The mask and the pill
Weight-loss drugs, smartwatches and a sleep apnoea pill are all reaching the patients ResMed treats. We expect the first two to send more people into ResMed's funnel than the pill takes out of it, and the FDA's decision on the pill in February 2027 is the first test.
One of us booked a home sleep study through a ResMed store after a stretch of poor sleep, and had not known until then that ResMed did sleep studies at all. The store felt like a retail shop on a main street. The study needed a GP referral, a sleep coach explained how to fit the recording device at home, and the results came back without a hospital visit. Most people know ResMed for its machines and masks, and in Australia ResMed runs the diagnosis step as well.
What ResMed does
Sleep apnoea is a condition in which the airway closes over and over during sleep, cutting off breathing for seconds at a time. ResMed makes the standard treatment, a CPAP machine that blows air through a mask to hold the airway open overnight, and patients replace their masks and parts regularly, so a patient who sticks with CPAP keeps buying from ResMed for years after the machine.
Why diagnosis matters
Sleep apnoea mostly goes undiagnosed until something else sends a patient to a doctor. People rarely suspect their sleep when they struggle to lose weight or a blood test shows low testosterone, and those problems usually lead to a sleep study only after a doctor has ruled out other causes.
Diagnosis is the narrow point in that path, so every new route into a doctor's office is a possible route into a sleep study, and a patient diagnosed with moderate to severe sleep apnoea is usually offered CPAP first.
What changes
Four changes are reaching ResMed's patients over the same two years.
- Smartwatches now screen for sleep apnoea, and Apple received US clearance for sleep apnoea notifications on its watch in September 2024, which puts a screening alert on millions of wrists while a sleep study still makes the diagnosis.
- Weight-loss drugs now treat sleep apnoea directly, and the FDA approved tirzepatide (Zepbound) for moderate to severe sleep apnoea in adults with obesity in December 2024.
- Apnimed's AD109, a nightly pill combining aroxybutynin and atomoxetine, is under FDA review, with a target decision date of 28 February 2027.
- Philips recalled millions of its CPAP machines in 2021 and is barred from selling new ones in the US under a court consent decree entered in April 2024, and Philips has not confirmed a date for its return to the US market.
How we expect each to land
The smartwatch alerts and the weight-loss drugs both bring people into care. A patient on tirzepatide sees a doctor regularly, and a doctor managing weight and blood sugar is more likely to order a sleep study. ResMed reported that patients on a GLP-1 drug started CPAP at an 11% higher rate than other patients, though ResMed drew the figure from its own data and patients who take GLP-1 drugs are already engaged with their health, so the comparison flatters the drugs. The direction matches how most patients reach a sleep study, through a doctor looking at something else.
Weight loss reduces sleep apnoea severity, and some moderate patients will fall into the mild range, where a mask is harder to justify. Weight loss leaves the jaw and airway shape that cause many cases unchanged, so many patients will still need a machine after losing weight.
The pill is the closest substitute for the mask, and in the SynAIRgy trial 21.2% of patients on AD109 stopped because of side effects, against 3.1% on placebo, which points to a drug that suits some patients well and others poorly. We expect the FDA to approve it, with most of its use among milder cases and among people who will not use a mask, and with CPAP still the standard treatment for moderate to severe cases. Many of the people who refuse a mask today are untreated, so a pill that reaches them takes fewer patients from ResMed than it first appears.
Philips competes for the same patients with the same kind of machine, so its return affects ResMed's prices and market share without changing whether patients choose a mask.
ResMed reported revenue of about US$5.65 billion for the 2026 financial year, up 10%, and revenue in the fourth quarter grew 9% to a record US$1.5 billion, so revenue kept growing through the first full financial year after tirzepatide was approved for sleep apnoea.
We give ResMed a reception score of 24 out of 30.
Where our view could be wrong
- The pill could be approved with a broad label and tolerable side effects in practice, and take moderate patients as well as mild ones.
- Oral weight-loss drugs could lower cost and spread faster than expected, pushing many moderate patients into the mild range at once.
- Philips could return sooner and compete hard on price in the US, where most ResMed revenue is earned.
- Payers could tighten coverage, because large trials (including SAVE, published in 2016) did not show that CPAP reduces heart attacks and strokes, which weakens the case for paying for masks over decades.
- A device maker that also runs sleep studies may draw scrutiny from regulators or doctors in Australia as the store model grows.
What to watch
- We predict the FDA will approve AD109 and CPAP will stay the standard treatment for moderate to severe cases, and the decision is due by 28 February 2027.
- ResMed's US device sales in the quarters after that decision are the clearest public measure of new patients starting CPAP.
- Mask and accessory resupply shows whether the patients who start CPAP keep using it once the first few months have passed.
- A confirmed date for Philips to return to US sleep apnoea sales would show how soon prices come under pressure.
- Independent data on whether GLP-1 patients are diagnosed with sleep apnoea and start CPAP at higher rates would test the funnel directly.
What would change our view
We would lower the score if AD109 is approved for moderate to severe patients without a tolerability warning, or if ResMed's US device sales, the clearest public measure of new patients starting CPAP, grow below mid single digits for two quarters after the decision. We would raise the score if independent data confirm that weight-loss drug users start CPAP at higher rates.