More Impediments To ResMed’s ASV Program

This story features RESMED INC. For more info SHARE ANALYSIS: RMD

-Risk of death higher in study
-No functional benefit from ASV
-Increasing competition in OSA
 

By Eva Brocklehurst

Further negative news regarding ResMed's ((RMD)) study data, published in the New England Journal of Medicine recently, has disappointed brokers and thrown a spanner in the development works for the sleep disorder product specialist.

The company has already acknowledged its phase III SERVE-HF clinical trial missed its end point. The risk of cardiac death is greater in patients using the Adaptive Servo-Ventilation (ASV) product and ResMed had to issue changes to its recommendation. The trial was conducted on heart failure patients with co-existent central sleep apnea (CSA). The adverse results were unexpected and the mechanisms unknown at this stage.

The preliminary findings signalled risk of cardiac death was 34% higher with the device and that the risk of death/life-saving intervention was also higher. Now, the article suggests a much broader negative outcome, that the risk of death from any cause is 28% higher in this patient group.

No symptomatic or functional benefit was found for the device. Independent experts have raised issues regarding the mechanism of harm or cause of the increased risk – which is yet to be clarified – and stated that auto-set devices should not be used in heart failure patients, a narrower recommendation than the one that ensued from ResMed on the preliminary findings.

Macquarie finds the sub-group analyses in the data were interesting and could suggest, if teased out, a narrowing of the at-risk population. The broker acknowledges that sub-group analyses carry little clinical weight. In the absence of any quantifiable benefit it means, even if sub-groups are not at risk, there is still no reason to use ASV.

The authors can choose to follow up further variables in the data but the broker suspects these sub-group findings will be unlikely to change clinical behaviour. Furthermore, the analysts at Macquarie believe that until the mechanism of harm is made clear, it is difficult to be confident about which patients are at risk.

Citi points out that a lack of evidence of an effect, even in the healthier patients in the trial, is not evidence of no effect. There is no evidence to suggest there is increased risk of cardiovascular death for patients with CSA without symptomatic chronic heart failure. 

Citi emphasises that the OSA (obstructive sleep apnea) market for ResMed's products, outside of this particular pathophysiology, is unlikely to be affected by the news. Nevertheless, a great deal of care needs to be taken when treating those with CSA/Cheyne-Stokes Respiration (CSR) in heart failure patients.

That said, the broker is unconvinced that the treatment of CSA/CSR in the diastolic heart failure population with ASV represents a good target for significant further investment. Outside of the medical issues, Macquarie also remains concerned about the impact on earnings. There are multiple large upcoming studies but there is not guarantee these will give positive outcomes.

Away from the issues with the SERVE-HF data, and in the wake of the FY15 results, brokers drew attention to increasing competitor offerings versus the company's AS10 generator which are lined up for FY16. FY15 results revealed a 53% rise in ResMed's flow generator sales with masks returning to positive with a 6.0% gain. Still, pricing pressure and market share losses are not unlikely with heightened competition.

Deutsche Bank took the opportunity to downgrade to Sell from Hold on the back of the potential for more competitive intensity, while Morgan Stanley upgraded to Overweight from Equal-weight, believing ResMed's underlying business remains quite strong.

In total, FNArena's database has four Buy ratings, two Hold and two Sell. The consensus target is $8.53, suggesting 16.2% upside to the last share price.
 

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