SAN FRANCISCO – It's quite difficult to maintain rapid growth as a company gets very large, since it takes more to move the needle on an increasingly bigger revenue base. But continuous glucose monitor (CGM) player Dexcom Inc. has managed to do just that so far – and its being richly rewarded by Wall Street for its performance and expectations going forward.
It was the only large cap company, exceeding a valuation of $10 billion, to move in the double-digits on the first day of the J.P. Morgan Healthcare Conference, as the San Diego-based company also offered a first glimpse of 2018 revenues and 2019 guidance. It added 12 percent on its announcement and presentation, which translates into a market cap gain of $1.2 billion to reach $11.5 billion.
Dexcom wasn't the only big med-tech mover on the first day of the iconic industry conference. But all those companies were around or below a $1 billion market cap threshold, making them appealing to a more limited range of investment groups. The ranks of double-digit, first-day JPM med-tech movers include affordable genetic testing company Invitae Corp.; volatile robotic surgery listing Transenterix Inc.; colorectal noninvasive testing player Exact Sciences Corp.; antibiotic resistance Dx company Accelerate Diagnostics Inc.; and sleep apnea implant player Inspire Medical Systems Inc.
By the numbers
For Dexcom, it gave a preliminary 2018 revenue figure of $1.025 billion. That's a 42 percent increase over 2017 and marks the first time that the company could exceed $1 billion in revenue. For 2019, Dexcom guided to revenue of $1.175 billion to $1.225 billion, which would translate into 15 percent to 20 percent growth over last year. Dexcom was one of the top med-tech performers on the stock market in 2018. (See BioWorld MedTech, Dec. 21, 2018.)
"Our success in 2018 was driven by increasing awareness of the importance of CGM in managing diabetes, supported by the approval and launch of Dexcom's G6 CGM platform both in the U.S. and internationally," said Dexcom chairman, president and CEO Kevin Sayer. "Looking ahead to 2019, we are confident in our position to continue delivering strong results."
For 2019, Dexcom currently anticipates total revenue of approximately $1.175 billion to $1.225 billion, representing expected growth of approximately 15 percent to 20 percent over 2018. This growth outlook is driven by strong growth in sensor volumes, continued international expansion, shifting channel mix and overall market dynamics.
The company expects that will be driven by growth in sensor sales volume and continued international expansion particularly in Japan, shifting toward a pharmacy channel away from durable medical equipment and continuing overall market expansion.
In Japan, Dexcom is focused on expanding reimbursement and launching its fingerstick-free, smartphone-connected G6. It's also considering moving into China, where it hasn't had much of a presence, but is debating whether it should launch with G6 or wait for the rollout of G7.
The latter is the second-gen, low-cost, fully disposable, smartphone-connected CGM coming from its partnership with Verily. G7 is expected to have a limited launch in late 2020 with a full rollout in 2021. The first-gen Verily/Dexcom CGM is expected to have a minimal rollout that's focused mostly on better understanding patient needs and market potential.
For G6, continuing to expand its Medicare and Medicaid patient base is a top priority even as it works to shift device fulfillment from a durable medical equipment (DME) route to the pharmacy channel. Dexcom said that its Medicare patients are still offered only the G5 system, but it expects those patients to gain access to G6 next year and that some physicians are waiting to prescribe until then.
DME is costlier both to Dexcom and payers, diverting more patients into the pharmacy system would reduce the company's expenses more than the benefit to payers. Dexcom noted that 40 percent of its contracts are through the pharmacy, which it would like to see become more than half over time in order to achieve a significant cost reduction.
Dexcom is considering the idea of making its G7 device being co-developed with Verily as an over-the-counter wellness product aimed at people who are prediabetic or otherwise interested in monitoring how their activity interacts with how they feel and their blood glucose levels. This would be the ultimate fruition of a process in which Dexcom has expanded its original base type 1 population into intensive insulin users across type 1 and type 2. It's now aiming for the broader type 2 population, and perhaps eventually for prediabetes patients or casual users who find the data of interest.
The CGM player also voiced some criticism of the first-to-market, fingerstick-free Freestyle Libre CGM from competitor Chicago-based Abbott Laboratories, noting that while it offers data on demand, it isn't technically continuous blood glucose measurement. It also observed that when it comes to the long-sought fingerstick free label, Dexcom has far fewer qualifications on the G6 than Abbott's Libre. Sayer said that 80 percent of new G6 users are Freestyle Libre users.
In order to better address the needs of diabetes patients globally, Dexcom plans to work with smart insulin pens. Insulin pens are a routine source of insulin for 70 percent of intensive insulin users in the U.S. – and for 90 percent of those outside the U.S. Dexcom noted that insulin giants Eli Lilly and Novo Nordisk both aim to roll out smart insulin pens in 2019, which it will integrate with its CGMs.
As for insulin pumps, Dexcom expects that the increasingly close linkage of with CGM data – including closed loop options – could boost the long-stagnated insulin pump market.
"We used to ship 65 to 70 percent of our products to folks on an insulin pump, but now that's much more representative of the actual market. Tandem and Insulet have products that simplify patient management and that will drive pump adoption," said Dexcom EVP of Strategy & Corporate Development Steven Pacelli in the breakout session. He noted that Typezero, a diabetes data integration company that Dexcom acquired this year, has software integrated into Tandem's system. "But while we expect to see intelligent insulin pens with decision support, we are optimistic that insulin pumps will reaccelerate."