Investors have plenty more to like about Tandem Diabetes (NASDAQ: TNDM) stock after the company reported its fiscal-fourth-quarter results on Feb. 26. TNDM stock reached $74.81 last month and is now trading around $62. Those who missed the run-up of TNDM may want to examine the company’s recent earnings to determine how much more Tandem stock can rise.
TNDM earned 2 cents per share of Tandem stock, as its revenue jumped 132.3% to $3.7 million. Its operating margin came in at 1%, the first time that metric has been positive, signaling that it will be profitable in the intermediate term.
TNDM grew thanks to the successful launch of Basal-IQ. According to diaTribe, Basal IQ is an “algorithm” which “stops basal insulin delivery when low blood sugar is predicted (within 30 minutes) and resumes insulin delivery once blood sugar levels start to rise.”
TNDM successfully transitioned Johnson & Johnson’s (NYSE: JNJ) customers to its product. For the year, TNDM’s revenue grew to $184 million, up over 70% from 2017. Never has Tandem grown this fast on an annual basis.
Guidance
Looking ahead, Tandem forecast 2019 sales of $255 million – $270 million and break-even EPS. It expects its gross margin to be around 52% in full-year 2019. In the very competitive industry of medical electronics, TNDM is doing very well.
The company transitioned successfully from a domestic-focused startup to a global diabetes-technology company. Given the strong momentum it’s expected to have this year, TNDM may become a big global player.
Management is unsure of its pricing strategy for its automated insulin delivery system, Control-IQ. The company has a priority of securing reimbursement for the product from health-insurance companies.
Building a Stronger Team
TNDM has added strong executives to its leadership team. Rick Valencia, the President of Qualcomm Life, joined Tandem’s board last year. In Q1, Becky Robertson also joined its board, bringing her proven track record of helping medical-device companies. She also has a great deal of experience as an engineer, entrepreneur, corporate executive, and board member. Manuel Jaime became Senior VP of Technology and Digital Health. He brings expertise in mobile connectivity and cloud technology.
Growth Opportunity
The FDA’s approval of Tandem’s T:slim X2, an ACE or alternate controller-enabled infusion pump, which features a touch screen and has the ability to receive feature updates remotely, greatly widens Tandem’s lead over other medical-devices firms. Not only will remote delivery lower operating costs, but customers will enjoy the ease of upgrading their devices.
The results speak for themselves: shipments of the device grew by over 100% last year. And what is more impressive is that TNDM has no debt and has positive-operating-cash flow.
New Products
Tandem is positioned for another strong year. It has a differentiated pump platform, an automated insulin delivery program, and will expand internationally this year. Surveys already show that Tandem’s customers are more satisfied than those who have bought insulin pumps made by other manufacturers.
Design testing of Tandem’s t:sport insulin pump, which is half the size of the t:slim and has a mobile control, will be mostly completed this year. Once the device receives ACE pump classification in the second half of the year, it will be submitted for CE marking in 2020.
Tandem’s Mobile App
TNDM is scheduled to launch its first-ever mobile app in the first half of this year. Since it will be offered on both major platforms, Apple and Android, the app should increase customers’ satisfaction. It will also give healthcare providers easier access to pump and blood glucose data.
The Valuation and Fair Value of TNDM Stock
Analysts are highly bullish on TNDM stock, according to Tipranks. But that has mixed implications for TNDM stock, since, if too many mainstream investors buy Tandem stock, its valuations will become stretched. But on the other hand, the fact that Wall Street has few red flags on Tandem stock is positive for TNDM.
The Bottom Line on TNDM Stock
Tandem stock has paused after rallying strongly in March. TNDM stock could continue to be profitable for investors as the company carries out its growth plans.
As of this writing, the author did not hold a position in any of the aforementioned securities.
