Dexcom (Nadsaq:DXCM) announced today that it received a warning letter from the FDA following inspections of two company facilities.
The letter followed inspections of the company’s plants in San Diego and Mesa, Arizona. San Diego is where Dexcom’s headquarters is located, while the company last year decided to move manufacturing out of San Diego to the Mesa site.
Dexcom said in an SEC filing that it does not expect a material impact from the warning letter on its manufacturing capacity. It also expects no impact on its 2025 financial guidance issued last month.
As of Monday, March 10, DXCM shares were down more than 15% from the week before, trading around $72 apiece.
The letter cites deficiencies in response letters sent by Dexcom to the FDA following observations made by the agency. Those observations relate to an inspection of the San Diego plant between Oct. 21, 2024, and Nov. 7 2024, and an inspection of the Mesa plant between June 10, 2024, and June 14, 2024.
According to the SEC filing, the warning letter describes observed non-conformities in manufacturing processes and quality management systems. The letter does not restrict Dexcom’s ability to produce, market, manufacture or distribute products. It also does not require a recall of products, nor restrict the company’s ability to seek new FDA 510(k) clearances.
Dexcom said it already submitted several responses to the FDA and has work underway on a written response to the warning letter. It intends to undertake certain corrective actions and continue to provide regular updates to the agency. The company can not give any assurances of satisfaction from the FDA, though. It also can not provide an expected date of resolution.
The analysts’ take on the Dexcom warning letter
BTIG analysts Marie Thibault, Sam Eiber and Alexandra Pang note the importance of the lack of expected material impact to manufacturing capacity or revenue guidance. They also point to the fact that Dexcom can continue to seek FDA 510(k) clearance of new products.
The analysts say they spoke with Dexcom investor relations, who say the company already implemented process controls three months ago in response to the FDA’s warning. Management didn’t reiterate its margin guidance as the company awaits more information from the FDA. However, they don’t expect changes in those metrics, either.
“While we were surprised by the news and will need to wait for more details once the warning letter is published, we think that most likely, DXCM will be able to resolve the issues with little impact to commercial and regulatory operations,” the analysts wrote. “Timelines are unclear at this time, but we expect this regulatory overhang will be lifted eventually.”
