ResMed Annual Report 2002

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FY2002 Annual Report · ResMed

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(cid:147) Sleep . . .

great nature(cid:146)s second course,

chief nourisher in life(cid:146)s feast.(cid:148)

Shakespeare

annual report

annual report 2002

ResMed’s Mission Statement

Continue global leadership in sleep medicine based on

innovative technology advancing the diagnosis, treatment, and

management of sleep-disordered breathing.

Corporate Aims and Objectives

ResMed is a leading developer, manufacturer, and marketer of

products for the diagnosis and management of sleep-

disordered breathing. ResMed operates through direct offices

in the United States, the United Kingdom, Switzerland, Sweden,

Spain, Singapore, New Zealand, the Netherlands, Malaysia,

Japan, Germany, France, Australia, and Austria and through a

network of distributors in over 50 other countries.

ResMed is committed to advancing innovative technology in

sleep and respiratory medicine and commercializing innovative

products that incorporate these technologies on a global basis.

In reaching its goals, ResMed will at all times act ethically in

dealing with both customers and employees.

Statements contained in this Annual Report, which are not historical facts, including
any projections regarding future opportunities in current and new markets, are
(cid:147)forward-looking(cid:148) statements as contemplated by the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements are subject to risks and
uncertainties, which could cause actual results to differ materially from those
projected or implied in the forward-looking statements. Such risks and uncertainties
are more fully discussed in the Company(cid:146)s Annual Report on Form 10-K for its most
recent fiscal year.

Cover: William Shakespeare (1564-1616),
English dramatist and poet,
Macbeth Act 2 Scene 2

Contents

financial summary

business overview

2002 highlights

chairman(cid:146)s report

12 strategy

14 medical advisory board

18 sleep-disordered breathing

23 operations

28 shareholders(cid:146) information

30 board of directors

31 1993(cid:150)2002 highlights

focused

ResMed is committed to alerting both public and physicians about
the inherent dangers of untreated sleep-disordered breathing.

Net revenue

Income

1
4
0
2

2
5
5
1

6
5
1
1

6
8
8

5
6
6

*
5
5
4

*
3
4
4

6
4
5

2
1
5

5
7
3

2
4
3

1
3
3

*
9
9
2

2
2
2

2
5
2

6
4
2

4
7
1

1
6
1

6
0
1

Assets &
shareholders(cid:146) equity

2
6
7
3

1
8
8
2

9
2
9
1

6
5
1
1

0
4
9

4
0
0
1

9
9
8

6
1
7

6
4
6

8
0
5

Income from operations
Income before income taxes
Net income

Shareholders(cid:146) equity
Assets

focused

financial summary ❘ business overview

Net income per common
share and equivalent

0
1
1

*
9
8
0

9
6
0

2
5
0

5
3
0

*after MAP acquisition costs of $18.2M
#due to MAP acquisition: Gross assets include $61M
of assets; shareholders(cid:146) equity is net of $18.2M of costs

(cid:147) Learn from yesterday, live for

today, hope for tomorrow.

The important thing is not to
stop questioning.(cid:148)

Albert Einstein (1879(cid:150)1955) physicist and Nobel Laureate

ResMed revenues grew by 32%

last year. We are dramatically

improving product performance

while expanding global operations,

which now cover over 60 countries.

One of the world’s leading sleep-disordered

breathing companies, ResMed develops,

manufactures, and markets devices for

diagnosing, treating, and managing breathing

disorders that occur during sleep. In fiscal 2002,

our sales were $204.1 million and operating

cash flow was $35.6 million. Since listing in

June 1995, we have maintained a growth rate

in excess of 25% per annum in both revenues

and net income (excluding 2001 MAP

acquisition costs).

2002 Highlights

Purchased 30 acre (12 ha) site for new Sydney headquarters. October 2001

S-3 Registration Statement for convertible bond issue declared effective by Securities and Exchange Commission. October 2001

Listed by Forbes magazine as one of the 200 Best Small Companies in America for fifth consecutive year. Ranked #24. October 2001

ResMed Chairman, Dr. Peter Farrell, wins Australian Entrepreneur of the Year title. October 2001

Acquired Swiss distributor Labhardt AG. November 2001

ResMed MirageﬁFull Face Mask Series 2 launched worldwide. October 2001 (cid:150) December 2001

Sold and leased back Australian facility (sale approximately US$18 million/A$34 million). April 2002

Acquired flow generator motor manufacturer Servo Magnetics Incorporated (SMI), USA. May 2002

Board authorized repurchase of up to 4 million shares of outstanding common stock. June 2002

ResMed Chairman, Dr. Peter Farrell, inducted to World Entrepreneur of the Year Academy. June 2002

Formed SDB Foundation in USA and committed to form SDB Foundation in Australia. June 2002

ResMed AutoSet Spirit(cid:153) launched worldwide. October 2001 (cid:150) July 2002

Converted to full Australian Stock Exchange (ASX) listing. July 2002

ResMed MirageﬁNV Full Face Mask Series 2 and NV Ultra Mirage(cid:153)Mask launched (outside US). August 2002

focused

2002 highlights ❘ chairman(cid:146)s report

(cid:147) One should hold one(cid:146)s theories by

one(cid:146)s fingertips so that the least breeze
of fact can blow them away.(cid:148)

Michael Faraday (1791(cid:150)1867) inventor, scientist

It is once more a pleasure to write the chairman’s report,

offering; the coupon rate was 4%, and the notes mature in

this time for 2002, our 13th year of operations. I said last

June 2006. These funds were raised to pay off acquisition

year that ResMed had had a great decade of achievement; the

debts, as well as provide flexibility for more possible

results for fiscal 2002 continue the legacy. The company

acquisitions or other capital needs.

performed extraordinarily well despite some marketing

challenges in Germany, which now appear to be resolving

themselves, as well as some frustratingly slow regulatory

approvals. However, the fact that we did so well in fiscal

2002 is a distinct credit to our employees, who displayed

both the dedication and the humor needed to help us grow

our market share at such an encouraging pace.

At the time of the offering, interest rates were in excess of

5% whereas, as the economy slowed, interest rates fell

during the fiscal year to close to 3%. This changed the once

favorable economics of the offering, and since the convertible

bonds began to trade significantly below par, the company

decided to buy back a portion of the bonds to extinguish

some debt. In short, during fiscal 2002, $56.75 million of face

Revenues grew by 32% to $204.1 million. Net income for the

value of the convertible notes were repurchased for $49.1

year was $37.5 million, or $1.10 per share on a fully diluted

million, including $0.6 million in accrued interest. On

basis; net income represented 18.4% of revenues, well in line

extinguishment, the company made a pre-tax profit of $7.65

with previous years and indicative of a well-oiled machine.

Compared with fiscal 2001, net income increased by 222%

while EPS, on a fully diluted basis, increased by 214%.

However, net income in FY2001 was negatively impacted by

a $18.2 million charge, relating to the MAP acquisition, and

a more relevant comparison, exclusive of this charge, is that

net income grew by 26% year over year while EPS, on a

fully diluted basis, grew by 24%. Gross margin remained

a robust 65%.

Let me briefly address balance sheet issues. During the latter

part of fiscal 2001, the company raised $180 million in

non-current debt through a convertible subordinated bond

million (excluding deferred borrowing costs), leaving a

total of non-current debt, due to the remaining bonds, of

$123.25 million.

During the June quarter, the company also elected, based on

a favorable share price, to undertake a share buy-back of up

to 4 million shares. To date 290,047 shares of common stock

have been repurchased at a cost of $7.9 million. As we

publicly announced, provided the economics continue to

remain favorable, we expect to repurchase more convertible

notes and shares as we go forward. ResMed’s balance sheet,

with total assets of $376.2 million (an increase of 31% year

over year) and with total liabilities of $183.3 million (down

2% year over year), remains very robust.

