From The Stock Masters
DexCom, Inc. (NASDAQ: DXCM) hit it big last summer after they received approval from the U.S. Food and Drug Administration (FDA) for its short-term continuous glucose monitoring system (DexCom STS). DXCM shares hit $25 in May and everything looked beautiful for the company just like Britney Spears in the early 90’s. Then as time moved forward the public lost its love for the bright new star and both DexCom and Britney now are at 52-week lows. 
DexCom has everything riding on it’s STS continuous glucose monitor and investors have bailed since last year. These days with the market looking like Britney’s latest haircut, why would you want to bet on a one-trick pony?
For people living with diabetes, their portable monitoring system is a blessing that provides real time glucose measurements every 5 minutes. You insert the STS sensor pad on your skin and you’ve got instant access to your glucose stats for up to 3 days. There are over 6 million people in the U.S. are unaware they have diabetes. An additional 54 million people have pre-diabetes, which puts them at the greatest risk for developing type 2 diabetes unless they make major lifestyle changes. Among the primary risk factors for type 2 diabetes are being overweight, sedentary, over the age of 45 and having a family history of diabetes (according to the American Diabetes Association). So you can see why people would get excited about cashing in on diabetes, with all the millions of potential customers, DexCom was singing "hit me baby one more time". So what happened?
Wall Street has punished DexCom with disapproval, just how the public trashed Britney after she married Kevin Federline. No matter how great that technology is, if you are not a profitable company, Wall Street doesn’t care. It’s tough love, but it’s just the world we live in and last month DXCM reported a net loss of $46.6M for 2006. Despite sales totaling $11M for the year as compared to zero for 2005, investors don’t seem to care. It appears the DexCom STS is selling as good as K-Fed’s CD "Playing with Fire" (don’t worry, no link provided here) even with that Parental Advisory of Explicit Lyrics. Just goes to show you, being hardcore isn’t as easy as it looks.
So of course both DXCM and Federline defended their products, let’s see how:
On DXCM’s annual report their CEO Steve Kemper said:
"We are pleased to report revenue of $835,000 for the fourth quarter of 2006 and $2.2 million for the year ended December 31, 2006, after launching STS in late March of 2006. Although we were supply constrained through much of the quarter we increased sensor revenues 23% when compared sequentially to our third quarter revenue".
K-Fed to defended his CD by saying:
"The record is everywhere. It’s definitely going to be kind of a dance club record. The inspiration and meaning behind the title ‘Playing With Fire’ is self explanatory. I’m excited about this album and am looking forward to continuing my promotional club tour in support of it and seeing the first-hand reaction of my fans listening to my songs for the first time. My album is sure to set the dance floors across the world on fire!”
Wow, and set fire it did, right into a stellar career that has lead to…well, something. Much like K-Fed and Britney’s damaged careers, DXCM cannot provide any assuring words to bring it to stardom. DexCom’s annual report (which will take you only 3 minutes to read) is full of risks and challenges that face the company such as a lack of acceptance in the marketplace by physicians and patients of their DexCom STS and the expenses with producing the device. What gets me is that DexCom just doesn’t provide enough information about the benefits of investing in their company stock. If they don’t do that, how the heck can they expect people to run out and buy their stock? More importantly, DXCM share holders are gambling with their holdings, just like Britney’s management team, praying for a turn around but unsure about what will happen next.
So is there hope?
You have a better chance with DXCM than you do with Britney. No one is excited about investing or buying more stocks these days. Everyone is down on the market right now and there’s good reason for that, it’s too unstable. Just like Britney doing emergency haircuts at a minutes notice, doesn’t she look lovely? Consider that the short percentage of DexCom shares when compared to the Float (as of 12-Feb-07) is 19.30%. So there are plenty of people betting DXCM is going to fail. There’s not much to go on here Masters and despite how much there could be to gain by sales of the DexCom STS, I just can’t get excited about it.
So what’s next, will Britney with her shaved head go the Sinead O’Connor route and rip up a picture of the Pope to get attention? Maybe she’ll start a new "Bald is Beautiful" campaign or fill in on Letterman for Paul Shaffer? I do hope that DexCom, Britney, and K-Fed can get things together. In March last year the DexCom STS was considered to become widely used as a single method to monitor blood sugar levels. The device, in the eyes of some experts, threatens to upend the $6B global glucose monitoring market. Millions of people suffer from diabetes and if the STS starts to sell, shares of DXCM won’t stay in the $6 range for long. Let’s face it, if Britney can make a comeback, so can DexCom.
Article written by: Phil McCallister
Article posted on: March 6th, 2007
Disclaimer: The Author does not own any stock or long/short positions of the securities mentioned in this publication.
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