Sleep-device sales set to boost F&P Healthcare

Michael Daniell's company is among a handful to have FDA approval to sell the devices in the US market.

Fisher & Paykel Healthcare is likely to post a 14 per cent gain in second-half profit today on sales of devices to treat obstructive sleep apnoea, analysts say.

A median forecast of eight analysts also believed net income probably rose to $38 million in the six months ended March 31, from $33.3 million a year earlier. Chief executive officer Michael Daniell is tapping a global market for sleep-apnoea devices he says may reach US$1.5 billion ($2.4 billion) this year after studies linked the condition to illnesses such as heart disease. Sales of sleep-apnoea equipment may overtake respiratory-humidification products for the first time, making it the company's largest unit.

"They will report pretty strong numbers out of their obstructive sleep-apnoea division," said Anthony Halls, of BT Funds Management .

Sleep apnoea, or OSA, is a condition where people briefly stop breathing during sleep. Daniell said yesterday the global market for devices was growing at more than 20 per cent a year.

F&P Healthcare is among a handful of companies that have Food & Drug Administration approval for sales of the devices in the United States, the company's biggest market.

Halls said ResMed, the world's second-biggest maker of products to treat sleep disorders, picked up market share from its larger rival, Respironics, in the latest quarter and Fisher & Paykel might also have gained share from Respironics.

ResMed and Respironics have both reported increases in sales for the quarter. In November, F&P Healthcare estimated it had about an 8 per cent share of the global market for the devices. Daniell said at the time he expected to gain about a percentage point every year.

Halls said the rate of growth in the company's respiratory humidification unit would probably lag behind the OSA unit. Respiratory unit sales would be boosted in coming years by new products.

Last week, F&P Healthcare said it would start selling devices to treat new conditions that might help double the market for its respiratory products.

Halls said much of the company's expected growth was already priced into its shares. The stock is trading at 33 times its estimated per-share earnings.

Macquarie Equities analyst Steve Hodgson yesterday cut his recommendation to "neutral" from "outperform" because the improved outlook was already reflected in the share price.

Shares in F&P Healthcare have gained 16 per cent in value this year and closed yesterday up 5c to $4.45.

Analysts think it will report a full-year profit of $69.6 million, from $61.4 million a year earlier.

Halls said investors would be looking for comments on the outlook after the company's currency contracts ended. About 61 per cent of the company's sales are in US dollars.

He also said investors would not want a reduction in R&D spending. "That's the driver of the products they will be selling in the medium term, so you don't want them to hold back on that accelerator."

- BLOOMBERG