Supplies market: 'It's an attractive space'

Friday, October 26, 2012

SAN DIEGO – ResMed officials remain confident in the growth of the supplies market for CPAP devices, they said during an earnings call Oct. 25.

This, despite a new rule from Medicare that requires providers to prove that supplies like masks are non-functioning before they can replace them.

“There’s a lot of potential to go from just under two masks per year (the current average) to three or four, if the patient does, indeed, need a new mask,” said Peter Farrell, chairman and CEO. “We think it’s a pretty attractive space.”

So far, ResMed officials say they’ve seen “no impact whatsoever” from the new rule on the supplies market.

ResMed officials remain bullish largely because they believe many providers still haven’t made providing supplies a focus of their businesses.

“A large majority of the large nationals have, but there are future improvements they can make in their systems,” said Mick Farrell, president of ResMed Americas. “The large regionals have a lot more room for improvement and the local regionals—there is still, sadly, a large segment where the focus on replenishment is not part of the conversation. Of the three tiers, two have considerable room for improvement.”

Among the other topics discussed:

The 2.3% medical device tax set to go into effect Jan. 1: ResMed officials said they’re still waiting to see the fine print from the U.S. Department of Treasury, which plans to issue a final rule sometime this fall.

“We’re waiting to get some clarity on that before we give the market more clarity on how that will impact us,” said Brett Sandercock, CFO.

The future of home sleep testing (HST): ResMed officials say by the end of this year four of the five largest commercial insurers will require prior authorizations for testing conducted in sleep labs, a move that they predict will increase the demand for HST significantly. The next group to be won over: primary care physicians (PCPs).

“Will PCPs adopt it in the way we’d like to see them adopt it?” Peter Farrell said.

During the call, ResMed reported revenues of $339.7 million for the quarter ended Sept. 30, 2012, an 8% increase over the same period last year. It reported net income of $71.3 million, a 41% increase.

ResMed also announced a quarterly dividend of $0.17 per share with a record date of Nov. 20, 2012, and payable Dec. 18, 2012.