Tandem Diabetes ( TNDM Quick Quote 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 both iOS and Android operating systems. The company expects to offer this novel feature to nearly 240,000 of its 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 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 somewhat pressured by 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 38.5% compared with the industry’s 25.3% fall. Key Picks
A few better-ranked stocks in the broader medical space that investors can consider are
AMN Healthcare Services, Inc. ( AMN Quick Quote AMN - Free Report) , Novo Nordisk ( NVO Quick Quote NVO - Free Report) and Merck & Co., Inc. ( MRK Quick Quote MRK - Free Report) .
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 (Strong Buy). You can see
the complete list of today’s Zacks #1 Rank stocks here.
AMN Healthcare has outperformed its industry in the past year. AMN has gained 17.3% against the industry’s 47.4% fall.
Novo Nordisk has a long-term earnings growth rate of 14.5%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 7.6%, on average. It currently carries a Zacks Rank #2 (Buy).
Novo Nordisk has outperformed its industry in the past year. NVO has gained 31.2% against the industry’s 16.9% growth.
Merck has a long-term earnings growth rate of 10.1%. The company surpassed earnings estimates in the trailing three quarters and missed in one, delivering a surprise of 13.4%, on average. It currently carries a Zacks Rank #2.
Merck has outperformed its industry in the past year. MRK has gained 18.4% against the industry’s 17% growth.