It’s now or never
A former insulin pump executive has noted that Tandem (NASDAQ: TNDM), who reported results yesterday, is like the cat that has nine lives only they used up all nine but have been granted one more. In fact, no one in the insulin pump arena, nor us here at Diabetic Investor can believe that the company has survived this long. Tandem has always had an excellent product that was not the problem, no the problem has always been running a commercially viable insulin pump company. Looking at the results and listening to the call we came thinking; ok they ain’t dead yet but it’s now or never.
First off, we should note that the fourth quarter traditionally is the best quarter for all the insulin pump companies so it’s not news that Tandem had a decent end to the year. It would have been news had they NOT had a good quarter. Perhaps the best news to come out of the call was the company’s announcement that they have submitted a PMA to the FDA for the t:slim X2 with Basal-IQ system. This system features a low glucose spend function and is the precursor to their closed loop system.
As we noted during ATTD the data for their closed loop system which features the Dexcom (NASDAQ: DXCM) G6 sensor and the TypeZero insulin dosing algorithm had some truly impressive data.
Fresh off their most recent dilution the company has approximately $90 million as per the press release;
“As of December 31, 2017, the Company had $24.2 million in cash, cash equivalents and restricted cash. This amount does not include the approximately $64.5 million in net proceeds that the Company received from its equity offering in February 2018.”
After cratering the stock price has improved closing at $3.39 yesterday up almost 27% over the last 30 days. With the improved stock price, it is now possible the warrants outstanding will be exercised which could generate another $32 million. Put simply Tandem has gone from virtually no cash available to being flush with cash.
Now that the company has breathing room from a financial perspective the question becomes can management do what they never done; execute? Can they take the impressive data from the Basal-IQ system and turn that into sales? Can they take some of their newer products under development and get them to market? Can they fight on the most important battlefield of all, payors?
We will say this one thing they and Insulet (NASDAQ: PODD) both have going for them is the visceral hate for the evil empire. As everyone knows Animas is being shut down and Johnson and Johnson (NYSE: JNJ) struck a deal with Medtronic (NYSE: MDT) so Animas patients would not be left out in the cold. Yet, even with this arrangement a fair number of Animas patients don’t want to be part of the evil empire. Now to be honest it’s very difficult to quantify just how many Animas patients are going to Tandem or Insulet but based on the reports we’ve been getting it’s a bigger number than we anticipated.
Thinking back to the call yesterday and reading the transcript again this morning just to make sure we didn’t miss anything we came away feeling that the company has always said the right things. They have always had a decent product which is liked by the patients who use it. Yet what they have never had is the ability to execute. Let’s be honest here before everyone starts thinking management suddenly gets it. Had they not screwed things up in the first place they would have not needed to dilute the stock. Had they not screwed up the products under development would be much further along than they are today. Had they not screwed up the company would not have been on the brink of closure.
Keep in mind just because the company is flush with cash now does not mean they won’t flush that cash down the toilet. It’s happened before and as has been said before leopards don’t change their spots. The Tandem story is no different than any other insulin pump story for a company not named Medtronic. This isn’t and never has been about building a way cool whiz bang system. This isn’t about saying all the right things. This is and always will be about the ability to execute. The ability to run a commercially viable insulin pump company.
Looking at the facts, yes facts are a pesky thing, Tandem hasn’t been able to execute. Yet they have been given yet another chance, why we have no clue, but the fact is they have been. So as Elvis used to say it’s now or never.