High sugar bloodbath for Tandem and Dexcom


It is difficult to be a minnow among pikes. Shares in the insulin pump maker Tandem Diabetes Care and blood glucose sensor specialist Dexcom crashed 59% and 19% respectively yesterday – and for one main reason: the threat of bigger fish.

Late September saw the US approval of Medtronic’s combined sensor and pump – the closest thing the market has yet seen to an artificial pancreas. This new product has altered the competitive scene so dramatically that Tandem was forced to issue a profit warning.

This is despite the fact that Medtronic’s system will not actually reach the US market until next spring (Medtronic’s artificial pancreas leads the field, September 29, 2016). On their respective conference calls the management of Tandem and Dexcom specifically attributed their poor sales expectations to patients delaying their purchase of new systems until the newest products are available.


Tandem’s third quarter non-GAAP revenue of $20.7m was below the consensus expectations of more than $23m, and at $0.75 the group’s loss per share was greater than the consensus of $0.58. But it’s not the miss that hurt the group so much as its pessimism for its full-year results. The company lowered its 2016 revenue guidance markedly, to $85-$90m from $105-$110m.

The problem is particularly acute for Tandem as it started shipping its newest pump, the t:slim X2, last week. What should be a sales bonanza has turned into a flop as the target population decides to hold on to their current tech for a little longer in the hope of getting something far more advanced.

On a conference call Tandem’s CFO John Cajigas outlined the odd problem of competing against something that it not yet available. “[Medtronic’s] 670 coming into the market in the height of selling season of Q4 and having that product not being launched … we can’t sell against the actual product’s performance but only what it promises.”

The company also pointed out that Medtronic is aggressively pitching its current system, the MiniMed 630G, to patients with the promise that they will then be first in line for the upgrade to the 670.


Dexcom’s third quarter revenue actually beat expectations – at $148.6m it was up 41% year-on-year and around $2m more than analysts were expecting – but owing to higher marketing and R&D expenses its loss per share was greater than expected at $0.22. The company said its full-year revenues would be within its previous guidance of which is $550-575m, but this was still lower than consensus expectations.

In a sense Dexcom is a victim of its own success. It has a history of exceeding analyst targets, so with quarterly loss greater and guidance lower than expectations – even if those expectations were not strictly reasonable – and so its shares sank.

And then there is the competition. As at Tandem, Dexcom management was exercised by the fact that the company is losing a race to a runner that has not even appeared on the track yet.

Steven Pacelli, executive vice president of strategy and corporate development at Dexcom, said that the MiniMed 530G – an even earlier version of Medtronic’s system which went on sale in 2013 – came close to putting the group out of business. “But [then] we had the benefit of having an actual product … we’re fighting a ghost for the next six to nine months, and we won’t really know what we’re up against until we actually have physical product.”

There is hope for Tandem and Dexcom. They are collaborating on an artificial pancreas of their own, which might – eventually – outdo Medtronic’s. Analysts from Feltl and Company wrote that Tandem has conducted market research comparing its first version of an artificial pancreas system which uses Dexcom’s G5 sensor with the 670G and found that the Tandem product was preferred, primarily because of its remote software update capabilities, ease of use, and design: the 670G is 62% larger, but its screen is 40% smaller.

The market might eventually swing round to favouring these smaller companies. But they will have a tricky time of it until then.

To contact the writer of this story email Elizabeth Cairns in London at elizabethc@epvantage.com or follow @LizEPVantage on Twitter

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