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DexCom Idea Proposal (DXCM)

DexCom Idea Proposal (DXCM)
 

Will Abbott’s new low cost/high tech Libre 2 take share from DexCom’s G6 or is the continuous glucose monitoring market big enough for both to thrive?

Report Available: April 24, 2019

 

Blueshift’s initial research found DXCM, the leader in developing and commercializing continuous glucose monitoring (CGM) systems, basking in a strong Q4 with several landmark achievements in 2018. Record Q4 and full-year revenue growth drove annual sales over $1 billion. The company’s G6 CGM platform received FDA and CE Mark approval in early 2018 and rose to become the gold standard for continuous glucose monitoring. Despite this outstanding performance, DXCM may soon face significant competition. ABT, the market leader in CGM volume with 70% share, introduced its next-gen Libre 2.0 CGM product. It is expected to match the G6 technically and cost 70% to 80% less than the G6 once approved by the FDA.

 

Observations

  1. DXCM’s Q4 results smashed Street estimates. Quarterly revenue grew 53% and full-year revenue rose 44% driving annual sales over $1 billion for the first time. Q4 business segment performance saw Sensors, which represents 75% of total revenues, climb 57% YY. Transmitter revenue (17% of total revenue) increased 39% YY and Receiver revenue (8% of total revenue) rose 46% YY. Guidance for 2019 was in line with expectations.
  2. On the 12th anniversary (March 27, 2018) of DXCM’s first FDA product approval in 2006, the agency bestowed a present on the firm in the form of approval for its next-gen Dexcom G6 CGM platform. The G6 is the first to offer direct-to-phone smartphone connectivity with no need for a separate receiver and or required fingerstick calibrations. In June 2018, DXCM received CE Mark approval for the G6 for people with diabetes aged two years and up. The product was made available to patients in the UK and Ireland in July and the rest of Europe later in 2018.
  3. ABT’s FreeStyle Libre platform has been the leading low-cost CGM provider since its arrival on the market with its Pro system in 2016 and its consumer version Libre 1 launched in 2017. The FreeStyle CGM franchise has 70% of the market and the product can service both Type 1 and 2 diabetics. The company now has its next-gen Libre 2 which is technically competitive with DXCM’s G6 and could capture significant additional share if patients switch monitors. Libre 2 received CE Mark approval for distribution in Europe in October 2018, and U.S. approval is expected soon. ABT’s diabetes care business has 1.3 million patients. In Q4 the segment saw 35% growth and the company added 300,000 new Libre patients which is almost equal to DXCM total G-series patient count. Additional investments have been made in manufacturing capacity in anticipation of the Libre 2 approval in the U.S. and ABT said it plans to “open the flood gates” once it receives approval.
  4. Perhaps in preparation for a competitive showdown with ABT and to address margin pressure, DXCM announced a restructuring initiative during its Q4 earnings call. The company plans to lay off 350 workers performing mostly tech support, administrative functions, and some sales roles that will now be outsourced to the Philippines. In a related move, DXCM plans to invest further in engineering and development of new technology, including decision management software for patients and efforts in the predictive and diagnostic areas, intended to expand its product pipeline.
  5. Diabetes affects more than 400 million people worldwide, including 1 in 11 adults with either Type 1 or Type 2. In the U.S., 30 million people (9.4%) had Type 1 or Type 2 diabetes as of 2015, according to CDC data. The North American CGM market is expected to grow at a 13.8% CAGR from 2019 to 2024. The size of the opportunity in this growing market could signify the ability for both ABT and DXCM to thrive.

 

Is there room in the CGM market for both ABT’s Libre 2 and DXCM’s G6? Are both products equal technologically or is the G6 still the gold standard? How will diabetic patients react to a low-cost high-tech product like Libre 2? What will ABT have to do to take share from DXCM? How can DXCM defend its gold standard position? Will the Libre 2 launch a price war?  To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: Endocrinologists, Nurse Educators, Diabetes Centers, Diabetes Sales Channel, Competitors, and Industry Specialists.

 

Companies: Abbott Laboratories (ABT), DexCom Inc. (DXCM), Medtronic plc (MDT), Senseonics Holdings Inc. (SENS)

 

Research Begins: April 8, 2019

 

Blueshift Research’s sister company, Intro-act, is launching its Intro-act Scorecard, the C-suite’s standard, ongoing measure of corporate investor engagement.

 

The Scorecard optimizes the ROI on corporate access by measuring: Concentration, Directionality, Breadth, Impact, Depth, and Duration