Inogen tries to manage cost increases

GOLETA, Calif. – Inogen expensed $2.3 million in higher material costs in the fourth quarter of 2021 and expects that number to double in the first quarter of 2022, company officials say. 

Inogen expects $4.5 million to $5.5 million in incrementally higher material costs in the first quarter of 2022 associated with open market purchases of semiconductor chips used in its batteries and portable oxygen concentrators, says interim CFO Mike Sergesketter. 

“We expect this cost to increase significantly in the first quarter of 2022 due to cost inflation on materials and labor throughout the supply chain, primarily related to semiconductor chips we forward bought in 2021,” he said during a conference call to discuss the company’s most recent financial results. 

Inogen’s success on the open market did allow the company to restart production at its Texas and California facilities, as well as at Foxconn, its Czech Republic-based OEM, between Feb. 7-9, following a temporary shutdown in January. 

The company’s price increase on all products, implemented Sept. 1, 2021, will cover most of the cost inflation related to the shortage of semiconductor chips, Sergesketter says. 

“While we believe our pricing actions will cover most of the material cost inflation, we expect negative operating and net losses for the full year of 2022 reflecting the anticipated supply constrained revenue, increased cost of goods sold per unit, higher operating expense and incremental growth investments versus the prior year,” he said. 

Inogen is also redesigning the motherboards in its Inogen One G5 POC to use alternative chipsets that currently have a better level of availability. The company expects to begin using those in production in the second quarter. 

“With the motherboard design, there will be no material impact on the functionality, performance, patient user interface or patient experience, but we expect greater optionality in sourcing semiconductors moving forward,” said CEO Nabil Shabshab. 

While it navigates headwinds from supply chain constraints, Inogen continues to increase its prescriber sales force – efforts that are starting to pay off. The company reported 42,900 patients on service as of Dec. 31, 2021, up 6.2% sequentially and up 33.2% year over year, partially driven by increased prescriber awareness. It expects 57 physician-facing sales reps to be in place by March as a result of a previously announced contract with Ashfield. 

“To support the combined 57 physician-facing sales reps, we have evolved our operating model by adding 12 Ashfield concierge service reps that will be assuming administrative responsibilities, which we believe will increase the selling time of the sales reps by about 60%, according to our internal early estimates, while improving the customer and patient experience,” Shabshab said.