@Chagsy thanks for those points. I listened to Matt Brown on ABC. https://www.abc.net.au/news/2023-09-08/how-a-diabetes-drug-transformed-denmark%E2%80%99s-economy/102834318

"Inventors say most people stop after couple of years because lack of interest in food makes them miserable. A year after going off the drug, on average people lost two-thirds of the weight they lost."

This is a bit different to the physical side-effects. This is an emotional one that competes with the emotional drive to take the drug in the first place. The joy of food is core to many/most people.

This adds to your thesis that it will take a long time for a drug to emerge that can reduce this and other side-effects, get approval, and then volume and competition to have a realistic retail price.

Thanks @jayjayjayjay .

Appreciate the insight.

Very informative coming from a non clinical perspective.

This is going to fascinating as to how it pan out over the coming years

@StuMas63 I have not watched that doco but have heard of it. I rarely watch TV personally. I have read the book the Blue Zones some years ago and the summary you put is interesting. I am extremely interest in longevity, one because it is somewhat linked to my job but secondly I am fascinated by the human body and how it can equip us with everything we need if we manage it accordingly.

From an investment point of view the world is set up to make money out of everything including our health (me included). Over the past 40-50 years we have become extremely worse off in our health even though we have all the gadgets and resources available to us to improve our health. The idea of gyms (which we pay money to attend to exercise) and health foods would be laughed at by most of the blue zones in the world where the key to good health is community, movement, farmed and wild caught food, and a stress free environment all of which are conducive to a good sleep and a long and healthy life. We get those fundamentals right and I would short ResMed. But the world is set up in a way this won't ever happen in the Western World (soon to be in the developing world) and we rely on quick solutions like Ozempic which I guarantee (and have put my money where my mouth is) will not cause long term health. For this to occur we need the above things as per the Blue Zones.

I watched the Neflix show a couple of weeks back and it happened to coincide with a book I'm reading called metabolical. Link below

https://robertlustig.com/metabolical/

Processed food full of sugar is the root of all premature death. Us humans are generally lazy or too busy doing lots of stuff that's not necessarily good for a long life. So sleep issues will likely continue to rise before a very slow decline unless by some miracle the world takes heed of the Singaporians very soon.

The reason I've never invested in RMD is actually the machine itself. It looks a pain to use? I know a couple of people who spent alot and used it for a year or so then dumped it. I can't say I know the business model. Is there RR? is churn a problem?

@mikebrisy Your second paragraph is the key point to what I believe will occur.

thanks for sharing the additional data.

humans will naturally try things others are doing, like herd mentality. I do not see long term this being a great trend, I think people will trial it and stop. But that is not to say better drugs will come out. But unless a drug came out that built muscle which is probably the best way to live a shitty lifestyle and maintain a decent weight because your body will always prioritise maintaining muscle I don’t see any of these drugs benefiting a consumer long term. I also don’t see them being able to develop a drug of this kind.

hence why even if RMD devices were only for obese people I’d still back them to win in the long term. Sleep apnoea is an incredibly damaging thing for the body and as we know leads to some seriously chronic disease. I think this short thesis is the worst one I’ve ever seen, but could make a case as per my original post that maybe GPs will recommend this drug before a sleep study therefore only delaying the use of a c-pap device into the future.

The hype over these drugs really is crazy..

WSJ online front page "To Pay for Weight Loss Drugs, Some Take Second Jobs, Ring Up Credit-Card Debts" - Cost of Ozempic, Mounjaro Push Some to Take Second Jobs, Pile on Credit-Card Debt for Weight-Loss - WSJ

Each month Tina Marie Porter pays about $1,000 out of pocket for Mounjaro. To make up for the extra monthly expense, the 49-year-old director of operations takes on more assignments and seeks odd jobs.

Porter belongs to a growing population of people taking extra measures to cover the full or almost-full price of popular drugs used for weight loss, after their insurance denied them coverage. 

“It is life changing,” said Porter, 49, of Kansas City, Mo. “But I shouldn’t have to pay because my insurance won’t cover it. It is making me healthier. It makes no sense.”

