Resmed lifts dividend 5pc on profit surge, reaps $US70m from rival Philips’ recall

Analysts say Resmed has an ‘uncontested sales opportunity’ of $US600m from rival Philips’s prolonged absence from the sleep apnoea device market.

Resmed CEO Mick Farrell says a redesign of its AirSense platform has “increase deliveries to customers and ultimately to get many more patients onto lifesaving sleep apnoea and respiratory care therapy”. Hollie Adams/The Australian

Sleep apnoea machine giant, Resmed, has lifted its dividend after its full year net profit surged 64 per cent and it reaped a windfall of up to $US70m ($98.6m) from a recall from rival Philips.

The San Diego-headquartered, ASX-listed company has also continued to produce ventilators for Covid-19 patients, generating annualised sales $US20m in the three months to June 30. Overall, full year revenue rose 12 per cent to $US3.58bn, while net income soared from $US474.5m to $US779.4m.

As a result, Resmed – which has a market value of $51bn – hiked its dividend 5 per cent to 44 US cents, which it will pay to shareholders on September 22.

Despite the increased payout, Resmed’s shares fell 3.2 per cent to $33.52 in early trade on Friday, following a 0.7 per cent dip across the broader sharemarket.

Chief executive Mick Farrell said during the quarter the company launched its “most advanced platform” AirSense 11 across several European markets, and its “newest device” the card-to-cloud enabled AirSense 10 in the US to overcome an “industry crisis” in the supply of sleep apnoea machines.

“The card-to-cloud device was launched into the U. and many other markets and is designed to work without an embedded communications module. This redesign allowed us to increase deliveries to customers and ultimately to get many more patients onto lifesaving sleep apnoea and respiratory care therapy,” Mr Farrell said.

“Both of these platforms, as well as our legacy, market-leading, 100 per cent cloud-connected AirSense 10 device, will support solid growth throughout FY23.”

In January, Mr Farrell warned a pandemic-induced supply chain crunch, particularly in semiconductors, was limiting a windfall of up to $US350m to reap from a recall of Philips’s rival Dreamstation machine.

Following Philips announcing its recall of as many as four million Dreamstation units mid last year, Mr Farrell estimated Resmed was set to gain between $US300m and $US350m.

On Friday, he said the company has generated “incremental revenue” of $60-70m from the recall in the three months to June 30.

“Our global team remains focused on supporting patients, providers, and physicians — our top priority is to get products directly into the hands of patients who need therapy most. Looking ahead, we are confident in our ability to grow steadily throughout fiscal year 2023 and to continue delivering for all stakeholders,” Mr Farrell said.

“We are investing in R & D to drive accelerated adoption of digital health solutions in sleep apnoea … and outside hospital care, as we progress towards our goal to improve 250 million lives in 2025.”

Wilsons analyst Shane Storey said: “Philips’ prolonged absence from the new patient segment of the … market leaves an under-contested US$600M sales opportunity in FY23”.

Dr Storey said Resmed earnings result was in line with expectations and showed “early evidence that the card-to-cloud ‘stopgap’ is leading renewed” sleep apnoea share gains in the US.

“Upside to FY23e forecasts depends on the pace of the ‘card-to-cloud’ AS10 rollout and the company’s efforts to rectify component supply shortages for its flagship, cloud-connected AS11 devices,” Dr Storey wrote in a note to investors.

“New market share analysis suggests that ResMed’s gains in FY22 have been most material in the US market (~75 per cent of the $US250M benefit).”

During the quarter, revenue in the US, Canada, and Latin America, excluding software-as-a-Service, jumped 12 per cent, while sales in Europe and Asia firmed 1 per cent on a constant currency basis.