Dexcom is Wednesday's IBD Stock Of The Day. Dexcom stock is lingering in a buy zone, bolstered by U.S. clearance of a new body-worn glucose monitor.
The company developed Stelo, its newest continuous glucose monitor, for the roughly 25 million people in the U.S. with type 2 diabetes not requiring insulin treatment. But the Food and Drug Administration cleared the device for all non-insulin-using adults. Further, it will be available without a prescription.
This undoubtedly means people without diabetes are going to use Stelo to help stoke weight loss.
CGM prescriptions have climbed alongside the growing popularity of weight-loss drugs from Eli Lilly and Novo Nordisk, Dexcom's Jake Leach recently told Investor's Business Daily. Leach is the company's executive vice president and chief operating officer.
"The CGM user population has grown rapidly," he said in an interview. "There's a lot of benefit for the two (weight-loss drugs and continuous glucose monitors) to be used in combination."
Dexcom stock is currently in the 5% chase zone after breaking out of a flat base with a buy point at 132.03, MarketSurge.com shows. The stock fell 2.7% to close at 131.68 on Wednesday.
Dexcom Stock And Its Ties To Metabolic Health
The company initially developed its continuous glucose monitors for patients with diabetes who need insulin treatment. That includes all type 1 diabetics and those with type 2 diabetes that has worsened. There are about 7.5 million insulin-using diabetics in the U.S., William Blair analyst Margaret Kaczor Andrew said in a recent report to clients.
"The broad approval (of Stelo) — as well as the over-the-counter indication, which eliminates the need for a prescription — increases the total addressable market by many multiples," Andrew wrote.
There are three times as many people with prediabetes in the U.S. as there are people with type 2 diabetes. Further, recent interest in metabolic health should drive more people to use continuous glucose monitors, she said. Metabolic health is related to how the body consumes and uses the energy in food.
"All of this should make the CGM market — and its largest pure-play beneficiary in Dexcom — one of, if not the, fastest-growing medical technology market (already above $5 billion) over the next five years," she said.
It's important to note Abbott Laboratories is also developing its Lingo device for U.S. patients. Lingo is Abbott's continuous glucose monitor for health and longevity. It's already available in the U.K. for people without diabetes. Medtronic also makes CGMs for diabetics.
Andrew has an outperform rating on Dexcom stock.
Stelo Launch Expected This Summer
Dexcom expects Stelo to launch this summer and account for about 1% of sales this year. That comes out to about $42.5 million in sales based on the company's full-year outlook for $4.15 billion to $4.35 billion in sales.
Analysts following Dexcom stock expect the company to generate $4.33 billion in sales this year with adjusted earnings of $1.75 a share. Sales would jump about 19.5% as earnings climb more than 15%.
William Blair's Andrew expects Stelo to generate $31 million in sales this year and $200 million in sales next year. She notes that the over-the-counter clearance and patients' ability to use their health savings accounts to pay for their continuous glucose monitors will be key to uptake.
"This will meaningfully ease the barriers/friction to accessing these technologies," she said. "This is important for not only non-insulin users, where demand has been strong despite limited access, but it opens up the non-diabetic market for CGM technologies altogether."
Today, Dexcom stock has a strong Composite Rating of 92 out of a best-possible 99, according to IBD Digital. This puts its shares in the top 8% of all stocks when it comes to 12-month performance.
Dexcom also joined Investor's Business Daily's Leaderboard on Tuesday.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
