Inogen bets on direct-to-consumer sales

GOLETA, Calif. - Inogen has begun to see the difference an expanded sales team can make, company officials said during a conference call on May 9 to discuss first quarter financial results.

Direct-to-consumer sales grew 53.4% in the quarter, primarily due to an expanded sales team and a corresponding increased marketing spend, says Scott Wilkinson, president and COO.

“What we're seeing in the first quarter is really driven by the (reps that we hired in the) third quarter, because as you recall, it takes four to six months for them to come up to speed,” he said. “What we are seeing is really reaping the seeds that were planted in the third quarter.”

Still, DTC sales lagged behind domestic business-to-business sales, which grew 61.2% in the quarter, primarily due to increased private label sales.

But company officials expect DTC sales to continue to grow in the second and subsequent quarters due to the planned launch of the company's next-gen portable oxygen concentrator by the end of this month. The Inogen One G4 will first launch exclusively in the DTC channel.

“This is clearly a product that is designed with patients in mind first,” Wilkinson said.

For the first time publicly, company officials shared some of the specs for the G4: It's about half the size of the G3, weighs only 2.8 pounds vs. the G3's 4.8 pounds, operates at a sound level of 40 decibels at setting two, and produces 630 millileters per minute.

“It's not only smaller and lighter, but it's also less expensive to manufacture,” Wilkinson said. “Over time, we expect it to be our flagship product for our direct-to-consumer sales channel.”

Adding to its sales team, launching innovative products and decreasing the cost of goods sold, as well as improving operational efficiencies, are all part of Inogen's plan to offset Medicare reimbursement reductions that go into effect July 1, 2016, with the second phase of the national rollout of competitive bidding and the Round 2 re-compete.

“We have shown progress toward these goals in the first quarter,” said CEO Ray Huggenberger.

Overall, Inogen reported total revenues of $43 million for the first quarter, a 27.4% increase over the same period last year. Net income was $2.4 million, a 50.4% increase.

Inogen also confirmed revenue guidance of $187 million to $191 million for 2016, representing year-over-year growth of 17.6% to 20.1%. It believes net income will come in at $12 million to $14 million, representing 3.6% to 20.8% growth over 2015.