Invacare stands by respiratory

‘There are some real product categories in there that we know we do well with and that I still think we can be a leader with’
Friday, May 10, 2019

ELYRIA, Ohio – Invacare’s respiratory product sales took a hit in the first quarter of 2019—a $7.7 million or 34.9% decrease compared to the same period last year.

Modest growth in mobility and seating was more than offset by the declines in respiratory—due to Medicare’s competitive bidding program, company officials say—resulting in an overall 5.8% decrease in net sales for North America.

“It’s a challenging market in total,” said Matt Monaghan, chairman, president and CEO. “But there are some real product categories in there that we know we do well with and that I still think we can be a leader with. If we can generate (10% EBITDA spreads), that’s a good return for shareholders.”

Excluding respiratory, Invacare reported constant current net sales grew 3% in the first quarter of 2019 compared to the same period last year. Additionally, operating loss improved 13% in the quarter, primarily due to cost reductions, including a significant reduction in SG&A.

Longer term, company officials still believe Invacare is well positioned in the respiratory market due to its balanced portfolio of not only portable oxygen concentrators—the modality du jour—but also stationary oxygen concentrators and, particularly, its HomeFill Oxygen System.

“There has been a feeding frenzy around battery operated portable oxygen concentrators, which are a great modality,” Monaghan said. “But I think providers are realizing that once the warranty ends, these things are a pretty expensive way to deploy ambulatory oxygen for a very fixed reimbursement, compared to other modalities like our HomeFill, which is roughly the same cost to purchase but lasts three or four times as long with very little service costs along the way.”

Invacare has also been working to counteract decreased respiratory sales, specifically, with cost reductions.

“We had a line of sight that we thought the respiratory business would be down year-over-year (due to competitive bidding) and we guided to that,” said Kathy Leneghan, senior vice president and CFO. “We shrunk our infrastructure that we had supporting that business (and) that gave us some upside on the margin side of the house. And we focused on more of the higher profitability products within the product category. So we focused more on the 10-liter concentrators and the HomeFill vs. the highly commoditized 5-liter concentrators.”