San Diego Five years ago, Michael “Mick” Farrell listened to an analyst forecast ResMed’s demise.
This was on an overnight flight from Hong Kong to Sydney, and the two sat together by happenstance. The Deutsche Bank analyst argued ResMed’s sleep-breathing devices already saturated the market.
Farrell, ResMed’s CEO, responded that its machines had yet to scratch the surface in disorders like sleep apnea, characterized by a gasping snore. To prove it, Farrell said a passenger would emit such a noise before touching down. His prediction came true during takeoff.
The analyst changed his tune. Farrell handed the snorer his business card. In recent years, strong demand and a digital transformation spurred ResMed’s growth. The company posted $2.07 billion in 2017 revenue, up 37.1 percent from 2013, when Farrell took over as CEO. The company’s market cap went from $6 billion to nearly $14 billion in this span.
Farrell said the market remains vastly underpenetrated. He’s pushing big data to break through.
Getting More Digital
“We’ve been working on this for 29 years. We’re going to be working on it for the next decade. But we’re getting better at it. We’re getting more digital. We’re getting more scalable. And we’re going to reach many, many, many more consumers over the coming five years,” Farrell said in a recent interview at ResMed’s headquarters in Kearny Mesa.
Founded in 1989, ResMed built an empire on machines that prevent a patient’s airway from collapsing during sleep.
Under Farrell, the company invested heavily in cloud-connected devices and apps, increasing awareness, diagnosis and treatment of sleep problems. An expression he uttered several times during the interview: “software eats the world,” meaning go digital so you’re not in the taxi business when Uber emerges.
When Farrell made his prediction on the plane, the odds were in his favor.
Roughly 50 million to 70 million Americans suffer from sleep or wakefulness disorders, the Centers for Disease Control and Prevention estimates.
This includes sleep apnea, in which breathing stops and starts, causing tiredness during the day and potentially serious issues like heart disease. Most sufferers don’t realize they have it.
It’s why the words “ignorance is our greatest competitor” immediately greet visitors stepping into ResMed’s 300,000-square-foot corporate headquarters. They’re emblazoned atop a cutout of Peter Farrell, founding CEO and chairman, and Mick’s father.
Peter’s former employer, Baxter Healthcare, developed Continuous Positive Airway Pressure, or CPAP, masks in the late 1980s but didn’t see the potential. Peter begged to differ and bought the technology.