As health officials continue to monitor the physical and monetary toll sleep disorders exact in the U.S., treating various conditions brought on by sleep problems has transformed snoozing into a sound business for a San Diego-based medical device manufacturer.
And the market of potential customers has yet to be fully realized, said officials at ResMed, a sleep apnea device maker with about 325 local employees.
In addition to announcing record revenues recently, ResMed is teaming up with a major competitor to educate the medical community in a $1 million campaign to help reach millions of undiagnosed Americans with sleeping disorders, especially sleep apnea.
Company officials said Sept. 30 that the campaign with Respironics, another device maker, and Cephalon, a drug company, is a wake-up call to action for a public health threat that the U.S. Department of Health & Human Services said results in an estimated $16 billion annually in medical costs, not including costs associated with lost work time.
This year’s goal is to educate some 10,000 clinicians, through continuing medical education activities in 24 U.S. cities, of the medical consequences of untreated sleep apnea.
Studies conducted by researchers at Harvard Medical School show that a lack of sleep negatively affects perception and judgment. In the workplace, sleep deprivation can result in reduced efficiency and productivity, errors and accidents.
While education and outreach are helpful in driving future sales, ResMed is clearly profiting by its own efforts to grow market share from sales of devices to sleep labs and sufferers. Equipment such as ResMed’s continuous positive airway pressure, or CPAP, masks help combat the harmful effects of sleep-disordered breathing, which doctors have linked to life-threatening diseases such as hypertension, stroke and heart problems.
Patients wear the masks — which are much more comfortable and compact than models a decade ago, said ResMed Senior Vice President David Pendarvis — while sleeping. The treatments reduce the number of times that air is momentarily blocked.
ResMed’s chief executive officer said research findings funded by the company and other groups have helped to encourage the growth of treatment providers.
Kieran T. Gallahue, president and CEO of ResMed, could not be reached for comment, but said in a news release announcing the company’s earnings: “Surpassing the billion-dollar mark in annual sales is a result of our ability to continue to innovate and launch new products to treat sleep-disordered breathing.”
In the fourth quarter of fiscal 2010, which ended June 30, revenue outside the U.S. (the company sells in about 70 countries) increased by 11 percent to $130 million compared with the same period of 2009, ResMed reported Aug. 5.
Listed as RMD on the New York Stock Exchange, shares were selling for about $33 last week. The stock has traded in a 52-week range from $21.50 to $35.33.
And the company is just scratching the international market’s overall potential, said Pendarvis, senior vice president of organizational development.
“We view our biggest competitor as ignorance,” said Pendarvis, referring to millions of undiagnosed Americans with sleep disorders, who are potential customers. He said sleep specialists estimated that 20 percent of adults have sleep apnea — but ResMed thinks it is closer to 30 percent.
That means at least 18 million people in the U.S. suffer from just that one sleep disorder. It occurs when a person’s upper airway is blocked, often by soft tissue in the back of the throat, causing a decrease in, or complete stop to, breathing.
The company’s primary mode of distribution in the U.S. is direct selling of the product to home medical equipment suppliers. “A physician writes a prescription for the device and the patient takes it to a home medical equipment company,” said Pendarvis.
He said the company is steadily growing its employment base in San Diego through the balance of 2010, where sales, marketing and customer support personnel are based.
“We pay above market for salaries and we have extremely low turnover,” said Pendarvis, adding that the company was founded by an Australian physician in the late 1980s and launched in San Diego in 1995. Worldwide, the company has 3,000 employees, with manufacturing based in Australia and Singapore.
Another measure of the company’s effort to advance its product line was the results of a recent clinical study at the company’s research center in Sydney, Australia.
The study confirmed that a patient’s compliance with sleep therapy increases when using ResMed’s new CPAP device. The clinical study of 50 patients suffering from sleep apnea showed an improvement of 30 minutes in average daily usage, from a mean of six hours and 35 minutes on the patient’s usual CPAP device, to seven hours and five minutes when using the new S9 Series.
A patient’s ability to comply with sleep therapy, however, is affected by potential negative side effects, such as noise from the device, nasal dryness/congestion and breathing discomfort, according to the study. To combat these side effects and increase patients’ ability to adhere to the sleep therapy, ResMed said it has developed new features for its S9 Series, including reduced noise, an improved humidification system and a more comfortable breathing system.
Dr. Brad Schnierow, one of about a dozen board-certified sleep medicine doctors in San Diego County, said the issue of condensation buildup in a CPAP mask is one of the problems contributing to patient noncompliance.
“ResMed has that innovative edge when it comes” to fitting patients with masks that are ventilated with a heated hose, thus avoiding humidification and making the treatment more comfortable, said Schnierow, medical director at San Diego Sleep Medicine, a specialty medical center in La Jolla where sleep problems are assessed.
Schnierow also is assistant clinical professor at the UC San Diego School of Medicine. At the school, he has directed all the sleep disorder programs required for medical students since 1999.
To be diagnosed with the condition, patients must be referred by a doctor to a sleep lab, said Schnierow. Traditionally, labs were housed in hospitals, but many physicians and entrepreneurs now are opening free-standing labs to get a share of the business, which business research and consulting firm Frost & Sullivan said generated $1.3 billion in revenue in 2008 for the sleep apnea diagnostic and therapeutic devices market, with a 16 percent growth rate.
While noncompliance is still an issue for many patients, “Fifty percent of my patients love their CPAP machines,” said Schnierow. “They sleep great and wake up with tons of energy.”