Q3 Insights:
ResMed, a respiratory care and software-as-a-service provider, grew device sales by 43% in its third quarter. The growth, which exceeded ResMed’s expectations, came as the company made progress on the supply constraints it has faced since its rival Philips began recalling devices.
“During the quarter, we were able to offer unconstrained access to cloud connected AirSense 10 flow generated devices in North America, as well as improved access to those cloud connected devices across our global markets. We continue to work through some supply chain constraints with our latest and greatest AirSense 11 platform, and we expect to steadily improve the global availability of AirSense 11 over the next several quarters,” ResMed CEO Mick Farrell said on a conference call with investors.
In the previous quarter, ResMed committed to meeting global demand for connected continuous and automatic positive airway pressure (CPAP/APAP) devices with a combination of AirSense 10 and AirSense 11 by the end of the 2023 calendar year. The company has now met that goal in its largest market, Farrell said on the call.
Farrell attributed the success to its validation of new components, addition of new suppliers and scaling of its manufacturing capabilities. The changes mean ResMed has now worked through the backlog in the U.S., Farrell said.
Shares in ResMed rose 4.71%, or $10.61, to $235.98 in morning trading on Friday.
Seeking further growth
ResMed does not provide formal sales forecasts but previously predicted that device sales would grow sequentially every quarter in its 2023 financial year. After a quarter in which device sales surged, Farrell refined the prediction on the conference call, in part because the third-quarter figure was boosted by “about 15 million of ventilator sales to China.”
Farrell said: “It’s a tough number to get there on sequential growth. Taking out those ventilators, I think we can do it. I’m confident in my team, I’ll back my team. They got a little bit ahead of me here in March. And I’d love them to be a little bit ahead of me in June.”
The 43% device sales growth is an outlier, he said, telling investors “market growth is closer to the mid to high single digits in this space.” But with Philips still off the market, ResMed has an opportunity to continue winning market share. Growth over the coming quarters will depend, in part, on how quickly ResMed can receive international regulatory approvals for AirSense 11, Farrell said.
Retaining market share
On the call, an analyst asked Farrell about ResMed’s ability to retain market share when Philips resolves its recall and starts competing for new patients again. Farrell gave a bullish response.
“They’ll ... have to come in and start fighting to become the number two share player from a 0% new patient setup share. We look forward to that. We were beating that particular competitor in 2019 before they had their recalls, so I know we’ll be able to beat them when they come back in. Their CFO last week said, ‘Oh, no, we won’t be coming in and lowering prices. We’ll look to take 2019 prices and add with inflation.’ So game on. I look forward to it,” Farrell said.
