DexCom drops after Abbott's diabetes sensors cleared for insulin delivery system integration

© Reuters.

By Sam Boughedda

DexCom Inc (NASDAQ:DXCM) shares are down more than 8% Monday afternoon after Abbott Laboratories (NYSE:ABT) announced that the U.S. Food and Drug Administration (FDA) has cleared its FreeStyle Libre 2 and FreeStyle Libre 3 integrated continuous glucose monitoring system sensors for integration with automated insulin delivery systems.

The Libre 2 and 3 sensors track the blood sugar of people with diabetes. This is then monitored via an app on the person's smartphone.

The FDA has cleared the ability for Abbott's modified sensors to integrate with an automated insulin delivery system which would then adjust and automatically administer insulin delivered via an insulin pump based on the real-time data provided by the Libre 2 and Libre 3 sensors.

Abbott said it is partnering with Insulet (NASDAQ:PODD) and Tandem Diabetes Care Inc (NASDAQ:TNDM) for future integrations in multiple countries. Its FreeStyle Libre 3 sensor is already authorized to work with the mylife Loop solution from Ypsomed (SIX:YPSN) and CamDiab in Germany, with additional launches in the UK, Switzerland, and the Netherlands planned for the first half of this year.

Reacting to the news, Piper Sandler analysts said the Libre approval for pump integration is "surprising" and will be "impactful eventually," as patients now have a couple of options when using a pump to manage their diabetes.

Wolfe Research analysts stated that while it is helpful for ABT, it has not struck them as a massive item as "by the time Libre integrates with PODD and/or TNDM in the U.S., DXCM should also have G7 integrated with both pumps."

"No doubt this creates new tension for DXCM in the U.S. AID-using population, but we think risk of an exodus of current DXCM users for Libre is extremely low," wrote the analysts.

Morgan Stanley analysts said the clearance timings and the fact that the Libre 2 and 3 were cleared together were ahead of the firm's expectations, "setting up pump integration, dependent on pump-partner integration timelines, likely this fall."

However, while they acknowledge that the announcement comes ahead of expectations, Morgan Stanley analysts "continue to view the '23 setup for Dexcom as largely unchanged, and continue to view upside to current FY23 guidance behind earlier-than-anticipated CMS basal coverage."

"Beyond '23, an additionally competitive AID landscape in the U.S. was already anticipated, and while Dexcom may see incremental pressure on new patient starts post-Libre 2 / 3 AID rollout, we continue to view Dexcom well positioned behind its historic and continued strong accuracy data, with basal expansion acting as a tide lifting all boats, benefitting all CGMs," wrote the analysts.