The sleep-disordered breathing (SDB) market continues to

remain a very exciting place to be. A report issued in May

2002 by investment bankers SG Cowen & Company of New

York puts the estimated global market for SDB products at

almost $800 million for calendar 2002, with approximately

90% for therapeutics and the remaining 10% for diagnostics.

The domestic market accounts for just under two-thirds of

the total while the estimated growth rates over the next

three years are 18% for domestic therapeutics and 22% for

the international (ROW) therapeutics. In both instances, the

diagnostics market is anticipated to grow at 10%, or about

half the global therapeutic market. If one were to compound

the current revenue base over five years, assuming 20%

growth, the market size would approximate $2 billion.

Assembling an AutoSet Spirit(cid:153) flow generator

And that is without the increasingly likely impact of the

treatment of SDB in patients suffering from cardiovascular

and other diseases, a point to which I will return.

When I was first exposed, in 1986, to the widespread nature

and potential dangers of untreated SDB (and obstructive

sleep apnea (OSA) in particular) by Dr. Colin Sullivan, the

inventor of nasal continuous positive airway pressure (CPAP)

(cid:151)still the gold standard to treat SDB/OSA(cid:151)he told me that

The Ultra Mirage(cid:153) Mask in production

the prevalence was believed to be about 2% of the

population. At the time I was working in renal disease, where

the prevalence was more like 0.2%. The Sullivan number

seemed gargantuan; we now know that the figure is more

like 10% of the population; this translates into an epic public

health problem, which is not being adequately addressed. I

have little doubt that the pendulum is now finally swinging to

considerably more diagnosis and treatment. For example, the

cardiac, neurologic and pediatric literature is increasingly

addressing issues where, in these specialties, untreated

SDB/OSA is being recognized as a major clinical issue. And,

on published evidence, so it should be. For example, in

patients with hypertension or diabetes, prevalence figures for

SDB are of the order of 50% and, in cases of more severe

comorbidities, such as stroke, transient ischemic attack (a

mini-stroke) or heart failure, the prevalence is closer to 70%

of the affected population. Unfortunately, too few

cardiologists, neurologists, endocrinologists, or

hypertensionologists are aware of these data; one of our

major goals is to address this chasm of ignorance. Perhaps

even more disturbing is a recent article from the University

of Toronto (Logan, et al. Journal of Hypertension 2001;

19;2271-7, 2001), which shows that the prevalence of

SDB/OSA in refractory hypertension was over 96% in men

and 65% in women. These are disturbing statistics which

need addressing as a priority.

The good news is that there are now several centers around

the world treating SDB/OSA in both stroke and congestive

heart failure (CHF), as well as in hypertension and diabetes

patients, although we are far from the critical mass of activity

needed. Nevertheless, the data are encouraging; we are

aware of at least 26 centers in Germany, as well as several in

France, using our patented AutoSet CS(cid:153)technology to treat

SDB in CHF patients. At the recent American Thoracic

CNC Machine Center capable of lathe and mill work operations
using both auto-bar and gantry loading methods at SMI

As I said before, the sleep business is truly exciting and

rewarding and ResMed understands the space well; we are

funding the necessary priority product development and

clinical studies to move the area forward. We remain, and

will continue to remain, the premier technology company in

the SDB space.

We are also taking further initiatives. During the year we

committed to setting up two ResMed sleep-disordered

breathing foundations, one in the US and one in Australia.

Over two million dollars have been set aside for these

foundations, where the overall mission is to educate both

public and physicians about the inherent dangers of

untreated SDB/OSA, particularly as it relates to traffic

and workplace accidents as well as cerebrovascular and

cardiovascular disease. The Australian foundation is

currently being set up, but the US one is already active.

The US Board of ten is chaired by Mr. Ron Taylor, the

former CEO of Pyxis, and the board members are

comprised of cardiologists, pulmonologists, sleep

physicians, and other academics and professionals. Two

grants, totaling $200,000 have already been approved,

including $100,000 for a study of SDB/OSA prevalence in

a select group of professional football players. No results

are yet available.

Society meeting, held in Atlanta this past May, five centers

(four from Germany and one from Australia) reported

compelling data on treating SDB/OSA in severe CHF

wherein, over a period of three to six months, CHF patients

treated with our AutoSet technology had significant

improvements in their heart disease, physical activity, and

quality of life. In addition, the treatment of SDB in diabetic

patients has been shown to significantly improve insulin

resistance. Hypertensive patients, when treated for their

SDB, also show significant reduction in blood pressure, with

the biggest positive impact being seen in those patients on

multiple antihypertensive medications. One more snippet of

encouraging information: in May, at the European Stroke

Conference held in Geneva, which I attended, there was a

plenary session held on SDB/OSA in stroke. The co-chairs,

Dr. Claudio Bassetti from Zurich and Dr. Antonio Culebras

from New York, told me that the estimated attendance was

well over 1,000. At a similar meeting, held three years before

in Venice, Claudio mentioned that the speakers almost

During the year ResMed made two very positive acquisitions.

outnumbered the participants. In short, the message is

In November 2001, we bought our Swiss distributor, Labhardt

starting to be understood.

and in May 2002, we bought Servo Magnetics, Inc. (SMI), which

supplies the bulk of our DC motors for CPAP devices. The

CEOs of these companies, Mr. Heinz Hasenfratz (Labhardt)

and Mr. Les Hoffman (SMI) have agreed to remain with the

companies, as will the bulk of their senior employees. The

integration of both businesses is on schedule and we are

delighted to be working with these groups of people. With the

extra employees from these acquisitions, ResMed now

employs almost 1,300 people globally, up from about 1,000

this time last year.

Also during the year, we enhanced the quality of the Board

of Directors as well as our Medical Advisory Board (MAB).

In February Dr. Anthony DeMaria, the Chair of Cardiology at

UCSD and former President of the American College of

Cardiology, and Dr. Barbara Phillips, a pulmonologist and

Professor of Medicine at the University of Kentucky, as well

as Board Member of the American Academy of Sleep

Medicine, joined the MAB; the total membership is now

twelve. This past May, Louis A. Simpson, President and Chief

Executive Officer, Capital Operations, Geico Corporation, a

wholly-owned Berkshire Hathaway subsidiary, joined the

Board. We welcome Tony, Barbara, and Lou, and look

forward to their contributions.

Also recently, we reorganized product development (PD)

and marketing activities in Sydney, as well as US marketing

activities. All of us, including PD staff, have been somewhat

frustrated with time to market for some of our key

The San Diego warehouse facility

products; as a result I have named Don Darkin to solely run

our patient interface activities; Rob Douglas will take over

bilevels and the AutoSet CS product range, while Eric Phuah,

a relatively new recruit, will take on all CPAP products,

including AutoSet Spirit(cid:153)and follow-on offerings. We are

confident that they will get the job done. In addition,

Dr. Glenn Richards, a pulmonologist and sleep physician who

has done research with Dr. Sullivan, has joined us as Medical

However, let me make it clear that ResMed is a team; all the

Director; Glenn will work out of the Sydney office.

company’s achievements are the result of our combined

In San Diego, Dana Voien recently joined us from a senior

talents. Teamwork really works.

position at Edwards Life Sciences, as Vice President and

Finally let me thank the Board of Directors, the Medical

General Manager of our diagnostics business. Dana has also

Advisory Board, and all employees for their continuing

taken over Marketing for the Americas, Business

efforts and dedication. Let me also thank our patients and

Development and Clinical Support and Training.

shareholders. We believe absolutely in our mission, and we

Curt Kenyon, Senior Vice President, is leading a new

have not lost a modicum of confidence in our strategy; the

telemedicine business unit initiative, while Dr. Deirdre

company is cash-flow positive, extremely profitable and has a

Stewart becomes Vice President, Strategic Clinical Initiatives.

very strong balance sheet. We also take a long-term view.

