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Yesterday’s selloff occurred after Novo Nordisk’s (NYSE:NVO) Ozempic showed promise in treating kidney failure. Baxter (NYSE:BAX) fell 12.3% while DaVita (NYSE:DVA) lost as much as 16.9%. Similarly, Outset Medical (NASDAQ:OM) dropped 21.2%.
“We believe MedTech stock price reaction to GLP-1s is overdone based on the extensive research on GLP-1s and our understanding of their impact on various procedure categories. In most cases, GLP-1s do not stop or reverse the progression of different diseases (e.g., diabetes, cardiovascular, kidney failure, etc.),” the analysts said in a client note.
“These patients will come into the funnel at some point.”
The analysts note that in most cases, GLP-1s do not reverse disease progression but can slow it down, primarily due to associated weight loss. Furthermore, the cardiovascular benefits associated with GLP-1s may allow more individuals to remain in the treatment market for an extended period. This could include people who would otherwise be classified as obese but now have a reason to seek treatment.
“It is also worth noting that many categories are highly under-penetrated- e.g., bariatric and diabetes, where we expect some impact in the near term from GLP-1s, but TAMs remain intact. Finally, we note that patient convenience, compliance, cost, and coverage continue to be practical considerations around adoption. These factors make us believe the reactions to GLP-1s are overblown, creating an attractive opportunity.”
More particularly, the analysts see an attractive investing opportunity in Outset Medical.
“We believe OM continues to be attractively positioned in dialysis given its size, technology differentiation, and cost advantage, positioning it to continue to take share in the acute care setting and drive a shift to the home setting, which collectively represents an $11B U.S. dialysis market,” the analysts concluded.
