Before we get into our analysis of the Dexcom (NASDAQ: DXCM) results we need to get something off our chest. Can all the corporate communications people get together and come up with some new adjectives to describe how business is doing. Seriously if we hear the term headwinds one more time we just might puke. Ok now that that’s over onto Dexcom.

Who by all accounts had a pretty good quarter, per the press release;

• Revenue grew 30% versus the same quarter of the prior year to $184.4 million

• International revenue grew 49% versus the same quarter of the prior year

• GAAP net loss of $24.2 million, or $0.28 loss per share

• Non-GAAP net loss of $28.3 million, or $0.32 loss per share

The company also increased their revenue guidance for the full year.

The street likes what they heard as in pre-market trading shares of Dexcom are up almost 5%.

Now here comes the good news, things are just going to get better as more patients and physicians become familiar with the new G6 system. This system is everything and more that Dexcom said it was going to be. We know this because we’re using it.

With a very patient friendly sensor insertion device and no calibration Dexcom has thrown down and now it’s Abbott (NYSE: ABT) who must decide how to respond. Do they attempt to go head to head with Dexcom and turn the Libre from a “flash” to a real CGM? Do they add things like smartphone connectivity, alerts, alarms and predictive analytics? Or do they fight back with a lower price?

During the call which followed the release pricing was big topic with the company fielding numerous questions on this subject. The executives at Dexcom did a nice job answering these questions as they politely noted that yes, it is a competitive environment. What they wanted to say but couldn’t say is this;

“Folks let’s get real here Abbott could care less if they make any money selling Libre. When Libre was first launched in Europe they heavily subsidized the product to gain share. Admittedly we underestimated how Libre would be received and thanks to our mistake Libre did exactly that. However, they are now playing in the big leagues here in the US a much different environment than Europe. Being a huge company with multiple product lines they can afford to lose money on Libre as unlike us they sell other things besides sensors. Therefore, it makes perfect sense they would be aggressive with their pricing as they know this about the only way they can gain share here in the US. However, with our new G6 they no longer have a competitive advantage other than price.”

In about two months the diabetes world will gather in steamy Orlando for the annual ADA confab. Given what we know about the G6 our guess is this product will be a hot topic. It will be interesting to see how Abbott responds as from our perspective when it comes to CGM Dexcom will own this show.

As we have said all along the CGM market is large enough and growing fast enough for both Dexcom and Abbott to win. The price war we anticipated has begun and as we anticipated Dexcom is ready to handle it. We suspect that another prediction will come true very soon as due to the G6 Abbott will now add features to Libre, so they can compete. They will still be aggressive price wise as they can afford to be, but this price advantage won’t last. Bottom line here is that Dexcom has regained the high ground in CGM and the tables are now turned as it is Abbott who must respond.

Before we move onto the pipeline, more good news here too, a quick comment on the Medtronic (NYSE: MDT) stand alone CGM which is sitting on the launch pad. While the train has left the station already and the company cannot shelve the product and start over we suggest Medtronic follow some advice Momma Kliff used to give us; “When you have nothing good to say it is best to remain silent.” Frankly it’s not an overstatement to say this product is dead on arrival.

Looking at the pipeline this is another area where Dexcom is well ahead of Abbott. Besides their multiple insulin pump partners, the company is working with all the insulin companies and that little company in Mountain View. Abbott is partnered with Bigfoot which could be good but for the moment Bigfoot has yet to even submit a product to the FDA. This is where things get interesting.

Let’s say Miles White Abbott’s CEO goes out and acquires an insulin pump company that has a product and patients. With Animas being shut down and their patients being shipped off to Medtronic and Dexcom now an investor in Tandem (NASDAQ: TNDM) that leaves Insulet (NASDAQ: PODD) as the only viable candidate. The two companies already work together and while Insulet also has a deal with Dexcom the company has previously stated they would be receptive to having the OmniPod work with the Libre too.

It’s well known that the folks at Insulet would like nothing better than to be acquired as this has been the goal since the company was started. Now that Pat Sullivan and his team has the company on the right track the timing for Insulet couldn’t be better. Given that Miles has fallen in love with the Libre and that Bigfoot is still some ways away it would not surprise us one bit if after he pays down the debt from Abbott’s most recent acquisition he pulls out the checkbook once again and buys Insulet.

The reality is the standalone CGM market is a two-horse race. The race isn’t over by a longshot and as we noted before it was a mistake to count out Dexcom when Abbott appeared to be in the lead. It would be just as foolish to now count out Abbott as they are heavily invested in the Libre. The best news of all is that everyone can win this race. Dexcom, Abbott and most importantly patients.