These two stocks tumble after Eli Lilly drug study shows promise for diabetes

Key recommendations

• Shares of Insulet and DexCom, which provide devices for diabetes patients, were the worst performers on the S&P 500 on Tuesday.

• The losses for medtech stocks came after Eli Lilly said its blockbuster drug effectively reduced the risk of patients developing type 2 diabetes.

• Insulet and DexCom have navigated phases related to their user growth prospects.

Insulet shares (Podda) and DexCom (DXCM), two companies that provide medical devices for patients dealing with diabetes, fell on Tuesday after a study showed that a popular drug made by Eli Lilly (LLY) significantly lowers the risk of developing type 2 diabetes.

Overweight or obese prediabetes patients saw a 94 percent reduction in their risk of developing type 2 diabetes after taking tirzepatide, the active ingredient in Eli Lilly’s Zepbound injectable weight-loss drug and diabetes treatment, according to the results of a three-year study. Mounjaro. , compared to a placebo.

Prospects for increasing successful drug pressures

Lilly’s study results demonstrate another benefit of tirzepatide and other drugs known as GLP-1 receptor agonists. While the growing list of positive effects will come as welcome news to many patients, it could be a concern for companies that make products to treat related conditions.

DexCom, which makes continuous glucose monitoring (CGM) devices, saw its shares fall in late July after the company cut its sales guidance for the current quarter and full year. The company said the lower forecasts reflected slower-than-expected additions of new customers, which could be exacerbated as treatments from Lilly and pharmaceutical rivals reduce diabetes risks.

In recent weeks, concerns about user growth have also drawn insulin pump maker Insulet. Shares fell on Aug. 6 after the company said its growth trajectory may be slower than previously anticipated as fewer patients switch from competing devices and wider adoption of GLP-1 receptor agonists could contribute to difficulties.

Stock performance

Shares of Insulet fell 6.9%% on Tuesday after Lilly released the study results, marking the worst daily performance of any stock in the S&P 500. Shares of DexCom weren’t far behind, falling 6.2% on that day.

Meanwhile, Lilly shares finished 3.1 percent higher after hitting an all-time high for the day in early trading on Tuesday.

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