Dexcom stock yo-yoed on Wednesday following rumors that it's in talks to acquire insulin pump-maker Insulet.
The potential deal, first reported by Bloomberg, would create a behemoth in diabetes management. But it also sent shares of Dexcom tumbling on Tuesday. Dexcom makes continuous glucose monitors, or CGMs, that keep tabs on patients' blood sugar. Insulin pumps can be connected to CGMs to create a more seamless process.
"Such a potential deal, if it were to happen, would likely be transformative and impactful to the diabetes technology landscape," BTIG analyst Marie Thibault said in a note to clients.
On the stock market today, Dexcom stock rose early, but ended the day with a loss, down 2.4% at 281.32. Insulet shares inched 1.8% higher, to 221.65. Both continued Tuesday's action, in which Dexcom shares plunged more than 11% and Insulet stock gained north of 7%.
Dexcom Stock Has Tumbled This Year
The rumored deal's timing is odd, however, Thibault said. Dexcom stock hit a record high in November, but has dropped off precipitously since then. Shares have fallen 46% this year as of Tuesday's close. At the same time, Insulet shares have skidded 18%.
"The timing appears less favorable if accomplished at least in part via stock," she said. Further, it would be a departure from Dexcom's focus in securing patients with less severe diabetes that doesn't require insulin treatment.
Thibault added it also could limit cooperation between diabetes technology firms. Dexcom's CGMs can be integrated with Tandem Diabetes Care's insulin pumps. Insulet is reportedly working to integrate its insulin pump with Abbott Laboratories' glucose monitor.
"It is not clear whether that kind of collaboration could continue with a potential merger," she said.
Still, Thibault kept her buy ratings on Dexcom stock and Insulet stock.
Major Players With Strong Growth
Representatives of the two companies declined to comment to Investor's Business Daily.
Last year, Insulet's sales grew 22% to $1.1 billion as Dexcom revenue climbed 27% to $2.45 billion. The deal would unite "two fast-growing major players entering new product cycles" with growth projected above 20% over the next few years, Thibault said.
Still, shares of both companies trade below their key moving averages, according to MarketSmith.com. Dexcom stock and Insulet stock fell below their 200-day lines last month.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
