VieMed Healthcare Inc. (Nasdaq: VMD) hit a record-breaking revenue total in the second quarter of 2024, driven by its M&A strategy and strong growth in its ventilator patient count, among other factors.
In turn, VieMed leadership is increasingly positive about their outlook for the remainder of the year and beyond, executives explained during an Aug. 7 earnings call.
Based in Lafayette, Louisiana, VieMed specializes in providing in-home health-care solutions, particularly focusing on respiratory care. It’s one of the large home medical equipment (HME) companies in the public markets.
VieMed’s growth is in large part due to the successful integration of East Alabama HomeMed, an HME business that operates within the East Alabama Health network. That deal is expected to generate about $4 million in incremental annualized revenue, according to CEO Casey Hoyt.
“Our HomeMed integration is on track, and we are close to the point where we are moving past process changes and can start to focus on growth for East Alabama Medical Center and VieMed,” Hoyt said during the company’s Q2 earnings call. “We expect to realize further growth throughout the back half of the year and are really more excited about the framework we have created for future JV [joint venture] opportunities through this transaction.”
In past earnings calls, Hoyt has mentioned that the integration will serve as a blueprint for further JV opportunities.
VieMed executives also talked about ventilator market expansion, responding to the Phillips recall and growth in the sleep sector.
Specifically, VieMed’s net revenues for the quarter ended June 30, 2024, were a record $55 million, an increase of $11.7 million, or 27%, over net revenues reported for the comparable quarter last year.
“The remarkable organic growth of our complex respiratory services continues to validate our strategy at VieMed,” Hoyt said in a press release announcing the financial results. “Our second-quarter results demonstrate the substantial demand for these essential services and confirm VieMed’s leading position in meeting the needs for complex respiratory care. The addressable market remains largely underserved, and our performance this quarter is a testament to our unwavering commitment to profitable growth by addressing the critical needs of an underserved market.”
Ventilator market expansion
A notable highlight for VieMed in Q2 was the 4.4% increase in active ventilator patients. The company reported a 15% rise in average monthly setups per sales representative, which Hoyt attributed to VieMed’s revamped sales force strategy.
This restructuring has positioned VieMed to continue accelerating its ventilator services, particularly in the noninvasive ventilation (NIV) segment, which remains a vastly underpenetrated market with less than 10% market penetration, Hoyt said.
VieMed leveraged the Philips ventilator recall to rejuvenate its fleet, he added.
The company entered into an agreement with Philips to buy back a significant number of affected devices, allowing VieMed to replace them with newer models at a reduced cost.
“By leveraging substantial volume purchase discounts with manufacturers of new ventilators, we can use the proceeds from the buyback to significantly reduce the average age of our VIP fleet without negative impacts on our overall cash flows and P&L,” he said.
Additionally, VieMed’s sleep division, now contributing 15% to the company’s revenue, continues to see double-digit growth, particularly in the CPAP and sleep therapy segments, Hoyt said.
“The GLP-1 craze may be contributing to this increase in sleep volume, as more folks are addressing their health concerns at higher rates around the country,” he said. “Sleep has grown at a double-digit quarterly rate over March. CPAP and sleep lines continue to thrive reflecting the enduring demand and effectiveness of positive airway pressure solutions.”
Regulatory and payer dynamics
The company is closely monitoring ongoing regulatory efforts, particularly those by AAHomeCare, to push for the reinstatement of the 75/25 blended relief rate, Hoyt said.
These regulatory changes could positively impact margins and improve overall access to care, because patients would no longer have to try and fail with less effective devices before receiving authorization for ventilation.
“These changes are expected to reduce the burden on patients by avoiding inferior treatments for chronic respiratory failure,” he said. “Additionally, these trends will allow clinicians to expedite VIP therapy, improving access to care in a more timely manner.”
Although he did not elaborate on specific targets or detailed trends within the M&A landscape, Hoyt said that recent mergers and acquisitions in the HME sector, such as Owens & Minor’s $1.4 billion acquisition of Rotech, are an indicator of the industry’s attractiveness.
“I think that seeing the Rotech transaction was good because that means that things are starting to maybe open up again,” COO Todd Zehnder said during the call.
