Tirzepatide patients also had a 55% to 63% reduction in nighttime sleep apnea events. ResMed, though, notes many patients still had enough events to require a CPAP machine. And William Blair analyst Margaret Kaczor Andrew says most doctors expect weight-loss drugs and CPAP to be the best combination for patients.

"Thus, we estimate the impact of approval on the CPAP market to be minimal, as it may bring more undiagnosed patients into the channel, something that clinicians spoke to seeing in the field already," she said in a report.

But on the stock market today, ResMed stock tumbled 11.5% to 182.20, nearly hitting a floor at its 200-day line, according to MarketSurge. Shares of Inspire Medical Systems skidded 16.5% to 135.74. Eli Lilly stock rose less than 1% to 890.11.

A Modest Headwind For ResMed Stock

Needham's Matson expects only a modest near-term headwind for ResMed stock.

Prior to the results, he expected tirzepatide to reduce nighttime sleep apnea events by 40% to 50%. Tirzepatide outdid that. But Matson also called for disease resolution of 50% to 60%. That was mostly above the 43% to 51.5% in Lilly's study.

He notes a "somewhat lower portion of patients" will be able to stop using CPAP machines after receiving treatment with weight-loss drugs like tirzepatide.

"We now expect an average 0.6%, 1.2% and 2.2% headwind to ResMed's revenue growth over the next three years in our bull, base and bear cases, respectively," he said in a report. He maintained his buy rating on ResMed stock.

Inspire Hits Seven-Month Low

Evercore ISI analyst Vijay Kumar noted Lilly's study focused on patients with a body mass index, or BMI, of at least 30. But most patients had BMIs closer to 40. This is a "fairly narrow subset of (the) broader sleep apnea population" — about 30% of the sleep apnea population.

"Another important observation is the onset of (effectiveness) is not immediate," he said. "And this is highly relevant as a prospective patient thinks about the decision to quit CPAP."

Inspire Medical Systems also made a key point on its recent first-quarter earnings call. Patients with obesity are most likely to have sleep apnea due to lateral wall collapse. This occurs when the cartilage on one side of the nose weakens, making it difficult to breath. These patients wouldn't qualify for Inspire's device, which is used in tongue base collapse.

But the question "is whether prescribing doctors will make this distinction," Kumar said.

Inspire Medical Systems stock hit its lowest point since November, while ResMed stock stayed within the bounds of a lengthy consolidation with a buy point at 243.52.

Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.

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