RBC Capital Markets initiated coverage on Tandem Diabetes Care, Inc. (NASDAQ:TNDM), a global insulin delivery and diabetes technology company that manufactures and sells advanced automated insulin delivery systems.
The analyst highlights several key growth drivers for Tandem, positioning it for sustained growth over the coming years driven by expansion into the U.S. Type 1 market with a 40% pump penetration (Tandem has a one-third share), which is expected to rise to the mid-60s and Type 2 market with 6% penetration.
The company is also seeking deeper penetration within existing accounts through product innovations.
The analyst also added that the rise of GLP-1s class drugs is not a major threat to insulin pump adoption.
GLP-1 drugs such as Novo Nordisk A/S' (NYSE:NVO) semaglutide as Wegvoy and Ozempic and Eli Lilly And Co's (NYSE:LLY) tirzepatide as Zepbound and Mounjaro, have recently made waves.
RBC analyst highlights that insulin is essential for insulin-dependent patients, as GLP-1 medications cannot regenerate beta cells or halt their deterioration. As a result, the need for insulin remains.
The Type 2 diabetes population, which suffers from irreversible beta cell loss, is underserved.
The growing popularity of GLP-1 drugs may lead to earlier diagnoses of Type 2 diabetes and prompt insulin use, potentially expanding the market.
RBC initiated Tandem with an Outperform, with a price target of $65, citing a significant upside potential driven by earning revisions and multiple expansions.
RBC sees an opportunity for Tandem to achieve profitability over time and projects gross margins of 51% in 2024 or flat y/y to reflect the Mobi launch and investments in several ongoing R&D initiatives.
The analyst sees a clear path for the company to reach its goal of approximately 65% margins, with Mobi accounting for about half of that progress. Further gains are anticipated from planned initiatives.
RBC projects breakeven for 2024, with positive adjusted EBITDA margins expected in the second half of the year.
Price Action: TNDM stock is down 0.37% at $40.92 at the last check on Wednesday.
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