Resmed Inc (NYSE:RMD) stock rose 0.65% (As on June 26, 12:07:25 AM UTC-4, Source: Google Finance) after Citi downgraded the company to Neutral from Buy with a price target of A$30 after Eli Lilly’s (LLY) SURMOUNT study showed that between 40%-50% of patients on tirzepatide had obstructive sleep apnea remission. The firm says the data indicates that GLP-1 drgus are a viable treatment option for the 70% of OSA patient population that are obese. Citi has also adjusted its earnings per share (EPS) forecasts for ResMed for fiscal years 2024 to 2026, reflecting potential market shifts due to new OSA treatments. The company has also been downgraded from Outperform to Perform by Oppenheimer. The change in rating comes after the presentation of the SURMOUNT-OSA dataset at the American Diabetes Association (ADA) on June 21, 2024.
The SURMOUNT-OSA study, which has been a topic of discussion due to its potential impact on the Obstructive Sleep Apnea (OSA) treatment landscape, has shown significant disease remission outcomes. These results stand out even against the backdrop of strong mean Apnea-Hypopnea Index (AHI) reductions. Despite these findings, GLP-1s, a class of drugs referenced in the study, are not yet approved for OSA treatment and do not have reimbursement, indicating that their full impact on the market may not be realized until the second half of 2025.
Oppenheimer suggests that the data from the GLP-1 study is likely to lead to a structural shift in patient preferences and referral patterns, as well as in the choice of therapy for OSA. This anticipated shift could pose challenges for ResMed, as the firm predicts an “airpocket,” or a potential period of stagnation or decline, for ResMed’s stock. Consequently, the decision was made to move to the sidelines regarding the company’s shares.
The downgrade reflects the anticipation of changing dynamics within the OSA treatment market, as new data influences patient and healthcare provider decisions. As the industry awaits the potential approval and reimbursement of GLP-1s for OSA, the implications for companies like ResMed are becoming clearer, prompting adjustments in stock ratings and market expectations.
Meanwhile, ResMed reported robust Q3 results, with a 7% increase in constant currency terms, leading to a group revenue of $1.2 billion. This growth was driven by a 5% increase in device sales and a 10% rise in mask and accessories sales. The company’s strategic focus is on expanding the sleep and breathing health market and investing in digital health technology.