ResMed sees surge in demand for vents

SAN DIEGO - ResMed generated about $35 million in revenues from a COVID-19 related surge in demand for ventilators in the third quarter of fiscal year 2020, but that represented only 4.5% of the company's $770 million in total revenues in what was a solid quarter.

The company says it produced 52,000 invasive and non-invasive ventilators in the quarter, a three-fold increase in production.

“Our core underlying business remains robust, over and above that of the ongoing surge of demand,” said CEO Mick Farrell.

ResMed reported net income of $163.1 million for the third quarter of fiscal year 2020, a 55% increase compared to the same period last year.

The company expects increased demand for vents to continue into the fourth quarter—and it expects to be able to meet that demand, Farrell says.

“Can we continue and/or increase the production capacity?” he said. “The answer is absolutely yes. We are constrained on some key components for invasive ventilators. But we really don't have significant constraints (for non-invasive ventilators). Those non-invasive vents can scale to 5x or 10x, and we can scale to whatever the demand is.”

The challenge for ResMed amid the pandemic: producing enough products to respond to continued surges in demand but scaling back when needed.

“We're getting pretty good at modeling these demand curves,” Farrell said. “So what we're doing is maximizing products in advance and then making sure we get through the peak, but not have an over amount of inventory on the other side. We're carefully managing the peak, the flattening and then making sure we get back to normal COPD, neuromuscular disease, ALS and other sales with those ventilators.”

On the CPAP side of its business, ResMed reported an 8% and 17% increase in device and mask sales, respectively, in the quarter, but it was keeping a close eye on reduced in-lab sleep testing and the downstream affects of that, including reduced referrals to HME providers.

“For the on-premise or in-laboratory tests for sleep apnea, we are modeling how those will scale back up again customer-by-customer, city-by-city and country-by-country, as the economy opens up and primary care physician visits and elective medical procedures come back online through telehealth and beyond,” Farrell said. “Physicians and therapists will then have to work through the backlog of undiagnosed patients that has been built through the COVID-19 lockdown in their region.”

Helping to buffer the lull in in-lab sleep tests is home sleep tests, a method of diagnostic testing that's gaining traction due to the pandemic.

“We're actually working very hard to enable home sleep testing to figure out how to help our lab customers and our physician customers virtualize their model, not just to our device offerings, but through workflows, through webinars and trainings, and we're working hard to see if we can virtualize some of that with software, which will take a little bit more time,” said Jim Hollingshead, president, sleep business. “And we do think that a shift to home sleep testing is, which has been going on worldwide for years, will be accelerated by this.”