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Key Takeaways
- Shares of Insulet and DexCom, which provide devices for patients with diabetes, were the weakest-performing S&P 500 stocks on Tuesday.
- The losses for the medtech stocks came after Eli Lilly said its blockbuster drug effectively reduced the risk of patients developing type 2 diabetes.
- Insulet and DexCom have been navigating headwinds related to their user growth outlook.
Shares of Insulet (PODD)Â and DexCom (DXCM), two companies that provide medical devices for patients managing diabetes, tumbled Tuesday after a study showed that a popular drug made by Eli Lilly (LLY) significantly lowers the risk of developing type 2 diabetes.
According to the results of a three-year study, patients with prediabetes who were overweight or obese saw a 94% reduction in type 2 diabetes progression risk after taking tirzepatide, the active ingredient in Eli Lilly’s injectable weight-loss drug Zepbound and diabetes treatment Mounjaro, compared with a placebo.
Blockbuster Drug Pressures Growth Outlook
The results of Lilly’s study 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 manufactures continuous glucose monitoring (CGM) devices, saw its shares plummet at the end of July after the company slashed its sales guidance for the current quarter and the full year. The company said the lower forecasts reflected slower-than-expected new customer additions, which could be exacerbated as treatments by Lilly and pharmaceutical rivals reduce diabetes risks.
Concerns about user growth have also dragged on insulin pump maker Insulet in recent weeks. Shares tumbled on Aug. 6 after the company said its growth trajectory could be slower than previously anticipated as fewer patients switch from competing devices, and wider adoption of GLP-1 receptor agonists could add to the headwinds.
Stock Performance
Insulet shares plunged 6.9%% on Tuesday after Lilly publicized the results of the study, marking the weakest daily performance of any stock in the S&P 500. Shares of DexCom were not far behind, falling 6.2% on the day.
Meanwhile, Lilly shares finished 3.1% higher after hitting an all-time intraday high early in Tuesday’s trading session.