Welcome to RBC's Global Healthcare Conference 2024. I'd like to welcome, with me to the stage, Carlos Nunez, the Chief Medical Officer at ResMed, and Amy Wakeham, the Chief Investor Relations Officer at ResMed. Welcome. Thank you. Thank you. Just wanted to get started. Carlos, could I get your thoughts on the top-line results of the SURMOUNT-OSA study? More importantly, your expectations for how that might evolve or affect the way that sleep apnea is treated. Sure, great. It's an excellent question, and obviously, for those of you who have been following this market and following ResMed for the last year or so, it's been a huge topic of discussion. There was a narrative that started to evolve that, "Oh my gosh, these drugs are so good at having people lose weight that, you know, everyone's going to look like a supermodel. No one will have diabetes or sleep apnea anymore." And so we have been working through what that narrative looks like to try and tease out the reality. And the biggest piece of reality really came just a couple of weeks ago with the readout of, let's say, with the top-line readout of the SURMOUNT-OSA results. We know the full results have not been published, but they are set to be presented in June at the American Diabetes Association conference, with a subsequent publication to follow. But looking at the top-line results, and these are results from a trial run by a principal investigator that we know very well. Dr. Atul Malhotra, who is based in San Diego, where ResMed is based, is actually a researcher that I work with a lot. And I spoke to him on the day that the results came out just to verify my hunch, and what my hunch was, what we saw was exactly what we expected. These drugs are really good at helping people lose weight, especially when you look at the very strict regimen that these patients were subjected to for a year. It's a little different than what we will probably see in real life, because remember, these patients, for a year, were under strict supervision of a study nurse. They were getting extensive lifestyle and diet and exercise therapy, as well as being on these GLP-1 drugs. What we saw was they lost a significant amount of weight, which led to a pretty significant decrease in their AHI. For those of you who don't follow the sleep apnea market that closely, it stands for apnea-hypopnea index, and it basically means the number of times you suffocate every hour while you sleep. Normal is considered less than five. All of us stop breathing maybe once or twice an hour every night, just here or there, but if you do it more than five times an hour, that's considered sleep apnea. What was interesting is if you look at the top-line results, what happened is most patients who were moderate to severe, meaning their sleep apnea was probably at AHI numbers of the 30s and 40s and 50 range, went down from being moderate to severe to being moderate to severe. So it helped, and it decreased their AHI, but these patients still have clinical sleep apnea and still require to be treated for that. So the expectations are that this is going to reinforce the clinical guidelines and the treatment paradigm for sleep apnea that have been in place for decades. It has always been when someone presents to a physician with sleep apnea, look at things like diet, exercise, and lifestyle, and then make sure they get the appropriate therapy for the underlying obstructive sleep apnea. So if I can speculate a little what the future might look like, these patients may see that, "Oh, my gosh, I've been struggling with my weight for many years. The entire medical system, society, has shamed me into not even seeking care. I don't, the doctor's just gonna tell me, 'It's my fault. Lose weight, stop eating, willpower, exercise.' But no, now I see there's a drug, there's a metabolic condition. It's recognized. Let me go get help." So these patients will show up, and when they talk to their doctor, the doctor will say, "This is amazing. I'm glad you're here. Let's look at your obesity and all of the comorbidities that are likely to follow: heart disease, hypertension, type 2 diabetes, joint problems, and obstructive sleep apnea." So looking at the results of the SURMOUNT trial and kind of get extrapolating from that, if these patients, under perfect conditions for a year of close supervision, lost enough weight to go from moderate to severe to still moderate to severe, what is going to happen is any decent ethical doctor is gonna say, "You know what? Let's treat you for what you've got. You've got high blood pressure, let's put you on meds for that. You've got sleep apnea, let's figure out what's the best therapy, whether it's a CPAP or whatever. And we'll put you on a weight loss regimen." Maybe it's GLP-1s, maybe it's something else. In a year or two, we will see if it helps, if it benefits, and maybe if they do like in the trial and their AHI goes down 40%-50%, maybe their CPAP pressures go down. It's easier for them to manage. Maybe they can even use a different, less invasive or less obtrusive mask. But no physician is going to say, "Oh, you showed up with an AHI of 50. That means you suffocate 50 times an hour." Think about that. Every minute or so, someone is invisibly choking you to the point that you turn blue. And that's