Dexcom plunges after competing glucose monitoring system approved
Shares of Dexcom (DXCM) are sliding after Abbott Laboratories (ABT) announced that the Food and Drug Administration has approved its FreeStyle Libre Glucose Monitoring System.
Several analysts commented on the news this morning, with JPMorgan, Raymond James and Northland downgrading Dexcom to Neutral-equivalent ratings.
LIBRE FDA APPROVAL
Last night, Abbott announced that the FDA has approved the FreeStyle Libre Flash Glucose Monitoring System as a replacement for blood glucose monitoring for adults with diabetes in the U.S.
This new glucose sensing technology eliminates the need for routine finger sticks and is the only personal continuous glucose monitor that does not require finger stick calibration, the company stated. The FreeStyle Libre reads glucose levels through a sensor that is worn on the back of the upper arm for up to 10 days, making it the “longest lasting personal glucose sensor available in the U.S.,” the company added.
Following the announcement, #Barclays analyst Matthew Taylor told investors that the FDA approval came a bit earlier than consensus expectations with a significantly better than expected label as it allows for dosing or a replacement claim.
The analyst noted that he believes Abbott’s entry into the U.S. market with this label could be disruptive. Further, Taylor argued that Libre could be both market expanding for glucose monitoring devices and take share from other players, including Dexcom. The analyst reiterated an Overweight rating on Abbott’s shares and raised his price target on the stock to $60 from $57.
Meanwhile, his peer at JPMorgan downgraded Dexcom to Neutral from Overweight, pointing out that Libre’s label came in better than expected, Abbott’s pricing strategy is even more aggressive than thought, and an aggressive Abbott commercial strategy with the five largest pharmacies is already lined up for distribution starting in December.
While not “game over” for Dexcom’s CGM, the approval introduces low priced competition into the MDI segment of the population where the company was previously the sole competitor, analyst Michael #Weinstein contended. He lowered his price target on Dexcom’s shares to $71 from $93.
His peer at Raymond James also downgraded Dexcom to Market Perform from Outperform, citing increased competitive concerns. Analyst Jayson #Bedford noted that Abbott’s approval was expected, but the broader label was not. Bedford expects #Libre to receive Medicare reimbursement and for Abbott to be more aggressive on pricing, impacting DexCom’s growth outlook.
Additionally, Northland analyst Suraj #Kalia downgraded Dexcom to Market Perform and lowered his price target on the stock to $60 from $85. Like his peer, the analyst sees Libre’s concomitant non adjunctive to fingersticks label as a surprise that removes a key competitive advantage for Dexcom.
WILLIAM BLAIR MORE POSITIVE
Also commenting on the news, William Blair analyst Margaret #Kaczor argued that while she did not think Abbott’s Libre would receive a dosing claim given the product’s “inferior accuracy,” it still lacks Dexcom’s alerts and alarms that proactively protect the patient from glycemic excursions.
Libre’s dosing may shift the competitive dynamic “modestly in Abbott’s favor versus Street expectations,” but more importantly, its approval should be market expansive as it creates a new type of glucose monitoring category in the U.S., Kaczor contended. The analyst believes Dexcom will retain a “material technological and brand advantage.”
In Thursday’s trading, shares of Abbott have gained over 4% to $54.28, while Dexcom’s stock has plunged over 36% to $42.95.
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