Selloff in MedTech stocks 'seems overdone': Citi

The recent selloff in MedTech stocks, particularly those related to diabetes management, "seems overdone," according to analysts at Citi.

MedTech diabetes stocks were pressured after the release of Eli Lilly & Co.'s (NYSE:LLY ) three-year Surmount-1 study results, which demonstrated significant weight loss and a dramatic reduction in the progression of type 2 diabetes among pre-diabetic and obese patients.

The Surmount-1 trial evaluated the effects of Tirzepatide, combined with regular physical activity and a reduced-calorie diet, on pre-diabetes patients.

The study showed weight loss, with reductions of 15.4%, 19.9%, and 22.9% for the 5 mg, 10 mg, and 15 mg doses, respectively, compared to a mere 2.1% reduction in the placebo group.

Additionally, the progression to type 2 diabetes was reduced by a staggering 94% in the treated group. These results were achieved through measurements of HbA1c, fasting glucose, and glucose levels during a two-hour oral glucose tolerance test—metrics that are also significantly influenced by physical activity and diet.

Despite the positive results from the Surmount-1 trial, analysts at Citi believe that the market's negative reaction toward MedTech diabetes stocks is excessive.

They note that the type 2 diabetes population is large and underpenetrated, and that continuous glucose monitoring (CGM) and insulin pump use have already been evaluated in a GLP-1 environment.

Given this context, Citi maintains a Buy rating on key players in the MedTech sector, including Abbott (ABT), DexCom (DXCM), Insulet (NASDAQ:PODD ), and Tandem Tandem Diabetes (TNDM). Medtronic (NYSE:MDT ), however, is rated as Neutral.

Citi's perspective suggests that while the Surmount-1 results are indeed impressive, the subsequent selloff in MedTech stocks is not entirely justified, presenting potential buying opportunities for investors in this sector.

Source: Investing.com