JPM23: With new production lines, ResMed aims to meet CPAP machine demand amid Philips' ongoing recall

Philips’ home ventilator recall is still in full force—spanning more than 18 months and over 5 million sleep apnea devices around the globe—and competitor ResMed has been looking to pick up the slack in the market and meet the demand as much as possible.

While ResMed had once forecast potential gains of more than $300 million in sales of its CPAP and BiPAP machines, as people look to replace their machines or wait on repairs, the company ran into the same international supply chain crunches and computer chip shortages that have stymied many operations inside and outside of the medtech industry, ultimately slowing its response.

But now, investments in international manufacturing facilities and component contracts are setting ResMed up to help better meet those patient needs in 2023 and beyond.

“We’ve been able to grow double-digits every quarter for the past six quarters,” ResMed CEO Mick Farrell said during an investor presentation during the J.P. Morgan Healthcare Conference in San Francisco, with the company estimating that Philips’ recall has driven an overall 50% increase in product demand.

“There’s still excess demand, and we see that as a humanitarian emergency,” Farrell said. “And we’re doing everything we can to source more and more semiconductor chips.”

Those communications chips are used to connect ResMed’s ventilation devices to the cloud, where its software networks can link telemetry from home sleep apnea treatments with care management programs and out-of-hospital providers. 

In that sense, the silicon that ResMed needs for its CPAP machines and other hardware places it more in competition for the chips sought after by the auto industry, versus high-tech consumer electronics, the company said—and ResMed has begun placing orders with chip producers spanning the next few years. Previously, the company estimated that manufacturing delays caused the company to miss out on about $100 million in potential sales during its 2022 fiscal year.

“We’ve been able to increase our supply every week, every month,” Farrell said. And when it comes to actually assembling those chips into new machines in 2023, ResMed highlighted the new major manufacturing plant it opened in Singapore last quarter.

“This production facility is the biggest on the planet for respiratory medicine,” he said. “We have the ability in that plant to take care of the whole market’s needs … and as we ramp up our supplies of semiconductor chips, we’ll be able to take more of the demand that’s out there.”

“We’re not going to have a problem with demand over the next 6, 12 or 18 months,” he said.

The polyurethane foam used to muffle the sound of motors in Philips' recalled devices, including its first-generation DreamStation CPAP machines, was found to break down over time and in some cases potentially deposit particles and debris into a user’s airstream. The FDA has logged tens of thousands of complaints as well as reports of more than 250 deaths, though the agency has not linked them directly to the devices.

Last month, Philips released a study, conducted alongside five independent testing labs suggesting the disintegrating foam is linked to minimal health risks. Philips also shared results of previous examinations of more than 40,000 returned devices, with “significant” visible foam degradation found in just 164 of the 36,341 devices returned from the U.S. and Canada, in only one of 2,469 that came in from Europe and in zero of the 1,964 devices returned from Japan.