Inogen stays focused on DTC

GOLETA, Calif. - Inogen's B2B business keeps posting the largest numbers, but the company has put a number of wheels in motion to boost its direct-to-consumer business in 2017.

For the third quarter in a row, Inogen's domestic B2B sales were the strongest in the fourth quarter, with 69% growth compared to the same period in 2015.

“We continue to see more traditional HME providers turning to portable oxygen concentrators to lower their operating costs in the face of reimbursement reductions and, specifically, they are turning to Inogen as the leader in this space,” said Scott Wilkinson, the company's new president and CEO, who replaces Raymond Huggenberger. “For the third quarter in a row, revenue from our private label partner and traditional HME providers represented more than half of total sales revenue in the fourth quarter of 2016.”

Inogen on Feb. 23 reported total revenue of $50.9 million for the fourth quarter of 2016, up 25.7% over the same period in 2015. Net income was $5.3 million, a 36.3% increase. It reported total revenue of $202.8 million for all of 2016, up 27.6% over 2015. Net income was $20.5 million, a 77.1% increase.

While Inogen's success in B2B sales has been a nice surprise, the company continues to prioritize direct-to-consumer sales, where “the closer we're to the end user, the more visibility we have on what we can expect in revenue,” said Ali Bauerlein, co-founder and CFO.

“We expect direct-to-consumer to be our fastest-growing channel (in 2017),” she said, while discussing increased revenue guidance of $233 million to $239 million for this year. “We also expected that going into 2016; however, what ended up happening was both B2B domestically and internationally grew faster.”

In play to boost Inogen's direct-to-consumer business in 2017: opening a new sales office and warehouse in Brooklyn, Ohio, that will serve as its center for eastern U.S. operations. The company currently has locations in California, where it's based, and Texas, where it's running out of space.

“We believe that having a sales and service support location based in the Eastern time zone will allow us to better service our customers,” Wilkinson said. “We're planning on adding approximately 240 people in the Cleveland area location over the next three years.”

By mid-2017, Inogen also plans to have a new customer relationship management or CRM system up and running.

“We have already begun execution of this project and we believe this will help improve productivity of our sales, customer service and billing departments,” Wilkinson said.

At its core, Inogen's focus on direct-to-consumer sales has to do with its inability to predict the speed with which traditional HME providers, who are concerned about capital expenditures, will adopt POC technology. With the company seeing 1% to 1.5% growth in adoption by providers year-to-year, it knows this is not a “short-term event.”

“We're cautious on how quickly the HME community will adopt,” Bauerlein said. “We certainly see the large market opportunity that eventually POCs should be the standard of care, but how the HME community will get from where we're at today to that point and the timing of that—we are still very cautious on that.”