ResMed rival sniffs an opportunity

Thursday, January 24, 2002

BNP Paribas

The release of a new medical product by a rival sent ResMed shares to a nine month low yesterday. Shares in ResMed, which makes medical equipment for sleeping disorders, plunged 18 per cent as investors fear its market dominance might come to an abrupt end. The fall follows news by Innomed Technologies that its Nasal Aire device was preferred by 98 per cent of users when compared with ResMed's product. Innomed, which is owned by Boca Raton of the US, said it had orders of more than $20 million. A US research group estimates total sales of sleep apnea devices will rise to $1 billion in 2007 from $386 million last year. ResMed, the sixth best performer of Australia's top 50 stocks in 2001, fell 74.5 to $9.10 after plumbing a low of $8.30 during the day. Volume was 10.3 million shares, or about five times the average turnover. The drop defied a 0.9 per cent rise in ResMed's US listed shares on Tuesday. The group dominates the US market for sleep disorder equipment. Burdett Buckeridge Young analyst Andrew Goodsall said Innomed's release was "bullish", but said it was unlikely to have any immediate impact on the group's earnings. BNP Paribas healthcare analyst Sean Laaman said it was a knee-jerk reaction by investors. "I don't think this is going to have much of a long-term impact on ResMed. They may present a good buying opportunity in future," he said. ResMed chief executive and founder Peter Farrell has forecast annual sales growth of 30 per cent for his products, which are distributed in more than 60 countries.