Industry analysts are insisting that new weight loss and diabetes drugs like Ozempic won’t hurt the demand for insulin pumps and continuous glucose monitors, but most investors aren’t buying it. Medical device stocks have been falling session after session, prompting UBS analyst Danielle Antalffy on Wednesday to lower her price targets for Dexcom and a number of small-to-mid-cap names, with the idea that historic valuation multiples have come down for the group for the foreseeable future. “Current multiples seem to be pricing in an overly bearish view, in which [total addressable markets] are cut meaningfully as GLP-1 adoption ramps (specifically in diabetes and obstructive sleep apnea),” she wrote in a research note. The big question for investors now is whether that sour view is warranted, or if this pullback is a buying opportunity. The answer may depend on who you listen to and whether you see GLP-1 drugs as a help or a hindrance to the category. Novo Nordisk’s Ozempic (semaglutide) and Eli Lilly’s Mounjaro (tirzepatide) belong to a class of medications known as glucagon-like peptide-1, or GLP-1, receptor agonists. The drugs are modeled off of hormones in the gut and help regulate insulin levels. Initially designed to treat Type 2 diabetes, the drugs also aid weight loss and could one day treat sleep apnea, liver disease and other conditions . Their blockbuster potential has pushed Novo Nordisk’s stock to new heights, making it the most valuable European company at the moment. ‘Difficult to disprove the negative’ Antalffy acknowledged that it’s “difficult to disprove the negative,” so she’s assuming the valuation trend will persist even though she expects demand hasn’t changed for insulin pumps and glucose monitors. “For [continuous glucose monitors], we remain steadfast in our view that all diabetes patients will be on a CGM within the next 5+ years, regardless of what their medical regimen entails,” she said. The analyst expects the demand for CGM devices will boost both sales and margins for Dexcom. With the sentiment shift, she reiterated her buy rating on the stock, but slashed the price target to $138 from $175. Dexcom is up more than 2% this week. DXCM 3M mountain In the quarter to date, Dexcom shares are down nearly 19%. Headline risk is real The latest pressure on the stocks came from a New England Journal of Medicine report on Thursday that detailed a study of newly diagnosed patients with Type 1 diabetes who reduced their need for insulin after taking semaglutide. Insulet , which makes insulin pumps, was particularly hard hit by the news. The stock continued its downward trend Friday, and is off about 10% this week. But the study’s findings came with some considerable caveats, including an extremely small sample size of only 10 patients. It also was a retrospective study, without a control group. PODD 3M mountain Insulet shares over the past three months The article’s findings are “highly unlikely” to hurt sales of continuous glucose monitors or insulin pumps, Piper Sandler analyst Matt O’Brien wrote in a research note Thursday. “We understand investor concerns about fighting the drug overhang on the diabetes device space, but we believe all of the name[s] have been unfairly punished over this topic in our view and we encourage starting or building positions in these names,” he said. O’Brien has an overweight rating on Dexcom, Insulet and Tandem Diabetes Care , but Dexcom is Piper’s favorite name in this group. Dexcom shares are down more than 7% year to date. O’Brien has a $160 price target on the stock, which implies 52% upside to where the stock closed Thursday. His price target for Insulet is $325, or about 82% above where the stock closed Thursday. Shares have fallen more than 40% year to date. Tandem Diabetes Care shares have fallen even further — down 46% year to date. Shares would need to rise about 57% to hit O’Brien’s $40 price target. O’Brien said he doubts that taking semaglutide would be able to prevent Type 1 diabetes for a prolonged period of time. “Perhaps the drug can slow the progression of T1 for a short period of time in what is known as the ‘honeymoon’ period for patients (right as they are diagnosed as their pancreas is about to stop making insulin entirely), but eventually they will end up with the disease and need advanced technologies (CGM and pumps) to keep themselves in the best possible glycemic control,” O’Brien said. TNDM 3M mountain Tandem Diabetes shares have fallen significantly this year. Dr. Paresh Dandona, of the Jacobs School of Medicine and Biomedical Sciences at the University of Buffalo, led the study. In a news release, he said the findings are “promising,” and support plans to conduct further research with a larger group of participants over a longer time period. But even with the study’s small scope and the need for further investigation, the reaction was clear in the market, and it’s the latest demonstration of headline risk around Ozempic, Wegovy and Mounjaro. With so many people wanting to shed pounds, there has been a lot of media attention paid to these drugs. With each new study, many of the related stocks react. UBS’s Antalffy pointed to the release of findings from Novo Nordisk’s Select trial in early August as the factor that spoiled sentiment on diabetes device stocks. That trial showed semaglutide reduced patients’ cardiovascular risks. A boost to CGM sales? Meanwhile, Dexcom is making the case to investors that GLP-1 medications can be a benefit to sales of CGM devices. It recently shared historical claims data from health-care services provider Optum that showed a 2 to 4 times increase in use of CGM after patients begin GLP-1 medications. “Our diligence has suggested a positive link between CGMs and GLP-1s,” Bank of America analyst Travis Steed wrote in a research note Tuesday. In understanding why this might be the case, it’s helpful to remember that patients who lose weight on Wegovy or other GLP-1 medications are likely to regain that weight when they stop taking the drugs. Since the medications can cost about $13,000 a year, some health insurance companies may limit access to the drugs or patients may be unable to tolerate side effects over the longer term. That means patients who lose weight will want to emphasize behavior modification as a means to maintain weight loss longer term. That’s where CGM can be helpful, according to Steed. The devices can provide instant feedback through phone alerts on how a person’s body is reacting to food, medicine and exercise. “CGM provides insights and behavior modification tools that enhance outcomes (all GLP-1 trials have significant lifestyle management protocols during the trials),” wrote Steed, who said he considers Dexcom to be one of his top picks for 2024. — CNBC’s Michael Bloom contributed to this report.