Dexcom stock helped lead a medical surge Wednesday after the company allayed concerns that popular weight-loss drugs like Wegovy would tamp down usage of its diabetes devices.
Instead, the inverse appears to be true, Dexcom said in a presentation Tuesday. Across all segments of patients with type 2 diabetes, use of continuous glucose monitors, or CGMs, increased after beginning treatment with GLP-1 drugs like Wegovy, Ozempic and Mounjaro. CGMs are body-worn devices that help measure blood sugar in real time and often pair with insulin pumps.
The analysis undercuts recent investor sentiment that the use of GLP-1 drugs would largely render moot CGMs for many patients. These drugs first won approval to treat type 2 diabetes. But they are gaining steam in obesity treatment.
The resurgence bolstered Dexcom stock as well as shares of diabetes device companies Insulet and Tandem Diabetes. Shares of Zimmer Biomet also jumped. Zimmer Biomet makes a sleep apnea device. Sleep apnea is another area with ties to the obesity market.
UBS analyst Danielle Antalffy says sentiment has been "overly bearish" for the group.
"Total addressable market (estimates) are cut meaningfully as GLP-1 adoption ramps (specifically in diabetes and sleep apnea)," she said in a note to clients. "We acknowledge that it will be difficult to disprove the negative over the next six to 12 months."
Dexcom Stock: Analysis Of Insurance Claims
Dexcom analyzed insurance claims from Optum. On average, CGM use doubled among patients taking intensive insulin regimens after they began treatment with a GLP-1 drug. For patients on basal insulin or non-insulin therapies, CGM use increased roughly fourfold after beginning GLP-1 treatment.
"Increasing access and simplicity of CGM systems supports continued acceleration of CGM adoption across all type 2 diabetes segments, including with GLP-1 use," Dexcom said in its presentation.
On today's stock market, Dexcom stock popped 6.5%, closing at 106.88. Shares of Tandem Diabetes and Insulet climbed a respective 3.3% and 3.4%. Zimmer Biomet shares gained 4.1%. This comes despite a broader downfall in the S&P 500.
The GLP-1 frenzy has weighed on medical products stocks over recent months. Since mid-July, IBD's 132-company Medical-Products industry group has tumbled 14%, as of Tuesday's close. It has fallen below its 50-day and 200-day moving averages, according to MarketSmith.com.
Dexcom stock has given back more. Shares have toppled 27% over the same time period. But on Wednesday, shares gapped higher. UBS' Antalffy kept her buy rating on Dexcom stock, though she cut her price target to 138 from 175.
"Despite this persisting sentiment shift, we believe little has changed for CGM," she said. "For CGM, we remain steadfast in our view that all diabetes patients will be on a CGM within the next five-plus years, regardless what their medical regimen entails."
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
