It isn’t often that Diabetic Investor gets to write about a diabetes device, heck any diabetes company, that gets it. A company that actually executes. That’s why it was such a pleasure to listen to Dexcom (NASDAQ:DXCM) report earnings this evening. Take a look at the results which according to a company issued press release;
“Total revenue grew to $72.8 million for the first quarter of 2015, an increase of 55% from the same quarter in 2014. Total gross profit totaled$46.5 million for the three months ended March 31, 2015, compared to a total gross profit of $29.8 million for the three months ended March 31, 2014.”
Yet the numbers as good as they are only tell half the story with Dexcom. What the company sees, and correctly we should add, is that continuous sensing is not just about collecting the data. Or having that data viewable on a smartphone, insulin pump or Apple Watch. The true value is not the data itself but what the patient does with that data. How this data is used to help the patient achieve better outcomes. In other words they are preparing themselves for the coming of outcomes based reimbursement.
To fully gauge the power the company now commands management made it clear while they will continue to work with their partners in the insulin pump space, Johnson and Johnson (NYSE:JNJ), Tandem (NASDAQ:TNDM) and Insulet (NASDAQ:PODD), only if they share this vision. The vision of empowering the patient by turning data into actionable information. Information which leads to better patient outcomes.
Frankly Dexcom is sitting in the catbirds seat as they know they have the best system on the market. They know that the success of the Animas Vibe can be directly linked to the fact the pump works with their system. Medtronic (NYSE:MDT) may have a larger installed user base than Animas, Tandem and Insulet combined, yet their sensor by any measure is subpar to the Dexcom sensor. A situation which creates the distinct possibility as sensor augmented pumps become more popular that Medtronic will see share erosion as their huge installed user base decides to switch to another system because the other system works with the Dexcom system.
Even better for Dexcom is as alternate insulin delivery systems become interconnected, insulin companies could soon be knocking on Dexcom’s door. It’s known that Sanofi (NYSE:SNY), Lilly (NYSE:LLY) and Novo Nordisk (NYSE:NVO) have all explored insulin pens that send data to the cloud. With sensor data now available on a smartphone Dexcom can do the same thing for patients following multiple daily injection (MDI) therapy as they are doing for insulin pump patients. Talk about expanding the market.
But the good news doesn’t stop there. One thing we have long admired about Dexcom is the company doesn’t forget about the daily routine of running the business or as former CEO Terry Gregg used to say, the basics of blocking and tackling. The company continues to develop even more accurate sensors, sensors that will be cheaper to make and explore alternate distribution models that generate higher margins. At their core they have not forgotten the two rules of running a successful diabetes device company- rule one – the patient comes first, rule two – reread rule one.
About the only negative and when it comes to Dexcom it’s hard to find any negatives is can they sustain their well-deserved success. Shares of Dexcom are up over 100% over the past 12 months, patient adds are up, new and better technology is on the way and continuous glucose sensing continues to gain greater acceptance.
Quite frankly Dexcom is a model that every other diabetes device company should strive to emulate. Not content to rest on past success they continue to innovate. Yet they haven’t forgotten about the basics of actually running a diabetes device company. Simply put Dexcom is the complete package with a very bright future.