Dexcom shares sank more than 40% on Friday and headed for their worst day ever after the diabetes management company reported disappointing revenue for the second quarter and offered weak guidance.
The stock fell $45.38 to $62.47 as of early afternoon, wiping out about $18 billion in market cap. Prior to Friday, the biggest drop came 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 year earlier, according to a release late Thursday. Analysts were expecting revenue of $1.04 billion, according to LSEG.
The bigger 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 release 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 suite of tools like continuous glucose monitors (CGMs) for patients that have been diagnosed with diabetes. On the earnings call, CEO Kevin Sayer attributed the challenges to a restructuring of the company’s sales team, fewer new customers than expected and lower revenue per user. Some of the shortfall had to do with customers taking advantage of rebates for the new CGM called the G7. Additionally, the company said it underperformed in the durable medical equipment (DME) channel.
“The DME distributors remain important partners for us in our business, and we’ve not executed well this quarter against these partnerships,” Sayer said on the call. “We need 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 in the wrong direction.” The analysts said they still have some unanswered questions, but are confident that the company’s performance was due to internal issues and not tied to market changes like the surging popularity of weight loss treatments called GLP-1s.
During 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 be caused by a change in the structure of the sales force.
“I feel like there has to be more going on,” Marcus said, and asked whether GLP-1s were having an impact.
Sayer responded by saying the company is “short a large number of new patients as to where we thought we would be at this point in time.” He said the sales force reshuffling, which led to changes in geographic coverage, was more dramatic than expected as physicians were now dealing with different reps.
In their note, the JPMorgan analysts highlighted “the magnitude of the downside,” and said the fact that it “appears to mostly be self-inflicted is just hard to grasp in totality.”
With respect to the DME struggles, Sayer said the…
Read More: Dexcom shares plunge more than 40% after Q2 earnings