Tina Marie Porter pays about $1,000 a month out-of-pocket for Mounjaro. PHOTO: TINA MARIE PORTER

Across the country, some consumers are paying $10,000 a year or more to get popular drugs from 

Eli Lilly & Co. and Novo Nordisk. Patients report taking on second jobs, racking up credit cards and cutting back on travel or family expenses to afford Lilly’s Mounjaro, a diabetes drug being used off-label for weight loss. They are also self paying for off-label use of Novo’s diabetes drug, Ozempic, and sister drug Wegovy, which is approved for weight loss. The willingness of consumers to pay thousands of dollars of their own money underscores the public’s appetite for more effective weight-loss medications, especially for people who have long struggled with obesity. The injectable medications can result in patients losing roughly more than 15% of their body weight.

Consumers are paying significant sums out of pocket in large part because insurers are denying coverage for weight loss. In addition, the drugmakers are charging the full list price of a drug instead of offering any of the discounts they give to health plans.

Insurers may deny coverage of weight-loss drugs or drugs that are used off-label for weight loss. 

Lilly and Novo didn’t comment on why they charge people list prices for their products when coverage is denied.

In Pittsburgh, Jordan Jones said she felt optimistic about her weight struggles when she heard about Ozempic. Then she found out her insurer wouldn’t cover the medication for off-label use. 

Jordan Jones says her insurance wouldn’t cover Ozempic for off-label use. PHOTO: JORDAN JONES

Her boyfriend is now working 12-hour shifts four days a week to pay for her $800 monthly supply. The couple is also cutting back on eating out, gas, groceries and alcohol, she said. 

“You would think it would be covered as preventive care,” said the 30-year-old who sells internet technology solutions. “I am lucky I can afford it out of pocket. I recognize my privilege. People want to feel healthy and they’ll get it any way they can.”

Jordan reduces part of her cost with a savings card from SingleCare, a prescription discount program.

Savings programs can offer some help to patients, if they qualify.

Advertisement - Scroll to Continue

Lilly had a savings program to help eligible, commercially insured adults with a diabetes diagnosis obtain Mounjaro if their insurance didn’t cover the medication. That program expired June 30. Patients with commercial insurance who don’t have coverage for Mounjaro might be able to re-enroll in an amended version of the program.

Lilly is hoping to get FDA approval of the drug for weight loss by the end of the year. 

Novo also offers a coupon for patients who don’t have insurance coverage for Wegovy or who pay cash for prescriptions, with savings of $500 off full retail price. The company, however, doesn’t offer discounts for Ozempic for off-label use. 

Even when patients get discounts, they often still have hundreds to pay out of pocket.

Many commercial health plans and federal programs such as Medicare won’t cover the drugs in part because they are viewed as lifestyle medications rather than lifesaving medications that treat the chronic disease of obesity. 

Only 43% of health-plan sponsors cover FDA-approved weight-loss drugs, according to a June report by Pharmaceutical Strategies Group, a pharmacy intelligence and technology company. 

Many commercial health plans and Medicare won’t cover drugs for weight loss because they are viewed as lifestyle medications. PHOTO: MARGARET ALBAUGH FOR THE WALL STREET JOURNAL

Federal statute excludes coverage of anti-obesity medications in traditional Medicare, putting them largely out of reach for many of the roughly 65 million people on the program. Almost 42% of people ages 60 and older are obese, according to the Centers for Disease Control and Prevention. 

Drugmakers are lobbying Congress to change the 20-year statute that bars Medicare from covering weight-loss medication. A bipartisan group of lawmakers in July reintroduced the Treat and Reduce Obesity Act that would enable coverage. 

Nicole Ferreira, a spokeswoman for Novo Nordisk, said Congress created the Medicare Part D drug benefit in 2003 when the medical community’s understanding of obesity was in its infancy. Science has advanced since then, she said. 

For Barbara Clements, 70, of Orlando, Fla., the lack of coverage from Medicare is costing her about $1,000 a month for her Mounjaro prescription. The retired small-business owner says the cost is more than her monthly Social Security check. She and her wife clip coupons, ask for senior rates, and take buses instead of cabs. 

“It is an investment because in the long run it will save me money and it will save Medicare money by improving the quality of my life,” she said. “But I resent it. I see other people getting it covered and people selling it on the black market.”

