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).
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”).
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