ResMed's Sleep Apnea Empire: Can It Maintain Dominance Amid New Threats?

ResMed Inc. (NYSE: RMD), the global leader in sleep apnea therapy, finds itself at a critical industry crossroads. Its stock, trading around $257 in late January, reflects a business that has deftly navigated a specialized medical market for decades. But as new screening technologies and weight-loss drugs reshape the patient journey, and a novel oral treatment looms on the horizon, investors are weighing the durability of its competitive moat.

Founded in 1989 by Dr. Peter Farrell to tackle obstructive sleep apnea (OSA), ResMed built an empire on Continuous Positive Airway Pressure (CPAP) therapy. The condition, affecting an estimated 1 billion adults worldwide, is linked to severe health risks like hypertension and stroke. ResMed's razor-and-blades model—selling CPAP devices and recurring mask replacements—propelled it to over $5 billion in annual revenue, creating a high-margin, recurring income stream.

For years, the market's growth was constrained not by treatment efficacy, but by low diagnosis rates. Cumbersome sleep studies and lack of awareness left millions undiagnosed. Now, the landscape is shifting. The proliferation of consumer wearables capable of sleep tracking and recent FDA clearances for home-testing devices are simplifying pre-screening. Simultaneously, the popularity of GLP-1 weight-loss drugs is driving more patients into sleep clinics, potentially expanding the top of the diagnosis funnel.

"This is a classic 'funnel expansion' story," says Michael Chen, a healthcare portfolio manager at Horizon Capital. "ResMed has the brand, the clinical data, and the digital tools like myAir and AirView to capture a significant portion of these newly diagnosed patients. The Philips recall was an unfortunate event for patients, but it undeniably accelerated ResMed's market share gains."

Indeed, the 2021 recall of millions of Philips Respironics devices handed ResMed a near-monopoly in new device sales for a period, turbocharging its installed base. The company's cloud-connected ecosystem, which helps patients with therapy adherence and providers with reimbursement, has deepened customer loyalty.

However, skeptics point to looming disruptors. Apnimed's AD109, an oral drug currently in Phase III trials, has shown promise in treating OSA without a machine. While not a cure-all, its potential success could fragment the treatment landscape.

Dr. Anya Sharma, a pulmonologist and outspoken healthcare analyst, offers a sharper critique: "The bull thesis is dangerously complacent. It glosses over two existential risks. First, if GLP-1 drugs actually *cure* obesity-related sleep apnea in a meaningful cohort, that's a permanent reduction in the addressable market. Second, AD109 isn't just another competitor—it's a paradigm shift. Patients *hate* masks. Given a safe, effective pill, adherence would skyrocket. ResMed's entire hardware-centric model is being challenged."

Despite these headwinds, ResMed's financials remain robust, with strong returns on invested capital. The company's ability to innovate within its digital ecosystem and potentially integrate new treatment modalities will be closely watched.

David Park, a long-term retail investor focused on medical tech, adds a more measured perspective: "It's easy to get caught up in the 'next big thing' narrative. CPAP is still the gold standard, and changing clinical protocols takes years, if not decades. ResMed has a massive service infrastructure and deep insurer relationships. Any new entrant faces a steep climb. For me, it's about execution—can they leverage their data advantage to stay ahead?"

The investment community remains divided. While ResMed did not rank among the top 30 most popular hedge fund stocks last quarter, institutional ownership saw a slight increase. The debate now centers on whether the company is a legacy giant facing disruption or a well-positioned incumbent ready to capitalize on a rapidly awakening market.