Pinned straw:
Here are the updated stats on GLP-1 impact (slide deck is on the RMD website, not the ASX).
Resupply uplift at 1 and 2 years is remarkable, indicating this is not a short-term or transient effect.
Earnings Call re GLP-1 impact.
General Comment
"ResMed has been tracking the impact of GLP-1s through a de-identified patient analysis using an overlap of our data and third-party claims data. With another quarter of data analyzed, we are now up to an incredible N equals 660,000 subjects in our analysis. The bottom line is that the data show that GLP-1s are having a positive impact on patients seeking and adhering to positive airway pressure therapy. The latest numbers are an improvement from what we presented previously.
For patients prescribed a GLP-1 medication, the latest data show a 10.5% higher propensity to start positive airway pressure therapy over those not taking the drug. As we follow these patients longitudinally, the resupply rate at T equals 12 months is 310 basis points higher. That's $3.1 billion absolute basis percentage points higher for patients who have a GLP-1 prescription. And then at T equals 24 months, the resupply rate is 500 basis points so 5.0 absolute percentage points higher for patients who have a GLP-1 prescription. These data show clearly that these new GLP-1 pharmaceutical class is actually a tailwind for our ResMed business. bringing more patients and more motivated patients into the health care system."
Unknown Analyst
I really appreciate some of the updates that you guys have provided on the data front. And I think what stood out to me a lot with the last couple of updates was the 10%-plus type of increase that you're seeing in [ PAP ] rates for the GLP users? And then especially considering this isn't really even reflecting some of the likely marketing activity from pharma. So curious some of the factors that you think might be driving this correlation. And then maybe looking ahead, where this number could potentially go once we're actually seeing patients that are prescribed with under an OSA indication and diagnosed with OSA?
Michael Farrell
Yes, Brett, it's a really good question. It's quite a complex one, and I think it will play out over time. We've obviously got very strong quantitative data with the 660,000 subjects that we're following in that analysis. But we get a lot of anecdotal information from folks all the way from folks who are involved in the clinical research to frontline physicians through our network, and we positioned this across 140 countries. These new medications are primarily focused on the U.S. and Western Europe right now.
But as we watch -- our hypothesis, is that this new therapy is bringing people into the health care system who weren't previously there. They weren't choosing to go as frequently to their GP or their primary care physician. They are now seeing that PCP, that GP and now they are getting treated for not only their obesity, but now other chronic diseases. And we've seen this in other disease states from some of our peers here in medtech.
But yes, it's quite extraordinary to have 10.5% higher propensity to start positive airway pressure therapy. There are not many other factors recently in terms of innovations from biotech and pharma that we've seen that could drive this level. And so it is early days as those drugs are penetrated in the U.S., Western Europe and beyond. But we're watching it very closely.
I do think that these trillions of dollars worth of capital will bring -- lots of advertising will bring lots of patients into the funnel. And then our job will be to help those patients to find the best path to the best therapy and the best therapy is positive airway pressure therapy. And we're seeing that in these early days. And yes, I think as we move forward, we'll learn more, and we'll keep updating as we go every quarter on our flow of patients coming to the funnel, how we're seeing them and how we're taking care of them through our own demand gen through the demand gen that will be driven by this big pharma and one that we didn't get a question on that I talked about on my prepared remarks, they're on big tech.
I think the fact that there'll be wearables on tens of millions, maybe hundreds of millions of people's writs looking at oximetry, looking at nocturnal sleep, looking at nocturnal breathing and helping patients find out if they're not sleeping well, they're not breathing well. I think that might actually be a higher tidal wave than the big pharma tidal way. But we'll watch that as we move forward, and thanks for the question, Brett.
Lyanne Harrison
I might come back to the real-world data, Mick. Obviously, some good resupply improvements there, 300 basis points and 500 basis points. But is there anything you can share on the data or the trend for lower severity OSA patients, sort of the mild to moderate categories? And then also secondly, on the data, whether should we do this or a separate data set, what trend are you seeing in the percentage of patients who have ceased CPAP therapy as a result of weight loss drugs?
