Dive Brief:

• Tandem Diabetes Care projects that its worldwide customer base will triple to 1 million by 2027 as the insulin pump maker launches multiple new products and user growth is projected to jump over the next five years among both Type 1 and Type 2 diabetes patients.
• CFO Leigh Vosseller said Monday during a virtual R&D event that the company's customer target will primarily come from capturing market share among Type 1 users as adoption by that specific population continues to grow. Tandem executives also said a group of new product releases and focusing more on Type 2 patients will help fuel the company's growth projections.
• Hitting 1 million installed units implies roughly $1.5 billion in sales by 2027, up from the approximately $700 million in sales the company has projected for 2021, Craig-Hallum analysts said in a Tuesday note. Despite the projected growth for insulin pumps and continuous glucose monitors, SVB Leerink analysts were more cautious on Tandem's growth plans, giving rival Insulet the competitive advantage as the diabetes tech market develops. After sliding by 1.75% when the market closed Monday, Tandem's stock price was up over 8% Tuesday.

Dive Insight:

The diabetes tech space has seen strong growth over the past few years as patients continue to increasingly adopt wearable medical devices and rely more on digital health monitoring or treatment. Over the past two years, CGM and insulin pump makers have driven user and revenue growth as other medtechs have been hit hard by the pandemic.

Tandem has brought in $492.8 million in sales through the third quarter, growth of about 50% compared to the first nine months of 2020. The company updated its year-end guidance in November and is now expecting a range of $685 million to $695 million in sales, which would represent year-over-year growth of nearly 40%.

Insulin pump use is only expected to pick up going forward. Elizabeth Gasser, Tandem's chief strategy officer, said Monday that the company expects worldwide pump adoption among patients with Type 1 diabetes to increase by 1 million users over the next five years, with penetration in the U.S. and international markets hitting about 65% and 20% by 2027, respectively.

While expectations are that diabetes tech users overall will grow steadily, competition in the space is heating up, particularly among insulin pump players. Smaller companies like Tandem or Insulet are competing with the likes of Medtronic, which has less market specificity but much more capital and resources.

Insulet is expected to take market growth over the next several years as more patients turn to pumps and automated insulin delivery (AID) systems, which automatically coordinate with CGMs to deliver insulin to patients.

Tandem and Medtronic beat Insulet to market with pumps that can be part of AID systems. However, Insulet's upcoming pump with AID system capability, the Omnipod 5, has been hyped all year as a device that will lead the market and even grow overall pump adoption.

Insulet announced last week that Omnipod 5 clearance is not likely until the first quarter of 2022 after the company originally expected a first-half FDA decision and launch. The move gives Tandem a bit of relief but not much.

The growing competition, and expected future success for Insulet from the Omnipod 5 launch, is the primary reason for SVB's skepticism coming out of Tandem's R&D event.

"Despite the positive update today, and our bullish view on the insulin pump market overall, we do remain somewhat skeptical that TNDM can continue to drive the extent of sales upside over the near to mid-term that investors have become accustomed to as new competitive products launch, notably [Insulet's] upcoming Omnipod 5 in 1Q22," the analysts wrote.

Craig-Hallum analysts said the event did little to change the immediate market landscape but were a bit more bullish on Tandem than the SVB analysts, writing that the company deserves valuation closer to its competitors and near-term competitive concerns "are overblown."

A key aspect of Tandem's growth will be behind new product introductions, which include a pump patch to match Insulet's Omnipod 5. A rival product is not likely to be on the market soon, however, as the product is still in the early days of development. SVB analysts wrote that they "expect any truly competitive patch pump offering will more likely be in the later stages of the 2022-2027 timeframe."

Tandem also outlined growth among patients with Type 2 diabetes, a population that the entire diabetes tech space is targeting due to its size. CGM maker Dexcom has made Type 2 patients a key growth driver going forward, and CEO Kevin Sayer has been openly bullish about the opportunity on multiple occasions.

Patients with Type 2 diabetes are a more limited growth driver for insulin pump makers as most patients do not typically need to manage insulin levels as intensely as patients with Type 1 diabetes. Still, Tandem is joining Insulet and Dexcom in focusing more on expansion among this group.

The company projected Monday that the worldwide Type 2 insulin pump market will grow from just 5% penetrated to about 15% by 2027. However, because the Type 2 market is so large, Gasser said growth to 15% penetration will equal about 325,000 more pump users.

Tandem did not give a detailed look at 2022 projections, but Vosseller did say the company expects at least 20% sales growth. More specific guidance will be given on the company's next earnings call early next year.