Inogen reports double-digit increases

GOLETA, Calif. - The impact of competitive bidding is “pretty much behind us,” Inogen President and CEO Raymond Huggenberger said during the company's first-ever earnings call on March 27.

Inogen, which completed an initial public offering in February, reported total revenues of $19.8 million for the fourth quarter ended Dec. 31, 2013, a 43% increase over the same period in 2012. It reported net income of $20.1 million, including a one-time tax asset benefit attributable to common stockholders, vs. a net loss of $1.6 million. Gross margin was 51.5% for the fourth quarter of 2013 compared to 50.8% for the same period in 2012.

“We want to highlight that this is the second full quarter after the implementation of bidding Round 2 and our gross margin has rebounded nicely,” he said. “We feel we have weathered the storm of the Round 2 reimbursement reduction, and we're well on our way to outgrow the issue.”

Inogen also reported total revenues of $75.4 million for 2013, a 55% increase over 2012. It reported net income of $18.2 million vs. a net loss of $5.2 million. Gross margin was 51.7% for 2013 compared to 49.3% for 2012.

But what about CMS's plans to take competitive bidding nationwide by 2016 and to possibly change the way it makes payments for certain HME?

“I don't think that impacts the industry in the short run, but there is a 2016 impact,” Huggenberger said. “The one thing that I found encouraging is their realization that the current billing administration is complex and expensive. The complexity of billing for CMS is way too high. Any simplification would be a good thing for the payer and provider.”

If CMS decides to pursue bundling, it likely won't affect oxygen equipment or Inogen.

“Oxygen is already bundling and therefore it should have minimal to no impact on our business,” he said.

Going forward, Inogen plans to focus on increasing its 4% to 5% penetration in the portable oxygen concentrator (POC) market by continuing to ramp up its consumer awareness marketing and sales capacities. Company officials acknowledge that increased adoption of POCs among HME providers is both a threat and an opportunity, because Inogen is both a provider and manufacturer of the technology.

“(Ultimately), it should be accretive to our business,” Huggenberger said.

Another area of focus for Inogen: In addition to consumers and physicians, it wants to court more non-Medicare payers. The company increased its number of private-pay contracts from 30 to 44 from Sept. 30, 2013, to Dec. 31, 2013.

“We have very little penetration on insurance contracts, so we're expanding beyond Medicare and beyond out-of-network benefits for the insurances contracts that we do have,” said Ali Bauerlein, co-founder and CFO. “That will increase our ability to grow into the market.”

Inogen's outlook for 2014 includes total revenue in the range of $90 million to $94 million, and net income in the range of $4 million to $5 million. The company has also submitted a 510K for a new stationary oxygen concentrator, but it hasn't received approval yet.

“When that occurs, it will be incremental to our guidance,” Bauerlein said. “With the product launch there will be a ramp-up period, so we don't think it will significantly material to our 2014 guidance.”