The recent surge in popularity for weight-loss drugs such as Novo Nordisk’s Ozempic and Eli Lilly’s Mounjaro has taken a toll on the stocks of diabetes device manufacturers. Companies like DexCom Inc. and Insulet Corp., major players in the field of insulin pumps and continuous glucose monitors, saw their shares drop significantly in the third quarter.
However, some experts believe that the market has overreacted and that these diabetes device stocks have been punished enough. Despite concerns that GLP-1 drugs like Ozempic and Wegovy will result in less insulin use and more stable blood glucose levels among type 2 diabetes patients, there are still promising opportunities for device makers.
In fact, some analysts see these recent setbacks as an opportunity for investors. DexCom, Insulet, and Inspire Medical Systems Inc., which manufactures a sleep apnea device, are all considered to be attractively valued and expected to experience share price appreciation in the coming months. While there are still short-term risks to consider, the long-term outlook for these companies remains positive.
It's worth noting that the impact of GLP-1 drugs on diabetes device manufacturers may not be as significant as originally perceived. The type 1 diabetes market is relatively unaffected by these drugs, and there is still ample room for growth in the type 2 diabetes market. Additionally, the costs and potential side effects of GLP-1 drugs may deter some patients from initiating and maintaining long-term treatment.
In conclusion, while the recent decline in diabetes device stocks may have been severe, there are indications that the market has overreacted. Investors should consider the long-term potential of companies like DexCom, Insulet, and Inspire Medical Systems, as the impact of GLP-1 drugs on the diabetes device market may not be as dire as initially feared.
The Growing Use of Continuous Glucose Monitoring in Diabetes Treatment
In recent weeks, concerns surrounding GLP-1 drugs have been addressed by various device makers. DexCom, for instance, highlighted in an investor presentation that the use of continuous glucose monitoring among type 2 diabetes patients increases after they start taking GLP-1 drugs. Similarly, Abbott Laboratories shared data showing a significant increase in the number of people using their FreeStyle Libre continuous glucose monitor while also using GLP-1 drugs, with higher adherence to the sensor among these individuals.
This pullback in DexCom shares has actually created a buying opportunity, according to Oppenheimer analysts. They point out that the use of continuous glucose monitoring is expected to continue to rise, making DexCom an attractive investment. Raymond James analysts also favor DexCom as a diabetes play, noting that continuous glucose monitoring can coexist with GLP-1s and contribute to upward revenue revisions for the company.
In addition, DexCom recently presented new study data at the European Association for the Study of Diabetes annual meeting. The data demonstrated that real-time continuous glucose monitoring led to greater reductions in blood-sugar levels compared to self-monitoring blood glucose over a seven-year period. Furthermore, when the continuous glucose monitor was connected to an automated insulin delivery system, additional reductions in blood-sugar levels were achieved.
While DexCom may be the first stock to recover from the GLP-1 concerns, according to Jefferies analysts, other device makers also show promise. Insulet stock has been upgraded to a buy rating due to its valuation following the GLP-1 incident. The company's disposable patch pump has gained market share thanks to its convenience for patients.
Jefferies analysts also maintain their buy rating on insulin pump maker Tandem Diabetes Care Inc. They anticipate continued growth for both Tandem and Insulet, as there is still a large population of diabetes patients globally who have yet to adopt the use of insulin pumps.
Overall, the increasing use of continuous glucose monitoring in diabetes treatment presents significant opportunities for device makers, with DexCom, Insulet, and Tandem Diabetes Care Inc. positioned for growth.
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