Wall Street concerns about the impact of GLP-1 on medical-device makers were rekindled last week when blood-glucose-measuring device maker Dexcom Inc. (DXCM) sharply cut its full-year outlook after missing profit expectations.
But Dexcom’s problems appear unrelated to the weight-loss and diabetes drug frenzy, and competitors such as Abbott (ABT) and Medtronic (MDT) have not been pressured by the failure, again easing Wall Street concerns.
The company explained that the outlook was due to a failed sales strategy.
“This has been a much more disruptive expansion than we’ve experienced in the past and there was a lot of disruption, particularly early in the quarter, but things improved toward the end,” CEO Kevin Sayer said on the earnings call.
In the past, the market had been pressuring food and beverage stocks due to concerns about long-term declines from GLP-1 use, but that has proven not to be the case, even though the GLP-1 market is expected to reach $130 billion by 2030.
Still, medical device stocks have experienced a roller coaster of ups and downs over the past year, in part due to Wall Street’s reaction to data and updates about GLP-1.
For example, Eli Lilly (LLY), maker of the weight-loss drug Zepbound, said in June that its GLP-1 compound could help reduce the incidence of sleep apnea. Data showed a more pronounced decline in the use of pressurized breathing masks, known as CPAP machines, but the news still sent shares of CPAP makers lower.
That includes ResMed (RMD), a leader in the space, whose CEO Mick Farrell told Yahoo Finance that he sees the news as a tailwind rather than a sign of trouble.
“They’re going to bring more patients into my funnel and we’re going to continue to grow,” Farrell said.
He sees this opportunity growing even more as tech companies like Apple (AAPL), Google (GOOG, GOOGL), Samsung, and the Oura ring offer sleep-monitoring software on their devices, which he said will increase awareness of sleep apnea and the number of people with the condition.
Unpenetrated Market
Over the past year, there have been multiple instances of Wall Street predicting doom for the sector based on GLP-1 data, but experts argue that in reality, any potential enthusiasm is being primarily contained by supply constraints.
“Many patients have not yet committed to lifelong GLP-1 use, but unless they do, they will likely move on to bariatric surgery, which still has a very low uptake rate,” JPM analysts wrote in an August 2023 note after one company’s earnings showed a drop in quarterly bariatric surgery volume.
The underpenetrated market concept also applies to continuous glucose monitoring, CPAP devices and bariatric surgery, as well as GLP-1, which has previously only been available in a limited number of countries and markets as both market leaders work to increase their manufacturing capacity.
Wall Street’s fears are also spreading among GLP-1 makers, with the current duopoly of Eli Lilly and Novo Nordisk (NVO) being threatened by hundreds of clinical trials of rival GLP-1s. Companies in focus include Roche (RHHBY), Amgen (AMGN), Pfizer (PFE) and biotech Viking Therapeutics (VKTX).
Roche recently announced positive data from an early-stage clinical trial, while Viking has begun late-stage clinical trials. The news over the past week has caused Eli Lilly’s stock to plummet; the company’s shares have fallen 14% in eight days, wiping $120 billion from its market cap. But the same news has not caused Novo’s stock to fall as much.
Anjali Khemrani Anjali is a senior health reporter at Yahoo Finance, covering everything from pharma, insurance, long-term care services, digital health, PBMs, health policy & politics, etc. Follow Anjali on all social media platforms. translation:.
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