Memorandum

Tandem closes $69 million public stock offering at $2 per share - February 14, 2018

Tandem just announced that it has closed a $69 million underwritten public offering of common stock – 34.5 million shares at $2 per share, or an ~20% discount over the prior share price of ~$2.48. Gross proceeds of $69.5 million come before discounts, commissions, and expenses.

This is a needed and expected fundraise. For context, cash stood at ~$24 million at the end of 2017 (Q4 preliminary report), implying a burn of ~$14 million in 4Q17. That means this fundraise more than doubles Tandem’s current cash. There is also further near-term upside if investors fully exercise $16 million of warrants expiring this April.  

In an SEC filing prior to this offering, Tandem estimated it needs $50 million-$60 million to reach cash flow breakeven, and its goal is to reach this milestone in 2H19. Assuming Tandem’s cash flow estimate is correct, the combo of current cash, this offering, and the warrants could take it to cash-flow breakeven. Much of that will depend on revenue and competition, of course.

As we expected in 3Q17, Tandem had a strong Q4 (preliminary results), which should restore confidence: estimated sales of $39-$40 million rose ~60% year-over-year and ~67% sequentially. Sales were in line with tailwinds from t:slim X2/Dexcom G5 enthusiasm, 3Q17 comments about “overwhelming” calls from former Animas customers, and capturing more infusion set revenue through t:lock. 4Q17 pump shipments of ~7,000 grew ~58% YOY and 81% sequentially, bringing the installed base to nearly 70,000 customers – a sizeable force.

We’ll be listening on the 4Q17 call on March 1 for an update on the predictive low glucose suspend system. To hit the expected summer 2018 launch, the product needs to go to the FDA fairly soon. The pivotal study (n=107, >6 years old) was just marked as complete on ClinicalTrials.gov, de-risking the path ahead. 

 

-- by Adam Brown Kelly Close