ResMed CEO: Weight-Loss Drugs Aren't Cutting Demand for Sleep Apnea Treatment -- Barrons.com

29-jan-2024 05:30

Del med andre

By Bill Alpert

As excitement built last year over weight-loss drugs from Novo Nordisk and Eli Lilly, investors abandoned companies that treat disorders inflamed by obesity.

Shares of ResMed sank 40% from July to October, on fears that fewer people would suffer from the nighttime breathing problem known as sleep apnea -- which ResMed's devices relieve.

ResMed stock has recovered some, but not all, of its losses after reporting a couple quarters of undisturbed growth. The latest earnings report was Wednesday, when the San Diego firm said December quarter sales grew 11% from the year-earlier quarter, to $1.16 billion. Profit rose 20%, to $1.88 a share. The news lifted the stock. It is now up 44% from its 2023 bottom, at $190.

"There was an overreaction," Chief Executive Mick Farrell told Barron's. "In the market, there can be irrational exuberance up and down."

He says weight-loss drugs should benefit many patients who suffer from sleep apnea, but expects the drugs will be used to complement proven treatments such as ResMed's continuous positive airway pressure, or CPAP, systems.

That isn't how the stock market viewed it in August, when a study of Novo Nordisk's Wegovy showed that overweight patients who slimmed down on the drug suffered 20% fewer strokes and cardiac events.

Traders dumped the stocks of firms that fight diabetes, liver disease, and other conditions for which weight is a factor. Even snack food stocks fell.

The selloffs were the inverse of gains enjoyed by Novo and Lilly, which have become the highest-valued pharma firms as they hustle to catch up with demand for their rival weight-loss drugs, which lead a category known as GLP-1 agonists.

Novo's Wegovy is a formulation of its diabetes drug Ozempic, while Lilly's Zepbound is the obesity version of its diabetes drug Mounjaro.

As its shares sank last year, ResMed addressed the worries about CPAP demand by examining its customers who also took GLP-1 drugs. At the J.P. Morgan healthcare conference this month, and again in Wednesday's earnings call, ResMed presented results from a retrospective comparison study of 530,000 CPAP users who did, or didn't, take GLP-1s.

ResMed says the patients on GLP-1s started CPAP therapy with 10% more frequency. And CPAP compliance increased with time. After one year, the GLP-1 patients reordered their CPAP breathing masks in 3% higher numbers, and 5% after two years.

"The fear was that it's going to get worse over time," said Farrell, of the GLP-1 impact. "It actually got better."

He guesses the sleep apnea patients who use GLP-1s are more motivated to improve their health, and therefore used CPAPs.

ResMed stock has recovered to a level where it is valued at 24-times the consensus forecast for earnings of $7.85 a share for the fiscal year ending June 2024 (per FactSet). But the company's observational study won't be the last word on GLP-1 implications.

In a few months, Lilly will report top-line results from a clinical trial called Surmount-OSA that is looking to see if Lilly's GLP-1 drug reduces episodes of disturbed breathing among sleep apnea patients. Unlike ResMed's retrospective, the Lilly trial is a prospective, randomly-controlled study. Whether a successful outcome will have the stock market impact of last August's cardiovascular study remains to be seen.

But this time, ResMed is trying to get ahead of events. It invited one of the Surmount-OSA investigators -- sleep medicine researcher Atul Malhotra -- on the company podcast. Malhotra, a professor at the University of California, San Diego, said he thinks the Lilly drug will indeed reduce apnea episodes. But Malhotra thinks that patients will continue their use of CPAPs.

Write to Bill Alpert at [email protected]

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

January 29, 2024 00:30 ET (05:30 GMT)

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