Michael "Mick" Farrell
Chief Executive Officer and Chair of the Board at ResMed
Thanks, Amy, and thank you to all of our shareholders for joining us today. Our second quarter fiscal year 2024 results reflect strong execution across our entire business, driving double-digit top and bottom line growth. These results are a testament to the incredible efforts of the global ResMed team. Our results were driven by double-digit global growth in both devices and our Software-as-a-Service business, together with high single-digit global growth in our masks and accessories business, holding our leading market share amongst high comps from the same quarter a year ago. In terms of bottom line leverage, our reorganization efforts and efficiency efforts in the quarter have set us on a clear trajectory of profitable growth.
Taking a step back, all 10,000 ResMedians are energized about the opportunities in front of us. There are over 2 billion people worldwide suffering from sleep apnea, chronic obstructive pulmonary disease, respiratory insufficiency due to neuromuscular disease or insomnia. These chronic conditions form a health care epidemic in which ResMed is uniquely positioned to help. We believe that health care should be delivered in the lowest cost, lowest acuity and highest comfort location possible. Very often, that is a patient's own home. Our end markets remain underpenetrated with many opportunities to add value, reduce friction, lower costs and improve patient outcomes. We support hundreds of millions of people as they take control of their health care journey and navigate the complex health care world outside the hospital system.
ResMed is the global leader in digital health solutions with over 17 billion nights of medical data in the cloud and over 23.5 million 100% cloud connectable medical devices sold into over 140 countries worldwide. We are the clear market leader in sleep apnea, a huge and growing market with over 1 billion people impacted globally. Our category-leading flow generator platforms grew 11% year-over-year. We have achieved and are maintaining supply of our two 100% connectable AirSense platforms with unconstrained supply of the AirSense 10 platform globally. Every quarter, we continue to gain regulatory approvals to launch and to increase delivery volumes of the best-in-class AirSense 11 platform on our pathway to support more and more patients worldwide.
Our commercial teams are successfully demonstrating the clinical and economic benefits of the ResMed mask portfolio. During the quarter our masks and accessories business grew 9% year-over-year in a highly competitive market, maintaining good market share with all players in the field in this category globally. We are excited to have achieved regulatory and reimbursement approval for our latest and greatest mask innovation, and we look forward to bringing this technology to market soon. I've personally worn this new mask and our test data show, not just 10 equals one from the CEO that it is highly favored by physicians, respiratory therapists and especially the most important customer, our patients.
In terms of maintaining our momentum of mask and accessory growth, our clinical and commercial teams continue to partner with physicians and providers to drive resupply programs directly with their patients. Peer reviewed and published clinical evidence shows that using resupply programs leads to better patient adherence and to better patient outcomes. This is proving out in the real world customer by customer.
We continue to see strong growth in the US mask and accessories business where resupply programs are powered by our digital health ecosystem including AirView for physicians, Brightree for home care medical equipment providers, and myAir for patients. Outside the US, we are focused on developing, launching and scaling our direct outreach and subscription programs to help consumers take control of their own health and engage directly in refreshing their own mask, their own tubing, their own humidifier and other accessories. The importance of respiratory health and respiratory hygiene in the eyes of consumers has seen a permanent uptick since four years ago when the COVID-19 epidemic started with supporting our customers with digital solutions and services to meet their needs and to ensure they have clean and fresh equipment to best treat their sleep suffocation and improve their health.
Before I review updates on our key strategic priorities, I'd like to discuss recent actions we have taken to accelerate profitable growth across ResMed and to power our long-term success. Last quarter, I discussed the steps we've taken to ensure that we can refocus and drive even more profitable growth. We stopped some projects that were not working out and we increased investment in areas that will be pivotal to our long-term success, including our digital health technology investments as well as focus device platform and mask technology development.
We have introduced a new operating model centered on making ResMed even more product-led, even more customer-centric and even more brand enhanced. We will measure the success of this new 2030 operating model by an increase in the velocity of new product innovation as well enhance value in the ResMed brand, while accelerating profitable growth. As the Founder of ResMed states, innovation is not just invention of a great new technology, is when a customer loves it, adopts it and chooses to pay for it. We have an incredible legacy and an exciting product pipeline to bring to market.
Let's now turn to a discussion of our three key strategic priorities. Number one is to grow and differentiate our core sleep health and breathing health business. Number two is to design and develop and deliver market-leading medtech and digital health solutions that can be scaled in 140 countries plus worldwide. Number three is to create and leverage the world's best software solutions for care delivered outside the hospital and preferably in the home.
In terms of addressing strategic priority number one, as the world's clear leader in the field of sleep apnea and breathing health, we're laser focused in 2024 on ramping up our demand generation initiatives. We're raising awareness and creating pathways for patients to find access to care for sleep suffocation across specific global markets. We are leveraging traditional health care channels and investing in cost effective social media driven demand generation campaigns to help consumers who are concerned about their own sleep and breathing to find their way into screening, diagnostic, treatment and management pathways. Our goal is to provide a digital health care concierge service to help guide people on that journey.
