1、ResMed2009 Annual ReportTEXTFORSPINECENTER WITHIN SPINERM-3723_FINAL:Layout 1 10/1/09 12:25 PM Page VResMed2009 Annual ReportRM-3723_FINAL:Layout 1 10/1/09 12:25 PM Page IResMGlobal leaders in sleep and respiratory medicineRM-3723_FINAL:Layout 1 10/1/09 12:25 PM Page IVWe are a global leader in the
2、development,manufacturing and marketing of innovativemedical products for the treatment andmanagement of respiratory disorders,with a focus on sleep-disordered breathing.We sell a comprehensive range of productsin more than 70 countries worldwide throughdirect offices and a network of distributors.W
3、e are dedicated to developing innovativeproducts to improve the lives of those whosuffer from these conditions and to increasingawareness among patients and healthcareprofessionals of the potentially serioushealth consequences of untreated sleep-disordered breathing.ResMedTransfer Agent and Registra
4、rInquiries regarding transfer requirements,lost certificates and changes of addressshould be directed to:American Stock Transfer and Trust Company59 Maiden Lane New York,NY 10038Tel:(718)921-8275Computershare,Level 360 Carrington StreetSydney,NSW 2000Tel:+61 2 8234 5000Legal CounselLatham and Watkin
5、s650 Town Center Drive,Suite 2000Costa Mesa,CA 92626 USAIndependent AuditorsKPMG LLP750 B Street,Suite 1500San Diego,CA 92101 USATo directly receive copies of company news,copies of the annual report on Form 10-K asfiled with the Securities and Exchange Com-mission without charge,please contact:Cons
6、tance BienfaitDirector,Investor RelationsResMed Inc.9001 Spectrum Center BlvdSan Diego,CA Tel:(858)836-5971Fax:(858)836-5517Email:Brett SandercockChief Financial OfficerResMed Inc.1 Elizabeth Macarthur Drive Bella Vista NSW 2153 Australia Tel:+61 2 8884 1000Fax:+61 2 8883 3114 Annual Meeting of Shar
7、eholdersDate:November 18,2009 Time:10:00 AM U.S.Time:November 17,2009,3:00 PM Location:1 Elizabeth Macarthur Drive Bella Vista NSW AustraliaLocationsUSAResMed Inc.ResMed Corp.ResMed Motor Technologies Inc.AustraliaResMed LimitedResMed Asia Pacific LimitedAustriaResMed Austria Medizintechnik GmbHBraz
8、ilResMed do Brasil Representacao de Produtos Medicos Ltda.ChinaResMed(Beijing)Commercial Co.,Ltd.ResMed Enterprise Management(Shenzhen)Co.,Ltd.FinlandResMed Finland OyFranceResMed SASResMed Paris SASGermanyResMed Gmbh&Co.KGTake Air Medical Handels GmbHResMed Medizintechnik GmbHHong KongResMed Hong K
9、ong LimitedIndia ResMed India Private Limited JapanResMed KKMexicoRedMed Mexico S.de R.L.de C.V.NetherlandsResMed Netherlands BVNew ZealandResMed NZ LimitedNorwayResMed Norway ASSingaporeResMed Asia Operations Pty LimitedSwedenResMed Sweden ABSwitzerlandResMed Schweiz AGUK ResMed(UK)Limited 05 06 07
10、 08 09 In Millions of Dollars425.5607.0716.3835.4920.7Net RevenueFinancial Highlights10008006004002000 05 06 07 08 09 In Millions of Dollars64.888.266.3110.3146.4Net Income1501209060300 05 06 07 08 09 In Millions of Dollars71.199.091.1137.8238.9Cash Flow from Operations250200150100500 05 06 07 08 09
11、 In Dollars0.911.160.851.401.90Earnings Per Share2.01.61.2.80.400 05 06 07 08 09 In Millions of Dollars474.1738.1931.210821115Shareholder Equity12009607204802400 05 06 07 08 09 In Millions of Dollars774.11013125214061508Assets160012809606403200ResMed 2009 AnnuAl RepoRt/1RM-3723_FINAL:Layout 1 10/1/0
12、9 12:25 PM Page 1 7:17:06 PMReplacement Pages 10/2:Layout 1 10/2/09 5:44 PM Page 3Message From the Founder and Executive ChairmanIIn the last 20 years,the importance of sleep has become more and more recognized as integral to ouroverall health.the reality isthat sleep is just as importantto our heal
13、th as adequatenutrition and regular exercise.And while the quantity ofsleep is important,the qualityis even more important.It is believed by many thatsleep disordered breathing(sdB)primarily affects men,the obese and those over40,but in actuality,it hasbeen shown to affect peopleof all ages,genders,
14、bodytypes and different healthconditions.the importance of qualitysleep has now been directlycorrelated to the growingunderstanding that sdB isrelated to some of the mostchronic,growing,deadly andcostly diseases in the worldsuch as heart disease,diabetes,hypertension andobesity.national Institutes o
15、fHealth estimates that at least18 million Americans sufferfrom sleep apnea(apnea is aGreek word that means“without breath”)and asmany as 90%remained undiagnosed.long term effects of poor sleep includean increased risk for:heart attack,strokes,decreasedimmune function,elevatedblood pressure,insulin r
