Dexcom (DXCM) 10-K risk factor changes: FY2020 vs FY2019

Washington, [removed: DC] [added: D.C.] 20549

[removed: FORM 10-K][added: FORM 10-K]

| ☒ | [added: | |] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | [added: | |]

For the fiscal year ended December 31, [removed: 2019][added: 2020]

| ☐ | [added: | |] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | [added: | |]

Commission file [removed: number 000-51222][added: number 000-51222]

[removed: ][added: ]

| Delaware | | [added: | | | |] 33-0857544 | [added: | |]

| (State or [removed: Other Jurisdiction] [added: other jurisdiction] of [removed: Incorporation] [added: incorporation] or [removed: Organization)] [added: organization)] | | [added: | | | |] (I.R.S. Employer Identification No.) | [added: | |]

6340 Sequence Drive, San [removed: Diego, CA 92121][added: Diego, CA 92121]

(Address of [removed: Principal Executive Offices, including area code)][added: principal executive offices)]

[removed: (858) 200-0200][added: (858) 200-0200]

Securities registered pursuant to Section 12(b) of the [removed: Exchange] Act:

| Title of [removed: Each Class] [added: each class] | [added: | |] Trading Symbol(s) | [added: | |] Name of [removed: Each Exchange] [added: each exchange] on [removed: Which Registered] [added: which registered] | [added: | |]

| Common Stock, $0.001 Par Value Per Share | [added: | |] DXCM | [added: | |] The Nasdaq Stock Market LLC | [added: | |]

| | | [added: | | | |] (Nasdaq Global Select Market) | [added: | |]

Securities registered pursuant to Section 12(g) of the [removed: Exchange] Act: None

Indicate by check mark if the [removed: Registrant] [added: registrant] is not required to file reports pursuant to Section 13 or 15(d) of the [removed: Exchange] Act.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit [removed: and post] such files).

See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting [removed: company”] [added: company,”] and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the [removed: Registrant] [added: registrant] is a shell company (as defined in Rule 12b-2 of the [removed: Exchange] Act).

As of June [removed: 28, 2019,] [added: 30, 2020,] the last business day of the [removed: Registrant’s] [added: registrant’s] most recently completed second fiscal quarter, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately [removed: $13,556.6 million] [added: $38.5 billion] based on the closing sales price of [removed: $149.84] [added: $405.40] per share as reported on the Nasdaq Global Select Market.

Indicate the number of shares outstanding of each of the [removed: issuer’s] [added: registrant’s] classes of common stock, as of the latest practicable date.

| Class | | [added: | | | |] Outstanding at February [removed: 7, 2020] [added: 4, 2021] | [added: | |]

| Common stock, $0.001 par value per share | | [removed: 91,594,142] | [added: | | | 96,177,363 | | |]

Portions of the [removed: Registrant’s] [added: registrant’s] definitive proxy statement relating to its [removed: 2020] [added: 2021] Annual Meeting of Stockholders (the [removed: Proxy Statement)] [added: “Proxy Statement”)] are incorporated by reference in Part III, Items 10 through 14 of this Annual Report on Form 10-K, as specified in the responses to those item numbers.

| DexCom, Inc. | [added: | |]

| Table of Contents | [added: | |]

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| PART I | | | [added: | | | | | |]

| [removed: ITEM 1.] [added: Item 1 - BUSINESS] | [removed: Business] | [removed: [3](#s394B35A74DC95653AEE4F947B4A475EB)] | [added: | | | | | | | | | | | |]

| [removed: ITEM 1A.] [added: [ITEM 1A.](#i889b093251984bfb881a094ef59c54bd_16)] | [removed: Risk Factors] | [removed: [24](#sB2B2A2FFB5AD59048087F45FF7556428)] | [added: [Risk Factors](#i889b093251984bfb881a094ef59c54bd_16) | | | [23](#i889b093251984bfb881a094ef59c54bd_16) | | |]

| [removed: ITEM 1B.] [added: [ITEM 1B.](#i889b093251984bfb881a094ef59c54bd_19)] | [removed: Unresolved] [added: | | [Unresolved] Staff [removed: Comments] [added: Comments](#i889b093251984bfb881a094ef59c54bd_19)] | [removed: [57](#s5148CF436CD954FEA9B04D4D60A8B424)] | [added: | [64](#i889b093251984bfb881a094ef59c54bd_19) | | |]

| [removed: ITEM 2.] [added: ITEM 2 - PROPERTIES] | [removed: Properties] | [removed: [58](#s903B427E80075861AE918E170E37E4AF)] | [added: | | | | | | | | | | | |]

| [removed: ITEM 3.] [added: ITEM 3 - LEGAL PROCEEDINGS] | [removed: Legal Proceedings] | [removed: [58](#sD537126CD9165A08A9C65F5A611C206F)] | [added: | | | | | | | | | | | |]

