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Diabetes Space Thrives on CGM Devices in 2021: 3 Stocks in Focus

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  • DXCM
  • ABT

The diabetes space held its ground despite the pandemic as diabetes control is essential to prevent any untoward health emergency. It shows why it is recognized as one of the most profitable segments of the MedTech sector.

As diabetics are at a higher risk of contracting the COVID-19 infection, scientists continued to resort to advanced diabetes management devices that can lessen chances of hospitalizations since the virus outbreak. This highlights the role played by continuous glucose monitoring (CGM) devices, which automatically track blood glucose levels (also called blood sugar) during the entire time the device is on the body.

With an ever-expanding patient pool and amid the ongoing pandemic severity, the prospects for CGM look extremely bright. Hence, investors can safely place their bets on such players to reap long-term returns.

Let us delve deeper.

CGM Gaining Traction in 2021

Per the National Diabetes Statistics Report 2020 by the Centers for Disease Control and Prevention, 34.2 million Americans suffered from diabetes whereas 88 million American adults had prediabetes in 2018. Further, WHO estimates that the number of people suffering from diabetes is expected to reach 578 million by 2030.

Hence, strict glucose control and monitoring are recommended for patients to help minimize the progression of diabetes and potential complications. However, traditional glucose testing might not be possible every time due to various constraints, including patient health. Under such situations, the presence of a CGM device that can actually alert before a potential hypoglycemic (low blood sugar level) or hyperglycaemic (high blood sugar level) event is a necessity.

Per a report by Grand View Research, the global CGM device market was valued at $3,929.7 million in 2019 and is anticipated to reach $10.4 billion by 2027, at a CAGR of 12.7%. Apart from the huge CGM market potential, this space recently received a fresh breath of life when Centers for Medicare and Medicaid Services opened up Medicare coverage for therapeutic continuous glucose monitors. This eliminates the rule of beneficiaries needing to use a blood glucose monitor and requiring at least four self-monitoring blood glucose tests per day to have devices covered.

With a potential patient pool of this size, a few MedTech players in the diabetes space have been strengthening their foothold in the CGM market. Also, the space holds immense potential as this is an area where treatment cannot be deferred. Therefore, investing in companies engaged in diabetes management via CGM devices seem to be a safe bet for now.

Realizing the potential in CGM devices, key diabetes player Abbott Laboratories ABT has been making impressive progress. Its Diabetes Care business has been particularly in the limelight for developments in its flagship, sensor-based CGM system, FreeStyle Libre. In 2020, the company received U.S. approval of Freestyle Libre 2 (an integrated CGM or iCGM system for adults and children) and CE Mark for Libre 3 (integrates Libre's accuracy and performance into the world's smallest fitness disposable sensor) and Libre Sense Glucose Sport (which is Abbott’s initial step in a very intentional approach to pursue mass market biosensor opportunities beyond diabetes).

3 Diabetes Stocks to Focus on

Here we have picked three CGM stocks from the MedTech space which have performed impressively in recent times.

The first stock that the investors can focus on is MedTech stalwart and renowned medical technology, services and solutions provider, Medtronic plc MDT. This Zacks Rank #3 (Hold) company announced real-world clinical outcomes for individuals on the MiniMed 780G system in June, which showed favorable average overall Time in Range and an overnight Time in Range levels. In May, the company announced CE Mark for expanded functionality of its InPen smart insulin pen for multiple daily injections and for its Guardian 4 sensor. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Its long-term expected earnings growth rate is pegged at 8.9%. Year to date, the stock has gained 6.8% compared with the industry’s 3.4% rise.

Key medical device company Dexcom, Inc. DXCM is the next stock on the list. This Zacks Rank #3 company announced in June that the Dexcom G6 CGM system might now be eligible for provincial coverage through BC PharmaCare. Diabetics who are on intensive insulin therapy and above the age of two may be entitled to the coverage. British Columbia has joined the ranks of Yukon, Quebec and Saskatchewan to offer public coverage of CGM systems under provincial health plans.

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Zacks Investment Research

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Its expected earnings growth rate for 2022 is pegged at 52.1%. Year to date, the stock has gained 14.9% compared with the industry’s 3.8% rise.

Renowned global medical technology company, Tandem Diabetes Care, Inc. TNDM, is the final name on the list. The Zacks Rank #3 company commercially offers its pump technology integrated with Dexcom’s CGM sensors. The company’s Basal-IQ technology (predictive low glucose suspend feature) has been designed to temporarily suspend insulin delivery to help reduce the frequency and duration of hypoglycemic events. With Dexcom G6 CGM integration, this feature works with no fingersticks required for mealtime dosing or calibration. Tandem Diabetes, in June, announced positive data on real-world use of the t:slim X2 insulin pump with Control-IQ advanced hybrid closed-loop technology.

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Its expected earnings growth rate for 2022 is pegged at 850%. Over the past year, the stock has gained 11.4% compared with the sector’s 6.6% rise.

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Abbott Laboratories (ABT) : Free Stock Analysis Report

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