Industry analysts are insisting that recent weight reduction and diabetes drugs like Ozempic won’t hurt the demand for insulin pumps and continuous glucose monitors, but most investors aren’t buying it. Medical device stocks have been falling session after session, prompting UBS analyst Danielle Antalffy on Wednesday to lower her price targets for Dexcom and a variety of small-to-mid-cap names, with the concept that historic valuation multiples have come down for the group for the foreseeable future. “Current multiples appear to be pricing in a very bearish view, by which [total addressable markets] are cut meaningfully as GLP-1 adoption ramps (specifically in diabetes and obstructive sleep apnea),” she wrote in a research note. The massive query for investors now is whether or not that sour view is warranted, or if this pullback is a buying opportunity. The reply may rely on who you take heed to and whether you see GLP-1 drugs as a help or a hindrance to the category. Novo Nordisk’s Ozempic (semaglutide) and Eli Lilly’s Mounjaro (tirzepatide) belong to a class of medicines often known as glucagon-like peptide-1, or GLP-1, receptor agonists. The drugs are modeled off of hormones within the gut and help regulate insulin levels. Initially designed to treat Type 2 diabetes, the drugs also aid weight reduction and could someday treat sleep apnea, liver disease and other conditions . Their blockbuster potential has pushed Novo Nordisk’s stock to recent heights, making it the most dear European company for the time being. ‘Difficult to disprove the negative’ Antalffy acknowledged that it’s “difficult to disprove the negative,” so she’s assuming the valuation trend will persist although she expects demand hasn’t modified for insulin pumps and glucose monitors. “For [continuous glucose monitors], we remain steadfast in our view that every one diabetes patients will be on a CGM inside the subsequent 5+ years, no matter what their medical regimen entails,” she said. The analyst expects the demand for CGM devices will boost each sales and margins for Dexcom. With the sentiment shift, she reiterated her buy rating on the stock, but slashed the worth 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 nearly 19%. Headline risk is real The newest pressure on the stocks got here from a Recent England Journal of Medicine report on Thursday that detailed a study of newly diagnosed patients with Type 1 diabetes who reduced their need for insulin after taking semaglutide. Insulet , which makes insulin pumps, was particularly hard hit by the news. The stock continued its downward trend Friday, and is off about 10% this week. However the study’s findings got here with some considerable caveats, including a particularly small sample size of only 10 patients. It also was a retrospective study, without a control group. PODD 3M mountain Insulet shares over the past three months The article’s findings are “highly unlikely” to harm sales of continuous glucose monitors or insulin pumps, Piper Sandler analyst Matt O’Brien wrote in a research note Thursday. “We understand investor concerns about fighting the drug overhang on the diabetes device space, but we consider all the name[s] have been unfairly punished over this topic in our view and we encourage starting or constructing positions in these names,” he said. O’Brien has an chubby rating on Dexcom, Insulet and Tandem Diabetes Care , but Dexcom is Piper’s favorite name on this group. Dexcom shares are down greater than 7% 12 months to this point. O’Brien has a $160 price goal on the stock, which means 52% upside to where the stock closed Thursday. His price goal for Insulet is $325, or about 82% above where the stock closed Thursday. Shares have fallen greater than 40% 12 months to this point. Tandem Diabetes Care shares have fallen even further — down 46% 12 months to this point. Shares would want to rise about 57% to hit O’Brien’s $40 price goal. O’Brien said he doubts that taking semaglutide would be capable of prevent Type 1 diabetes for a prolonged time frame. “Perhaps the drug can slow the progression of T1 for a short time frame in what’s often known as the ‘honeymoon’ period for patients (right as they’re diagnosed as their pancreas is about to stop making insulin entirely), but eventually they’ll find yourself with the disease and wish advanced technologies (CGM and pumps) to maintain themselves in the most effective possible glycemic control,” O’Brien said. TNDM 3M mountain Tandem Diabetes shares have fallen significantly this 12 months. Dr. Paresh Dandona, of the Jacobs School of Medicine and Biomedical Sciences on the University of Buffalo, led the study. In a news release, he said the findings are “promising,” and support plans to conduct further research with a larger group of participants over a longer time period. But even with the study’s small scope and the necessity for further investigation, the response was clear available in the market, and it’s the newest demonstration of headline risk around Ozempic, Wegovy and Mounjaro. With so many individuals wanting to shed kilos, there was a lot of media attention paid to those drugs. With each recent study, most of the related stocks react. UBS’s Antalffy pointed to the discharge of findings from Novo Nordisk’s Select trial in early August because the factor that spoiled sentiment on diabetes device stocks. That trial showed semaglutide reduced patients’ cardiovascular risks. A lift to CGM sales? Meanwhile, Dexcom is making the case to investors that GLP-1 medications can be a profit to sales of CGM devices. It recently shared historical claims data from health-care services provider Optum that showed a 2 to 4 times increase in use of CGM after patients begin GLP-1 medications. “Our diligence has suggested a positive link between CGMs and GLP-1s,” Bank of America analyst Travis Steed wrote in a research note Tuesday. In understanding why this might be the case, it’s helpful to do not forget that patients who drop some weight on Wegovy or other GLP-1 medications are more likely to regain that weight after they stop taking the drugs. Because the medications can cost about $13,000 a 12 months, some medical insurance firms may limit access to the drugs or patients may be unable to tolerate negative effects over the long term. Meaning patients who drop some weight will want to emphasise behavior modification as a means to keep up weight reduction long term. That is where CGM can be helpful, in line with Steed. The devices can provide easy feedback through phone alerts on how a person’s body is reacting to food, medicine and exercise. “CGM provides insights and behavior modification tools that enhance outcomes (all GLP-1 trials have significant lifestyle management protocols throughout the trials),” wrote Steed, who said he considers Dexcom to be one in all his top picks for 2024. — CNBC’s Michael Bloom contributed to this report.