Why Goldman refused to change its ratings on these ASX stocks after Ozempic-driven selloff. Picture Getty

Check Up: Why Goldman Sachs won’t change its ratings on 3 ASX stocks despite Ozempic-driven selloff

Health & Biotech

2 hours ago | Eddy Sunarto

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• News relating to Novo Nordisk’s Ozempic has led to a selloff in some ASX stocks
• CSL, FPH, and RMD fell heavily last week
• But Goldman analysts say they won’t change ratings on these 3 stocks

Goldman Sachs analysts said they will make no changes on their ratings for CSL (ASX:CSL), Fisher & Paykel Healthcare (ASX:FPH), and Resmed (ASX:RMD), despite the heavy selloff last week.

Traders have been aggressively selling these stocks after Danish biotech Novo Nordisk appeared to have made a breakthrough in its weight-loss wonder drug, Ozempic.

Novo announced that its FLOW trial had been stopped early on the advice of the Independent Data Monitoring Committee (IDMC), because Ozempic had met the pre-determined criteria for efficacy after showing signs of delaying the progression of kidney disease in diabetes patients.

FLOW is a large, placebo-controlled study evaluating semaglutide 1.0mg (branded as Ozempic), as a treatment to slow/prevent the progression of kidney disease in a population with CKD (chronic kidney disease) and type 2 diabetes.

The trial was initiated in 2019, and has enrolled more than 3,500 participants across 28 countries, with a read-out scheduled in 1H24.

Goldman says it’s not uncommon for trials to stop early (for efficacy or futility), and there are no hard and fast rules for what threshold would trigger it.

Novo’s breakthrough has impacted these three ASX stocks for two main reasons, says Goldman.

First, there is a direct earnings impact for CSL’s Swiss subsidiary, Vifor, which sells drugs to the kidney disease/dialysis market. In addition, GS says there is also potential consequences for the carrying value of Vifor itself, which is comprised almost entirely of intangible assets and goodwill.

Secondly, each positive outcome trial from Novo broadens the potential utility of the GLP-1/GIP receptor drugs like Ozempic, which strengthens the argument that US payor coverage/reimbursement should be expanded.

When this payor access improves, it would impact those companies with exposure to weight, diabetes, and cardiovascular diseases like Resmed and Fisher and Paykel.

Why Goldman has maintained its ratings

Goldman says it maintains the ratings on the three stocks, CSL, FPH, and RMD, for the following reasons:

CSL – still Neutral rating

Chronic kidney disease (CKD) is a progressive disease (stage 1-4), which can ultimately lead to End-Stage Renal Disease (ESRD), also known as kidney failure.

At the point of ESRD, the patient will require either regular dialysis or a kidney transplant to remain alive, of which around 70% will proceed to dialysis, partly since the waitlist for a transplant can be long and the risk of rejection is not insignificant.

According to Goldman’s estimate for FY24, kidney disease contributes around 7-8% of CSL Group FY24 revenue forecast (which includes Vifor’s).

Goldman has however maintained its Neutral rating on CSL, arguing that the degree of benefit from GLP-1s to CKD progression for Ozempic is not at all clear (and won’t be until data in 1H24).

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Check Up: Why Goldman Sachs won't change its ratings on 3 ASX stocks despite Ozempic-driven selloff - *