Riding on diabetes devices revolution
• Winner in tubeless insulin pump and real-time blood sugar monitor market as the pump is >20% cheaper, longer sensor life, battery life >40% longer, and 11-36% smaller in size than global peers
• Current market cap is only 2.1-5.0% of comparable global peers; attractive entry point now
• With share price catalysts on the horizon – entry into U.S. market, breakeven in 2023 and launch of artificial pancreas – we initiate with BUY, TP HK$24.9
Long-term winner in revolution of diabetes devices. MicroTech has developed a tubeless insulin pump and real-time blood sugar monitor. This is revolutionizing the way to inject insulin and monitor blood sugar as it operates automatically and eliminate risks like hyperglycemia. MicroTech’s tubeless insulin pump is 11% smaller in size, battery life 11x longer, >20% cheaper than peer Insulet (PODD US). Its real-time blood sugar monitor has longer sensor life (14 vs 10 days) and 66% cheaper than peer Dexcom (DXCM US) which should enable it to gain market share in the long run. We expect its sales to grow at 104% CAGR in 2021-25F. Yet, MicroTech’s market cap is just 2.1% to 5.0% of global peers. The stock offers an attractive entry point now.
Where we differ. Based on share price performance of global peers, we believe approval to launch tubeless insulin pump and real-time blood sugar monitor in the US, artificial pancreas in EU & China, breakeven in 2023 can drive share price in the next 24 months.
Valuation: Our TP of HK$24.9 is based on 1) net present value estimate of major products; 2) net cash.
Key Risks to Our View: Limited track record of commercialization in EU & US.