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Abbott, Tandem Diabetes Seal Deal on Diabetes Management

Zacks

Abbott Laboratories ABT announced finalization of its diabetes care deal (proposed in October 2019) with Tandem Diabetes Care, Inc. TNDM. The deal will enable the companies to integrate Abbott's FreeStyle Libre continuous glucose monitoring (“CGM”) technology with Tandem Diabetes’ insulin delivery systems for enhanced diabetes management.

The deal covers the technical development of device integration and associated commercial-support activities. The initial focus of all commercial activities related to the partnership will be in the United States and Canada, and will later be expanded to other regions.

With the collaboration, Abbott aims to fortify grounds in the global CGM market, thus boosting its Medical Devices segment. The FreeStyle Libre portfolio is a component of the company’s diabetes care business.

Rationale Behind the Collaboration

The companies, through the collaboration, are aiming to digitally connect respective technologies for future automated insulin-delivery systems, thus simplifying diabetes management.

The FDA-approved FreeStyle Libre 2 integrated CGM (“iCGM”) system is the latest offering from Abbott whereas t:slim X2 insulin pump is the offering from Tandem Diabetes. Through the deal, the companies will focus on the interoperability between diabetes care devices.

For investors’ note, Tandem Diabetes’ t:slim X2 insulin pump was the first to receive FDA clearance in 2019 in a new device category, known as alternate controller enabled (“ACE”) infusion pumps. The design of ACE pumps enables reliable and secure communication with compatible external devices.

Industry Prospects

Per a report by Grand View Research, the global CGM device market size was valued at $3,929.7 million in 2019 and is anticipated to reach $10.4 billion by 2027 at a CAGR of 12.7%. Factors like rising incidents of diabetes and increasing adoption of CGM devices are expected to drive the market.

Given the market potential, this well-timed clearance will boost the company’s business.

Recent Developments in Diabetes Care

Of late, Abbott has been witnessing a slew of developments in its business arm.

Abbott, in June, announced receipt of the FDA’s approval for its next-generation FreeStyle Libre 2 iCGM system for use in diabetic patients aged four years and above.

In the same month, the company announced new late-breaking data which illustrated that use of its FreeStyle Libre system is associated with significant reduction in hemoglobin A1c levels for people having type 2 diabetes on either long-acting insulin or non-insulin therapy.

In April, Abbott announced receipt of Health Canada’s authorization for the use of FreeStyle Libre system in hospital settings during the COVID-19 pandemic. This will enable frontline healthcare workers to remotely monitor patients' glucose status and history. Additionally, Abbott announced that it will donate 3,000 FreeStyle Libre sensors to ensure hospitals in need have immediate access to the technology.

During the company’s first-quarter 2020 earnings call in April, it confirmed that Freestyle Libre continued to be accepted by new users throughout the quarter at an impressive rate, as reflected in the robust sales growth. Abbott also continued to expand reimbursement coverage for Libre globally, recently becoming the only CGM system to obtain reimbursement in Japan for Type 2 diabetic patients.

Price Performance

Shares of the company have gained 5.4% in the past year against the industry’s 9% fall and the S&P 500's 3.6% rise.



Zacks Rank & Other Key Picks

Currently, Abbott carries a Zacks Rank #2 (Buy).

A few other top-ranked stocks from the broader medical space are Quest Diagnostics Inc. DGX and Hologic, Inc. HOLX.

Quest Diagnostics’ long-term earnings growth rate is projected at 7.6%. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Hologic’s long-term earnings growth rate is estimated at 7%. The company presently has a Zacks Rank #2.

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