DexCom Inc. DXCM reported net loss of 5 cents per share in the second quarter of 2015, wider than the Zacks Consensus Estimate of a loss of 3 cents. However, net loss per share was narrower than the year-ago equivalent of 9 cents.
Quarter Details
Second-quarter revenues surged nearly 58.5% year over year to $93.2 million, which handily beat the Zacks Consensus Estimate of $85 million. The upside was driven by an impressive 59.6% jump in product revenues.
Average selling price (ASP) for sensors was at the high end of the company’s stated range of $70−$75 per sensor while ASP for Dexcom’s hardware stayed at approximately at $850 to $900 per starter kit.
Gross margin expanded 290 basis points (bps) year over year to 70.8%, primarily on the back of higher revenues and a favorable product mix, comprising roughly 30% durable and 70% consumable in the quarter.
Selling, general and administrative (SG&A) and research and development (R&D) expenses rose 46.3% and 64.9% year over year to $45.2 million and $24.4 million, respectively, owing to increased marketing expenses, additional payroll related costs and expenses related to work on near-term product pipeline as well as an advanced product suite.
DexCom reported operating loss of $3.6 million, lower than the year-ago operating loss of $5.8 million, thanks to higher revenues, offset by increasing operating expenses.
DexCom had cash and cash equivalents of $67.7 million as of Jun 30, 2015, higher than $54.2 million as of Mar 31, 2015.
Product Pipeline
DexCom expects to launch G5 mobile system for both pediatrics and adults in 2015. The company is well on track to conduct a pre-pivotal study with its gen 6 sensors later this year. Following that, the company will look to commence a pivotal study. DexCom expects to launch gen 6 in early 2017.
The company is initiating investments in its real-time analytics platform, given that G4 PLATINUM is gaining significant market traction.
Outlook
DexCom raised its revenue guidance from a range of $340–$360 million to a range of $350–$375 million. The company expects to make additional investments prior to the rollout of the G5 mobile system. Hence, SG&A expenses are expected to increase 25% on a year-over-year basis in 2015.
In the near term, DexCom expects gross margin to remain at about 70%, but gross margin on hardware is expected to be lower, going forward, due to the roll out of the G5 mobile transmitter. Management expects the product mix between durable and consumable products to remain steady at 30% and 70%, respectively.
Our Take
DexCom’s healthy product pipeline is a major positive. The company plans to launch several new products in 2015. We feel the pipeline approvals and their subsequent launches will benefit DexCom’s long-term prospects and drive significant top-line growth. However, higher product development costs and R&D expenses will continue to hurt margins in the near term.
Zacks Rank
Currently, DexCom has a Zacks Rank #3 (Hold). Better-ranked stocks in the broader medical sector are Agios Pharmaceuticals AGIO, NuVasive NUVA and Abaxis ABAX. All the three stocks sport a Zacks Rank #1 (Strong Buy).
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