okay? No, it's not okay. Sleep apnea kills you one of two ways: It'll either kill you in 30 years when your heart or your brain are all, you know, damaged from the repeated insults, or it kills you today, and you fall asleep driving your car, and that semi T-bones you in the intersection. I hate to be dramatic, but that's what the doctor is thinking. "I can't put you on a GLP-1 drug today and hope that in a year or two, your sleep apnea is less severe. I still need to treat the whole patient sitting in front of me." So if you have diabetes, if you have heart disease, if you have sleep apnea, you're still going to go into the regular treatment paradigm that's been in place for 30 years. You just now have a better shot at losing the weight that will help. Yeah, I think that's a great point you make about sort of, you know, just if you're in that moderate to severe, you're still in that moderate to severe. But with the kind of population who undertook the study, they were sort of generally obese, kind of over a 30 sort of BMI. C ontinuing that speculation, like, what do you think might happen for those who are not obese, who might be in that kind of pre-obese or overweight category? Yeah. So it's a, it's another great question. The reason why, obviously, they enrolled patients who were obese, so BMI of 30 or above, is they were trying to show that this drug was safe and effective for use in patients with sleep apnea and obesity. So they are trying to nail a pretty specific indication for use. Now, to be clear, the trial did not compare a GLP-1 drug to PAP therapy. They didn't want to. They would lose every time, because if you're on PAP therapy, your AHI goes down to less than 5 every day, all the time. You're on GLP-1, you go from 50 to 25 or whatever, you still have sleep apnea. So the trial was looking at what is the safety and efficacy of these drugs in patients with sleep apnea, whether or not they were on PAP therapy. So it's really important to remember that point. So along the lines of-- Oh, my gosh, ask your question again. Sorry, I went into the discussion and So for those patients who are, are not obese- Not obese. Yeah. Sorry, thank you. So the indications for this study were 30, 30 and above, obviously. If you are not obese, the problem there is going to be, if there is no indication for use for non-obese patients, it is gonna be a judgment call by the physician. And then, that means it's going to be a judgment call by the insurance company as to whether or not they're going to reimburse this. You know, one of the things, if you look at some of the analyst notes that have been published recently, is that prior auths for these drugs have been a bit of a blocker for some patients who want to get them. You know, these drugs are primarily indicated for people with type 2 diabetes and obesity for the weight loss component of it, so it's gonna be hard to tell. I don't know that they're going to get an indication for overweight. It's gonna be much easier for them to get an indication for obesity. It'll be indicated as an adjunct therapy, not as a first-line therapy, so it's not gonna displace PAP therapy. And what we're going to see is the patients who are just looking to treat that number on their scale, the ones who are overweight, they don't meet the indications for use, are probably gonna do like those who do today. They are going to go self-pay. They'll go around to, you know, a weight loss clinic that might be working with a compounding pharmacy. We're seeing a lot of that for the patients who can't get a prescription or don't qualify for on a basis of diabetes or their BMI. Yep. Thank you. Now, thinking about, you know, something that's talked about is with increased awareness, so with these pharmaceutical companies, you know, promoting GLP-1s, that like, sort of potential effect it might have, I mean, what do you think that could have on the awareness for sleep apnea and the benefits or the sort of impact that that would have on ResMed and other sleep apnea companies? Yeah. So we believe, and I think we're starting to see, that the benefit is real, that patients are getting activated by the news and the narrative that's emerged around these drugs, and they're seeking care, and they're talking to their doctors for the very first time. And what we are seeing. As you heard, I'm the Chief Medical Officer. I lead our medical affairs function. We do a ton of research, and lately, a lot of our research is focused on looking at the real-world evidence around these drugs. A controlled trial is great, but as I said, it's a very artificial situation for a year or two, as opposed to what's happening in the real world. So we look at recent real-world data. These drugs, not the older versions of these drugs that were in the market 20 years ago or 19 years ago, but the ones in the last couple of years, the ones that are getting all of this hype about weight loss. And when we look at this data, and keep in mind, the SURMOUNT study was 450 patients roughly, we've looked at about 600,000 patients who are on GLP-1s and on PAP therapy for OSA. And what we have found is patients who are on GLP-1s are a little more than 10% more likely to start PAP therapy than all comers. So if patients show up on GLP-1s, they're more likely to start PAP