ResMed (RMD) and Inspire Medical Systems (INSP) stocks took a significant hit on Monday following Eli Lilly’s (LLY) announcement that its weight-loss drug successfully reduced sleep apnea events in obese individuals.
According to Eli Lilly, their drug, tirzepatide, showed promising results with 43% of patients experiencing complete resolution of sleep apnea after a year of treatment. This compares to a 51.5% resolution rate in patients using ResMed’s CPAP (continuous positive airway pressure) machines, as reported by Needham analyst Mike Matson.
Despite these advancements, analysts believe there remains a significant market for CPAP machines and Inspire implants, which address obstructive sleep apnea—a condition where breathing temporarily stops during sleep. Although tirzepatide reduced nighttime sleep apnea events by 55% to 63%, ResMed points out that many patients still experienced enough events to necessitate continued CPAP usage. Additionally, William Blair analyst Margaret Kaczor Andrew highlighted that most doctors consider the combination of weight-loss drugs and CPAP machines to be the optimal treatment for patients.
“The impact on the CPAP market may be minimal, potentially increasing the number of undiagnosed patients seeking treatment,” Kaczor Andrew stated in her report.
In the stock market, ResMed shares plummeted 11.5% to 182.20, nearing its 200-day moving average, while Inspire Medical Systems saw a 16.5% drop to 135.74. Conversely, Eli Lilly’s stock experienced a minor increase, rising less than 1% to 890.11.
A Modest Impact on ResMed Stock
Needham’s Matson predicts a modest short-term impact on ResMed’s revenue due to tirzepatide’s performance. Initially, he estimated the drug would reduce nighttime sleep apnea events by 40% to 50%, but the actual reduction was higher. However, Matson’s expectations for disease resolution were slightly above Lilly’s study results, forecasting 50% to 60% resolution compared to the 43% to 51.5% observed.
Matson now anticipates that a smaller percentage of patients will discontinue CPAP use following tirzepatide treatment. “We foresee a 0.6%, 1.2%, and 2.2% headwind to ResMed’s revenue growth over the next three years in our bull, base, and bear scenarios, respectively,” he noted, maintaining a buy rating on ResMed stock.
Inspire Medical Systems Reaches Seven-Month Low
Evercore ISI analyst Vijay Kumar pointed out that Lilly’s study focused on patients with a body mass index (BMI) of at least 30, with most patients having BMIs around 40. This subset represents about 30% of the broader sleep apnea population.
Kumar emphasized that the effectiveness of tirzepatide is not immediate, a crucial consideration for patients deciding whether to discontinue CPAP use. Inspire Medical Systems highlighted during their recent first-quarter earnings call that patients with obesity typically have sleep apnea due to lateral wall collapse, a condition unsuitable for their device designed for tongue base collapse.
“The critical issue is whether prescribing doctors will differentiate between these conditions,” Kumar explained.
Inspire Medical Systems’ stock dropped to its lowest level since November, while ResMed’s stock remained within a prolonged consolidation phase, with a buy point at 243.52.
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