ResMed Inc. (NYSE: RMD) reported strong growth in the sleep apnea market during its fiscal fourth quarter, despite the rise of GLP-1 medications, which treat conditions that could cause sleep apnea.
That bodes well for home medical equipment (HME) companies with sleep therapy service lines, as GLP-1s have grown to be a potential concern over the last 12 months or so.
“Our global ResMed team executed incredibly well in our fourth quarter, producing another strong period of growth and execution across our business,” Michael Farrell, ResMed’s CEO, said during a Q4 2024 earnings call earlier this month.
Farrell added that the demand for ResMed’s flow generators, particularly the AirSense 11 platform, grew 6% globally.
The company reported quarterly revenue of $1.22 billion, a 9% year-over-year increase, with a significant 15% growth in its masks and accessories segment. For the full fiscal year, ResMed reported $4.69 billion in revenue.
Brett Sandercock, ResMed’s CFO, attributed the company’ gross margin increase of 59.1% in Q4 to manufacturing cost improvements, though it was offset partially by increased freight costs.
“We continue to monitor the freight cost headwinds arising from the Middle East conflict and congestion in Asian ports,” he said on the call. “We expect increased freight cost rates will continue to impact our gross margin in fiscal year 2025.”
San Diego-based ResMed operates in more than 140 countries, employing around 10,000 people. The company’s business focuses on three key areas: sleep apnea, respiratory care and software as a service (SaaS).
ResMed’s revenue is diversified across three primary segments: devices, which accounts for 52% of its revenue; masks and other products, contributing 35%; and SaaS, which makes up 13% of its total revenue.
A significant part of ResMed’s growth strategy is its focus on the underpenetrated sleep apnea market.
The company is leveraging its digital health ecosystem, which includes digital health platforms like AirView and myAir, to enhance patient engagement and adherence to therapy, Farrell said.
“We aspire to be the digital health concierge for each person as they pursue their personal journey to better sleep, better breathing and better residential care,” he said.
Increased utilization of GLP-1s
Although it stands to reason that the increased use of GLP-1 medications, used to treat obesity and diabetes, might diminish the market for sleep apnea treatments, Farrell said the increased use of GLP-1s will bring many new people “into the health-care funnel.”
“We believe this will open them up to treating other chronic diseases that they may suffer from, including increased awareness of sleep apnea, ultimately driving new patients into diagnosis and treatment pathways that they may not have previously considered or been treated for,” he said.
Indeed, ResMed conducted a study of 811,000 de-identified patients that supports this view. The analysis shows that patients prescribed GLP-1 drugs are 10.7 percentage points more likely to start positive airway pressure (PAP) therapy compared to those not on GLP-1s.
“The emphasis on GLP-1 medications and increased focus by big pharma has put a spotlight on sleep apnea like never before,” Farrell said, adding that these patients are not only more likely to start therapy, but also show higher adherence rates over time, making GLP-1s a significant tailwind for the company.
