Respiratory devices maker ResMed revenue misses top forecasts

ResMed has recorded a 12 per cent rise in quarterly revenue but failed to deliver on expectations a rival’s product recall would result in higher sales.

The medicine regulator is reviewing ventilators and CPAP devices, seeking details from manufacturers including ResMed. A promotional image for a ResMed CPAP product, above.

ResMed, the manufacturer of respiratory devices, has recorded a 12 per cent rise in revenues in the three months to December 31 – but failed to deliver on expectations that a product recall affecting rival Philips would result in higher sales.

ResMed, which manufactures CPAP and other related medical devices, said revenues for the quarter were $894.9m ($1.27bn), compared to $US800m in the previous corresponding period.

“Our second-quarter results ­reflect continued strong performance across our business resulting in double-digit top-line revenue growth, driven by ongoing high demand for our sleep and respiratory care products, and solid growth in our software-as-a-service business,” ResMed chief executive Mick Farrell said.

“We are working every day to meet the extraordinary demand generated by our competitor’s ongoing device recall.”

Philips found that the polyurethane foam used within the machines to muffle noise had the potential to degrade and release small particles, which were then inhaled by users. Many subsequently complained of irritated airways, and there are unconfirmed fears ingesting the material may have the potential to cause cancer.

Ord Minnett analysts said the company’s revenues were in line with their forecasts but missed market consensus by around 3 per cent “which we attribute to a weaker boost from the Philips recall”.

“We remain confident ResMed will be able to ramp up production through 2022, supporting strong top and bottom line growth,” the Ord Minnett analysts wrote in a note to clients.

Philips devices are expected to remain out of the patient market until at least December, with the recall now affecting 5.2 million people. The recalled machines are being replaced by Philips, leaving it little stock for new patients.

RBC analyst Craig Wong-Pan said ResMed’s results were below the bank’s forecasts and consensus expectations. “While the company delivered 13 per cent constant currency revenue growth, the numbers were below expectations and the main miss in the result. This was partially offset by lower SG&A costs,” Mr Wong-Pan wrote.

Analysts had broadly expected ResMed to record revenues in the quarter of $US926m. Revenues increased the most in North America, followed by Europe and Asia.

Shares fell 1.3 per cent on Friday to $30.98, but have risen more than 13.7 per cent in 12 months.

“Our sense is that every available DS2 unit Philips manufactures is still being shipped to replace installed base CPAP recalls,” wrote Wilsons analysts Shane Storey, Melissa Benson and Madeleine Williams.

“As a result, the new patient segment of the market remains uncontested. Philips hopes to begin supplying new (sleep apnoea) customers during fourth quarter of 2022 but we assess that it will take several years to recapture a position.”

The Australian last month reported that the medicine regulator had launched a broader review into ventilators and CPAP devices, seeking details from manufacturers including ResMed.