DexCom Stock Gains from GLP-1 Diabetic Users

Key Points

• DexCom is a leading maker of continuous glucose monitoring (CGM) systems initially serving Type 1 diabetics, which are around 5% of the diabetes population, with Type 2 being 95%.
• Diabetes is a growing epidemic expected to reach 780 million people worldwide by 2045.
• DexCom is expected to launch Stelo, its CGM system for Type 2 diabetics that doesn't require finger sticks, competing directly with Abbott Lab's Freestyle Libre.

DexCom Inc. NASDAQ: DXCM is a leading medical device company in the medical sector that specializes in continuous glucose monitoring (CGM) systems. People with diabetes use CGM systems to monitor their blood glucose levels. People with diabetes usually have to pinprick a finger to draw blood onto a finger stick to place into a glucose monitor to get their blood sugar reading. Doing this multiple times a day can get painful, not to mention the risk of infections.

CGM systems use a small sensor inserted under the skin to provide steady blood sugar readings throughout the day. DexCom competes with Abbott Laboratories NYSE: ABT and Medtronic plc NYSE: MDT.

Diabetes is a Growing Epidemic

There are nearly 30 million people in the United States with diabetes, with estimates of potentially growing to 50 million by 2030. Globally, it's estimated that 780 million people will experience diabetes by 2045 and up to 25% of the nation's healthcare spending is spent on diabetics. The causes can be hereditary, viral, or lifestyle-related. Sugar doesn’t get processed and stays in the bloodstream because the pancreas can’t produce enough insulin.

There are 2 types of diabetes. Around 5% of diabetics are Type 1 and can't produce their insulin, must take insulin injections, and require constant glucose monitoring. Around 90% to 95% of diabetics are Type 2, who can produce insulin but fail to use it properly. They require occasional glucose monitoring, depending on severity.

GLP-1 Off Label Popularity

The GLP-1 weight-loss trend has gone viral as diabetes drugs like Novo Nordisk A/S NYSE: NVO produced Ozempic and Eli Lilly and Co. NYSE: LLY produced Mounjaro are being swept up for off-label use. Due to the mass popularity of weight loss usage, both companies have created Wegovy and Zepbound specifically for obesity. However, the problem is many insurers, including Medicare and Medicaid, don't reimburse these expensive medications for weight loss purposes. These GLP-1 drugs can run up to $1,300 a month for a once-a-week injection.

GLP-1 for Diabetics and Cardiovascular

The benefits of GLP-1 beyond controlling blood sugar in people with diabetes continue to be discovered. Medicare Part D covers GLP-1 for diabetes and also to cut cardiovascular risk. The side effect of losing weight is a cherry on top. Dexcom is a benefactor as people with diabetes need to monitor their blood sugar levels. While GLP-1 has been

Targeting Type 2 Diabetics

While Type 1 diabetics are the ones that use DexCom’s CGM systems, which are compatible with insulin pumps, the company is targeting Type 2 diabetics with the launch of Stelo. Stelo can be used by people with diabetes who don't depend on insulin injections, which is a much larger market. The company submitted Stelo for FDA approval. The launch is expected in Summer 2024. It will compete directly with Abbott Lab’s Freestyle Libre non-fingerstick CGM systems. Check out the sector heatmap on MarketBeat.

Compounding Growth  

DexCom reported Q4 2023 EPS of 50 cents, beating 43 cents consensus analyst estimates by 7 cents. Revenues grew 27% YoY to $1.03 billion, beating $1.02 billion consensus estimates. Both United States and International revenues rose 27% YoY. GAAP operating income was $216.9 million or 21% of revenues. Non-GAAP operating income was $242.7 million, or 23.5% of revenues.

DexCom In-Line Guidance

DexCom provided full-year 2024 revenues of $4.15 billion to $4.35 billion versus $4.33 billion consensus estimates. Non-GAAP gross profit margin will be between 63% to 64%. Non-GAAP operating margin is expected to be around 20%. Adjusted EBITDA margin is expected to be around 29%.

DexCom CEO Ken Sayer commented, “2023 was an incredible year for Dexcom with significantly expanded access, another year of record new customer starts, and growing momentum behind our global rollout of Dexcom G7.” Sayer concluded, "We are looking forward to another great year in 2024 as we strive to improve the health of significantly more people around the world with Dexcom CGM technology.”

DexCom analyst ratings and price targets are at MarketBeat. DexCom peers and competitor stocks can be found with the MarketBeat stock screener.

Daily Pennant Pattern

The daily candlestick chart for DXCM illustrates an ascending triangle pattern. The ascending trendline formed at $124.12 on March 6, 2024. Rising to the flat-top resistance trendline at $137.46. The higher lows against a flat-top are attempting to break out as the surge initially peaked at $141.87. The daily relative strength index (RSI) initially peaked just under the 70-band and is stalling underneath it. Pullback support levels are at $133.39, $128.62, $124.12 and $119.65