Saturday, November 17, 2012

How Much Of Our Costs is Their Profit?

For 2011, Dexcom reported a revenue of over 76 million dollars, and under 36 million dollars in cost of revenue, which means the cost of manufacturing the receivers, transmitters, and sensors. That looks like 40 million dollars of profit. But no- Dexcom says that it also paid out 49 million dollars for sales, administrative people, etc, and another 30 million dollars for research. It ended the year in debt and therefore the company paid no money to investors or the IRS.
 $76 million in revenue, if it all came from sales, would mean a minimum of 19,000 Dexcoms in use in 2011, not counting those in clinical trials that weren't paid for (because people aren't averaging a cost of greater than $1000 per year per receiver + transmitter, and $3000 per year for sensors), which I think is kind of alot. I think if the numbers all come from sales, 30,000 Dexcoms in use in 2011 is more likely, which kind of blows me away. I thought we were a smaller minority. But anyways. Of our money, less than half was used to actually produce our products. Less than half was used for the costs of research. 
I find it extremely implausible that more than a small portion of that other $49 million was spent on the people I get when I call their phone number, because I usually have a long wait time on the phone and those people don't strike me as all that trained (or for that matter all that moral but that's another story). That means it was probably spent on ads (and that website!). And executive bonuses. And lands the company in $40 million of debt. 
And that is where your money, both the money you're paying directly, and the money you are paying vis a vis your insurance company, goes when you buy a Dexcom.

In contrast, most other diabetes companies sell many products and report large earnings every year. Medronic reported that sales generated over $16 billion in 2011 (whoa!). They spent under $4 billion in producing their products, another 1.49 billion in research, and $5.6 billion on sales and executives and all that, and overall spent enough money on other things (like lawyers) to report earnings of just 200 million dollars to the IRS.

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