The Resmed (ASX: RMD) share price has sunk around 30% since the start of August 2023 and it's down by more than 40% from September 2021.
The ASX healthcare share specialises in providing treatments for sleep apnea, which the company describes as a "disorder in which the muscles in the throat relax to the point of collapse, restricting airflow. This causes breathing to become shallow and even stop for seconds or minutes at a time."
Resmed provides masks, machines and software that help people breathe better during the night and sleep better.
Image source: Getty Images
What's going wrong for Resmed shares?
Part of the problem for the company may be an overall decline in market sentiment for ASX healthcare shares. For example, in the past six months the CSL Limited (ASX: CSL) share price is down 15% and the Sonic Healthcare Ltd (ASX: SHL) share price is down 17%.
However, in investors' eyes, there may be specific trouble ahead for businesses that treat sleep apnea because of a concern that new weight loss drugs, such as ones that reduce appetite, could lead to fewer people needing sleep apnea treatment.
According to the Royal Australian College of General Practitioners, obesity is the largest risk factor when it comes to developing obstructive sleep apnea (OSA). It is estimated that 58% of moderate-to-severe OSA is due to obesity.
If a sizeable portion of the population were taken out of Resmed's potential customer base, it would theoretically reduce the growth prospects for the business and that would be a negative for Resmed shares.
Is the ASX healthcare share an opportunity?
The broker JPMorgan certainly thinks it's an opportunity, with an increase to its rating on the company to overweight, which essentially means a buy.
A price target is where a broker thinks the share price will be in 12 months from the time of the recommendation. According to reporting by The Australian, the broker has a price target of $26.50 on Resmed shares, which implies a rise of 13% from the current level.
That suggests a bit of a recovery but would also simply mean that the Resmed share price could linger at a lower level than where it was in the first half of 2023.
At this Resmed share price, I think it's possible that the market may have become too pessimistic too early about what may happen with Resmed's future growth and the effectiveness (and take-up) of weight loss drugs. Time will tell whether the market is right to be as pessimistic as it is currently with the ASX healthcare share.
