ResMed believes storm has now passed

‘There are green shoots starting to appear’ says CEO Mick Farrell
Friday, January 24, 2014

SAN DIEGO – Competitive bidding helped to drive down ResMed’s revenues in the Americas by 2% for the second quarter ended Dec. 31, 2013, compared to the same period in 2012.

Year-on-year, sales revenues from masks were flat and sales revenues from flow generators declined 5%, CEO Mick Farrell said during a Jan. 23 earnings call.

“We were not satisfied with the results,” he said.

Overall, ResMed reported revenues of $384.3 million for the quarter, a 2% increase. Net income was $86.6 million, an 11% increase. It also reported revenues of $742 million for the first six months of its fiscal year, a 4% increase over the same period in 2012. Net income was $167.6 million, a 12% increase.

While providers shifting their strategies and structures in response to competitive bidding has had a negative impact on sales revenues at ResMed, officials see signs that the impact of the program is beginning to moderate. They cite, among other things, providers starting to pick up new patient volume through asset purchases and referral pathway development.

“We are not done, but there are green shoots starting to appear,” Farrell said.

ResMed officials say they don’t consider the current environment the “new normal.”

“I don’t think the dynamic we’ve been seeing is permanent,” said Jim Hollingshead, president of the Americas. “It’s like a thunderstorm has passed through town. The storm is through, but there is cleanup. Over the next several months, we will see it stabilize.”

Another external headwind decreasing sales revenues at ResMed: new product launches by competitors that have eaten away at a portion of the company’s market share gains. In response, ResMed recently launched the first of three upcoming new products, the AirFit P10 nasal pillows system, which Farrell says is “flying off the shelves.”

“We are confident that our pipeline can address this challenge,” he said. “It is a game we have played before and we know that we can win.”