Biotechnology That Is Growing at an Alarming Rate Encourages Everyone to Invest in the Sector - Case Study Example

Rероrt on ResMed Limited and her Products NAME: UNIVERSITY: COURSE: INSTRUCTOR: DATE: © 2013 INTRODUCTION Biotechnology is simply the application of technology to manipulate living systems and organisms for the benefit of human beings. It is a concept that has grown in popularity particularly in Australia which is considered the mother of innovation. This claim is supported by the numerous number of biotechnology companies found operating in Australia. The success stories associated with biotechnology companies across the world have seen thousands of investors seeking opportunities of investing their money in the sector. It is out of this ‘mad-rush’ that I have decided to explore ResMed Limited Company and her products with a view of investing in it. The present report therefore gives a comprehensive description of ResMed Limited Company and one of her most successful product and the patents and regulations applying to the product. The report also gives a description of ResMed’s market segment as well as the type of competition facing the Company before presenting my final conclusions. RESMED LIMITED COMPANY Accessed information indicates that ResMed Limited was founded by Peter Farrell in 1989 as a biotechnology company, involved in the manufacture and sale of corrective devices for “obstructive sleep apnea” (Chan, 2006). According to Melissa (2004), the Company specialises in respiratory medical devices such as the ResMed AutoSet machines in the S-series. This device was initially put in the market for the purposes of helping individuals with sleep problems and appears to be of its own kind. Since inception, ResMed has grown in fame and innovativeness as noted by Melissa (2004). The parent Company is headquartered in Sydney, Australia but the Company has subsidiaries across the world such as the US, Europe, Asia and Oceania just to mention but a few. On the business front, ResMed has partnered with other companies such as the “American Heart Association; National Sleep Foundation (USA); Flaga hf in Iceland; MedCath; and Medical Devices” all mentioned by Vance (2013). Unfortunately, ResMed is not involved in major research work as it should be and thus no notable interventions in this area. The Company’s leadership structure is quite acceptable and is composed of the executive team at the top, followed by the directors, senior management and the line managers. The Company on the one hand is blessed with an able team of employees capable of fulfilling the Company’s mandate. The executive team comprises of the “Founder and Executive Chairman (Peter Farrell); CEO (Michael Farrell); and six presidents for the various regions. The senior management has a Chief Information Officer and Chief Financial Officer (Lim et al, 2006) while the line management is represented by the Company secretary (David Pendarvis). Based on the neat structure and able leadership of the management team, ResMed’s financial position appears very bright and quite promising. This claim is supported by data accessed from the Company’s annual reports and presents a colourful picture. Considering the Company’s annual reports for the three months preceding March 31st, ResMed’s revenue was $US383.6 million ($374.35m) (Vance, 2013). This was a 10 per cent increase over the corresponding quarter the previous year. In fact, the Company was in concerted efforts to introduce new products into the market in order to increase her market share segment (Powell et al, 2005). Among this is the proposal to produce two improved mask products to advertise the company’s edge in innovativeness. According to Redline and Pack (2006), the proposed products will be “smaller, quieter and more comfortable” masks (Elshaug et al, 2007). But on the whole, the Company had some expenses amounting to some to $US2.8m going into research and development expenses (Friedman, 2008). In view of the foregoing illustration, it is clear that ResMed has been enjoying the maximum advantage of her joint investment venture with her partners and the same is expected to continue further now that the initial operational costs have been overcome. The same is applicable to the Company’s share price in the Australian Stock Exchange market which has not been very attractive. In fact, Diaz (2008) indicates the Company’s share price to have been oscillating between plus or minus half a cent well above 60 cents since listing on the Australia Stock Exchange market sometime in 2003. Predictions show that the Company’s share price is expected to stabilise in the next six to twelve months. Factors attributed to this stabilisation include popularisation of the Company’s product and also the Company will have gone past the initial “start-up” stages as advocated by Eriksson et al (2003). Equipped with this kind information, I have no doubts in my mind that I’ll be doing the right thing to invest my money in ResMed Limited Company. RESMED’S PARTICULAR MARKET SECTOR As already mentioned, ResMed operates in a single market segment involved in the manufacture and sale of devices used in the treatment of obstructive sleep apnea both in adults and children. Webb (2006) explains that sleep apnea is a treatable disorder in which a person stops breathing during sleep, often hundreds of times during the night. It is estimated that at least 5 per cent of the world population have unrecognised sleep apnea. ResMed’s device works by applying what is known as continuous positive airway pressure (CPAP). CPAP therapy involves wearing a mask, which is connected to an electric device that delivers air at positive pressure. The air pressure acts as an air splint to keep the upper airway open and prevent apneas (Lore, 2006). In this aspect, ResMed’s particular market sector resides in a myriad of areas. For instance, ResMed believes that home health care dealers and sleep clinics play a significant role in determining which brand of CPAP product a patient will use. For example, in the United States, when a physician at a sleep clinic prescribes the use of a CPAP product, the patient typically purchases the product from a home health care dealer (Vance, 2013). The physician may or may not prescribe a specific brand of CPAP product as underlined by Elshaug and colleagues (2007). If a specific brand is prescribed, ResMed believes the brand prescribed depends upon the brand of CPAP product that is used in the sleep clinic. If a specific brand is not prescribed, the home health care dealer may recommend a specific brand (Elshaug et al, 2007). Occasionally, even if the physician prescribes a specific brand, a home health care dealer may substitute a competitive CPAP product. ResMed has limited resources to market the more than 2,000 US sleep clinics and the more than 4,000 home health care dealer branch locations. Most of these