DexCom Surges as CGM Market Could be Doubled on New Medicare Proposal

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Shares of DexCom (NASDAQ:DXCM) are 8% higher in early trading Friday after Medicare issued a Local Coverage Decision (LCD) proposal on Thursday for continuous glucose monitors (CGM) that appears to expand coverage to include type 2 basal patients. William Blair analysts said the news effectively doubles the domestic market for CGM.

“While we have expected this at some point over the next year, the announcement comes earlier than expected and is meaningful as the domestic CGM TAM could now more than double in the next several months, moving from 4 million type 1 and type 2 intensive insulin patients to add another 5 million type 2 basal patients,” the analysts commented.

The news is also favorable for Abbott Laboratories (NYSE:ABT), which is gaining 1% early Friday.

“… this is an unequivocally positive development for DXCM (and ABT), with seemingly little in the way of proposed patient restrictions on the 3-4M US basal population,” Stifel analysts commented on the news. As a results of the news, he raised his price target on Buy-rated DexCom to $120 from $112.