Diabetes-device makers have finally broken free from the confines of what analysts call “GLP-1 jail.” For months, these companies have faced significant stock-market backlash due to concerns that the rising popularity of obesity drugs would negatively impact their products.
However, investors were pleasantly surprised when DexCom Inc. (DXCM), Tandem Diabetes Care Inc. (TNDM), and Insulet Corp. (PODD) experienced substantial gains in premarket trading on Friday. This surge followed DexCom’s impressive third-quarter profits, which far exceeded analysts’ expectations. In addition, DexCom raised its full-year revenue forecast, adding fuel to the fire of these companies’ success.
Unfortunately, DexCom and Insulet had a challenging third quarter as healthcare stocks. Investors were worried that the widespread use of GLP-1 drugs, such as Novo Nordisk’s Ozempic and Wegovy, would diminish the demand for diabetes devices like insulin pumps and continuous glucose monitors.
The tide seems to be turning for these diabetes-device makers, as they rise above the hurdles that held them back.
DexCom Sees Rise in Continuous Glucose Monitoring
GLP-1 drugs driving growth
DexCom, a leading provider of continuous glucose monitoring systems, has reported a significant increase in prescriptions following the use of GLP-1 drugs. This trend has been observed specifically among the latest generation of these medications. According to DexCom’s president and CEO, Kevin Sayer, the data from the past 12 months through August clearly demonstrate that CGM usage grows at a faster rate among GLP-1 users compared to those not on therapy.
Positive Outlook for DexCom Stock
GLP-1 recovery anticipated earlier than expected
Leerink Partners analysts have analyzed DexCom’s latest earnings report and anticipate a potential early recovery in the GLP-1 market segment. They believe that these results set an optimistic tone for pure-play diabetes stocks in the current quarter. As a result, the analysts have raised their price target for DexCom shares from $110 to $125.
Share Buyback Program Signals Confidence
Investment opportunity for shareholders
In addition to promising financial results, DexCom has also announced a $500 million share buyback program. This move reinforces the company’s commitment and shows that they are willing to invest in their own success. The Leerink analysts view this initiative as a positive catalyst for investors, providing them with a reason to consider re-entering the market with confidence.
Time to Exhale for DexCom: Quarterly Results Strong
The latest quarterly results for DexCom have received positive reviews from Stifel analysts. They emphasized that the company has achieved multiple record-breaking quarters in terms of new patient starts.
DexCom Shares in Decline, While Competitors Struggle Even More
While DexCom continues to impress with its consistent growth, its shares have experienced a decline of 28% year to date. In comparison, competitors Insulet and Tandem have faced even greater challenges, with their stocks down by 54% and 60% respectively. It is worth noting that the S&P 500 SPX has performed well, gaining 7.8% this year.