Eli Lilly’s Obesity Drug Milestone Sends ResMed to 52-Week Lows as PBM Coverage Expands

GLP-1 Access Milestone Triggers Fresh Sell-Off

ResMed Inc. (RMD) is facing a sharp intraday decline of 3.87%, with shares tumbling to $195.55 during Friday’s session. This move represents a significant divergence from the broader market, as the S&P 500 (SPY) remains in positive territory with a 0.29% gain. The primary catalyst for today’s underperformance is a major announcement from Eli Lilly (LLY) regarding its obesity medication portfolio, including Zepbound and the newly launched Foundayo. Late Thursday, Eli Lilly confirmed that all three of the nation’s largest pharmacy benefit managers (PBMs) have agreed to cover its full suite of obesity treatments. For ResMed, which dominates the market for Continuous Positive Airway Pressure (CPAP) machines, this news is a direct threat. Expanded PBM coverage effectively removes the primary barrier to entry for millions of patients who might otherwise have been prescribed a ResMed device to manage obstructive sleep apnea (OSA).

The market’s reaction today underscores a growing consensus that the "GLP-1 threat" is no longer a distant theoretical risk but a present-day headwind. Clinical data from the SURMOUNT-OSA trials previously demonstrated that tirzepatide (the active ingredient in Zepbound) could reduce the severity of sleep apnea by up to 62.8%, with nearly half of the participants achieving complete disease resolution. With PBMs now opening the floodgates for coverage, investors are pricing in a faster-than-expected erosion of the CPAP patient funnel. While ResMed management has argued that weight-loss drugs could actually increase the diagnosis rate by bringing more people into the healthcare system, the immediate market sentiment remains focused on the potential for "disease resolution" to cannibalize long-term device demand.

Sector Context and Competitive Pressures

The weakness in ResMed is also being exacerbated by a shifting competitive landscape within the medical equipment sector. While ResMed has enjoyed a period of near-monopoly in the U.S. following the massive 2021 recall of Philips Respironics (PHG) devices, that window of uncontested growth is closing. Recent reports indicate that Philips is making steady progress on its regulatory path back to the U.S. market, with international sales already showing double-digit growth in the first quarter of 2026. As Philips prepares for a potential U.S. re-entry between 2026 and 2028, ResMed faces the prospect of fighting a two-front war: defending its market share against a resurgent Philips while simultaneously battling the pharmaceutical industry for the "first-line" treatment of OSA.

Peer comparisons further highlight ResMed's current struggle. While other healthcare equipment providers like Boston Scientific and Medtronic have shown resilience in 2026, ResMed has been caught in a persistent downward trend, falling roughly 22% year-to-date. The divergence is particularly stark when compared to the broader healthcare sector, which has benefited from a rotation into defensive, high-margin stocks. ResMed’s high margins—currently sitting at a non-GAAP gross margin of 62.3%—are now being viewed through the lens of potential pricing pressure. If Philips returns to the U.S. market with aggressive pricing to regain lost ground, or if PBMs demand lower device costs to offset the high expense of GLP-1 medications, ResMed’s premium valuation could be at further risk.

Technical Breakdown and Volume Analysis

From a technical perspective, today’s price action is particularly damaging. By dropping to $195.55, ResMed has decisively broken below its previous 52-week low of $198.61. This breach of a critical support level often triggers automated sell programs and institutional de-risking, which appears to be contributing to the elevated intraday volume of 772.2K shares. The stock is currently trading well below its 50-day moving average of $217.68 and its 200-day moving average of $239.69, indicating a firmly established bearish trend. The Relative Strength Index (RSI) is approaching oversold territory, but in a "falling knife" scenario driven by fundamental shifts in the industry, technical indicators often take a backseat to the underlying narrative.

Analysts have been increasingly divided on the stock's fair value, reflecting the uncertainty surrounding the GLP-1 impact. While some firms, such as RBC Capital, maintain an "Outperform" rating with a price target as high as $321 based on current earnings beats, others have turned significantly more cautious. Wolfe Research currently holds an "Underperform" rating with a target of $180, suggesting that the stock may still have another 8% to fall before finding a true bottom. Wells Fargo also recently reduced its price objective from $270 to $227, citing the "medium-term disruption" from obesity therapeutics. Today’s break below $200 likely forces many of the remaining bulls to re-evaluate their models, especially as the stock enters a "price discovery" phase without clear historical support levels in the immediate vicinity.

Forward Outlook: Noctrix Integration and FY27 Projections

Looking ahead, investors will be closely watching the closing of ResMed’s $340 million acquisition of Noctrix Health, which is scheduled for June 1, 2026. While the acquisition is intended to diversify ResMed’s portfolio into the treatment of Restless Legs Syndrome (RLS), management has already guided for a $0.02 headwind to non-GAAP earnings per share in the upcoming fourth quarter. In a market that is already hypersensitive to any signs of margin compression, the integration costs of Noctrix could provide another excuse for sellers to remain in control. The company is expected to report its full fiscal year 2026 results in late July, where the focus will likely shift from historical earnings beats to the fiscal year 2027 guidance.

The critical question for the second half of 2026 will be whether ResMed can prove that its "ecosystem" of masks, software, and accessories can offset the potential decline in new CPAP machine starts. ResMed’s software-as-a-service (SaaS) business, which serves out-of-hospital providers, has been a bright spot, growing at double-digit rates. However, if the total addressable market for sleep apnea devices begins to shrink due to pharmaceutical intervention, the high-margin recurring revenue from masks and accessories will eventually follow suit. For now, the "GLP-1 fear trade" remains the dominant force driving ResMed's valuation, and until the company can provide definitive data showing that GLP-1 users are staying on CPAP therapy at higher rates, the stock is likely to remain in the penalty box.