With Covid hospitalizations and deaths dramatically on the rise, it’s easy to overlook another major healthcare crisis confronting America.
And yet, it’s one that could affect as many as 120 million of us and pose profound long-term medical issues.
Ironically, the Covid binge eating of “comfort food” we’ve seen over the last 18 months may add to the new level of concern.
Of course, I’m talking about the nation’s obesity crisis.
There’s a silent health crisis A recent report by the American Obesity Association says 42% of Americans are obese.
No wonder a federal panel recently recommended lowering the age to begin screening for diabetes, which is closely tied to being overweight, down to 35.
To me, the two reports together mean that a life sciences firm with a strong diabetes hook will be in high demand.
With that in mind, I want to reveal a company taking on the challenge of this $72.8 billion sector with a leader that is beating the overall market by nearly fourfold…
Crisis By the Numbers
Now, you’ve probably seen the words “obese” and “overweight” thrown around interchangeably. But to scientists, they actually mean two different things.
Overweight is a lesser form of obesity, usually defined as having a Body Mass Index (BMI) of between 25 and 30. True obesity comes next when BMI is 30 or more.
BMI is a measure of how much a person weighs relative to their height. It’s inexact, especially in athletes or people who are taller or shorter than usual. But it provides a very good initial picture, especially on the level of a whole population.
And as the American Obesity Association recently reported, last year 42% of Americans were obese. Another 35% were overweight.
That’s 120 million Americans suffering from obesity. This is already costing America $1.7 trillion dollars a year in healthcare costs and lost productivity.
And in a recent study by the same group, these numbers are set to keep growing.
By 2025, 50% of Americans will have obesity. By 2030, 60% will have it.
Being overweight and especially obesity already come with lots of added health risks. The Covid pandemic only made things worse.
That’s because not only does obesity weaken the immune system. It also makes your lungs have to work harder, giving you less reserve lung capacity to use in case they get infected.
Simply suffering from obesity triples your chances of having to go to the hospital if you catch Covid. And the higher a person’s BMI, the higher their risk of bad Covid outcomes get.
In fact, obesity turns out to be one of the main risk factors for Covid complications. About 78% of Americans hospitalized with Covid were overweight or obese, and many either had diabetes or were on the verge of getting it.
And right now, about 13% of all American adults suffer from diabetes. Another 34.5% have prediabetes, a condition of high blood sugar that often leads to the patient getting the disease.
Even worse, about one-fifth of those with diabetes don’t know they have it. Meanwhile, only 15% of people with prediabetes have been diagnosed.
And both conditions are creeping down the age brackets, with more and more people getting affected as early as 35 years of age.
In other words, a company taking on this challenge will have an outstanding opportunity to grow.
Working In Tandem
The company I have in mind is a San Diego-based medical device maker that focuses on diabetes. It was formed in 2006 with the aim of revolutionizing how diabetics take insulin.
By interviewing more than 4,000 diabetics who used insulin pumps and their health care providers, the company designed the best insulin pump on the market.
The result was the t:slim Insulin Pump, released in 2011. It was the first ever touch-screen insulin pump. But the company, Tandem Diabetes Care Inc. (TNDM), didn’t stop there.
Two years later, the firm received FDA clearance to release software that connects the t:slim pumps to the cloud, allowing diabetics and their healthcare teams to look at continuous data from the pumps and from some glucose meters.
This was a first and allows them to see exactly how well the insulin is working and when, and fine-tune the dose and schedule.
The company has since released another insulin pump with a built-in glucose meter for even better dosing and data.
Its latest release, the t:slim X2 Insulin Pump, is up to 38% smaller than the competition, features a built-in continuous glucose monitor, and has been proven to be better at keeping users in the ideal blood sugar range compared to non-touchscreen pumps.
Wall Street analysts think Tandem’s combination of more user friendliness to the patient combined with ease of accessing data by the healthcare team will see Tandem gain market share.
That’s especially good for the company as with obesity and diabetes numbers unfortunately set to rise, that market will keep growing at a fast pace.
Now, over the last several years, profits at Tandem have been in short supply. This quintessential grow firm instead invested heavily in building out the franchise.
But the company just produced a smoking second quarter report, with sales up 58%. Even better, per-share profits more than doubled that, with an increase of 113%.
No wonder the stock has been on a tear this year. Since the market bounced back from a selloff on May 12, the S&P 500 is up a respectable 11.35%.
Tandem, meanwhile, jumped more than 50% in that time-frame, beating the broad market fourfold!
Add it all up and you can see why Tandem Diabetes Care is a great long-term play on wealth-building healthcare tech.
Cheers and good investing,
Michael A. Robinson