| [removed: ITEM 4.] [added: ITEM 4 - MINE SAFETY DISCLOSURES] | [removed: Mine Safety Disclosures] | [removed: [59](#sC64C48DCFD5D50B28B960A1753D33379)] | [added: | | | | | | | | | | | |]

| PART II | | | [added: | | | | | |]

| [removed: ITEM 5.] [added: ITEM 5 - MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES] | [removed: Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities] | [removed: [60](#sA8EC57ACEC355957A9CA1FE862822632)] | [added: | | | | | | | | | | | |]

| [removed: ITEM 6.] [added: ITEM 6 - SELECTED FINANCIAL DATA] | [removed: Selected Financial Data] | [removed: [62](#sDAEECAAB8B86591391F01122DB44A6A6)] | [added: | | | | | | | | | | | |]

| [removed: ITEM 7.] [added: ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS] | [removed: Management’s Discussion and Analysis of Financial Condition and Results of Operations] | [removed: [63](#sC3A902C4DAC35550A0BE7005FFA5DC34)] | [added: | | | | | | | | | | | |]

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Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

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The mailing address of our headquarters is 6340 Sequence Drive, San Diego, California, 92121 and our telephone number at that location is (858) 200-0200.

The reports are also available at www.sec.gov.

We are pursuing regulatory approvals for our next generation G7 CGM system.

The G7 carries forward many of the same features as our G6 CGM system and adds several new or improved features, including

- Reduced size.

A 60% reduction in size of the on-body wearable.

- Fully disposable.

Sensor and transmitter combined into a single, disposable wearable.

- Simple application.

New application process streamlines the number of steps required.

- Faster warmup.

Warmup period expected to be reduced from the current two-hour warmup for G6.

- Reduced packaging waste.

Significant reduction to the product packaging waste profile on a per unit basis.

like the Apple Watch® and Wear OS by Google devices.

Global revenues associated with the sales of our previous commercial products, the Dexcom G4® Platinum CGM system and G5® Mobile CGM system, or G5 Mobile, amount to less than 10% of our revenue for the fiscal year ended 2020 and we anticipate phasing out these commercial products by the end of 2021.

We have also entered into collaborations with several organizations that are currently using, or are developing, programs for the treatment of Type 2 diabetes that utilize our current CGM systems.

These collaborations align with the strategy to seek broader access to our CGM systems for people with Type 2 diabetes, including those who are not treated with intensive insulin therapy.

At our election, we may make these milestone payments in shares of our common stock or cash.

According to the Centers for Disease Control and Prevention, or CDC, in its National Diabetes Statistics Report, 2020, or the 2020 CDC Report, crude estimates for the prevalence of diabetes in the United States as of 2018 include 34 million people with diabetes, of which 26.9 million people have diagnosed diabetes.

Failure to maintain blood glucose levels within the normal range leads to numerous and significant health risks.

These risks include eye disease, nerve disease, kidney disease, cardiovascular disease and potentially hypoglycemic events.

- Limited Information. Even if people with diabetes test several times each day, each measurement represents a single blood glucose value at a single point in time.

Given the many factors that can affect blood glucose levels, excursions above and below the normal range often occur between these discrete measurement points in time.

Without the ability to determine whether their blood glucose level is rising, falling or holding constant, and the rate at which their blood glucose level is changing, the individual’s ability to effectively manage and maintain blood glucose levels within normal ranges is severely limited.

Further, people with diabetes cannot test themselves during sleep, when the risk of hypoglycemia is significantly increased.

- Inconvenience. The process of measuring blood glucose levels with single-point finger stick devices can cause significant disruption in the daily activities of people with diabetes and their families.

To do so, people with diabetes must always carry a fully supplied kit that may include a spring-loaded needle, or lancet, disposable test strips, cleansing wipes and the meter, and then safely dispose of the used supplies.

This process is inconvenient and may cause uneasiness in social situations.

- Difficulty of Use. To obtain a sample with single-point finger stick devices, people with diabetes generally prick one of their fingertips or, occasionally, a forearm with a lancet.

They then squeeze the area to produce the blood sample and another prick may be required if a sufficient volume of blood is not obtained the first time.

The blood sample is then placed on a disposable test strip that is inserted into a blood glucose meter.

This task can be difficult for individuals with decreased tactile sensation and visual acuity, which are common complications of diabetes.

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In August 2015, we received approval from the FDA for the DexCom G5 Mobile Continuous Glucose Monitoring System, also referred to as the G5 Mobile.

The G5 Mobile is designed to allow our transmitter to run the Software 505 algorithm, and to communicate directly to a patient’s compatible mobile device, including iPhone, iPod touch, iPad, and certain Android mobile devices.

The G5 Mobile transmitter has a labeled useful life of three months.

