Last week, reports circulated saying talks over a potential acquisition were ongoing, with an agreement between the two diabetes technology developers on the horizon in the coming weeks.
On the back of the Dexcom statement, DXCM shares were up 7% at $308.87 apiece as the market opened today. Conversely, PODD shares sank 11% to $209.65.
Bloomberg previously reported that people “with knowledge of the matter” confirmed ongoing talks. The outlet’s sources preferred to remain anonymous because the information is private and both companies declined to offer comment at the time. No potential financial figures related to any acquisition discussions were shared in the report.
Today, Dexcom issued a statement “in response to recent media and market speculation,” saying that it regularly reviews opportunities to enhance stockholder value and create benefits for customers, a process that includes looking at mergers and acquisitions.
“It is generally our policy not to comment on rumors or speculation, however, in light of recent sustained media and market speculation as well as the upcoming American Diabetes Association conference, we wish to confirm that Dexcom is not in active discussions regarding a merger transaction at this time,” the company statement reads. “We do not intend to comment further on this topic, and we assume no obligation to make any further announcement or disclosure should circumstances change.”
Dexcom develops continuous glucose monitoring (CGM) technology, while Insulet markets automated insulin delivery devices, including the recently FDA-cleared Omnipod 5 automated insulin delivery system, which integrates with Dexcom’s G6 CGM. Once Dexcom’s next-generation G7 CGM receives FDA approval — a milestone that the company has suggested could come after the American Diabetes Association Scientific Sessions — the companies plan to integrate it into the Omnipod 5 platform.
Rumors of the merger were particularly intriguing considering the announcement earlier this month that Insulet CEO Shacey Petrovic was stepping down due to personal reasons. She will be succeeded by ResMed executive Jim Hollingshead, beginning June 1.
BTIG analyst Marie Thibault wrote in a report when the rumor first circulated that such a deal would be surprising. Dexcom’s stock price currently sits near a two-year low (down 40% year-to-date) and Insulet is down 24% in 2022, making the timing “unfavorable.” She also said the merger would lead the combined business away from Dexcom’s focus on growth in the non-intensive type 2 diabetes market. She also said it could represent a departure from open innovation in diabetes tech and — she stressed it is BTIG’s “own supposition” — it could result in fewer choices for patients.
“We do not typically write notes in response to such reports, but such a potential deal, if it were to happen, would likely be transformative and impactful to the diabetes technology landscape,” Thibault wrote. “We think the potential deal would make sense in some ways, as it would unite two fast-growing major players entering new product cycles that are both expected to grow 20+% over the next few years. … There would likely be synergies since the companies sell into the same clinician call points, have relatively similar margin profiles, and we believe they share similar philosophies on commitment to R&D, marketing, and education. We think the merits of a potential deal, if announced, would likely be debated by investors.”
Thibault said today that BTIG expects shares to “continue to be volatile” as investors react to the Dexcom statement ahead of the ADA Scientific Sessions.