It is often strange how two disparate thoughts coalesce into some form of narrative pointing you in the direction of something. Coincidentally I came across an article by some domestic fund manager telling me that because RMD had collapsed it was the buy of the century at the same time I was cleaning out one of my desktop drawers that had hidden at the back and an old Nokia phone which had a top that slides up to reveal the keyboard. For those born in the wrong century, Nokia used to be the world’s premier maker of mobile phones their phones were often masterpieces of design and nearly indestructible. However, that was the past – Nokia was swamped by the emergence of the smartphone and as can be seen by the chart below the market was well aware of this transition.
The chart above begins at precisely the date at which the iPhone was released and as can be seen it was all downhill from there for Nokia. However, my recollection of the release of the iPhone was that it was not met with universal enthusiasm, particularly from the likes of Microsoft who thought the idea would never fly. Much of the lack of enthusiasm could undoubtedly be put down to simple corporate jealousy and trying to undermine a rival. However, part of the lacklustre response was due to the human tendency to understand when the world had changed and was the consequences of that change would be. People seem to be very bad at envisaging change and what it might mean. There is also the tendency to assume that the first iteration of something will be the endpoint in development and that the technology will never improve from that point. My Nokia might be a wonderful piece of industrial design but all it could do was make phone calls and send basic text in a somewhat labourious fashion. My latest generation phone can do all sorts of things – none of which I actually need ti to really do.
This brings me to RMD which as you can see from the chart below has taken somewhat of a hammering.
The reason for the precipitous collapse in its share price is attributed to the appearance of the new GLP-1 agonist drugs such as Ozempic which seem to be having remarkable success in generating weight loss. The narrative goes RMD is a major player in the field of devices to treat sleep apnea and one of the major causes of sleep apnea is obesity. These new drugs have introduced a form of disruption into that market in much the same same the iPhone changed the mobile phone market. Much of the commentary around this seems to be repeating the pattern of commentary around the introduction of the iPhone – that the drugs are in limited supply, people won’t get used to injecting themselves once per week, or that they are expensive. Much of this might be true but it is based upon the assumption that tomorrow will be like today and that there will be no change. This is a major failing of traders as well. There is no consideration given to the fact that the next evolution in these drugs is that they will appear in tablet form and the cost will come down. The first iteration you see in a technology is not the last but we often fail to consider variant futures where things are very different.
Will these new drugs see the end of companies like RMD – I have no idea But I do know that you never buy a share in a downtrend. Nokia is still with us despite the tsunami of smartphones which are now ubiquitous. What I do have an inkling of though is that if I were a general surgeon who had built their practice on gastric banding for weight loss I would probably start revising how to do hernias.