therapy. So they are engaged, they are activated, they are thinking about their health in ways they never have, and so maybe we're seeing some healthy user effect. Maybe we're seeing better awareness, both in the physician community and the patient community, but that's a really good sign. Then, we looked at the data even more, looked even more into the data and found that at one year, patients on GLP-1s are 3.1, 310. But you guys talk in basis points. Sorry, I'm a doctor. We don't talk in basis points. But 310 basis point increase in resupply, meaning this patient has not just got a device, but a year later, they're still ordering masks and supplies at a rate that is higher than the average patient. Then, we looked further. We looked at two years out, and these patients are now 5% more likely to get a mask or some supply, 500 basis points. Sorry. So what we are seeing is exactly—I mean, it's playing out, and look, couldn't play out more beautifully if I had written the script myself. Patients are showing up. They're getting cared for, the whole patient, and they are more likely to end up on the right therapy for their sleep apnea on a PAP device. And then, they are more likely to become good patients, and I hate to say it this way, but good customers, because the total patient value is over the life of that patient. We don't want to sell them a box once. We want to make sure that they are on that device, they're treating their sleep apnea, and every month or so, when it's time for a new mask, a new tube, a new cushion, they're coming back to ResMed to get their supplies. It's actually been quite nice to see that the narrative we tried to, you know, that we hoped would evolve, has evolved before our eyes, beautifully. And then, just coming back to the SURMOUNT study, I mean, when the final results are released, I mean, is there anything that you'll be looking for? Could you sort of share what you might be looking for in those final results? Yeah. T he main thing I'm looking for are some of the details about these top-line results. I did speak to Dr. Malhotra on the day that the press release came out, just to make sure I was thinking about this correctly. You know, so some of the things that he and I spoke about, and he shared this with me openly, so I can talk about this. He's like, if you go back to. They published a methodology paper describing how they were conducting the study before they even had results. He says, "If you go back to the methodology paper and look at, like, the baseline," so the average starting AHI was around 50. He said, "And then look at what the results in the press release. H e was kind of, like, leading me a little bit, and he's like: "You're gonna know pretty much what you need to know. These patients started here, they ended up here, and almost no one was cured." Then there are some secondary results that are quite interesting to me. Once we get the details on what really was the baseline, how did the different groups, 'cause we got just very top-line numbers. I'm interested in some of the other markers. Specifically, there's one, C-reactive protein is a marker in the blood that's synonymous with inflammation. Higher the level, the higher inflammation. It'll be interesting to see if these drugs, independent of the weight loss, cause things like a decreased systemic inflammation. Those are the nerdy scientist in me looking for those sorts of things. But to be honest, putting my ResMed hat on, I'm not surprised by what we're seeing. I don't think I'll be overly surprised by the details, and it—you know, the top-line results are pretty much what we expected. It's a great new tool to help patients lose weight and to help us better manage them if they happen to have sleep apnea. But it is not a first-line treatment. You know, it—you don't—you can't treat this disease halfway. You have to treat it all the way because that's how patients get better. And just on that point about a first-line, it's not a first-line treatment. I mean, what do you say to some of the thinking out there that the potential for some patient to drop out of the funnel, who might not be moderate, who might be sort of moderate, but then go down to mild? Mm. Yeah. So it's a, it's a good question. We'll have to see the numbers just to see how many of them will drop into mild or even resolve completely. Again, a tool. And I say, oh, I hate to say it like this. ResMed has a podcast, and I am the host. I'm not trying to get more listeners or subscribers. But I interviewed Dr. Malhotra at the end of last year, and it was such a good interview, we split it into two episodes, and he talks about this very thing. And, you know, listen, you know, listen to his words. He's the principal investigator of this, and he said it as clear as day. He He goes, "I haven't yet". This is before the top line. He says, "I haven't yet unblinded the results, but I haven't seen many people getting cured." My feeling is that this is just going to reinforce his hypothesis that this is going to be better together. Patients need to lose weight, get a handle on their overall metabolic health, and then the PAP therapy will then help finish by getting them to a normal level. Because guess what? Suffocating 50 times an hour or 25 times an hour is still suffocating way