DexCom Inc. (DXCM), the maker of blood- sugar monitoring systems for diabetics, may engage in takeover talks starting next year if the company can achieve a profit, Chief Executive Officer Terrance Gregg said.
DexCom is expecting to introduce a fourth-generation version of its Seven Plus sensor in 2012, Gregg said in an interview. If DexCom can double its stock price to $20 or more as a result, Gregg said he’d be open to takeover bids. Gregg declined to name potential suitors.
Gregg, 63, became CEO of San Diego-based DexCom in 2007. He had led MiniMed Inc., a maker of insulin pumps, from 1996 to 2001, when that company was acquired by Minneapolis-based Medtronic Inc. (MDT) for $3.4 billion. While DexCom’s market value is now about $720 million, there is a chance the shares may reach Gregg’s 2012 goal, said Raj Denhoy, an analyst for Jefferies & Co. in New York.
“They have the best sensor on the market,” Denhoy said in a telephone interview. “There is no one that is even close. Medtronic has a next-generation product, but they are years away” in a “terribly underpenetrated market.”
DexCom rose 10 cents, or less than 1 percent, to $10.84 at 4 p.m. New York time in Nasdaq Stock Market trading on a day the Nasdaq index declined 1.6 percent.
The company had dropped 18 percent on Aug. 4 after announcing that the U.S. Food and Drug Administration asked for more extensive data on the fourth-generation monitor. “There is certainly going to be enough from a data point” by the first quarter when the FDA is set to review the product, he said.
Once approved, the monitor will be sold separately and be integrated with insulin pumps made by Insulet Corp. and Animas, a unit of Johnson & Johnson (JNJ), DexCom has said.
Denhoy, who has a buy rating on DexCom and a target price of $19.50, said the company can’t add to marketing costs in 2012 if it wants to become profitable.
In the second quarter, DexCom narrowed losses to $7.37 million, or 11 cents a share, from $11.69 million, or 20 cents, a year earlier, according to a company statement. Revenue, including a development grant, climbed 82 percent to $21.4 million.
“I’ve been acquired six times in my career,” Gregg said in the interview.
Johnson & Johnson
While Gregg acknowledged that Johnson & Johnson, the world’s second-biggest seller of medical products, has been linked to DexCom in acquisition speculation, he wouldn’t say if he had talks with the New Brunswick, New Jersey-based company. He declined to categorize talks he said he has had this year with officials at Basel, Switzerland-based Roche Holding AG. (ROG)
“There’s a number of pharmaceutical companies in the space that are looking to fulfill their portfolio with both devices and drugs,” Gregg said.
Claudia Schmitt, a spokeswoman for Roche, said the company doesn’t comment on such speculation. J&J’s policy is to not comment on “rumor or speculation,” Carol Goodrich, a company spokeswoman, said in an e-mail.
There have been 46 announced acquisitions of companies in the medical instruments industry in the last 12 months, according to Bloomberg data. The average disclosed deal size was $497.4 million, with an average premium of 45 percent, the data show.
DexCom has about $100 million in cash, enough to get the company to profitability, Gregg said. The company is running studies for fifth- and sixth-generation sensors in human patients, and each is exhibiting increasing accuracy, he said.
This is “opening up the architecture for connectivity to smart phones in the near future,” Gregg said.