UPDATED: Google joins forces with Dexcom for miniaturized glucose monitor

Dexcom CEO Kevin Sayer

Google ($GOOG) has been scouting out promising med tech projects since launching its life sciences division a couple of years ago, inking deals to expand its reach in patient monitoring and wearable health. In its latest foray the company will work with Dexcom ($DXCM) to develop cheaper, miniaturized glucose monitors, combining its electronics platform with Dexcom's sensor technology to improve care for patients.

As part of the deal, Google and Dexcom will focus on developing disposable continuous glucose monitoring (CGM) products for patients with diabetes, allowing individuals to check their blood sugar through a bandage-sized sensor that is connected to the cloud. Further down the road the system could replace finger stick tests, Dexcom said in a statement, providing a different monitoring option for patients.

"This partnership has the potential to change the face of diabetes technology forever," Dexcom CEO Kevin Sayer said in a statement. "Working together, we believe we can introduce products that will move us beyond our core Type 1 business to become the standard of care for all people living with diabetes."

Dexcom will hold onto sales and distribution rights of products developed through the partnership. But the company will also fork over an initial upfront payment of $35 million and $65 million in milestone payments throughout development, as well as revenue-based royalties for sales over $750 million.

The deal stands to benefit both sides, as Dexcom increases the reach of its CGM technology and Google makes a bigger splash into med tech. Dexcom has been on a roll this year, with second-quarter revenues that beat the Street's expectations. The numbers were enough to prompt the company to raise its 2015 revenue guidance to $350 million to $375 million from $340 million to $360 million, setting the stage for growth in the months ahead. Dexcom plans to get FDA approval and launch its newest CGM, the Gen 5 mobile system, later this year.

Working with Google on the miniaturized pump is a "positive strategic move" for Dexcom, Leerink analyst Danielle Antalffy said in a note to investors. The partnership will "position the company well for sustainable strong double-digit growth longer-term," she added, even as the company chalks up more R&D spending in the short-term to fund development.

Meanwhile, Google's life science division is busy with its own growth initiatives. Last year, the company struck a deal with pharma giant Novartis ($NVS) to license and commercialize its smart contact lenses for diabetes. Earlier this year, Google announced that its Google X research unit would develop a health-tracking wristband device to measure pulse, heart rhythm and skin temperature, providing real-time data on patients' physical states.

Google's Andrew Conrad

With its latest partnership in tow, Google is poised to make an even bigger mark on patient monitoring in the year ahead.

"We're committed to developing new technologies that will help move health care from reactive to proactive," Andrew Conrad, head of Google's life sciences division, said in a statement. "This collaboration is another step towards expanding monitoring options and making it easier for people with diabetes to proactively manage their health."

- read Dexcom's statement

Special Reports: Top 10 med tech market movers in 2014 - Dexcom | The 5 top trends for med tech in 2014 - Google goes after med tech, along with other VCs

Editor's Note: This story was updated with analyst comments.

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