Wall Street’s concerns about the impact of GLP-1 on medical device makers were heightened after glucose-monitoring device vendor Dexcom (DXCM) cut its full-year forecast after reporting weaker-than-expected results last week.
However, Dexcom’s troubles appear unrelated to the weight-loss and diabetes drug frenzy, as rivals like Abbott (ABT) and Medtronic (MDT) have not been pressured by the failure, once again easing Wall Street’s fears.
The company attributed its forecast to a failed sales strategy.
“This was a much more disruptive expansion than we’ve seen in the past, and it led to a lot of disruption, particularly early in the quarter. We saw things improve toward the end,” CEO Kevin Sayer said on an earnings call.
Food and beverage stocks were previously under pressure over concerns about an expected long-term decline in GLP-1 use. That turned out not to be the case, even though the GLP-1 market is expected to reach $130 billion by 2030.
However, medical device stocks have been on a roller coaster ride over the past year, partly due to Wall Street’s reaction to GLP-1 data and updates.
Consider the June announcement by Eli Lilly (LLY), maker of the weight-loss drug Zepbound, that its GLP-1 formula helps reduce cases of sleep apnea. The data showed a greater reduction in people using pressurized breathing masks, called CPAP machines, but the news still sent shares of CPAP makers tumbling.
That 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 believes the opportunity will grow further as tech companies like Apple (AAPL), Google (GOOG, GOOGL), Samsung and Oura Ring offer sleep-monitoring software on their devices. That, he says, will help raise awareness of sleep apnea and therefore attract more patients.
Underpenetrated market
Over the past year, Wall Street has seen plenty of doomed predictions based on GLP-1 data, but experts insist the reality is that the potential frenzy has been mostly dampened by supply constraints.
JPM analysts said in an August 2023 note, in response to a company’s results showing a decline in bariatric surgery volumes in a quarter: “Unless patients commit to lifelong use of GLP-1s, which many are unwilling to do, they will likely continue to shift to bariatric surgery, which remains extremely underpenetrated.”
The idea of being an underpenetrated market is also true for continuous glucose monitoring devices…
