DexCom Shares Warrant Caution

DexCom, Inc. (DXCM) reported a second-quarter net loss of $0.48 per share compared with a net loss of $0.40 per share in the comparable period last year. We are pleased with top line product revenue growth and are encouraged by the recently announced contract with Blue Cross of California for limited reimbursement of continuous glucose-monitoring (CGM) to patients in California and across the Anthem Blue Cross network.

We remain mindful of the recent approval of Abbott Labs' (ABT) CGM system by the Food and Drug Administration; however, we regard any progress on the reimbursement front towards comprehensive CGM coverage as positive for all players. Our Hold remains intact at current levels.

We have valued DXCM on a forward price/earnings (P/E) basis, as well as a comparison to similar firms in the medical device sector. We remained cautious with regards to the potential impact of Abbott’s FreeStyle Navigator Continuous Glucose Monitoring System to the growth of DXCM sales over the long term. Our $7 price target is derived using a multiple of 30x FY09 EPS forecast of $0.30 discounted at 28 percent.

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Read the full analyst report on DXCM

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