ResMed 'plans to stay ahead of the game'

Friday, April 26, 2013

SAN DIEGO – Despite pervasive reimbursement pressures, ResMed officials have reported solid earnings for the third quarter and outlined “major growth horizons” for the company’s future.

During an earnings call with investors on April 25, newly minted CEO Mick Farrell detailed ResMed’s plan to drive market penetration in three markets: sleep disordered breathing, COPD and heart failure.  

“We are more excited than we have ever been,” he said.

ResMed reported $383.6 million in revenues for the quarter ended March 31, a 10% increase compared to the same period in 2012. It reported a net income of $84.9million, a 31% increase. Revenues in the Americas, specifically, were $215.2 million, a 13% increase.

In sleep disordered breathing, where ResMed already has a significant presence, officials plan to grow the market through education and awareness (it’s only 5% to 15% penetrated, they say) and grow market share with the help of two new masks in the fourth quarter (with more to come in fiscal year 2014, they say).

“We plan to stay ahead of the game by constantly innovating,” said Peter Farrell, executive chairman. “We’re going to provide in the near future smaller, quieter and more comfortable masks.”

ResMed officials say they made a significant stride in the COPD market April 25, when they launched a non-invasive ventilation device cleared by the Food and Drug Administration to treat the disease.

“In the hospital and homecare vent and humidification market, we have a leadership position in Western Europe, but in the U.S. market, there’s significant room for share growth,” Mick Farrell said. “There’s multiple hundreds of millions of dollars of potential.”

In heart failure, ResMed is still in the process of conducting a study to determine whether or not managing CSR-CSA (Cheyne-Strokes respiration with central sleep apnea) with the company’s adaptive servo-ventilation technology increases survival rates and decreases hospitalizations.

One of few gray clouds on the horizon: Medicare’s competitive bidding program. ResMed officials told investors that they’ve been having many conversations with provider customers in the past few weeks about how to attack the, on average, 47% blow to reimbursement for CPAP devices.

“The more sophisticated HME providers understand that there’s a volume opportunity if they’ve won a contract and what they need to do to drive efficiencies into their businesses,” said Jim Hollingshead, president of the Americas.

Investors also wanted to know: Will ResMed cut prices in response to reimbursement pressures?

“There’s a traditional 3% to 5% annual reduction in pricing,” Mick Farrell said. “Could this push (the reduction) a little beyond that, certainly.”

ResMed also reported $1.1 billion in revenue for the nine months ended March 31, a 10% increase compared to the same period in 2012. It reported a net income of $234.1 million, a 32% increase.