INSP - ResMed upgraded at JPMorgan; says GLP-1 threat overdone
2023-10-09 15:19:52 ET
JPMorgan upgraded the respiratory device maker ResMed ( NYSE: RMD ) to Overweight from Neutral on Monday, arguing that the newer class of weight loss drugs called GLP-1 agonists will have only a modest impact on the company.
Analyst David Low argues that the dual-listed ResMed ( RMD ) has come under pressure over the last three months as investors recognized the impact of those drugs, marketed by the likes of Novo Nordisk ( NVO ) and Eli Lilly ( LLY ), on the company's sleep apnoea franchise.
While Low expects clinicians to start prescribing obesity drugs to treat sleep apnoea by FY25, he notes that "the impact on ResMed should initially be modest," without an immediate transition given the current supply issues and high cost of these drugs.
Despite rising popularity, Medicare has yet to cover weight loss therapies, even after Danish drugmaker Novo ( NVO ) highlighted that its weight loss drug Wegovy generated cardiovascular benefits in a large Phase 3 trial in August.
However, "in the medium term, the management of obesity-related obstructive sleep apnoea (OSA) is likely to change, impacting demand for CPAP devices and masks," Low wrote, noting historically poor adherence rates in the CPAP market and the attractiveness of a regular injection.
He slashes his price target on RMD to $170 from $210 per share after reducing the sales forecast for the company's CPAP/ mask devices and the stock's terminal growth rate in a DCF-based valuation.
ResMed's ( RMD ) rivals in the sleep care market include Philips ( PHG ), Inspire Medical Systems ( INSP ), and Owens & Minor ( OMI ).
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ResMed upgraded at JPMorgan; says GLP-1 threat overdone