Dexcom Stock: How One New Devices In Diabetes Has Reinvigorated Shares

Dexcom Stock: How One New Devices In Diabetes Has Reinvigorated Shares

There’s a new rock star product behind diabetes sensor maker Dexcom (DXCM) — and, even in its earliest days, the new product has reinvigorated Dexcom stock.


Dexcom has now launched its newest sensor, dubbed G7, in five countries. It hopes to follow suit in the US in the first quarter. The sensor helps run Dexcom’s continuous glucose monitor, or CGM. The body-worn device helps diabetics keep tabs on their blood sugar levels.

Chief Executive Kevin Sayer says the G7 launch is Dexcom’s biggest ever. The new sensor offers an array of improvements over its predecessor, the G6. The G7 is more accurate, 60% smaller, has more convenient onboarding options and a better app experience for patients, he said.

“Everything anybody loves about G6 gets better with G7,” Sayer told Investor’s Business Daily.

Investors in Dexcom stock now are watching for the Food and Drug Administration’s decision on G7. The company expects the FDA to sign off on the new sensor this quarter ahead of a first-quarter launch.

Dexcom Stock: Adding New Patients

Dexcom is working feverishly to make it product more widely available. Today, its CGM is used by patients with type 1 and type 2 diabetes who require insulin injections or pumps. In these patients, their bodies don’t make enough — or any — insulin. Insulin helps control dangerous spikes in blood sugar.

In the not-too-distant future, Dexcom expects a new group of patients will be eligible for CGMs. The Centers for Medicare and Medicaid Services is considering a rule change that would allow patients who only need one insulin injection a day — a type of long-acting insulin called basal — to receive reimbursement for CGM use. The same decision also may include people who experience repeated episodes of low blood sugar, but aren’t taking insulin.

Commercial insurers tend to follow Medicare’s direction on reimbursement, Sayer said. The company expects that ruling next year and a potential financial benefit in late 2023.

Bank of America analyst Travis Steed says it’s “a matter of timing, not a matter of if” when it comes to Medicare reimbursement for CGM use among patients who either take insulin once a day or suffer from low blood sugar but don’t take insulin . He has a buy rating on Dexcom stock.

“We see mid-20% growth for at least the next five to seven years and 2024 could be very exciting with basal/G7/international (sales growth),” he said in a recent note to clients.

Dexcom’s recent study, dubbed Mobile, was a driving force behind the Medicare proposal. The Mobile study tested CGM use in this pool of patients and showed “remarkable results,” CEO Sayer said. Estimates suggest there are 2 million to 5 million of these patients in the US

That decision could lift sales expectations for Dexcom in 2023. Currently, Dexcom stock analysts call for $3.47 billion in sales next year — about 20% above the midpoint of Dexcom’s own guidance for 2022. This year, the company expects sales to grow 18%- 19% we have a strict, as-reported basis.

Other Expansion Efforts For CGMs

Dexcom stock is also closely tied to more nascent expansion efforts for CGM devices. The company is working to expand CGM use to hospitalized patients as well as women with gestational diabetes. Both populations would require shorter-term use of CGM than typical patients.

The pandemic provided Dexcom a unique opportunity. How do health care professionals monitor and manage patients with diabetes while minimizing potential Covid contact? Enter Dexcom’s CGM.

“We were able to get our product into the hospital and get it used in numerous institutions and we saw great results,” Sayer said.

Dexcom was given permission to use its product in the hospital without an official FDA authorization. In March, the FDA gave Dexcom a breakthrough device designation to test its CGM use in hospitalized patients. The decision didn’t move Dexcom stock at the time, however. But a permanent FDA approval could.

The company is now working to iron out the challenges of monitoring hospitalized patients. Sayer says Dexcom has already done the “hard part.” It has an accurate sensor for its CGM. What’s left: Figuring out where to direct the monitor’s results and connecting the data securely to a patient’s chart.

Could Dexcom Stock Move On A Pre-Diabetes Decision?

More distantly, Sayer says there’s room for patients with prediabetes to also use CGMs. These people have higher-than-normal blood sugar levels.

The Centers for Disease Control and Prevention estimates 96 million adults in the US have prediabetes. More than eight in 10 don’t know they have prediabetes.

Sayer says knowledge is power for patients.

For patients already using body-worn glucose monitors, “the decisions they make are based on that CGM data,” he said. Having that information allows patients to make different choices about what they eat and how active they want to be.

Dexcom also partners with companies like Tandem Diabetes (TNMD) and island (PODD) to pair its CGMs with their insulin pumps. Abbott Laboratories (ABT), which sells another body-worn glucose monitor called Freestyle Libre, has similar deals.

A Smashing Third-Quarter Success

Though some of these opportunities lie in the future, demand is evident for Dexcom’s wares. During the third quarter, Dexcom’s sales advanced 18% to nearly $770 million. Organically, sales jumped about 20%. Sales also beat expectations for roughly $752 million, according to FactSet.

Adjusted earnings surged more than 27% to 28 cents a share and met forecasts.

The day following the company’s report, Dexcom stock rocketed more than 19%, hitting a record high.

Sayer says it’s an important time in Dexcom’s future. Investors also are taking notice. Notably, shares have a strong Relative Strength Rating of 93, putting Dexcom stock in the leading 7% of all stocks in terms of 12-month performance, according to IBD Digital.

“I think we’re at a very exciting point in our history here as we launch G7,” he said. “This product truly is vastly different and the experience is much better than we’ve had before. I think we’re on the brink of another expansion.”

Follow Allison Gatlin on Twitter at @IBD_AGatlin.


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