Zacks_Analysts' Blog : DexCom Misses but Losses Trim - Analyst Blog

DexCom (DXCM), a prominent player in the glucose monitoring market, reported first-quarter fiscal 2011 loss per share of 19 cents, a penny higher than  the Zacks Consensus Estimate while sharply less than the year-ago loss of 40 cents per share. Net loss for the quarter trimmed roughly 41.5% year over year to $11.9 million owing to a healthy revenue growth.

Revenues

Revenues for the quarter shot up roughly 48.5% year over year to $14.2 million, still missing the Zacks Consensus Estimate of $15 million. Product sales almost doubled year over year to $13.1 million while development grant and other revenues dropped 62.8% to slightly over $1 million.

Margins and Expenses

Gross margin for the quarter dipped slightly to 36.1% from 36.2% a year ago. Operating expenses leaped 16.9% year over year to $17 million, partly on account of higher R&D spending, which surged 32.3% to $6.3 million.

Balance Sheet

DexCom exited the quarter with cash and short-term marketable securities of $37.3 million, down 25.2% year over year. The company de-leveraged its balance sheet as long-term debt (inclusive of current portion) declined to $0.3 million at the end of the quarter from $5.9 million a year ago. Accumulated deficit climbed 3.4% year over year to $358.2 million, as of March 31, 2011.

Outlook

DexCom has not provided any financial forecasts for fiscal 2011. We believe the company is poised to gain a major share of the glucose monitoring market driven by sustained product development initiatives, collaborations, favorable reimbursement coverage and increased need for continuous glucose monitoring.

However, we remain concerned about aggressive competition from much larger players such as Johnson & Johnson (JNJ), Medtronic (MDT) and Abbott (ABT), and a stricter regulatory environment. We currently have a long-term Neutral recommendation on DexCom.