ResMed has reported a fourth quarter sales slump in the key United States market that has capped off a tough year as the medical device maker battles falling prices and hesitant customers.
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The San Diego-based company, which manufactures sleep therapy equipment, reported flat sales of $US415.2 million in the three months ended June 30. The result was a 1 per cent fall in constant currency.
Although the device manufacturer’s sales in Europe and ‘rest of the world’ rose 11 per cent in the period, the result was dragged down by the Americas, in which sales fell 7 per cent.
ResMed’s Australian share price fell by 4 per cent in early trading to $5.29 at 10:47am AEST.
Chief executive Mick Farrell said the US slump, where ResMed derives about 47 per cent of revenue, was due to customers buying smaller amounts of stock, despite patient numbers remaining steady. “It’s not the volume on the end of the patient it’s the distributor who is changing their buying behaviour,” he said.
The soft sales result was also due to slow take up of newly launched mask products, and a price drop in the third quarter that worsened comparisons to the prior corresponding period, he said.
ResMed has been forced to drop its prices to come in line with competitors, partly as a consequence of competitive bidding - government policy designed to limit the cost of publicly funded healthcare. Despite the price cuts Mr Farrell said Resmed “maintained an appropriate premium over our competitors.”
ResMed sells flow generator machines and masks for the treatment of sleep apnoea, which is said to be a $US8 billion market.
The company is expected to launch a new flow generator series soon, as flagged by The Australian Financial Review prior to the result. Mr Farrell would not comment on the launch, other than to say the company’s strategy was to communicate directly with medical suppliers about new products.
However he did say that rumours about the impending launch of the flow generator platform, which is expected to be called Airsense 10 and would be the first new platform in four and a half years, had likely lead to some suppliers putting off buying stock.
Mr Farrell said sales people from a competitor had been telling customers that ResMed would launch a new product on July 1. “It did impact we think even materially our sales in the US during the quarter,” he said.
The lower than expected quarterly result lead to a full year sales increase of just 3 per cent, (2 per cent in constant currency) to $US1.56 billion. The result was below consensus of $US1.58 billion, according to Bloomberg.
Net profit in the 12 months ended June 30 increased 12 per cent to $US345.3 million.
The company declared a dividend of US28¢ per share which is payable on September 18 for Australian shareholders.
Wilson HTM analyst Shane Storey said the US result was disappointing although the rest of the world market “looked in reasonable shape”. He said the result would likely drive down expectations of sales growth in the 2015 financial year.
But Citi analyst Alex Smith said he expected growth to improve on the back of a new series of masks, known as the AirFit series. “We think the outlook for [2014-15] is positive and that performance should improve,” he said.
One highlight of the result was ResMed’s European launch of a life support ventilation machine, the Astral. During the quarter the company received approval from the US regulator for the new platform and Mr Farrell said it will launch before the end of the calendar year. “That’s an incredibly exciting market for us,” he said.
Mr Farrell called out the performance of his European president Anne Reiser who had exceeded expectations in what was a “very tough time” for the continent.
