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The fundamentals of the respiratory device market, including the sleep market, remain strong, with both U.S. and international markets poised for growth into the foreseeable future. “Over the years, the increased development of evidence-based care, continued prevalence of respiratory and sleep disorders, internationalization of respiratory care paradigms—as developed in the United States—increasing industry participation, and breakthroughs in information technology have led to the present strong state of the market,” says Joshua Zable, a medical devices analyst at Natixis Bleichroeder (New York City).
Zable says the possibility of home diagnostic testing reimbursement is arguably the most important issue on the minds of players in the sleep device market. To date, the Centers for Medicare and Medicaid Services (CMS; Baltimore) has provided reimbursement only for facilities-based polysomnography for the diagnosis of obstructive sleep apnea. But on December 14, 2007, CMS issued a memo containing a proposal to provide reimbursement for home diagnostic testing for obstructive sleep apnea. “Nearly all home testing devices fell under the proposal—classes II, III, and IV—and this potential change in diagnosis can spur growth in what we already view as one of the most attractive markets in medtech,” Zable says. “With the final ruling expected to be posted no later than March 14, we do not expect an immediate impact from this ruling, but it should allow the proper channels time to prepare for this change.”
In addition to forecasting continued growth in the sleep and respiratory markets for devices, Zable provides the following insights into some of the major and emerging sleep and respiratory device players.
Respironics. Zable says that Respironics Inc. (Murrysville, PA) seems well positioned to benefit from an estimated 15% market growth rate in the obstructive sleep apnea therapy market. “Respironics is a diversified respiratory company, with leadership in multiple respiratory areas,” Zable says. “Despite being known as the leader in sleep devices, Respironics is also the leader in noninvasive hospital ventilation, an area that is receiving more attention.” In December, Respironics announced that it had entered an agreement under which Royal Philips Electronics will acquire the company for about $5.1 billion.
ResMed. A pure-play respiratory device manufacturer, ResMed Inc. (Poway, CA) is one of the largest players in the obstructive sleep apnea market. “Despite recent challenges associated with a product recall, we still believe the company is a leader in the space,” Zable says.
Vital Signs. Zable says Vital Signs Inc. (Totowa, NJ) appears ready to look to acquisitions or partnerships to help it expand geographically, specifically outside of the United States. “As a reminder, 70% or more of its revenues are derived from the United States, so international expansion could be a real driver of growth,” he says.
Xltek and Natus Medical. Excel-Tech Ltd. (Xltek; Oakville, ON, Canada) is now part of Natus Medical Inc. (San Carlos, CA). “The integration appears to be going well, with products launching on schedule,” Zable said. “Despite going head to head with significantly larger companies in the space, the combined Natus-Xltek entity should have the largest market share in its business lines.”
Invacare. Zable says Invacare Corp. (Elyria, OH) is also making a bid to become a larger player in the sleep market. “Despite Invacare's reach and reputation, previous efforts in sleep have fallen short of expectations,” Zable says. “We continue to believe that Respironics' and ResMed's leadership will be difficult to challenge.”