On Track and then some

On Track and then some

It is becoming increasingly difficult to come up with words that accurately describe just how well Dexcom (NASDAQ: DXCM) is doing. Besides being the market leader in the growing continuous glucose monitoring space, the company continues to superbly balance the demands of today while building for the future. This is not to say everything perfect, in the medical device business it never is. However, the minor setbacks that the company has encountered are being efficiently dealt with.

Here are a few highlights from this afternoon’s earnings call that tells just how well the company is executing –

The company added 2% of the Type 1 population to their installed user base during the quarter.

Their partnership with Verily is targeted to launch their first product in 2018, followed by the Band Aid sensor in 2020. We believe both target dates are on the conservative side.

And, of course, the FDA panel vote to give the system a non-adjunctive claim also occurred during the quarter.

The question now becomes, other than can they continue to meet expectations, expectations which keep getting bigger, is when someone will come along and acquire the company. The flip side of this question naturally is does the company even want to be acquired. Why rush into any deal when the company keeps getting more valuable by the day. Simply put they are in the right place, at the right time, with the right partners and they just happen to play in the fastest growing segment of the diabetes device market which just happens to have a very bright future.

As Momma Kliff used to say “Money buys lots of things.” And it just could be that those companies who could acquire the company might just decide to bite the bullet today rather than pay even more later. Given the growing importance of CGM to future diabetes management systems, all these companies who are building these diabetes echo systems can ill-afford to let Dexcom fall into someone else’s hands.

Perhaps the best way of thinking about this is to take a look at my favorite hockey team, the Chicago Blackhawks. Before the Hawks started winning Stanley Cup’s every other year they spent heavily on two young stars, Patrick Kane and Jonathan Toews. They then took the next step and resigned both to even bigger contracts to keep them together. They did not wait to see if these two superstars would actually become superstars, they took a risk which has paid off big time. They knew if they did not sign them another team could come along and offer even more money.

This is the position Dexcom is now in. They have developed into a superstar and are in a position to demand an even bigger multiple. They also know that there is no rush to sell and can afford to wait. Basically the more Cups they win the higher the price.

Dexcom also shares something else with my beloved Hawks, solid management teams which are committed to winning. Both are committed to long term excellence and neither is content with what they have accomplished to date. Neither has shown any signs of hubris or arrogance, understanding that past success does not guarantee future results.

Perhaps the biggest difference is we highly doubt the Hawks owner, Rocky Wirtz would sell the team. Dexcom management understanding their responsibility to their stakeholders is obligated to at minimum listen to offers. This seasoned team understands that not only does the patient come first but the goal of any publicly traded company is to maximize shareholder value. And maximizing they are.