This is a business news question, not medical, but folks here always seem to know so I’ll ask.
In today’s business news, CNBC says Dexcom took an earnings and revenue hit and its stock price dropped 40%. On Wall Street, that’s huge. The CEO said part of its earnings and revenue shortfall has to do with “the G7 rebate”. What rebate? I’m just about to receive my very first 90-day order. Am I missing out on something?
EDIT: I’m not sure about the dates. There was an “earnings call” in June according to Google which is the first piece of information and apparently reflected the filed results.
According to my financial adviser (aka my wife) Dexcom’s earnings did exceed expectations by 4c. That was June 25. Their earnings went up 11.36% (from Google) but their revenue was down about 3%.
So that explains the comments; well, the comments are spin. Abbott CGMs are increasingly regarded as equivalent to Dexcom and my assumption is that Dexcom is dropping the price across the planet.
At the same time costs have gone down (a lot), e.g.:
Nothing like firing people to reduce costs.
There was a biggish drop on June 24; the stock lemmings always hope for better-that-forecast earnings and the per-share price dropped from US $116.41 to $110.57. That’s a 5% drop.
However the volume of trades started creeping up on July 24 then there was the massive drop overnight (so far as the US is concerned). Apparently it closed at $107.85 last night and opened at $66.00 this morning.
The trigger may have been growth expectations; Dexcom does not pay a dividend so all the investors are growing after growth. All the same it’s a bit weird suggesting maybe that there has been an online attack. The share price is way outside any sane value given their earnings; even after the drop it’s over 67 times the earnings, about 1.5% which is not a good return on investment.
Reuters seems to think it’s due to cuts in the revenue forecast:
The comments are worth reading. One identified factor is failure of uptake by insulin dependent T2s, identified as people who just use long-acting or (I assume) medium acting insulin mixes.
Good comments, John. Thank you.
I just reread the latest from CNBC, my main source of business news (not advice! Just news!
). I agree with you I mischaracterized the numbers but my real question was and still is: “What rebate on G7?” No one at Dexcom or CCS Medical, my supplier, has offered me any sort of rebate or price cut. I’m just curious what the CNBC blurb is talking about re “rebate on G7” and I want to know if I’m missing out on something that might could save me some $.
May be referring to this.
This isn’t a rebate on the patient end. This is a rebate for the PBMs and distributors. Incentive to contract the G7, instead of just keeping on with the G6, and initiate patients on the new system. You know how all the DME suppliers are strongarming people to switch to G7, mass mailing “G6 is being discontinued” threats, everyone’s offering free upgrade and new receiver, pharmacies are “out of stock of G6, but we can upgrade you to G7”, etc… It’s because there’s a once per person bounty on our heads… It’s just more polite to call it a “rebate”.
You can read the transcript of the call here: DexCom (DXCM) Q2 2024 Earnings Call Transcript | The Motley Fool
You can read the whole thing if you want, or use the find in page function on your browser to search for rebate. “Rebate” appears 28 times in that call, but on the 10th occurrence someone specifically asks him to explain the rebate thing. I tried to copy/paste it here, but the whole page kept highlighting, so you’ll have to find it yourself.
This seems to be normal business for Dexcom even if it looks awful on paper. It’s the cost of rolling out a new product and coercing the middlemen in our screwed up health system to switch. It happened with the G6 and G5, too. Dexcom planned for these rebates to be earned through the end of the year, and paid through Q1 2025, but the bounty hunters were a little too good at earning their fees, so they’ve got to pay out about $75 million more than expected to them Q3 2024. They listed some other reasons, too, for the massive drop in earnings forecast: like competition, fewer new patients than expected, and the fact that people are switching to pharmacy channel which isn’t as lucrative as DME.
Specifically Travis Steed asked this:
Travis Steed – Analyst
Hey, thanks for the question. I guess maybe could you just kind of explain what is the rebate eligibility, what it is, what it means
The “answer” was not an answer:
Jereme M. Sylvain – Executive Vice President, Chief Financial Officer
Yes, I can take that. So when you think about rebate eligibility, over time
In other words Jereme avoids the question and just says what he said before, using the same word “rebate”. If I were a lawyer I would use the word “dissemble” but I’m not.
I believe your definition is accurate:
This is consistent with the rest of the spiel.
More clearly stated, assuming I am correct:
Dexcom have discounted the G7 to suppliers in the US (and maybe elsewhere, though Jereme does not say that). This has resulted in adoption of the G7 over the G6 and this has, as a result, dropped Dexcom’s revenue significantly.
Dexcom face what might be termed a “discount crunch” where they wipe out their profits on the G6 while undercutting the price of the G7 to such an extent that the profit on that is wiped out too.
The stock lemmings are scared, they sold.
01:28 PM EDT, 07/26/2024 (MT Newswires) – DexCom ( DXCM ) shares were down more than 41% in recent Friday trading following downgrades by JPMorgan and Baird after the company cut its 2024 revenue guidance.
JPMorgan downgraded DexCom ( DXCM ) to neutral from overweight and lowered the price target to $75 from $145.
Baird also downgraded the company’s stock to neutral from outperform and reduced its price target to $80 from $161.
DexCom ( DXCM ) cut its 2024 revenue outlook to a range of $4 billion to $4.05 billion from $4.20 billion to $4.35 billion previously.
Price: 63.00, Change: -44.85, Percent Change: -41.59
I would say, time to buy at a bargain price now that the panic is over (or nearly over, we’ll see on Monday).