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How ResMed is advancing sleep and respiratory care

(Image courtesy of ResMed)

The COVID-19 pandemic’s propulsion of widespread telehealth adoption has ResMed (NYSE:RMD) eyeing remote technologies for the next phase of its sleep and respiratory businesses.

The president of that business for the San Diego-based company, Jim Hollingshead, told Medical Design & Outsourcing in a recent interview that the future lies with remote care and digital health offerings.

“Right before the crisis, we got up to a point where home sleep testing was done at about 40% of the time,” Hollingshead said. “Right now, I think it’s more like 50/50 because of the way sleep labs are using home testing instead of bringing people in.”

ResMed’s remote diagnostic technology includes mail-order delivery of an elastic belt that wraps around the user’s chest and connects to a pulse oximeter and a cannular tube that goes over the ears and sticks on the nose. The home sleep test looks for oxygen saturation while the belt measures chest movement as the user breathes.

If the belt is moving and there’s no airflow while blood oxygen levels drop, the subject is having an apnea event and a sleep doctor will look at the results to determine if the user has sleep apnea and needs a CPAP.

Instead of having patients sleep in a strange bed with wires hooked up everywhere and a technician watching, creating an unnatural sleeping situation, ResMed is leaning toward at-home testing.

“We think it’s a better patient experience,” Hollingshead said. “We’ve been pushing for many years for this testing to be the norm.”

ResMed has been at the forefront of connectivity and remote care in the sleep and respiratory space for years and now hopes to build on that with advances in digital health. Beyond diagnostics, ResMed’s AirSense 10 system includes a cell chip to connect to devices in the cloud and monitor a patient’s adherence to therapy. It’s quite an advance from the previous method of phone calls to check up on the patient’s usage, according to Hollingshead.

ResMed offers remote fitting routines for CPAP masks and operates provider apps that have remote management capabilities and 2.5 million users. These technologies give the company confidence about using data, machine learning and artificial intelligence in a post-pandemic market.

“We’re really focused on the patient experience,” Hollingshead said. “Our industry was already headed there. Our offerings were already headed there, but we’re going to drive harder and faster on those things.

“That’s the trend we’re going to continue to try and pioneer in our space. … COVID created so much disruption in healthcare, but there’s an opportunity here for us to continue to use digital tools to get patients more access to good care.”

Coping with COVID-19

Ahead of this effort to change the sleep and respiratory space, in what seemed like the blink of an eye, ResMed went from treating sleep apnea to treating COVID-19.

When the coronavirus pandemic took hold in the spring, ResMed joined the fight against the virus, pivoting much of its business toward ventilator production. Hollingshead said that the “mad scramble” resulted in many extra shifts for employees and a lot of work, but also an impressive outcome.

“I think we ended up increasing ventilation production by 3.5 times during that span,” he said. “As we made thousands and thousands of vents, we were able to service a lot of demand. … During that early crisis period of March, April, May, it was a huge pivot for everybody and I was proud of what we were able to accomplish.”

In April, AdvaMed promoted clinical evidence that it said revealed the benefits of non-invasive ventilators, like ResMed’s CPAP machines, for use in less severe cases of COVID-19-related respiratory issues. Shortly after, the company received a government contract worth $31.98 million to produce 2,550 ventilators. Demand for ventilators shot up, with ResMed’s earnings in its third and fourth quarters reflecting sales growth of 16.2% and 9.3%, respectively.

With the pivot to ventilation came plenty of adjustments, though. Hollingshead cited supply chain as the biggest obstacle, with component suppliers in China forced to shut down and air and sea freight limited, too.

Looking ahead

Now, with the ventilator demand returning to baseline and some underlying operating expenses coming in higher than usual, the company has work to do.

“There’s a constrained supply,” Hollingshead said. “That means there’s a little bit of disruption in domestic shipping in the U.S., so in some instances, that’s been slower for us and the cost of that is up. We’re still wrestling through that.”

Hollingshead foresees steady growth in new patient demand over the next two or three quarters, although the unpredictability of the virus could throw a wrench in that.

Analysis shared with Medical Design & Outsourcing by William Blair’s Margaret Kaczor highlights expectations for acceleration in sleep revenues in 2021, creating a “more durable trend” down the line as ResMed introduces more diagnostic options. Additionally, Kaczor noted that ResMed’s digital health investments aren’t being valued today, but should drive growth and represent opportunities for innovation in untapped spaces.

Additionally, Kaczor said the analysts believe ResMed has a long runway in sleep, COPD and out-of-hospital healthcare information technology, while smaller business moves that have the potential for significant gains are seen as cause for optimism. William Blair projects consistent double-digit, top-line growth, rating ResMed’s stock as “outperform.”

Given how the company responded to the pandemic’s initial wave, Hollingshead believes ResMed has proven that it can adapt to whatever situation comes next.

“I was really proud of what we were able to accomplish in terms of getting those products built and getting them out,” he said. “Thousands of patients ended up on ResMed ventilators, which was terrific for us to feel like we had the ability to help in a crisis.”

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