Inogen sees growth curve for POCs

Friday, May 12, 2017

GOLETA, Calif. – Are Inogen’s continued strong earnings a sign that HME providers are finally adopting portable oxygen concentrators in larger numbers?

Yes, says CEO Scott Wilkinson, but don’t get too carried away.

“I think this transition will be a process, not an event,” he told investors during an earnings call on May 10 that was cut short due to technical difficulties. “I know we get a lot of questions about, do you think we’re at the hockey stick, or is this the tipping point? I’m not sure there is such a point. I think it’s a process where you’re going to see a curve that continues to grow.”

Inogen reported total revenues of $52.5 million for the first quarter of 2017, an increase of 22% over the same period last year. It reported a net income of $5.9 million, a 135.3% increase.

Inogen’s domestic business-to-business sales channel, where revenues grew 84.2% in the first quarter of 2017 compared to the first quarter of 2016, was the star of the company’s earnings report. Within that channel, traditional HME provider and private label sales accounted for more than half of the growth, another sign of the changing mindset among HME providers.

“I think it’s fair to say at this point we have a little bit more time under our belt, here, as far as HMEs trialing, experimenting, and trying to understand more how POCs fit into their businesses in this phase of reimbursement decline,” Wilkinson said. “We’re seeing pretty steady progress in those trials, in that transition.”

Another data point showing the acceleration of POC adoption: Medicare paid Inogen about $6.2 million for POCs (E1392) in 2015, $5.6 million in 2014 and $4.3 million in 2013, according to the HME Databank.

For Inogen’s direct-to-consumer channel, sales also grew in the first quarter, 27.8%. The company expects to give this channel a boost later this year and into 2018 as it ramps up its inside sales team, including at a proposed new facility in Ohio.

“We added new inside sales representatives in the first quarter of 2017 and we are pleased with our team’s success,” Wilkinson said. “We are planning to hire additional sales employees throughout 2017 as this is still our strongest bottleneck to growth in direct-to-consumer sales.”

Looking ahead, Inogen maintains its 2017 revenue guidance of $233 million to $239 million, representing year-over-year growth of 14.9% to 17.8%. It is increasing its full year net income and adjusted net income guidance to $22 million to $24 million, representing 7.2% to 17% growth.

“As HME providers adopt portable oxygen concentrators this could change our historical sales seasonality,” said Ali Bauerlein, CFO. “Given these changes, we expect our strongest sales in the third and fourth quarter in 2017 in contrast to our historical pattern of the second quarter being the strongest.”