DexCom, Inc. (DXCM) reported a net loss of 29 cents per share in the third quarter, 3 cents below the Zacks Consensus Estimate of a net loss of 32 cents and significantly below the year-ago net loss of 53 cents. The significant improvement in financial results was due to higher revenue.
Revenue came in at $7.3 million, up 278% from the $1.9 million reported in the year-ago period. Total revenue consists of product revenue and development grant revenue. Development grant revenue came in at $2.6 million.
Product revenue increased 146% to $4.6 million for the third quarter of 2009. On a sequential basis, product revenue increased 12%. During the reported quarter, DexCom sold approximately 2,125 systems representing a sequential increase of 10%.
Product cost of sales increased $1 million to $4.6 million for the third quarter of 2009 mainly due to increased product revenue. Development cost of sales increased to $1.8 million due to costs related to the company’s development of a hospital based continuous glucose monitoring system under its agreement with Edwards. Total cost of sales increased to $6.4 million due to additional product sales and development costs related to development and collaboration agreements entered into during 2008.
Total operating expenses increased 3.1% mainly due to an increase in selling, general and administrative expense (SG&A) which was partially offset by a decline in research and development (R&D) expense.
R&D expense declined 35.4% to $3.5 million for the third quarter of 2009 due to the allocation of expenses to development cost of sales for activities performed pursuant to development and collaboration agreements entered into by DexCom in 2008.
Meanwhile, SG&A expense increased 34.5% to $8.9 million in the third quarter of 2009. Additional marketing, customer service, insurance reimbursement and sales costs led to the increase in SG&A spend. We expect SG&A expense to increase as DexCom works on focusing its sales and marketing efforts on increasing awareness among diabetes patients regarding the use of continuous glucose monitoring systems.
We believe DexCom is well-positioned to gain a significant share of the glucose monitoring market. In addition to upgrading and enhancing the functions of existing products, DexCom has also been pretty active on the collaboration front through which it is looking to integrate its technology with its partner’s product offerings.
Increased awareness and acceptance of the need for continuous glucose monitoring, more favorable reimbursement coverage, and data supporting blood glucose monitoring should help drive product revenue. However, we note that competition in the market is fierce with big names like Johnson & Johnson (JNJ), Medtronic (MDT), and Abbott (ABT) accounting for a major part of glucose monitoring system sales.
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