Ann: ResMed Announces Results for the Fourth Quarter of FY2023, page-233

This from an analyst who maintain an overweight rating and a 12 month PT on the stock.

We maintain our OVERWEIGHT rating and $36.25 PT on ResMed. GLP-1 receptor agonists (GLP-1Ra agents) have been used for almost a decade to manage obesity, so why has the ‘existential threat’ they pose to CPAP only manifested now? The ‘scare’ has wiped 6.5-points off RMD valuation, smashing it back to pre-Brightree levels. That weight loss should improve obstructive sleep apnoea (OSA) symptoms is intuitively appealing but incomplete. Our equanimity on this issue (no changes to forecasts or valuation) is based on two observations. As stunning as some of the new GLP-1Ra agents look, they are unlikely to impact the gross epidemiology of OSA. Whether they are approved or not for an OSA indication, they look unlikely to provide complete resolution of OSA symptoms and to combat CPAP as standard of care. Key PointsThe GLP-1R agonists join a long list of would-be usurpers to CPAP therapy in obstructive sleep apnoea (OSA). CPAP’s great strengths are its ability to treat OSA across the spectrum of symptomatic severity and its low cost. Its great weakness is treatment adherence. That it works so completely in the adherent patient means that its incumbency as standard of care should remain unchallenged for the foreseeable future. Furthermore, the medical channel treating OSA (especially in the USA) are focused on treatment adherence and compliance, which may make them reluctant to hand patients over to pharmacologic intervention alone. Anyone doubting that assertion should look at the barriers to adoption oral appliance therapies for OSA have faced in the US market (e.g. mandibular adjustment devices, which offer no real-time data or follow-up). Even the most bullish GLP-1Ra obesity scenario offers an incomplete solution for OSA, which is unlikely to be reimbursed. We provide a brief review of the GLP-1Ra obesity drug development landscape, noting that Eli Lilly’s ‘double agonist’ (MOUNJARO) and ‘triple agonist’ (retatrutide) look most compelling. Lilly and its investigators are predicting that retatrutide will halve OSA symptoms (AHI event rates), recalling that the only formal RCT ever done in OSA to date (Novo’s liraglutide SCALE trial) underwhelmed. SCALE showed modest benefit; undistinguishable from any other weight loss study in OSA. In fact, while weight loss progressed over the 32-week treatment period, OSA improvement stopped at week 12, suggesting a limit to what weight loss alone could achieve in the moderate-severe OSA patient. SCALE also underlined the challenge that any drug class will face in treating OSA: addressing anatomical, physiological and neurological components, simultaneously. If agents like MOUNJARO or retatrutide do halve AHI events in a severe OSA patient, that individual will still have residual OSA, needing CPAP. Even if GLP-1Ra pricing declines from today’s ~US$1,000/month to US$350/month, this strikes as expensive for partial efficacy. GLP-1Ra agents may achieve full disease resolution in a mild patient, but we won’t know, because those patients are not included in the Phase III trials.