The world still needs to wake up to sleep, and we aim to

make it happen.

Dana, Curt, and Deirdre will report to me; we are excited

by some of the ideas we are now hatching.

As I indicated last year, ResMed was again ranked by Forbes

as one of the fastest growing companies in America. In fact,

Forbes has ranked ResMed as one of the top 200 Best Small

Companies in America for five consecutive years.

In October 2001, I was lucky enough to be selected as Ernst

and Young’s inaugural Australian Entrepreneur of the Year, as

well as Master Entrepreneur for the country. As a result, I

attended the World Entrepreneur of the Year event in early

June in Monte Carlo where I was inducted into the World

Entrepreneur of the Year Academy. I would certainly not

have received these accolades without the support of

ResMed employees. In addition, I was selected by the

San Diego Corporate Director’s Forum as the recipient of

the CDF award for creating economic value for 2002.

alert

Staying awake, alert, and attentive throughout the day are
just some of the major benefits of treating sleep apnea.

Think global, act local

ResMed operates through direct offices in the United States, the United Kingdom,

Switzerland, Sweden, Spain, Singapore, New Zealand, the Netherlands, Malaysia,

Japan, Germany, France, Australia, and Austria and through a network of

distributors in over 50 other countries.

309

236
5

5
6

597

(cid:149) Offices with employee numbers
(cid:149) Representatives

Targeting growing market opportunities

physical fitness, and treating SDB, as part of disease

Since formation in 1989, ResMed has maintained its focus on

the under-penetrated but strongly growing sleep-disordered

breathing (SDB) market. Currently less than 10% of people

with obstructive sleep apnea (OSA), a major subset of SDB,

have been diagnosed and treated. This has created a large

and relatively undeveloped market for SDB therapies.

We believe opportunities in this market will continue to

grow due to a number of factors. These factors include the

acknowledgement of the vital role that healthy sleep plays in

good health. It is just as important as good nutrition and

management in a range of diseases, is of primary importance.

Understanding of the role of SDB treatment in cardiovascular

disease is also improving. In recent years we have been

targeting areas of cardiovascular disease such as

hypertension, stroke, and congestive heart failure, as well as

other conditions associated with SDB such as chronic

obstructive pulmonary disease (COPD).

ResMed’s strategy for expanding business operations and

capitalizing on the growth of the SDB market consists of the

following key elements:

alert

strategy ❘ MAB

Continue product development and innovation

ResMed has led a revolution in the design of comfortable,

effective masks and devices to treat SDB, and we are

committed to ongoing innovation in developing products for

diagnosing and treating SDB. At June 30, we had over 500

patents granted or pending and around 160 registered

designs worldwide. In fiscal 2002, 7.3% of revenues were

invested in research and development.

Expand geographic presence

ResMed products are sold in over 60 countries to sleep

clinics, home healthcare dealers, third-party payers, and

patients. We intend to increase sales and marketing efforts in

principal markets as well as expand in new geographic regions.

Increase public and clinical awareness

Educating and informing the public and medical community

on the dangers of untreated SDB is of primary importance.

This year ResMed brought together key players in the sleep

community to form sleep foundations in the US and

Australia. These foundations will focus on advancing

education, increasing awareness, and funding research in

SDB. The first Australian project to receive funding is an

innovative physician-training program, using the Internet to

educate medical practitioners about SDB and other sleep

related disorders.

In addition, we are developing strong relationships with

patient advocacy groups, including the US National Sleep

(cid:147) One never notices what has been done;

one can only see what remains
to be done.(cid:148)

Marie Curie (1867(cid:150)1934) physicist, Nobel Laureate

establish models for the treatment of SDB in stroke

rehabilitation as well as rehabilitation in general and help put

ResMed products on the cutting edge of this market.

Leverage the experience of our management team
and Medical Advisory Board

One of our key strengths is the experience of our senior

management team, which is experienced in the field of SDB

and the medical device industry in general. This year, a

Medical Director, Dr. Glenn Richards was appointed to focus

our medical research and increase our capacity to manage

our large clinical trial programs. In the US, Dr. Deirdre

Stewart is responsible for clinical strategic initiatives and

global clinical education policies. We also have a Medical

Advisory Board comprised of experts in the field of SDB,

including Professor Colin Sullivan, the inventor of nasal CPAP

for treating OSA. We intend to continue leveraging the

knowledge and expertise of these professionals to maintain

our innovative approach to developing products

Foundation, the US National Stroke Association, the

and increasing SDB awareness.

American Heart Association, and the Australian National

Stroke Foundation. We are also maintaining close working

relationships with a number of prominent physicians,

exploring new medical applications for our products and

technology, and working closely with major rehabilitation

providers in the US and Australia. These partnerships will

SDB affects more than

80% of drug resistant hypertension patients1
60-70% of stroke/TIA patients2,3
50-60% of congestive heart failure patients4
30% of coronary artery disease patients5

left to right

Helmut Teschler, Claudio Bassetti, J. Woodrow Weiss, B. Tucker Woodson, Terence M. Davidson,

Michael Coppola, Neil Douglas, Barry J. Make, Anthony DeMaria, Colin Sullivan, Barbara Phillips, Nicholas Hill

alert

strategy ❘ MAB

(cid:147) Therefore if a man looks sharply

and attentively, he shall see Fortune:

for though she be blind, yet she is
not invisible.(cid:148)

Francis Bacon (1561(cid:150)1626) English statesman, philosopher

Claudio Bassetti, MD, is a neurologist with expertise in sleep, sleep
medicine, stroke, and cerebrovascular disease. He is a leader in
studying the implications of SDB on stroke and is Head of the
Neurology Outpatient Clinics and Vice-Chairman of the Neurology
Department at the University Hospital, Zurich. Dr. Bassetti is a
member of the American Academy of Neurology, the American
Sleep Disorders Association, and the scientific committee of the
European Sleep Research Society (ESRS). He is also a member of
boards of the Swiss Societies of Neurology, Neuroscience and Sleep
and sits on the editorial boards of Sleep Medicine, European
Neurology, and Swiss Archives of Neurology and Psychiatry. Dr. Bassetti
has produced over 100 publications.

Michael Coppola, MD, is a leading pulmonary, critical care, and
sleep disorders physician and is President of Springfield Medical
Associates, a multi-specialty medical group in Springfield,
Massachusetts. He is an attending physician at Baystate Medical
Center and Mercy Hospital, and a Fellow of the American College of
Chest Physicians. Dr. Coppola is also the Medical Director of
Winmar Diagnostics, a sleep-disordered breathing specialty
company, and Associate Clinical Professor of Medicine at Tufts
University School of Medicine.

Terence M. Davidson, MD, FACS, is Professor of Surgery in the
Division of Otolaryngology(cid:151)Head and Neck Surgery at the
University of California, San Diego School of Medicine. He is Section
Chief of Head and Neck Surgery at the Veterans Administration, San
Diego Healthcare System, and Associate Dean for Continuing
Medical Education at the University of California, San Diego. He is
also Director of the UCSD Head and Neck Surgery Sleep Clinic in
La Jolla, CA.

Anthony N. DeMaria, MD, is Professor of Medicine and Chief,
Division of Cardiology at the University of California, San Diego,
specializing in cardiac imaging techniques, particularly
echocardiography. He is a Diplomat on the American Board of

Internal Medicine and is board certified by the Subspecialty Board in
Cardiovascular Disease. He is Past President of both the American
College of Cardiology and the American Society of
Echocardiography. Dr. DeMaria is currently Editor-in-Chief of the
Journal of the American College of Cardiology and has authored or co-
authored over 400 articles for medical journals.

