Inogen reports big gains, improves outlook

GOLETA, Calif. - Inogen's focus on direct-to-consumer sales is paying off, CEO Ray Huggenberger says.

The company has enjoyed double-digit increases in total revenues for two quarters in a row now: 50.8% for the second quarter ended June 30, 2014, and 50.1% for the first quarter ended March 31, 2014.

“We made a shift in focus starting at the beginning of this year to focus more on cash sales,” Huggenberger said during a conference call last week to discuss Inogen's financial results for the second quarter. “We weren't quite sure how that would turn out. The first quarter was very encouraging; the second quarter is confirming those numbers and that trend. I don't want to call one quarter a trend. I'm going to be cautious calling two quarters a trend.”

Inogen reported total revenues of $30.4 million for the second quarter. Net income was $2.3 million compared to $2 million for the same period last year. Sales revenues were $20.5 million vs. $12.8 million, and rental revenues were $9.9 million vs. $7.4 million.

Inogen now plans to double down on the direct-to-consumer market by expanding its sales force, Huggenberger says.

“We were able to drive some substantial growth without purely relying on increased headcount to drive growth,” he said. “Now…I think it is time to invest in more capacity to do more of it.”

Business-to-business sales continue to be Inogen's fastest growing segment (it saw an 88.8% increase in the second quarter), but Huggenberger believes it's enjoying some “pull through” from the company's direct-to-consumer advertising.

“I think the bigger driver of the business to business success in the second quarter is that we're educating patients about this technology,” he said. “Not every call goes to us. Many call their current provider and say, 'Yes, this is what I want and if you don't give it to me, I'll go somewhere else.'”

With two solid quarters under its belt, Inogen has revised its outlook for the rest of the year: It projects total revenues for 2014 to be in the range of $102 million to $106 million, instead of $92 million to $96 million; and net income to be in the range of $4.5 million to $5.5 million, instead of $4 million to $5 million.

Filling out this year, Inogen expects to begin shipping its new stationary concentrator, the Inogen At Home, in the fourth quarter. But it doesn't expect the launch to have a material impact on revenues, Huggenberger says.

“We plan to test various marketing and sales strategies for the Inogen At Home before it is rolled out on a broad scale,” he said.

As for CMS's proposals to expand competitive bidding pricing nationwide in 2016 and to use bundled monthly payments for certain DME—Inogen remains bullish. It expects the former to have a potential impact on revenues of 4% to 5%, and the latter to actually have a positive impact.

“It has the potential to add more patients and reduce complexity in the sales, setup and billing processes,” Huggenberger said.