Dexcom’s stock slid by about 40% following its second-quarter earnings report after the diabetes sensor maker said it saw not only fewer customers but also fewer dollars per customer—driving revenue below expectations and the company’s “high standards” both in the U.S. and internationally.
On a call with investors, President and CEO Kevin Sayer attributed part of the problem to an ongoing realignment of its U.S. sales force—as it splits its efforts following the launch earlier this year of its over-the-counter Stelo wearable—as well as a steep, unanticipated rise in the number of people obtaining rebates for its G7 continuous glucose monitor.
“We expected the G7 to get rebate eligibility over a schedule that was literally twice as fast as the G6,” Sayer said. “It's been three times faster. The G7 got the full rebate very quickly; quicker than we had planned.”
“We believe this enhanced G7 coverage has helped facilitate new customer starts … but the pace of these starts did not allow us to offset the temporary impact from this rebate eligibility,” he said, adding that the company expects the drag on revenue to reach its peak in the third quarter.
At the same time, Dexcom saw its products lose market share among durable medical equipment distributors—while it has looked to expand sales via pharmacy shelves—which equates to about a $100 million decline over the course of the year, according to Chief Financial Officer Jereme Sylvain.
“Together, these dynamics adversely impacted our revenue this quarter by approximately $40 million as compared to our internal estimate,” Sylvain said. “Based on the compounding effect of these lower second-quarter new customer starts, we also expect our growth rate in the back half of the year to be impacted.”
As a result, the company cut its 2024 financial guidance to between 11% and 13% growth, down from the 17% to 20% it had pitched earlier this year—translating to revenue figures between $4 billion and $4.05 billion versus $4.2 billion and $4.35 billion.
Following the news, Dexcom’s stock price dropped from about $107 to around $64 per share, for a four-year low.
Earlier this month, one of the company’s main CGM competitors, Abbott, reported a 20.4% bump in diabetes sales, with $1.65 billion from its FreeStyle Libre system. The company also garnered FDA clearances for a pair of over-the-counter CGMs in June.
“We have higher expectations for our business than what we experienced this quarter,” said Sayer.
All told, quarterly revenue was still up 16% year over year, just cresting the billion-dollar mark compared to $871.3 million in the same period the year prior. Meanwhile, operating income summed to $158 million, up from $128 million. The company also announced a new $750 million share repurchasing program along with $3.12 billion in cash and equivalents.