Neil J. Douglas, MD, FRCP, is Professor of Respiratory and Sleep
Medicine, University of Edinburgh, an Honorary Consultant
Physician, Royal Infirmary of Edinburgh, and Director of the Scottish
National Sleep Laboratory. He is Vice President of the Royal College
of Physicians of Edinburgh, Chairman of the British Sleep
Foundation, past Chairman of the British Sleep Society, and past
Secretary of the British Thoracic Society. Dr. Douglas has published
over 200 papers on breathing during sleep.

Nicholas Hill, MD, is Professor of Medicine at Tufts University
School of Medicine and Chief, Pulmonary, Critical Care and Sleep
Division, Tufts-New England Medical Center in Boston. He is a
Fellow and Vice Chair of the Home Care Network in the American
College of Chest Physicians and a member of the Leadership
Committee for the Pulmonary Circulation Assembly and of the
Program Committee for the Critical Care Assembly of the American
Thoracic Society. Dr. Hill(cid:146)s main research interests are in the acute
and chronic applications of noninvasive positive pressure ventilation
for treating lung disease.

Barry J. Make, MD, is Director, Emphysema Center and Pulmonary
Rehabilitation National Jewish Medical and Research Center, and
Professor of Pulmonary Sciences and Critical Care Medicine of the
University of Colorado School of Medicine. He has served on
numerous national and international committees for respiratory
diseases. Dr. Make(cid:146)s research and clinical investigations have
resulted in a large number of publications on mechanisms,
treatment, and rehabilitation of chronic respiratory disorders.

J. Woodrow Weiss, MD, is Associate Professor of Medicine and
Co-Chairman of the Division of Sleep Medicine at Harvard Medical
School as well as Chief, Pulmonary, Critical Care, and Sleep
Medicine, Beth Israel Deaconess Medical Center, Boston, MA. He is
an internationally recognized researcher in sleep-disorders medicine.

B. Tucker Woodson, MD, FACS, is Associate Professor of
Otolaryngology and Communication Sciences at the Medical College
of Wisconsin, a Diplomat of the American Academy of Sleep
Medicine, and a Fellow of the American Academy of
Otolaryngology(cid:151)Head and Neck Surgery and the American College
of Surgeons. He is the Director of the Medical College of
Wisconsin/Froedert Memorial Lutheran Hospital Center for Sleep.
Dr. Woodson also sits on multiple committees for the American
Academy of Sleep Medicine and American Academy of
Otolaryngology.

MAB continued

Barbara Phillips, MD, MSPH, FCCP, is Professor of Pulmonary,
Critical Care, and Sleep Medicine at the University of Kentucky
College of Medicine. She directs the Sleep Center, Sleep Clinics, and
Sleep Fellowship at the Samaritan Sleep Center in Lexington, KY.
Dr. Phillips is a Board member of the American Academy of Sleep
Medicine, a recipient of a Sleep Academic Award from the National
Institutes of Health, past president of the American Board of Sleep
Medicine, and a past member of the Advisory Board to the National
Center of Sleep Disorders Research. Her research interests are the
epidemiology of sleep-disordered breathing and sleep disorders in
the aged.

Colin Sullivan, MD, PhD, FRACP, FAA, is Chairman of the MAB
and inventor of nasal CPAP for the treatment of OSA. He is
Professor of Medicine and Director of the David Read Research
Laboratory and Australian Centre for Advanced Medical Technology
at the University of Sydney. He established the Centre for
Respiratory Failure and Sleep Disorders at the Royal Prince Alfred
Hospital, the Pediatric Sleep laboratories at the New Children’s
Hospital, and Sydney Children’s Hospital. Professor Sullivan is a
Fellow of the Royal Australian College of Physicians, a Fellow of the
Australian Academy of Science, and a Fellow of the Australian
Academy of Technological Sciences and Engineering.

Helmut Teschler, MD, is Professor and Head of the Department of
Respiratory Medicine, Sleep Medicine, and High Dependency Unit,
Ruhrlandklinik, Medical Faculty, University of Essen, Germany. He is
a Fellow of each of the following associations: German Pneumology
Society, American Thoracic Society, European Respiratory Society,
and American Sleep Disorders Association. Dr. Teschler is an
internationally recognized researcher in respiratory medicine and
sleep-disorders medicine.

healthy

Everything at ResMed, from research and product development to
marketing and customer service, is based on a simple truth:
(cid:147)Healthy sleep is vital for a healthy life.(cid:148)

It is time for the nation to wake up to the staggering impact of sleep disturbances on the health and

welfare of our society, an impact that rivals that of smoking.

Eliot Phillipson, MD, New England Journal of Medicine, April 29 1993

Normally, during sleep the muscles that control
the tongue and soft palate hold the airway open.

When these muscles relax, the airway
narrows, which may cause snoring and
breathing difficulties such as hypopneas.

If these muscles relax too much, the airway can
become blocked, preventing breathing.

This is an obstructive apnea.

What is SDB?

Sleep-disordered breathing (SDB) is a general term for

Obstructive sleep apnea (OSA). During sleep, the body

breathing disorders that occur during sleep. Although the

relaxes, and muscle tissues like the tongue and soft palate lose

consequences of untreated SDB can severely affect health

their slight rigidity. In people with OSA, these tissues relax

and mortality, awareness among medical practitioners is

too much, partially or completely blocking the airway and

relatively low. As a result, patients can find themselves

shutting off breathing. As the brain recognizes the increasing

receiving treatment for other conditions when the cause of

need for oxygen, it wakes the sleeper enough so that they

their symptoms originates in their sleep. Studies have shown

breathe again(cid:151)and then fall back to sleep. This happens from

that SDB is strongly associated with hypertension, nocturia,

dozens to hundreds of times per night for people with OSA,

stroke, and congestive heart failure as well as being

but they usually don’t remember their brief awakenings, called

independently associated with insulin resistance.6

sleep arousals. If you listened to someone with OSA while

Obstructive sleep apnea (OSA) is the most common form of

they slept, you would probably hear loud snoring interrupted

SDB, affecting almost 10% of the general adult population(cid:151)a

by moments of silence, followed by gasps and snorts as they

similar prevalence to asthma or diabetes. Other manifestations

struggled to start breathing again.

include central sleep apnea (CSA) and hypoventilation

OSA sufferers often wake up feeling exhausted. They also tend

syndromes that occur during sleep. CSA is controlled from

to suffer a range of other symptoms including excessive daytime

the brain and not related to the airway being obstructed.

sleepiness, reduced cognitive function, memory loss, lack of

Hypoventilation syndromes are generally associated with

concentration, depression, and irritability. Studies have linked

obesity and chronic obstructive pulmonary disease (COPD).

OSA to increased traffic and workplace accidents. OSA sufferers

healthy

sleep-disordered breathing ❘ operations

may also experience an increase in heart rate, an elevation of

blood pressure during apneas, and daytime hypertension. Even

very mild levels of SDB increase the risk of developing stroke,

heart failure, and coronary heart disease.7

Generally, primary care physicians who recognize OSA

(cid:147) Vision without action is a daydream.

Action without vision is a nightmare.(cid:148)

Japanese proverb

Evidence shows that positive airway pressure improves cardiac

function in patients with congestive cardiac failure.13

symptoms will refer the patient to a specialist for further

OSA and stroke. SDB is common in the stroke population,

evaluation. OSA diagnosis typically involves an overnight sleep

affecting up to 70% of stroke survivors.2,3 Increasing evidence

test at a sleep clinic. The number of sleep clinics in the US alone

suggests a cause-effect relationship between OSA and stroke.

has expanded from 100 in 1985 to over 2000 today.

