ResMed at Bank of America Conference: Strategic Growth and Innovation

On Tuesday, 23 September 2025, ResMed Inc (NYSE:RMD) presented at the Bank of America Global Healthcare Conference 2025. The company highlighted its strong financial performance and strategic plans for growth. While ResMed showcased its leadership in cloud-connected medical devices, it also addressed challenges such as competition and the impact of GLP-1 drugs on its market.

Key Takeaways

• ResMed aims to improve 500 million lives by 2030 through expanded use of devices, masks, and software.
• The company generated over $1.7 billion in free cash flow in the past year.
• ResMed is leveraging wearable technology to enhance sleep apnea diagnosis and treatment.
• The introduction of innovative products like the AirTouch N30i mask underscores ResMed’s commitment to innovation.
• A focus on educating primary care physicians is central to ResMed’s strategy to drive market growth.

Financial Results

• Free Cash Flow: ResMed generated over $1.7 billion in free cash flow in the last 12 months.
• Gross Margin: Achieved a 230 basis point year-on-year increase in Q4 and a 150 basis point increase from Q3 to Q4.
• Guidance: Provided gross margin guidance of 61% to 63%.
• R&D and SG&A Investment: Invests 6% to 7% of revenues in R&D and 19% to 20% in Sales, General, and Administrative expenses.
• Share Buyback: Increased share buyback program to $600 million annually, $150 million quarterly.

Operational Updates

• Product Innovation: Launched the AirTouch N30i mask with fabric and the AirFit F40 mask. Acquired Ectosense and NightOwl home sleep test technology and launched the first-gen AI product, Dawn.
• Market Reach: Operates in 140 countries with 30 million cloud-connected medical devices and has amassed 23 billion nights of medical data.
• myAir App: Over 10.3 million downloads, enhancing patient engagement and adherence.
• Primary Care Physician Training: Trained 20,000 unique primary care physicians with 32,000 sessions.

Future Outlook

• Market Growth: Aims to drive device growth by 25, 50, 75, or even 100 basis points.
• Strategy: Focused on product-led, customer-centric, and brand-enhanced growth.
• Primary Care Physicians: Targeting education of 40,000 high-volume GLP-1 prescribing primary care physicians.
• Gross Margin: Aims for double-digit basis point improvement annually through 2030.
• Demand Generation: Experimenting with demand capture and conversion strategies in specific geographies.

Q&A Highlights

• Competitor Return: A key competitor has returned to 120 countries, vying for the number two or three market position.
• Capital Deployment: Prioritizes R&D, sales and marketing, dividends, share buybacks, and strategic acquisitions.
• GLP-1 Impact: GLP-1 drugs increase referrals for sleep apnea testing and treatment, as patients using both CPAP and GLP-1 therapies are more likely to start and continue CPAP therapy.

In conclusion, ResMed’s presentation at the Bank of America Global Healthcare Conference 2025 highlighted its robust financial health and strategic initiatives aimed at sustaining market leadership. For further details, please refer to the full transcript below.

Full transcript - Bank of America Global Healthcare Conference 2025:

Leanne Harrison, Australian Healthcare Analyst, Bank of America: Good afternoon, everybody. My name’s Leanne Harrison. I am the Australian Healthcare Analyst here for Bank of America, and I cover ResMed. Today I have the pleasure of introducing Mick Farrell, Chairman and CEO of ResMed, and Carlos Nunez, the Chief Medical Officer for ResMed. Welcome, gentlemen.

Mick Farrell, Chairman and CEO, ResMed: Thank you.

Carlos Nunez, Chief Medical Officer, ResMed: Thank you.

Leanne Harrison, Australian Healthcare Analyst, Bank of America: Mick, we might start off with you with some opening comments about ResMed, and before we go into questions and answers, we can open up to the audience as well.

Mick Farrell, Chairman and CEO, ResMed: Yeah, okay. I’ll just do like a five-minute overview of the company and then refer to our ResMed 2030 strategy, and then, yeah, happy to get into the discussions with you and now my Chief Medical Officer to my left. Look, ResMed is the global leader in cloud-connected and digital health for three verticals: for sleep health, for breathing health, and for healthcare technology delivered in the home, whether it’s products, hardware, or software. We’ve got the biggest virtual asset in the field of digital health of everyone in healthcare, not just everyone in medtech, but everyone in healthcare. We have 30 million 100% cloud-connectable medical devices that we’ve sold into 140 countries, the most expensive real estate in the world, which is your bedside table. We have 23 billion nights of medical data from respiratory medical data from those devices. The company was founded in 1989.

