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ASX:RMD
Resmed CDI
Investment Summary
The fund managers believe that ResMed (RMD) is well-positioned in the market despite concerns surrounding GLP-1 weight loss drugs. In their opinion, improvements in gross margin and earnings have reiterated the company’s ability to adapt and innovate amidst competitive pressures. They note that recent data suggests that GLP-1 therapies may be complimentary rather than competitive to CPAP devices, enhancing the demand for ResMed’s products. Furthermore, the company’s focus on digital health and new product launches, such as the AirSense 11 platform and new mask designs, showcases its commitment to improving patient care. While there have been fluctuations in share price, driven by market fears around competing therapies, fund managers concur that ResMed's current valuation remains attractive, trading at a discount to its historical P/E ratio. They anticipate positive growth propelled by ongoing health trends and the company’s strong market position supported by brand trust, especially in light of competitors’ struggles post-recall.
Commentary From The Managers
Endeavor Asset Management
28 Feb 2025
$37.12
- Endeavor Asset Management sold their investment in ResMed (RMD).
- In 2023, ResMed shares faced a sharp sell-off due to exaggerated market concerns regarding weight loss drugs.
- Endeavor re-entered ResMed in November 2023 at $24.30 per share.
- They added to their position around $28 per share.
- As market fears eased, ResMed shares appreciated steadily over the following 12 months.
- Endeavor exited their position over the past two months at an average price of $39.50 per share.
Blackwattle Investment Partners
31 Oct 2024
$36.92
- ResMed (RMD) remains the fund’s largest active position.
- Strong sales and earnings growth are reported, countering market concerns about GLP drugs.
- New patient activations are driving double-digit revenue growth.
- The "razor and blade" model is supported by re-supply as well as new patients.
- AirSense 11 platform is progressing well, with expected improvement in gross margin as production scales.
- Launch of the new mask, N30i, features a proprietary fabric-wrapped system for enhanced comfort.
- RMD’s price-to-earnings multiple is at a 10% discount to its ten-year average, slightly above CBA.
Blackwattle Investment Partners
31 Aug 2024
$36.01
- Blackwattle Investment Partners continues to hold a positive view on Resmed (RMD), reflecting their recent strong performance.
- Resmed reported a remarkable +10% revenue growth and a +38% increase in income for the 12 months to 2024, alleviating market concerns.
- Notable performance included Resmed’s stock rising +11% following Q4 2024 results.
- Mask growth was strong at +15%, attributed to software-driven resupply initiatives and the successful launch of the AirFit F40.
- There has been an acceleration in patient inflows to the sleep channel, as individuals seeking obesity treatments (GLP-1 drugs) are also diagnosed with diabetes and sleep apnea.
- CEO Michael Farrell noted a positive correlation between GLP-1 prescriptions and adherence to positive airway pressure therapy, with a 10.7 percentage points higher propensity for patients prescribed GLP-1 medications to start PAP therapy.
Endeavor Asset Management
31 Aug 2024
$36.01
- ResMed Inc (RMD) experienced a 10% increase in share price after reporting an expanded gross margin of 3.3% YoY.
- Gross margin improved to 59.1% due to cost optimisation, scale benefits, and an advantageous product sales mix.
- Management aims for gross margin to reach approximately 60% in FY25.
- Endeavor Asset Management continues to hold due to ResMed's ambition to evolve into a digital health business, leveraging data analytics and trends in consumer wearables.
- Expectations for earnings multiples to expand as concerns around GLP-1 anti-obesity drugs diminish.
- Current FY25 P/E ratio is 25x, with a target of ~30x, aligning with historical averages over the last 5 years.
Blackwattle Investment Partners
31 July 2024
$32.49
- Blackwattle Investment Partners maintains an overweight position in ResMed (RMD.AX), contributing positively to performance in July.
- This marks a reversal from the previous month where ResMed was a significant detractor due to concerns regarding GLP-1 drugs.
- Current evidence suggests that GLP-1 drugs are not a mortal threat to ResMed's sleep apnoea devices.
- Key countervailing factors include benefits from combined weight loss treatment and increased sleep apnoea testing.
- The side effects and temporary nature of GLP-1 drugs do not pose a significant risk.
- ResMed’s FY24 results showed continued revenue growth of 11% and improved gross margins.
- This performance supports Blackwattle Investment Partners' thesis regarding ResMed’s resilience against existential threats.
Endeavor Asset Management
30 June 2024
$28.60
- Endeavor Asset Management notes that Resmed's share price fell by 7% in June due to increased negative sentiment related to competing alternative products in the sleep apnea market.
- Competitors have been actively trying to penetrate the same market, contributing to market pressure.
- Specific competitor clinical trial data was released that negatively impacted RMD's share price, although this information was previously disclosed.
- Despite these challenges, Endeavor Asset Management continues to hold RMD.
Blackwattle Investment Partners
30 June 2024
$28.60
- ResMed (-7%) detracted from fund performance.
- Sold off after Eli Lilly released results on GLP-1 drugs, showing a 63% reduction in the apnoea hypopnea index (AHI).
- Initial impressions suggest GLP-1 could resolve AHI, impacting CPAP demand.
- A closer look shows a significant portion of trial patients still have moderate AHI.
- Post-study discussions indicate moderate AHI will still require intervention, likely through a mix of GLP-1 and CPAP therapy.
- Feedback from physicians suggests side effects like nausea and diarrhea complicate GLP prophylaxis compliance.
