Shares of Tandem Diabetes (TNDM) are on the rise on Tuesday after the company announced an agreement with Abbott (ABT) to develop and commercialize integrated diabetes solutions. While Piper Jaffray analyst JP McKim views the partnership as positive for Tandem, his peer at Baird argued that the release timing raises several questions, including about potential for further iCGM timing delays for Libre.
PARTNERSHIP: Abbott and Tandem Diabetes Care have announced that they intend to develop and commercialize integrated diabetes solutions that combine Abbott's glucose sensing technology with Tandem's insulin delivery systems to provide more options for people to manage their diabetes.
POSITIVE FOR TANDEM: In a research note to investors, Piper Jaffray's JP McKim argued that Tandem Diabetes and Abbott's announcement that they are exploring a diabetes management closed loop system is the first step in a process that he believes will need at least 10 months, and likely more, to result in an integrated product coming to market. While he does not know if this announcement implies integration with Abbott's Libre 2.0 or Libre 3.0, his "gut is most likely Libre 3.0" but he views the news as a positive for Tandem "either way." The announcement will likely have a negative read-through for DexCom (DXCM), added McKim, who expects a similar announcement from Insulet (PODD) about working with Abbott as well. McKim kept an Overweight rating and $80 price target on Tandem shares.
'SEVERAL QUESTIONS': While Baird analyst Jeff Johnson is not "overly surprised" by this announcement as Tandem has long said it would eventually work with various continuous glucose monitor manufacturers, he believes the release timing raises several questions, including about potential for further iCGM timing delays for Libre. Regardless, Johnson sees the news as "slightly positive" for Tandem and "slightly negative" for DexCom as the latter was previously Tandem’s sole CGM partner, but "nothing overly impactful" for either over the next year or two. He has an Outperform rating and $81 price target on Tandem's shares.
PRICE ACTION: In morning trading, shares of Tandem have gained about 9% to $61.63, and Abbott's stock has advanced over 2% to $81.65. Meanwhile, shares of DexCom have dropped almost 6.5% to $149.80.