too much. So the goal will be: Let's help them lose weight, let's manage the metabolic risk to everything, including their hearts, etc., and then let's continue to treat the sleep apnea 'cause it's still there. The other thing he said, which is really important, we don't talk about a lot because everything is so focused on the metabolic effects of these GLP-1 drugs, weight loss, diabetes, etc., is the neurocognitive problems that come from sleep apnea. You know, again, half being, dramatic for effect, but if I choke you out 15, 20 times an hour to the point where you turn blue, that's less oxygen to your brain. Imagine that happening 100 or more times every night when you sleep for many decades. Well, we are starting to see the evidence that untreated sleep apnea puts you at much higher risk for things like dementia, Alzheimer's later in life. We see that just one night of sleep apnea, you wake up the next morning, and your cognitive function is impaired. And so you may lose weight, your breathing may be a little easier 'cause your AHI goes down, but you have to treat it completely because any suffocation is too much suffocation. So again, I think what we are going to see as the results come out is this is a better-together situation. It's much better for our sleep apnea patients. And we are, again, we're starting to see them show up more, they're more adherent, they're better patients 'cause they're activated and engaged with their health. I can testify, the Awaken Your Best podcasts are a great listen. You know, those four talks that you've got there, great speakers that you've had on. Oh, thank you very much. Last question, which you sort of touched on, but just if you kind of look forward, you know, with the sort of standard of care, like, how do you see that changing or not with kind of, I guess, the different, sort of products that are out there? You've got some, sort of different pharmaceutical products as well. So you've got a full range of things. You've got sort of a number of devices as well now. How do you think that might evolve over the next decade or so? Yeah. I think for me, the biggest way that it will evolve is, as more physicians think about sleep apnea in this context, more physicians will think about sleep and sleep apnea with their patients. I don't know. Think about the last time you went to your primary care, and many women, not to overgeneralize, they see their OBGYN more than they actually see a primary care, so that may be their primary care. How many of you have been asked about your sleep? How many of you have been asked if someone told you it sounds like you stop breathing while you sleep? It's probably not many. I work for ResMed, and my primary care has never asked me. I asked him why, and he goes, "Well, I just assumed you knew." I said, "Well, do you ask your other patients?" He goes, "No, that's not a big thing that we do in our practice." So to me, I think the overall level of awareness is going to get more physicians talking about sleep apnea or at least sleep in general. I think we're going to see greater collaboration across specialties. You know, many sleep physicians or sleep labs are not set up to administer these drugs, especially if they are by injection. You know, some patients can do them at home on their own, some go into the doctor's office, and, you know, a sleep lab may not even have a sharps container to throw away a used needle. So, we're going to see greater collaboration among the specialists dealing with the comorbidities for obesity. That's gonna be real. Dr. Malhotra's wife is an endocrinologist, and he said, "Look, I know nothing about, you know, diabetes, metabolism, none of that stuff. I'm a sleep doc. But when my patients need to lose weight, I'll refer them to someone who practices like my wife practices." And so I think we will see that greater awareness continue to, you know, sort of lift the tide, if you will. I hate using that term, but, you know, sort of lift the tide and all the boats will float. And then, you know, the last thing I'll say about that is our TAM is so underpenetrated. You know, there are 1 billion people in the world with sleep apnea. One out of eight people in the world, that's how they breathe. The problem is 85% are undiagnosed and untreated. Imagine if there was a form of cancer where 85% of the people were undiagnosed and untreated. We'd have colored ribbons. The NFL would wear special helmets one month out of the year. But it's sleep apnea. People actually denigrate and stigmatize the treatment more than the disease. Every time you see it on TV, it's a joke, right? They got the big Darth Vader mask, the loud machine. It doesn't look like that. It doesn't work like that. It hasn't been like that for a decade or more. But the treatment is a joke, and the disease is ignored. And I hope what we're going to see as more and more people think about sleep apnea in the context of this hype around GLP-1s, we'll realize this disease is no joke, and the therapy is real, and it's important. And guess what? I can speak to it personally. I have sleep apnea, and I, like a good doctor, was in total denial for decades. It was only when I started working at ResMed that I finally said: "Shoot, I better do this." And I can guarantee you it is the only therapy