Dexcom rises after pushing back on GLP-1 concerns

Shares of Dexcom (DXCM) are on the rise on Wednesday after the company said data suggests an uptick in continuous glucose monitor, or CGM, adoption in conjunction with the initiation of GLP-1 therapy across all type two, or T2, diabetics segments. Commenting on the news, Jefferies says it views this as “a meaningful counter-punch to the pressure” shares have been under since mid-July, which it attributes as largely due to worries that GLP-1 drugs could impact the obesity and diabetic growth curves.

CGM USE INCREASES: In slides accompanying its investor presentation, Dexcom said that “across all segments of T2 diabetics, CGM use increases with GLP-1 initiation.” It also states that the percentage of CGM usage for those initiating GLP-1 therapy in each year is as follows: Type 2 Intensive Insulin – average CGM increase of 2.0-times; Type 2 Basal Insulin Only – average CGM increase of 3.8-times; Type 2 Non-insulin Therapy – average CGM increase of 4.2-times.

‘MEANINGFUL COUNTER-PUNCH’: Jefferies notes that DexCom has updated its investor deck to show that it has found that CGM use increases in T2 diabetics with GLP-1 therapy initiation. While the firm says it doesn’t “normally write a report on a new slide in a company investor deck,” it views this finding as “a meaningful counter-punch to the pressure” shares have been under since mid-July, which it attributes as largely due to worries that GLP-1 drugs could impact the obesity/diabetic growth curves. The firm, which argues that the CGM market is “so large and underpenetrated” that even some improvement in disease progression from GLP-1 drugs would “likely only scratch the surface of the opportunity ahead,” keeps a Buy rating and $155 price target on DexCom shares.

Also commenting on the data, BofA notes that the slide in question includes historical claims data from Optum showing the percentage of people on CGM before and after initiation of a GLP-1. The historical data suggests an uptick in CGM adoption in conjunction with the initiation of GLP-1 therapy, across all segments of T2. The firm’s diligence has suggested a positive link between CGMs and GLP-1s. CGM provides insights and behavior modification tools that enhance outcomes. CGM supports dose titration for the GLP-1, as well as preferred combo therapies used alongside them, giving doctors a tool to adjust and minimize side effects. For the significant number of people who cannot tolerate the drug for long-term use, CGM can enhance durability of outcomes. BofA sees Dexcom as one of its top picks for 2024 and has a Buy rating on the shares with a price target of $140.

ENDOCRINOLOGISTS SURVEY: Late last month, Baird had lowered the firm’s price target on DexCom to $130 from $153, while keeping an Outperform rating on the shares after surveying 25 endocrinologists regarding GLP-1 use in type two diabetes. The firm noted that GLP-1 use was expected to grow from 46% to 70% of current type two diabetes patients in the next few years. More importantly, the endocrinologists believe GLP-1 use could halt the progression to basal/bolus insulin use for nearly 50% of the patients for the next 5-10 years and that the overall size of the U.S. intensive insulin therapy type two population could shrink 11% over the next decade.

PRICE ACTION: In Wednesday morning trading, shares of Dexcom have gained over 4% to $104.75.