Keep heart with ResMed
Recommendation
- {{x.value}}
{{ twilioFailed ? 'SMS Code Failed to Send…' : 'Enter verification code' }}
{{ completedStep1 ? 'Authentication & Security' : content.trialHeading.replace('{0}', user.FirstName) }}
{{ content.upgradeHeading.replace('{0}', user.FirstName) }}
The email address you entered is registered with InvestSMART
Please login to continue
We have sent you an email with the details of your registration.
Looks you are already a member. Please enter your password to proceed
{{ upgradeCTAText }}
Updating information
Please wait ...
Your membership to InvestSMART Group recently failed to renew.
Please make sure your payment details are up to date to continue your membership.
Having trouble renewing?
Please contact Member Services on support@investsmart.com.au or 1300 880 160
You've recently updated your payment details.
It may take a few minutes to update your subscription details, during this time you will not be able to view locked content.
If you are still having trouble viewing content after 10 minutes, try logging out of your account and logging back in.
Still having trouble viewing content?
Please contact Member Services on support@investsmart.com.au or 1300 880 160
Please click on the ACTIVATE button to activate your Intelligent Investor 15-day free trial
Please click on the ACTIVATE button to finalise your membership
Unsuccessful registration
Registration for this event is available only to Eureka Report members. View our membership page for more information.
Registration for this event is available only to Intelligent Investor members. View our membership page for more information.
- You are already registered for this event.
- This event is already full.
- Please select a quantity for at least one ticket.
- {{ i }}
Forgotten password
Please enter your email address below to request a new password
- Indepth analysis of ASX listed shares
- BUY, Hold and Sell Recommendations
- Ideas Lab
- Special Reports
- Alan Kohler’s Weekend Briefing
- Interviews with CEO’s & top influencers
- Money Cafe and Talking Finance
- Super Advice and Q&A with Ask Alan
The excitement appears to be building around the benefits of ResMed's ventilation therapy for heart failure patients, judging by its share price, which has soared 20% since our update on its interim result on 23 January and 73% since ResMed set to awaken on 14 Oct 14 (Buy – $5.44).
According to ResMed, around three-quarters of heart failure patients also suffer from some kind of sleep apnea – about half of them with obstructive sleep apnea (which results from a collapsing of the airway) and the other half with central sleep apnea (which results from problems with the body's neurological feedback mechanisms that control breathing during sleep).
- Study has demonstrated benefits of CPAP for HF patients
- Larger study relating to central sleep apnea due later this year
- Raising price guide; Hold
ResMed is currently funding a number of studies to demonstrate the benefits of treating these patients with ventilation therapy.
One small study was presented over the weekend to the American College of Cardiology 2015 Scientific Sessions. It showed that out of a group of 70 acute heart failure patients with sleep apnea, the mean number of hospital return visits within six months decreased by 0.8 visits for those who underwent continuous positive airway pressure (CPAP) treatment, and increased by 1.1 visits for those that didn't. The study is part of a larger study, CAT-HF, which is due to report in 2016.
Big study; big market
The bigger study, however, is ResMed's SERVE-HF trial, which involves 1,325 patients enrolled between 2008 and 2013 and is due to wrap up later this year. The study aims to showcase the benefits of providing adaptive servo ventilation therapy to patients with central sleep apnea and heart failure.
Around half a million people are diagnosed with heart failure each year in the US alone, and with ResMed's main treatment machine, the VPAP Adapt, selling for about US$3,200, the available market could be around US$1.5 billion. Given that the US currently accounts for about half of ResMed's sales, the worldwide market might be as much as US$3 billion. And if ResMed was able to get a 50% share of this market, it would almost match the US$1.6 billion revenue the company achieved in the year to June 2014.
Now of course there are a lot of ifs in all of this – not least that SERVE-HF hasn't even concluded yet – but it does demonstrate the dangers of relying exclusively on past and even current numbers for healthcare companies. The good ones keep innovating to improve their various treatments and bring them to a wider market.
Valuation boost
So it often pays to hang on even if the valuation becomes a bit stretched, subject to keeping an eye on your portfolio weightings (our recommended maximum for ResMed stays at 7%) and taking profits along the way – that way you'll have banked some of the benefits even if the hopes turn to dust.
With the potential for heart failure treatments as well as the substantial valuation boost from the weaker Australian dollar (which is down another 5% since we reviewed the company's interim result less than two months ago), we're giving our price guide a substantial boost, from a buy-sell range of $6.50–9, to a range of $7-11. HOLD.
Disclosure: The author regrets that he no longer owns shares in ResMed.
Recommendation
Call 1300 880 160
Start a chat
Schedule a call
