ResMed and Inspire Medical Stocks Plunge After Eli Lilly’s Positive Zepbound Data; Citi Lowers Ratings
ResMed (RMD) and Inspire Medical Systems (INSP) stocks fell dramatically in early Monday trading. This sharp drop was due to Eli Lilly's positive clinical trial results for their new drug, Zepbound (tirzepatide), aimed at treating obstructive sleep apnea (OSA).
What is Zepbound?
Zepbound is a medication developed by Eli Lilly. It's also known as tirzepatide. In recent Phase III clinical trials, it showed a significant reduction in the severity of obstructive sleep apnea (OSA) in adults who are obese.
OSA is a serious sleep disorder where breathing repeatedly stops and starts during sleep. It can cause severe health problems if not treated.
Key Trial Results
The trials were conducted in multiple centers and involved randomized, double-blind, and placebo-controlled studies. This means participants were randomly assigned to different groups, neither the doctors nor the participants knew who was receiving the real drug versus a placebo (a dummy treatment).
The primary objective was to show that tirzepatide is better than the placebo in reducing the apnea-hypopnea index (AHI), which measures the severity of OSA.
- Study 1: Included obese adults with OSA not using positive airway pressure (PAP) therapy.
- Study 2: Included obese adults with OSA who were using PAP therapy.
In these trials, participants were given either a maximum tolerated dose of tirzepatide (10mg or 15mg) or a placebo. The results showed that tirzepatide reduced the apnea-hypopnea index (AHI) by up to 62.8%, which means around 30 fewer breathing interruptions per hour of sleep.
Additionally, complete disease resolution was observed in:
- 43% of participants in Study 1
- 51.5% of participants in Study 2
Impact on ResMed and Inspire Medical Systems
Following these promising results, Citi analysts downgraded RMD stock from a Buy to a Neutral rating. This contributed to a steep decline in RMD's stock price by 9.4%.
“Given the GLP-1 dose escalation period of about 20 weeks, we estimate CPAP therapy will continue to be prescribed along with GLP-1s, at least initially,” noted Citi analysts. CPAP therapy here refers to continuous positive airway pressure devices used to manage OSA.
Furthermore, Citi predicts a slow rebalancing of the CPAP device market over several years, with rival Philips expected to regain around 20% market share, half of which may come at ResMed's expense.
Meanwhile, analysts at Stifel maintained a Hold rating on INSP stock but warned that the situation remains challenging. They cut their price target for INSP from $210 to $170.
What Does This Mean?
For those unfamiliar with the technical terms:
- Phase III clinical trials: These are large studies to confirm the effectiveness and safety of a drug.
- Double-blind study: Neither participants nor researchers know who is receiving the real treatment.
- Placebo: A dummy treatment used to compare the effects of the real drug.
These developments indicate that Eli Lilly's new drug could change the way obstructive sleep apnea is treated, impacting existing medical device companies like ResMed and Inspire Medical Systems.
