Dexcom Shares fell greater than 40% on Friday, their biggest drop ever, after the diabetes management company reported disappointing sales for the second quarter and offered weak guidance.
The stock fell $43.85 to shut at $64, wiping out greater than $17 billion in market capitalization. Before Friday, the most important drop got here in September 2017, when shares plunged 33% in in the future. Dexcom made its stock market debut in 2005.
Dexcom's revenue rose 15% to $1 billion from $871.3 million a 12 months earlier, based on a press release late Thursday. Analysts had expected revenue of $1.04 billion, LSEG said.
Investors were more concerned in regards to the forecast. For the third quarter, Dexcom expects revenue of $975 billion to $1 billion to “account for certain one-time items impacting seasonality in 2024,” the statement said. Dexcom has updated its full-year forecast and now expects revenue of $4 billion to $4.05 billion, in comparison with the forecast of $4.20 billion to $4.35 billion. last quarter.
Dexcom offers a variety of devices resembling continuous glucose monitors (CGMs) for patients diagnosed with diabetes. On the quarterly earnings call, CEO Kevin Sayer attributed the difficulties to a restructuring of the corporate's sales team, fewer latest customers than expected and lower revenue per user. Part of the shortfall was resulting from customers profiting from discounts on the brand new CGM called the G7. In addition, the corporate said it underperformed within the durable medical equipment (DME) space.
“DME distributors remain important partners in our business, and we did not see good results from those partnerships this quarter,” Sayer said on the conference call. “We need to refocus on those relationships.”
JPMorgan Chase & Co. Analysts downgraded the stock from a buy to a hold on Friday, saying the report represented a “sharp turn in the wrong direction.” The analysts said they still had some unanswered questions but were convinced the corporate's performance was resulting from internal issues and never related to market changes resembling the rising popularity of weight-loss treatments called GLP-1.
In the question-and-answer portion of Thursday's conference call, JPMorgan's Robbie Marcus asked for more details on the numerous reduction in forecasts and said he was “shocked” at how much disruption a change within the structure of the sales team could cause.
“I feel like there’s more that needs to happen,” Marcus said, asking if GLP-1 had an impact.
Sayer responded that the corporate is “missing a larger number of new patients than we would have expected at this time.” He said the restructuring of the sales team, which resulted in changes in geographic coverage, was more dramatic than expected because doctors are actually coping with different representatives.
In their note, JPMorgan analysts emphasized “the magnitude of the downward movement” and said the indisputable fact that it “appears to be largely self-inflicted is simply difficult to comprehend in its entirety.”
Regarding DME's difficulties, Sayer said the corporate has lost customers “who have the highest annual revenue per year,” adding that eligibility for G7 rebates is 3 times faster than with the previous product, G6.
Jereme Sylvain, Dexcom's chief financial officer, said all of those variables added as much as a $300 million shortfall in comparison with the corporate's annual forecast.
“It's certainly not something we're happy about,” Sylvain said. He said that within the interest of “complete transparency,” the corporate needed to supply clarity on “what impact this will have for the rest of the year.”
Analysts at William Blair wrote that Dexcom's results were “disappointing” but their long-term view stays unchanged. Dexcom has the power to expand the market and recuperate recent market share losses, they said.
“This short-term dynamic is likely to prove temporary,” they wrote in a press release on Friday.
Leerink analysts agreed, writing in a report Friday that the “magnitude of the sell-off is overdone” and that the problems currently hurting the corporate are unlikely to have a cloth impact on Dexcom's longer-term trajectory.
In March, Dexcom announced its latest The over-the-counter CGM called Stelo has been cleared to be used by the U.S. Food and Drug Administration. Stelo is designed for patients with type 2 diabetes who don’t use insulin. Dexcom announced Thursday that it’ll officially launch in August.
Friday's sell-off has sent Dexcom shares down nearly 50% for the 12 months, while the S&P 500 has risen 15%.
REGARD: Dexcom lowers forecast
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