DexCom (DXCM 0.93%) might just have significant untapped potential and even greater growth ahead. In this clip from "3 Minute Stocks Updates" on Motley Fool Live, recorded on Feb. 16, Motley Fool contributors Brian Feroldi and Brian Withers discuss why DexCom investors are keeping a close watch on the company for two main reasons.
Brian Feroldi: For now, all eyes remain on two things with DexCom. The first thing to keep an eye on is the launch of the G7, so this is the company's next generation sensing technology. There are all benefits to it. It's factory calibrated. It's going to be a significant reduction in manufacturing costs and even more accurate than the current methodology, so management is really pumped about this system very small. To second, they are taking their current technology called the G6 and they're actually selling in international markets such as Bulgaria, Estonia, Latvia, and Lithuania at a discounted price. They're taking their existing technology and allowing people around the world who don't have access to reimbursement and are far more price sensitive to use this technology which is really cool and could be a long-term driver of growth for the company. However, doing so is likely to be a short-term drag on the company's margins until they get that up and scale. But if you look at the big picture for investors, revenue is trending in the right direction, 70% of this company's revenue is recurring from the sensors and the opportunity ahead of this company's still remains large.
Brian Withers: Brian, I didn't realize on that slide you shared with the G7, the product is actually pictured there. Can you pop that up again?
Feroldi: Yes.
Withers: I was focusing on the iPhone [Apple (AAPL 1.06%)] app and I totally missed there it is. Wow, that is super cool.
Feroldi: It's like the size of a quarter essentially.
Withers: It's fantastic. I was reading through the press release and they said they've submitted a 5-10 K pre-market notification to the U.S. FDA for regulatory reviews, the G7. They said data in the submission highlighted industry-leading precision, including mean, absolute relative difference from the pivotal trial as follows, adults, 8.2%, pediatrics, 8.1. What does all that mean?
Feroldi: Yes. They love that science talk in the thing. A 5-10 K is a type of FDA approval that you can go for basically saying, this isn't a brand-new device. This is substantially equivalent to an existing device that's on the market, aka they're G6. Therefore, the regulatory requirements to get the thumbs-up are far less than it would be if it was like a branded devices the FDA had ever seen before, so that's 5-10 K. MARD, mean absolute relative difference, is the difference between what the sensor says your blood glucose is, and what's your blood glucose actually is as measured by the labs. That's one downside to using sensor technologies, continued to censor technology is they're not as accurate as fingerprint technology when you're applying an actual blood dropped to it. However, the knowledge that I've heard, which I just absolutely love is imagine you were on a road in a car and your task is to drive this car straight for the rest of your life. In the old technology, picking your finger, you only get to look out of your front dash a once every four hours or so to tell what direction you are in. You left or are you right? Would you rather do that, or would you rather look out of a dash that's in real-time but blurry, which of those you think will allow you to stay on the road better? While the blurry is the continuous glucose monitoring and you getting real-time feedback about the direction of your blood glucose is incredibly valuable. What they're saying with that MARD thing is blurry, but it's less blurry than previous versions of the system. Again, they have continually, every time they come out with a new version of their system, the accuracy gets better and better and better, so essentially the screen that you're seeing gets less and less blurry.