This was an invention from the University of Sydney from Professor Colin Sullivan. We’re now headquartered in San Diego, California, and listed on the New York Stock Exchange and the Australian Stock Exchange through Chess Deposit Instruments. ResMed 2030 strategy, you can hear the full strategy just about exactly a year ago at the New York Stock Exchange. It’s available at investor.resmed.com. I had myself and all of my top C-suite present. It was our 25 years on the New York Stock Exchange, 100 quarters. We’re celebrating that, ringing the bell, but then we had a detailed investor day, so you can go and refer to that.

At a high level, in the last 12 months, we changed 154 million lives by providing them with a device, a CPAP, an APAP, a bi-level, or a full mask system, or a software product that changed their life, whether it was myAir or AirView or Brightree or Beyond. Our goal is to improve 500 million lives by 2030. In growing the volume of impact across devices, masks, and software, double digits every year for the next five years. We make the smallest, the quietest, the most comfortable, but also the most cloud-connected and the most intelligent software and hardware systems in sleep health, breathing health, and health tech at home. We make products that people love. When Carlos and I go through Heathrow, we both have our little ResMed bags.

I guarantee you one of us will get a second look from someone, and they will say, "Are you ResMed?" and we’ll say, "Yes, I am." They will say, "Thank you. That product saved my job. It saved my marriage." "It saved my life." Actually, those were the words of Annie Merk, who was the first patient who spoke to my dad when this thing was the size of a swimming pool pump and a Rube Goldberg glue-on mask, whereas now it’s our little travel packs, like three iPhones on top of each other, and the mask is like a nasal cannula. We lead the industry in market growth, profitability, quality, cybersecurity, and interoperability. That’s ResMed 2030 in a nutshell. I know you want to go in further detail. Three themes from our last quarter. We end our fiscal year June 30. Q4 fiscal 2025 was June 30.

Three themes from that. One, ResMed has an incredibly strong balance sheet with very strong cash flow. We generated over $1.7 billion in free cash flow in the last 12 months. That’s point one, a very strong financial position. Point two, operational excellence and innovation excellence. We delivered 230 basis points year on year of gross margin accretion in Q4 and 150 basis points quarter on quarter from Q3 to Q4. 150 basis points of gross margin appreciation in those quarter to quarter. Innovation excellence, we’re delivering products faster than ever before. Part of the 2030 strategy pivot was to become product-led, customer-centric, and brand-enhanced. How you see that as investors is the product-led means increased product velocity. The customer-centric means increased profitable growth. Gross margin expansion all the way down to NOP. Now net operating profit margins in the 33, 34+% range.

The other part of this innovation excellence is the delivery of products. I’ll talk about, you know, I talk about the basis of competition being smaller, quieter, more comfortable, more connected, more intelligent. We’ve also changed the basis of competition in old school hardware by, for the first time in the history of our space, putting fabric on the patient interface. Not like a medical product, liquid silicon or silicon rubber, think, for where the nasal stent or the pneumatic stent is delivered through the nose. We put fabric in a product we call the AirTouch N30i. We won’t stop with that one product. Getting a multi-cavity tool at high pressure, high temperature to produce masks at the costs and the volume that we can do with fabric is pretty unique. I think it changes the basis of competition for the mask business. We also launched the AirFit F40.

We bought a company called Ectosense from Belgium here and a technology called the NightOwl, which is a home sleep test, which is the size of my fingertip here. It fits around there, and it’s fully FDA cleared and can get a patient onto therapy. The third and final point from our last call is that we’re a steady ship in a pretty topsy-turvy world of tariffs and geopolitics. ResMed has, through our work with CBP and the U.S. government, the Nairobi Protocol that protects and gives complete tariff relief for all ResMed products, whether they’re made in Singapore or Australia or in Atlanta. There are no tariffs on anything that we deliver. That’s it. That’s my intro. Back to you, Leanne.

Leanne Harrison, Australian Healthcare Analyst, Bank of America: Thanks, Mick. Very, very helpful. Let’s start with where you started on that cloud-connected device, you know, 30 million bits of data there, 23 billion nights of sleep data. What are you doing with that data to leverage it? How is that supporting ResMed?

Mick Farrell, Chairman and CEO, ResMed: I’m going to hand that to Carlos since I just did the whole intro. What are we doing with our data, Chief Medical Officer?

Carlos Nunez, Chief Medical Officer, ResMed: Sure. As you heard, I’m the Chief Medical Officer. I lead our Medical Affairs and Government Affairs functions. The Medical Affairs function has the privilege of accessing that data, all permitted by our patients in a de-identified manner, to do really one of a few things: make our products better, make our services better, and more importantly, contribute to the peer-reviewed research that we publish quite often to make the field better, to make the science and the medicine better. For example, we recently published a study in The Lancet Respiratory Medicine, a very, very good journal, just about a month and a half ago that showed an epidemiologic projection of the prevalence of sleep apnea in the U.S. through 2050, using real-world evidence, using access to this data.

