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Barry Cohen
Barry Cohen
Articles (175) 

Abbott Deal, UnitedHealth Coverage Push Up Tandem Shares

Stock of San Diego-based medical device company hits one-year high

Two leaders in the diabetes market are teaming up to provide a better way to administer insulin to patients.

Abbott Laboratories (NYSE:ABT) and Tandem Diabetes Care Inc. (NASDAQ:TNDM) have finalized an agreement to marry their respective continuous glucose monitors and digital insulin delivery systems, according to an article in FierceBiotech. The companies will also work together to market the system.

The announcement helped push the shares of San Diego-based Tandem to a one-year high of nearly $106, more than doubling its 52-week low.

Abbotts stock is up several dollars since the partnership was announced, but its unlikely the deal drove much of the gain given the size and diversity of the Chicago-area health care giant. Abbotts market cap is $164 billion, almost 27 times higher than Tandems.

In February 2019, Tandem received Food and Drug Administration approval for a type of diabetes device that established an entirely new category of systems. Its plug-and-play insulin pump is designed to work with a range of compatible dosing systems, glucose monitors and blood sugar meters.

Meanwhile, Abbott just got an OK from the FDA for its next continuous glucose monitoring system, which is worn. It was approved for adults and children over four and can record blood sugar levels for two weeks.

Abbott and Tandem are hoping to improve their position in the large and growing market for insulin delivery devices. Acumen Research says the business is growing at a compound rate of more than 7% and is expected to reach more than $22 billion by 2026. Right now, iData Research reports the market is dominated by three companiesMedtronic (MDT), Insulet Corp. (PODD) and Roche (RHHBY).

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Other key players in the overall diabetes market are Novo Nordisk (NYSE:NVO), Ypsomed Holding (XSWX:YPSN), Ascencia (XMAV:ASCE), Terumo Corp. (TSE:4543), Becton, Dickinson and Co. (NYSE:BDX), Sanofi (SNY) and Johnson & Johnson (JNJ).

In addition to the Abbott deal, Tandem got a big boost last week when UnitedHealth Group Inc. (UNH) announced in a bulletin that the countrys largest health insurer is now covering insulin pumps from Tandem in network for members on Medicare Advantage, Medicaid and individual and group market plans, according to Medtech Dive. Analysts believe this will add low- to mid-single-digit gains to the coming year's revenue.

During the last month, eight analysts gave Tandem a buy rating, reported Invest Chronicle. One analyst tabbed the shares as overweight, five rated it a hold. No one assigned Tandem an underweight or sell rating. On July 1, Baird analyst Jeff Johnson raised the price target on the company to $87 from $82.

In the first quarter, the company lost 22 cents per share, 22% more than the same period in 2019. Net loss was 25 cents versus 40 cents last year. Sales were nearly $98 million, beating estimates and topping last years revenue by nearly 50%.

Disclosure: The author holds a position in Johnson & Johnson.

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About the author:

Barry Cohen
Barry Cohen has nearly 40 years experience in communications and marketing, the majority in senior positions at large international health care companies, including Abbott Laboratories and Bayer Inc.

He has contributed to a number of financial websites, writing primarily about the stocks of health care companies.

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