Here’s the hard, cold reality: Despite what the perception is, many people taking GLP-1 medications like Ozempic will drop pounds, but remain obese and overweight. This may sound like a disappointing outcome, but for some patients who are trying to lose large amounts of weight, the results from the drugs can still be life-changing. It can mean the difference between qualifying for bariatric surgery or not. Or, in other cases, it can open the door to new options for the treatment of obstructive sleep apnea. Ultimately, the patient could wind up on the path to a healthier life. Remember, in clinical trials, Novo Nordisk’s anti-obesity medication, Wegovy, helped patients lose about 10% to 15 % of their body weight , while Eli Lilly’s Zepbound resulted in a loss of around 16% to 23% . This means severely obese patients may be successful in using the drug, but still have large amounts of weight to lose and continue to suffer from conditions like sleep apnea that accompany the extra pounds. Medical device companies have been making this observation, and using it to support their claim that Wegovy and Zepbound will increase the market for bariatric surgery and sleep apnea treatment. While there is no doubt that individual patients will fit into these scenarios, it remains to be seen if it’s a significant enough trend to move the needle. Mizuho Securities analyst Anthony Petrone told CNBC that he is watching the trends for bariatric surgery very closely. He expects if there is a follow-on impact from anti-obesity medications, it will show up there first. If it does, he expects the trend is likely to help not only the companies tied to bariatric surgery like Intuitive Surgical and Medtronic , but also Inspire Medical Systems , which makes an implantable device that can help keep a patient’s airway open while they sleep. Inspire Medical Systems’ shares under pressure Intuitive Surgical makes the da Vinci 5 robotic system, which can be used for bariatric surgery as well as other procedures. The company said it saw “flat” growth in the first quarter of 2024 for bariatric surgery year over year, but demand decelerated from the fourth quarter. The company has said the bariatric market is down low- to mid-teens. In other words, there isn’t an uplift in surgeries yet. INSP 1Y mountain Inspire Medical shares over the past year Inspire Medical’s shares have be suffering for some time now. The stock lost 19.2% of its value in 2023, and is down another 22% since the start of this year. Much of the pressure has come from fears that new anti-obesity medications will reduce its market opportunity. This fear was intensified after headline data for Zepbound’s phase 3 trial came out in mid-April that showed patients with sleep apnea who took the drug experienced fewer interruptions in breathing during sleep as they shed weight. Eli Lilly will share fuller details of the study at the American Diabetes Association annual meeting on June 21. Some expect the media buzz that will come from this event will help raise awareness about the condition, and lead to more patients being treated. Treating obesity and addressing sleep apnea Sleep apnea is a serious sleep disorder that results in interrupted breathing, preventing patients — and even their sleeping partners — from getting restful and restorative sleep. Obstructive sleep apnea, the most common form, occurs when muscles in the throat relax and collapse preventing air flow. If left untreated, the condition may result in an increased likelihood of cardiovascular disease and stroke. Also, patients may be less productive as they feel tired all the time. It also can result in traffic accidents as they doze off while driving. Inspire Medical CEO Tim Herbert told CNBC he is optimistic about the possibility for Wegovy and Zepbound to assist patients with obesity and sleep apnea to lose enough weight to qualify to use their device. “These two can work in combination to help a lot more patients than GLP-1 or Inspire could on their own,” he said. Patients with too much excessive weight aren’t good candidates for Inspire’s device, which is implanted in the body to stimulate the hypoglossal nerve and keep the upper airway open during sleep. Before qualifying for the device, patients usually need to have tried treatment with a CPAP machine and an oral device and been unsuccessful. Then, they are tested to see what kind of muscle collapse is interrupting their breathing during sleep. Only after clearing these hurdles, can they receive the Inspire device. According to Herbert, between 35% and 65% of patients do not use their CPAP machine one year after receiving it. He added, about 2 million people receive a CPAP prescription each year in the U.S. “So that’s a significant number of patients who are diagnosed, given a CPAP device and cannot benefit from it,” he said. “They need to find an alternative therapy and that’s where Inspire comes in.” The selloff may be overdone Mizuho’s Petrone rates Inspire shares a buy and has a $250 price target, which is more than 57% higher than where shares closed on Friday. He said the 33% decline in the stock following Inspire’s first-quarter results was overdone. Notably, his target is roughly in-line with the average analyst price target of $253.14 reported by FactSet. Petrone expects that if Zepbound were to receive a label expansion to treat sleep apnea, it won’t happen until next year. While that could be a negative, he sees a positive on Inspire’s side: The Food and Drug Administration cleared the way for more patients to qualify for the Inspire device, and UnitedHealth was the first insurance company to expand coverage. Petrone expects more insurers to follow its lead, and that will benefit the company. Specifically, patients with a higher body mass index and more events of interrupted breathing now can be treated. “Our calculus here factors in the high prevalence of obstructive sleep apneas (OSA) and severe OSA in obese patients relative to the rigor that is required to be deemed compliant with [oral appliance therapy]. Recently published [National Institutes of Health] studies quote OSA prevalence as high as 40% in obese males with > 30 BMI can reach up to 90% for severely obese patients 40 BMI,” Petrone wrote in research note on May 8. That said, there could be a messy period for Inspire shares as this shifting landscape is sorted out, according to Stifel analyst Jonathan Block. He downgraded Inspire shares to hold at the beginning of the year due to this uncertainty he was anticipating. “Overall, our checks suggest United’s policy revision may elongate the [hypoglossal nerve stimulation] referral timeline for a subset of patients, and to a lesser extent modestly weigh on HGNS’ overall (very large) [total addressable market],” Block wrote in a research note in mid-April.