We published a study about four months ago that showed those diagnosed with sleep apnea, someone who accepts treatment with a CPAP, someone who refuses treatment, over the next three years, if you don’t treat your sleep apnea, you have a 35% higher risk of all-cause mortality and a 55% higher risk of cardiovascular mortality. It goes on and on and on. We do so much research with these data to, again, show that the billion nights of people with sleep apnea was real-world evidence data that ResMed published and sponsored. Adherence increase with a connected device from 50% to 73%. When you download the app to 87%, all of that, again, real-world evidence data.

Yes, we are extremely prolific and use these data that we are privileged to have to make sure we can continue to scope the size of the problem, the dimensions of the problem, and why it’s important to find and treat these billion people with sleep apnea.

Leanne Harrison, Australian Healthcare Analyst, Bank of America: To what extent is that research looking at cases outside of the U.S. in terms of helping court reimbursement and payers incentivized to support CPAP?

Carlos Nunez, Chief Medical Officer, ResMed: Quite a bit. I’ll use France as an example. France has the largest claims database on the planet. Almost every single French citizen is in there. We collaborated with the French government and with key opinion leaders and researchers in France to look at their claims data. That was actually the first mortality data that we saw. We also worked with the French government to show that adherence is better when a device is connected to the cloud. When a doctor can see how the patient is doing, the patient does better. It saves the health system thousands of dollars a year per patient. France started a differential reimbursement scheme where a run-of-the-mill regular CPAP gets reimbursed at a lower level, but a connected device, like a ResMed device, gets reimbursed at a higher level.

We also did a study in England, here in the UK, because the NHS did not reimburse for mild sleep apnea. We did a real-world evidence study called the MERGE study. We showed such overwhelming benefit to treating patients who were symptomatic, even with mild sleep apnea. The NHS changed their guidelines to allow reimbursement for mild sleep apnea and to incentivize and prioritize connected devices over non-connected devices, and on and on. We just came from Singapore, the World Sleep Congress in Singapore, where we unveiled the results of a study looking at OSA prevalence in Asia. It’s not exclusive to the U.S. that the billions of nights of data come from all 140 countries where we do business.

Leanne Harrison, Australian Healthcare Analyst, Bank of America: One of the things I’m interested in is that difference in terms of mask reimbursement between the U.S., which is four times a year, versus the rest of the world, which might be two times a year. Is there any work that you’re doing around that to try and support increased reimbursement outside the U.S.?

Mick Farrell, Chairman and CEO, ResMed: Yeah, we’ve got, I mean, look, the U.S. allows up to four masks per patient per year in Medicare and many of the other payers, but no one really goes up to that level. It’s sort of a theoretical maximum. What we want to do is empower a person, no matter where they live, no matter which country they’re in, and 140 countries we do business in around the world, that when a person wants access to fresh equipment, whether it’s a mask or a filter or tubing accessories, that it’s available to them. In a cash-pay market like Australia, New Zealand, Singapore, or China, that’s our job to engage with that person and let them know there’s an easy way to access a new mask or a new accessory. There, there’s no theoretical maximum limit in a cash-pay market, but it’s really about helping the person.

The ultimate customer is always that patient, helping the person get access to it. Whether they’re in a reimbursement system like the U.S., where there’s a maximum of four, let’s just engage with them. Make sure they’ve got Brightree systems running through the HME. Make sure there’s SNAP technologies for people who aren’t on Brightree and engage with the patient. We have now over 10.3 million downloads of myAir, the app that we have that patients can use. Engaging with patients through the app, engaging with doctors through AirView, and engaging through the DMEs as well. As you said, in Europe, with a sort of capitated approach of up to two masks per year, sometimes people don’t even know that and get access to it. We need to empower patients through myAir and through communications to know that they can get up to two masks per year.

Yet, why is there a theoretical limit on that? Why isn’t it more? A patient can always go and buy cash pay, even in Europe at cpapeurope.com, and find access to it. There’s no real limits to it. Making sure the person has access, knows how to get it, knows what the costs will be, and that we make it easier, make it seamless. I think medtech can learn so much from consumer tech. Look at what Amazon can do just to empower people to know that in one click, they can get something delivered right to their home. Why can’t we in medtech provide similar services? I think with the relatively low cost of our equipment, first-time setup, and the masks, we can get there.

