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ResMed rides shift in product mix

ResMed rides shift in product mix But 'our focus is on our core market' says CEO Mick Farrell

SAN DIEGO - ResMed benefited from $40 million in sales for ventilators and accessories in the first quarter of its fiscal year 2021 - again helping to compensate for sluggish new patient volume for CPAP devices due to the COVID-19 pandemic.

In the last quarter, ResMed recorded $125 million in sales for vents and, at the time, the company was “muted” on whether demand for vents would continue into the first quarter of 2021. It did, but ResMed expects sales to be “significantly reduced” again in the second quarter.

“We don't think we're going to reach a state where there's going to be hospitalizations like we had early January-February in Wuhan and February-March in Milan and then March-April in New York, where you reached a 100% capacity and literally ran out of vents and ICU beds,” said said CEO Mick Farrell, during a conference call to discuss the company's financial results. “Our best models show that the magnitude of the second and third waves are actually reduced and so we're just being realistic. Our job is to focus on our core market and the coming back of that.”

That core market being CPAP devices and masks. Because new patient volumes are under pressure from the pandemic, ResMed has seen growth only in the single digits year over year for devices.

But ResMed officials emphasized the company is showing quarter to quarter increases in sales of CPAP devices, as a result of more sleep labs opening back up and home sleep testing becoming more common.

“Where we end up in Q2 or Q3 - time will tell,” said Brett Sandercock, CFO. “We're certainly seeing that nice sequential increase week to week, month to month, which I think gives us a lot of confidence that sleep devices are improving throughout FY2021.”

Also helping to dull the pain: Sales of masks and accessories have continued to be strong throughout the pandemic, driven by an increased awareness of and emphasis on “respiratory hygiene and respiratory health” by patients.

“What's going on is patients want new, clean equipment,” said Jim Hollingshead, president of the sleep and respiratory care business. “They're more sensitized to that because of the pandemic, and our HME provider customers have realized it's an avenue that's better for patient care and better for the business.”

Other topics discussed during the call:

Company officials called CMS's plans to drop 13 product categories, including CPAP devices and masks, from Round 2021 of national competitive bidding, and to extend the current 50/50 blended reimbursement rates in rural areas “really good outcomes for our industry.” “The one thing we know is that on Jan. 1, the rates will remain where they are,” Farrell said. “And it was great that CMS listened to feedback from the industry. And it wasn't just around COVID. The rates just as they are fit the need. CMS found they weren't going to have savings, which means we've reached sort of a market equilibrium.”

Company officials expect use of home sleep testing to continue to increase post-pandemic. “The data we do have, from our devices and from anecdotes from the market, strongly suggest HST has become a much higher percentage of testing,” Hollingshead said. “I do think it's sustainable. Patients prefer it and a number of clinicians are seeing it as an easier way to diagnose.”

Company officials announced that, as part of a new value-added reseller agreement, Brightree has become a preferred solution for Cerner's HME, pharmacy and home infusion customers in the next step in ResMed's partnership with the giant EHR vendor.


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