Dexcom (DXCM) stock plunged to a four-month low Monday after the Food and Drug Administration issued the diabetes devices maker a warning letter tied to inspections of two facilities in the U.S.
The warning letter stems from inspections of Dexcom's Mesa, Ariz., manufacturing site in June 2024 and the San Diego, Calif., facility last fall. The inspector "observed non-conformities in the manufacturing processes and quality management system," William Blair analyst Margaret Kaczor Andrew said in a report.
↑ X NOW PLAYING How To Sell Stocks: Long-Term Trend LinesBut she said Dexcom doesn't expect an impact on its 2025 sales. The company reiterated its guidance for $4.6 billion in sales. Dexcom's largest manufacturing site is in Malaysia.
"Given that Dexcom's 2025 guidance does not assume any share gain throughout the year, we remain confident in its ability to deliver on its revenue guidance, with any incremental U.S. share gains potentially driving upside to estimates," she said.
Still, in midday trades on today's stock market, Dexcom stock slumped more than 6% to 72.77. Shares hit their lowest point since mid-November, continuing a six-day losing spree. Shares undercut their 50-day and 200-day moving averages earlier this month. Its move has mirrored the broader Medical-Products industry group, which has tumbled almost 10% since the middle of last month.
Dexcom is well known for its continuous glucose monitors, or CGMs. These body-worn devices help people with diabetes keep track of their blood sugar in real time. Recently, Dexcom won FDA approval for Stelo, which is available over the counter for people who don't use insulin to treat their diabetes. This means people without diabetes are now likely using the device.
Andrew noted the FDA warning letter doesn't restrict Dexcom from receiving approval of new products. That includes the company's 15-day G7 CGM, which is expected to win approval in the middle of the year. The G7 device is tailored for people with diabetes.
Other companies have found themselves in similar situations, Andrew said. Most recently, iRhythm Technologies (IRTC) received warning letters in August 2022 and May 2023. The company received another letter in July 2024.
"The process has admittedly taken longer than we anticipated, (but) the company saw little to no impact on its Zio AT business," she said. Zio AT is iRhythm's patch that monitors heart rhythms for up to 14 days. "In fact, Zio AT has more than weathered the storm, with incremental share gain in the (mobile cardiac telemetry) market despite the warning letter still outstanding."
Andrew kept her outperform rating on Dexcom stock.
Follow Allison Gatlin on X/Twitter at @AGatlin_IBD.
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