clinics are found to use, sell or recommend several brands of CPAP products (Lim et al, 2006). Numerous study findings have confirmed that there is a wide variety of therapeutic areas that need intervention. These include the improvement of the recently developed ResMed’s devices: the S9 Elite™ and S9 AutoSet™ in order for them to effectively fit in the market (Arnold, 2005). Because of this indication therefore, ResMed S9 AutoSet™ is found to be up against very steep competition in the fast growing area of sleep problems. This steep competition is found to be offered by close to three companies namely: “Sunrise Medical Inc., Covidien plc, and Philips Healthcare” as noted by Webb (2006). This notwithstanding, S9 AutoSet™ has been able to weather this competition and emerge successful as illustrated by the contents of the following paragraph. The market for S9 AutoSet™ as already demonstrated is found to consist of two main segments namely sleep clinics and home health care. The sleep clinics market to begin with includes all the sales and deliveries channeled towards these institutions identified as being in need of these devices. The purchases are usually done by both governmental and non-governmental agencies and are usually in bulk. The home health care market segment on the other hand is composed of the type of devices found sold by individuals to private homes which offer assistance in addressing the problem of sleep apnea according to illustrations by Lore (2006). This market segment deals with small quantities of supplies as compared to the former segment. But all in all, the net movement of volume is more or less the same in both market segments. RESMED’S PRODUCTS Throughout this report, it has been established that ResMed Limited is involved in the manufacture and sale of obstructive sleep apnea (OSA) devices other medical items. Among these said products, the S9 Elite™ and S9 AutoSet™ are some the most successful devices. These products, particularly the S9 AutoSet™ are successfully marketed by the parent company and ResMed highly regards these products. Additionally, ResMed’s partners in business across the Globe claim that the S9 AutoSet™ device is designed with the patient’s comfort and compliance in mind (Vance, 2013). This is in addition to the fact that the device will provide the much needed sleep with ease and professionalism. More reports imply that the S9 AutoSet™ device was built on the success of its predecessor, the S9 Elite™ (Lore, 2006). Moreover, the S9 AutoSet device is now combining an enhanced AutoSet Advantage™ with the core platform benefits of the S9 series to create a truly unique APAP standard and more comfortable therapy experience (Elshaug et al, 2007). Key technologies To come up with the S9 AutoSet™ device, ResMed Company settled on the AutoSet technology, which uses a new advance in continuous positive airway pressure therapy (Lim et al, 2006). A patient’s breathing is monitored on a breath-by-breath basis, with pressure adjusted automatically in response to the severity of flow limitation, snoring and/or apnea (e.g. Webb, 2006). Research show that AutoSet technology has been clinically validated and hence a big help to patients suffering from sleep-disordered breathing (Powell et al, 2005). PATENTS PROTECTING RESMED’S PRODUCT Because of the complexity involved in the manufacture and development the ResMed sleep devices, particularly the S9 AutoSet™, several patents have been instituted to protect it from being imitated by other competing generics (Neslihan, 2010). One such patent is aimed at protecting the product from being imitated and be offered at a cheaper price in the market. Although there are no specific patents being mentioned, there is evidence of some efforts from the Company to protect its patents and other intellectual property successfully (Thieman et al, 2008). REGULATORY BODIES In both Australia and the USA, there are certain regulatory bodies that oversee the development, production and marketing of common products in the health sector. In Australia for example, The Intellectual Property Laws Amendment Act 2012 approves the manufacture and sale of ResMed products while The US Food and Drug Administration (FDA) is responsible for regulating the product’s sale outside Australia (Springham et al, 2011). Currently, S9 AutoSet™ has passed the New Drug Application stage with the Food and Drug Administration of the United States and has therefore been approved for marketing both inside and outside of US (Webb, 2006). COMPETING PRODUCTS AND TECHNOLOGIES Because of the complexity in the process of manufacturing and selling S9 AutoSet™, a large percentage of competitors have been left out. To ensure that this competition is completely shut out, the earlier mentioned patents have been very instrumental. Additionally, research work has continuously demonstrated that S9 AutoSet™ has designed innovatively bearing the comfort of the patient in mind. In fact, the Company is lauded for her possession of “a commitment to build a series of products that can more effectively treat apneas, increase patient comfort and encourage compliance with prescribed therapy” (Elshaug et al, 2007). This gives the company an edge over others. CONCLUSIONS In this report, it has been made explicit that biotechnology is growing at an alarming rate such that everyone is being encouraged to invest in the sector. Although the idea of investing in this fast-growing economy, it must be noted that there are certain risks as well as benefits abound. Firstly, the sector is prone to piracy where a myriad of generics are coming up day after day. Similarly, the products in this sector have not been in the market for long and thus risk the disadvantage of lagging behind in net sales. Finally, these products need to safety approval and if they don’t pass the test, then there could result in massive losses. On the part of benefits, the sector is quite promising since human therapeutic products are ever in demand throughout our lives. REFERENCES Arnold, J. P. (2005). Origin and History of Beer and Brewing: From Prehistoric Times to the Beginning of Brewing Science and Technology. Cleveland, Ohio: BeerBooks. p. 34. Chan, C. T (2006) Sleep apnea with intermitten themodialysis. Time for a wakeup Call, J Am Soc Nephrol 17: 3279-3280 Diaz, E. (2008). Microbial Biodegradation: Genomics and Molecular Biology (1st ed.). Caister Academic Press. Elshaug, A. G., Moss, J. R., Southcott, A. M., and Hiller, J. E (2007) Redefining success in airway surgery for obstructive sleep apnea: A meta Analysis and synthesis of the evidence Sleep 30 (4) 461 Friedman, Y. (2008). Building Biotechnology: Starting, Managing, and Understanding Biotechnology Companies. Washington, DC: Logos Press. Lim, J., Lasserson, T. J., Fleetham, J., and Wright, J. (2006) Oral appliances for obstructive sleep apnoea. 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