The San Diego life science company’s quarterly dividend increased by 8% to $0.42 per share. According to the fourth quarter earnings for the period ending June 30, income from operations increased 8%.
A recent recall for a competitor’s ventilators as well as ResMed’s launch of a new sleep apnea machine have created an opportunity for the company to capitalize on growth beyond the fourth quarter.
In June, Phillips (NYSE: PHG) recalled millions of sleep apnea and ventilator devices for safety concerns. Following this announcement, ResMed’s CEO, Mick Farrell made a statement reiterating the safety of their products and assured customers that they were preparing for an increased demand for ResMed devices.
“I want to reassure our patients, providers, physicians, and communities that ResMed devices are safe to use and are not subject to Philips’ recall,” Farrell wrote in a July 14 statement. “At this time of considerable increase in demand for ResMed products, we are doing everything we can to increase our manufacturing of sleep and respiratory care devices, so we can get them to the patients who need them most.”
In response to analysts’ questions about the Phillips recall and supply chain constraints brought on by the coronavirus pandemic, Farrell said he expects the company to continue growing and accelerate its product flow in the first half of 2022.
“We’re doing everything that we can to partner further and further up our supply chain in order to increase our access to the supply of the past, the pieces and the components that we need to manufacture at scale,” Farrell said. “We expect to be in a somewhat supply chain constrained environment throughout fiscal year 2022...We do see room for expansion of supply ahead.”
He added that based on ResMed’s latest supply chain information and analysis, they could add up to $350 million in additional revenue in fiscal 2022, which exceeds their initial growth projections.
“Looking ahead, we are confident in our ability to grow steadily through our fiscal year 2022 and to deliver for all our stakeholders,” Farrell said. “We’re driving accelerated adoption of digital health solutions in sleep apnea, COPD, and out-of-hospital care, accelerating our ResMed 2025 strategy.”
New Product Rollout
ResMed launched a new positive airway pressure (PAP) device called the AirSense 11 for the U.S. market on Aug. 17. Digital health and customized care are the way of the future and play into the design of the AirSense 11, which features a touch screen and connects to a patient’s smartphone to help the hundreds of millions of people who struggle with sleep apnea seamlessly manage their therapy.
Jim Hollingshead, president of ResMed’s Sleep and Respiratory Care business said that this product was rolled out in a new way to accommodate recent demand for its products following the Phillips’ product recall and added supply chain challenges.
This situation has created an increased demand for ResMed’s products and while they have the manufacturing capability to meet this moment, Hollingshead said the supply chain constraints brought on by the pandemic have made it difficult for companies across many industries to secure electronic components.
With this in mind, ResMed adjusted its strategy and initiated a “controlled extended product launch” for the AirSense 11. Typically, the company would ramp up production of the new product and allow inventory of the previous model to “fade out” but given the constraints in supply, Hollingshead said they pulled the launch of AirSense 11 up a bit to have a steady, controlled release.
Hollingshead said that he expects sales to go up for their new product similar to the AirSense 10, which “changed the paradigm in the industry.”
“We saw a big benefit when we launched AirSense 10 and we do anticipate a real benefit with AirSense 11,” Hollingshead said. “We hope to take market share with the launch of this product and to have revenue growth...we had pretty significant growth when we launched AirSense 10.”
CEO: Mick Farrell
HEADQUARTERS: Kearny Mesa
BUSINESS: Maker of cloud-connected medical devices and digital health specialist
REVENUE: $3.2 billion in FY2021
NET INCOME: $475 million in FY2021
STOCK: RMD on the New York Stock Exchange
EMPLOYEES: 8,000+ companywide
NOTABLE: ResMed sells products in more than 140 countries.
CONTACT: (858) 836-5000