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Tandem's Global Growth a Boost, Operating Losses a Bane

Zacks Equity Research

On Mar 6, 2019, we issued an updated research report on Tandem Diabetes Care, Inc. TNDM. Tandem Diabetes’ expansion initiatives in the global markets are a major positive. However, the company’s heavy dependence on the sales of insulin pumps and its recurring operating losses pose concerns for the stock. Tandem Diabetes currently carries a Zacks Rank #3 (Hold).

The company has outperformed the industry in the past three months. The stock has soared 91% compared with the industry’s 3.6% rise. Notably, the company fared well on the top-line front with better-than-expected results in fourth-quarter 2018.

Strength in domestic sales along with the launch of the t:slim X2 Insulin Pump in selected international markets bode well for the company. In the fourth quarter, the company witnessed a strong rollout of this system globally. The sales guidance for 2019 looks promising. Also, favorable demographics in the diabetes market are expected to boost demand for Tandem Diabetes’ products.

Tandem Diabetes Care, Inc. Price

Tandem Diabetes Care, Inc. Price | Tandem Diabetes Care, Inc. Quote

As a major milestone, t:slim X2 Insulin Pump obtained a commercial license in Canada during the fourth quarter. Also, the FDA classified it under the first and a new device category called alternate controller enabled infusion pumps, in short, referred to as ACE pumps. Moreover, the same is related to the FDA's interoperability initiative, which the company previously termed as an iPump.

Tandem Diabetes is also working on a mobile application, currently designed to use the Bluetooth radio capability to wirelessly upload pump data to t:connect, receive notification of pump alerts and alarms plus integrate other health-related information from third-party sources.

The company is consistently focusing on strengthening its global presence.
In 2018, it informed about entering into agreements with independent distributors for markets in Australia, New Zealand, Italy, Scandinavia, South Africa, Spain and the United Kingdom.

On the flip side, excessive reliance on sales of insulin pumps and persistent operating losses pose threats to the company. Moreover, the company’s operations are likely to be affected by a tough competitive environment.

Key Picks

Some better-ranked stocks in the broader medical space are Varian Medical Systems VAR, Illumina, Inc. ILMN and DexCom, Inc. DXCM, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Varian’s long-term earnings growth rate is projected at 8%.

Illumina’s long-term earnings growth rate is expected at 21.5%.

DexCom’s second-quarter fiscal 2019 earnings per share are estimated to grow 116.7%.

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