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Tandem Diabetes (TNDM) Global Pump Sales Aid, Price Issue Ails

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Tandem Diabetes (TNDM - Free Report) has been gaining from robust international pump shipments. The growing utilization of the company’s Control-IQ technology buoys optimism. However, the business suffers from its heavy dependence on sales of insulin pumps. Mounting operating expenses do not bode well for the company either. The stock currently carries a Zacks Rank #3 (Hold).

Tandem Diabetes exited the first quarter with better-than-expected revenues. The company delivered record sales growth in and outside the United States for the first quarter. Robust pump shipments resulting from an increase in the company’s installed base buoy optimism. In this regard, the company recorded a new milestone as its installed base surpassed more than 350,000 people worldwide. This equates to nearly 30% of people utilizing insulin pumps in the company’s regions.

In the first quarter of 2022, Tandem Diabetes witnessed high international demand for the t:slim X2 pump. International pump shipments rose 8.4% year over year to 9,437 pumps.

The company also witnessed strong customer retention in the reported quarter, driven by the impressive positive response from the Control-IQ technology. Continued adoption of the company’s t:slim X2 insulin pumps looks encouraging. The raised sales guidance for 2022 also instills investors’ confidence.

In February 2022, Tandem Diabetes gained FDA clearance for the t:connect mobile app — the first-ever smartphone application capable of initiating insulin delivery on iOS and Android operating systems. The company expects to offer this novel feature to nearly 240,000 in-warranty U.S. customers free of charge in the upcoming months.

Another notable product under development is Mobi, a novel miniaturized durable pump. Mobi is intended to be fully controlled through a mobile app on a personal smartphone, with the t:connect being at the foundation of its mobile control functionality. The Mobi pump will be submitted to the FDA through the ace pump 510(k) pathway in the third quarter of 2022, which will enable it to be integrated with interoperable algorithms and CGMs, without requiring additional regulatory review.

On the flip side, Tandem Diabetes’ earnings for the first quarter missed the Zacks Consensus Estimate. Contraction of gross margin is discouraging. During the quarter, selling, general and administrative expenses rose 25.1%, whereas research and development expenses increased 84.6%. The escalating costs resulted in an operating loss in the quarter, building pressure on the bottom line. Further, the company faces pandemic-led staffing challenges and global supply-chain headwinds, raising apprehension.

In the reported quarter, the company’s non-manufacturing costs were under pressure as a result of higher freight prices due to global supply issues. Based on increases in freight and acquisition costs of certain materials, the company anticipates this pressure to be more significant in the upcoming second quarter.

Further, Tandem Diabetes is taking a careful approach on the potential impact of COVID-19 on its business in 2022. Despite witnessing robust demand in international markets, the company expects COVID impacts on distributor order timing to continue to produce a significant degree of variability in sales outside the United States.

Tandem Diabetes has been underperforming the industry for the past year. The stock has lost 40.1% compared with the industry’s 28.6% fall.

Key Picks

A few better-ranked stocks in the broader medical space are Alkermes plc (ALKS - Free Report) , AMN Healthcare Services, Inc. (AMN - Free Report) and Medpace Holdings, Inc. (MEDP - Free Report) .

Alkermes has an estimated long-term growth rate of 25.1%. Alkermes’ earnings surpassed estimates in the trailing four quarters, the average surprise being 350.5%. It currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Alkermes has outperformed the industry in the past year. ALKS has gained 14.4% against the industry’s 42.6% decline in the said period.

AMN Healthcare has a long-term earnings growth rate of 1.1%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.6%, on average. It currently sports a Zacks Rank #1.

AMN Healthcare has outperformed its industry in the past year. AMN has gained 7.6% against the industry’s 54.2% fall.

Medpace has a historical growth rate of 27.3%. Medpace’s earnings surpassed estimates in the trailing four quarters, the average surprise being 17.1%. It currently has a Zacks Rank #2 (Buy).

Medpace has outperformed its industry in the past year. MEDP has declined 20.2% compared with the industry’s 54.2% fall.