DexCom Inc at Stifel Virtual Healthcare Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Mathew Justin Blackman - Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst : But before we dive in, maybe it's been about a month or a little under a month since we reported in the backdrop in the U.S. and internationally, it's become a little bit more uncertain. Maybe that's the best way to phrase it. And to the extent you're willing or want, is anything worth noting about trends? And I think particularly outside the U.S., where we're seeing lockdowns again and access to hospitals. Maybe a little bit more challenging in different countries. Just any thoughts there. And then I guess on top of that, we now have 2 vaccine updates. Not sure if that changes the calculus at all for how you're thinking about the fourth quarter or even sort of the first part of next year. But any thoughts?

Question: Mathew Justin Blackman - Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst : Good. All right. So I can't use the word headwinds. Let's see. So let's transition then and sort of talk about one of the bigger debates post the third quarter, which were updated views on price or revenue per patient, which I think is now tracking closer to $175 million. Previously, it was more in the $115 million annual sort of ballpark. So I just want to make sure we understand what happened, what is happening. And maybe to do that, just give us a little bit of background to the extent there's some folks that may not I fully appreciate what we're talking about here, but also sort of deconstruct the elements of this now higher headwind that you anticipate in the -- you saw in the third quarter, but also anticipate in the fourth quarter.

Question: Mathew Justin Blackman - Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst : Yes. You know the game. I guess -- and just to sort of sum that all up really is the point of equilibrium is the same. That price point is the same. The trajectory to get there is just steeper now or you're getting there faster is sort of the way to think about it.

Question: Mathew Justin Blackman - Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst : And do you think COVID accelerated the shift to pharmacy? Or is this more successful contracting? Any reason for that seeing that sort of manifest in the third quarter as opposed to first half of the year?

Question: Mathew Justin Blackman - Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst : Got it. And then how do we think about -- and who knows when this is or -- and your guess is probably better than ours. But as we think about where sort of the mix of this business is going to do over the next several years, I guess, the first question really is where are we now? I know you don't necessarily break out mix by channel. But clearly, Medicare and pharmacy were big drivers this last quarter. Is there a way to sort of quantify the magnitude of and whether it's sort of in most recent quarters or in terms of the installed base, where you are in terms of pharmacy as a percent of mix and Medicare?

Question: Mathew Justin Blackman - Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst : And then is there a way to sort of frame just the relative pricing differential between those 3 major, just keep a commercial DME, commercial pharmacy and Medicare? Just how those stack up in terms of the relative revenue per patient, perhaps maybe is the best way to think about it? Just -- I don't need the absolute dollars, but just on a relative basis, how those 3 different segments stack up? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 16, 2020 / 4:20PM, DXCM.OQ - DexCom Inc at Stifel Virtual Healthcare Conference

Question: Mathew Justin Blackman - Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst : Got it. And Steve, you mentioned this earlier in passing but maybe worth expanding on it here is one of the things that got glossed over with all the focus on that revenue per patient headwind. Was that -- your gross margins were pretty remarkable -- remarkably strong in the quarter. And how should we be interpreting that? I obviously have my view as we think about the business today. But also importantly, as we look ahead to sort of G7 and as you sort of march your way into expanding into less intense type 2s and other CGM adjacencies, how important was it for us to see that strong gross margin despite some of the headwinds that you're absorbing?

Question: Mathew Justin Blackman - Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst : Yes. Makes sense. And just sort of last question I have on this section is, you did mention that the gap between unit growth and revenue growth is about 14 points this quarter, 40 versus 26. I mean how should we think about that gap? Is that -- was the third quarter the stiffest -- the steepest that we're going to see and maybe things improve over time? I'm just trying to get a sense of how to think about that sort of data point and where we go from here. Sort of appreciating that you're still in the middle innings, I think, as you phrased it in this sort of channel mix shift. But any way to think about that delta?

Question: Mathew Justin Blackman - Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst : Yes. Okay. Great. So let's transition to G7. And I want to start, we did see some data, early feasibility study data at DTM last week. And if I'm capturing correctly, sub-9% MARD overall. MARD days 13 to 16 was, I think, it's up 8%. That's what we saw. Anything you would have us focus on? And I guess the real question that folks have is whether we can extrapolate from this data for the sort of the full-fledged data set, whenever that may be on G7? And what that may mean for things like iCGM and such? Any thoughts there?

Question: Mathew Justin Blackman - Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst : Yes. That's great. And I've got a question from the audience about whether you can use that G7 early feasibility data to file for CE Mark approval? Is that something that's possible?

Question: Mathew Justin Blackman - Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst : And then back to the wear duration. It doesn't seem like it's a performance issue that needs to be resolved, at least not fully. But what about some of these other little things? And I guess they're not really little things, but things like adhesives, things that do impact survivorship. Just give us a sense of, even if it's just the roughest terms, what still needs to be done? And how much heavy lifting is there really truly to do to get that to where you want it to be?

Question: Mathew Justin Blackman - Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst : Okay. I appreciate that. And maybe sort of just to wrap on this section on G7, taking a step back, there's been some new competitive launches, iterations, evolutions, whatever you want to call that, of the competitor platform. You've got G6. We have a flavor for what G7 is going to look like. Can you just take a step back and maybe not on a point-by-point basis, clearly, you're still confident in the Dexcom technology and just maybe help us understand where you see the biggest points of differentiation today and, certainly, as G7 comes as you continue to sort of differentiate yourselves from the competition?

Question: Mathew Justin Blackman - Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst : Okay. And I got a couple of questions here. I'll just feather in from the audience team relative to this theme, this topic. And I think they're both -- well, this was, certainly, G7, it says, "We know the sensors are great for anyone with type 2 -- type 1 diabetes. Can you elaborate a little bit about how the new G7 could also be useful to the type 2 customer now as well?" REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 16, 2020 / 4:20PM, DXCM.OQ - DexCom Inc at Stifel Virtual Healthcare Conference

Question: Mathew Justin Blackman - Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst : Got it. And then another question here is more of a sort of just a bigger-picture question about how to think about the portfolio and how it evolves. And so please describe how you will have different products. And I assume this is in the years to come for type 1s and type 2s. So I guess sort of a menu of options and how you can offer features that are needed by each separately. And can that be priced separately? Any sort of thoughts about a menu approach of having a portfolio of products for different...

Question: Mathew Justin Blackman - Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst : All right, guys. I think we hit the mark here. Really appreciate it. Thank you. Looking forward to Analyst Day, and enjoy the rest of your week. Appreciate it, guys. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 16, 2020 / 4:20PM, DXCM.OQ - DexCom Inc at Stifel Virtual Healthcare Conference