SAN DIEGO – Sometime after its 1989 launch as a small company in Sydney, Australia, a painting depicting David’s fight against Goliath was hung in the office of ResMed (NYSE: RMD) for inspiration.
Thirty-five years later, the company identifies more with Goliath as the top producer of sleep apnea products in 140 countries.
CEO
ResMed Inc.
“Nearly 2.5 billion suffer from major sleep health and breathing disorders. As the market leader in these significantly underpenetrated markets, we’re well-positioned as the clear leader to drive increased market penetration, demand generation, and accelerate growth for our businesses,” said ResMed Chairman & CEO Mick Farrell.
The company’s fourth quarter and end-of-year financial report released Aug. 1 showed ResMed’s annual revenue increased by 11% to $4.7 billion, and a fourth quarter revenue increase of 9% to $1.2 billion.
“Ongoing patient and customer demand for our best-in-class products and software solutions is incredibly strong, driving solid growth across our devices, masks, and software businesses,” Farrell said.
Diluted earnings per share were $6.92 after 12 months ending on June 30 compared to $6.09 on June 30, 2023. While the company’s stock dropped because of market jitters just before the report was released, it jumped 4% the following day and was just over $220 a share.
“The global ResMed team’s focus on operating excellence, ongoing cost discipline, and profitable growth acceleration resulted in gross margin expansion, strong operating leverage, and double-digit growth in bottom-line profitability,” Farrell added.
Patient Zero
The $4.9 billion ResMed raked in in FY2024 was the company’s highest gross revenue in its 35 years and a part of a continuous pattern of YOY growth for well over two decades.
ResMed was founded by Peter Farrell, father of CEO Mick Farrell, who previously ran the research and development portion of Baxter Healthcare in Asia Pacific.
While looking for investment opportunities in new technology, Peter Farrell was introduced to Dr. Colin Sullivan, who had invented an intriguing device.
“So Dad went to Dr. Colin Sullivan’s lab in the mid ‘80s and saw this contraption,” Mick Farrell said. “And I’m not kidding. The first CPAP (continuous positive airway pressure machine) was a Hitachi blower that was the size of a swimming pool pump.”
Eddie Merck, who became known as patient zero, was breathing better at night by wearing a glue-on mask that covered his entire face and was connected to a tube that ran through a hole in a wall and led to a loud pump in the garage.
“My dad said, ‘Eddie, why would you put yourself through this?’” Farrell said. “And Eddie said, ‘It’s simple. This therapy saved my job, saved my marriage, and saved my life. I would do anything to have this therapy.’”
Farrell said his father saw an investment opportunity and he believed he could make the device smaller, quieter and more comfortable.
Baxter bought the rights to the device, and then Farrell bought the rights to it for $800,000 after Baxter closed its Asia Pacific R&D division. He launched ResMed in Sydney with a staff of seven people.
Milestones and Pitfalls
The company invested heavily into R&D to study plastic engineering and anthropometrics, or the study of dimensions of the face, and over its first decade ResMed became known for making the best CPAP masks on the market.
In the early 2000, ResMed became known for its sleep apnea devices, which were smaller and quieter than others on the market.
In 2012, ResMed began focusing on software and became the first medtech company to have 100% connectivity in every device. Farrell said 26 million devices are connected to the cloud. Those include the recently released AirCurve 11 and the popular myAir app that allows users to check how they slept at night.
ResMed became a public company in 1995 when it was first listed on Nasdaq. Because the stock exchange required the CEO to live in the United States, Peter Farrell moved its headquarters to Sorrento Valley to be next to its distributor at the time, Medtronic.
Reputation Building Decision
Looking back over 35 years, Farrell said the company has had many challenges along the way, but one significant setback had a silver lining.
The company invested tens of millions of dollars into a seven-year clinical trial about the effects of adaptive servo ventilation devices on patients with heart failure, with expectations of a positive finding.
The results were negative. Even worse, the study found a small signal that the devices could have a detrimental effect on the patients because they might become more active than their hearts could endure. The company responded with a global recall of ASV devices for heart failure patients.
Farrell recalled showing the data to Anthony DeMaria, founding director of the Sulpizio Cardiovascular Center at UC San Diego, and telling him that he was going to announce the recall the next day and expected the company’s stock to crash.
“He said, ‘Well, I don’t know about your stock price, but your reputation with academic researchers like me and my colleagues is gonna go through the roof,’” Farrell said about DeMaria’s response to the company’s response to a small signal about possible harm, which other companies might have swept under the rug.
“I can tell you today, there are people who write prescriptions for ResMed because 10 years ago we did the right thing,” Farrell said.
As for the picture of David versus Goliath, that was taken down years ago and replaced with another of musicians performing together, painted by the same artist.
ResMed Inc.
FOUNDED: 1989
CEO: Mick Farrell
Headquarters: Spectrum Center, Kearny Mesa
Business: Maker of cloud-connected medical devices, specialist in digital health
Stock: RMD (NYSE)
Revenue: $4.7 billion (FY2024)
Employees: 10,000+
Website: www.resmed.com
Social Impact: ResMed devices have helped 178 million people with various conditions sleep better.
Notable: ResMed has sold more than 26 million cloud-connectable devices in more than 140 countries
