F&P's first half: Stability and variability, all at the same time

LAGUNA HILLS, Calif. - Fisher & Paykel Healthcare reported stable operating revenue for its homecare products group in the first half of the 2021 financial year, despite many sleep labs closing or operating at reduced capacity due to the COVID-19 pandemic.

The company reported $226.2 million in operating revenue for the group, which includes products used to treat obstructive sleep apnea in the home, a 5% increase compared to the same period in the previous financial year.

“The first half was challenging for our sales team and obstructive sleep apnea,” said Lewis Gradon, managing director and CEO, during a conference call in November to discuss the company's latest financial results. “Many sleep labs around the world were closed or operating at reduced capacity, and that resulted in a reduction in new patient diagnoses.”

Company-wide, F&P reported operating revenue of $910.2 million for the first half of the 2021 financial year, a 59% increase compared to the same period in the previous financial year. It reported a net profit after tax of $225.5 million, an 86% increase.

Gradon noted that, regardless of the pandemic, customers have responded positively to new launches from the homecare product group, including the Evora and Vitera masks.

“We're confident that these great products have yet to reach their full potential,” he said.

The majority of F&P's growth in the first half came from the hospital product group, which saw a 93% increase in operating revenue, driven by increased demand for its Optiflow nasal high flow therapy as a treatment for COVID-19. Gradon largely declined, however, to project whether that demand would continue into the second half of the year.

“When we look back at the first half, we have massive variability from month to month in both our hardware and our consumable revenue,” he said. “If we took the last three months and we tried to forecast the next three months on that, we'd be changing our forecast on a (regular) basis.”

Generally speaking, company officials believe the exposure that clinicians are getting to the company's nasal high flow therapy in hospitals and in the home during the pandemic will result in increased demand beyond the pandemic.

“What has been very helpful is that we've got a whole lot of new customers and they are gaining interest in Airvo and Optiflow,” said Paul Shearer, senior vice president of sales and marketing, “and I think that bodes pretty well for the future.”

F&P reported a reduction in gross margin for the first half to 61.7% due to the increased use of and costs associated with air freight during the pandemic, but the company has no immediate plans to adjust its prices in response, officials say.

“The cost of air freight and expediting the supply of raw materials has been significant, with the cost per cubic meter of air freight averaging four times to five times higher than normal,” said Lyndal York, CFO. “However, we have opted not to increase prices to our customers. This has impacted our gross margin. Excluding the additional freight costs, gross margin was in line with the same period last year in constant currency.”