ResMed eyes improved performance in FY2015

Friday, August 1, 2014

SAN DIEGO – ResMed capped off a tough year in the Americas last week when it reported financial results for the fourth quarter ended June 30.

The company reported revenues of $214.9 million for the Americas, a 7% decrease compared to the same period last year. Sales of flow generators were $99.3 million, a 5% decrease; and sales of masks were $115.6 million, an 8% decrease.

CEO Mick Farrell said there were two main reasons for the decrease. The first: a lack of bulk orders in the fourth quarter, particularly by large customers.

“They’ve all faced the reality now of 12 months of competitive bidding Round 2 impact,” he said. “Everybody in the space is looking for ordering efficiency and making sure that operations are delivered to patients but that they don’t have excess inventory.”

The second: a rumor that it would introduce a new flow generator on July 1.

“It was clearly a false rumor,” he said. “But nevertheless, it caused some customers to hold off on ordering. When we are ready for full commercial launch, we will issue a press release. And before that, we will talk to our sales team so that they can talk to customers.”

Overall, ResMed reported net revenues of $415.2 million for the fourth quarter, flat compared to the same period last year, and $1.56 billion for fiscal year 2014, a 3% increase. It reported net income of $87.7 million for the fourth quarter, a 20% increase compared to the same period last year, and $345.3 million for the year, a 12% increase.

Also impacting sales for the fourth quarter in the Americas, particularly for masks: the impact of new pricing structures that were introduced in the third quarter, which continue to “wash through,” and the launch of the AirFit N10 and F10 nasal and full-face masks, respectively.

“(We) only got a half-quarter of sales or so from those two products in the category,” Farrell said.

Additionally, a reorganization of ResMed’s commercial and research and development teams in the Americas resulted in a $6.3 million expense related to employee termination benefits in the fourth quarter. The reorg affected about 1% to 2% of the company’s global workforce of about 4,000.

“The way to think about what we did was to align with the strategy,” said Jim Hollingshead, president of the Americas. “We made some changes and some additions to the sales force in preparation for the launch of Astral (ventilator) and then we made some changes to align across some business (units). So we’ve done some things to better align the marketing organization and also to create better alignment between sales and marketing.”

ResMed expects to put the bulk of these obstacles behind it in fiscal year 2015, buoyed by a stabilizing market and improving patient referral volumes.

“I’d like to emphasize that we believe that our performance in the U.S. will improve over the coming fiscal year,” Farrell said.