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ResMed Inc (ASX:RMD) has recently reported its 1Q FY24 results, with a 36% share price drop in the past six months. While the financials appear robust, concerns about the impact of Ozempic and GLP-1 medications on ResMed's business have raised investor uncertainty. These medications have shown effectiveness in treating obesity, a common precursor to obstructive sleep apnea (OSA), a condition ResMed's devices treat. In the context of ASX healthcare stocks, ResMed's performance has been of particular interest.
ResMed's Recent Performance:
The share price of ResMed has experienced a significant decline, down 36% over the past six months. This is notable because ResMed is an influential ASX 50 large-cap company and is the fourth-largest healthcare share in the market with a market capitalization of $33 billion.
Investor Concerns and Analyst Perspective:
Investors have expressed concerns that Ozempic and GLP-1 medications may reduce ASX RMD's revenue as they effectively treat obesity, a common contributor to OSA. However, analysts argue that the sleep apnea market is vast and underserved, leaving room for ResMed to grow its market share. They recommend taking advantage of this market confusion and investing in ResMed. Goldman Sachs holds a buy rating with a 12-month price target of $33, while Wilsons has an overweight rating and a share price target of $36.25.
CEO's Response:
ResMed's CEO, Mick Farrell, has reassured investors by stating that the company continues to experience strong growth in patient numbers. He emphasized that the impact of GLP-1s on ResMed's addressable market is limited since obesity is only one of the causes of sleep apnea. Despite the potential effectiveness of these medications, ResMed's total addressable market remains substantial, allowing room for growth.
Impact of GLP-1s on ResMed's Future Customer Base:
ResMed conducted internal modeling to assess the potential impact of GLP-1 medications on its future customer base. According to this modeling, even under the aggressive adoption of GLP-1s, ResMed's addressable market for sleep apnea is projected to reach 1.2 billion people in 2050, remaining substantial.
Monitoring and Data:
ResMed is actively tracking thousands of patients on GLP-1 medications and APAP therapy and has observed no significant change in the adherence rates or reduced participation in resupply programs. The company intends to publish this data in peer-reviewed clinical publications.
Potential "Net Positive" Effect:
Farrell suggests that GLP-1s could become a "net positive" for ResMed, as these medications may encourage individuals with obesity to seek medical attention, leading to discussions about broader health issues, including sleep difficulties. This increased patient flow is expected to benefit ResMed's growth.
Conclusion:
While ResMed's share price has experienced a significant drop, the CEO's reassurances and data on patient adherence suggest that the impact of Ozempic and GLP-1 medications on the company's business may be limited. This has led analysts to maintain a positive outlook for the stock, emphasizing ResMed's growth potential in the sleep apnea marke