The final thing I’ll say, and Carlos can talk about the actual study this came from, is just putting a patient on a resupply or adherence protocol improves their adherence. Carlos talked about up to 87% adherence we’re able to get with people on doctors using AirView, patients using myAir. Putting them on a resupply program, just that idea of reaching out to them helps them understand the value of their care and engages them more. Adherence actually goes up. It saves the healthcare system money because an adherent patient is less showing up to emergency rooms, and less costs of their chronic disease because the suffocation is treated. There’s an overlap, if you like, of altruism and the profit motive for optimizing, not maximizing, but optimizing mask renewals at the patient level. It’s all about empowering the patient no matter what system they’re in.

Leanne Harrison, Australian Healthcare Analyst, Bank of America: Okay. Whilst we’re talking about that in terms of adherence and resupply, let’s move on to GLP-1s or weight loss drugs. You shared some data previously about people who are on these weight loss drugs being 10% more likely to start CPAP therapy, more likely to engage in resupply. Have you looked at that data since then? Is there any updates that you can provide to us?

Carlos Nunez, Chief Medical Officer, ResMed: Yeah, we look at the data. We refresh that data every quarter so that Mick has something to talk about when he meets with all of you every quarter. No, but it’s important data because what we are seeing is we’ve looked at over 1.6 million patient records now. For patients who carry a prescription for CPAP and GLP-1, they are nearly 11% more likely to start on CPAP than someone who just has a CPAP prescription alone. After a year, they’re more likely to order resupply masks. After two years, they’re even more likely. The data for GLP-1s is starting to come out that at one year, the drop-off is pretty significant. At two years, it’s even more significant. Those patients who started with CPAP and a GLP-1 at two years are still ordering masks from us, even though they may have dropped off of their GLP-1 therapy.

The thesis that we had going back two plus years that this would be a tailwind for us has really played out for us in the market, at least in the data we can see. Obviously, you see how our results have been through these two years where everyone thought the wheels were falling off. In reality, ResMed has taken advantage of exactly what we thought. The tailwind from GLP-1s and also from big tech entering the sleep apnea have truly been the tailwinds we expected them to be.

Mick Farrell, Chairman and CEO, ResMed: I get asked, why is that? Why is the 300 basis points higher, not just adherence, but resupply rate at one year? Why is it the curve separated and it’s 500 basis points higher resupply rate for a patient who has a GLP-1 plus CPAP prescription versus just the CPAP prescription? We don’t actually know. I mean, you know, I have a medical doctor to my left. The engineer’s opinion is I actually think these people are just motivated patients, that this promise of the miracle injection drug has brought them back into the healthcare system they weren’t in before. I think they’re actually participating more probably in their hypertensive meds, their diabetes products. We know they’re getting more masks from us. We don’t truly know why, but I think they’re more motivated. They’re in the system. They’re getting half improvement of their apnea.

The final thing I’ll say is I actually think with some weight loss reduction, there’s probably a reduction in the mean and maximum pressure that has to be delivered from the APAP device. That may generally lower pressures, lead to higher adherence. That’s a hypothesis, but that could be part of it as well.

Leanne Harrison, Australian Healthcare Analyst, Bank of America: Okay. You mentioned, Carlos, that you noticed that people or these patients tend to stay on CPAP even though they’ve stopped taking the GLP-1s. What can you share with us in terms of how long have they been on a combination therapy? Do they restart the GLP-1 therapy at a later point in time?

Carlos Nunez, Chief Medical Officer, ResMed: Yeah. It’s hard to know because the claims data give us they have a GLP-1 prescription, but we can’t then tell, did they show up and fill the prescription or actually take it? We can just track whether or not the prescription is still active. It’s hard for us to tease out all of the data. Going anecdotally, I know someone very well who was diagnosed with sleep apnea years ago, and also a couple of years ago, BMI went above 30 and became obese. That’s me. If you haven’t figured it out, that’s why I’m on it. I took a GLP-1. I lost 20% of my body weight. I was the perfect surmount OSA success story. I decided to stop using my CPAP, and that lasted all of one night.

I woke up the next morning with horrible bruising on my side because my wife was going like all night long, reminding me that my sleep apnea didn’t go away. What we are starting to see in the data that we can see, we see that it is very real for cost, for side effect profile, for whatever reason, people are not staying on GLP-1s as long as they should. They’re supposed to be on them for life for things like diabetes. What we are seeing is that those patients who have a connected device, who have downloaded the app, who are using the most comfortable masks, the best devices, are adherent, 87% adherent in the first 90 days. They become better patients for us and for the DMEs because they stay on therapy. Why?

