ResMed shares hit as Eli Lilly’s weight loss drug demonstrates sleep apnoea benefits

Medical device maker ResMed (ASX: RMD) saw its shares tumble more than 13% after pharmaceutical rival Eli Lilly announced that its weight-loss drug Zepbound (tirzepatide) could also help resolve sleep apnoea in some patients.

California-based ResMed is a giant in the sleep apnoea space, manufacturing face masks, nasal devices and continuous positive airway pressure (PAP) machines to treat the condition.

Last week, Eli threatened to shake up the company’s place in the market when it announced that Zepbound could sharply reduce the restriction or blocking of airflow in patients with obesity and obstructive sleep apnoea (OSA), or interrupted breathing during sleep.

Severity reduction

Obesity can often be an underlying cause of sleep apnoea and the advent of weight-loss drugs such as Zepbound and Ozempic (semaglutide) have triggered concerns that an effective obesity treatment could shrink the number of patients needing ResMed’s solutions.

Results from Eli’s most recent clinical trial indicated Zepbound could be effective at reducing the severity of sleep apnoea without the need for the types of traditional face masks developed by ResMed.

Zepbound could also help lower biomarkers related to sleep apnoea including oxygen desaturation, blood pressure and C-reactive proteins.

A year after the trial, up to 51.5% of participants met the criteria for “disease resolution” while up to 63% experienced a reduction in night-time sleep apnoea events.

Based on the positive trial data, Eli said it planned to submit authorisation requests to the US Food and Drug Administration and other global regulatory bodies for the expanded use of Zepbound for sleep apnoea and obstructive sleep apnoea.

Overstated impact

Despite the share price plunge, some analysts have kept ResMed amongst their top picks globally, suggesting that the promise of weight-loss drugs as a sleep apnoea cure has been overstated.

“We think widespread adoption of these drugs will take some time, given their higher cost, limited supply and risk of side effects,” said one analyst.

“Obesity is also just one risk factor for sleep apnoea… sleep apnoea patients who experience weight loss may still be considered obese and, in most cases, would likely still benefit from a sleep device.”

Solid fundamentals

Research firm Morningstar also believes the potential for weight-loss drugs to greatly impact ResMed has been exaggerated.

“We think these drugs will continue to have little to no impact on ResMed in the near term,” it said.

“ResMed is still delivering really strong top-line growth and we think what’s more likely is that the market will realise these drugs will take some time to be widely adopted and for that to flow through into ResMed’s financials.”

Gold standard

ResMed chief medical officer Dr Carlos Nunez cautioned against the use of weight-loss drugs as a sole treatment for sleep apnoea.

“Although anti-obesity medications like tirzepatide are poised to assist many in managing their weight, including those who also have OSA, the role of PAP therapy remains central to the management of this important and often overlooked condition,” he said.

“It is important to note that [Eli’s] trial did not directly compare PAP therapy, either alone or in combination, with tirzepatide [and] it is crucial to remember that PAP therapy continues to be the gold standard which has been shown to reduce a patient’s apnoea-hypopnea index by an average of 86%.”