Nothing new here

Strong revenue growth, adding more capacity, increasing revenue guidance all in an expanding market what more could anyone want. Nothing if you’re a Dexcom investor as this company continues to methodically build their already strong business. As well as the company is doing it would be foolish to ignore what could derail this runway freight train. Here are just some of the possible items that could push this train off the rails.

Abbott Goes Nuclear

Abbott has already made it very clear they will be the value option in CGM. However Dexcom is beginning to invade their turf on two fronts. First Dexcom is transitioning from DME to a pharmacy benefit and second the G7 is expected to be here in 2021. Abbott could go nuclear on pricing to keep Dexcom fighting on the price front.

The law of large numbers

As much as we hate the term headwinds or the phrase about running into tough comparisons this is going to happen to Dexcom and Abbott. Yes the CGM market is continuing to expand and in our opinion has tailwinds not headwinds but the street isn’t thinking this way and will soon get ahead of themselves with revenue and/or profit projections. Although we don’t put much stock in how shares perform after hours Dexcom is down in after hours trading which is crazy when you consider how strong their quarter was, go figure.

Unforeseen Events

No company not even one as well managed as Dexcom is immune to unforeseen events. Dexcom for all practical purposes is doing all the right things including expanding capacity. However as much as they’d like to they do not control all the links in the chain and could due to circumstances beyond their control run into issues. Abbott faces the same issue as does just about everybody in the CGM business.

The one area we aren’t really worried about is competition even if Medtronic goes completely off the reservation and starts giving away their crappy sensor for free. As Dexcom noted today and Abbott has noted in the past manufacturing processes are as important as sensor accuracy. Dexcom has designed the G7 not just to be the best sensor but also the cheapest to manufacture. Medtronic however has known issues with their design and barring a complete and very expensive make over these issues will not go away.

The fact is if you took away the installed user base of the 670G Medtronic would have virtually no sensor presence at all.

Another area we see Dexcom having an edge over Abbott is possible buyers, unless Miles White Abbott’s CEO has something crazy up his sleeve it’s unlikely anyone will come along and buy Abbott. Sure it could happen but it’s much more likely that someone would come along and buy Dexcom.

The reality with CGM is Dexcom and Abbott own this market and everyone else is a mere after thought. Each can and will make boatloads of money. Each can and will ride this incredible wave of expansion in the CGM market. We just see Dexcom as a better buy as they have more options available to them then Abbott. This is after all about money.