Additionally, the excessive daytime sleepiness and fatigue

OSA and hypertension. Recent studies found that SDB is

profoundly associated with hypertension, independent of all

other risk factors8, with untreated SDB being a risk factor for

hypertension.9 SDB arousals cause an increase in sympathetic

nerve activity, which leads to increased blood pressure and heart

rate. These factors may relate to the higher rate of hypertension

in SDB patients. In fact, over 80% of patients with refractory

hypertension have OSA (96% in men and 65% in women).1

OSA and congestive heart failure. About 60% of patients

with congestive heart failure (CHF) have SDB.4 The majority of

these patients suffer from obstructive or mixed sleep apnea (a

combination of OSA and CSA). Those with the most severe

heart failure often have a serious condition known as Cheyne-

Stokes respiration (CSR). With CSR, the patient’s breathing

continuously cycles between underbreathing (may stop

altogether) and overbreathing. Mortality is higher in patients

with CSR compared to CHF patients without CSR10, and

nocturnal CSR is an independent predictor of poor prognosis.11

Long-term treatment of CSR using nasal CPAP (page 21) has been

shown to improve sleep quality, daytime sleepiness, cognition,

and also heart function in CHF patients.12 Further studies have

revealed a reduction in mortality and hospital admissions.

associated with OSA may adversely affect the outcome of

post-stroke rehabilitation. It may also reduce the ability and

motivation of the stroke survivor to participate in

rehabilitation programs. Studies have shown that stroke

sufferers with SDB have worse functional outcomes and

higher mortality after one year compared to control

subjects.15 Treating OSA in the stroke population is

important as it may also reduce the risk of secondary stroke.

78% of long distance truck drivers have SDB14

Chronic obstructive pulmonary disease (COPD). COPD

is a group of diseases, the most common being chronic

bronchitis and emphysema. The common characteristic of

COPD is obstruction to the airflow out of or from the lungs.

People with COPD may eventually require supplementary

oxygen and rely on mechanical ventilatory assistance.

Noninvasive positive pressure ventilation results in

improvements in daytime arterial blood gas tensions, which

are sustained after two years of treatment. It also reduces both

hospital admissions and general practitioner visits by patients

with severe COPD in hypercapneic respiratory failure.16

symptoms and Terri became involved in a study being

conducted by the David Read Laboratory, Sydney University.

The study is investigating the reduction of blood pressure

using CPAP treatment. Terri started treatment on a ResMed

AutoSet T using an Ultra Mirage Mask.

(cid:147)When I did the sleep study I actually stopped breathing 30

times an hour,(cid:148) she said. Terri was actually pleased to be

told she had sleep apnea(cid:151)before that no one had been able

to find out why her blood pressure was so high(cid:151)but now

she had a reason.

The treatment worked well and helped reduce her blood

pressure from 143/84 to 124/72. Baby Sam was born on

Terri’s 40th birthday at 35 weeks and 6 days, weighing a

healthy 7.2lb (3.25kg).

(cid:147)After just one night [on CPAP] I had so much energy. And

it’s just putting a mask over your face. You’re not taking any

drugs(cid:151)that’s great.

Terri Duchar
Business Systems Salesperson
and new mother, age 40

When Terri Duchar was pregnant, her blood pressure was

so high the doctors told her she would have to deliver her

baby at 28 weeks. (cid:147)I was pretty much at the maximum

dosage of (blood pressure) medication, and they said they

couldn’t give me any more unless it was intravenously,(cid:148)

(cid:147)I was only made aware of sleep apnea by my friend. Now I

she explained.

She also snored so loudly she actually woke herself up at

night, and her husband Mark noticed that she stopped

breathing at intervals. Worse still she would wake up with

headaches and feel exhausted during the day.

Fortunately, a friend with sleep apnea recognized her

look for it in other people. It’s [the mask] not a good look,

but I think my husband would rather have a live wife(cid:151)and

now he can watch the cricket and rugby in bed without the

sound being drowned out by my snoring.(cid:148)story

healthy

sleep-disordered breathing ❘ operations

What are the treatments?

Positive airway pressure. Professor Colin Sullivan, the

Chairman of our Medical Advisory Board, invented nasal

continuous positive airway pressure (CPAP) as a treatment for

OSA in 1980. CPAP systems were commercialized in the US in

the mid-1980s and, today, use of CPAP is acknowledged as the

gold standard for managing OSA.

Nasal CPAP provides a highly successful, noninvasive means of

treating OSA. During treatment, a patient sleeps with a nasal or

full-face mask connected to a small portable airflow generator

have been extensively clinically evaluated. A recent study

that delivers room air at a continuous positive pressure. The air

comparing leading automatically adjusting machines showed

from the flow generator supplies just enough pressure to

that ResMed’s AutoSet T(cid:153) device responds most predictably

prevent the upper airway from collapsing. Positive airway

to abnormal breathing patterns and is affected in a more

pressure applied in this manner acts like an "air splint" to keep

consistent manner by inadvertent leak.20,21

the upper airway open and unobstructed, allowing normal

breathing during sleep.

AutoSet devices are suitable for a range of patients with OSA

and ideal for treating sleep apnea in stroke patients. This is

Positive airway pressure treatment has been shown to have wide-

because they adjust to the dynamic changes in the severity of

ranging benefits. For example, it has been shown that for patients

OSA that occur during recovery from stroke. They also have

with severe OSA, nasal CPAP reduces blood pressure, providing

data recording capabilities that make patient management easier

significant vascular risk benefits and substantially improving

for clinicians and healthcare providers.

excessive daytime sleepiness and quality of life.17

This year ResMed launched the AutoSet Spirit(cid:153), which is

During normal pregnancy, a number of physiological changes

currently surpassing all sales forecasts. AutoSet Spirit provides

occur that may compromise the respiratory system. Nasal CPAP

information that allows patients to troubleshoot minor

can reduce nocturnal blood pressure increments in women with

problems and clinicians to access details of the patient’s

preeclampsia and SDB.18 It has also been shown to reduce the

treatment. This information is available via an LCD without the

need for acute hospital admission due to cardiovascular disease

need to download data using a separate device.

and pulmonary disease for patients with OSA.19

Small and light with a unique new casing design, the AutoSet

Automatically adjusting devices represent the newest positive

Spirit also has a compact humidifier module that can be

airway pressure technology. ResMed’s AutoSetﬁ technology

added if required. AutoSet Spirit is the first and only AutoSet

continually monitors the status of the upper airway on a

device to feature truly integrated humidification.

breath-by-breath basis, and allows the device to automatically

adjust the pressure to suit the patient’s pressure needs as

they vary overnight and over time. By responding to the

patient’s changing pressure needs, AutoSet devices are able

to deliver lower mean pressures.

A ResMed S7(cid:153) CPAP device was also launched in the US in

July 2002. Using the same case as the new AutoSet Spirit, the

ResMed S7 CPAP is completely modular and upgradable to

integrated humidification. It will also be upgradable to AutoSet

technology in the near future. ResMed’s S6(cid:153) range of CPAP

ResMed’s AutoSet devices are intelligent CPAP systems, which

systems, which was launched in February 2000, has three

models to suit different patient needs. S6 CPAP systems are

performance and general patient well-being. In another trial,

renowned for their small, elegant casing, extremely low noise,

those patients on AutoSet CS showed significant improvement

light weight, and exceptional reliability.

in exercise capacity, sleep, and left ventricular fractional

Bilevel therapy. ResMed’s VPAP (variable positive airway

shortening, in comparison to those on oxygen therapy.

pressure) devices provide bilevel therapy, which is similar to

Patient interface. The key to effective CPAP and bilevel

CPAP therapy but involves two pressure settings instead of

therapy is the patient interface or mask system. ResMed mask

one. A higher pressure during inspiration helps the patient

systems consist of a nasal or full-face mask and headgear.

inhale while a lower pressure during expiration reduces

Launched in 1997, ResMed’s Mirageﬁ Mask revolutionized mask

resistance, making it easier to exhale while still preventing

technology and formed a platform for a sophisticated range of

upper airway collapse. Bilevel therapy is recommended for

masks that are among the most popular in the world today. In

some patients with OSA who have difficulty tolerating CPAP

the past year we released the Mirageﬁ Full Face Mask Series 2

or who have both sleep apnea and other respiratory

plus the Mirageﬁ NV Full Face Mask Series 2 and Ultra Mirage(cid:153)

problems. Bilevel therapy is also used for patients with ALS,

NV Nasal Mask for the noninvasive ventilation market.

kyphoscoliosis, muscular dystrophy, COPD and other

disorders that impact breathing during sleep. In this instance

the treatment is used to provide ventilatory assistance rather

than upper airway stabilization.