Even though maybe after a year or so, and I had to stop taking the GLP-1s because of side effects, and I have struggled to not rebound. It’s not been easy, but it’s very real. I actually had very severe side effects. People struggle with that. If you are symptomatic and you start sleeping with a CPAP, as Mick says, it immediately, one night is all it takes to change your life, to potentially save your marriage from a sleep divorce where you’re down the hall and your bed partner is in the bedroom. It’s real. People love their CPAP. Mick mentioned that part of our new strategy is to be brand enhanced because for now, most people don’t know ResMed’s brand unless you follow us like you do, or you really, really love your CPAP and you stop people like us in the airport.

Our goal is to make sure that the billion people, 90% of whom are undiagnosed and untreated, understand that this is life-changing therapy. It’s easy to do. It’s just taking the air from your bedroom and putting it in your lungs where you belong. There’s no needles, there’s no knives, no surgery, no drugs. It is natural, and it is, again, saves your life, your marriage, your job, and makes you feel better immediately.

Leanne Harrison, Australian Healthcare Analyst, Bank of America: Do you see those people who are taking, so obviously you see the prescription data, so people who might be on GLP-1, do you see any fluctuations in that adherence over short periods of time, similar to what you said, you might stop for a short period of time and then start up again?

Mick Farrell, Chairman and CEO, ResMed: No, we’re watching really closely. Churn is something, I look at it the other way. You know, churn is what people say is a negative, but I talk about adherence rates, and we’re watching laser-focused on our adherence rates. You know, for the 15 years GLP-1’s been around, the five years of the most recent gen, and even just since this IFU from December, we haven’t seen any change in the churn, and the reverse of that, the adherence rates. We’re watching super closely. Everyone was like, oh, you know, there’s going to be this impact. What it is doing is it’s bringing people into primary care physicians. As we look at that, our job isn’t to educate all 370,000 primary care physicians in the high-volume market for GLP-1s, which is the U.S. What we want to do is take actually a very significant subset. It’s around 10%.

So there’s around 40,000 primary care physicians that are high-volume GLP-1 prescribers, and overlap the circles, they’re also users of home sleep apnea testing protocols. They’ve used, you know, one, three, or five per month referrals for home sleep apnea tests from these primary care physicians within that trailing 12-month period. Those 40,000 primary care physicians, we want to educate, and we are going to them with continuous medical education, CME programs. We already have 20,000 unique PCPs trained as part of that group, 32,000 trainings. Up to 12,000 of them did not just sleep 101, but sleep 201 or 301. Here’s the best stat from all that education. At the end, we do a survey, did you like the education and the gold standard CPAP, silver standard, dental bronze standard, half treatment from an injectable or an implant?

75% of the primary care physicians at the end of that said they’re going to change their sleep health protocols of how they screen, diagnose, and refer patients. From the survey to what actually happens, watch this space, but we are laser-focused to say we’re not going to waste this opportunity where Eli Lilly, because of the Zepp bound with its IFU, to half treat sleep apnea, they’re going to be putting patients into the funnel like never before. They’re going to be told, go see your doctor. We know which doctors they’re going to go to. We know which geographies. We’re going to make sure those doctors are trained to know Hippocratic Oath and liability. You better write a prescription for CPAP immediately on that. We are going to give them protocols to send to good DMEs that are providing the highest level of adherence. Watch this space.

It’s a once-in-a-generation opportunity for demand generation driven by Big Pharma. The other one is, as Carlos said earlier, the wearables. The Apple Watch and Samsung Watch both have FDA clearance to detect sleep apnea, not to diagnose, but to detect sleep apnea. Those patients will have to come into the funnel as well. We are focusing a lot of our investments with Virtuox, which is a home sleep apnea testing acquisition we did, NightOwl, the one I talked about, the Belgian company with the wearable, and Somnoware, which is software for the pulmonary physicians. Putting together this sort of end-to-end seamless, frictionless pathway for screening, diagnosis, treatment, referral, and management.

Carlos Nunez, Chief Medical Officer, ResMed: I just wanted to emphasize something, Mick, there that might get lost in the translation a little bit. It is very.

Mick Farrell, Chairman and CEO, ResMed: I’m not, this is Australian. No, no, no, in English.

Carlos Nunez, Chief Medical Officer, ResMed: Not your accent. No, no, no, not your accent, just because you made the point very quickly, but it’s a subtle point. The average patient who is showing up at that primary care physician’s office who says, "Hey, I heard of these new miracle drugs. I’ve been struggling with my weight for years." When they walk into that primary care’s office, let’s say they’re diagnosed with hypertension and obesity at the exact same time. They can be put on a GLP-1 and told it’s going to take you a year, two years to lose all the weight. Maybe your blood pressure will be easier to manage. I need to start treating your blood pressure right now because you could have a stroke tomorrow. The same thing happens when they walk in and they’re diagnosed with OSA. I’ll put you on the GLP-1.

