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ResMed CEO on Crusade to Treat Sleep Apnea

Five years ago, the term sleep apnea seeped into the layman’s vocabulary to describe what one local company bills today as a major public health threat and leading cause of death.

Like a religious crusader, Australia-born Chief Executive Officer Peter Farrell of ResMed Inc. travels the globe in pursuit of spreading the message.

“It’s the major cause of hypertension, which is the major cause of stroke and heart failure, which is the major cause of death in this country,” said Farrell, whose company makes devices to be worn at night by those who have breathing troubles during sleep.

In obstructive sleep apnea, a sufferer’s throat briefly collapses, causing the person to stop breathing for 10 to 20 seconds at a time or longer. The disorder can make one feel as though he or she hasn’t slept all night, which can cause the person to fall asleep at work, or worse , at the wheel.

ResMed’s research estimates that 20 percent of the world’s population suffers from the disorder, with 90 percent either not realizing they have it or not being treated.


Overweight

Most people who have the condition are overweight and male, according to the National Institutes of Health.

With the huge global market potential , $17 billion a year, says Farrell , the competition among firms that sell the breathing equipment is getting fierce. Competitors include Tyco Healthcare Group, Respironics and Fisher & Paykel Healthcare. Farrell said ResMed is repositioning itself as competitors gear up with less expensive devices.

ResMed and Respironics share 80 percent of the market, analysts say, though ResMed has a slight lead with 41 percent of the market.

To keep its share, ResMed has identified several markets it plans to target and will increase its sales and technical employee count by 20 percent, or 500 workers.

Farrell said 100 people hired in the next two to three years will be based in the Poway headquarters. The firm has 3,000 employees globally, including workers in Los Angeles, France, Germany and Australia.

ResMed will focus heavily on the diabetes market, occupational health and safety, as well as on cardiologists and anesthesiologists.

Farrell pointed to a slew of studies conducted by ResMed and other groups that provide a basis for the new target markets.

A study conducted by ResMed and The Whittier Institute for Diabetes in San Diego showed that 80 percent of people who have type 2, or adult onset, diabetes, also have sleep apnea.

Farrell said patients have died when anesthesiologists didn’t screen them for sleep apnea before sedation, and another study showed that four of every 10 truck drivers have sleep apnea.


Hypertension

The NIH said in 2003 that sleep apnea was a major cause of hypertension, and according to a recent Yale University School of Medicine study, sleep apnea increases a person’s risk of having a heart attack or of dying by 30 percent after five years.

The findings, as well as another Yale study linking sleep apnea and diabetes, were presented last month at the American Thoracic Society 2007 International Conference in San Francisco.

The second study found that sleep apnea sufferers have more than 2.5 times the risk of developing type 2 diabetes compared with those without it.

Despite these studies and others, some say the links need to be more widely documented and accepted before rewriting the medical books on how to treat disease.

“I don’t know how effective they’re going to be in tying this all up,” said Bud Leedom, a former Wall Street analyst who publishes the California Stock Report. “A lot of these products are pie in the sky, if it’s not widely accepted. It’s very difficult for physicians to drop everything they’ve learned, ‘Here’s the answer to heart disease and it has nothing to do with how we’ve been attacking this problem.’ ”

ResMed has been profitable for 12 years with 48 consecutive record quarters of revenue, so Farrell probably feels he has some leeway in attempting to change the way things are done.

He is an executive council member of the Division of Sleep Medicine at Harvard Medical School, where he works to get sleep medicine deeper into the school’s curriculum.

“Our goal is to make it standard of care,” Farrell said. “Sleep medicine should be taught to medical students.”

Another analyst, Steve Brozak of San Diego-based WBB Securities, said calling sleep apnea a public health crisis is “self-serving.”

“The problems we have with obesity definitely provide a basis for (Farrell’s) statements,” Brozak said. “But are they just suffering from sleep apnea? No. Look at their knees, their joints, their blood sugar level. Globally, we are now less and less in shape. Does this cure sleep apnea? No, it goes out there and cures a symptom.”


No Quick Fix

But Farrell said treating sleep apnea is no quick fix, trendy cure-all. He said references to sleep breathing disorders, though they weren’t known as “sleep apnea,” go back to ancient Greek and Roman literature.

“It was really identified by Charles Dickens in ‘The Pickwick Papers.’ Fat Boy Joe knocked on a door and accidentally fell asleep,” Farrell said.

Farrell, 64, who holds a master’s degree from MIT and two doctorates , one in science and medicine and the other in biomedical engineering , was working for Illinois-based Baxter in the 1980s when he met a University of Sydney medical school professor who had invented an early version of ResMed’s devices.

“You could have powered a swimming pool with it,” Farrell said of a prototype that an acquaintance was using. “It sounded like a freight train, and I couldn’t believe the guy used it every night. I thought, you’ve got to be kidding, but he said, ‘It saved my life, my marriage and my job.’ ”

Baxter bought the device from the professor at the urging of Farrell, who later bought it from Baxter, founding ResMed in 1989. In 2006, the company saw $607 million in revenue.

Without insurance, the ResMed equipment would cost a patient between $900 and $1,000, Farrell said.

For higher end machines, one could spend $6,000. In the United States and Japan, most insurance companies cover the devices, he said.

ResMed’s stock, listed on the New York Stock Exchange as RMD, trades around $45.

“The arguments are bogus,” Farrell said. “At the end of the day, it’s the data that counts. It’s not an emotional response. You will die from stroke, heart attack or a workplace or car accident.”

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