Patient breathing synchronization with the machine is vital

for successful therapy. ResMed VPAP devices have two

unique features called Vsync(cid:153) and TiControl(cid:153) that help
compensate for mask leaks and ensure the VPAP device stays

in tune with the patient’s breathing.

The AutoSet CS(cid:153) (not available for sale in the US; currently

undergoing FDA-approved trials) is an automatically adjusting

servo ventilator device designed to treat CSR and CSA.

AutoSet CS automatically adjusts pressure on a breath-by-

breath basis, delivering varying degrees of ventilatory

assistance to stabilize breathing and reduce CSR. The device

responds to the dynamic nature of these patients’ disease

states and recovery needs. In addition, the device is fully

portable and has a number of features designed to improve

CHF patient comfort and compliance.

Trials are showing that the AutoSet CS provides better control

of CSR than other forms of respiratory therapy. Recent results

from trials in Germany are extremely promising. In one trial

AutoSet CS normalized detrimental breathing patterns and,

over periods up to three months, improved cardiac

The key to effective therapy

Positive airway pressure therapy, while not a cure, does

provide a means to manage SDB and positively impacts

cardiovascular health. It must be used on a nightly basis for

as long as treatment is required.

Early generations of CPAP units and masks provided limited

patient comfort and convenience. In more recent years,

ResMed innovations have improved therapy for millions of

users with SDB. These innovations include: AutoSet

technology; more comfortable mask systems; delay timers,

which gradually increase air pressure, allowing the patient to

fall asleep more easily; and heated humidification systems to

make airflow more comfortable.

AutoSet technology is changing the face of treatment with

devices that monitor both usage and treatment efficacy. This

increases the amount of information available to clinicians

during patient follow up and improves their ability to

intervene successfully in problems that patients may

experience with treatment. AutoSet treatment is more

comfortable for patients and can lead to improved

compliance and better outcomes.22

healthy

sleep-disordered breathing ❘ operations

(cid:147) If everything seems to be

under control, you(cid:146)re just not
going fast enough.(cid:148)

Mario Andretti (1940(cid:150) ) automobile racer

Product development

been developed by a small, internal team. The manufacturing

ResMed has a strong track record of innovation in the SDB

process consists of major subassemblies produced externally

market and is committed to an ongoing program of product

by subcontractors. Final assembly and testing of finished

advancement and development. Current product

products is performed in-house.

development efforts are focused on both improving current

products and expanding into new product applications. In the

three fiscal years ended June 30, 2002, 2001, and 2000,

ResMed invested $14,910,000, $11,146,000, and $8,499,000

In May this year we acquired Servo Magnetics Incorporated

(SMI). Based in California, US, SMI designs, manufactures, and

distributes the high quality electric motors used in ResMed(cid:146)s

flow generators. The SMI motors are also used in the

respectively, on research and development.

aerospace and data storage industries.

We consult with physicians at major sleep centers throughout

the world to identify technological trends in the treatment of

SDB. Some of these physicians currently serve on our Medical

Advisory Board. New product ideas are also identified by our

marketing staff, direct sales force, network of distributors,

manufacturers’ representatives, customers, and patients.

ResMed’s mask systems are excellent examples of the company’s

commitment to product development. ResMed’s engineers have

integrated their research and development efforts with feedback

from patients and professionals to maintain a constant evolution

of quality and comfort in mask systems.

Manufacturing

Sales and marketing

ResMed currently markets its products in over 60 countries

using a network of distributors, independent manufacturers’

representatives, and a direct sales force. ResMed attempts to

tailor its marketing approach to each regional market, based

on local awareness of SDB as a health problem, physician

referral patterns, consumer preferences, and local

reimbursement policies.

North America and Latin America. In the US, sales and

marketing activities are conducted through a field sales

organization made up of regional territory representatives,

program development specialists, diagnostic system specialists,

ResMed’s principal manufacturing facility is located in Sydney,

regional sales directors, and independent manufacturers’

Australia. Sydney operations consist primarily of research,

representatives.

development, testing, manufacturing, and assembly of flow

generators, masks, and accessories.

ResMed also promotes and markets its products directly to

sleep clinics. Patients who are diagnosed with OSA and

The MAP German manufacturing operation is based in

prescribed CPAP treatment are typically referred by the

Munich. The products are primarily flow generators that have

diagnosing sleep clinic to a home healthcare dealer to fill the

Thorough testing of the AutoSet Spirit ensures high quality standards are maintained

prescription. The home healthcare dealer, in consultation

with the referring physician, will assist the patient in selecting

the equipment, fit the patient with the appropriate mask, and

set the flow generator pressure to the prescribed level.

Canadian and Latin American sales are conducted through

independent distributors. Sales in North America and Latin

America accounted for 49%, 52%, and 54% of net revenues for

the fiscal years ended June 30, 2002, 2001, and 2000 respectively.

Europe. ResMed markets its products in all major Western

European countries. The company has wholly owned

subsidiaries in the United Kingdom, Switzerland, Sweden, Spain,

Netherlands, Germany, France, and Austria and uses

independent distributors to sell products in other areas of

Europe. Distributors are selected in each country based on

their knowledge of respiratory medicine and a commitment to

College of Cardiology, the Heart Failure Society of America, the

American College of Neurology, the American Society of

Hypertension, the American Stroke Association, the US

National Stroke Association, and the Australian National

Stroke Foundation.

People

As of June 30, 2002, we had 1250 employees or full-time

consultants, of whom 503 were employed in warehousing and

manufacturing, 178 in research and development, 337 in sales

and marketing and 232 in administration. Of our employees and

consultants, 597 were located in Australia, 317 in the US, 318 in

Europe, and 18 in Asia.

SDB therapy. In subsidiaries, a local senior manager is

Properties

responsible for direct national sales. MAP conducts its sales

efforts through a direct sales force and subsidiaries in Germany,

Austria, the Netherlands, and Switzerland.

Our principal executive offices and US distribution facilities,

consisting of approximately 144,000ft2 (13,378m2), are located

in Poway (North San Diego County), California, in a building

ResMed’s Executive Vice President, Dr. Christopher Roberts,

we own. Manufacturing operations are leased in Sydney,

is responsible for coordination of all European activities and,

Australia, in a 120,000ft2 (11,148m2) facility, and California in a

in conjunction with local management, the direct sales

35,500ft2 (3,298m2) facility. Construction of a new facility for

activity in Europe. Sales in Europe accounted for 42%, 39%,

the Sydney operations commenced in July 2002. Occupying a

and 35% of net revenues for the fiscal years ended June 30,

30 acre (12 hectare) site, the 376,800ft2 (35,000m2) facility

2002, 2001, and 2000 respectively.

should be completed in 2004 and will accommodate up to

Asia Pacific/rest of world. Marketing in Asia Pacific and the

2,000 staff.

rest of the world is the responsibility of the Executive Vice

Sales and warehousing facilities are leased in Oxford, England;

President, Dr. Christopher Roberts. Sales in Australia and

M(cid:246)nchengladbach, Germany; Lyon, France; Trollh(cid:228)ttan,

the rest of the world accounted for 9%, 9%, and 11% of net

Sweden; and Singapore. Prior to moving our executive offices

revenues for the fiscal years ended June 30, 2002, 2001, and

and distribution facilities to Poway, California, we leased

2000 respectively.

space for this purpose in San Diego, California. Our lease on

Other marketing efforts. In addition to our sales efforts, we

those premises expires in 2005. In August 2000, we began

work with the following cardiovascular disease associations

subleasing those premises to another company.

