ResMed’s new CEO Plans Growth

ResMed is one of the largest medical technology companies based in San Diego, named in my story about the biggest remaining local biomedical companies left after the sale of Life Technologies, Amylin Pharmaceuticals and Gen-Probe.. But it could become much larger, says its new CEO, Michael “Mick” Farrell.

ResMed has only reached a small percentage of people who could benefit from its breathing assistance devices, Farrell said in an interview last week at ResMed headquarters. And as the company extends its product line, even more people become potential customers.

The great majority of ResMed’s devices assist with sleep-related breathing disorders such as sleep apnea. The company is introducing products to help with chronic obstructive pulmonary disease, or COPD. The disease takes various forms. It may be caused by smoking, which can destroy the alveoli in which gas exchange takes place. Bronchitis caused by bacterial infection is another cause. Regardless of cause, those with COPD have in common difficulty in getting enough oxygen into the lungs. In its worst stages, COPD is incapacitating and life-threatening.

Last month, ResMed said it has received FDA approval to sell the first device for use at home by patients with stage 3 or 4 COPD, the most severe kinds. The home variable positive airway pressure (VPAP) device is intended to help keep COPD patients sufficiently oxygenated to reduce hospital admissions. The VPAP delivers a customized flow of air, including oxygen if desired, to help reduce the trapping of exhausted air in the lungs.

The COPD market is large; 12 million people in the United States have been diagnosed, and another 12 million may have the disease and not be diagnosed, according to National Institutes of Health.

ResMed earned a positive review in an April 29 research note from Morningstar analyst James Cooper.

“Its ability to introduce novel products that improve the comfort and effectiveness associated with these devices has helped ResMed become a key leader in the sleep apnea niche and generate returns well above its capital costs,” Cooper wrote. “Considering those development capabilities, and the large potential patient pool that still remains undiagnosed or untreated in the sleep apnea market, ResMed looks positioned to continue growing at a fast pace.”

However, Cooper said ResMed may have difficulty keeping its prices up because of “strained government finances.”

In the United States, those finances are supposed to be eased by the new national health care system known as the Affordable Care Act. Its main premise is that the quality and cost of patient care needs to be considered as a whole. Even an expensive therapy could qualify for reimbursement, theoretically, if it is demonstrated to improve the quality of care and reduce total expenses.

Theory is one thing, reality another. And biomedical companies aren’t sure whether the generalized descriptions of the new health care system will be translated into concrete standards that they can use to develop products. That was the message at a panel discussion on the Affordable Care Act at last month’s Biotechnology Industry Organization convention in Chicago.

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May 12th, 2013