RMD -3.09%: Reported quarterly results in the US on Friday that were solid on first pass, though the market has latched onto a weaking trend from organic sales which overshadowed the strong financial performance;
- Overall sales of $1.28bn were broadly inline with the $1.27bn expected.
- A better operational performance drove an earnings beat, with earnings per share (EPS) of $2.43 up 29% year on year and nicely ahead of consensus for $2.32
RMD continue to ‘talk up’ the positive impacts of ‘wellness’ which would improve demand for their sleep products, however, there remain question marks over the impact of weight loss drugs on longer term demand, particularly given Eli Lilly recently won FDA approval for its drug, Zepbound, as a treatment for sleep apnea while will likely lead to Medicare reimbursement for Zepbound in patients with obstructive sleep apnea.
The company, though, says the new class of drugs is complementary to treatment with a ResMed mask and while some patients might have their sleep apnea resolved with Zepbound or Novo Nordisk’s Wegovy, it’s only a small number. UBS supports that view, upgrading RMD from Neutral to Buy, believing that the market is placing too much emphasis on the negatives of GLP-1’s, and not enough on the positives, with GLP-1 usage actually driving demand for RMD masks in the medium to long term.
MM is neutral on RMD around all-time highs
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