DexCom-Lily Partnership To Boost CGM Platform, Customer Base

DexCom, Inc. (NASDAQ:DXCM) recently announced the signing of a development agreement with Eli Lilly and Company (NYSE:LLY) . Per the agreement, DexCom’s flagship continuous glucose monitoring system (CGM) will be added to Lilly’s Connected Diabetes Ecosystem.

Through the integration of CGM with Lily’s smart insulin delivery devices, DexCom aims to provide a holistic approach to diabetes management for its customers. Notably,clinical trials are expected to begin by the end of 2017.

DexCom's FDA-cleared CGM system — the DexCom G4 Platinum — is contributing significantly to the top line. DexCom G4 Platinum is the most innovative CGM system in the market. In June, DexCom had announced the FDA approval of the DexCom G5 mobile app for Android devices.

Moreover, DexCom has collaborative agreements with several companies, which should not only bring in cash in the form of milestone payments and royalties but should also help expand its product use. In September 2017, DexCom announced a tie-up with leading wearables brand Fitbit to develop and market products to help people better manage diabetes and get a clearer picture of their overall health. The first planned initiative is to bring DexCom CGM data to Fitbit’s new smartwatch, Fitbit Ionic. The companies aim to make the smartwatch available in 2018 and will continue to explore ways to develop tools to improve diabetes management.

We believe the glucose monitoring market represents significant commercial opportunity for DexCom. Per a report by Mordor Intelligence, the global market for diabetes care devices is projected to reach a value of $30.25 billion by 2021, at a CAGR of 5.93%. Also, the International Diabetes Federation (IDF) estimates that by 2035, the worldwide incidence of people suffering from diabetes will reach 592 million.

Recently, management at DexCom confirmed that the company is well poised to congregate the unmet demand in the global diabetic space, especially when it comes to CGM. DexCom’s increased patient convenience, enhanced connectivity, data analytics, and lower cost platforms fortify the company’s foothold in the global diabetic space.

However, the diabetes market is dominated by many well-established players, Abbott (NYSE:ABT) being the most prominent one. In this space, Abbott recently announced the receipt of FDA approval for the FreeStyle Libre Flash glucose monitoring system in the United States.

Share Price Performance

DexCom has been gaining investor confidence on consistently positive results. Over the last month, the company’s share price outperformed the broader industry. The stock has gained 23.1%, as compared with the broader industry’s 1%. The company has also outperformed the 0.9% gain of the S&P 500 market.

Zacks Rank & Key Pick

DexCom carries a Zacks Rank #3 (Hold).

A better-ranked medical stock is PetMed Express, Inc. (NASDAQ:PETS) , with a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PetMed has a long-term expected earnings growth rate of 10%. The stock has rallied roughly 80.9% in a year.

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