(CVD includes coronary artery disease, congestive heart

MAP’s principal offices are located in Munich, Germany, in a

failure, hypertension, stroke, and transient ischemic attack) to

45,000ft2 (4,181m2) facility leased by us. MAP’s subsidiaries

raise awareness of the co-morbidity of SDB in cardiovascular

also lease sales and warehouse facilities in Lyss, Switzerland;

disease patients: the American Heart Association, the American

Villach, Austria; and s’Hertogenbosch, the Netherlands.

story

Charles M
retired Master Chief Petty Officer and
counselor, age 69

These data downloads proved invaluable for pinpointing and

helping to eliminate mask leaks. Charles started using a

Mirage Full Face Mask Series 2, which he found to be the

most comfortable of all the masks he tried. Subsequent

Despite a 20-year history of snoring, Charles M. had never

downloaded data showed good compliance and elimination

been screened for OSA until he was diagnosed with

of previous mask leak.

congestive heart failure (CHF) eight years ago.

With the mask problems resolved and after using the

Prior to treatment for OSA, Charles was frequently short of

AutoSet T for eight months, Charles showed significant

breath. "On my visits to the heart failure clinic, I would have

improvement on all measured cardiac outcomes. Currently

to take a break walking the short distance from the parking

his physician has decreased his dosage of CHF medications.

lot to the hospital. Once inside the hospital, I would have to

His physician attributed this reduction to the improvements

take another break before taking the elevator to the CHF

associated with positive airway pressure treatment.

clinic," he says. At the time he was taking 16

pharmacological medications to manage his heart failure.

From someone who previously had barely enough energy to

walk across the hospital car park, Charles is now able to walk

Fortunately for Charles, an investigator at the hospital

more than 16 blocks before he is tired. He leads a very

invited him to participate in a study looking at the links

active social life and travels at least once a year, taking his

between sleep apnea and heart failure. On his overnight

AutoSet T with him. He is very involved with his church as

sleep-study, he had 26 apnea events per hour and his blood

an elected Elder and is a volunteer alcohol and chemical

oxygen levels dropped to 81%.

Charles was introduced to ResMed’s AutoSet T treatment

by the CPAP clinic at the hospital. A case manager followed

his progress with regular phone calls and AutoSet T

downloads, which included compliance and efficacy data.

addiction counselor. Charles personally attributes all his

quality-of-life improvements during the last eight months to

his use of ResMed’s AutoSet T system.

steadfast

On the right treatment, people with sleep disorders sleep better,
work better, relate better . . . in fact their whole life is truly enhanced.

Annual meeting of shareholders

The annual meeting of shareholders will be held on Monday,
November 11, 2002, at 2.00pm at The Exchange Square Auditorium,
Ground Floor, 18 Bridge Street, Sydney, NSW Australia.

Year ended June 30

In thousands, except per share data

Net revenues

Income from operations

Income before income taxes

Net income

Basic EPS

Diluted EPS

2002

2001

2000

204,076

155,156

115,615

51,159

54,592

37,506

1.17

1.10

44,269*

45,541*

29,857*

0.96*

0.89*

33,138

34,166

22,226

0.74

0.69

1999

88,627

25,255

24,577

16,102

0.55

0.52

1998

66,519

17,363

16,112

10,611

0.37

0.35

1997

49,180

8,327

11,087

7,465

0.26

1996

34,562

3,595

6,561

4,503

0.16

1995

23,501

2,787

3,781

2,833

0.19

0.16

1994

13,857

1,289

1,831

1,232

0.10

0.09

1993

7,650

637

1,205

846

0.09

0.06

Market for the company’s common stock and
related shareholders’ matters

The company’s shares are traded on the New York Stock Exchange
(primary listing) and the Australian Stock Exchange under the
symbol RMD. Prior to September 1999, ResMed was listed on the
NASDAQ-AMEX national stock market under the symbol RESM.
The company began trading on the Nasdaq market on June 2, 1995.

The company does not intend to pay cash dividends with respect
to its common stock in the foreseeable future. High and low
closing sale price information for the company’s common stock for
the applicable quarters is shown below.

2002

2001

High

60.95

61.75

53.15

40.34

Low

45.90

50.47

36.36

24.70

High

38.38

41.50

47.00

57.68

Low

24.63

25.50

36.65

37.91

Quarter One

Quarter Two

Quarter Three

Quarter Four

Form 10-K

Copies of the ResMed Inc. annual report on Form 10-K, as filed
with the Securities and Exchange Commission, are available upon
request without charge. Please address written requests to Walter
Flicker, Corporate Secretary, ResMed Inc., 14040 Danielson St,
Poway, CA 92064-6857 USA.

Shareholder and investor inquiries

ResMed has a Web site containing details about the company, its
products, SDB, and information for sleep professionals, as well as
the latest company news releases. You can visit the Web site at
www.resmed.com.

To directly receive copies of company news and other investor
information, please contact Walter Flicker, Corporate Secretary,
ResMed Inc., 14040 Danielson St, Poway, CA 92064-6857 USA.

Tel: +1 858 746 2400; Fax: +1 858 746 2830;
E-mail: InvestorRelations@ResMed.com.

Security analysts and institutional investors are invited to
contact Adrian M. Smith, Vice President, Finance, ResMed Inc.,

steadfast

shareholders(cid:146) information ❘ board of directors

❘ 1993(cid:150)2002 highlights

(cid:147) There are no shortcuts to
any place worth going.(cid:148)

Anon.

As at June 30

Working capital

Long-term debt

2002

2001

144,666

144,272

123,250

150,000

2000

47,550

Shareholders(cid:146) equity

192,930

100,366

93,972

Total assets

376,191

288,090

115,594

In thousands, except per share data

1999

32,529

71,647

89,889

1998

32,759

50,773

64,618

1997

34,395

274

44,625

54,895

1996

30,844

578

38,986

47,299

1995

27,354

787

28,867

35,313

1994

5,010

386

5,630

9,608

1993

2,589

163

2,895

5,173

*Numbers after MAP acquisition are: Income from operations 26,042; Income before income taxes 27,314; Net income 11,630; Basic EPS 0.37; Diluted EPS 0.35

Tel: +61 2 9886 5000 or Walter Flicker, Corporate Secretary,
ResMed Inc. Tel +1 858 746 2400 or 1 800 424 0737 (US only).

Transfer agent and registrar

Inquiries regarding transfer requirements, lost certificates, and
changes of address should be directed to either of the following:

American Stock Transfer and Trust Company, 59 Maiden
Lane, New York, NY 10038. Tel: +1 718 921 8275.

Computershare, Level 3, 60 Carrington Street,

Sydney NSW 2000. Tel: +61 2 8234 5000.

Convertible notes inquiries

The indenture trustee for the notes is American Stock
Transfer and Trust Company. Inquiries regarding the notes
should be directed to American Stock Transfer and Trust
Company, 59 Maiden Lane, New York, NY 10038.

the time of issue. The securities were subsequently
registered for resale under Securities Act (Registration No.
333-70500) effective October 9, 2001; and consequently the
Securities may be resold in accordance with the prospectus
that is part of the registration statement by the selling
security holders’ names in the prospectus or a supplement to
the prospectus. Other sales of the Securities may only be
made in compliance with the registration requirements of the
Securities Act and all other applicable securities laws, or
pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities
Act and any other applicable securities laws.

Legal counsel

Latham and Watkins, 650 Town Center Drive, Suite 2000,
Costa Mesa, CA 92626 USA.

