Tandem Diabetes Care, Inc. TNDM is likely to grow in the coming quarters due to its impressive streak of new product offerings. The company is actively pursuing growth through strategic acquisitions, partnerships and operational improvements. Strong solvency buoys optimism.
However, the company’s heavy reliance on insulin pumps and a fiercely competitive space may adversely impact its operations.
In the past year, this Zacks Rank #3 (Hold) stock has declined 325.2% compared to the 11.2% growth of the industry and a 29.3% rise of the S&P 500 composite.
The renowned medical device company has a market capitalization of $1.88 billion. Tandem Diabetes projects an estimated earnings growth rate of 34.6% for 2025 compared with the 23.1% of the industry. In the trailing four quarters, TNDM delivered an average earnings surprise of 1.5%.
Let’s delve deeper.
Tailwinds
Impressive Product Innovation Continues: Throughout 2023, the company launched new products to increase pump adoption and extend the benefits of the technology to more people living with diabetes. Tandem Diabetes is now the only pump company to offer users choice in CGM integration in the United States, having launched the t:slim X2 with DexCom’s G7. TNDM’s newest pump platform, Tandem Mobi, can be fully controlled through a mobile app on a personal smartphone, with the t:connect being at the core of its mobile control functionality.
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The Tandem Source diabetes management platform is now available for all Tandem pump users and their healthcare providers in the United States, with international availability expected in 2024. The company is also working on an extended wear infusion set and a tubeless wear option for Mobi, an ergonomic patch pump for Sigi with pre-filled insulin cartridges. Several clinical studies are underway and more to come this year in support of these development initiatives.
Strategic Developments Bode Well: Tandem Diabetes aims to grow through acquiring products or technologies or investing in businesses. In 2023, it acquired the Swiss developer of the Sigi Patch Pump, AMF Medical SA, and also collaborated with Dexcom and Abbott on the integration of their sensors. The new Tandem Source brings together the features of the company’s legacy t:connect, t:connect HCP and t:connect Portal offerings with new comprehensive data reporting in one central, scalable platform.
The inventory transition to the European distribution center is expected to support nearly 70% of TNDM’s sales outside the United States, reduce logistical supply-chain challenges, strengthen international distributor relations and bring closer correlation between pump shipments and pump placements on patients. Other strategic initiatives made during the year include driving operational cost savings across all products and processes through lean activities and other manufacturing efficiencies.
Strong Solvency: Tandem Diabetes exited the fourth quarter of 2023 with cash and cash equivalents and short-term investments of $467.9 million, while short-term payable debt remained nil. Long-term debt totaled $285 million (compared to $283.2 million at the end of 2022), much lower than the company’s cash balance.
Headwinds
Heavy Dependence on Insulin Pumps: While TNDM generates substantial revenues from the sales of insulin pumps, various factors like challenges in gaining widespread acceptance among people with insulin-dependent diabetes, their caregivers, healthcare providers and key opinion leaders in the diabetes treatment community could adversely affect the market acceptance of the products. Moreover, the lack of evidence supporting the safety, effectiveness and ease of use of its products compared to competitors, along with perceived risks, adverse regulatory actions and clinical study results, can potentially hamper the company’s business, financial condition and operating results as well.
Tough Competitive Pressure: Tandem Diabetes operates in a highly competitive environment dominated by firms ranging from large multinational corporations with significant resources to start-ups. The competitive and regulatory conditions in the markets where the company operates limit its ability to switch to strategies like price increases. Significant changes within the industry like several companies developing and marketing their own insulin delivery systems and related software applications, including insulin pumps and Bluetooth-enabled insulin pens to support MDI therapy, may affect the company’s business and operating results.
Estimate Trend
The Zacks Consensus Estimate for Tandem Diabetes’ 2024 loss per share has moved up from $1.38 to $1.62 in the past 30 days.
The Zacks Consensus Estimate for the company’s 2024 revenues is pegged at $847.3 million. This suggests a 13.3% rise from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Cardinal Health CAH, Stryker SYK and DaVita DVA.
Cardinal Health has a long-term estimated earnings growth rate of 14.2% compared with the industry’s 11.6%. CAH’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.6%. Its shares have increased 54.8% compared with the industry’s 15.6% rise in the past year.
CAH carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stryker, carrying a Zacks Rank #2 at present, has an earnings yield of 3.37% compared to the industry’s 0.01%. Shares of the company have increased 27.9% compared with the industry’s 6.6% rise over the past year.
SYK’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 5.09%. In the last reported quarter, it delivered an average earnings surprise of 5.81%.
DaVita, sporting a Zacks Rank #1 at present, has an estimated long-term earnings growth rate of 12.1% compared with the industry’s 11.9%. Shares of DVA have rallied 75.7% compared with the industry’s 23.8% rise over the past year.
DVA’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 35.6%. In the last reported quarter, it delivered an average earnings surprise of 22.2%.
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