Diabetes drugs could become an effective way to treat behavioral issues and addiction. WSJ’s Daniela Hernandez breaks down the science on how they work and how they could change psychiatry forever. Photo illustration: Elizabeth Smelov

New research shows the medications have other health benefits. Wegovy cut the risk of cardiovascular events such as heart attack and stroke by 20%, in a study of people who are obese or overweight.

Lower-income people who have higher risks for obesity might be left behind because they can’t as easily afford to pay out of pocket. Medicaid, a program for low-income and disabled Americans, covers some of the newer weight-loss drugs in only about a dozen states, including Pennsylvania and California. 

States have the option, but aren’t required to cover anti-obesity medication, according to the Centers for Medicare and Medicaid Services. The Social Security Act as it applies to the Medicaid program says that states may exclude or restrict coverage of drugs used for weight loss.

“From a historical perspective, people pretended obesity wasn’t really a medical condition, so a lot of prescription drug plans won’t cover it,” said Ted Kyle, former chair of the Obesity Action Coalition, a nonprofit representing individuals affected by the disease of obesity.

Great, you’re working extra hours just to be able to afford to lose weight, but at what cost to other aspects of your health and well-being?

FWIW - just to uncover some of the opposing view - UBS's Global Research and Evidence Lab have (yesterday) downgraded ResMed from Buy to Neutral

The full report runs some 37 pages but the following is from the first page summary

GLP-1 headwind sees us downgrade to Neutral

The GLP-1 thesis has taken hold

We are downgrading RMD shares from Buy to Neutral. The stock is down 28% since FY23 results, more than our DCF analysis suggests for a gross margin miss of 64bps. The GLP-1 / weight loss thesis has now become firmly rooted in the RMD story. We previously outlined high-level potential revenue exposure "What if people with sleep apnea start taking weight loss drugs?" and now review the GLP-1 literature, concluding that Lilly's SURMOUNT-OSA trial is likely to succeed in 1H 2024 triggering better US access and estimate c.14% volume headwind for RMD's Sleep business by the 2030s. We have lowered our LT sales growth rates from mid- to low- single digits and our DCF-based PT falls from USD265 to USD170. We think the shares reflect assumptions close to ours and our PT sees only modest upside. USD170 would see the shares on 24x FY25 core EPS, well below the c.30x we argued for prior, but RMD is starting to lap strong FY23 growth and at c.11% FY24-28E CAGR, the stock no longer looks exceptional on growth vs US peers. Our conservative stance on FY24E gross margin puts us below consensus but we do not think near term consensus downgrades will be the dominant narrative

Existing data point towards meaningful benefit from newer GLP-1s in OSA

Most OSA is linked to excess body weight. Lilly is testing Mounjaro (20%+ weight loss in trials), in OSA. We think CPAP will still be used to provide immediate relief so impact is later, when patients no longer need masks or new devices. If SURMOUNT-OSA works, we think Medicare Part D should be able to reimburse, (weight loss is not covered for now) and assuming coverage in other channels similar to weight loss drug Wegovy, we arrive at c.14% LT volume loss for RMD plus additional US payer burden of c.USD4bn. We see negative read for FPH (covered by Marcus Curley) and second order impact for others in the value chain e.g. distributors (AHCO, OMI, covered by Kevin Caliendo)

Risk is probably to the upside but we expect short term volatility

Our PT reflects our best estimates for GLP-1 uptake but RMD will probably look to act, so there could be upside. We outlined prior a scenario where c.300bps of improvement in diagnosis rates could offset topline headwinds. The company could focus on other aspects of its business e.g. COPD patients. We also note that at a hypothetical net debt/ EBITDA ceiling of 3x at end FY24E, we estimate RMD could deploy c.USD4.4b externally

Valuation: DCF-based price target of USD170 (from USD265)

We value RMD shares using DCF(WACC 7.3%). Our near term estimates are unchanged, but cuts to our long term revenue growth rates see high single digit / double digit downgrades to EBIT in the outer years of model. We have cut our TG from 3.5% to 2.5% to reflect what now looks like a more mature market in in the long term

Something UBS covers in more detail further into the report is ...

