Credit: Shutterstock photoDexCom, Inc. ( DXCM ) recently revealed the U.S. Food and Drug Administration (FDA) approval for a new algorithm designed for its G4 PLATINUM Continuous Glucose Monitoring (CGM) system. Following the announcement, shares of DexCom shot up nearly 14.12% to close at $50.93 in the last trading session.
This latest software enhancement to DexCom G4 Platinum will make the performance level of blood glucose monitoring comparable to finger stick meters, the traditional standard-of-care for the same. With this new technology, the G4 Platinum system approaches a MARD (Mean Absolute Relative Difference) measurement of 9%, making it the first and only CGM system in the market with a single-digit MARD.
The new algorithm will be made available free of charge to existing adult patients using G4 Platinum and will be preloaded onto the new DexCom receivers. The combination of the latest software with CGM advantages of real-time trends, speed and direction, will allow healthcare providers, patients and caregivers to have a complete picture of the patient's glucose activity.
Management is extremely optimistic with regard to the new algorithm for the G4 Platinum system, which according to them, represents a significant potential to support the company's ultimate goal of replacing finger-sticks altogether.
In fact, since its launch in Oct 2012, the G4 Platinum CGM system has been driving superior product revenue growth at DexCom. Notably, DexCom's average year over year quarterly revenue growth has been approximately 63% since the launch.
The recently reported third-quarter 2014 also saw a significant 60% rise in product revenues, on the back of continued growth in the installed base of customers using the G4 Platinum system. Other highlights of the quarter are provided below.
Third-Quarter Results
DexCom reported a loss of 8 cents per share in the third-quarter of 2014, wider than the Zacks Consensus Estimate of a loss of 5 cents. However, losses during the quarter remained flat on a year-over-year basis.
DexCom's total revenue surged 60.8% to $69 million, topping the Zacks Consensus Estimate of $61 million. The upside was driven by an impressive 60% rise in product revenues to $68 million and a $0.7 million increase in development grant and other revenues to $1.1 million.
Gross margin expanded 450 basis points year over year to 69.5%, primarily due to increased revenue and greater sales of the high margin G4 Platinum system.
Both selling, general and administrative (SG&A) and research and development (R&D) expenses rose 56% and 56.8% year over year, respectively, owing to higher cost of sales, increased marketing expenses, additional payroll and consulting costs and other key expenses for commercial infrastructure.
Despite the increase in both R&D and SG&A expenses, operating loss narrowed to $5 million from the year-ago level of $5.8 million, riding on strong revenue growth and higher gross margin base.
DexCom had cash and cash equivalents of $63.2 million as of Sep 31, 2014, higher than $49.5 million as of Jun 30, 2014. Total long-term debt went down to $5.2 million from $5.8 million as of Jun 30, 2014.
Our Take
We are encouraged with DexCom's revenue beat and narrower operating losses in the third quarter. DexCom also boasts a robust product pipeline with the recent launch of DexCom SHARE - the first FDA-approved mobile remote monitoring system - and the new software for its G4 Platinum CGM System.
However, DexCom continues to face stiff competition from Johnson and Johnson ( JNJ ) Abbott Laboratories ( ABT ) and Medtronic ( MDT ), which remains a headwind.
Currently, DexCom carries a Zacks Rank #3 (Hold).
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
