Dexcom shares sank greater than 40% on Friday, their steepest decline ever, after the diabetes management company reported disappointing revenue 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 cap. Prior to Friday, the largest drop got here in September 2017, when the shares plunged 33% in a day. Dexcom held its stock market debut in 2005.
Dexcom’s revenue increased 15% to $1 billion from $871.3 million a 12 months earlier, in response to a release late Thursday. Analysts were expecting revenue of $1.04 billion, in response to LSEG.
The larger concern for investors was the forecast. For the third quarter, Dexcom expects revenue of $975 million to $1 billion to account for “certain unique items impacting 2024 seasonality,” the discharge said. Dexcom updated its full fiscal-year guidance and now expects revenue of $4 billion to $4.05 billion, down from the $4.20 billion to $4.35 billion it forecast last quarter.
Dexcom offers a collection of tools akin to continuous glucose monitors, or CGMs, for patients which have been diagnosed with diabetes. On the earnings call, CEO Kevin Sayer attributed the challenges to a restructuring of the corporate’s sales team, fewer latest customers than expected and lower revenue per user. A number of the shortfall needed to do with customers benefiting from rebates for the brand new CGM called the G7. Moreover, the corporate said it underperformed within the durable medical equipment, or DME, channel.
“The DME distributors remain necessary partners for us in our business, and we’ve not executed well this quarter against these partnerships,” Sayer said on the decision. “We’d like to refocus on those relationships.”
JPMorgan analysts downgraded the stock Friday from the equivalent of a buy to a hold, and said the report marked a “sharp turn within the incorrect direction.” The analysts said they still have some unanswered questions, but are confident that the corporate’s performance was resulting from internal issues and never tied to market changes akin to the surging popularity of weight reduction treatments called GLP-1s.
Throughout the Q&A portion of the earnings call on Thursday, JPMorgan’s Robbie Marcus had asked for more details on the substantial drop in guidance, expressing “shock” at how much disruption could possibly be attributable to a change within the structure of the sales force.
“I feel like there must be more happening,” Marcus said, and asked whether GLP-1s were having an impact.
Sayer responded by saying the corporate is “short a lot of latest patients as to where we thought we could be at this cut-off date.” He said the sales force reshuffling, which led to changes in geographic coverage, was more dramatic than expected as physicians were now coping with different reps.
Of their note, the JPMorgan analysts highlighted “the magnitude of the downside,” and said the incontrovertible fact that it “appears to mostly be self-inflicted is just hard to understand in totality.”
With respect to the DME struggles, Sayer said the corporate lost customers “who’ve the very best annual revenue per 12 months.” He added that G7 rebate eligibility was thrice faster than over the prior product, the G6.
Jereme Sylvain, Dexcom’s finance chief, said all those variables add as much as a $300 million shortfall in the corporate’s guidance for the 12 months at the highest end.
“Definitely not something we’re blissful about,” Sylvain said. He said that within the interest of “full transparency,” the corporate needed to supply clarity “about what the impact is for the balance of the 12 months.”
Analysts at William Blair wrote that Dexcom’s results were “disappointing” but their long-term view stays unchanged. Dexcom has the flexibility to expand the market and to win back recent share losses, they said.
“These near term dynamics should prove transient,” they wrote in a note 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 fabric effect on Dexcom’s longer-term trajectory.
In March, Dexcom announced its latest over-the-counter CGM called Stelo had 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 said Thursday it’s going to officially launch in August.
With Friday’s sell-off, Dexcom shares are down almost 50% for the 12 months, while the S&P 500 is up 15%.
WATCH: Dexcom cuts forecast
