Is now the right time to buy ResMed Inc.?

Treatment of sleep apnea is a fast-growing market and ResMed is its leader.

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ResMed (ASX:RMD) is the leading developer, manufacturer and distributor of medical equipment for treating, diagnosing, and managing sleep-disordered breathing, which includes sleep apnea. The company develops a comprehensive range of innovative products to improve the lives of those who suffer from these conditions in approximately 100 countries worldwide, through direct marketing and a network of distributors.

The market

Sleep-disorder breathing affects around 20% of the adult population in Australia and other countries, making it as widespread as diabetes or asthma. However, awareness is low and the company believes that about 90% of people who have sleep-disorder breathing remain undiagnosed and untreated. ResMed is well positioned to meet the growing challenges of this under-penetrated market.

Today there is greater public and physician awareness of the morbidity and mortality caused by sleep-disorder breathing. ResMed has developed Continuous Positive Airway Pressure (CPAP), as non-invasive treatment for sleep apnea, as well as a number of innovative products for sleep-disorder breathing and other respiratory disorders, including airflow generators, diagnostic products, mask systems, headgear and other accessories.

ResMed is committed to increasing education and awareness of the serious health consequences of untreated sleep-disorder breathing among both the general public and physicians.

Competition

Several medical device companies are actively supplying alternate products that treat sleep disorders. Local manufacturers and marketers are Fisher and Paykel Healthcare (ASX: FPH) and Somnomed (ASX: SOM). Compared with ResMed, whose market capitalisation is $7.1 billion, these are relatively smaller companies with values of $2.1 billion and $70 million, respectively.

Fisher and Paykel Healthcare is a New Zealand-based company engaged in design, development, manufacture and marketing of products and systems for use in respiratory care, acute care and the treatment of obstructive sleep apnea. Fisher and Paykel currently sells its products and systems in over 120 countries worldwide. Somnomed has a device that consists of two dental plates, which look similar to a sports mouth guard. This device is custom made to fit patient's mouth and should be worn at night whilst sleeping in order to bring the lower jaw forward and open up the airway.

Foolish takeaway

As one of Australia's leading healthcare companies, I believe ResMed is suitable in a long-term portfolio, mainly for its growth potential. Having been as high as $5.94 on 11 October last year and as low as $4.78 on 5 February this year, it seems to me to be a very reasonable buying opportunity trading today at $4.91.

Motley Fool contributor Chris Koenig does not have shares in any of the companies mentioned. 

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