ResMed: Breaking even isn't breaking bad

SAN DIEGO - ResMed's revenues in the Americas were flat for the third quarter this year compared to last year, but that's not necessarily a bad thing, company officials say.

ResMed had a tough target to beat—revenues in the Americas grew 13% in the third quarter last year. It also had challenging market conditions from strong competition and reduced reimbursement.

“Given this…keeping our topline flat on a year-over-year basis was a good result,” said CEO Mick Farrell during a conference call on April 23.

While revenues outside of the Americas increased to $181.6 million for the third quarter ended March 31, 2014, an 8% increase over the same period last year, revenues in the Americas were $216.1 million vs. $215.2 million.

Overall, ResMed reported revenues of $397.8 million for the third quarter, a 4% increase over the same period last year. It reported a net income of $90 million, a 6% increase. ResMed also reported revenues of $1.14 billion for the nine months ended March 31, 2014, a 4% increase over the same period last year. It reported net income of $275.5 million, a 10% increase.

By category, ResMed's revenues in the Americas from masks grew by 2% and revenue from flow generators decreased 2% year-over year. That's a slight improvement over last quarter, when masks were flat and revenues from flow generators declined 5%.

“The U.S. market dynamics began to improve in Q3, although the environment is still evolving” Farrell said. “New patient growth, while still subdued, is continuing and, more importantly, resupply to the installed base of patients is also growing.”

Farrell also made a point of highlighting that, since the last quarter, ResMed has made some pricing adjustments that have allowed the company to regain market share in the third quarter.

“Although,” he said, “pricing adjustments were an offset to those volume gains, resulting in a flat quarter.”

Despite competitive bidding, ResMed officials believe HME providers are on firmer and firmer ground with each quarter that passes.

“To reiterate what Mick said, volume growth is strong and volume growth was stronger in Q3 than in the past couple of quarters,” said Jim Hollingshead. “(Additionally), I'd say the vibe is a bit better. Nobody is happy about the reimbursement rates—that continues to be a tough pill to swallow—but the tone and tenor has improved.”

A possible new threat on the horizon: bundling. CMS is toying with the idea of using bundling to pay for certain DME, including CPAP equipment and supplies—a move that some fear could decrease utilization.

“If CMS does decide to implement bundling, ResMed is not only ready and willing, but also able to respond to a market like that because we're already in one,” Farrell said. “In France, we have a bundling model where providers are paid a fixed amount per member per month to look after patients on sleep apnea therapy. There are certain minima in terms of the number of masks that they have to provide. So our assumption is that the bundling approach, if CMS did go forward, would have such minima in their programs.”