Steady as she goes

Steady as she goes

Far too often in this wacky world of ours people think they must do something different. That even though there is nothing wrong with their business they want to do something different. It’s rare when any company concentrates on what they do best. It’s even rarer that a company has the confidence to stay the course when everyone around them says they should be doing something different. This is the exact situation Dexcom (NASDAQ: DXCM) is in as they reported first quarter results this afternoon.

Given how well the company has performed and continues to perform it’s not surprising that they are approached by a host of people telling them they should do this or buy that. Hey Tandem (NASDAQ: TNDM) is cheap, you’ve got an insulin pump background and sensor augmented pumps are all the rage, why don’t you buy them? Or what about buying Johnson and Johnson (NYSE: JNJ) diabetes device unit besides having an insulin pump you can use the installed LifeScan user base as the launching pad for the slap it on turn it on Band-Aid sensor that you’re working on with Google.

Thankfully the company has politely said thanks but no thanks.

There may come a time in the future when the company expands beyond their core competency but that day is not today. The simple fact is the CGM market is the hottest market going, Dexcom has the best system in the market and they have the hottest new platform that fits perfectly into the future of diabetes management. As we have been writing this week any company that can successful penetrate the Type 2 or non-insulin using market will be rich beyond their wildest dreams. Dexcom is one the few companies that has the potential, product and talent to make this happen.

Looking over first quarter results combined with the known problems with their insulin pump partners their results are even more impressive. The 670G from Medtronic (NYSE: MDT) may be sucking the wind from the sails in the insulin pump market but it is NOT adverse impacting Dexcom in any noticeable way. It will remain to be seen what happens when Tandem officially goes belly up and when JNJ finally parts with Animas, but even with those unknowns the company continues to push their advantage in the multiple daily injection (MDI) market segment.

Yes, Medtronic will enter the stand alone CGM market but the only weapon they have in their arsenal is price. And in the CGM market price just might not be enough. Based on what we have seen so far with the new Enlite sensor it is better than the older Medtronic sensor but the system is still behind Dexcom in terms of reliability, consistency and most important accuracy. Medtronic is closing the gap but Dexcom is also getting better making it very difficult to convince non-pump patients to use any other CGM but Dexcom.

The key for the company is to maintain their focus, not to become distracted and develop the Band-Aid sensor which will become the goose that lays the golden eggs. The problems with their insulin pump partners will eventually be solved one way or another. While Medtronic will always be nipping at their heels. But this is not the market that matters most and Dexcom knows this. They are one of the few companies that sees the bigger picture and is working with that picture in mind.

As Momma Kliff used to say; “Sometimes it’s a matter of blocking out all the noise. To stay focused amid what can be tempting distractions. Best to keep your eye on the prize.” Which in Dexcom’s case is a very, very big prize.