Inogen details strengths in bid to court investors

GOLETA, Calif. - Inogen's Nov. 27 filing for a proposed initial public offering (IPO) provides a window into the inner workings of the company, including its direct-to-consumer strategy and its financial viability.

Inogen lists its direct-to-consumer strategy as one of its main strengths, setting it apart from other HME manufacturers and helping it to grow revenue from $10.7 million in 2009 to $48.6 million in 2012. The company adopted the strategy in 2009, after receiving pushback from HME providers who it says are “disincentivized to encourage adoption of portable oxygen concentrators due to their investments in the physical infrastructure and personnel required for the delivery model.”

“We believe converting to a portable oxygen concentrator model would require significant restructuring and capital investment for home medical equipment providers,” the company states. “Our direct-to-consumer marketing strategy allows us to sidestep the home medical equipment channel, appeal to patients directly and capture both the manufacturing and provider margin associated with long-term oxygen therapy.”

One industry watcher says Inogen's direct-to-consumer model will “go a long way” with potential investors.

Inogen also lists its revenue growth, profitability and recurring revenue as strengths. In addition to a 354% increase in revenue in three years, the company was profitable for the first time in 2012: Net income was $600,000 in 2012, compared to a net loss of $2.6 million in 2009. Recurring rental revenue represented 40.9% of sales in 2012.

Another strength: a more efficient cost structure. Inogen says the rates implemented in the latest round of competitive bidding, the Round 1 re-compete, average $115 a month for delivery-based portable and stationary oxygen concentrators. The company estimates that the aggregate cost of the delivery model, including delivery, filling and buying equipment, ranges from $76 to $107 per month. Inogen has been awarded numerous contracts as part of the competitive bidding program.

One industry watcher says Inogen is proposing an IPO to raise money to expand its business or to cash out initial investors. A group of investors led by Novo A/S has pumped cash into the company on at least two occasions: $22 million in 2007, and another $22 million in 2012.

“It's usually one of those two reasons, or both,” the source said.

The filing with the Securities and Exchange Commission (SEC), called an S-1 form, outlines Inogen's plans to raise up to $86.25 million through an IPO. The company hasn't determined yet the number or the price of the shares it will offer, or the date for the IPO.

“A successful IPO would be great for the industry,” said one industry watcher. “But the amount they want to raise seems high.”

Inogen, as well as the bankers managing the proposed IPO, declined to comment outside of the S-1 form per SEC regulations.