Wall Street is still jittery on GLP-1s

　　Wall Street's concerns about GLP-1s' impact on medical device makers was back in full swing after glucose monitoring device seller Dexcom (DXCM) slashed its full-year guidance after an earnings miss last week.

　　However, Dexcom's troubles appear unrelated to the weight loss and diabetes drug frenzy, as competitors such as Abbott (ABT) and Medtronic (MDT) haven't been pressured by the miss, once again allaying Wall Street's fears.

　　The company attributed its guidance to a fumbled sales strategy.

　　“It was a much more disruptive expansion that we've had in the past, and that did lead to a lot of disruption, particularly at the beginning of the quarter. We saw things getting better toward the end,” said CEO Kevin Sayer on an earnings call.

　　The Street previously pressured food and beverage stocks on fears of long-term declines expected from GLP-1 use. That has proven to not be the case, even as the GLP-1 market is expected to reach $130 billion by 2030.

　　Still, medical device stocks have been through a roller-coaster ride in the past year, in part on Wall Street's reaction to data and updates about GLP-1s.

　　Take, for example, an announcement in June from Eli Lilly (LLY), maker of the weight-loss drug Zepbound, that its GLP-1 formula helps reduce incidents of sleep apnea. The data showed greater reduction for those who use pressurized breathing masks, known as CPAP machines, but the news still sent stocks of CPAP makers down.

　　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 sees the opportunity growing further 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.

　　Bay Saunders, 12, with Dexcom G6 patch on her arm for the treatment of her Type 1 diabetes, attends a Senate Appropriations Committee hearing on how the Special Diabetes Program is creating hope for those Living with Type 1 Diabetes, together with other children with Type 1 diabetes, Tuesday, July 11, 2023, in Washington. (AP Photo/Manuel Balce Ceneta) (ASSOCIATED PRESS)

　　Underpenetrated market

　　In the past year, there have been multiple instances of Wall Street predictions dooming sectors based on GLP-1 data, but experts insist the reality is that the potential frenzy has been tamped primarily by supply constraints.

　　JPM analysts said in a note in August 2023, in response to one company's earnings showing lower volumes of bariatric surgery in a quarter, “Unless patients commit to using GLP-1s for life, which many aren‘t keen to do, they’ll likely still progress to bariatric surgery, which remains extremely underpenetrated.”

　　Story continues

　　The idea of being an underpenetrated market holds true for continuous glucose monitoring devices and CPAP machines, along with bariatric surgery. And it's also true for GLP-1s, which have only been available in a limited number of countries and markets to date, as both the market leaders work to add manufacturing capacity.

　　Wall Street jitters haven't spared the GLP-1 makers, either. The current duopoly of Eli Lilly and Novo Nordisk (NVO) is being threatened by several hundred clinical trials for rival GLP-1s. Among those being closely watched are Roche (RHHBY), Amgen (AMGN), Pfizer (PFE), and the biotech Viking Therapeutics (VKTX).

　　Roche recently announced positive early-stage trial data, while Viking is beginning its final-stage clinical trial — the news within the span of a week sent Eli Lilly's stock diving. It traded down 14% in eight days and lost $120 billion in market value. But the same news didn't drag Novo's stock as much.