“We are delivering on our promise to drive top-line revenue growth this fiscal year by launching a strong portfolio of new products, services, and solutions.”: ResMed CEO Mick Farrell. Photo: Luis Ascui
New products used in the treatment sleep disordered breathing, which is associated with snoring, lifted ResMed’s sales in the first quarter.
The result suggest some long-awaited new releases are proving popular, which halts a period of sluggish growth and sets the sleep therapy giant up for a strong year, analysts said.
Investors did not snooze on the news, piling into the medical device maker’s stock and pushing the share price up 6.5 per cent on Friday. The stock closed up 35¢ to $5.72, down from a 12-month high of $5.90 hit last September.
The San Diego-based medical device maker, which hails from Australia, said its revenue in the three months ended September 30 increased by 6 per cent to $US380 million ($433.84 million). Met profit after tax rose 3 per cent to $US83.3 million.
Chief executive Mick Farrell said the launch in the quarter of the new AirSense 10 platform, which includes the company’s first new ventilation machine in a number of years, drove revenue growth. “We are delivering on our promise to drive top-line revenue growth this fiscal year by launching a strong portfolio of new products, services, and solutions,” he said.
Citi analyst Alex Smith said the result was “largely in line with consensus”.
Analysts expect revenue growth to ramp up as the year goes on, as customers become more familiar with AirSense 10, as well as a consumer product that ResMed launched in the quarter.
The company recently began selling S+ by ResMed, a device that looks like an alarm clock, but tracks sleeping patterns from the bedside table. ResMed’s ambition to play in the growing consumer area of “quantified self” was revealed by Fairfax Media in April.
Revenue outside of the Americas rose 11 per cent on a constant currency basis to $US173.2 million in the quarter. Revenue in the Americas rose at a slower pace of 3 per cent, to $US207.2 million.
A couple of ResMed’s cost lines floated up in the quarter. Mr Smith said the cost of research and development, as well as selling, general and administrative expenses were “slightly higher than we anticipated”.
Research and development expenses rose 10 per cent to $US30 million, which represents 7.9 per cent of revenue. The company said the increase was due to greater investment in “healthcare informatics and cardiology”.
In cardiology, ResMed is running a trial to measure whether its sleep therapy products limit the incidence of heart failure, which can lead to heart attacks and strokes. The treatment of sleep-disordered breathing, which is caused by obstruction of the airway and associated with snoring, is a market worth about $US9 billion annually. But if the study shows the treatment can play a role in limiting mortality due to heart events, ResMed could open up a much larger market.
Selling, general and administrative expenses rose 9 per cent to $US110.5 million, as ResMed increased its marketing of new products. It also hired more people “to support our commercial activities”.
During the quarter, ResMed repurchased 835,000 shares at a cost of $US42.9 million, as part of its continuing capital management program