Operator: Next question is coming from Dan Hurren from MST.
Dan Hurren: I was going to ask some questions about the results rather than GLP-1 drugs, if that’s okay?
Mick Farrell: Dan, that would be delightful.
Dan Hurren: Look, just a question for Brett. Could you walk us — can you just walk us through the headwinds and tailwinds for gross margin over the balance of FY24. And maybe we’re seeing some pricing increases out there in the market and product mix shifting around. Could you just perhaps walk through those factors?
Brett Sandercock: As we look forward on GM, I mean, Mick mentioned it in his remarks as well. But if you look at it in terms of GM, we do feel that we’re going to see improvements in our gross margin over FY24. And those tailwinds are really going to be around improved product mix, manufacturing improvements and efficiencies that we think we can drive. Freight cost reductions are still making their way through inventory and some of that will manifest in FY24. We’re seeing stabilized component costs now, that was a headwind even for this quarter but we’re cycling, largely cycling that, particularly in the second half FY ’24. And then we have, obviously, the AS10 to AS11 transition that will be progressive over FY24 as well and then your point mentioning a little bit around pricing as well. So a combination of those factors will give us confidence, I think, in the gross margin through FY24.
Operator: Your next question is coming from Chris Cooper from Goldman Sachs.
Chris Cooper: Sorry come back to it, guys, but I think it is an important topic. So just on the patient data mix that you’re tracking CPAP patients also in GLP-1s. Can you just update us on how many patients you’re tracking there, and when you intend on publishing that? I know Rob foreshadowed last month that you would be sort of releasing that data? Would it make sense to do that before, or do you think maybe after the major study that’s going to read out next year? And just any high level thoughts you have on the outcome of that study would be helpful at this stage.
Mick Farrell: And so yes, there will be ongoing longitudinal studies that will get out to the peer-reviewed press, but obviously, look, it’s an urgent issue. And if you look at the market reaction the last 90 days, there’s an assumption of 30%, 40% reduction in immediate TAM, right? If you look at that market cap change and it’s just in congress with every piece of scientific evidence that we’ve looked at historically and going forward. So there’s many thousands of patients on our GLP-1 plus PAP database. We also have 17,000 patients that we’re tracking that have had gone through bariatric surgery and are on PAP therapy post surgery with 50%-plus weight loss reductions in that cohort. So we’re tracking much stronger weight loss cohort and this sort of — depending on which type of GLP-1, 10, 20, 30, plus percent weight loss reductions in the extreme case of the 50% weight loss reductions.
And so we’ll be are publishing data in the peer reviewed and clinical press across all of those cohorts as we go forward. Yes, we will choose — as we keep putting out the epidemiology data, we will choose to put some of those data, which aren’t going into the peer-reviewed press, right? So we don’t those studies that we actually want to get into the clinical information that can really be out there versus just the stuff that we put together for an investor, which then would prohibit those same data going into a clinical paper. But we are finding the balance between those and we definitely hear that the market is looking for those data. I can tell you now that the data on aggregate are showing no change despite how you look which GLP-1 class, which AHI group for adherence and resupply.
But I will start to find the right division between the information we can get out on the short to medium term basis and the information that needs to go in those longitudinal studies to really show the sites behind this and really balance it out. One of the best ways we’re doing it every quarter is to show the incredible growth that we’re getting in our devices and our masks and particularly the resupply of masks, right? There’s no impact of anyone’s recall, there’s no impact of any drug therapy and you just look at the replenishment rate of masks, if you’re not on therapy, you’re not ordering masks. And we’re seeing really strong resupply. The other fact to bring into this that we can publish and do publish is the number of patients in our Air Solutions ecosystem, 22.5 million patients that continues to go up.
We had record numbers of new patients starting up. And in addition to that record numbers of patients themselves engaging with myAir and that’s driven by AirSense 11 being far more digitally engaged and higher rates of adoption of that. But we’re seeing a really strong uptake of patients and flow in and patients on adherence, but we’ll continue to publish every quarter those data and the appropriate data we can from the clinical, and we’ll definitely update the epidemiology model every quarter.
Operator: Next question is coming from Craig Wong-Pan from RBC.
Craig Wong-Pan: Just on your Americas mask growth, could you provide some more details on where that additional growth in resupply has been coming from, and how long do you think you can sustain that strong year-on-year growth in mask revenues?
Mick Farrell: It’s a really good question because the mask growth across the group was 21% on constant currency. Europe was incredibly strong at 15% constant currency growth in a full competition market with everybody on the field and 23% in US, Canada, Latin America. Look, as I said in my description in the prepared remarks on our look forward over the next n number of decades, the stable market growth in our field was mid single digits on the device side and high single digits on the mask side. If you look at the five year CAGR, three year CAGR leading into 2019 pre COVID. And that’s sort of what we’re looking at that epidemiology model that mid single digit growth on devices and high single digit growth on masks. So if you think of that as the market growth in a stable state, it then comes up to, well, what can ResMed do in market demand?
