10-KPeriod: FY2018

DEXCOM INC Annual Report, Year Ended Dec 31, 2018

Filed February 21, 2019For Securities:DXCM

Summary

DexCom, Inc. (DXCM) reported strong revenue growth in its 2018 10-K filing, driven by the successful launch and adoption of its latest generation continuous glucose monitoring (CGM) system, the DexCom G6®. The company's focus remains on expanding its market leadership in diabetes management technology, with a clear strategy to innovate and broaden product indications. Key growth drivers include increased sales volume of disposable sensors and durable systems, supported by expanding direct sales efforts and strategic partnerships. Financially, while the company generated substantial revenue growth, it also incurred an operating loss, reflecting significant investments in research and development, sales, and marketing to fuel future expansion. The company's liquidity position appears robust, supported by substantial cash reserves and available credit facilities. Investors should monitor the company's continued investment in product development, market penetration, and the evolving reimbursement landscape for CGM technology.

Financial Highlights

52 data points
Beta

Revenue

$1.03B

64.4% Gross Margin

Net Income

-$127.10M

-12.3% Net Margin

EPS (Diluted)

$-0.36

Total Assets

$1.92B

Cash & Equivalents

$1.14B

Free Cash Flow

$56.10M

Financial Statements
Beta
Revenue$1.03B
Cost of Revenue$367.70M
Gross Profit$663.90M
R&D Expenses$199.70M
SG&A Expenses$432.80M
Operating Expenses$850.20M
Operating Income-$186.30M
Interest Expense$22.70M
Net Income-$127.10M
EPS (Basic)$-0.36
EPS (Diluted)$-0.36
Shares Outstanding (Basic)352.80M
Shares Outstanding (Diluted)352.80M

Key Highlights

  • 1DexCom launched its latest generation DexCom G6® integrated Continuous Glucose Monitoring (iCGM) system in 2018, which received FDA marketing authorization via the de novo process. The G6 is the first CGM system cleared by the FDA for use with integrated systems, including automated insulin dosing systems.
  • 2The company reported strong revenue growth of 44% in 2018, reaching $1.03 billion, primarily driven by increased sales volume of disposable sensors and durable systems.
  • 3Despite revenue growth, DexCom incurred an operating loss of $186.3 million in 2018, reflecting significant investments in R&D and sales/marketing.
  • 4DexCom has expanded its strategic collaborations, notably with Verily Life Sciences LLC, to jointly develop next-generation CGM products and enhance its technology platform.
  • 5The company's strategy focuses on establishing its technology platform as the leading CGM approach, driving adoption through direct sales and partnerships, seeking broad reimbursement, and expanding product use to new patient demographics and settings.
  • 6DexCom holds a significant patent portfolio with 449 issued U.S. patents and numerous pending applications, protecting its core sensor and membrane technologies.
  • 7As of December 31, 2018, DexCom had $1.386 billion in cash, cash equivalents, and marketable securities, indicating a strong liquidity position.

Frequently Asked Questions

DexCom's primary products are continuous glucose monitoring (CGM) systems, including the DexCom G6® and G5® Mobile. Key advantages over traditional finger-stick glucose meters include continuous real-time glucose readings every five minutes, trend information, customizable alerts for high and low glucose levels, the elimination of finger sticks for treatment decisions with the G6, and the ability to share glucose data with up to five followers. The G6 also offers improved features like longer sensor wear (10 days) and better interference resistance from certain medications.

DexCom generates revenue primarily through the sale of disposable CGM sensors and reusable durable systems (transmitters and receivers). The company's growth strategy involves expanding its direct sales force and distribution channels, forging strategic partnerships with insulin pump manufacturers for integrated systems, securing broad third-party reimbursement coverage, and expanding its product offerings to new patient populations and healthcare settings.

In 2018, DexCom reported significant revenue growth (44%), but also a net loss of $127.1 million. This reflects heavy investment in R&D and sales/marketing to drive future growth. Key financial risks highlighted in the filing include reliance on third-party reimbursement, the competitive landscape, potential manufacturing constraints, ongoing product development timelines, and the substantial debt incurred from convertible note offerings.

The collaboration with Verily Life Sciences LLC (an Alphabet Company) is significant as it aims to jointly develop next-generation CGM products. The amended agreement provides DexCom with exclusive commercialization rights for these future products and an exclusive license to use Verily's intellectual property in glucose monitoring. This partnership is a key part of DexCom's strategy to maintain technological leadership.