Given the way things have been going this week with the Medtronic recall and the Insulet notice it’s refreshing that the Dexcom earnings announcement had no surprises. Yes as Momma Kliff used to say surprises can be fun but dull isn’t so bad either. Although we wouldn’t exactly classify Dexcom’s earnings as dull as the company continues to click on all cylinders. If anything one has to wonder with their stock surging ahead can it sustain this momentum.
While there were several positive takeaways from the earnings and call the biggest was the continued progress of the G7, which as the company noted will be fully rolled out in 2021. This news isn’t a surprise to us nor should it surprise the folks at Abbott who continue to wait for Libre2 approval. The longer the FDA takes with the Libre2 the worse it gets for Abbott and the more it benefits Dexcom. Nothing we heard today changed our opinion that G7 has the potential to seriously hurt Libre especially since no one seems to have any idea when, or if Libre2 will get here.
As crazy as this will sound the reality is neither Dexcom nor Abbott has reached anywhere near their true potential. Looking at diabetes alone even if you add the two companies together, they have yet to penetrate 10% of the total diabetes market. As much as we believe CGM has tremendous potential outside of diabetes, there is still plenty of room for growth within the diabetes market.
The facts are these;
1. There are approximately 5 to 6 million intensively managed patients in the US alone.
2. CGM continues its move towards becoming the standard for glucose measurement regardless of how the patient manages their diabetes. A move which will accelerate once the G7 arrives.
3. The Medtronic recall combined with the launch of the Control IQ and the coming launch of the Horizon from Insulet is just more good news.
4. Dexcom’s multiple partners, Lilly, Novo Nordisk and Companion just to name a few is more gas being thrown on the fire.
5. There is no Dexcom wannabe within spitting distance of developing anything that would disrupt this growth.
Frankly it boggles the mind what will happen once CGM moves beyond diabetes and into other disease states.
So the real question now becomes just how much longer will it take for someone to come along and make an offer for the company. Yes, the company now carries a market cap of just under $24 Billion. Yes, the stock is up almost 70% over the past year and almost 350% over the past two years. Yes, Abbott is a serious competitor who will not go quietly into the night, however the Libre2 misstep is going to cost them and cost them dearly. The fact is the longer these possible suitors wait the more expensive it gets for them.
Will Verily pull the trigger? Will it be Apple? Could Amazon make a bold move or perhaps someone completely unknown? Think of what would happen should Medtronic come to their senses and allow the Dexcom sensor to talk with their insulin pumps. This is highly unlikely but given how bad things are going at Medtronic we aren’t counting anything out.
With tomorrow being Valentine’s Day there is no question Dexcom and their stakeholders are feeling the love. We hate to be redundant, but this is the best run diabetes device company and we aren’t surprised they continue to execute with near flawless perfection. Sure there will be the occasional misstep but Dexcom has proven they can bounce back quickly from mistakes when they happen.
Happy Valentine’s Day everyone.