The problem is probably not Ozempic, but Mounjaro

"Ozempic" has quickly become a byword for GLP-1s used for weight loss, but we think the real problem is probably going to be Lilly's Mounjaro (tirzepatide). In clinical trials Mounjaro has delivered the best weight reduction of the marketed GLP-1s (c.22%) and Lilly is running the phase III SURMOUNT-OSA trial (NCT05412004) in non-diabetic people with obesity and obstructive sleep apnea. The trial will look at OSA patients both using and not using PAP and we expect a top line read out in 2Q 2024

By testing tirzepatide for OSA specifically and getting it on the label if it is successful, market access will likely become easier and ensure it is used over competitors in this population, particularly in the US, which is both the largest single market for many drugs, and ResMed's largest single market (67%, FY24 top line, UBSe) 

Magic Pills - How New Weight Loss Drugs are Changing Society and the Stock Market - YouTube [Aug 31, 2023]

Plain Text: https://www.youtube.com/watch?v=rxrPzTJvd2s

Forager Funds Podcast: Stocks Neat: Show Notes: "In the latest episode of Stocks Neat, Steve and Gareth discuss the recent news surrounding the GLP-1 inhibitor drugs taking the world - and stock markets - by storm. Originally used to treat Type-2 diabetes, clinical trials have shown GLP-1 drugs may be highly effective in causing weight loss. While the most common form of the drug requires regular injections, Steve believes that the forthcoming oral version could be a "game changer" for the future of health. But are GLP-1's really a magic pill for weight loss? And how do we think about the future of portfolio companies like ResMed or Viva Leisure in light of this news? Listen to the podcast to find out."

Disclosure: I like RMD and have held them previously, but not now, or recently. I have also held FOR (FOR.asx is the Forager Australian Shares Fund) in prior years, but not holding them currently. Regardless, this podcast is good, and I found it quite interesting and informative.

UBS have released a follow on update to their downgrade to Neutral report on RMD from a few days ago

Downgrade feedback: The skinny

Our thesis is different

The most consistent feedback we have had to our downgrade of ResMed shares to Neutral earlier this week is that our more bearish view has different roots than some who are negative on the stock, in two ways. 1) We argue most newly diagnosed OSA patients will get a CPAP device on top of a GLP-1 (if the patient is going to get a GLP-1), because giving immediate relief is a priority. This means the upfront cost for payers would be for both interventions (i.e. even more expensive than GLP-1 alone) and the problem for ResMed comes later when these patients stop using masks / do not get a new machine. Most investors we have spoken with agreed this makes sense; some suggested that for those with milder OSA, perhaps GLP-1 alone will be preferred. We think further investigation of this idea is warranted. 2) We argue there are options to solve for what happens when initial weight loss comes to an end (we assume c.2yrs), to manage rebound weight gain. In particular we suggest that as some older and less potent GLP-1s lose exclusivity (1-4 years) we could see maintenance studies with cheaper generics

Long term vs short term - what drives the stock?

Some investors have argued the share price represents an overreaction to a very long term issue and that the stock has overlooked near term earnings power that could drive a re-rating. Our view is that either long or short term views can drive a stock but which dominates is a function of timing and the path from fuzziness to clarity. To us ResMed is notable (although not unique, see US Med Tech analyst Danielle Antalffy's note) among healthcare companies, for the extent to which it is trading around long term views (we think the near term multiple is reasonable). We think as more data on individual applications for weight loss drugs come to light, and the market view converges more (if it does), the stock stands a greater chance of returning to trading on near to mid term dynamics. This could take time: GLP-1 newsflow is not due to stop soon

What are GLP-1 users telling us?

Our conversations since May have revealed a surprising (to us) number of anecdotes from OSA sufferers and GLP-1 users. This is hardly an unbiased sample, but the narrative has consistently been one of weight loss that allows the user to enjoy the same social life, but with far better ability to stop eating part way through a large meal. We have not met anyone discontinuing due to AEs and think the differences between discontinuation rates in trials vs real world are well discussed, as in other areas of medicine 

DISC: small position now held in RL & SM

Macquarie - $32.60

 Recent share price performance: RMD's share price has declined by 26% over the past three months, driven primarily by multiple de-rating (29.5x to 21.1x). This implies a 20% premium to the XJI (10-year average of 60%). We see this as driven by concerns relating to the impacts of GLP-1 receptor agonists (RA) on the long-term growth outlook for RMD.