- Weight loss trends tied to GLP treatments are often temporary without lifestyle changes.
- Increased rates of bariatric surgery noted due to complications from GLPs, as mentioned by Medibank.
- Demand for CPAP remains robust, with patients prescribed both GLP treatment and CPAP for combined benefits.
- Blackwattle Investment Partners continues to hold because of the enduring demand for CPAP.
Endeavor Asset Management
31 May 2024
$31.40
- Endeavor Asset Management notes ResMed's share price decreased by 4.4% in May.
- The company reported a stronger-than-expected gross profit margin.
- Investor sentiment was weighed down by concerns regarding GLP-1 and competing drugs for OSA treatment (e.g., Apnimed's AD109).
- Despite short-term challenges, ResMed is well-positioned to benefit from long-term trends in the healthcare sector.
- The company continues to innovate in its product offering.
- Endeavor Asset Management remains optimistic about ResMed’s fundamentals and potential for growth.
Endeavor Asset Management
30 Apr 2024
$32.85
- Endeavor Asset Management highlights that Resmed (RMD) was the Portfolio's second largest contributor during April.
- The share price increased by 9.0% following a stronger than expected gross profit margin, improving by ~240bps versus previous comparable period (pcp) and ~120bps versus consensus.
- This improvement resulted in a +10% beat to consensus earnings per share (EPS).
- Throughout the remainder of April, the share price strength persisted as concerns regarding the effect of GLP-1 transitioned from competitive to being viewed as complimentary.
- Endeavor Asset Management continues to hold Resmed based on these developments.
Blackwattle Investment Partners
30 Apr 2024
$32.85
- ResMed (+10% in the month) remains the funds top active position, contributing to outperformance.
- ResMed delivered a result that was above market expectations, alleviating concerns over GLP drugs.
- Considered one of the most innovative medical equipment providers globally under Michael Farrell's leadership.
- Cloud connectivity now spans 25m devices, providing data to payers and enhancing user experience.
- Digitally enabled resupply programs support distributors and improve efficiency.
- Market leader in sleep apnoea treatment, facing less competition due to rivals stumbling.
- GLP threat turned into an opportunity, with an accelerating patient funnel for CPAP diagnosis.
- Profitability is improving due to easing freight inflation and transition to the new Airsense 11 platform.
- Airsense 11 offers enhanced features like personal therapy and care check-in, developed over several years.
- Valuation has de-rated from 44x forward EPS in 2021 to 20x in 2023, with a current forward PE of 24x.
- This valuation remains attractive relative to ASX Industrials, given ResMed's superior returns on capital and strong cash flow.
- Tailwinds include an aging population and rising obesity rates, despite the introduction of GLP drugs.
- Benign competitive landscape expected as it will take years for competitors like Philips to rebuild trust after recalls.
- Brand trust is crucial for CPAP products, especially given the conservative nature of sleep physicians.
Blackwattle Investment Partners
31 Mar 2024
$29.24
- Blackwattle Investment Partners continues to hold a long position in ResMed (RMD.AX).
- The stock's performance has significantly contributed to the fund's outperformance in the Health Care sector.
- Recent sell-off was driven by concerns over GLP-1 weight-loss drugs impacting the demand for ResMed’s CPAP devices.
- The market is beginning to recognize the enduring need for ResMed’s products.
- Combination of weight loss and CPAP use is viewed as beneficial for managing obstructive sleep apnoea (OSA).
- ResMed benefits from a benign competitive environment due to Phillips being under FDA consent decree.
Blackwattle Investment Partners
31 Mar 2024
$29.24
- RMD was the largest positive contributor to performance during the month.
- RMD rose 13% in March, as the stock continues to climb the wall of worry.
- Concerns regarding the potential impact of GLP-1 class of drugs are being addressed.
- Support came from competitor Fisher & Paykel Healthcare, which showed no impact from GLP-1 drugs.
- Upcoming GLP-1/OSA study (SURMOUNT) from Eli Lilly in May is expected to provide further clarity.
- Expectations that GLP-1 and CPAP treatment in combination will show benefits, contrary to initial market assumptions.
- Blackwattle Investment Partners continues to hold its position, anticipating positive developments.
L1 Capital
31 Jan 2024
$29.20
- Resmed shares rose by +15% in January after a Q2 earnings report showed better-than-expected gross margin improvement.
- Concerns over GLP-1 weight loss drugs affecting the market were alleviated.
- Resmed is a key player in manufacturing CPAP machines and masks for sleep apnoea treatment.
- L1 Capital established its position in September 2023, after reviewing insights from over 20 sleep physicians and distributors.
- Consultations indicated manageable impacts from GLP-1 weight loss drugs and suggested the stock was over-sold.
- Attendance at the JP Morgan conference unveiled Resmed's analysis, which aligned with L1 Capital's views on GLP-1's impact.
- Despite a recent share price rally, Resmed shares trade at over a 20% discount to historic average forward P/E.
Blackwattle Investment Partners
31 Jan 2024
$29.20
- Resmed rose 15% in January, significantly contributing to performance during the month.
- Strong Dec Q results reinforced the company's ability to grow earnings consistently.
- Resmed demonstrated that patients using both GLP-1 and CPAP benefit from combined therapy.
- Key competitor, Philips (PHG EU), continues to struggle due to US recall issues.
- This supports Blackwattle Investment Partners' view that Resmed will maintain higher market share levels in the US.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
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