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DexCom (DXCM - Analyst Report), a player in the glucose monitoring market, reported fourth quarter 2012 adjusted loss per share of 14 cents, better than the Zacks Consensus Estimate of a loss of 16 cents per share. For 2012, DexCom reported adjusted loss per share of 81 cents better than the Zacks Consensus Estimate of a loss of 84 cents per share. Net loss for the quarter dropped 30.3% year over year to $8.5 million (or loss of 12 cents per share).


Revenues surged 48.7% year over year to $33.3 million in the fourth quarter, beating the Zacks Consensus Estimate of $29 million. For 2012, revenues rose 30.9% to $99.9 million surpassing the Zacks Consensus Estimate of $96 million. 

Product sales increased almost 51.7% to $31.7 million while development grant and other revenues improved 6.7% to $1.6 million in the reported quarter.

Margins and Expenses

Gross margin improved to 52.6% in the fourth quarter from 47.8% a year ago. Operating expenses increased 13.1% year over year to $25.9 million due to higher selling, general and administrative expenses, which grew 25.5% in the reported quarter. The company reduced its operating loss year over year.

Balance Sheet

DexCom exited the fourth quarter with cash and short-term marketable securities of $48.7 million, down 40.6% on a year-over-year basis. Long-term debt (net of current portion) amounted to $6.8 million, up from zero in the year-ago period.

Our Take

DexCom is well placed in the industry that it serves. Given the burgeoning diabetes population in the U.S., its G4 Platinum presents considerable market opportunity. Successful commercialization of G4 in the U.S. could just be the catalyst that the company needs to gain share in the market it serves.

Increased awareness and acceptance of the need for continuous glucose monitoring and international expansion should help drive sales of DexCom’s products. The company is eyeing prospects in the vast markets of India, China and Japan.

In addition to upgrading and enhancing the functions of existing products, DexCom has also been active on the collaboration front, through which it is looking to leverage its technology with its collaborator’s product offerings.

Competition in the glucose monitoring market is fierce. DexCom competes with Roche Diabetes Care, a division of Roche (RHHBY - Analyst Report) and LifeScan under Johnson & Johnson (JNJ - Analyst Report) for its Seven Plus offering. Additionally, Medtronic (MDT - Analyst Report) and Abbott (ABT - Analyst Report) have gained FDA approval for continuous glucose monitoring systems.

We believe that the company’s move to buy healthcare IT company SweetSpot Diabetes Care, may allow it to compete more effectively through better data management systems.

Despite increasing revenues, DexCom remains a loss making entity and its efforts are made more difficult by a stringent regulatory environment. The stock currently holds a Zacks Rank #3 (Hold).

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