We are tracking new patient starts in our physician and provider-based ecosystem, which now contains more than 26 million patient records as well as the new user starts in myAir, which is a patient app, where patients choose to participate in their own personalized health care journey to better sleep and better breathing. Our goal is to cost-effectively drive more and more of the over 1 billion people worldwide who need our help into the channel.
There were two mega trends that can have an influence on increasing that patient flow, one from big consumer tech and one from big pharma. Let me talk briefly about each of these mega trends. Many of the big consumer tech companies are increasing their focus on the area of sleep wellness. Apple has sleep wellness tracking built into its latest generation Apple Watch and has plans to enhance that capability with further sleep quality assessment. Google's Fitbit division has sleep wellness tracking built into its platform. WHOOP is doing the same. Samsung have not only built sleep wellness tracking into its latest operating platform, but is helping to define sleep personas to help consumers better understand the 30% of their lives they spend in the state of sleep.
We love this attention on the field of sleep wellness and many of these technologies will help each person find out if they have issues with sleep architecture, issues with breathing during sleep or issues maintaining high-quality sleep. This could be one of the biggest ways of people taking control of their own pathway for discovering they have sleep apnea or they have insomnia or maybe they have both, a state that is called COMISA for comorbid insomnia and sleep apnea. Ultimately this will lead to increasing patient growth for ResMed overall. And our goal is to best educate the person as they move from sleep wellness tracking to sleep health tracking and from consumer awareness into a true health care pathway for screening, diagnosis, treatment and ongoing management of their chronic condition. ResMed plans to be there with the person through that entire journey.
In terms of the impact of mega trends from big pharma, the current focus is squarely on GLP-1 medications. Let me take some time to address what we're seeing in the market with patients on latest generation GLP-1 therapies and positive airway pressure therapy. We're tracking a cohort of over 0.5 million patients with prescriptions for both GLP-1 medications and positive airway pressure therapy. These data are included in our investor deck. So you can review them there on our website. But I'll briefly summarize what we have observed.
Around six months ago, there was a thought amongst some in the market that patients on GLP-1 medications would be less likely to start positive airway pressure therapy. We stated at the time and still do that this was not likely the case as important risk factors such as craniofacial geometry, gender, age and the basic physics and anatomy of the upper airway would remain unchanged despite this new pharmaceutical therapy option. Still the theory remained. So now we have real-world data and real-world evidence at scale. Our analysis of over 529,000 patients with GLP-1 prescriptions shows that not only is there not a reduction in the propensity to start positive airway pressure therapy, it is the exact opposite.
For patients who have been prescribed a GLP-1, there is an increase of 10% of the absolute percentage of patients that commence positive airway pressure therapy. So as an example, if you take a baseline of 75% of patients that commenced PAP therapy after their prescription on average in a certain group that would become 85% of those same patients who were on a GLP-1 that would commence positive airway pressure therapy. And by the way, the vast, vast majority of these GLP-1s are the latest generation medications.
Another hypothesis about six months ago was that patients on GLP-1 therapy and PAP therapy would quit their PAP therapy, their CPAP or their APAP at a higher rate than the general population over time. The real-world data, again with a cohort of over 0.5 million patients, shows the exact opposite. At T equals [Phonetic] 12 months after therapy commencement on PAP, the delta from general PAP population to a PAP plus GLP-1 prescribed population shows an increase in the resupply rate of 300 basis points. So again, as an example, if the general population resupply rate at 12 months was say 70%, it would then become 73% for the population that was prescribed both PAP and GLP-1 therapy. This delta actually increases over time going further with the delta from the general PAP population receiving resupply at 12 months being 500 basis points higher for a population prescribed both PAP and GLP-1.
Here at ResMed we believe in treating the whole person, including the combination of what Professor Bill Dement, one of the founders of the field of sleep medicine, may he rest in peace, called triumvirate of health. That triumvirate is; one, regular cardiovascular exercise; two, balanced diet and nutrition; and three, good sleep and breathing. We believe that addressing all three aspects results in the best patient outcomes.
In terms of best-in-class treatment of sleep apnea achieving that goal of good sleep and good breathing, we have peer-reviewed and published research, demonstrating that we can achieve over 87% of patients' adherence to our PAP technology by combining our market-leading device platforms with digital health solutions including AirView for physicians and myAir for patients. Even with this best-in-class global technology, we still have more than 10% of patients that need alternatives. We just can't get them adherent, those 10%. We're investing in these alternative therapies and we are working to help patients who do not adhere to positive airway pressure to find their path to second-tier therapies such as dental devices where ResMed has invested and scaled the market-leading 3D printed dental device for sleep apnea in Europe called Narval.
