Medical-device makers ResMed and Inspire slump after Lilly's Zepbound trial shows benefits for sleep apnea

By Ciara Linnane

Analysts say some patients will still need CPAP treatment

Shares of medical-device makers ResMed Inc. and Inspire Medical Systems Inc. tumbled on Monday after Eli Lilly & Co. said it has applied for regulatory approval of its weight-loss drug Zepbound to include treatment of sleep apnea.

ResMed (RMD) is the maker of a popular continuous positive airway pressure, or CPAP, machine for people with sleep apnea. Inspire Medical (INSP) makes a mask-free device for sleep apnea patients that allows them to control their treatment from the palm of their hand.

ResMed's stock was down 12.5% to put it on track for its biggest one-day percentage decline in almost a year, according to Dow Jones Market Data. The last time the stock was down that much was Aug. 4, 2023, when it fell 18.5%.

Inspire was down 15.7%, putting it on track for its worst one-day selloff since it fell 33% on May 8.

The moves came after Lilly (LLY) said Friday that Zepbound sharply reduced the restriction or blocking of airflow in patients with obesity and obstructive sleep apnea or interrupted breathing during sleep.

That was based on new late-stage trial results released by Lilly and presented at the American Diabetes Association's annual scientific conference in Orlando, Fla.

Needham analysts said they expected only a near-term headwind for ResMed and that they viewed Monday's pullback as a buying opportunity.

ResMed "had previously noted that many of the patients in the study still have clinically relevant AHIs (apnea-hypopnea index) and continued to need CPAP treatment," said analysts led by Mike Matson.

"We now expect an average 0.6%, 1.2%, and 2.2% headwind to ResMed's revenue growth over the next three years in our Bull, Base, and Bear Cases, respectively," the analysts wrote.

Lilly's stock was up 0.9% on Monday.

-Ciara Linnane

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06-24-24 1126ET

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