• Linking GLP-1 RA and OSA: GLP-1 RA have been approved for chronic weight management, with clinical trial results showing significant weight reductions. The relationship between weight loss and AHI reduction (a measure of OSA severity) has been well documented. ~60% of moderateto-severe adult OSA cases are attributable to obesity. As such, the uptake of GLP-1 RA has the potential to reduce the number of patients with OSA, impacting growth for RMD. However, we note significant weight regain following withdrawal from GLP-1 RA treatment as well a number of side effects and potential safety concerns.

• What it could mean for RMD: Our previous forecasts assumed device growth of ~6% p.a. to FY33, with ~8% growth for masks/accessories. Our revised forecasts assume ~50% uptake of GLP-1 RA in relevant OSA patients to FY33, with ~35% of patients continuing therapy (as per realworld data). This reduces device and mask/accessories growth by ~1% p.a. to FY33 (~5% and ~7%, respectively), providing a DCF valuation of A $32.60. We estimate the current share price as implying device growth of ~2% p.a to FY33, with mask/accessories growth of ~4% p.a. 

Retain Outperform. The current share price implies material uptake and continuation of GLP-1 RA treatment to FY33. With real-world data showing high levels of discontinuation and weight regain, we see the potential impact on OSA patient populations and growth for RMD as overstated.

Assessing GLP-1 implications

• We review the potential implications of the approval and utilisation of GLP-1 receptor agonists (RA) on the obstructive sleep apnea (OSA) market and growth for RMD. Key takeaways

• Patients regain weight once GLP-1 RA treatment ceases: Clinical trials for Saxenda and Wegovy (Novo Nordisk) showed weight reductions of -4.9% to -16.0% for patients treated with GLP-1 RA. However, real world data shows reduced adherence and increased discontinuation of treatment over time. The STEP-1 extension study (Wegovy) showed that patients regained ~2/3 of body weight in the 52 weeks following withdrawal from treatment (net weight loss of -5.6% vs -17.3% while on treatment). As such, we see ongoing treatment as required in order for weight loss to be sustained.

• GLP-1 RA are high cost, with a number of side effects: In the US, the list price for GLP-1 RA ranges from ~US$900 to ~US$1,350 per patient per month (no current CMS/ government reimbursement). GLP-1 also have a range of side effects (mostly GI related) and are currently being reviewed by the European Medicines Agency (EMA) for potential risks relating to thyroid cancer as well as suicidal thoughts.

• Linking obesity and OSA: The relationship between weight loss and apnea-hypopnea index (AHI) reduction has been documented in a number of studies. This was also evident in the 2016 SCALE Sleep Apnoea Study which demonstrated a relationship between weight loss and improvements in OSA patients when treated with GLP-1 RA liraglutide (Novo Nodisk). We would expect similar results from the Phase 3 SURMOUNT-OSA trial assessing tirzepatide (Eli Lilly) for the treatment of moderate-to-severe OSA in patients with obesity (trial completion expected in Mar-24).

• Estimating the impact of GLP-1 RA on OSA growth: It has been estimated that ~58% of moderate-to-severe adult OSA cases are attributable to excess weight or obesity. Combined with assumptions in relation to potential uptake and continuation of GLP-1 RA treatment, we use this data to estimate potential impacts on growth for OSA patient populations. Compared to our previous baseline assumptions for device and mask accessories growth (~6% p.a. and ~8% p.a. to FY33, respectively), we calculate: ⇒ A scenario which assumes ~50% uptake of GLP-1 RA by FY33 and ~50% continuation of treatment would reduce device and mask/accessories growth by ~1.5% p.a. to FY33, providing a valuation of A$31.50 (-13% below our prior valuation of A$36.50). ⇒ The current share price implies device growth of ~2% p.a. to FY33, with mask/ accessories growth of ~4% p.a. (both ~4% below our previous baseline assumptions). Further, we estimate this to imply ~75% uptake of GLP-1 RA by FY33, with 75% of patients continuing therapy.

• Revised assumptions: Within our revised forecasts, we assume ~50% uptake of GLP-1 RA with ~35% of patients continuing therapy (in line with real-world data). This reduces device and mask/accessories growth by ~1% p.a. over FY24-33 (~5% and ~7%, respectively) and provides a revised DCF valuation/target price of A$32.60 (-11% vs our previous valuation).

