ResMed shares rise on major Philips news

This sleep treatment company's rival will be MIA in the US for a while longer.

| More on:
A man and woman in an office look at a laptop and discuss investing, budget strategies or other financial concepts

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

ResMed Inc (ASX: RMD) shares are lifting on Tuesday morning.

At the time of writing, the sleep treatment company's shares are up almost 2% to $28.98.

This means its shares are now up over 7% since this time last week.

Why are ResMed shares rising again?

Investors have been buying the company's shares again on Tuesday after its main competitor Koninklijke Philips NV (NYSE: PHG) was dealt another major blow.

Overnight the Dutch health technology company revealed that it will not sell new sleep apnoea devices in the United States in the coming years while it works to comply with a settlement with the Food and Drug Administration (FDA).

This follows the 2021 recall of millions of Philips' breathing devices and ventilators amid concerns that the foam used on the device to reduce noise could degrade and become toxic. The company stated:

In the US, Philips Respironics will continue to service sleep and respiratory care devices already with healthcare providers and patients, and supply accessories (including patient interfaces), consumables (including patient circuits), and replacement parts (including repair kits). Until the relevant requirements of the consent decree are met, Philips Respironics will not sell new CPAP or BiPAP sleep therapy devices or other respiratory care devices in the US.

This is a big positive for ResMed in the enormous United States market. In fact, Goldman Sachs recently spoke about the massive opportunity that the Philips recall has given the company. So, the longer it is absent from the United States, the better for ResMed. Goldman said:

The PHIA recall (ordinarily 35-50% of market supply) has afforded RMD a generational opportunity to capture market share. While supply chain challenges have limited the upside from the recall to date, the rollout of the card-to-cloud OSA flow generators should bridge a majority of the deficit through to an easier period for component shortages. We see clear scope for market share gains (on top of the typical MSD/HSD market growth) to accelerate […]. We also see further upside to this growth trajectory if the PHIA recall is extended.

Goldman currently has a buy rating and $33.50 price target on ResMed's shares.

Motley Fool contributor James Mickleboro has positions in ResMed. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and ResMed. The Motley Fool Australia has positions in and has recommended ResMed. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Healthcare Shares

Doctor doing a telemedicine using laptop at a medical clinic
Healthcare Shares

The Mesoblast share price just rocketed 38%! Here's why

ASX investors just sent the Mesoblast share price up 38%. But why?

Read more »

couple having a happy discussion with a banker
Healthcare Shares

Expert: 4 ASX healthcare stocks to buy ahead of reporting season

Could these ASX healthcare stocks be good additions to your portfolio?

Read more »

Excited couple celebrating success while looking at smartphone.
Healthcare Shares

Guess which ASX 200 stock just jumped 9% on big news

Let's find out what is getting investors excited today.

Read more »

Male doctor in a lab coat working at laptop looking serious.
Healthcare Shares

What are Cochlear shares worth according to Macquarie?

Let's see what the broker is saying about this blue chip.

Read more »

Shot of a mature scientists working on a laptop in a lab.
Healthcare Shares

When will CSL shares finally catch a break?

Here's where analysts think the biotech stock is heading next.

Read more »

An analyst wearing a dark blue shirt and glasses sits at his computer with his chin resting on his hands as he looks at the CBA share price movement today
Healthcare Shares

JP Morgan initiates coverage of Telix Pharmaceuticals. After rising 1,667% in 5 years, is it still a buy?

Can this ASX 200 juggernaut go higher?

Read more »

Cropped shot of an attractive young female scientist working on her computer in the laboratory.
Healthcare Shares

Why this top broker expects CSL shares to surge 26%

A leading broker foresees a big rebound ahead for CSL shares. But why?

Read more »

Man jumps for joy in front of a background of a rising stocks graphic.
Healthcare Shares

Guess which ASX All Ords stock is jumping on big US news

This small cap is catching the eye on Thursday. But why?

Read more »