It may take you a year or two to have the results you saw in that fancy commercial. If I don’t treat your sleep apnea today, you could leave my office, fall asleep at the wheel, and die right now. I would be liable for ignoring your sleep apnea. Or you can die in 20 or 30 years when you’ve forgotten all about GLP-1s and that sleep apnea that’s untreated is causing your hypertension, your stroke, your cardiovascular disease, your dementia, all of those things. What the dynamic we’re seeing is everyone just assumed you show up, get put on a GLP-1, and everything else doesn’t matter. In reality, everything matters right now, and the GLP-1 has a very long and delayed effect. You have to do both.

Leanne Harrison, Australian Healthcare Analyst, Bank of America: Is there anything you can share with us, whether it be anecdotal, about what sort of rates of increase in referrals that the sleep labs are getting from this work you’re doing with primary care physicians?

Mick Farrell, Chairman and CEO, ResMed: Yeah, look, I think it’s very early days on this because the IFU for Lilly Zepp bound came through in December. They didn’t start any advertising until June. It’s been very light, sort of don’t sleep on OSA, general market awareness advertising, not at scale in specific geographies. I do think, you know, if you look forward the next one, three, five quarters, the next one, three, five years, you’re going to see increased advertising as they do with these drugs to bring them in. I think you’re going to see increased pull from not just Big Pharma, but from consumer tech too, as people start to engage more with the sleep health wearables.

Both of those, you know, I’ve said this, I think it can lead to 25, 50, 75, even 100 basis points of increased growth of new patients coming through, which would impact both the devices and then over time with resupply of the masks revenue for us. It’s not immediate. It’s not some step change. It’s just like, boom, there it is. It happened on June 20. I think we’re doing a lot of experiments. We’re going to very specific geographies and saying, okay, you know, we’ve got flexibility in the home sleep apnea testing protocols in these five metropolitan statistical areas. Let’s do some demand capture, curation, conversion in Dallas Fort Worth or Phoenix. You run the experiment, you put in the investment in the demand gen capture, curation, and then you track screenings, prescriptions, and then ultimately, you know, first set up of CPAP and mask system.

Then you can see, okay, there’s an ROI. It’s not just brand development. It’s brand ROI. I want to see a return on investment for every single investment we make there. If you get it, you keep going. If you don’t, you stop, you pivot, and you go to another place. That sort of over our portfolio of the 50 states and the 140 countries should lead to some sort of what I would call some acceleration of the flow of patients into the funnel.

Leanne Harrison, Australian Healthcare Analyst, Bank of America: Let’s talk about demand capture. You’ve got Virtuox now, you’ve got NightOwl. Can you tell us what you’re doing to ramp that up to ensure that you’re capturing these patients that you’re identifying through the demand generation side of things? Is that currently U.S. focused at the moment? Are you looking broader than that?

Mick Farrell, Chairman and CEO, ResMed: Yeah, obviously, Virtuox is a U.S.-based home sleep apnea testing approach. The NightOwl product is Belgian technology. It’s available. It’s FDA cleared for the U.S. We just launched it to our North America sales team last month at the sales meeting. It’s the biggest market in the world, so there will be a lot of emphasis there. There’s a lot of learnings that we get from the U.S. that we then take to our global markets, and vice versa too. We learn a lot about consumer markets from Australia, New Zealand, Singapore, China, where we have direct to consumer and consumer-driven markets. We bring that learning back to North America as well. Look, how they’re all coming together, you’ve got Virtuox. We’ve got the sort of scale there. We’ve got the NightOwl. We’ve got some scale there. We’re creating this seamless experience.

We’re very careful, though, when you go from that positive diagnosis. Let’s say a primary care physician has checked the box. Look, I want to have home sleep apnea testing by Virtuox. I want a sleep doctor to review the test because they’re going to be the expert. I want them to write the prescription. Yes, I’m happy for you, Virtuox, to choose the DME. Obviously, we’re not going to choose exactly where it goes other than to say, what is the DME in this area that gives the highest level of adherence? If they have the scope and they have the scale and they’re the highest adherence, they would get the referral and be driven by an algorithm linked to highest adherence. It’ll be our job to have the most highest adherence, which we do, devices, masks, to capture that downstream.

It’s sort of a little bit of a separation of the church and state, but it’s setting up algorithms that drive towards the best outcomes for the patient, the physician, the provider, and long-term care.

Leanne Harrison, Australian Healthcare Analyst, Bank of America: Okay, great. I might pivot a little bit because this is a question I get asked all the time. I’m sure you do as well. I feel the need to ask it here. It’s about your key competitor that’s out of the market because of the recall. Are you hearing any murmurings through the CPAP grapevine in terms of when they might come back to market?

