DexCom

DXCM : NASDAQ : US$36.77

BUY
Target: US$44.00

COMPANY DESCRIPTION:
DexCom is a medical device firm focused on pioneering
technologies for the continuous monitoring of glucose levels in
people with diabetes. The company has received FDA approval for
its short-term continuous glucose monitoring system (CGMS), the
DexCom STS system, and in June 2007 gained approval for its
second-generation STS Seven system

Life Sciences — Biomedical Devices and Services
Q4/13 PRELIM RESULTS STRONG;
UPDATING MODEL & PT; REITERATE
BUY, PT TO $44
Investment recommendation
We reiterate our BUY rating on DexCom following release of Q4/13
preliminary numbers which again demonstrated the market-expanding
potential of the next-generation Gen4 Platinum sensor. We note tough
comps as the Gen4 first launched Q4/12. Additionally, management
provided 2014 guidance indicating 30-40% growth for the foreseeable
future, not including pump partners, but including pediatric label –
which has not yet been approved but has been deemed “approvable” by
the FDA. More importantly, management provided color regarding its
patient base, ~54,000 users today, and sensor utilization, 1.5M in the
15-months post launch. Net, net, we remain buyers of DexCom despite
its being one of the most expensive names in medtech and note that
additional 2014 catalysts such as the JnJ/Animas partnership and
DexCom Share are NOT in our forward estimates, providing upside to
current projections.
Investment highlights
Q4/13 results with product revenues of approximately $51M, up
20% Q/Q, 61% Y/Y, and well above our estimate of $47.1M.
2014 guidance for product revenues of $205M-$225M (~30%-40%
growth Y/Y), vs our/consensus estimates for $207.1M/$210.3M.
Valuation
We are raising our price target to $44.00 from $34.00 utilizing an 11.3x
EV/sales multiple applied to our 2015E revenue estimate of $272.1M.

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