(Bloomberg) — A new kind of weight-loss drug being tested as a cure-all for everything from knee replacements to liver disease continues to roil the stock market.
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Late Friday, shares in makers of devices to treat sleep-related disorders shook the market again with data on tirzepatide, a compound sold by Eli Lilly & Co. under the names Maunjaro and Zepbound. The data showed that Lilly’s blockbuster weight-loss and diabetes drug reduced the severity of obstructive sleep apnea in obese patients.
Shares of ResMed Inc., which makes breathing machines known as CPAP machines, fell about 11% on Monday, its steepest drop in more than 10 months. Inspire Medical Systems Inc., which makes sleep apnea implants, fell 17% to its lowest since November. AdaptHealth Inc., a home medical equipment provider that sells sleep therapy supplies, fell 8.1%, its biggest drop since December.
The results, presented at the American Diabetes Association meeting, were hailed as “a landmark trial in the history of obesity and sleep apnea treatment,” according to Louis Aronne, an obesity specialist at Weill Cornell Medicine.
Pressure on medical device makers is growing as data piles up showing just how far-reaching the effects of weight-loss drugs are on obesity-related conditions.The recent share price declines are an echo of a year ago, when diabetes device makers such as Insulet Inc. and Tandem Diabetes Care Inc. plummeted on concerns that blockbuster GLP-1 drugs would upend the industry and wreak havoc on sales.Insulet Inc. is down about 26% through 2023, while Tandem Inc. is down 34%.
Analysts at Citigroup downgraded ResMed to neutral from buy, writing that the latest results point to “the risk that some patients with mild symptoms will discontinue CPAP therapy over time.”
Meanwhile, Truist Securities sees the impact of Inspire’s weight loss as lasting. “Inspire will likely remain a competitive (and volatile) stock in the coming months, at least until investors become confident that occupancy rates will return to a sustainable growth trajectory through 2024 and 2025,” analyst Richard Newitter wrote.
Early results from Lilly’s trial were released in April, and investors were bracing for the impact as the full story became clear. Stifel analyst Jonathan D. Block said the new data raises more questions than it answers for device makers.
Lilly’s “excellent results further encourage sleep physicians to make GLP-1 a more integral part of their treatment paradigm,” Block wrote in the memo.
(Updated at closing price.)
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