Tandem Diabetes: Initiating Coverage With No Moat and $34 Fair Value Estimate

In initiating coverage on Tandem Diabetes, we peg its fair value estimate at $34 per share. Despite the solid commercial adoption of Tandem’s t:slim pump franchise, we think the firm has yet to dig an economic moat. The firm remains a distant third in the pump market where Medtronic has dominated through its ability to pioneer meaningful innovation and Insulet has been able to attract a greater proportion of new pump users through its disposable, tubeless format. Though Tandem has made a splash in the insulin pump market as the latest entrant, the firm is still endeavoring to establish itself as a major competitor and reach profitability. Also, on its rather lengthy path from the initial 2012 launch of its original t:slim pump to consistent positive earnings, Tandem still has a few years to go, from our perspective.