Tel: +1 718 921 8275.

Independent auditors

The notes and the common stock issuable upon conversion
of the notes (the "Securities") were not registered under the
Securities Act or any other state or foreign securities laws at

KPMG LLP, 750B Street, Suite 3000, San Diego, CA 92101 USA.

(cid:147) There is no such thing as a great
talent without great will-power.(cid:148)

HonorØ de Balzac (1799(cid:150)1850) French novelist

Senior Executives

Mark Abourizk

Lasse Beijer
Michael Berthon-Jones
Don Darkin
David D’Cruz
Norman DeWitt
Robert Douglas
Paul Eisen
Walter Flicker
Robert Frater
Connie Garrett
Elliott Glick
Leslie Hoffman

Curt Kenyon
Brett Lenthall
Tom Miller
William Nicklin
David Pendarvis
Alain PersØguers
Terry Pethica
Eric Phuah
Ron Richard
Glenn Richards
Greg Rogers
Klaus Schindhelm
Joerg Schneider
Adrian Smith

Caspar Stauffenberg
Deirdre Stewart
Ann Tisthammer
Dana Voien

Vice President, Intellectual Property
and Legal Affairs (Asia Pacific)
Chief Executive, Sweden and Scandinavia
Chief Scientific Officer
Vice President, Patient Interface Division
Vice President, Regulatory Affairs
Vice President and General Counsel*
Vice President, Bilevel Division
Vice President, Asia Pacific
Corporate Secretary
Vice President, Innovation
Vice President, Human Resources
Vice President, US Operations
President, SMI, a wholly owned
subsidiary of ResMed
Sr. Vice President, Telemedicine & Informatics
Vice President, Information Systems
Vice President, Sales, Americas
Vice President, Manufacturing
Vice President and General Counsel
Chief Executive, Southern Europe
Chief Executive, United Kingdom
Vice President, OSA Division
Vice President, Marketing, Americas
Medical Director
Vice President, Quality Assurance
Sr. Vice President, Global Operations
Chief Executive, ResMed Germany
Vice President, Finance and
Chief Financial Officer
Chief Executive, MAP, Germany
Vice President, Strategic Clinical Initiatives
Vice President, Clinical Education and Training
Sr. Vice President, New Business,
US Marketing and Clinical Education Affairs

* Mr. DeWitt resigned from General Counsel position contemporaneously with
Mr. Pendarvis(cid:146) assumption of that position effective September 1, 2002.

Chairman of the Board

Peter C. Farrell President, Chief Executive Officer, ResMed Inc.

Directors

Christopher A. Bartlett Thomas D. Casserly, Jr. Professor in Business
Administration, Harvard Business School

Donagh McCarthy President and CEO of Protiveris Inc and former senior executive,
Baxter Healthcare

Gary W. Pace Chairman, QRxPharma and former CEO of a number of
pharmaceutical development companies

Michael A. Quinn CEO of Innovation Capital and formerly CEO of a medical
device company and co-founder of NYSE listed environmental company

Christopher G. Roberts Executive Vice President, ResMed, Inc.

Louis A. Simpson President and Chief Executive Officer, Capital Operations,
Geico Corporation

(Photos (cid:150) left to right (cid:150) Louis A. Simpson, Christopher G. Roberts, Michael A. Quinn,

Christopher A. Bartlett, Peter C. Farrell, Gary W. Pace and Donagh McCarthy)

steadfast

shareholders(cid:146) information ❘ board of directors ❘ 1993(cid:150)2002 highlights

(cid:147) Any activity becomes creative

when the doer cares about
doing it right, or doing it better.(cid:148)

John Updike (1932(cid:150) ) author

Business

01 Acquires MAP Medizin-Technologie GmbH; acquires

business activities of French distributor Premium Medical

Swiss distributor Labhardt AG; Securities and Exchange

S.A.R.L. purchased and ResMed SA established in France

Commission declares S-3 Registration Statement

95 Company name changed to ResMed; lists on NASDAQ,

effective; issues $180 million through private placement

raising US$24 million

of convertible subordinated notes due 2006

00 2-for-1 stock split; purchases business activities of

Swedish distributor Einar Egnell AB

99 Begins trading on the New York Stock Exchange

(NYSE); secondary listing of common stock on the

Australian Stock Exchange (ASX); acquires holding in

Flaga hf becoming distributor of Embla sleep diagnostic

equipment in US and selected other countries

94 ResCare group incorporates as Delaware Corporation

93 Nomura Jafco invests

Products

01 Mirage Full Face Mask Series 2; Embletta; AutoSet Spirit

(outside US); AutoSet CS (outside US)

00 ResMed S6 CPAP system; Ultra Mirage Mask; enhanced

AutoSet T; enhanced VPAP; AutoScan; Embla sleep

98 Construction of Australian premises begins; 3-year

recorder

agreement signed with Invacare Corp. for distribution of

99 AutoSet T & AutoSet PDS devices; Mirage Full Face

selected products in the US; 2-for-1 stock split

Mask; Mirage Disposable Full Face Mask; ResControl

97 Liquid silicone manufacturing assets of TQR Pty Ltd

acquired; awarded $2 million competitive Government

98 AutoSet Clinical II device; AutoSet Portable II Plus

device; VPAP II ST-A & VPAP MAX bilevel devices

R & D Grant; NSW State Government offers financial

97 AutoSet Portable II device; HumidAire active humidifier;

assistance for the expansion of Sydney manufacturing

Mirage Mask; SCAN 2.0; UCU 2

plant; Singaporean and Malaysian distributor Innovmedics

acquired and ResMed Singapore Pte Ltd established for

direct distribution in SE Asia

96 German distributor Priess Med Technik purchased and

ResMed Priess GmbH & Co established in Germany;

96 Comfort device; ResCap II headgear; VPAP II bilevel device

95 Alert CPAP device; AutoSet Portable device; Modular

Mask frame; Pediatric CPAP device; SCAN software;

SULLIVAN V CPAP device; UCU (Universal Control Unit)

94 AutoSet Clinical device; Infant Mask; SmartStart;

SULLIVAN IV CPAP device; VPAP bilevel device

99 Ranked 67 by Business Week as one of the 100 Hottest-Growth

93 Bubble Mask - Series 3; Constant CPAP (Germany);

ResCap headgear; SULLIVAN III CPAP device

Awards

01 Ranked 24 by Forbes magazine in the 2000 Best Small

Companies in America; Dr. Peter Farrell named Australian

Entrepreneur of the Year; ranked 31 in Business Week as

one of the 100 Hottest-Growth Companies ($25m to

$500m annual sales) in the US; ranked 30 by Fortune

Small Business magazine as one of America(cid:146)s 100 Fastest-

Growing Small Business Companies; ranked number 1

Medical Products Company by Investor(cid:146)s Business Daily

00 Ranked 58 in Business Week as one of the 100 Hottest-

Growth Companies ($25m to $500m annual sales) in the

US; wins two Australian Technology Awards for

excellence, the first in the Development of

Biotechnology, Pharmaceutical Technology and Medical

Instrumentation and the second in the globalization of

technology pioneered in Australia; ranked 34 in Forbes

magazine in the 200 Best Small Companies in America for

fourth year in a row; listed by Fortune magazine as one of

the 100 Fastest Growing Companies in the US; Dr. Peter

Farrell received AT & T International Business Leadership

Award 2000 from San Diego World Trade Center

Companies ($25m to $500m annual sales) in the US; ranked 94

by Fortune as one of America’s Fastest-Growing Companies; ranked

27 by Forbes magazine in the 200 Best Small Companies in America

98 Dr. Peter Farrell named San Diego’s Entrepreneur of the

Year in Health Sciences; ranked 63 by Forbes Magazine in

the 200 Best Small Companies in America; wins NSW

Exporter of the Year Award across all industry