ResMed BBY healthcare

ResMed Inc: 

ResMed Inc Klaus Schindhelm Senior Vice President, Applied Research Global

ResMed Overview: 

ResMed Overview Operate in over 68 countries through wholly owned subsidiaries and independent distributors ~2,500 personnel in direct offices in 18 countries Manufacture in Australia, US, and Europe Leading manufacturer of medical devices for sleep-disordered breathing market Global market size: $2 billion1 Market growth estimated at 15-20% Market <10% penetrated NYSE / ASX: RMD 1Frost & Sullivan 2004 reported $1B but growth is ~20%

Strong Financial PerformanceAnnual: 

Strong Financial Performance Annual US$ (Million) *Excluding stock-based compensation, restructuring, and acquisition-related costs

Sales by Product Category Q1 of FY’07: 

Sales by Product Category Q1 of FY’07 Masks, Accessories 50% CPAP/APAP 31% VPAP/Saime 19%

Sales by Geographic Region Q1 of FY’07: 

Sales by Geographic Region Q1 of FY’07 Americas 55% Europe 38% Asia-Pacific 7%

What Is SDB?: 

1Young et al. Am J Respir Crit Care Med 2002 What Is SDB? Disordered breathing during sleep due to collapse of the upper airway Serious disorder linked to leading causes of death in the US (heart disease, stroke) Affects over 40 million Americans 90% of cases are undiagnosed1

Treatment for Sleep Apnea: 

Treatment for Sleep Apnea CPAP - Continuous Positive Airway Pressure OSA treatment first described in 1981 by Sullivan (Lancet) Works as an air splint to keep upper airway open during sleep Prevents upper airway collapse and associated physiologic responses Most effective non-invasive therapy

US Market Opportunity: 

US Market Opportunity SDB Prevalence Diagnosed Treated New User Share Compliant Share Adult population 221.3M 44M 4M 4M 2.5M 44M

Growth Drivers: 

Growth Drivers SDB Prevalence Diagnosed Treated New User Share Compliant Share

Growth Strategy: 

Growth Strategy Increase awareness and understanding of sleep apnea and co-morbidities Deliver innovative products to optimize patient care Maximize the advantage of global operations for manufacturing and selling products

Increasing Public Awareness of SDB: 

Increasing Public Awareness of SDB Public relations campaign with another industry leader Launched HealthySleep.com: resource on symptoms and risks of sleep apnea Supporting centers of excellence and thought leaders to educate physicians and public ResMed Foundations (United States and Australia) Today Show Segment on Sleep Apnea

Growth in SDB Publications: 

Growth in SDB Publications

Sleep Apnea Prevalence in Cardiovascular Disease Patients: 

Sleep Apnea Prevalence in Cardiovascular Disease Patients Logan et al. J. Hypertension 2001 Javaheri et al. Circulation 1999 Sjostrom et al. Thorax 2002 Schafer et al. Cardiology 1999 Sanner et al. Clin Cardiology 2001 Somers et al. Circulation 2004 80%+ 70% 50-70% 35-45% ~30% ~30% Erman et al. APSS 2005 ~50%

Economic Studies on CPAP Benefits: 

Economic Studies on CPAP Benefits Treating all US drivers suffering from apnea would save $11.1 billion in collision costs and save 980 lives annually1 Higher hospitalization rates for patients with untreated apnea (251 nights vs. 90 nights)2 Medical costs of undiagnosed sleep apnea patients were double in the year prior to diagnosis ($2720 vs. $1384)3 Prior to apnea diagnosis, patients utilized 23-50% more medical resources4 1Sassani, et al., SLEEP 2004 2Kryger, et al., SLEEP 1997 3Kapur, et al., SLEEP 1999 4Smith, et al., CHEST 2002

Documented Medical SavingsSchneider Trucking: 

Documented Medical Savings Schneider Trucking Case study: Schneider Transportation Company Results 12 months post-CPAP treatment 57.4% reduction in total medical expenses = $6,456 / yr 91% reduction in hospital admits Does not include savings from accidents, liability Results from original 6 month follow-up study Improved retention by 229% 73% reduction in accidents 1Berger, et al., CHEST 2006

Slide16: 

Educating Physicians: Hub and Spoke Model Cardiology: Collaborations with Guidant and Medcath, educational symposia Bariatrics: Unique product offering; education of bariatric surgeons on post-operative risks Diabetes: A huge prevalence of SDB (~72%) which positively impacts the disease. Endocrinologists need educating.

Slide17: 

High $ New Product Cycle Med $ Low $ Basic Full Unique © ResMed 2006 FEATURES PRICE

Premium Segment: 

S8 Platform Fully integrated humidification Comprehensive efficacy/usage data Remote data downloading capabilities New EPR comfort feature Customizable patient reminders Mirage Swift Light and comfortable Superior seal Improved compliance Quick fitting Simple inventory S8 – Swift System Premium Segment

Value Segment Strategy: 

Value Segment Strategy Access value segment of the market, not previously addressed by RMD Price driven, minimal feature set Incremental US segment for RMD Raise barriers to entry Strategic blocking point New entrants come in low, grow upward Gross margin support Similar GMs to core CPAP Segments Premium products from Value products

Specialty Segment Strategy: 

Specialty Segment Strategy Access incremental 15-20% of sleep lab patients Previously unidentified patient population Mayo Sleep paper cites 15% + prevalence Reduce non-compensated costs for channel Cost to serve “problem patients” High gross margins Unique algorithm Only FDA approved product for Periodic Breathing

Research And Development: 

Research And Development In 2007 ResMed plans to spend 6-7% of its revenues on R&D. Major development areas are: Masks CPAP Ventilation Focal Areas are: Patient “comfort/compliance” System Intelligence Respiratory/Cardiopulmonary Systems

Summary. I.: 

Summary. I. SDB/OSA is a major public health problem on a level equivalent to that of tobacco smoking (NEJM, April, 1993) SDB/OSA is the major cause of hypertension (JNC7, 2003) which, in turn, is the major cause of heart disease and stroke, the #1 and #3 killers in most western countries SDB/OSA is easy to diagnose and easy to treat; it has been shockingly neglected by the medical establishment

Summary. II.: 

Summary. II. ResMed’s biggest competitor is ignorance. ResMed is the leading global technology company in the SDB/OSA space; we have the track record to prove it. The SDB/OSA opportunity is a marathon and we are only lacing our shoes; it is time for the nation and the world to wake up to sleep