Securities Regulation Daily Wrap Up, FRAUD AND MANIPULATION—S.D. Cal.: Glucose monitor maker misled about prescription data, (Sep 10, 2025)

By Rodney F. Tonkovic, J.D.

The CFO claimed that the company was "taking share," but prescription data clearly contradicted this statement.

A fraud action brought against the maker of glucose monitors used by diabetics will move forward. The complaint alleged that Dexcom, Inc. misled about its efforts to increase its presence among diabetics newly covered by Medicare. The complaint failed to plead falsity as to all statements but two relating to prescription data indicating that the company was gaining market share while the actual data showed that this was not so. The court accordingly denied Dexcom's motion to dismiss as to portions of two statements but dismissed the remaining dozen without leave to amend (In re Dexcom, Inc. Class Action Securities Litigation, No. 3:24-cv-01485 (S.D. Cal. Sept. 9, 2025)).

Monitor market. Dexcom, a San Diego-based company, makes glucose monitoring devices for use by persons with diabetes. As relevant to this case, there are two types of users: individuals with diabetes and requiring insulin intensive treatment, and those with Type 2 diabetes who use basal insulin, which is delivered once a day. Before April 2023, Medicare covered monitors only for insulin intensive patients.

The market is dominated by Dexcom and its competitor, Abbott Laboratories. While Dexcom focused on increasing its presence among insulin intensive users and selling its monitors through pharmacies, Abbott focused on the basal insulin user market. Abbott also made use of a rebate program to make its devices more affordable without insurance.

When Medicare coverage was expanded to the Type 2 basal patients, Dexcom began to promote opportunities in this market. This was an uphill battle, as Abbott was entrenched there, but Dexcom assured investors that it could compete. To that end, the company expanded and reorganized its sales force and throughout assured investors that it was succeeding in the Type 2 basal market.

In an April 2024 earnings call, Dexcom raised the midpoint of its revenue guidance and said afterwards that it was "happy" with its full-year guidance. In July 2024, however, Dexcom reduced its full-year guidance by $300 million, conceding that it was "not doing wonderful in the basal space." After this, Dexcom's stock price dropped by over 40 percent, and this action followed.

Falsity alleged. The complaint challenged 14 statements made by individual defendants between April 2023 and June 2024. The court found that the plaintiff failed to adequately plead falsity for 12 of the challenged statements. Generally, these statements about Dexcom's ability to compete or relationships with distributors were inactionable puffery or not adequately alleged to be misleading; one of the statements was also protected as forward-looking. The court noted that in this amended complaint, the plaintiff had again failed to adequately identify which specific statements it alleged were false or misleading, so leave to amend was denied as to them.

The two remaining statements were made during conference calls discussing Dexcom's Q4 2023 and Q1 2024 results and referenced the company's "taking share" in the Type 2 basal market. Both times, Dexcom's CFO indicated that "script data" showed that Dexcom was capturing market share. This was a verifiable statement, and the complaint showed that Abbott in fact had secured a steady seven out of ten prescriptions for most of 2024, which plausibly suggested that the statement was false when made.

The plaintiff asserted that the CFO had access to data enabling him to monitor Dexcom's share of the Type 2 basal market and thus knew that these statements were false when made. Here, both of the CFO's statements made explicit reference to his ability to access and his reliance upon prescription data: "[W]e get script data, we look at script data based on pathology... We know we’re taking share, and we see that data." By referencing prescription data directly, the CFO created a strong inference that he knew that his statements were false when he made them.

The case is No. 3:24-cv-01485.

Judge: Huie, R.

Attorneys: Daniel S Drosman (Robbins Geller Rudman & Dowd LLP) for National Elevator Industry Pension Fund. Cristina Maria Ferruolo (Cooley LLP) for Dexcom Inc.

Companies: National Elevator Industry Pension Fund; Dexcom Inc.

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