Stocks

ResMed Inc. Shares Fall On Heart Failure Device Trial Results

Shares of ResMed are getting slammed today, down -16%, after clinical trials for its sleep aid medical devices was found to have put heart attack patients at further risk.  ResMed initially began its clinical trials back in September 2013 for the device that treats primarily sleep apnea for patients that either are at risk for heart failure or those who have already suffered a heart attack.  The company saw this as a big opportunity to get a piece of the $35 billion tab the US government spends on heart failures each year.

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Patients who used the device during trial were found to have had an “increased risk of death”

ResMed conducted the study across Europe and Australia, totaling 1325 trial patients that tested the new sleep apnea devices.  ResMed’s initial “mission statement” of the trials was to provide a medical device that could treat sleep disorders, while also limiting hospital visits and chances of death due to heart complications.  However, the conclusive evidence showed that test group using the medical devices was found to have a “significant 2.5% absolute increased risk of cardiovascular mortality” than the control group that was not using the devices.  In total, the cardio mortality rate for the test group came out to be 10% per year, as opposed to 7.5% mortality rate per year in the control group.  Glenn Richards, ResMed’s chief medical officer, said that “the safety signal in SERVE-HF was observed only with the use of ASV therapy in people who have predominant central sleep apnea and symptomatic chronic heart failure with reduced ejection fraction. We are further analyzing the data to understand why this unexpected result was observed in this trial” (Sydney Morning Herald).

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Revenue miss in recent 3Q earnings release and downgrade add to headaches

On April 23rd, ResMed reported third quarter earnings net income of $91 million or adjusted earnings per share of $0.65.  Revenue for the third quarter came out to $422.5 million.  While adjusted earnings per share for amortization costs just beat analysts’ estimate of $0.64 per share, the company missed revenue estimates of $424 million.  Only days later, Goldman Research downgraded shares of ResMed from a “buy” to “neutral”, further adding to the bearishness.

Overall, investors are very disappointed in the conclusive findings of its near two year trial for sleep apnea and heart attack patients.  The device increased chances of death for heart failure victims and this puts ResMed right back to “square one”, as the company tries to pick up the pieces from this defeat.

Disclosure: None