I came across Tandem Diabetes recently and have been building position upto 3% now over last few weeks.
Tandem Diabetes is 3rd largest insulin pump supplier in the US market.
TNDM has been delivering accelerating revenue growth for last five quarters starting with $40M (+39% y/y) in quarter ending 12/17 to $66M (+142%) in quarter ending 3/19; while also growing gross margins and reducing negative FCF through this period.
Quarter ending 2016-12 2017-03 2017-06 2017-09 2017-12 2018-03 2018-06 2018-09 2018-12 2019-03 Revenue $M $28.9 $19.0 $21.3 $27.0 $40.3 $27.3 $34.1 $46.3 $76.2 $66.0 Growth Y/Y % 39% 44% 60% 71% 89% 142% Gross margin % 35% 37% 38% 44% 42% 42% 44% 48% 55% 51% Share count (M) 3.1 3.2 5.0 5.2 10.1 18.0 50.9 55.6 57.5 58.0 FCF $M -$16.0 -$23.0 -$16.0 -$19.0 -$13.0 -$12.8 -$7.0 -$4.0 $13.0 -$5.5
TNDM’s latest t:slim X2 pump with automatic software update seems to be a major driver for it accelerating revenue growth. Tandem competes with Medtronic (#1) and Insulet (#2) suppliers. Medtronic is a giant med-tech company with market cap >$100B for which diabetes pump is one of the smaller markets. Insulet is more focused competitor on this market and has been steadily growing revenue for many years. At this point, Tandem seems to be growing much faster than both larger suppliers due to multiple factors including better reception to its latest product, increasing access to payors and a strong demand in international markets.
Tandem’s business model is razor / blade in a four years cycle. Tandem typically charges ~$4K for pump in upfront payment and also gets another ~ $1K / year in consumables revenue. Insurance typically pays for new / upgraded pump once in four years which results in a ~$2K / year on an average per patient.
On the latest conference call, management mentioned that they have been capacity constrained for a while and that’s being addressed in multiple ways.
See company presentation for some really good info.
I do not have enough understanding of MedTech market in general and diabetes management in particular. This is why I am hesitating to buy more. Very curious if anyone has thoughts and opinions on this.