Michael Farrell
Yes. So it's a good question, Lyanne, and there are sort of multiple parts to it. I'll address it at a high level, which is to say, yes, look, the real-world data is excellent. It's the largest data set out there with over 660,000 patients that have been prescribed to GLP-1 and are on positive airway pressure therapy and we're really laser-focused on tracking that cohort very carefully. We can and will look to in the future, slice and dice it by AHI 5 to 15, 15 to 30, 30 plus. We'll look to slice and dice it by age, by gender, by geography and others.
A lot of that will be for our internal work so that we can we can best drive social media marketing and know which patients to go after. For instance, the public information out there is that women are using GLP-1s more than men, and they're more adherent to the GLP-1s than men are. The rate that people quit the GLP-1 therapy is a lot higher in men than women. And so we're tracking a lot of that information publicly, and we will, over time, release it.
We haven't seen at all a correlation to our information around people quitting PAP therapy because of a GLP-1. It just doesn't compute in the data we've got. It's the other way that it's a huge tailwind for people coming in. Look, when we see -- as we say, we get 87% adherence, we're very proud of that. For the 13% that don't get there, we look at all the reasons why, is it claustrophobia, is it insomnia where they have a psychological condition where they can't fall asleep and then they blame it on the CPAP mask when it's really a fact of a need to have treatment or their insomnia as well as or in parallel to or even before their OSA. So we're looking at all types of reasons for that.
But look, we'll continue to update you and the rest of the world as we do the slice and dice by AHI, by age, by gender, to find the best way to help patients find the best path to therapy. But right now, we're seeing a huge trend of more patients coming in, more motivated patients. And our challenge is to keep up with that and make sure that we can scale and help them get on that great digital health journey.
Negative
One negative - refuse to answer what the split out was between manafacturing efficiencies versus freight for the rebound in gross margin - so not sure whether that will rise further next quarter. Could also have been the new airsense that helped.
@Mujo agree these are impressive results.
On the revenue line, growth to PCP was only 7% (breakout shown in the table below). CEO Mick pointed out this was cycling a very strong PCP result, particularly in Europe and China. But the magic is in the cost of sales and operating expenses.
%Gross Margin was 57.9%, which follows 55.6% in Q2 and 54.4% in Q1, and up from 55.3% in PCP. So, it is a standout result and may - as you say - have an exceptional element to it. That said, Mick has been saying for over a year now that %GM will recover back to pre-pandemic levels over time (got up as high as 59.0% in 2019).
CFO Brett indicated that 4th Q %GM will be hit by 30-50 bps, due to Red Sea shipping disruptions. Mick pointed out that new products have helped, as well as working through some of the inventory from the high freight cost legacy of 9 and 12 months ago. Brett added that the result was due mainly to improved freight costs and manufactuing cost improvements. Overall, they see %GM continuing to improve through FY25.
On expenses, we got to see the benefit of last year's organisation restructuring. Operating Expenses only increased 0.3% to PCP, phenonemal give the current environment.
All this adds up to Operating Profit (PBIT) up 24.6% and GAAP Net Income up 29.2%, and up 27% on their preferred Non-GAAP measure.
But as @Mujo points out, they now have another quarter of data with now 660,000 customers on GLP-1s, and the data continues to support the claim that "Patients with an OSA diagnosis and prescribed a GLP-1 drug are 10.5% more likely to initiate PAP therapy" so Mick made the point that the huge marketing spend in the multi-trillion dollar GLP-1 industry, is actually going to drive more OSA sufferers into the CPAP funnel. If this is true and sustained, then GLP-1 is a hugh tailwind for $RMD, given that OSA is under-diagnosed and undertreated.
So, I agree, the facts are showing there is no substance to the bear thesis, and I think this is going to continue to dawn on the marketover time.
On the analyst questions, the Lynne Harrison question and answer @Mujo posted is a key one. I am not sure what to make of the fact that $RMD haven't yet published the splits according to differnt AHI segments. I am interested to know what the data is showing for AHIs 5-15. If these get a solid benefit from GLP-1s, is the benefit enough for them to discontinue CPAP? Hopefully we'll get to see that next time.
Bottom line: very good result and good to see such strong progress on gross margins and expense control, all the while launching new products.
Disc: Held in RL