Inspire rises, ResMed slips as Street digests data from Lilly sleep apnea trials

Shares of sleep apnea device makers ResMed (RMD) and Inspire Medical (INSP) are moving in opposite directions after Eli Lilly (LLY) announced topline results of the SURMOUNT-OSA Phase 3 clinical trials, showing tirzepatide injection significantly reduced the apnea-hypopnea index, or AHI, compared to placebo, achieving the primary endpoints of the studies. After initially moving into negative territory, Inspire Medical has gained as much as 6% on Wednesday as several Wall Street firms say they view the news as positive for the company, removing an overhang for the shares.

SLEEP APNEA TRIAL: Eli Lilly announced topline results of the SURMOUNT-OSA phase 3 clinical trials that showed tirzepatide injection significantly reduced AHI compared to placebo, achieving the primary endpoints. Percentage change in AHI was a key secondary endpoint in both studies. AHI records the number of times a person’s breathing shows a restricted or complete block of airflow per hour of sleep and is used to evaluate the severity of obstructive sleep apnea, or OSA, and the effectiveness of treatment outcomes. Tirzepatide is the only approved GIP and GLP-1 treatment for chronic weight management, commercialized as Zepbound in the U.S. and Mounjaro in some global markets outside the U.S. SURMOUNT-OSA Study 1 evaluated tirzepatide in adults with moderate-to-severe OSA and obesity who were not on positive airway pressure, or PAP, therapy for 52 weeks.

POSITIVE FOR INSPIRE: JPMorgan recommends buying shares of Inspire Medical on initial weakness following Eli Lilly’s results of SURMOUNT-OSA, which evaluated the use of tirzepatide in obstructive sleep apnea. The firm says that to argue for tirzepatide replacing obstructive sleep apnea therapy like CPAP machines or Inspire, the non-positive airway pressure arm reduction of 50.7% is the right metric to use. This came in at the low end of expectations, which is a win for Inspire, contends JPMorgan. The firm does not see a 50.7% reduction as sufficient to replace CPAP or Inspire, saying tirzepatide could be used alongside these therapies to treat sleep apnea. It believes Lilly’s data clears an overhang for Inspire Medical shares and allows investors to return to focusing on the Q1 fundamentals, which it thinks “should be good.” JPMorgan has an Overweight rating on Inspire Medical.

Morgan Stanley also views Eli Lilly’s results as “a small net-positive” for Inspire Medical over the long-run, with the hypoglossal nerve stimulator, or HGNS, therapy patient funnel likely expanding thanks to weight-loss benefits. The firm, which says it appreciates that SURMOUNT-OSA “has been a large overhang on shares for some time,” thinks that while this result “should begin to eliminate the bear thesis,” shorter-term patient funnel trends will likely be the core focus assuming tirzepatide obtains the obstructive sleep apnea, or OSA, label. Morgan Stanley has an Overweight rating and $250 price target on Inspire shares.

Also commenting on the news, KeyBanc notes that Eli Lilly’s headline results from its SURMOUNT-OSA trial appear directionally in line with its expectations and may ultimately be viewed as a bit of a relief for Inspire Medical once investors fully understand moving pieces from the study. For Inspire Medical, KeyBanc believes the average patient from the SURMOUNT-OSA study would likely still be a potential candidate, as a 55% reduction in AHI implies an endpoint of about 23 – which would be categorized as moderate OSA. Additionally, the firm believes almost half of the patients in the study could actually be moving into Inspire Medical’s TAM, as an average starting BMI of 38.8 means many would not have otherwise qualified for surgery. 

For ResMed, KeyBanc thinks the headline results are a bit more mixed as the firm would have expected to see a greater reduction in AHI for patients using a combination of PAP therapy and Tirzepatide.

PRICE ACTION: In morning trading, shares of Inspire Medical have gained about 5% to $232.56, while ResMed’s stock has dropped more than 5% to $175.37.