Mick Farrell, Chairman and CEO, ResMed: That company was here at this conference earlier today and gave no new information. I don’t have any, they don’t. I got to tell you, we operate in 140 countries worldwide. Even in our largest country, that competitor was never out of the mask market. We’ve been dealing with them very well the last five years when all they could sell was masks. Not fearful at all of them coming back for devices in the U.S. I look forward to it. I look forward to them competing for the number three position against the React BMC. That’s 120 countries of the 140, roughly. They’re already back. Been back 6, 12, 18, 24 months. Some countries, they never left. They’re fighting for that number three, number four, number two position versus, you know, Lornstein in Europe and BMC in Asia. They’ll do the same versus React over here.

Look at our Europe, Asia, and rest of the world device sales over the last 2, 4, 8, 12 quarters. Ask me, do you think there’s been a big impact? No. Do I think there’ll be a big impact here? No. When do they come back? I don’t care. I look forward to it. I like having competition. I actually think the game has changed. The basis of competition has changed. This isn’t about just the device or a mask. It’s about a software. It’s about an ecosystem. It’s about providing the best value. One fact we didn’t talk about is that we lower the labor cost because of this ecosystem. We lower the labor cost of setting a patient up on CPAP, APAP, bilevel by 50%. What’s your price discount to get that? I’m very confident that we’ll go the right direction here.

The real competition is ignorance, lack of education, lack of awareness, and the ability to get to the billion people, the 77 million in the U.S., the billion people worldwide. We’ve now got a big pharma company and a bunch of big tech companies going to be talking to those consumers on their own dime for their own purposes. It’s going to bring people into the funnel like never before. We’ve never seen this. It’s an opportunity of a generation.

Carlos Nunez, Chief Medical Officer, ResMed: I just wanted to mention, I mentioned that last week I was at the World Sleep Congress in Singapore. Philips was there. Full-size booth, all their stuff, even devices. As Mick said, in 120 some odd countries, we’re competing with them already.

Leanne Harrison, Australian Healthcare Analyst, Bank of America: Okay, great. I’m mindful of the time. I just wanted to check if there’s any questions from the audience. Otherwise, I’ll keep going.

Mick Farrell, Chairman and CEO, ResMed: Microphone’s coming.

Perhaps just one question following the one on Philips. Have you seen anybody else starting to take their place in the U.S. or like newcomers that might have profit from that?

Yeah, it’s a good question. On the mask side, they never left. It was just us and them and FMP. On the device side, yeah, the React BMC took that number two position, much smaller share on the device side and the mask side. I think customers always want two players out there. You know, when that competitor comes back, those two can fight out for who’s number two.

Maybe a few words on capital deployment.

Yeah, really good question. Sophie, you missed it on the webcast. Capital deployment with really strong cash flow. What are you doing? Look, I actually think the best use of our cash flow is to reinvest in our business. We put 6% to 7% of our revenues back into research and development. Smallest, quietest, most comfortable, most cloud connected, most intelligent, most ML and AI driven. Launched our first gen AI product, Dawn, to the market. It’s on resmed.com. It’s going on to myAir, Australia and New Zealand. We’ll go beyond that. Best use of capital, R&D, 6% to 7% of revenues. Next best is to invest in all this sales and marketing to do the demand capture curation. It’s about 19% to 20% of our revenues we’re investing back in SG&A.

Of course, we’ve got our dividend that we just increased at double digit rates this year, and our share buyback that we’ve increased up to $600 million a year, $150 million a quarter. They’re very good uses of capital. Beyond that, though, we have extra cash, right? We do have cash available for acquisitions. I speak more in the lines of tuck-in acquisitions, sort of along the lines of Virtuox, which was $140 million for $45 million in revenue. Is it really just about that? Yes, that asset alone is worth that and has a great return. More than that, it opens up the funnel and allows us to scale home sleep apnea testing and to encourage competition from all the other players to deal with this wave of patients that will come through. Same with Ectosense, you know, Belgian company, great technology, wanted to bring it to world markets.

Somnoware, amazing entrepreneurs, Subath and team. We’ve incorporated that into the front end of our funnel, the way we did with Brightree on the back end of our funnel. Are we looking at other M&A? For sure. There are some great tuck-ins out there in the field of sleep health, breathing health, and health tech at home. I can’t tell you, because otherwise you guys are getting in before I do. Watch this space.

Leanne Harrison, Australian Healthcare Analyst, Bank of America: Great. Thank you. I might come back to what you talked about, market growth. You’ve consistently mentioned that the device market in particular is a mid-single-digit growth market. If I look at ResMed over the last few years, it’s been consistently growing at, you know, sort of 6%, 7% on average. I guess that’s supported by some of the demand gen work that you’re doing. How long do you think you could sustain that above-market growth?

