“Triple-Digit Profits from the Diabetic ‘Patch’ Company Going to $1 Billion.”

By Travis Johnson, Stock Gumshoe, October 28, 2014

Today the pitch that’s been catching my eye is from Mitchell Clark for his Biotech Breakthrough Stock Report — we haven’t covered this newsletter before, but we have certainly covered teaser spiels from Mitchell Clark’s wide variety of Lombardi-published newsletters in the past (before he was a biotech expert this week, he was a bible scholar teasing energy stocks for his America’s Redemption newsletter).

And it’s a pitch about diabetes, which we don’t see that often these days — despite the fact that it’s among the most expensive diseases/conditions in medicine and, therefore, would be expected to generate a lot of profit for the companies whose products can help these patients. So let’s delve into it, shall we?

The tease is that Clark says he has identified the “Little-Known Public Company Battling World’s Biggest Plague” … and that he’ll tell you all about if if you subscribe to his newsletter ($195 for the first year, auto-renews for $295 after that). I don’t feel like paying that, but I’m curious about the company… and our loyal Gumshoe readers are asking… so let’s dig into the clues and see if we can name that stock for you.

Here’s how he opens:

“Last year, 5.1 million people died from this disease.

“The World Health Organization says that number will rise to nearly 7.7 million by 2024.

“The worst part is that there is no cure.

“It’s not Ebola. It’s not AIDS.

“Incredibly, 382 million people worldwide have this disease.

“And an estimated 175 million don’t even know they have it.

“You may have it. Or a friend or a loved one may have it without even knowing.

“This disease can lead to blindness, heart attacks, and death.

“In fact, it’s the seventh leading cause of death in America….

“While there is no cure, there is one American company that has developed a solution to help slow the blindness and the heart attacks this disease causes…

“… a small, little-known public company almost nobody has heard of until now.”

Sounds pretty compelling, right? Small companies that are addressing huge markets but are largely unknown?

That’s the bread and butter of the newsletter business — most of the publishers know that if they repeatedly make recommendations to buy big, established, boring stocks their readers have already heard of, like Johnson and Johnson (JNJ) or Novo Nordisk (NVO), people will cancel in droves (assuming you enticed them to subscribe in the first place without having a secret, small, unknown idea to share) — many subscribers want to think they’re getting something cool and sexy that no one else knows about.

And, yes, all that chatter above is about diabetes — so what’s this “solution to help slow the blindness and the heart attacks” that Clark is hinting at? More clues:

“… it’s the measurement of sugar in the blood’s system that is critical.

“Diabetics need to measure their blood sugar regularly (as often as 4 times a day) to ensure there isn’t too much sugar in their blood.

“But there’s a big problem that has plagued diabetics for years when it comes to measuring their sugar levels.

“Testing your blood sugar physically hurts.

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“Imagine having to jab a needle into the tip of your thumb or finger, multiple times a day.”

OK, so it looks like we’re being teased at some company that sells something related to glucose monitoring — which, for those who aren’t diabetic or aren’t familiar with the business of diabetes, is a huge industry… the pin sticks and the glucose monitoring devices and especially the tester strips have been cash cows for a lot of these companies, though that is probably moderating now that Medicare has imposed some competitive bidding and lower reimbursements in what was already becoming a pretty competitive monitor/strip marketplace.

And, yes, noninvasive, no-finger-prick glucose monitoring devices have been a priority for decades… so is one really available now? Is that what’s being teased? Well… it sounds like that’s a “sort of…” and it depends on what you mean by “no finger pricks” and “noninvasive.” Let’s get the rest of our clues from Clark so we can narrow it down:

“Introducing the ‘Patch’ for Diabetics

“The company I’m introducing you to today has developed a non-invasive, non-needle alternative for measuring blood sugar levels.

“The name of the company’s device is scientific, so it’s a long and complicated name.

“I just call it ‘the patch’ because it looks like the patch that some people use to quit smoking.

“About the size of a silver dollar, but paper thin, diabetics just need to stick it on their body, like a nicotine patch.

“But instead of delivering nicotine, this “patch” measures blood sugar levels…right through a person’s skin. 24 hours a day, seven days a week.

“If the diabetic person’s blood sugar goes too high or too low, the “patch” sounds an alarm. It also records all the information so the patient or doctor can look it over later.

“It’s really quite remarkable; so much better than having to prick your fingers four times a day.

“In fact, since it works around the clock, it can detect spikes or drops in blood sugar that the diabetic person wouldn’t notice by testing only four times a day.”

OK, so that’s pretty close to being the “promised land” — a noninvasive, continuous glucose monitor that doesn’t require finger pricks and is the size of a nicotine patch. So those are our product clues … how about some clues about the company?

“The company was just recognized as one of the 50 most innovative companies by Fast Company magazine.

“The company is well-capitalized with $60 million in cash and marketable securities and long-term debt of only $3 million….

“In the first six months of 2013, the company did $63 million in sales. In the first six months of 2014, sales reached $105 million.

“With the FDA just having approved a remote monitoring version of the company’s blood testing device…

“…that means the blood sugar levels of a person can be sent via wireless connection to a smartphone…

“I don’t think it will be long before this company hits $1 billion in annual sales….

“I expect the stock to triple again over the next few months as its diabetic ‘patch’ goes mainstream.”

And Clark includes a two-year stock chart for us, showing the shares moving from around $13 in late 2012 to about $43 now… which gave us a nice point of confirmation after we hauled the tarp off the ol’ Thinkolator and started it up on this chilly New England morning. The stock being teased is: DexCom (DXCM)

And yes, DexCom’s main line of business is devices and systems for continuous glucose monitoring. Their current model is the DexCom G4