Why ResMed stock is down 5% today

Medical technology company ResMedhis (RMD -5.12%) the stock wasn’t exactly the picture of health on Wednesday. Shares lost more than 5% on news of an analyst’s demotion and his new bearish outlook. That performance didn’t look good against his S&P 500 index, which decreased by 0.3%.

A change in recommendation for the worse

Well before the market opened that day, Wolfe Research’s Mike Polark changed his recommendation for ResMed. He flagged it as an underperformer (sell, in other words) with a lower value than his previous peer perform estimate (hold). Polark’s current target price is $180 per share; that’s more than 24% below the health care stock’s most recent closing price.

ResMed specializes in medical devices targeting sleep and respiratory disorders. As such, the analyst is primarily concerned with that giant of the pharmaceutical industry Eli Lilly will take a considerable share of the company in the near future.

Polark wrote in its new ResMed note that “risks of RMD business disruption increase in 2025-2026 due to Lilly’s likely launch of an obstructive sleep apnea indication for its GLP-1 drug tirzepatide.” That drug, sold under the brand names Mounjaro (approved for diabetes) and Zepbound (obesity), is a hot commodity amid the current weight-loss drug craze.

Keep an eye on the big guy

With Eli Lilly’s threat, the analyst believes ResMed could suffer a 15% to 25% drop in sales of its continuous positive airway pressure (CPAP) products that help treat sleep apnea. This seems realistic, but we should keep in mind that the pharmaceutical giant still has a ways to go with tirzepatide to get approval for the sleep apnea indication. Even the most powerful drug developers are not assured of success; regardless, ResMed shareholders would do well to keep an eye on Eli Lilly’s progress.