In addition, we have investments in other third-tier therapies including pharmaceutical agents with our Apnimed investment as well as hypoglossal nerve stimulation technology with our Nyxoah investment. ResMed stands for respiratory medicine, not CPAP company, and we want to take care of the patient. We obviously start with the lowest-cost, highest-efficacy therapies, including CPAP, APAP and bi-level therapies and we then work through the alternatives to help the person sleep better and breath better. The bottom line is this. A huge number of people need our sleep apnea treatment solutions today and for the next decade, two decades, three decades and beyond. We want every patient to find a path to good breathing and good sleep.
Let's pivot for a moment to talk about our digital health technology investments, leveraging the 17 billion nights of de-identified medical data and the 23.5 million 100% cloud connectable devices in our ecosystem. We are investing in several artificial intelligence-driven data products and capabilities in that ecosystem that we call Air Solutions. We're continuing to roll out, one publicly we're talking about, which is called Compliance Coach to customers in the US market in a controlled market launch. Compliance Coach is a solution that helps home medical equipment providers to prioritize both digital and personal outreach to improve patient compliance and drive better patient outcomes at a lower cost. Compliance Coach models and predicts the likelihood that a particular patient will or will not adhere to therapy based on algorithms built on billions of data points. The AI product then identifies for the HME provider the key patients who may struggle to meet compliance requirements and takes a step further to drive digital and/or human actions to maximize the probability of adherence across the group. Customers using the product in its initial launch are excited and are starting to see very positive results across their business and for their patients.
One final update on AI technology for this quarter. We recently launched an in-market trial of a ResMed developed generative AI product that serves as a digital concierge to help a group of people that we call sleep concerned consumers to best navigate as they search for their sleep-related information and they ask questions about their sleep wellness and potential treatment options. This generative AI tool helps the person identify, engage and enroll on their personal journey to better sleep and better breathing. We're currently beta test marketing this product in Asia Pacific and we will look to scale globally over time. Our goal is to develop and scale this digital sleep concierge so that all those seeking better sleep and better breathing can find their personal pathway for the best outcome, best treatment and the best long-term care.
Our respiratory health business continues to be supported by sustained activity across our non-invasive ventilator platforms as well as our life support ventilator platforms. We continue to invest in clinical and economic trials for high flow therapy that we call HFT to even more cost-effectively treat COPD in the home. As we develop these next-generation therapies, we will generate strong clinical evidence and economic outcomes that will support broader adoption of these innovations for treating respiratory conditions at home. The prevalence of respiratory insufficiency due to COPD as well as neuromuscular disease continues to increase and we offer low-cost, high-quality treatments to help address this health care epidemic.
Turning to our residential care Software-as-a-Service business. We had another great quarter with year-over-year growth of 24%. Organic growth of our SaaS business was solid across our Brightree and our MatrixCare brands with another full-quarter contribution from our MEDIFOX DAN brand in Germany. Ongoing customer-facing synergies between our Brightree offering in the US and our home medical equipment resupply revenue remains very strong, driving good growth across both our SaaS business and our core sleep health business. We expect to have sustainable organic growth across our portfolio of SaaS solutions in home medical equipment, home health, home nursing and beyond to be in the high single digits as we continue through this fiscal year and to achieve stable double-digit organic growth through fiscal year 2025 and beyond.
We continue to drive operating expense leverage through management of our capabilities for cloud compute, our capabilities for cyber security, interoperability and technology development and we plan to accelerate net operating profit growth across our SaaS portfolio and across the entire ResMed business. Our residential care SaaS business remains an integral part of ResMed's growth strategy. This business complements the market-leading software and the market-leading device solutions that we have in our sleep health and breathing health business. And we are well positioned as the leading global strategic provider of SaaS solutions for residential care.
We are transforming respiratory medicine and residential care at scale. We are leading the industry in developing, applying and adopting digital health technology across our markets. We continue to scale and drive efficiencies in our operations. We're focused on driving top line revenue growth, focused cost discipline and increased efficiencies to accelerate profitability. We have created differentiated products and solutions for customers worldwide driving long-term sustainable value for our shareholders. We lead the industry in digital health technology with the smallest, quietest, most comfortable, most connected and most intelligent solutions. And we don't plan to stop innovating anytime soon. We invest around 7% of our revenues straight back into market-leading research and development.
ResMed's mission remains crystal clear, to improve 250 million lives through better residential health care in 2025. This patient-centric mission motivates me and ResMedians every day. During the last 12 months, we have improved over 117 million lives by delivering a medical device directly to a patient or a complete mask system to a patient or a digital health software solution that provides personal care for patients. We've helped each person to sleep better, to breathe better or to live higher-quality lives with best-in-class health care delivered right where they live. I'm very excited about the opportunities in front of us and the pipeline we have ahead.
In closing, I want to express my sincere gratitude to the more than 10,000 ResMedians for their perseverance, their hard work and dedication today and every day. Thank you.
With that, I'll hand the call over to Brett in Sydney for his remarks and then we'll open up to Q&A for Brett and me and the team. Over to you, Brett.
