US medical device maker DexCom (DXCM:NASDAQ) brushed aside concerns that the craze for obesity drugs is impacting demand for diabetes treatments after smashing third quarter earnings estimates. The news sent the shares 17% higher in after-market trading.

DexCom has seen strong demand for its CGM (continuous glucose monitoring) devices which track blood sugar levels in diabetes patients throughout the day.

WHY ARE INVESTORS WORRIED?

Novo Nordisk’s (NVO:NYSE) Wegovy (branded Ozempic in the US) and Eli Lilly’s (LLY:NYSE) Mounjaro were originally developed to treat diabetes and they work by suppressing appetite.

Investors have been worried that the increasing popularity of these treatments which are referred to as GLP-1 receptor agonists would decrease the number of patients which use CGMs.

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Johnson & Johnson (JNJ:NYSE) reported lower than expected medical device sales in its third quarter due to a slowdown in devices used for bariatric surgeries which help obese patients get back to a healthy weight suggesting obesity drugs are having an impact.

But DexCom’s chief executive Kevin Sayer reassured investors saying increased use of weight loss treatments is helping business. ‘Physicians are also pursuing CGM as they add GLP-1 as diabetes therapy,’ said Sayer.

BUMPER NUMBERS AND RAISED OUTLOOK

The latest numbers seem to support Sayer’s view as DexCom revealed a 27% increase in third quarter sales to $975 million beating Wall Street estimates of $939.2 million according to LSEG data.

Adjusted EPS (earnings per share) came in at $0.5 compared with analysts’ forecasts of $0.35, an increase of 79% compared with a year ago.

The company also raised its full year forecast for revenue to between $3.58 billion and $3.6 billion equating to a 2% upgrade at the midpoint and higher than current Street estimates of $3.55 billion.

DexCom shares are down around 20% year to date compared with an 8% gain for the S&P 500.

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