Inogen sees challenges ahead

GOLETA, Cailf. – Inogen saw a nice boost in revenue in the second quarter, thanks to increasing consumer confidence and ambulation, but the company expects supply chain constraints to inhibit its ability to meet demand in the second half of 2021. 

The company expects total revenue for the second half to be lower than the first half of the year, and it expects net losses for the third and fourth quarters, as well as for the full year. 

“We continue to see strong consumer demand and business demand for our products, and you can see that reflected in our second quarter results,” said Ali Bauerlein, co-founder and CFO, during an Aug. 4 conference call to discuss financial results. “However, the chip shortages that we are seeing, they are impacting our ability to meet that demand. So, I think when we look at the third and fourth quarter dynamics – it’s not necessarily driven by demand, it’s more reflective of what we have from a supply chain perspective.” 

Inogen reported total revenue of $101.6 million for the second quarter of 2021, a 41.7% increase compared to the same period in 2020. The company reported domestic direct-to-consumer revenue of $40.9 million, a 35.6% increase, and rental revenue of $11.3 million, an 85.2% increase. 

The semiconductor chips used in Inogen’s products are not only more difficult to find but also more expensive to buy, forcing the company to also increase prices in the “low double-digit range” on all products on Sept. 1, says Nabil Shabshab, president and CEO. 

“We’re doing it in a very orderly fashion,” he said. “There are some contractual obligations that we have. We believe that about 70% of it will go through, depending on the terms and conditions of different customers. So, we’re trying to get ahead. But I also want to clarify: We’re not covering all our increases in costs; we’re actually trying to catch up a little bit on the cost increases that have been happening since the beginning of the pandemic.” 

Inogen continues to work with its OEM partners to explore alternatives, including buying semiconductor chips on the open markets, but the company will likely be grappling with shortages into next year, Shabshab says. 

“This is a very fluid situation, not only for us, but for a lot of people,” he said. “By way of background, we’re in the mix with huge other customers that we are fighting for allocations with. Our OEMs are actually planning on a 52- to 78-week cycle. The indication is, it’s not going to stabilize until Q2 of 2022.” 

Other highlights from the call: 

• Supply chain constraints are also affecting hiring, with Inogen planning limited hiring for the direct-to-consumer, inside sale team, mainly just to offset any attrition. 
• Inogen supports the proposed changes to the national coverage determination for home oxygen therapy, as it believes they will result in expanded coverage, reduced administrative burdens and greater physician decision-making authority.