Inogen adjusts channel mix

GOLETA, Calif. – Demand is high, but with supply restricted, Inogen is prioritizing POC orders from its direct-to-consumer channel. 

That meant it was unable to fulfill some orders from other channels, particularly its domestic business-to-business channel, which saw sales of $22.8 million in the third quarter, down 1.1% from the same period last year. 

"Due to supply chain constraints and in an effort to optimize financial results, we intentionally focused our available capacity on supplying our direct-to-consumer sales and rental channels and our international business to business sales channels, which you will see reflected in results, while attempting to fulfill critical orders for our domestic business to business partners,” said Nabil Shabshab, president and CEO during a conference call to discuss financial results from the third quarter. 

By comparison, the director-to-consumer channel saw sales of $36.3 million in the third quarter, up 24.6%; and the rental channel saw sales of $12.1 million, up 61.3%. 

Inogen’s supply is restricted due to shortages of semiconductor chips, which are used in the batteries and printed circuit boards of its POCs, and due to the increased cost of those chips – a situation that will likely only get worse in the fourth quarter and beyond, company officials say. 

“In the third quarter, we incurred $0.9 million of higher material costs associated specifically with the semiconductor chips,” said Ali Bauerlein, founder and CFO. “We expect $5 million to $7 million of higher material costs for the full year associated with chips for our batteries and POCs. So, if you took $0.9 million off of that, that's what you would expect in the fourth quarter, since there were no costs incurred in the first or second quarter associated with these higher material costs.” 

Inogen did increase prices on its POCs in the “low double digit” range on Sept. 1, helping to partially offset some of these increased costs. 

“From a context perspective, we’ve seen multiple competitors actually follow us in the price increase because everybody is under the same pressure we were,” Shabshab said. “So, it has extended out exactly like we planned it.” 

Despite supply chain constraints and their financial impact, Inogen described an agreement with Ashfield Healthcare that will add about 20 reps to the company’s prescriber sales organization as “very timely.” 

“We expect the team to be staffed and trained in the first half of next year,” Shabshab said. “We acknowledge there is a ramp up in terms of productivity, (but) we also believe simultaneously, the supply chain concerns are going to start easing up as of the back half of next year. So, it would be very timely in the sense that these salespeople, who have been in the field and who have established relationships, are getting up to productivity (at the same time). It’s absolutely the right time to make the investment.”