This week, we had Mick Farrell, CEO of ResMed (RMD), a sleep apnea company, on to discuss the company’s latest earnings, where it beat top and bottom-line estimates and saw a number of analysts raise their price targets. Shares have run 40% higher year-to-date and hit a 52-week high earlier this month.

Sleep apnea is a disorder where breathing stops and starts during the night. The Mayo Clinic describes the two most common types as Obstructive, where the throat muscles relax and literally block the airways, or Central, where the brain is not sending the right signals to control breathing.

While rarely fatal by itself, it can lead to a host of other medical issues, including strokes and heart attacks, as well as preventing a person from getting restful sleep. Risk factors include obesity, age, and smoking, and it is more common in men.

Farrell estimates 1 billion people around the world suffer from the suffocating condition, but the American Academy of Sleep Medicine estimates that 80% of sufferers in the U.S. alone are undiagnosed. He noted that the FDA recently approved a sleep apnea detector on the Samsung Galaxy watch and Apple watch. As more wearable devices are approved to detect medical issues, sleep apnea diagnoses could surge, including in populations previously underdiagnosed, such as women or athletic people.

ResMed creates the most common treatment for sleep apnea: the continuous positive airway pressure, or CPAP, machine. It pushes air into the body with enough pressure to keep the airways open. Farrell emphasizes the company’s work to make diagnosis and treatment “seamless, frictionless, and easy.” He says about 80% of ResMed’s business is hardware, with about 40%-50% of that being “recurring” income from masks and accessories. Sleep apnea is a chronic condition, so patients will be using the devices for the rest of their lives.

While ResMed isn’t the only CPAP maker on the market, one of its biggest competitors, the behemoth Philips (PHG) recalled up to 15 million devices in 2021 after discovering that the foam used in the CPAP masks could crumble. According to ProPublica, this sent “potentially carcinogenic” material into users’ airways. Widespread defects are certainly a risk when a company has a concentrated product or market.

However, adding value, ResMed also runs the myAir app to assist tracking sleep and offers “automated coaching” to users. Farrell says ResMed has over 26.5 million cloud-connectable medical devices in 140 countries worldwide, leading to 20 billion nights of medical data so far. He highlights how ResMed is integrating its app and data with wearable tech to personalize care and provide a more holistic picture of a user’s health.

Be sure to watch the full interview below for a further breakdown of the company’s financials, strategic acquisitions, and more!

Tune in live from 8 a.m. to 5 p.m. ET, or anytime, anywhere, on‑demand.

Or stream it via thinkorswim® and thinkorswim Mobile, available through our broker-dealer affiliate, Charles Schwab & Co., Inc

Please do not reply to this email. Replies are not delivered to Schwab Network. For inquiries or comments, please email [email protected].

See how your information is protected with our privacy statement. 

Charles Schwab and all third parties mentioned are separate and unaffiliated, and are not responsible for one another's policies, services or opinions. Schwab Network is brought to you by Charles Schwab Media Productions Company (“CSMPC”). CSMPC is a wholly owned subsidiary of The Charles Schwab Corporation and is not a financial advisor, registered investment advisor, broker-dealer, or futures commission merchant.