• Key takeaway: The uptake of GLP-1 RA treatment has the potential to reduce OSA severity/the number of patients with OSA, impacting device and mask/accessories growth for RMD. This is captured within our revised forecasts. Looking ahead, we await further data in relation to uptake of GLP-1 RA, weight loss changes for those who discontinue treatment as well as potential side effects/safety from long-term use. In the nearer-term, we see the earnings growth outlook for RMD as attractive (EPS growth of ~13% p.a. to FY26), with the current PE premium to the ASX200 Industrials around 10-year lows. 

@Mujo thanks for posting. This is one of the better analyses I have seen so far on the issue. Some of the other broker notes don’t really get into attempting to quantify the impact based on the published science, whereas Macquarie have had a decent attempt at this.

Of course, inevitably there are still a lot of assumptions, but I think this provides a solid basis for a “wait and see what the data shows over time” approach, with clear support that the reaction to date is overdone. So I remain firmly in that camp.

Disc: Held in RL

The downtrend has been more severe and unabated than I expected - I thought we would see a lot more buying and some sort of a recovery by now. The current price seems far too attractive to pass up, so I'm in the market again looking to add.

I think Macquarie’s view on the uptake of GLP-1 RA and and the potential impact to device and mask/accessories growth for Resmed sounds reasonable. I think the market has overreacted and there is potentially a 20%-30% upside within the next 12 months.

However, the share price has been a falling knife and it is tricky knowing when to buy. Looking at the MACD it appears the panic selling might be starting to ease as the MACD line has now crossed up over the Signal line. It is still very weak, but it appears to be flattening. A more positive buy sign will be when the MACD lines trends upwards toward the zero line and then into positive territory. This might be a safer time to buy if you agree with Macquarie’s thesis.

Disc: Added IRL today in post market trade

Resmed Short Selling & MACD

Between April and September this year the ResMed share price was subject to short selling with total shares shorted rising from 0.5% to 2.5%.

However, since the 18th August the level of short selling has steadied to approx 2.6%.

The MACD line has remained above the signal line since the beginning of September and is trending upwards very slowly. This trend is still very weak (see below).

I could be wrong, but I think the selling pressure is starting to ease on Resmed shares.

My view is that Ozempic will not be a silver bullet cure for sleep apnea. Many of the friends and relatives I know with sleep apnea are not obese. I also find it hard to believe Ozempic will solve the global obesity problem in the long-term.

Resmed is a quality business, consistently averaging a return on equity (ROE) of 20% (for over 10 years) while reinvesting approx 70% of its earnings into growth.

I haven’t owned Resmed before and with the PE down to around 24, I think this is a unique opportunity to build a solid position in a proven growth stock.

Disc: Accumulating IRL (1.6%), SM (7.2%).

It’s worth adding that after some 18 months “on allocation” production for AirSense-10 has only in the last Q been ramped up to be able to meet demand. The new (and higher margin) product AirSense-11 remains on-allocation, which means demand for units exceeds their ability to produce, so they are having to decide which customers to serve.

The next Q result which reports in a few weeks will be interesting. Highly likely that volumes remain strong and the question is where %GMs are headed, as we are overdue the start of trending back to historical levels.

In terms of long term drivers there are as many bull as bear arguments, and so I think no-one really knows. My decisions are going to be driven by the delivery numbers of the actual business.

Last night I gave a seminar on supply chain management and use cases for blockchain, which are continuing to grow. Doesn’t mean I’m selling $WTC, even though you could develop a plausible short thesis that blockchain will completely render Cargowise redundant in 5-10 years.

I guess that’s what makes a market.

Disc: $RMD and $WTC held in RL

I have to agree with you there @Rick that many Sleep Apnea sufferers do NOT have weight issues. My sister has very severe sleep apnea and she is thin - no fat on her at all. During one of my hip operations when I was meeting with the anaesthetist, he said that in his experience people with large tongues tended to have sleep apnea and that in his experience was a more significant factor than their weight. For the record, I have mild to moderate sleep apnea myself (and I am overweight and apparently also have a larger-than-normal tongue) and I do not use any device to help me sleep, although I do often wake up very tired in the morning - usually late morning because I work late and go to bed late. I have tried to use a CPAP device a few years ago and could not sleep with it because I do toss and turn and roll over multiple times in the night.

