At a market cap of $557 million and facing huge risks, DXCM is simply overpriced. Kudos to the company for trying to develop a continuous glucose monitoring system, but there are some tremendous challenges that will need to be addressed:
1. Reimbursement. Who is going to pay $12 per day for sensors? Not to mention the initial cash outlay for the receiver, transmitter (which only lasts six months and then must be replaced with another $250 transmitter.) Also, per the label, calibration with fingerstick must be done with a particular brand of strip-reader (Lifescan, I believe), so if you don't own that brand, you will have to go and purchase a new strip reader and disposables as well. Also, you need to buy covers for the sensor / transmitter to use in the shower. Baths and swimming that expose the sensor / transmitter to moisture probably not a good idea.
According to many physicians, it's VERY unlikely a product that will require twice a day calibration against fingerstick will see much use--reimbursed or not.
2. Competition. MDT has approval for its integrated CGMS / insulin pump system, which has inherent advantages over DXCM's stand-alone system, since pump patients are those most likely to be among the early adopters of CGMS systems. ABT will be launching its CGMS system later in the year. Should have better accuracy than DXCM system, will have a five-day sensor at launch versus DXCM's three-day sensor, and the ability to provide a glucose reading every minute versus every five minutes. Short interval between readings is important for those who want to use device to quickly and conveniently determine direction of blood glucose level changes.
3. Will MARD accuracy with DXCM's technology be sufficient for DXCM to EVER get a fingerstick replacement claim? This issue deserves very close scrutiny. No data have been presented to suggest that DXCM can address this issue. DXCM sensor technology, because of inherent limitations, may not be able to do this. Abbott will present data on accuracy of its sensor at upcoming ADA meeting that it believes is supportive of a replacement claim.
4. Insiders / current stockholders are selling and registering to sell huge amounts of stock as part of the current secondary offering. Someone is going to get left holding a big bag on this one. Directors and investors have been selling significant amounts of stock already. If DXCM is such a terrific investment, why aren't current investors staying in the game?
5. ABT litigation. If ABT prevails, DXCM may be required to pay significant damages for willful infringement--a big deal.
6. Cramer is wrong more times than right when it comes to health care.
It is never fun to have missed a great stock run, especially when a stock has a nice double like DXCM has.
Overpriced? According to yourself, but the market is voting to the contrary and technically this stock is very strong. In fact, it just turned positive again on weekly momentum. Demand is in control of the stock and it has continued to make higher highs and higher bottoms. Perhaps it is actually a sucker's sell, because demand is in control of the stock and it continues to make higher highs and higher bottoms. This company is a gem.