Dexcom held its Q4 2018 earnings call last week, reporting an overall very strong year, but also announcing outsourcing plans that will likely lead to layoffs in the US.
The company broke $1 billion in annual revenue in 2018, CEO Kevin Sayer said on the call, while increasing adoption, especially in Medicare and international markets, both of which are new to the company. And the company has set an internal goal to double production of its G6 CGM, the newest model, by the end of 2019.
The outsourcing, which Sayer discussed at the end of his remarks, will involve both third-party contractors and a new Dexcom office in the Philippines.
“Similar to our scaling of manufacturing capacity, we have had to rethink how we build our customer-facing infrastructure to better serve our rapidly growing patient base, not just for today, but also to build a sustainable infrastructure for the future," Sayer said. "We have therefore expanded and reorganized our customer support efforts, which includes an increase of resources on our new Philippines location, as well as outsourcing other functions through third parties. … This expansion will result in organizational changes, including a reduction in certain staff at both our San Diego and Arizona facilities, despite an expected overall increase in employee numbers in these locations this year.”
Dexcom reported revenues of $338 million in Q4 2018, a 53 percent increase over Q4 2017’s revenue of $221 million. The company’s revenue for the whole year was $1.32 billion.
Operating expenses for the quarter also rose, to $170 million compared to $142 million in Q4 2017.
The company is projecting 2019 revenues between $1.175 billion and $1.225 billion.
On the record
“Simply put, 2018 was an incredible year for DexCom on several fronts,” Sayer said. “First and foremost, we broke through one billion dollars in annual revenue. Very few, if any, medical device companies have reached the billion-dollar revenue mark while growing revenues organically at greater than 40 percent year-over-year.”
The biggest milestone last year for Dexcom was the FDA approval of its G6 system, which also was the first (and so far only) system to meet the FDA’s new special controls for iCGM. The year also included the acquisition of TypeZero.
Executives also mentioned on the call that Dexcom modified its agreement with Verily in November last year. Whereas before, the Verily product was being discussed as a separate project from Dexcom’s main line. Now, it is a technology integration in the G7.
“What you heard us talk about in the prepared remarks was G7 and committing to the timeline of launching G7 by the end of next year or the first part of 2020, and that remains on track,” Steve Pacelli, EVP of strategy and corporate development, said during the Q&A. “That will be the first launch of a product that incorporates our technology together with Verily. We're not referring to it specifically as the Verily platform anymore. It's really, it's a DexCom product and we're going to call it G7 going forward.”
And importantly for Dexcom’s financials, the renegotiated agreement eliminates future royalty payments from Dexcom to Verily.
In 2019, Dexcom plans to continue working with partners and is anticipating a number of launches in the insulin delivery space that make use of its technology. That includes Tandem’s Control-IQ system, Insulet’s Horizon system, and partnerships with Lily and Novo Nordisk around insulin pens.
The company is also planning a number of studies to further validate the device, though they likely won’t be published. They are working with UnitedHealthcare on one, and others focus on the hospital and gestational markets.