10 of the best performing medical device stocks of 2018

Dexcom: +109%

The G6 continuous glucose monitor system (Image courtesy of Dexcom)

The continuous glucose monitor manufacturer’s stock has more than doubled this year, with Dexcom (Nasdaq:DXCM) riding waves of good news throughout the year.

The San Diego company’s G6 continuous glucose monitor (CGM) won FDA clearance in March 2018 as “fully interoperable” with other medical devices, including insulin pumps and decision-support software. The Dexcom G6 attaches to the patient’s abdomen, and a small sensor continuously measures the user’s blood sugar levels. The G6 also eliminates the need for patients to calibrate the device by pricking their fingers. About the size of a quarter, the device is calibrated at the factory and can be worn for 10 days at a time. It’s but another example of how Dexcom’s big spending on R&D – representing more than a quarter of its annual revenue – appears to be paying off.

The company’s stock shot up by nearly 52% in early August on the release of its second-quarter earnings. Sales reached $242.5 million, up 42% from the previous year, which CEO Kevin Sayer attributed to its CGMs.

Third quarter sales were up 45% over the same period last year, with the company’s business outside the US growing faster than in any period over the last five years, Sayer said in an earnings call transcribed by Seeking Alpha. The G6 system is available in 14 countries and will roll out further globally in 2019, said Sayer, who added, “2018 has exceeded our expectations in every way.”

More good news arrived in October when the Centers for Medicare and Medicaid Services announced that it would cover the G6 for Medicare recipients. Dexcom expects to start shipping its G6 system to Medicare customers in early 2019.

In November 2018, Dexcom announced that it was going to pay $250 million upfront in stock to Verily in an amended collaboration and licensing deal. Through the deal, Dexcom is expected to make a payment of $250 million in shares of its common stock with additional milestones of up to $280 million, contingent upon product launches and revenue milestones. The two companies are collaborating to develop a second-generation continuous glucose monitoring system.

Dexcom also priced its $750 million offering of convertible senior notes due in 2023 last November. The convertible senior notes are expected to be offered to qualified institutional buyers.