The West Coast Trio

The West Coast Trio

This is a big week for our friends on the west coast as Dexcom (NASDAQ: DXCM), MannKind (NASDAQ: MNKD) and Tandem (NASDAQ: TNDM) all report fourth quarter and full year results. Of the three we will be paying very close attention to what Tandem has to say, although we were somewhat surprised that Dexcom according to recent SEC filings now owns 2.5 million shares of Tandem. This really isn’t a surprise given the way things have been going with the company’s insulin pump partners. The last thing Dexcom wants is another Animas situation.

Now before everyone starts jumping for joy and doing the hippy hippy, Tandem is not yet out of the woods. The good news is their still alive and kicking. The better news is given that shares have recovered from their lows the company now stands a good chance that warrant holders will exercise their warrants generating even more cash for the company. Still and we hate to be redundant money is only part of the problem here.

Dexcom continues to deal with the FreeStyle Libre fallout and the coming price war. This is one reason the company wants Tandem to survive as they just cannot afford to lose that patient base. The company finally got some good news from Insulet (NASDAQ: PODD) as it looks as though the OmniPod/Dexcom system is finally producing at a nice rate. Still the company must prepare for battle as Abbott (NYSE: ABT) isn’t the only player itching for a price war as big bad Medtronic (NYSE: MDT) wants in on this market too.

MannKind for their part will be judged, at least by us anyway, how scripts are doing and whether they have learned to stop spending money on foolish marketing efforts. It will be interesting if Dr. David Kendall who just joined the company will participate in tomorrows call. As we stated previously this is a huge addition for the company, however there are certain things that even Dr. Kendall with all his talent cannot do.

We find it both amusing and ironic that of the three companies the one in the strongest position, Dexcom has had the worst share performance year to date. Not that this means all that much to us, but it is a perfect example of just how wacky our world is. We continue to believe that Dexcom is undervalued at today’s levels and investors with a 24-month time horizon will be richly rewarded adding to their holdings.

We cannot say the same for either Tandem or MannKind although we suspect both have more upside than down right this very moment. Tandem would be worth holding IF the Board replaced the current management team and brought in some real talent, ala what Insulet did a few years back. However as much as this should happen we doubt it will happen, the Board seems content to let this team have a chance for a turnaround. Why we have no idea.

MannKind like Tandem could be worth holding IF they bring some financial discipline to the table. All the data in the world will not change certain fundamentals. We also find it strange that while everyone knows that a biosimilar short-acting injectable insulin will wreak havoc on the insulin market this is never discussed with MannKind. It’s as if the people who believe in Afrezza think the drug is immune from market dynamics; dynamics which are less than favorable.

So, stay tuned everyone it should be an interesting week.