COVID-19 is creating much uncertainty across the medical device industry, both in terms of revenue guidance and in terms of clinical trial timing. For Dexcom, that uncertainty will directly impact the timing of the company's latest continuous glucose monitoring (CGM) sensor, the G7.
"We remain confident in our ability to deliver G7, but acknowledge that the timing of the pivotal trial will be delayed due to the pausing of new trials at most clinical sites," Dexcom CEO Kevin Sayer said during the company's first-quarter earnings call, according to SeekingAlpha transcripts.
Sayer said the company currently expects COVID-19 to delay the G7 trial by at least six months. The new model was previously on track for a 2021 market launch with a limited launch possible by the end of this year, pending FDA approval.
Matthew O'Brien, an analyst at Piper Jaffray, said most people had expected to see a bit of a delay with the G7 trial, but six months was longer than he had expected. O'Brien had been under the impression that it was a 14-day trial, but Sayer explained that the pivotal trial is not, in fact, just a 14-day study.
"If we could run a 14-day study and put several hundred people on it for 14 days that would be relatively simple," Sayer said. "These trials are not that simplistic. There's going to be at least four in-clinic days where blood is drawn for 12 hours and we can only handle two to three patients at a time, at a clinic per day. So, these trials are very well orchestrated and scheduled from a logistics perspective. We do not know when clinics who run these trials are going to open back up and allow patients in to run these kinds of studies."
It will be a while before things return to normal, Sayer said, and many large clinics where these studies are conducted are not even allowing patients in the door right now, let alone allowing patients in for clinical trials. He also emphasized the high standards involved with getting not just FDA approval for the device but getting it approved for interoperable continuous glucose monitoring (iCGM). Dexcom's G6 model was the first FDA-approved iCGM system on the market, meaning it is approved to work interoperably with automated insulin dosing systems. Abbott has applied for iCGM classification for its Libre 2 CGM, but the agency has yet to render a decision on that device.
"We're not shooting for just anything. We're shooting for high iCGM standards and that is a high bar, that is not an arbitrary bar set by the FDA," Sayer said. "That's a high bar we've met with G6 and we executed a perfect study to get that done. We've got to execute perfection again. So, we've given ourselves this timeframe to make sure all our plans are locked down, that we can get the centers open, they can go and do this, and we'll be methodical and thoughtful about it."
There are also a lot of different balls in the air, so to speak, on the manufacturing and supply chain side of the equation, and any number of things could impact the timing of a full-scale G7 launch, even if the pivotal trial and regulatory approval come through sooner than expected. But Sayer pointed out, it's not like Dexcom doesn't already have a highly successful iCGM on the market already.
"While we wait, and sometimes we forget, we have a fantastic product of what we have in G6, and we will continue to refine and make that better," he said.
Dexcom withdraws 2020 revenue guidance
As social distancing measures took effect in March, physician office visits dropped off dramatically, and that decline has impacted the number of new CGM patients for Dexcom. However, some of that impact is being mitigated by the rapid adoption of telemedicine, as MD+DI recently reported here.
Like a lot of public companies have done, Dexcom also withdrew its revenue guidance for 2020 due to COVID-19 uncertainty. The company previously said it expected to see a 17% to 20% revenue bump this year.
"To be clear, this decision does not necessarily imply upside or downside to our prior guidance," said Quentin Blackford, Dexcom's COO and CFO. "Our first quarter performance was above our expectations and, apart from the uncertainty created by COVID-19, we would be in a position to raise our guidance today. Ultimately, we believe the underlying demand for CGM has not changed despite the situation with COVID-19."
Blackford said the company is monitoring the macroeconomic environment to gauge employment levels and the ultimate impact of the company's new COVID-19 financial assistance program, which was also announced this week. Dexcom said it will provide financial assistance to its existing patients who have lost or may lose access to insurance coverage for their Dexcom supplies as a result of COVID-19. The program is expected to launch in the next several weeks and is designed to provide up to two 90-day supply shipments for $45 each.
While Dexcom's global supply chain has remained stable, Blackford noted that it is less predictable in the current environment and could experience interruption.
"Predicting all of these future variables has been difficult, and we found it prudent to temporarily suspend our guidance until visibility improves," he said.
Despite all of this, Canaccord Genuity's Kyle Rose said he sees no reason to change his view that the CGM market remains in the early stages of penetration across various use cases within diabetes, and that Dexcom's manufacturing focus and product pipeline position the company with a strong lineup of fully equipped, lower-cost technologies.
"In sum, we remain bullish on the near- and long-term product pipeline, growing total addressable market, and opportunity for [Dexcom] to deliver significant upside in 2020 despite COVID-19," the analyst said in a report this week.
Regarding the growing total addressable market, Rose mentioned the company's efforts to expand its customer base beyond insulin-dependent patients. The analyst said Dexcom has received promising early clinical data in the patients with type 2 (T2) diabetes who are not insulin-intensive, including a cost-benefit analysis from Intermountain Healthcare showing that CGM use can save thousands of dollars per patient per year. Dexcom has partnered with digital health management companies like WellDoc and Livongo to unlock this value over the long term, Rose said.
"That said, the non-intensive T2 opportunity will rely on the lower-cost G7 sensor which positions it as a 2021 or beyond growth driver (possibly later if the pivotal trial delays continue)," Rose said.
He also noted that the reimbursement pathway remains nascent for non-intensive type 2 diabetes patients and will likely depend on additional clinical data and refinement on the utilization model will be required to help the case for reimbursement.
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