ResMed Inc.

ASX:RMD

ResMed Inc.

ASX:RMD
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$32.96 (+0.6%)
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Forum Topics RMD RMD Bull Case

Pinned straw:
nerdag
Last edited 7 months ago

Much has been written on GLP1 agonists being the nail in Resmed's coffin, and many here (myself included) think that this is premature.

I went digging for some medical evidence to see if I could shoot my thoughts down. 

TL:DR - Whilst GLP agonists reduce weight, it won't be enough to make an outsized dent to Resmed's business model.

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GLP1 agonists seem to help people lose between 4-17% weight loss - with numbers of 4-6% for people with diabetes (more likely to be in Resmed's target group).

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9063254/

If any weight loss intervention is destroy Resmed's business, a person needs to 1) lose enough weight and 2) sustain the weight loss.

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7874406/

A 10% weight reduction at 1 year (picked as it's the number/duration quoted in many GLP1 studies), results in remission of OSA for 13% of people. 

That's still 87% who don't remit. 

And whilst important, weight loss alone doesn't account for sustained improvement in OSA. See the 10 year data in the link above.

If we look at weight loss in bariatric surgery, a more drastic intervention than in the above paper, the data show that 72% manage to keep >20% weight off at 10 years.

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5112115/

These weight loss numbers from bariatric surgery are likely to be far more impressive in terms of magnitude and durability than for GLP1 agonists.

Weight loss by bariatric surgery cures a lot of OSA, but not all of it.

https://bmcresnotes.biomedcentral.com/articles/10.1186/s13104-018-3484-5

In fact 45% of people had OSA that did not improve at all following bariatric surgery. So it isn't purely a weight related condition.

So what is the take home message here?

GLP1 agonists will absolutely have a role in reducing obesity, and with it OSA. But they won't single handedly cure obesity or OSA and the magnitude of the clinical effect isn't going to be as big as the market seems to be anticipating. Almost certainly not enough to justify a 30% drop in value over the last 3 months.

I'll be buying more Resmed.

Disc: Held, and buying more.
Remorhaz
7 months ago

More "confirmation bias" :) for us for both RMD & CSL - this time in a Livewire post by Mark Gardner from MPC Markets

Why it's time to focus on healthcare stocks, not weight loss miracles


11
thunderhead
7 months ago

New intra-day low today, so it has given back all of the gains from the recent rally.

Buyers are in violent argument with the market here. Never a comfortable position to be in.

19
Solvetheriddle
7 months ago

its can be dangerous to compare situations that are tenuous at best, but that wont stop me here!, since i have been watching the US market closely there are quite a few examples of wide fluctuations in stocks that in hindsight appear ridiculous or that stretch market credibility,

for eg, (these are massive mkt cap stocks) (SP changes)

NVDA--$326--oh no its business is disintegrating due to bitcoin --(down to) $120---wait now theres AI --(back up to) $470

GOOGL--$150---GOOGL knows nothing about AI--$87---wait maybe they do $140

META--$326--wait AAPl changes, metaverse spend, tik tok--$90----decides to cut costs --$324

these moves were over 18 months, and there are quite a few similar instances.

the point is the SP and mkt cap moves were huge, and clearly overreactions, that gives me some confidence that, at times, the market goes into lala land.....i blame momentum trading


28
thunderhead
7 months ago

That’s the flip side. Some of the most stomach-churning buys also turn out to be the best, but there are at least twice as many examples of companies that continue to be in protracted downtrends leading into some sort of long stupor or terminal decline. Judging the quality and prospects of a business is paramount in that scenario - is the reason behind the price action temporary or permanent (or cyclical v/s structural, as Strawman likes to put it)?

18
Mujo
7 months ago

I think it's in for a tough time with so many hedge funds probably doing a pairs trade - long Nova Nordisk and Eli Lilly and short others. When they over there'll be snapback but these bubbles can go for months.

17
nerdag
7 months ago

No doubt it's going to get worse before it gets better.

There's plenty of hype and excitement about GLP1 agonists, a lot of which is justified.

The error that Mr Market is making here is assuming the outcomes are mutually exclusive, i.e., that success for GLP1 agonists = failure for Resmed.

My view is that they aren't mutually exclusive, and I suspect Resmed will show in good time that it's sales won't be meaningfully affected at all.

19