ResMed Achieves Key Milestone in Sleep-Disordered Breathing

Zacks Equity Research

While remote patient monitoring market is growing fast to become a $30 billion industry by 2020 (tech analyst firm Berg Insight’s data), renowned sleep-disordered breathing (SDB) company ResMed, Inc. RMD recently achieved a significant milestone in this respect.

After one billion nights of sleep data was downloaded using ResMed’s remote patient monitoring platform AirView, the company reached a landmark in the field of sleep research and treatment of sleep apnea.

According to ResMed, this huge data enables predictive analytics and accordingly will help physicians and providers better manage patients' sleep apnea and Chronic Obstructive Pulmonary Disease (COPD) therapy, and improve their overall health.

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Notably, there were no meaningful digital health solutions in respiratory medicine until ResMed led the market with 100% cloud connected respiratory medical devices. Since 2004, when ResMed first enabled remote monitoring of Continuous Positive Airway Pressure (CPAP) patients, its safety features in transferring data has helped in identifying therapy issues, improving both patient health outcomes and business efficiency for healthcare providers.

Share Price Performance

For the major part of the past six months, ResMed outperformed the Zacks categorized Medical - Products industry with respect to price performance. Overall the company lost 2.4%, much narrower than 7.93% loss of the broader industry. This reflects the company's solid fundamentals and long-term growth prospects. With the latest breakthrough, we expect it to continue with the same bullish trend, going ahead.

The market for SDB is huge and is yet, to a great extent, underpenetrated across the globe. Per a 2013 study, it has been estimated that 26% of adults in the age group 30–70 have some form of obstructive sleep apnea, which is the most common form of SDB. In the U.S. alone, this represents approximately 46 million people.

To get along with this impressive market opportunity, ResMed had earlier identified three horizons for its future growth. In terms of progress in the first horizon, which focuses on ResMed’s core sleep apnea franchise, the company has been witnessing strong growth in the sleep and ventilation device platforms since the launch of Air Solutions. The inclusion of Brightree has already started contributing to the company’s top line in the connected care market. Per management, ResMed currently leads this market, with more than two million of 100% cloud-connected medical devices of the company, sending data to the cloud every day.

The second horizon is growth in adjacent product and geographic markets, including homecare ventilation for COPD, Amyotrophic Lateral Sclerosis and other respiratory disorders, and emerging markets in China, India and Brazil. In terms of progress on this horizon, ResMed is engaged in the integration process of its business with Inova Labs, a Portable Oxygen Concentrator (POC) company, which ResMed bought in third-quarter 2016. Going ahead, ResMed aims at growing its revenues by selling POCs through its global market channels in a bid to maximize its value throughout fiscal-year 2017 and beyond.

The third growth horizon incorporates a portfolio of opportunities in new markets, including atrial fibrillation, heart failure with preserved ejection fraction, asthma, chronic disease management as well as sleep wellness. So far ResMed’s S+ sleep wellness tool is its first product in this space and the company plans to expand the range further. Recently, in connection to the third horizon, ResMed demonstrated favorable results from the CAT-HF trial, which is the first global study to show that addressing SDB with Adaptive Servo-Ventilation may improve cardiovascular outcomes, heart outcomes for people with heart failure and preserved ejection fraction.

Zacks Rank & Key Picks

ResMed carries a Zacks Rank #4 (Sell). Better-ranked medical stocks include ICU Medical Inc. ICUI, Align Technology, Inc. ALGN and Haemonetics Corporation HAE. NxStage Medical and Align Technology sport a Zacks Rank #1 (Strong Buy) while Haemonetics carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

ICU Medical gained 36.9% over the last one year compared with the S&P 500’s 14.1% growth. The company has a four-quarter average positive earnings surprise of 46.3%.

Align Technology rallied 50.7% in the past one year, way better than the S&P 500. It has a trailing four-quarter average positive earnings surprise of 23%.

Haemonetics recorded a 27.8% gain over the past one year, better than the S&P 500. It has a trailing four-quarter average positive earnings surprise of 0.82%.

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