Famous for its continuous glucose monitoring technology targeted at diabetes patients, DexCom has seen investors picking up shares in bulk. As a result, the stock is already up 39% so far in 2017, and we believe DexCom is only just getting started.
Thanks to its innovative technology, this 18-year-old enterprise has only grown in scale and potential over the past few years. Revenues have climbed from a mere $2 million in 2006 to $400 million in 2015.
Dexcom is expected to bring in $570 million in 2016 and over $700 million in 2017, with gross margins of over 65%. The company's management provided guidance of 270,000 patients globally by year end 2107, which would be a 35% increase from its 200,000 patients in 2016. Investors love the company's massive growth target.
In the diabetes management industry, glucose measurement is only a fraction of the larger spectrum. Sanofi's (SNY - Get Report) Lantus, Merck's (MRK - Get Report) Januvia and Eli Lilly's (LLY - Get Report) Humalog are well-recognized diabetes drugs.
However, patients are no longer satisfied with intermittent monitoring of their blood glucose levels. And that dissatisfaction is where DexCom capitalized.
The scope for growth is massive since the U.S. population of patients with intensive insulin needs is roughly 3 million out of the total 30 million diabetes patients.
The U.S. Centers for Medicare and Medicaid Services have already established reimbursement for DexCom's G5 mobile CGM device after classifying it as Durable Medical Equipment. Other CGM products are often criticized for being adjunctive devices, since they complement but do not substitute blood glucose meters.
Medtronic remains DexCom's chief rival. With the goliath receiving FDA approval for its artificial pancreas product, investors would like to see if DexCom takes a hit from Medtronic's full-scale artificial pancreas launch.
There's a strong possibility that Medtronic might one day look to buy out debt free DexCom.
DexCom's primary area of concern is the lack of profitability despite the sharp rise in revenues. However, given that DexCom is still in the early stages of its business cycle, profitability should come in the near future.
The company's growth potential and solid product addresses a critical and hitherto unrecognized area of diabetes treatment. For these reasons investors would be wise to invest in DexCom before it gets too expensive.
There's no denying its potential. DexCom may well be leading force in the glucose monitoring segment.
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