ResMed reports double-digit increases

'We’ve been pioneering a market dynamic that is finally getting traction'
Friday, January 25, 2013

SAN DIEGO – With home sleep testing (HST) gaining ground and new products in the works, 2013 should be a good year for ResMed, officials reported last week.

During a conference call to discuss its quarterly earnings (see below), Chairman and CEO Peter Farrell noted that he expects up to 50% of all sleep tests will be conducted in the home by end of the year.

“We’ve been pioneering a market dynamic for several years that is finally getting traction,” he said.

Driving that growth: By this spring, 75% of people covered by commercial insurers will require pre-authorizations for sleep lab testing, a trend that continues to steer referral sources toward HST, Farrell said.

ResMed is highly invested in the growth of HST, as it’s a good vehicle for its auto-adjusting APAP, a more high-end and costly device than CPAP, but one that officials say is more effective for patients and more efficient for HME providers.

“The mix shift to APAP will continue,” said Mick Farrell, president of ResMed Americas.

Other positive developments in the sleep market, ResMed officials say: With continued emphasis on compliance, a steady stream of providers are ramping up their data gathering capabilities, which bodes well for the company’s EasyCare monitoring product. They’re also ramping up their supplies replenishment capabilities, which bodes well for products like mask cushions.

“There’s a lot more runway in that cushion area,” Mick Farrell said. “How do we empower this across segments? We have a team dedicated to this, so we’re not just talking about it. We’re taking action.”

ResMed officials commented on two topics du jour: competitive bidding (“We partnered with the winners (in Round 1) and when it goes 10x, we’ll partner with the winners again,” Mick Farrell said. “We know the plan. We’ve got it in place”); and a demo project between one of its competitors, Philips Respironics, and Kroger (They have no plans to do the same, but it spurred “great conversations” with customers about the importance of replenishment and cash businesses).

ResMed officials also reported that they plan to launch new masks and devices this year, with an eye toward increasing comfort, and reducing noise and costs.

The numbers

ResMed officials reported revenue of $376.5 million for the quarter ended Dec. 31, 2012, a 13% increase over the same period in 2011. It reported net income of $77.9 million, a 24% increase.

“It was an extremely robust quarter,” Peter Farrell said. “You may be tired of hearing this, but it was the 72nd consecutive quarter in which we’ve grown our top line.”

The company reported revenue of $716.3 million for the six months ended Dec. 31, 2012, an 11% increase over the same period in 2011. It reported net income of $149.2 million, a 32% increase.

Et cetera

ResMed officials also reported during the call:

They believe only a small number of the company’s products will be taxed 2.3% as part of a new tax on medical devices that went into effect Jan. 1. The impact on its bottom line: “less than $1 million,” says Brett Sandercock, CFO.

A quarterly dividend of $0.17 per share will be payable on March 19.

They plan to buy back 2 million shares in 2013.