Baird Sees 'Improved Odds' Tandem Diabetes Care Will Survive

Tandem Diabetes Care Inc TNDM, a medical technology company focused on the treatment of diabetes and insulin infusion therapy, has seen transformed from a "solid competitive" company in mid-2016 to one where it might not survive, according to Baird.

But the company may boast the "most compelling" HCL system in diabetes by the middle of next year.

The Analyst

Baird Equity Research's Jeff Johnson upgraded Tandem Diabetes' stock from Neutral to Outperform with a price target lifted from $3 to $7.

The Thesis

Tandem Diabetes' t:slim X2 pump will "eventually drive" the company's Control IQ HCL system (TypeZero's InControl algorithm) as it has already been used in more than 30 trials at 15 research sites, the analyst said in a note. The trials also consisted of 450 patients and 14,500 system days dating back to 2011. This puts Tandem Diabetes in a strong position to push its Control IQ HCL system (made up of t:slim X2, the InControl algorithm, and DXCM's G5 and ultimately G6 sensors) the regulatory process in a "efficient manner."

The company's Control IQ has a high likelihood of launching by the middle of 2019 and benefit from strong domestic demand, Johnson said. In fact, if the company sees this success it "won't necessarily matter" if management achieves cash flow break even over the next 18 to 24 months although it's "looking increasingly achievable."

It's likely the FDA has a "deep understanding" of Tandem Diabetes pump capabilities and the associated benefits, the analyst said. This should help in de-risking future product innovation and is an element to the story which is underappreciated by investors.

Price Action

Shares of Tandem Diabetes were trading higher by nearly 6 percent Friday at $4.00.

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