Mick Farrell, Chairman and CEO, ResMed: Yeah, look, I mean, as the market leader now in 140 countries, we can’t just accept market growth. We’ve got to actually actively participate and drive market growth. I, you know, mid-single-digit device growth would happen even if we didn’t do anything in ResMed. The question is, what of all these experiments, what’s going to work? The number keeps getting bigger. It’s now trailing 12 months revenue of $5 billion, right? Even just keeping at a constant growth of 5% is hard in devices. Can we be at 7% every quarter or 6% every quarter? No. Can we say 25, 50, 75, 100 basis points ahead as often as possible when we’re doing demand gen that’s working? We’re getting the brand ROI. We’re getting demand capture ROI that the PCP training is leading to prescriptions that are going through. 100%. On the masks too, that’s high single-digit growth.

Everyone’s focused a lot on the devices. They’re lower margin. The masks, making sure that we have that high single-digit growth, we’ve been doing pretty well, sort of not just 7, 8, 9, but getting, you know, 9, 10, 11, 12, even % growth on masks. Both of those, we’re not just going to accept mid-single-digit growth on devices and high single-digit growth on masks and high single-digit growth on the software. We’re going to try to drive each of them up 25, 50, 75, 100 basis points every quarter. Do you get it every quarter? No. Are we going to invest too? Yes. I do think some of these other factors out there that are driving the import are going to help us achieve it. It’s our job to convert that and make sure it happens.

Leanne Harrison, Australian Healthcare Analyst, Bank of America: Can you talk about the device growth dynamics then within North America and outside North America? Can we expect, you know, we’ve certainly seen higher growth rates outside of the U.S. because of, you know, product devices coming off allocation. Can that be maintained going forward, particularly in the medium term?

Mick Farrell, Chairman and CEO, ResMed: Yeah, look, I mean, it’s the same challenge in the U.S. as externally. It’s just different because we’ve got 140 different healthcare systems, business models, ways that we go to market. There’s just huge scale you can get in the U.S. I can do one investment in Virtuox and scale that across 50 states because I’ve got a sales force that goes across it. It’s not the United States of Europe. There are no United States of Asia. We can, and we have done some really strong targeted investments in China that I think are really helping us on the direct-to-consumer side and going through the dealer side. Some really good experiments in Singapore and Korea are working in that. We even did some vertical integration work in Korea in terms of multi-channel, right? Through traditional DME as well as through cash pay.

I think that whole omnichannel market is a huge opportunity for us. Our experience in omnichannel markets is they add to each other, so that when you have a cash pay market plus a distributor market plus others, they actually multiply and everyone does better. You know, watch this space.

Leanne Harrison, Australian Healthcare Analyst, Bank of America: If I can then come to gross margins, you mentioned very good gross margin expansion this quarter. Can you talk to us about the room for growth there, which factors would probably drive that most over the next 12 months?

Mick Farrell, Chairman and CEO, ResMed: Yeah, I mean, I’ll go further. I’ll look out towards 2030, right? I mean, we only give guidance, you know, in that sort of 12 months. We’ve said 61% to 63% gross margin is our guidance number. If you look at that, as you said, that pretty incredible gross margin expansion, coming out of, you know, COVID and supply chain crises and going from air freight to sea freight and all that sort of stuff. 230 basis points year on year, incredible. 150 basis points quarter on quarter, incredible for Q4. Are we going to do that every year? No. Our guidance, you know, sort of says that. When I sit down with Shane Azzai, our new Chief Supply Chain Officer, I shouldn’t say new, he’s been with us a year now. He came from Hasbro, Kimberly-Clark, mask confectionery company with much lower margins and broad SKU profiles.

He sees lots of opportunity. What we’ve done is we’ve established what we’ll call a pipeline. We’ve got a product pipeline. We actually have a supply chain pipeline of gross margin opportunities, not at the same quantum as you saw in those last 12 months. I say, you know, I want double-digit bps improvement every year from here through 2030. Go get me 50 bps every year between here and 2030. Is it going to happen every year or every quarter? No. Having that pipeline and being able to turn the dials to get there using ML and AI and all the off-the-shelf tools, but also using some of the skills and capabilities that just med tech can learn so much from retail and fast-moving consumer goods. I think all of us can do better. We’ve got a pipeline of opportunities ahead.

Leanne Harrison, Australian Healthcare Analyst, Bank of America: Great. I’m just mindful of the time. Thank you so much, Mick. Thank you, Carlos. Really appreciate it. Thank you, everybody, for listening in.

Mick Farrell, Chairman and CEO, ResMed: Thanks, Leanne.

Carlos Nunez, Chief Medical Officer, ResMed: Thank you.

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