I don't think there's a significant bear case for ResMed based on new weight loss drugs coming to market. My own bear case, or the reason why I will pass on buying ResMed, is just around the inconvenience that many people experience with using CPAP and similar machines, the intrusiveness of the experience and the way it limits sleep habits. I feel that there are a significant group of people who are using ResMed devices because they do work, but are not entirely happy with them, because of the inconvenience of the way they work, and will always be searching for viable alternatives that are less intrusive and easier to use. ResMed might be the company that provides those alternatives and benefits from that switch, but I don't know that, and I feel they could be easily disrupted in the future.

@mikebrisy raised a good point in relation to WTC and Blockchain this morning - any possible disruption isn't going to happen in the next year or three - and I would agree with that also in relation to ResMed - they have more demand than they can currently supply - so they're absolutely flying right now. I still think their future is less clear than some others tend to think it will be.

I think Strawman could be part blame for your lack of sleep @Bear77! But please don’t start going to bed too early because we’d miss your valuable contributions too much (a little selfish I know!) :)

I guess Resmed is a good example of what potential disruption can do to the share price of any business we own. In Resmed’s case I think it will take a few years to find out what the real consequences will be. I don’t think anyone can call this right now with any degree of certainty. My hunch is that Ozempic will not be a miracle cure for sleep apnea. However, I could be completely wrong and Resmed could turn out to be another ‘Blackberry’!. I’m happy to build a position of up to 2% IRL (knowing there is a potential risk) and see what happens from here. I’ll be watching revenue and earnings growth like a hawk from here.

In the AFR today

Why Hamish Tadgell just bought back into ResMed

It basically tells us nothing we aren't already aware of... but yet another part of the self reinforcing narrative :)

For those outside the paywall this is the relevant part ...

Hamish Tadgell is portfolio manager of SG Hiscock’s High Conviction Fund based in Melbourne that manages $2.5 billion in assets

You recently bought back into ResMed. What do you like about the stock and do you think the concerns about obesity drugs are overblown?

It is a company we have owned in the past but not for a while. With the stock having fallen about 30 per cent on the back of concerns that obesity drugs pose an increasing competitive threat, we think the risk-reward looks much more compelling

It’s important to recognise Glucagon Like Peptide (GLP-1) drugs have been around for a while and have not been considered efficacious enough to see commercial take-up and be reimbursed for weight loss. New trials are seeking to show greater clinical benefit from using GLP-1 drugs in reducing the risk of major cardiovascular events and OSA (obstructive sleep apnoea)

There is still a huge amount of uncertainty around the potential clinical adoption, cost-benefit and commercial take-up of GLP-1 drugs and whether they will allow patients to stop using CPAP machines, and if so, how many

The share price reaction for ResMed implies that these drugs will have material uptake and reduce the long-term addressable market for CPAP. This is providing an opportunity to buy a high-quality business at a discount to its longer-term fundamental value

DISC: Small position held in RL & SM

I thought I’d ask my uncle what his thoughts were on Resmed. I respect his views because he has been investing for a very long time and has done exceptionally well.

He has owned RMD since 2015, he has sleep apnea and uses a CPAP machine even though he underweight for his height.

His thoughts below:

Resmed are in our holdings and the share price tumble does not seem justified given their recent financial report.

The threat from Ozempic could be an over reaction if that is the case for the share price decline. 

There are possible side effects from Ozempic and the treatment may not suit all people.

Not everyone who has sleep apnea are obese, if I take myself as an example.

 Other risks I see with Resmed are:

Classified as a one technology company though there are many companies such as Cochlear fit into this category.

The technology is becoming mature with minor upgrades in the past 8 years.

A number of other established global players.

Philips are re-entering the market after a product recall.

China is now manufacturing Sleep apnea machines into the Western market including Australia at a lower price.

The China effect could be concerning. Many of those needing a CPAP machine could be those on a government pension and eligible for a government funded machines.

Take hearing aids for example. Free government supplied hearing aids are cost driven.

New technology such as implantable stimulation devices??

Potential for litigation and there is some reference to this in the recent report.

In saying all of the above I have not sold any shares in Resmed as I started buying in 2015.

Cheers,

Rick