Investors re-commit to Inogen

SANTA BARBARA, Calif. - Five years after their initial outlay, a group of investors led by Novo A/S has decided to pump millions more into Inogen, the manufacturer and provider of the Inogen One portable oxygen concentrator (POC).

Novo A/S will give Inogen $22 million in equity financing primarily to help the company pay for rental assets.

“If you're growing in this business—where you have to pay for equipment upfront but Medicare pays you monthly—it just sucks down cash,” said Scott Wilkinson, executive vice president of sales and marketing for Inogen. “Like any other provider, we need financing so we can manage cash flow.”

Novo A/S gave Inogen $22 million in 2007, praising the company for being “at the forefront of a paradigm shift in home oxygen therapy.” Inogen now has patients in 49 states.

Wilkinson says Novo A/S has been pleased with Inogen's compounded annual growth rate of 60% to 70% over the past three years—a growth rate that the company credits to the scale it has been able to achieve as a provider.

“Initially, their mandate to us was, 'We'd like you to grow faster; what are the barriers?'” he said. “We told them we needed cash to cover assets and they gave it to us. Now they're saying, 'Can you grow even faster?' They like what they've seen.”

Nova A/S's re-commitment to Inogen came a few weeks after the company submitted bids in the oxygen product category for all 91 areas included in Round 2 of competitive bidding. Inogen won contracts for oxygen in six areas in Round 1 of the program at a significantly reduced rate.

“We've always counseled our investors, 'Count on the rates coming down,' so they're not surprised by that,” he said. “They look at our business and see that we're as well-positioned as anyone to compete in a market with lower rates due to our scale and our non-delivery business model.”

Inogen also plans to use the financing to invest in R&D, though Wilkinson wouldn't speak directly to any new products in the pipeline.

“We have a five-year plan to fill in products,” he said. “There will be something new this year.”