Tandem Diabetes Care, Inc. TNDM has been gaining on robust domestic pump sales. Its international performance has also been impressive. Its better-than-expected revenues in the first quarter of 2020 buoy optimism. However, the company’s expectation of a greater impact of the pandemic on its international markets and heavy dependence on insulin pumps are concerning.
Over the past year, the Zacks Rank #3 (Hold) stock has outperformed its industry. The stock has gained 23.6% compared with 7.3% growth of the industry and 11.4% rise of the S&P 500.
The renowned designer, developer and distributor of insulin pumps has a market capitalization of $5.09 billion. The company expects to maintain strong product performance. The company surpassed estimates in three of the trailing four quarters and missed estimates in the other one, the average positive surprise being 64.2%.
Let’s delve deeper.
Strong Q1 Results: We are upbeat about Tandem Diabetes’ better-than-expected revenues in the first quarter of 2020. Strong domestic pump sales and the company’s expansion in international markets boosted the top line significantly during this period. We are impressed with the surge in global pump shipments. The company’s second-quarter 2020 sales forecast also looks upbeat amid the coronavirus crisis.
Expansion in the gross margin in the quarter was also encouraging.
Regulatory Approvals: We are upbeat about Tandem Diabetes’ FDA approval for its Basal-IQ technology, received on Mar 2, to be used as an interoperable automated glycemic controller (iAGC). Last December, the company received the iAGC designation for its t:slim X2 insulin pump with Control-IQ technology, following the FDA approval.
Product Pipeline: We are optimistic about the company’s product pipeline, which includes AID systems, a next-generation hardware platform, as well as connected (mobile) health offerings. Currently, all these are under development. The company is on track to launch its second-generation AID system — t:slim X2 — with Control IQ internationally in the latter half of 2020.
Coronavirus: The coronavirus pandemic is wreaking havoc on the economy as a whole, with Tandem Diabetes facing the impact since March. The company expects to witness a greater proportional impact on its international markets due to the difference in the diabetes care model outside the United States. Further, the company withdrew its financial guidance for the full year amid coronavirus-led uncertainties.
Heavy Dependence on Insulin Pumps: Tandem Diabetes generates a large portion of revenues from sales of insulin pumps. During 2017, the company’s insulin pump products included the t:slim X2, t:flex and t:slim G4. However, in August 2017, Tandem Diabetes discontinued sales of t:slim G4 in connection with the launch of t:slim X2 with G5 in the third quarter of 2017. In the fourth quarter of 2018, 72% of revenues were generated from the sale of pumps.
Tandem Diabetes has been witnessing a negative estimate revision trend for 2020. Over the past 60 days, the Zacks Consensus Estimate for its loss per share has widened from a loss of a penny per share to a loss of 56 cents per share.
The Zacks Consensus Estimate for second-quarter 2020 revenues is pegged at $86.1 million, suggesting a 7.7% fall from the year-ago reported number.
Some better-ranked stocks from the broader medical space are Aphria Inc. APHA, Surmodics, Inc. SRDX and Owens Minor, Inc. OMI.
Aphria’s long-term earnings growth rate is estimated at 24.6%. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Surmodics’ long-term earnings growth rate is projected at 10%. The company presently sports a Zacks Rank #1.
Owens Minor’s long-term earnings growth rate is estimated at 8.3%. It currently carries a Zacks Rank #2.
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