Responding to Demographics : Ventilator Firm Bets on Aging

The aging of the U.S. population and the corresponding increase in lung cancer and other respiratory ailments have helped create a respiratory health care market worth $2 billion a year. Infrasonics, the Sorrento Valley-based manufacturer of hospital ventilators, is responding with a newly expanded product line.

Ventilators are devices for patients who have limited ability to breathe on their own. Connected to a user by plastic tubes, they pump and deliver oxygen into the lung passageways.

Initially, Infrasonics had only one product, the Infant Star, an $8,000 ventilator designed for babies born prematurely. Since its introduction in June, 1985, more than 2,000 units have been sold to hospitals.

During the past 18 months, the company has invested $2 million to develop four new respiratory products, including the Adult Star ventilator.

Market Expected to Double

As the average age of Americans has risen, Infrasonics has turned its attention to the adult market, anticipating the increase in demand for respiratory care equipment, according to James Hitchin, the company’s president.

Apart from lung cancer patients, as many as a third of all U.S. adults over age 45 suffer from some form of chronic lung disorder, according to industry officials. The annual respiratory health care market is expected to double to $4 billion by 1995.

“The senior population is rising, air quality seems to get continually worse, there’s still a lot of people who smoke,” said Larry Selwitz, director of research at Newport Beach-based Cruttenden & Co.

The most significant advantage of the Adult Star, which sells for $15,250, is that it is computerized and provides information in digital display, allowing physicians to obtain more accurate information quickly.

“Little had been done in terms of technological advances,” said John Boettiger, first vice president of Rotan-Mosle, a Houston-based brokerage firm. “Until Infrasonics introduced its products, most hospitals were using ventilators that you had to turn knobs or look at needles to evaluate.”

For the fiscal year ended June 30, Infrasonics posted $5.4 million in revenue, up 29% from 1988 revenue of $4.2 million. However, the company posted a loss this year of $154,000, or 1 cent a share, an improvement from the loss of $788,000, or 6 cents a share, in 1988.

Although the company is now targeting the adult market, Hitchin says Infrasonics has no intention of abandoning its original niche. Indeed, according to industry analysts, the infant respiratory care market is growing as well. The fact that women are bearing children later in life increases the chances of premature babies needing respiratory aid, Boettiger said.

“There are 500,000 premature infants born each year, and respiratory failure is the leading cause for their deaths,” he said, and increased drug and alcohol abuse are producing more infants born “at risk.”

The introduction of Infrasonics’ HFV Infant Star ventilator may help counter such mortality rates, Hitchin said, adding that the company expects to receive FDA approval for that device any day now. The $14,500 ventilator delivers oxygen to an infant at a higher frequency than existing models, resulting in better oxygen/carbon dioxide exchange.

“Instead of completely inflating and deflating lungs, which causes great strain, especially for an infant’s fragile lung tissue, the HFV delivers oxygen in small puffs--always providing oxygen for the lungs, but never blowing them out,” Boettiger said.

In addition to the Adult Star, Infrasonics has introduced the Star Calc, a $40,000 pulmonary function tester that helps physicians diagnose lung disease and analyze breathing patterns. Since its introduction in late 1988, the company has sold about 20 units.

In July, Infrasonics also received FDA approval for its $3,500 Star Sync, a device that allows a ventilator to be responsive to an infant’s breathing needs. Existing models allow doctors only to estimate an infant’s breathing rate and then select a fixed machine rate. The Star Sync automatically adjusts its operating rate to the infant’s constant and naturally changing breathing pattern.

Sole Manufacturer

Thus far, Infrasonics is the sole manufacturer of such advanced ventilators, but industry officials say competing products could be introduced within the next two years. Such competition could come from a handful of larger companies, including Siemens, a giant West German conglomerate that manufactures medical equipment, and Puritan-Bennett, an Overland Park, Kan.-based manufacturer of specialized equipment for the safety and health care industries.

Hitchin founded Infrasonics in 1982 and took the company public two years later.

“I spent hours in the library researching several industries” to enter, said Hitchin, who earned a physics degree from San Diego State University and worked at Cubic Corp., a local high-technology firm, before launching Infrasonics. “This one kept coming back and coming back to me. It’s a large market that’s getting bigger, and one in which new technology was not being introduced.”

Infrasonics plans to capture an even larger section of that growing market by introducing ventilators suitable for use at a patient’s home. “As more and more of the elderly are treated at home, it’s a market we’ll definitely address,” Hitchin said.

Infrasonics employs 74 people. Its Sorrento Valley corporate headquarters and manufacturing plant occupy a 26,000 square feet.