10-QPeriod: Q1 FY2013

DEXCOM INC Quarterly Report for Q1 Ended Mar 31, 2013

Filed May 1, 2013For Securities:DXCM

Summary

This 10-Q filing for DexCom Inc. (DXCM) as of March 31, 2013, highlights the company's progress in the continuous glucose monitoring (CGM) market. Key developments include the recent FDA approval of the DexCom G4 PLATINUM system in October 2012 and CE Mark approval for a pediatric indication in February 2013, expanding its market reach. The company is actively transitioning its sales and marketing focus towards these newer, more advanced G4 PLATINUM systems. Financially, DexCom is still in an early commercialization stage, reporting an accumulated deficit of $456.7 million. While product revenues saw a significant increase year-over-year for the first quarter of 2013, driven by G4 PLATINUM sales, the company continues to incur operating losses due to ongoing research and development and commercialization efforts. Management believes existing cash and credit facilities will be sufficient to fund operations through at least March 2014, but acknowledges the potential need for future financing.

Financial Highlights

46 data points
Beta

Revenue

$29.60M

55.7% Gross Margin

Net Income

-$11.10M

-37.5% Net Margin

EPS (Diluted)

$0.00

Total Assets

$98.80M

Cash & Equivalents

$18.90M

Free Cash Flow

-$5.90M

Financial Statements
Beta
Revenue$29.60M
Cost of Revenue$13.10M
Gross Profit$16.50M
R&D Expenses$9.30M
SG&A Expenses$18.10M
Operating Expenses$27.40M
Operating Income-$10.90M
Interest Expense$200K
Net Income-$11.10M
Shares Outstanding (Basic)279.20M

Key Highlights

  • 1Product Development: FDA approval of the DexCom G4 PLATINUM system in October 2012 and CE Mark approval for a pediatric indication in February 2013 are key advancements, expanding market potential.
  • 2Revenue Growth: Product revenues increased to $27.8 million for the quarter ended March 31, 2013, up from $18.6 million in the prior year's quarter, primarily due to increased sales volume of durable systems and disposable sensors, driven by the G4 PLATINUM launch.
  • 3Strategic Shift: The company plans to reduce marketing and sales efforts for the older SEVEN PLUS system to focus on the G4 PLATINUM.
  • 4Financial Position: As of March 31, 2013, DexCom had an accumulated deficit of $456.7 million, indicating continued investment in growth and development rather than profitability.
  • 5Liquidity: The company reported $45.3 million in cash, cash equivalents, and short-term marketable securities, with management expressing confidence in sufficient funding through at least March 2014.
  • 6R&D Investment: Research and development expenses remained stable year-over-year at approximately $9.3 million, indicating continued commitment to innovation.
  • 7Legal Proceedings: DexCom is actively engaged in patent litigation with Abbott Diabetes Care, with ongoing reexamination proceedings for several patents.

Frequently Asked Questions

DexCom's primary focus is on its continuous glucose monitoring (CGM) systems, specifically the recently approved DexCom G4 PLATINUM system. The company is expanding its market reach with FDA approval in the US and CE Mark approval for a pediatric indication in Europe, and is shifting its sales and marketing resources to promote these advanced products.

DexCom is in an early commercialization stage and has incurred losses since its inception, with an accumulated deficit of $456.7 million as of March 31, 2013. While revenues are growing, the company expects to continue incurring losses in the future due to significant investments in research and development, sales, marketing, and manufacturing infrastructure. Management believes it has sufficient liquidity to fund operations through at least March 2014 but may seek additional financing.

Key risks include the need for widespread market acceptance of CGM technology, uncertainties in third-party reimbursement from payors like Medicare, intense competition from established medical device companies, dependence on key suppliers, potential delays or failures in obtaining regulatory approvals for new products or indications, and ongoing patent litigation with Abbott.

DexCom acknowledges that reimbursement from third-party payors is critical. While some private payors have established coverage policies for CGM devices, these can be restrictive. The company employs in-house reimbursement expertise and a field-based team to work with payors to obtain coverage decisions and contracts. Medicare coverage is still pending a national decision. Widespread adoption is contingent on adequate reimbursement from both government and private payors.