Dexcom stock popped Wednesday after the Food and Drug Administration cleared its newest body-worn glucose monitor for people who don't require insulin treatment.
Though Dexcom is gearing its new continuous glucose monitor, Stelo, to the 25 million people in the U.S. with non-insulin intensive type 2 diabetes, the FDA cleared the device for non-diabetics as well, William Blair analyst Margaret Kaczor Andrew said in a report. People can also request the device over the counter, meaning it doesn't require a prescription.
"The broad approval — as well as the (over-the-counter) indication, which eliminates the need for a prescription — increases the (total addressable market) by many multiples," she said.
On today's stock market, Dexcom stock jumped 9.8% to 133.73. Shares broke out of a flat base with a buy point at 132.03, according to MarketSurge.com. Dexcom stock easily hurdled its 50-day moving average.
Dexcom Stock Rises On Broad Clearance
Beyond the non-insulin users among type 2 diabetics, William Blair's Andrew estimates there are three times as many people with prediabetes in the U.S. as there are people with type 2 diabetes. This is a massive expansion from the 7.5 million insulin-using diabetics in the country — the group that's still most likely to use continuous glucose monitors.
Dexcom's move also plays into the red-hot metabolic health space. Metabolic health examines how well a body can consume and use energy. This area is booming with the rise in popularity of weight-loss drugs from Novo Nordisk and Eli Lilly. These drugs, known as GLP-1 agonists, have historically been used in patients with diabetes. But they are now pivoting to the lucrative obesity treatment market.
Experts say doctors are prescribing continuous glucose monitors for patients taking weight-loss drugs.
"As awareness of metabolic health and disorders brings people into the system, it should raise demand for technologies like CGM even higher," Andrew said. "All of this should make the CGM market — and its largest pure-play beneficiary in Dexcom — one of, if not the, fastest-growing medical technology market (already above $5 billion) over the next five years."
Andrew kept her outperform rating on Dexcom stock.
Abbott's Device Is In The U.K.
Abbott Laboratories is also working to gain FDA clearance for its Lingo device in the U.S. The rival to Stelo is already available in the U.K. for people without diabetes.
Andrew said people in the U.S. seeking to gain access to Dexcom's Stelo could use their health care savings accounts, or HSAs, to defray the costs of their 15-day device. Dexcom's devices generally sell at a premium to Abbott's. In the U.S., a FreeStyle Libre — Abbott's CGM for diabetes — costs about $80 a month. Andrew assumes Dexcom's Stelo will cost around $90 a month.
"While Abbott has discussed launching Lingo (which may gain a similar OTC approval), we note that the product is geared for health and wellness," she said. "This would make Stelo — at least in the immediate term — the only OTC device targeting type 2 non-insulin diabetics."
Andrew expects the new device to add $31 million in sales this year after launching this summer. That's below Dexcom's guidance for 1% of sales, which comes out to about $42.5 million at the midpoint of the company's guidance. But Andrew is more bullish on future sales. Conservatively, she sees $200 million in 2025 sales, or about 5% of total U.S. sales.
Marketing Matters
It all depends on how Dexcom opts to promote the product, she says. People with prediabetes will be the low-hanging fruit. But there are other metabolic health uses, including nutrition, weight loss and athletic performance. Dexcom stock has made a strong comeback since October as enthusiasm for the metabolic health space grows.
"Collectively, we believe there are over 100 million people between prediabetic individuals and potential metabolic health users who add to the (total addressable market) that Dexcom and Abbott will be pursuing in the coming years as their next leg of growth," she said.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
