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Trade analysts are insisting that new weight reduction and diabetes medicine like Ozempic will not harm the demand for insulin pumps and steady glucose displays, however most buyers aren’t shopping for it. Medical machine shares have been falling session after session, prompting UBS analyst Danielle Antalffy on Wednesday to decrease her worth targets for Dexcom and quite a lot of small-to-mid-cap names, with the concept that historic valuation multiples have come down for the group for the foreseeable future. “Present multiples appear to be pricing in a very bearish view, by which [total addressable markets] are lower meaningfully as GLP-1 adoption ramps (particularly in diabetes and obstructive sleep apnea),” she wrote in a analysis word. The massive query for buyers now’s whether or not that bitter view is warranted, or if this pullback is a shopping for alternative. The reply might rely on who you hearken to and whether or not you see GLP-1 medicine as a assist or a hindrance to the class. Novo Nordisk’s Ozempic (semaglutide) and Eli Lilly’s Mounjaro (tirzepatide) belong to a category of medicines generally known as glucagon-like peptide-1, or GLP-1, receptor agonists. The medicine are modeled off of hormones within the intestine and assist regulate insulin ranges. Initially designed to deal with Kind 2 diabetes, the medicine additionally assist weight reduction and will at some point deal with sleep apnea, liver illness and different circumstances . Their blockbuster potential has pushed Novo Nordisk’s inventory to new heights, making it probably the most priceless European firm in the mean time. ‘Tough to disprove the unfavourable’ Antalffy acknowledged that it is “troublesome to disprove the unfavourable,” so she’s assuming the valuation development will persist though she expects demand hasn’t modified for insulin pumps and glucose displays. “For [continuous glucose monitors], we stay steadfast in our view that every one diabetes sufferers will probably be on a CGM inside the subsequent 5+ years, no matter what their medical routine entails,” she mentioned. The analyst expects the demand for CGM gadgets will enhance each gross sales and margins for Dexcom. With the sentiment shift, she reiterated her purchase ranking on the inventory, however slashed the value goal to $138 from $175. Dexcom is up greater than 2% this week. DXCM 3M mountain Within the quarter to this point, Dexcom shares are down practically 19%. Headline threat is actual The newest strain on the shares got here from a New England Journal of Medication report on Thursday that detailed a examine of newly recognized sufferers with Kind 1 diabetes who lowered their want for insulin after taking semaglutide. Insulet , which makes insulin pumps, was significantly laborious hit by the information. The inventory continued its downward development Friday, and is off about 10% this week. However the examine’s findings got here with some appreciable caveats, together with a particularly small pattern measurement of solely 10 sufferers. It additionally was a retrospective examine, and not using a management group. PODD 3M mountain Insulet shares over the previous three months The article’s findings are “extremely unlikely” to harm gross sales of steady glucose displays or insulin pumps, Piper Sandler analyst Matt O’Brien wrote in a analysis word Thursday. “We perceive investor issues about combating the drug overhang on the diabetes machine area, however we consider the entire identify[s] have been unfairly punished over this subject in our view and we encourage beginning or constructing positions in these names,” he mentioned. O’Brien has an chubby ranking on Dexcom, Insulet and Tandem Diabetes Care , however Dexcom is Piper’s favourite identify on this group. Dexcom shares are down greater than 7% yr to this point. O’Brien has a $160 worth goal on the inventory, which means 52% upside to the place the inventory closed Thursday. His worth goal for Insulet is $325, or about 82% above the place the inventory closed Thursday. Shares have fallen greater than 40% yr to this point. Tandem Diabetes Care shares have fallen even additional — down 46% yr to this point. Shares would wish to rise about 57% to hit O’Brien’s $40 worth goal. O’Brien mentioned he doubts that taking semaglutide would be capable to stop Kind 1 diabetes for a protracted time period. “Maybe the drug can gradual the development of T1 for a brief time period in what is called the ‘honeymoon’ interval for sufferers (proper as they’re recognized as their pancreas is about to cease making insulin totally), however ultimately they are going to find yourself with the illness and wish superior applied sciences (CGM and pumps) to maintain themselves in the very best glycemic management,” O’Brien mentioned. TNDM 3M mountain Tandem Diabetes shares have fallen considerably this yr. Dr. Paresh Dandona, of the Jacobs College of Medication and Biomedical Sciences on the College of Buffalo, led the examine. In a information launch, he mentioned the findings are “promising,” and help plans to conduct additional analysis with a bigger group of individuals over an extended time interval. However even with the examine’s small scope and the necessity for additional investigation, the response was clear out there, and it is the newest demonstration of headline threat round Ozempic, Wegovy and Mounjaro. With so many individuals desirous to shed kilos, there was plenty of media consideration paid to those medicine. With every new examine, most of the associated shares react. UBS’s Antalffy pointed to the discharge of findings from Novo Nordisk’s Choose trial in early August because the issue that spoiled sentiment on diabetes machine shares. That trial confirmed semaglutide lowered sufferers’ cardiovascular dangers. A lift to CGM gross sales? In the meantime, Dexcom is making the case to buyers that GLP-1 drugs could be a profit to gross sales of CGM gadgets. It just lately shared historic claims knowledge from health-care providers supplier Optum that confirmed a 2 to 4 occasions enhance in use of CGM after sufferers start GLP-1 drugs. “Our diligence has instructed a optimistic hyperlink between CGMs and GLP-1s,” Financial institution of America analyst Travis Steed wrote in a analysis word Tuesday. In understanding why this may be the case, it is useful to keep in mind that sufferers who drop a few pounds on Wegovy or different GLP-1 drugs are prone to regain that weight once they cease taking the medicine. Because the drugs can price about $13,000 a yr, some medical health insurance corporations might restrict entry to the medicine or sufferers could also be unable to tolerate unintended effects over the long run. Meaning sufferers who drop a few pounds will wish to emphasize conduct modification as a way to keep up weight reduction long term. That is the place CGM might be useful, in line with Steed. The gadgets can present prompt suggestions by way of telephone alerts on how an individual’s physique is reacting to meals, drugs and train. “CGM supplies insights and conduct modification instruments that improve outcomes (all GLP-1 trials have vital life-style administration protocols through the trials),” wrote Steed, who mentioned he considers Dexcom to be one in all his prime picks for 2024. — CNBC’s Michael Bloom contributed to this report.
