ResMed/RMD
Headlines
The big clinical trial of GLP-1s (miracle weight loss drugs) into their effect on heart health is out.
Recall that this was one of the big “overhangs” to ResMed, with the fear being that GLP-1s are good for “all that ails you”, and the more things they fix, the less complementary ResMed’s products look (and indeed, the more outright substitutes they become).
Detail
The below is a good summary of the excitement (recall how Novo Nordisk lit up the market with that August announcement).
…..and, it worked. But. The 20% is real, across most patient cohorts. But.
For every 100 patients in the trial, the drug did not show any reduction in cardiovascular events, nothing for 98.5 of them, despite taking the drug for 3 years, at an enormous cost. The 20% reduction is for those in the 1.5 per 100 part.
So, what’s the point. Isn’t it good that the drug does something. Isn’t that progress, however incremental. Well, yes, absolutely. But the RMD share price was cut in half. That’s quite different.
The detail above is at the least a mild suggestion that ResMed won’t see a proportionate collapse in TAM just yet.
Restated; the market had run hard with the idea that GLP-1s are “good for all that ails you” in whatever forms that takes. Since CPAP is also good for helping you with comorbidities, people extrapolated out GLP1s as a substitute rather than a complement.
And so, we continue to own RMD (having bought just below $25) thinking that RMD has many years of growth ahead of it, which is quite a reasonable outlook for a stock on 19x forward earnings. We see the GLP-1s as more likely to bring people “into the funnel” (e.g. the sales pipeline, by patients going to see their doctor to get the drugs, and the doctors says “glad your here, let’s also treat that sleep apnea”).
Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.
This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.
Please note that past performance is not a reliable indicator of future performance.
General Advice Warning: This document has been prepared without taking into account your objectives, financial situation or needs, and therefore you should consider its appropriateness, having regard to your objectives, financial situation and needs. Before making any decision about whether to acquire a financial product, you should obtain and read the relevant Product Disclosure Statement (PDS) or Investor Directed Portfolio Service Guide (IDPS Guide) and consider talking to a financial adviser.
Taxation warning: Any taxation considerations are general and based on present taxation laws and may be subject to change. Aequitas is not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and investors should seek tax advice from a registered tax agent or a registered tax (financial) adviser if they intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.