Inogen manages expectations for Q4

Friday, November 6, 2020

GOLETA, Calif. – Inogen saw sequential improvements in its financial results from the second to third quarters, but company officials aren’t confident that will continue into the fourth quarter due to rising numbers of COVID-19 across the United States and Europe. 

Inogen reported that total revenues in the third quarter were $74.3 million, a 19% decrease year over year but a 3.7% increase sequentially. Its domestic business-to-business sales were $23.1 million, a 23.5% decrease year over year but a 6.9% increase sequentially. 

“You’re seeing the prevalence of cases go up in the United States as we get into the fourth quarter and there’s talk of, you know, what do we need to do to control that and curb that?” said Scott Wilkinson, president and CEO of Inogen, during a conference call to discuss the company’s financial results. “While we’d love to continue the trend of sequential growth, you have to acknowledge those signals are out there. We also have to put in the pot that, even in normal times, the fourth quarter is a seasonally slower time.” 

Broken down, Inogen’s direct-to-consumer sales were $29.2 million in the third quarter, a 22.7% decrease year over year but a 3.3% decrease sequentially. Rental revenues were best of all: At $7.5 million, they represented a 40.1% increase year over year and a 23% increase sequentially. 

While Inogen sees those rental revenues as a “bigger part of our future,” Wilkinson is hesitant to predict what the company’s product mix might be in the future. He did note that when the company went public in 2014, rental revenues made up 40% of its business. 

“We’ve already been in a spot where it has been a significant part of our revenue,” he said. 

Reimbursement reductions from Medicare’s competitive bidding program somewhat soured Inogen on rental revenues over the years, but the company is now better positioned to make that reimbursement work with operational efficiencies, Wilkinson says. 

“(Rental revenues) got knocked out with competitive bidding reimbursement cuts, but we’ve weathered that storm and, we’re ready to go climb that mountain again,” he said. 

Inogen considers the pandemic a bump in the road for POC adoption – since March, patients have de-emphasized travel and, therefore, the need for POCs; and providers have emphasized stationary oxygen concentrators with higher flow characteristics to treat COVID-19 patients. 

“Share of POCs in the traditional, fee-for-service Medicare long term oxygen therapy market grew from 13.9% in 2018 to 18% in 2019, and that doesn’t include patient cash sales or private insurance transactions, so this data is a conservative estimate of actual POC market concentration,” Wilkinson said. “POCs are still the fastest growing modality in oxygen therapy and we still believe this category has a significant growth opportunity ahead.”