Got $10,000? I Think DexCom Stock Could Be a Quiet Winner of the GLP‑1 Wars
Key Points
Analysts feared the advent of GLP-1 medications would harm DexCom's blood glucose monitoring devices.
However, as its turns out, DexCom's devices are being prescribed together with GLP-1s.
The company has several tailwinds and a large addressable market.
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Many pharmaceutical companies are looking to develop and market the now highly popular GLP-1 drugs, which help treat diabetes, help patients lose weight, and reduce their risk of a range of conditions linked to obesity. The drugmakers that lead this market over the next decade could reap substantial financial benefits for themselves and their shareholders.
But what if companies outside of the pharmaceutical industry benefit as well? One excellent candidate to do so is DexCom (NASDAQ: DXCM). Let's consider why this healthcare specialist could be an under-the-radar winner of the GLP-1 boom.
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Image source: Getty Images.
Not competing with GLP-1 drugmakers
DexCom is a medical device leader that develops and markets continuous glucose monitoring (CGM) systems to track blood glucose levels in real time. DexCom is a leader in this niche. And while some investors initially thought the rise in popularity of GLP-1s would be bad for the company, the opposite proved true. Some studies have found that using CGM devices alongside GLP-1 medicines yields even better outcomes for patients with diabetes.
Meanwhile, according to DexCom's management, CGM adoption has grown faster among GLP-1 users, as physicians increasingly prescribe one in conjunction with the other. In other words, GLP-1 drugs help complement CGM devices and improve patients' control over their health. What the drugs don't seem to be doing is replacing CGM devices. That's excellent news for DexCom, as it's benefiting from the GLP-1 revolution without having to develop novel therapies.
Most drugmakers that are currently trying to do so will likely fail. That's just how the pharmaceutical industry works: Most new compounds that enter clinical trials never make it to the market. Some will, but whichever ones do won't really matter to DexCom. Growing GLP-1 prescriptions for diabetes patients could drive demand for its own devices, no matter which drugmaker dominates this space. It's a win-win situation for DexCom.
Plenty of growth runway
DexCom's addressable market is underpenetrated. The company estimates that over 9 million patients in the U.S. have reimbursement for CGM devices but have yet to opt in. For context, the company's global installed base is about 2.5 million patients. Considering the opportunities in the U.S. and abroad, DexCom's growth runway looks massive.
The rise of GLP-1s won't be its only -- or perhaps even its main -- tailwind. DexCom's constant innovations, expansion into new markets, and efforts to secure reimbursement for more patients in more countries have historically driven solid financial results. For all those reasons, its stock looks attractive. As the company profits from the GLP-1 wars and other tailwinds, investing $10,000 (that's not being saved for emergencies) in shares today could be a great move.
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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool recommends DexCom and recommends the following options: long January 2027 $65 calls on DexCom and short January 2027 $75 calls on DexCom. The Motley Fool has a disclosure policy.
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