We remain Neutral on
DexCom
(
DXCM
), a prominent player in the continuous glucose monitoring market.
Its fourth-quarter fiscal 2011 loss per share of 18 cents was a
penny higher than the Zacks Consensus Estimate. Losses widened year
over year despite solid double-digit growth in the top line.
Revenues zoomed 43% year over year to $22.4 million, beating the
Zacks Consensus Estimate. Product sales spiked 54% to $20.9 million
in the quarter.
DexCom is focused on the development and commercialization of
continuous glucose monitoring systems for ambulatory use by people
with diabetes and by healthcare providers for the treatment of
diabetic and non-diabetic patients.
The diabetes market is large and growing. An important component
of effective diabetes management is frequent monitoring of blood
glucose levels. DexCom's product has a comparative advantage in
terms of both patient convenience and quality of data generated
vis-à-vis traditional diagnostic tests.
We believe DexCom is poised to gain a major share of the glucose
monitoring market driven by sustained product development
initiatives, collaborations, favorable reimbursement and increased
need for continuous glucose monitoring. Increased awareness and
acceptance of the need for continuous glucose monitoring and more
favorable reimbursement coverage should help drive sales for
DexCom's products.
Other potential catalysts include the FDA approval and launch of
new products under the company's collaborative agreements with
several companies including Insulet Corporation. DexCom plans to
file a Premarket Approval ("PMA") for the Gen4 sensor system at the
end of the first quarter or early second quarter of 2012.
In addition to upgrading and enhancing the functions of existing
products, DexCom has also been active on the collaboration front,
through which it is looking to leverage its technology with its
collaborator's product offerings.
We also feel that the company's recent move to buy healthcare IT
company SweetSpot Diabetes may allow it to better compete with
Medtronic
(
MDT
) through better data management systems.
However, competition in the glucose monitoring market is fierce
and DexCom faces stiff challenges from much larger players such as
Johnson & Johnson
(
JNJ
), Medtronic and
Abbott Labs
(
ABT
). Moreover, the company has incurred losses since inception and is
exposed to a strict regulatory environment. Our recommendation on
the stock is supported by a short-term Zacks #3 Rank (Hold).
ABBOTT LABS (
ABT
): Free Stock Analysis Report
DEXCOM INC (
DXCM
): Free Stock Analysis Report
JOHNSON & JOHNS (
JNJ
): Free Stock Analysis Report
MEDTRONIC (
MDT
): Free Stock Analysis Report
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