Data from the G5 Mobile can be integrated with DexCom CLARITY.

In September 2015, we launched the G5 Mobile in certain countries in Europe.

Similar to the G6, the disposable sensor is inserted by the user and is intended to be used continuously for up to seven days, after which it may be replaced with a new sensor.

The related transmitter is reusable until it reaches the end of its use life, and the related receiver is also reusable.

In December 2016, the FDA approved the G5 Mobile as the first CGM system in the United States to have a non-adjunctive indication.

The non-adjunctive indication expands the lawfully permitted use of the G5 Mobile as a replacement to finger stick glucose testing for diabetes treatment decisions.

With the new label indication, the G5 Mobile only requires two finger sticks per day for calibration.

In the countries and regions outside of the United States that recognize the CE Mark, as well as the United States and Canada, the G5 Mobile also does not require confirmatory finger sticks when making treatment decisions, although a minimum of two finger sticks a day remain necessary for calibration.

Approval of the non-adjunctive indication was also an important and necessary step in enabling people with Medicare to access CGM.

Except with respect to the foregoing, the G5 Mobile is functionally equivalent to our earlier generation CGM systems in its technical capabilities and its regulatory requirements and indications.

*DexCom G4®* *PLATINUM*

The DexCom G4 PLATINUM CGM system, or G4 PLATINUM, replaced our DexCom SEVEN PLUS system beginning in 2012, when it was approved for up to seven days of continuous use by adults with diabetes.

Since 2012, we have marketed the G4 PLATINUM under a CE Mark in the European Union, the countries in Asia and Latin America that recognize the CE Mark, New Zealand and Australia, and in the United States with approval from the FDA.

We received approvals for a pediatric indication under the CE Mark in February 2013 and from the FDA in February 2014, enabling us to market and sell this system to persons two years old and older who have diabetes.

In June 2014, we received approval from the FDA for an expanded indication for the G4 PLATINUM for professional use, which allows healthcare professionals to purchase the G4 PLATINUM system for use with multiple patients.

Healthcare professionals can use the insights gained from a G4 PLATINUM professional

session to adjust therapy and to educate and motivate patients to modify their behavior after viewing the effects that specific foods, exercise, stress and medications have on their glucose levels.

In October 2014, we launched our Software 505 algorithm for the G4 PLATINUM, an algorithm which enabled our systems to achieve a single digit MARD, a measure of the accuracy of continuous glucose monitoring.

In 2015, we received approval from the FDA for the G4 PLATINUM with DexCom Share, or Share, and began commercializing this product in the United States in the first quarter of 2015 using a secure wireless connection between a patient’s G4 PLATINUM receiver and an app.

We now offer this feature through the G6 and the G5 Mobile apps as well as the Share2 app, which works with the G4 PLATINUM receiver with Share.

*Data and Insulin Delivery Collaborations*

On November 20, 2018, we entered into an Amended and Restated Collaboration and License Agreement with Verily Life Sciences LLC (an Alphabet Company) and Verily Ireland Limited (collectively, Verily), which we refer to as the Restated Collaboration Agreement.

This replaced our original Collaboration and License Agreement with Verily from August 2015, as amended in October 2016, and eliminated any future royalty obligations under the original agreement.

Pursuant to the Restated Collaboration Agreement, we and Verily have agreed to continue to jointly develop a certain next-generation CGM product, and potentially one or more additional CGM products, for which we will have exclusive commercialization rights.

The Restated Collaboration Agreement requires us to use commercially reasonable efforts to develop, launch, and commercialize the CGM product(s) that are the subject of the collaboration according to certain timing and other objectives, and provides for one executive sponsor from each of us and Verily to meet periodically and make decisions related to the collaboration (within a limited scope of authority) by consensus.

| • | On December 28, 2018, we made an initial payment of $250.0 million in shares of our common stock, calculated under the Restated Collaboration Agreement to be 1,840,943 shares of our common stock, allocated between Verily and Onduo, LLC, subject to certain transfer restrictions. |

| • | During 2019, we paid $3.2 million for the completion of certain development obligations before the agreed-upon deadline. |

| • | Additional milestone payments of up to $275.0 million may become due and payable by us upon the achievement of future product regulatory approval and revenue milestones. At our election, we may make these milestone payments in shares of our common stock, also allocated between Verily and Onduo, LLC, with the number of shares being calculated based on the same share value that was used for purposes of the initial payment, adjusted for stock splits, dividends, and the like, subject to customary closing conditions, including any required antitrust approvals applicable to the issuance of such shares. Alternatively, at our election, we may make any of these milestone payments in cash. Any such cash |

payment would be equal to the number of shares that would otherwise be issued for the given milestone payment (calculated as described above) multiplied by the value of our stock on the date the relevant milestone is achieved, adjusted for stock splits, dividends, and the like.