Dexcom, Diabetes and Dollars

12/29/2015 7:00 am EST

Focus: STOCKS

James Oberweis

President, Oberweis Asset Management, Inc.

Our latest featured small-cap stock is a medical device company primarily focused on the design, development, and commercialization of continuous glucose monitoring (CGM) systems for ambulatory use by people with diabetes, explains Jim Oberweis, Jr., editor of The Oberweis Report.

Dexcom (DXCM) offers these CGM systems that provide real-time glucose readings throughout the day and night, allowing people with diabetes to see their glucose levels and track how quickly they’re increasing or decreasing.

The typical CGM provides as many as 288 readings per day, providing a dynamic understanding of how a patient’s glucose level fluctuates.

Dexcom’s system consists of: 1) a small sensor that fits just underneath the skin, and 2) a transmitter that’s fastened on top of the sensor that sends data wirelessly to a Dexcom receiver or Dexcom-approved smart phone (via the company’s latest G5 system, which was recently approved by the FDA).

Dexcom dominates the market with over 60% share and is taking share from competitors like Medtronic (MDT).

Additionally, CGM systems are only used by about 10% of Type I diabetics in the US, meaning the runway for growth is long as adoption rates increase.

In the company’s latest reported third quarter, sales increased approximately 52% to $105.2 million from $69.0 million in the third quarter of last year.

Dexcom has been reporting consistent EPS losses as the company invests heavily in its sales and marketing functions. We expect the company will turn profitable later in 2016.

Clients of Oberweis Asset Management own approximately 79,000 shares. These shares may be appropriate for risk-oriented investors.

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