Inogen ramps up support for DTC biz

Friday, March 2, 2018

GOLETA, Calif. – Inogen’s sales team for its direct-to-consumer business hit a record 263 reps by the end of 2017, an increase of 86 reps compared to 2016, company officials told investors during a Feb. 28 conference call to discuss fourth quarter and year-end financial results.

At least 43 of those new sales reps are located in Inogen’s new Cleveland facility, opened last year.

“Our strategy is to steadily hire additional sales representatives throughout 2018 and continue to invest in marketing activities to increase consumer awareness, as we believe this is still our most effective means to drive growth of direct-to-consumer sales,” said Scott Wilkinson, CEO and president.

Inogen’s DTC business was the clear leader in the company’s recent financial results, with sales increasing 57% in the fourth quarter of 2017 compared to the fourth quarter of 2016. Sales increased 46.1% for the company’s domestic B2B business.

Inogen’s growing DTC sales team, as well as an increasing marketing and advertising spend that was $4.4 million in the fourth quarter of 2017 compared to $1.7 million for the fourth quarter of 2016, sets the stage for the business to post even bigger numbers in 2018, something that’s reflected in the company’s increased guidance for the year to $298 million to $308 million in revenues, representing growth of 19.5% to 23.5% vs. 2017.

“Our limit to growth in creating additional consumer awareness is really tied to how much sales capacity we have,” said Ali Bauerlein, co-founder and CFO. “So we add that additional sales capacity and we spend more in marketing to drive more leads to fill that sales capacity. We feel we're a long way from full saturation on the direct-to-consumer sales side of the business.”

With Inogen’s DTC business going gangbusters, analysts asked company officials why they still hang on to their business as a provider renting POCs to Medicare beneficiaries, with all its challenges, namely competitive bidding. The company reported rental revenues of $5.4 million for the fourth quarter of 2017, a 34.1% decrease compared to the fourth quarter of 2016.

“As you know, we've deemphasized (that business), but we haven't given up on it,” Wilkinson said. “From a strategic standpoint, it opens up access to our products to patients because there are still some patients that do want to use their (Medicare) benefit and we don't want to completely screen them out. It also sets us up to continue to walk in other providers’ footsteps, so we better understand their business and, (as a result), I think that we become a better resource to help them through the navigation of conversion to a non-delivery model.”

Additionally, “way out in the future,” as POCs surpass stationary concentrators as the main mode of oxygen therapy, Inogen’s rental business, which Wilkinson acknowledges “hasn’t been a positive contributor,” will become increasingly important.

“If everybody is able to get a POC from their traditional homecare provider, it will be more difficult to sell somebody a POC from a retail standpoint,” he said. “So we do see rental as still our long-term future, at least in oxygen therapy. Once we hit a conversion point with POCs, then we’ll need to back fill with other disruptive products that we can leverage the expertise of that sales force and still drive growth.”

But Wilkinson was clear that for the foreseeable future Inogen remains hyper focused on its DTC business.

“While I painted a picture of what the future will look like in 10 years, that’s not where we are today,” he said. “The opportunity today is still using our sales team to convert oxygen patients (to POCs), so that’s what we’re focused on.”