DXCM

DexCom, Inc. (DXCM)

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DexCom, Inc. (DXCM)

Barclays Global Healthcare Conference

March 13, 2013 02:30 pm ET

Executives

Terrance Gregg - CEO

Kevin Sayer - President & Chief Operating Officer

Analysts

Presentation

Unidentified Analyst

Thanks for joining us this afternoon's session. I am really pleased to have DexCom with us today, and we have Terry Gregg, the CEO and Kevin Sayer, the President and COO. So, DexCom, as most of you probably know has had a lot of success lately in product approvals and partnerships and certainly has a lot going on in terms of making improvements both, on the top line and on the gross margin side, so we're hearing a lot of about that. Do you want to start off with just some opening comments in terms of the product launch that you are driving and as you report higher gross margins over the next few periods here?

Terrance Gregg

Sure. Well, as you know we got approval for fourth-generation glucose sensor last October, so we've been in that full launch mode since then. Here we are into the last weeks of the quarter and excited. That's the way I can describe it. Demand has remained strong. We live in a cyclical world with the DNA business whereas the first quarter sequentially after strong fourth quarter tends to be weaker. We certainly expect some of that, but as looking at the pipeline, what we pipeline having to do with the number of patients that have asked for the product going, go through benefits analysis for them. That remains as strong as ever we've ever seen.

It's certainly stronger than any first quarter following a strong fourth quarter, so all of that, and I'll have Kevin talk about margin, but all of that drives to volume and volume drives to improved margins. So, we're exceeding our expectations in the performance of product at the user level and at the prescriber level, and so we think that this really meets the criteria what CGM has been expected to be over the years, but really unfortunately including us failed to reach that criteria until the Gen4.

Kevin margins?

Kevin Sayer

On the margin side, our fourth-quarter margins were strong due to a number of factors. The volumes that we generated, a number of units that we produced, not just sales, but our manufacturing lines were very high in anticipation of the product launch as well.

As we move into the first quarter, those were offset by startup yields, which were acceptable as we planned on. As we moved into the first quarter so far, our margins targets, we're hitting them, our yields have been very strong on the Gen4 product. It was originally designed as a cost savings product evolution on our product pipeline and those cost savings, they are coming to fruition as we go.

Unidentified Analyst

You've been working on some pediatric communication, so?

Kevin Sayer

We filed our pediatric labeling indication in the first quarter with the agency, so we will go from there.

Unidentified Analyst

In Europe, you received CE Mark in the first quarter. Is that correct?

Terrance Gregg

Yes. We just felt the advanced technology meeting was in Paris two weeks ago. We had two sets of banners. One without pediatric indication and one with pediatric indication, we got it two days before going into the meeting, so we're now in the process of doing the necessary labeling updates and our goal is to allow our distributors who represent us in the European sector to begin calling on that population early in the second quarter.

Unidentified Analyst

Can you just help us frame that additional opportunity with having that indication in Europe and in the U.S.?

Terrance Gregg

Sure. Well, let's start with the U.S., because that's still our largest market, and today there are somewhere between 800 and 1,000 pediatric endocrinologists that we don’t call. We do have an installed base. Let's say roughly 10% of our population are individuals less than 17 years of age, but that’s off label use, therefore we don’t compensate our salespeople for that placement on that group of patients. We certainly don’t call on physicians to prescribe. It's the physician decision or the parent's decision, so we think this opens up a whole new opportunity. We scale our sales force up by 20 new territories this quarter in anticipation of that as well as better geographic satisfaction to the prescribers that we're calling on today, and so we think that's an uptick.

If you looked at our guidance, for the year about $120 million to $130 million, 35% to 40% over last year’s product revenue certainly some of that higher end towards the upper range of the guidance is based on the expectation of a pediatric claim approval later in the year.

Unidentified Analyst

And you mentioned most of your businesses in the U.S., can you talk a little bit about the strategy outside the U.S.

Kevin Sayer

Right now there is not strong reimbursement any place outside the U.S. and so it’s been used largely by physicians in clinics and by people who do cash pay, but our businesses is growing very consistently, and as we've disclosed on our calls our U.S. revenues are nearing 10% of the total pie. We'll continue to grow that more rapidly than the growth the U.S., but proportionate when you get into numbers. U.S. will still be bigger.

Our approach right now is we are not going direct anywhere. We have a very strong network of distributors who distribute our products in the various geographies and we'll add several new countries this year. We'll probably double the number of countries we are in from today by the end of this year, not all of them are huge, but nevertheless every time we do it more translation this it's more manual it's more operational issues as well, so we are expanding internationally. We have good distribution partners. Roche is a very good distribution partner for us in some of these geographies as well. They have been very instrumental in helping us for our business. It is a good network and it's a good way for us to start.

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