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Tandem Diabetes Hits New 52-Week High: What's Driving It?

Zacks Equity Research

Shares of Tandem Diabetes Care, Inc. TNDM reached a new 52-week high of $87.20 on Feb 14, before closing the session marginally lower at $86.03. The stock has rallied 47.6% since its third-quarter 2019 earnings announcement on Nov 5.

The company is witnessing an upward trend in its stock price, prompted by the receipt of a series of regulatory approvals and a product launch. Further, its robust third-quarter 2019 results, backed by strong t:slim X2 Insulin pump adoption domestically as well as global revenue growth, boosted the market sentiment about its fourth-quarter results (to be released on Feb 24). Currently, Tandem Diabetes is reinforcing the focus on its diabetes market, which currently holds bountiful opportunities.

Let's delve deeper:



 

Recent Approvals and Launch

Investors are upbeat the FDA’s approval in December 2019 for the company’s t:slim X2 insulin pump with Control-IQ technology. The system integrates with Dexcom G6 continuous glucose monitoring (CGM), thus requiring no fingersticks for calibration or diabetes treatment decisions.

Tandem Diabetes received Health Canada approval for the t:slim X2 insulin pump with Basal-IQ technology in November 2019, which will provide an option for existing pump users in Canada to add Basal-IQ technology free of charge. This can be done via a remote software update in February 2020.

Investors are also optimistic about the company’s commercial launch of the t:slim X2 insulin pump with Control-IQ technology in the United States in January 2020.

Other Growth Drivers

Q3 Performance: Tandem Diabetes exited third-quarter 2019 on a solid note, with better-than-expected numbers. It is encouraging to note that the company registered growth, backed by the international launch of t:slim X2 along with the domestic launch of the Basal-IQ technology (which has been witnessing positive customer reception), increased supply capacity and renewal sales.

Tandem Diabetes’ domestic and global pump shipments registered a solid uptick, driving the total revenues. Its updated sales forecast for 2019 also buoys optimism.

Product Pipeline: The booming diabetes market provides a huge potential for the company to concentrate on its product pipeline. Under-development products like AID systems (a next-generation hardware platform and connected or mobile health offerings), t:sport Insulin Delivery System and t:sport cartridge line also instill optimism.

Focus on International Markets: Investors are upbeat about the company’s continued expansion in new geographies like Germany, France and the Benelux apart from its expanding operations in Canada. Tandem Diabetes was registered as an approved vendor of insulin pumps and supplies under the Assistive Devices Program (“ADP”) in Ontario. This enabled diabetic patients to obtain reimbursement for the t:slim X2 insulin pump, thus enabling the company to further expand operations.

However, despite the upsides, Tandem Diabetes’ stock price may witness a downturn due to its heavy dependence on insulin pump sales and recurring operating loss. The company also faces tough competition from big-shots like Medtronic’s MiniMed as well as start-ups. Also, competitive and regulatory conditions in the markets, where Tandem Diabetes operates, limit its ability to switch to strategies like price increases.

Zacks Rank & Other Key Picks

Currently, the company carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks from the broader medical space are ResMed Inc. RMD, Hill-Rom Holdings, Inc. HRC and Medtronic plc MDT.

ResMed’s long-term earnings growth rate is expected to be 12%. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Hill-Rom’s long-term earnings growth rate is estimated to be 11.1%. The company presently carries a Zacks Rank of 2.

Medtronic currently carries a Zacks Rank #2 and has a projected long-term earnings growth rate of 7.4%.

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