Finance
Wall Street is still nervous about GLP-1s
Wall Street concerns about the impact of GLP-1s on medical device makers were back in full swing after glucose monitoring equipment seller Dexcom (DXCM) cut its full-year guidance following an earnings loss last week.
However, Dexcom’s troubles appear to be unrelated to the weight loss and diabetes drug frenzy, as competitors like Abbott (ABT) and Medtronic (MDT) haven’t been pressured by the miss, once again allaying Wall Street fears.
The company attributed its guidance to a clumsy sales strategy.
“It was a much more disruptive expansion that we’ve had in the past and it caused a lot of disruption, especially early in the quarter. We saw things getting better towards the end,” says CEO Kevin Sayer. an earnings call.
The Street previously put pressure on food and beverage stocks amid fears of a longer-term decline expected from the use of GLP-1. That has not proven 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, partly due to Wall Street’s reaction to data and updates on GLP-1s.
Take, for example, a June announcement from Eli Lilly (LLY), maker of the weight-loss drug Zepbound, that its GLP-1 formula helps reduce the incidence of sleep apnea. The data showed a bigger decline among those who use pressurized breathing masks known as 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 that he sees the news as a tailwind rather than a sign of trouble.
“They will bring more patients into my funnel, and we will continue to grow,” Farrell said.
He sees the opportunities continuing to grow as tech 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.
Underpenetrated market
Over the past year there have been several examples of Wall Street forecasts undermining sectors based on GLP-1 data, but experts emphasize that the reality is that the potential frenzy is largely tempered by supply constraints.
JPM analysts said in a note in August 2023, in response to company earnings showing lower volumes of bariatric surgery in a quarter: “Unless patients commit to taking GLP-1s for life, which many are reluctant to do, they will.” are still likely to turn to bariatric surgery, which remains extremely underpenetrated.”
The idea that there is an underpenetrated market applies to continuous glucose monitoring devices and CPAP machines, as well as bariatric surgery. And this also applies to GLP-1s, which are only available in a limited number of countries and markets so far, as both market leaders work to increase production capacity.
The jitters on Wall Street have not spared the GLP-1 makers either. The current duopoly of Eli Lilly and Novo Nordisk (NVO) is threatened by hundreds of clinical trials of rival GLP-1s. Among those being closely watched are Roche (RHHBY), Amgen (AMGN), Pfizer (PFE) and biotech Viking Therapeutics (VKTX).
Roche recently announced positive early-stage trial data, while Viking begins its final clinical trial – the news within a week sent Eli Lilly’s stock plunging. It fell 14% in eight days and lost $120 billion in market value. But the same news didn’t drag down Novo’s stock all that much.
Anjalee Khemlani is the senior health reporter at Yahoo Finance, covering all things pharmaceutical, insurance, healthcare services, digital health, PBMs, and health policy and politics. Follow Anjalee on all social media platforms @AnjKhem.
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