Dexcom lowered its sales forecast for 2024, surprising Wall Street as it lost market share among durable medical equipment (DME) providers and restructured its salesforce. Shares of the company were down 41% Friday morning.
The diabetes device firm now expects 2024 revenue of $4 billion to $4.05 billion, a decrease from its previous forecast of $4.2 billion to $4.35 billion.
“We have higher expectations for our business than what we experienced this quarter,” CEO Kevin Sayer told investors on Thursday, adding that he expects “more from myself and more from my team going forward.”
Sayer attributed the lower sales outlook to three factors: a salesforce restructuring, lower revenue per customer due to rebates, and a loss of market share in the durable medical equipment channel.
Those dynamics put Dexcom’s U.S. revenue about $40 million below the company’s internal estimates, CFO Jereme Sylvain said. The company also had about 70,000 fewer patient starts than expected in the quarter, “a pretty sizable disruption,” he added.
Analysts pressed for more details on the forecast cut.
“I'm just kind of in shock at how big of a disruption and a downward guide it is,” J.P. Morgan analyst Robbie Marcus said on the call.
Dexcom cut 535 employees a month prior, as part of a move to consolidate manufacturing in Arizona. The company is also in the process of launching its first over-the-counter continuous glucose monitor, which is slated for late August.
Sayer said the salesforce changes differed from those the company has done in the past, where Dexcom took territories and divided them up geographically. This time, the company divided up the teams into groups that focus on high-prescribing physicians, and other groups that “prospect” with primary care physicians who don’t prescribe as many Dexcom products.
“The magnitude of the downside, the fact that it was US and OUS, and the fact that it appears to mostly be self-inflicted is just hard to grasp in totality,” Marcus wrote in a research note early Friday.
Loss of DME market share
Sayer also said Dexcom lost market share among DME companies. As a result, the company is also losing customers who have the highest annual revenue per year as a patient, he said. Dexcom previously sold most of its glucose sensors through DMEs, but began a push for more pharmacy coverage in recent years.
“When we started this journey down pharmacy coverage, we had, as a company, zero relationships in the pharmacy channel. We worked very hard to develop those relationships, because… that is where a large portion of the business has moved,” Sayer said. “In creating and building those relationships, we ignored other relationships that were very important to us more than we should have.”
People who take basal insulin, a coverage expansion for CGMs that Medicare added last year, are a “big piece” of the DME space, the CEO noted.
William Blair analyst Margaret Kaczor Andrew wrote that the decreased guidance led investors to question Dexcom’s long-term growth, but that she expects the CGM market to expand in the high teens, if not more, through 2027.
“We also believe in DexCom’s ability to both 1) grow the market with continued coverage expansion and 2) win back recent share losses as it better manages its expansion into the pharmacy channel and re-engages the DME channel,” she wrote.
Marcus added that “we feel very confident this is due to multiple self-inflicted issues rather than a market growth issue,” and that the “opportunity remains for the long-term.”
