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Wall Street still nervous about LPG-1
Wall Street’s concerns about the impact of GLP-1s on medical device makers are back in full swing after glucose monitoring device vendor Dexcom (DXCM) cut its full-year outlook after weaker-than-expected results last week.
However, Dexcom’s problems appear to be unrelated to the weight-loss and diabetes drug craze, as competitors such as Abbott (ABT) and Medtronic (TDM) were not pressured by the error, once again calming Wall Street’s fears.
The company attributed its guidance to a clumsy sales strategy.
“It was a much more disruptive expansion than we’ve had in the past, and that led to a lot of disruption, particularly early in the quarter. We saw things pick up toward the end,” CEO Kevin Sayer said on an earnings call.
The Street has previously pressured food and beverage stocks on fears of expected long-term declines in GLP-1 use. 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 been on a rollercoaster ride over the past year, in part due to Wall Street’s reaction to the data and updates on GLP-1s.
Consider for example, an announcement in June from Eli Lilly (LILY), maker of the weight-loss drug Zepbound, said its GLP-1 formula helps reduce incidents of sleep apnea. The data showed the greatest reduction for those using pressurized breathing masks, known as CPAP machines, but the news still sent shares of CPAP makers tumbling.
This includes ResMed (RMD), a leader in the space. CEO Mick Farrell told Yahoo Finance 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 the opportunity growing even more as technology companies like Apple (AAPL), Google (GOOG, GOOGL), Samsung and the Oura ring offer sleep monitoring software on their devices. This, he said, will bring more awareness about sleep apnea and therefore more patients.
Bay Saunders, 12, with a Dexcom G6 patch on her arm for treatment of type 1 diabetes, attends a Senate Appropriations Committee hearing on how the Special Diabetes Program is creating hope for those living with type 1 diabetes, along with other children with type 1 diabetes, Tuesday, July 11, 2023, in Washington. (AP Photo/Manuel Balce Ceneta) (ASSOCIATED PRESS)
Underpenetrated market
There have been several instances of Wall Street forecasts dooming sectors based on GLP-1 data over the past year, but experts insist the reality is that the potential frenzy has been held back mainly by supply constraints.
JPM analysts said in a note in August 2023, in response to a company’s earnings showing lower bariatric surgery volumes in one quarter: “Unless patients commit to lifelong use of GLP-1s, which many are not interested in doing, they will likely still progress to bariatric surgery, which remains extremely underpenetrated.”
The story continues
The idea of being an underpenetrated market is true for continuous glucose monitoring devices and CPAP machines, along with bariatric surgery. And it’s also true for GLP-1s, which have only been available in a limited number of countries and markets to date, as both market leaders work to add manufacturing capacity.
Wall Street’s jitters haven’t spared LPG-1 manufacturers either. The current duopoly of Eli Lilly and Novo Nordisk (NVO) is being threatened by several hundred clinical trials for rival GLP-1s. Among those being closely watched are Roche (RHHBY), Amgen (AMGN), Pfizer (PFE), and biotechnology company Viking Therapeutics (VKTX).
Roche recently announced positive early-stage trial data, while Viking is starting its late-stage clinical trial — the news within a week sent Eli Lilly shares tumbling. They traded down 14% in eight days, wiping out $120 billion in market value. But the same news didn’t drag Novo’s stock down as much.
Anjalee Khemlani Anjalee is the senior health reporter for Yahoo Finance, covering everything from pharmaceuticals to insurance to healthcare services, digital health, PBMs, and health policy and politics. Follow Anjalee on all social media platforms @AnjKhem.
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