It's a beyond me too @Strawman. There are multiple events and trends converging on RMD which makes it very difficult to predict the future.

On one hand, it shouldn't be a surprise to anyone that an effective weight loss drug that reduces weight by 20% over a period of 12 months, will reduce the instances of sleep apnea for a good deal of people with the disease. It's also going to impact a lot of other diseases as well.

On the other hand, 85% of people with OSA go undiagnosed according to Eli Lilly. I can see a scenario where people go and get a OSA diagnosis to gain reimbursement on a weight loss drug, and at the same time get prescribed a PAP machine. The results does show that PAP + Tirzepatide work slightly better than Tirzepatide alone. And in this study it appears that most/all patients will still be highly encouraged to use a PAP machine after 12 months of treatment.

The latter will be certainly what RMD will be pushing. Last conference call, the CEO hit back with a study showing that patients on GLP-1 purchased more Resmed gear. It's a tailwind, not a headwind so goes the claim. (I'm very skeptical)

It's really easy to go either way -- bulls and bears both make a plausible case! The truth is probably somewhere in between.

@mushroompanda and @Strawman as an "$RMD Baggy" I'll share what I understand.

These are the kind of results that Mick Farrell addressed at the last earnings call in January, and $RMD have been anticipating for some time now that GLP-1 data will show positive results for OSA sufferers.

What their real world study (not a controlled clinical trial) found was that patients presenting for GLP-1 therapy were 10% more likely to commence on PAP therapy. Importantly, rather than seeing patients on GLP-1 therapy quit PAP therapy over time, they found that the resupply rate in the GLP-1 population was 300bps higher than in the non-GLP-1 population after 6 months.

Here's the relevant quote from the last earnings call:

"For patients who have been prescribed a GLP-1, there is an increase of 10% of the absolute percentage of patients that commence positive airway pressure therapy. So as an example, if you take a baseline of 75% of patients that commence PAP therapy after their prescription on average in a certain group, that would become 85% of those same patients who were on a GLP-1 that would commence positive airway pressure therapy. And by the way, the vast, vast majority of these GLP-1s are the latest generation medications. Another hypothesis about 6 months ago was that patients on GLP-1 therapy and PAP therapy would quit their PAP therapy, their CPAP or their APAP at a higher rate than the general population over time. The real world data, again, with a cohort of over 0.5 million patients shows the exact opposite. At t equals 12 months after therapy commencement on PAP, the delta from general PAP population to a PAP plus GLP-1 prescribed population shows an increase in the resupply rate of 300 basis points."

As @Strawman writes, there is a push and pull of various effects here. Surely, if the GLP-1 benefit is strong enough, then for that proportion of patients who benefit to a significanlty large extent you'd have to believe that some will quit the obtrusive PAP therapy. However, so far in aggregate, this isn't being observed. On the contrary, the evidence based on real world data as reported by $RMD appears to indicate that GLP-1 treatment appears to be driving CPAP continuation above the non-GLP1 population by 300bps.

If could be, as @mushroompanda observes, that although the AHI improvements are impressive (AHI score reductions of 50.7% in the moderate-to-severe cohort in real word conditions) they still move a moderate-to-severe cohort to still be in the zone of moderate symptoms, where PAP therapy is beneficial.

PAP-therapy isn't a silver bullet for severe sufferers, but pehaps PAP-therapy in combination with GLP-1 therapy is, so those who can afford both, or who can get reimbursed for both get the best improvement in quality of life.

As I am writing this, $RMD on the ASX has followed the US down over 5%, so the rollercoaster is going to continue. It will be interesting to hear what $RMD have to say at their earnings call in a week's time.

Personally, I'm going to continue to hold my current position, as so far despite the great news for GLP-1 and their benefits, there isn't any actual evidence of bad news for PAP.

If the % reductions in AHI were dramatically higher, then of course, that would be a cause for concern, and it will be important to keep an eye on the emerging studies,

There is also a further potential synergy. Although there aren't any clinical studies (as far as I am aware), there are some indications that patients with very high AHI results, suffer more sleep interruptions and as a result are more aware of the discomfort of the PAP treatment, and therefore more lilekly to discontinue. If the AHI scores for these patients are brought into a lower range and sleep interruptions are reduced, then this may be a factor that drivers PAP adhere and treatment continuation. These arguments have certainly been put forward by PAP bulls, but I haven't seen any clinical evidence to support it. Makes sense though.

This is a fascinating story, and I think it has some way to run. As soon as there is some evidence that taking a pill makes you less likely to get on or stay on PAP, then the thesis is broken and I'm a sell. But that evidence isn't there....yet.

I think that's the right approach @mikebrisy -- usually a good idea to let the data guide your thinking.

@mikebrisy sensible rationale imo

held

Great post @mikebrisy.

I'm also a "RMD Baggy", so the slur was a self depreciating one.

There are multiple events and trends converging on RMD which makes it very difficult to predict the future.

And at 30x earnings it continues being to rich for my blood. If someone asked me if I think CPAP machines will be in use in 10-15 years I'd say yes. But that's not what the share price is asking me. It's asking if I think all these new technologies will fall by the wayside and the growth trajectory remain in tact, and to that I would say that at best I don't know and probably no.

So what's the margin of safety here? This is basically a single product company selling something that is very expensive and "the least worst option". If one of these potential new techs comes out and even starts just peeling off market share at the periphery then permanent loss of capital is a front and centre risk given growth expectations implied in the price.

OTOH, what is the upside if all these new things are just furphies? I'm all for holding on to something because I think I'm right and the market is wrong, but I need risk asymmetry. This setup seems like a scenario of heads I win bragging rights and market returns and tails I lose a lot of money.