Dexcom’s Not-So-Flattering Earnings Results

Dexcom shares tumbled nearly 45% after the diabetes tech titan reported a 2Q24 miss and cut guidance. The San Diego, CA-based company posted $1.04 billion in revenue which was $33 million lower than consensus.

The results come on the heels of Dexcom winning FDA clearance for the Stelo, the first over-the-counter glucose monitoring device. Dexcom stands at the forefront of the continuous glucose monitoring (CGM) market.

The company changed its full fiscal year guidance and expects revenue of $4 billion and $4.05, which is down from the $4.20 billion to $4.35 billion in forecast in 1Q24.

In an earnings call, Dexcom CEO, Kevin Sayer called out three factors that led to the miss and change in outlook. He said the factors were lower new patient adds than expected due to disruption from the salesforce reorganization; faster broad patient eligibility for G7 rebates; and lower share in the Durable Medical Equipment (DME) channel.

“This was a different expansion for us than other ones,” Sayer said of the salesforce reorganization, according to a Seeking Alpha transcript of the earnings call. “In other ones, we've done, we literally took territories and just divided them geographically. This time, we changed roles. We changed positions people called on. It was a much more disruptive expansion we've had in the past, and that did lead to a lot of disruption, particularly at the beginning of the quarter. We saw things getting better towards the end.”

Related:Dexcom Ends the Year with FDA Nod for G7

He added, “With respect to the other factors, as far as market share, we said we've lost market share in the DME channel. While we've done well in the pharmacy channel, as you can all see by scripts and scripts that are filled in the pharmacy on the DME side, we've lost share, and that has hurt us. We're also losing the customers who have the highest annual revenue per year as a patient.”

Finally, he said, “The last piece of this is rebate eligibility. And again, we expected G7 to have rebate eligibility over schedule that was literally twice as fast as G6. It's been three times faster. G7 got the full rebate very quickly, quicker than we had planned. So, all those things added together, while they had somewhat of an effect on Q2, they have a longer-range effect on the rest of the year. So, we added all those things together, and that's how we came up with our guide.”

Marie Thibault, a BTIG analyst, said Dexcom could bounce back and that the outlook wasn’t the result of a weakened CGM market.

“This Q2 report was certainly a shock but at this early stage we do not think the issues are structural or irreparable,” Thibault wrote in an analyst report. “We expect greater attention to relationships in the DME channel can start to reverse the share loss over the next few quarters.  “With management repeatedly taking responsibility for its execution issues, we do not think the potential of the CGM market has changed or that a new competitive dynamic has suddenly emerged. The company's margin profile has remained strong despite these challenges. We do think Dexcom can return to high-teens or better sales growth in 2025 and beyond.”

Related:Dexcom’s CEO Joins Let’s Talk Medtech for a Candid Discussion on Firm’s Future

Dexcom’s earnings report comes about three weeks after it said it would cut 535 employees at its San Diego headquarters. The layoffs came as the company reportedly moved to centralize its Unites States manufacturing to its Mesa, AZ location, according to a Warn notice.