on the face of the planet that treats two people at the same time, 'cause I've never slept better, and my wife has never slept better now that I don't snore. So yeah, that's how I expect things will change. It's going to get better for sleep apnea 'cause more people will know, more people go to their doctor, even if it's for another reason, and they will get on the therapy they deserve. Because you know what? Everybody breathes, everybody sleeps, and we shouldn't take any of that for granted. We all deserve to do that, and one out of every eight deserves to not suffocate. And then just talking about looking at kind of current conditions, you said, you know, kind of one in eight are only diagnosed. There's a huge amount of sort of the population that aren't diagnosed. Looking at OSA diagnosis rates, I mean, how do they compare to pre-COVID levels, and are there any particular markets that are experiencing vastly different diagnosis rates than others? Yeah, and you keep me honest on this- Yeah 'Cause some of this is actual financial, based on financial numbers. But we use, you know, new device sales as sort of a surrogate for, you know, a patient who's been diagnosed. Some devices actually go to replacements of older devices, but, you know, roughly 90%-95% of those new device sales are new setups. Obviously, even during this hype cycle, you have seen that ResMed, you know, pretty much every quarter without fail, has increased the number of patients on our devices. So what we are seeing is, overall, every day, more and more and more people are diagnosed with sleep apnea. It does vary by market. The U.S. is slightly more penetrated than most other markets. There is a little bit more awareness here. It's also the idiosyncrasies of our quite unique healthcare system that, you know, maybe incentivize some of that over other markets. And then we see other markets that are quite large and attractive, but very, very underpenetrated. I think of China. I recounted this story earlier. I was in Beijing not so long ago, and going down the highway, and there was a sign, several, I saw them every, you know, few miles, with a cartoon of a person sleeping, and in Mandarin at the top, English at the bottom, said, "Don't drive sleepy," you know, for safety reasons or something. So there's a government campaign in China to change highway signs to make sure people don't fall asleep while they're, s o there's something there. You know, so there are large markets, and when you think, again, 1 billion people, 85% don't even know they have it. The total addressable market, even if GLP-1s decrease the growth of obesity, it's not gonna make it go away. It just, it won't. Even the most ambitious models from the pharma companies don't show obesity getting less. They just show it growing slower. Even if they were to whack, you know, a good chunk of that TAM, we have decades to go before we get to every single patient, and that's from the company who owns market share all over the world and is doing really well. So, you know, for me, the future looks quite, quite good because more patients will get that therapy they deserve. Did I misstate anything? No. Great. We're running out of time. So just, maybe a couple more. One is, you know, during the last few years, you've gained a lot of share. You know, your major competitor's been out of the market. I mean, how do you see that evolving when Philips comes back to the market? I mean, how much share do you think you're able to retain? That's an Amy question. Yeah. So, yeah, certainly, Craig, we have, you know, done a lot of work to fill that gap that Philips has left. You know, other competitors have come into the markets. You know, ResMed is the market leader now, and, you know, that does limit us a bit in terms of what we can do. You know, we get questions often of, you know: Are you gonna lock your customers in? Are you gonna force them to, you know, buy from you, or, or bulk or, or other things? And we don't expect to do that. One, you know, from an antitrust perspective, you know, we're prohibited, but also, you know, our view is that, you know, our products and services, the value we offer, the digital ecosystem, the benefits it brings our customers, is that as they become more and more familiar with our products and services and solutions, they won't want to leave. And, you know, we're, you know, we're gonna work to keep as much of that market share gain as we can. But also think about the fact that this market is a zero-sum market, so it's not like if we lose any share, it means that somebody else has gained, and there's no opportunity. It really is, gets to what Carlos talked about, the large patient TAM, and it's really now incumbent upon us to start to drive market growth. How can we expand, awareness and increase, patients coming into the top of the funnel so that we can, you know, ultimately drive additional growth? And, you know, that might mean that market, share moves depending on how the size of the market grows. But if we're growing at a faster clip, that's good for us, and probably good for the overall market. All right. I think we're out of time, so I just wanted to say thank you, Carlos, thank you, Amy. That's been very helpful. Thank you so much. Thank you. Thanks for your time. Thank you.