Pharmacy Channel Adoption And Bihormonal Pipeline Will Drive Long Term Diabetes Care Impact

Catalysts

About Beta Bionics

Beta Bionics develops automated insulin delivery systems that simplify and improve diabetes management for people living with type 1 and type 2 diabetes.

What are the underlying business or industry changes driving this perspective?

• Rapid expansion of the iLet installed base, particularly from multiple daily injection converts and underpenetrated type 2 diabetes patients, is creating a larger pool of high-visibility, recurring supply revenue. This can sustain elevated top line growth and support operating leverage in earnings.
• Growing adoption of the iLet through the pharmacy channel, enabled by broad PBM coverage and increasing health plan pull through, is shifting the model toward a subscription-like revenue stream. This structurally enhances gross margins and stabilizes cash flow.
• Progress on Mint, the next generation patch pump built around the same adaptive algorithm and a differentiated user experience, positions the company to participate in the high growth patch segment and extend the brand into new patient cohorts. This can drive incremental revenue layers beyond the current pump franchise.
• Advancement of the bihormonal system, supported by completed PK and PD work and upcoming feasibility trials, opens a path to step-change clinical outcomes that can support premium pricing, higher reimbursement and long-duration revenue streams from both device and drug, with potential expansion in long term earnings power.
• Strengthening gross margin profile driven by manufacturing scale, cost per unit reductions and a rising mix of high-margin pharmacy supply revenue is improving the path to free cash flow generation. This can fund continued R&D and commercial investment without diluting shareholders and support future net margin expansion.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Beta Bionics's revenue will grow by 38.4% annually over the next 3 years.
• Analysts are not forecasting that Beta Bionics will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Beta Bionics's profit margin will increase from -87.9% to the average US Medical Equipment industry of 12.9% in 3 years.
• If Beta Bionics's profit margin were to converge on the industry average, you could expect earnings to reach $30.3 million (and earnings per share of $0.66) by about December 2028, up from $-77.8 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 59.4x on those 2028 earnings, up from -16.8x today. This future PE is greater than the current PE for the US Medical Equipment industry at 30.4x.
• Analysts expect the number of shares outstanding to grow by 1.56% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.67%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The company is rapidly gaining share in an underpenetrated insulin pump market, with 70% of new starts coming from multiple daily injection users and roughly 25% from type 2 patients. This supports a long runway of high revenue growth that could drive the share price higher rather than remain flat by expanding the installed base and recurring supply sales.
• Pharmacy channel adoption is inflecting, with low 30s percent of new patient starts already reimbursed through pharmacy and guidance being raised. This is creating a subscription-like, high-margin recurring revenue model that structurally improves gross margin and earnings power, which could be rewarded by a higher valuation multiple.
• Sustained gross margin expansion, from 53.4% in the prior year to 55.5% in Q3 and guidance of 54% to 55% for 2025, combined with manufacturing scale benefits and lower cost per unit, strengthens the path to free cash flow generation and improving net margins. This can support share price appreciation over the long term.
• A well-funded innovation pipeline, including Mint patch pump targeted for an unconstrained launch by the end of 2027 and a bihormonal system with a dedicated glucagon asset moving into human feasibility trials, offers multiple future growth vectors that could add incremental revenue layers and long term earnings. This would challenge the assumption of a flat share price.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of $31.3 for Beta Bionics based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $35.0, and the most bearish reporting a price target of just $23.0.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be $234.9 million, earnings will come to $30.3 million, and it would be trading on a PE ratio of 59.4x, assuming you use a discount rate of 7.7%.
  
• Given the current share price of $29.76, the analyst price target of $31.3 is 4.9% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.