Summary
- G7 could change the valuation dramatically.
- It is a risky play, especially in the short term.
- G7 could finally deliver affordable CGM for type 2 diabetes patients.
DexCom (DXCM) has delivered incredible revenue growth during 2020 despite COVID, and the market estimates it will be growing enviously in the following years. The company manufactures Continuous Glucose Monitoring (CGM) devices to monitor glucose levels in diabetes patients. The company collaborated with Alphabet's (GOOG) (NASDAQ:GOOGL) health division Verily to integrate its technology into CGM.
Source: DexCom
The G7 will fully integrate Verily's technology and a completely new manufacturing process and design, which promises to deliver higher comfort, lower cost, and longer duration. Typically, CGM is used for type 1 diabetes patients who require insulin. Still, as CGM becomes more affordable, it could make sense for a greater percentage of type 2 diabetes patients to monitor their glucose via CGM.
The stock presents a high-risk, high-reward profile, with the highest concentration of risk in the short term. The company could improve dramatically with the launch of the G7, which could push it to the higher end of the spectrum and reduce the risk dramatically.
All you need to know about G7
Approval support trials for G7 started in mid-October. It is expected to launch in the second half of 2021, and it will likely conclude by Q3 of 2022. It will have a duration of 10 days at launch, but the target duration of 15 days will likely come in 2022.
"Again, we currently sell a 10-day sensor, and pricing is very much based upon the cost per month, whether you buy two sensors or three sensors as we've done these contracts, CGM is a monthly cost." - Kevin Sayer - CEO DexCom Q3 Earnings Call.
About 70% of DexCom users get their products for $60 a month, and as the contract is per month, the cost improvements from the G7 could flow directly to increase the gross margin.
