In a bid to fortify its foothold in the Type 2 diabetes space, DexCom, Inc. (DXCM - Free Report) recently announced a new amendment to its license deal with Verily, the life sciences unit of Alphabet (GOOGL - Free Report) . With this deal, DexCom is expected to deliver its next generation CGM (Continuous Glucose Monitoring) platform by the end of 2020. Further, the latest development strengthens DexCom’s synergy with Verily's Onduo franchise.
The companies’ mutual interests in bringing DexCom CGM technology in the diabetes market are noteworthy. Also, both companies publicized plans on future collaborations for developing additional products and software per DexCom’s profile.
Shares of DexCom have outperformed the industry in a year’s time. Notably, the stock has surged 119.7% against the industry’s decline of 0.3%. The current level is also higher than the S&P 500 index’s return of 1.9%. The stock sports a Zacks Rank #1 (Strong Buy).
The Deal: A Glimpse
DexCom will make an initial payment of $250 million in stock.
Moreover, additional payments of up to $280 million may become due and payable through product launch and revenue milestones.
DexCom is likely to pay $275 million of the milestones in stock as well.
DexCom — A Key Player in the CGM Market
DexCom’s FDA-cleared CGM system — the DexCom G4 Platinum — is significantly boosting its top line. The inbuilt features of G4 Platinum make it the most innovative CGM system in the market. Last year, DexCom won the FDA approval of the DexCom G5 mobile app for Android devices.
In fact, the FDA recently granted a De Novo request for the DexCom G6 CGM System. In June, DexCom announced the receipt of CE Mark for its DexCom G6 System for people with diabetes aged two years and above. In August, DexCom acquired TypeZero Technologies, which has an inControl diabetes management system. It is designed to provide personalized diabetes management solutions.
In fact, Tandem Diabetes (TNDM - Free Report) plans to launch its new FDA-approved t:slim X2 Insulin Pump with DexCom’s G6 CGM system.
Lucrative Glucose-Monitoring Industry Prospects
Diabetes is one of the most challenging health conditions in the United States. About 1.4 million new cases of diabetes are diagnosed every year in the country, thanks to a rise in the geriatric population, urbanization and poor lifestyle practices. An important component of effective diabetes management is frequent monitoring of blood glucose levels. Traditional glucose testing methods can be inconvenient, painful and difficult to use. Plus, it provides limited information.
In contrast, DexCom's products have a comparative advantage in terms of both convenience to the patient and quality of data generated relative to traditional diagnostic tests.
We thus believe that the glucose monitoring market represents a significant commercial opportunity for DexCom. Per a Research and Markets article, the blood glucose monitoring devices market is expected to see a CAGR of 8% between 2018 and 2024.
However, cutthroat competition from MedTech behemoths like Becton, Dickinson and Company (BDX - Free Report) is rampant in the industry. Becton, Dickinson offers a wide array of insulin syringes like BD 1-mL conventional insulin syringes, SafetyGlide 6mm insulin syringe and Safety-Lok insulin syringe. Additionally, BD’s pen needles are compatible with leading diabetes medication pens in the United States.
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