Tandem Diabetes Care: Navigating the Challenges of the Insulin MarketSmall Caps 2 replies 0 likes 0 votes 812 views
Tandem Diabetes Care, Inc. (NASDAQ:TNDM) has been in the spotlight due to a 65% decline in its shares year to date. The primary reason for this decline is the growing belief that increasingly popular GLP-1 weight loss drugs, such as Ozempic and Wegovy by Novo Nordisk (NVO) and Mounjaro by Eli Lilly (LLY), will significantly reduce the demand for insulin injections in people with diabetes.
Tandem Diabetes Care is a medical device company headquartered in San Diego, CA. The company focuses on developing and commercializing various products for individuals with insulin-dependent diabetes, both in the United States and globally. Its flagship product is the t:slim X2 insulin delivery system, which includes the t:slim X2 pump, a 300-unit disposable insulin cartridge, and an infusion set. Currently trading just above $15.00 a share, the company has a market capitalization of just over $1 billion.
In its third-quarter results, Tandem Diabetes reported a GAAP loss of 51 cents per share as revenues fell just over nine percent on a year-over-year basis to $185.6 million. The loss was in line with consensus expectations, but revenues came in around $7 million lower than anticipated. What sent the shares tumbling after the report was the company's guidance. Management now anticipates FY2023 sales of $765 million, with $575 million from the United States and the remainder from global markets. At the time, the analyst consensus for FY2023 was a bit over $795 million.
Tandem Diabetes is pinning its hopes on new product launches, such as the t:slim X2 with DexCom's (DXCM) G7 and Abbott's (ABT) FreeStyle Libre sensors, and notably, the launch of its Tandem Mobi, a smaller and wearable insulin pump. The rollout of the Tandem Mobi began last month in the U.S.
Analysts have provided mixed recommendations, with some lowering price targets. Just over 13% of the outstanding float in the shares are currently held short. While four insiders, including the CFO, bought just over $500,000 worth of shares collectively in May and September of this year, a different insider sold just over $410,000 worth of shares in early March.
Tandem Diabetes finished the third quarter with just under $500 million in cash and marketable securities on its balance sheet, despite posting a GAAP net loss of $33 million for the quarter. This represents an improvement from the $49 million GAAP net loss in 3Q2022. The company also has nearly $285 million in convertible senior notes on its books.
Looking ahead, Tandem Diabetes is projected to continue posting losses in FY2023 as sales decline slightly. In FY2024, losses are expected to decrease to just under a dollar per share on a 10% increase in revenue.
While Tandem Diabetes Care faces challenges in the evolving insulin market, the emergence of GLP-1 weight loss drugs has reset the narrative for insulin pump manufacturers. Investors may be less tolerant of companies posting losses, and the recent rise in interest rates has also presented a headwind for these smaller profitless companies. Tandem Diabetes, at least a couple of years away from potential profitability, projects $95 million of non-cash, stock-based compensation expense in FY2023, which some may find excessive for a company with just over a $1 billion market capitalization.
In conclusion, the recent pullback in Tandem Diabetes Care's stock has raised questions about its prospects. While the company is investing in innovation and new product launches, the challenges presented by the insulin market and competition from GLP-1 drugs may impact its growth trajectory. Investors are advised to approach this investment opportunity with caution.