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Why Tandem Diabetes Care Is Skyrocketing Today

By Brian Feroldi - Updated Apr 20, 2019 at 5:59PM

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Shares jumped after the company reported blowout fourth-quarter results and issued bullish guidance. Here's what investors need to know.

What happened

In response to expectation-topping results, shares of Tandem Diabetes Care (TNDM -1.07%), a medical device company focused on diabetes, jumped 25% as of 11:15 a.m. EST on Wednesday.

So what

Here's a review of the key numbers from Tandem's fourth quarter:

  • Revenue went up 89% to $76.2 million. That sailed past the $56.3 million that Wall Street had expected. The jump was driven by a 133% increase in the number of insulin pumps sold. 
  • Gross margin expanded 1,200 basis points to 55%. 
  • Net income -- yes, income -- was $3.7 million, or $0.06 per share. Market watchers were predicting a loss of $0.20 per share, so this figure blew past expectations.
  • Cash balance at year-end was $129 million. 

Tandem also announced in a separate release that longtime CEO Kim Blickenstaff is stepping down and will be replaced as of March 1, 2019, by an insider named John Sheridan. 

Zooming out to the full year, here's how the company's numbers shook out in 2018:

  • Pump shipments more than doubled to 34,493. 
  • Sales grew 71% to $183.9 million.
  • Operating margin improved to -24% from -58%.
  • Net loss was $122.6 million, of $2.55 per share. This figure includes noncash charges of about $72 million. 
Four business people giving high fives

Image source: Getty Images.

Looking forward, here's the forecast for 2019:

  • Sales are expected to grow 39% to 47% to a range of $255 million to $270 million. For context, Wall Street was projecting $219.5 million in sales.
  • Gross margin is expected to be 52%.
  • Adjusted EBIDTA is estimated to be about breakeven.
  • Non-cash charges are expected to be about $55 million.

Given the expectation-topping results and strong guidance, it isn't hard to figure out why shares are flying high today.

Check out the latest Tandem earnings call transcript.

Now what

These blowout results cap off a truly remarkable year for Tandem. Sales growth was high, margins ticked up across the board, and the company is in a much better financial position today than it was just 12 months ago.

Can the gains continue from here? That's a tough call to make. The company is currently trading for more than 20 times trailing sales, which prices in a lot of future growth. While I wouldn't bet against its continued success, I think that several other diabetes stocks are more attractive when measured on a risk-adjusted basis.

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