16、esistance,disruption of personal relationships,irritability,depression,motorvehicle accidents,and premature death.In fact,it isestimated that more accidentsoccur as a result of sleepapnea than as a result ofdriving under the influence of drugs or alcohol.Most people with diabeteshave sleep apnea.It
17、is now estimated that more thanhalf of all patients with type 2 diabetes could have thecondition and as many as86%of obese males.In addition,the national Centeron sleep disorders Researchsays that tens of thousandsof cardiovascular deaths annually are in some way related to sleep apnea.our mission a
18、nd our strategyare to address and treatsdB to improve quality andlength of life.Great servicecan also be done in combatinghuge in-patient and out-pa-tient costs by treating thesdB that contributes to theseverity and morbidity ofchronic diseases.It is clearto us that we can not onlyreduce the carnage
19、 thatsdB causes in the lives ofmany and help people feelbetter and function more ef-ficiently,but help to reducethe burgeoning costs facingour healthcare system.Weneed to continue to raise theawareness both in the publicand medical minds aboutthe morbidity and mortalityassociated with undiagnosedsdB
20、 that could arguably bea major cause of prematuredeath in the Western World.Two decades ago,industry visionary Peter C.Farrell founded ResMed,a company focused on the importance of sleep.Today,ResMed is thelargest corporation focused exclusively on providing therapies for improving the quality of sl
21、eep and therefore the quality of life.Peter C.FarrellExecutive ChairmanResMed 2009 AnnuAl RepoRt/3RM-3723_FINAL:Layout 1 10/1/09 12:25 PM Page 3our fiscal 2009 was an extraordinary year in manyways,a year in which theCompany performed aboveand beyondand a yearwhen our team was able totouch the lives
22、 of millions of patients across the globe.It was also a year that produced sustained salesperformance throughout allof our commercial regions,terrific gains in capturingmarket share and success in managing our expenses.our focus on quality and innovation meant that evenduring difficult economictimes
23、,customers and patients reached for thebest,for products they could trust,from a team they could trust.We did all this while buildingthe foundation for futuregrowth;upgrading our globaleRp technology system,opening new operations in Malaysia and singapore and moving into new head-quarters in san die
24、go.total revenue in 2009 was$921 million,up 10%fromthe past year and up 15%on a constant income was arecord$146.4 million,an increase of 33%over theprior year and earnings pershare were$1.90,an increaseof 36%over the prior year.our balance sheet remainsstrong,with total assets atyear-end of$1.5 bill
25、ion andnet equity of$1.1 billion.our cash balance at the endof the fiscal year stood at$416 million.the sleep-disorderedbreathing market continuesto be vastly underpenetrated,with only 10%of the potentialpatient population receivingtreatment.Awareness of sleepdisordered breathing and itsconsequences
26、 continues toexpand,a promising signalfor the future of patient careand ResMeds continuedgrowth.the global marketgrew in double digit percent-age terms in fiscal 2009,ayear in which many industriesaround the globe struggled.our most critical mission isto continue expanding themarkets we serve,whethe
27、rthrough our long-standingefforts in cardiology,type 2diabetes and occupationalhealth and safety,throughventilation and anesthesiology,or through helping to increasethe numbers of masks andaccessories a patient receiveseach year.As a marketleader,we are focused ondriving market growth,notjust accept
28、ing it.ResMed products address a patient population linked to some of the most prevalentand expensive chronic disorders faced by globalhealthcare systems.sleep-disordered breathing islinked to three out of the fourtop killers in the u.s.alone,costing the healthcare systemmore than half a trillion do
29、llars per annum.We haveproducts that we believe canhelp reduce the cost of caringfor these patients while extending their lives.In orderto persuade even the mostDear Shareholders,skeptical audiences,we haveembarked on the largestclinical study ResMed hasever undertaken seRVeHF.seRVe HF is a large,mu
30、lti-national randomizedprospective study focusedon treating new York HeartAssociation Class 2,3 and 4heart failure patients withadaptive servo-ventilation.the aim of the study is todemonstrate improvementsin morbidity,mortality and reduced hospitalization costswhen using our adaptiveservo-ventilator
31、 device ascompared to standard ofcarecritical objectives forgovernments and healthcaresystems around the globe.Good patient care and good economics is a powerfulcombination.type 2 diabetes is a criticalco-morbidity that we are addressing in order to supportimproved patient care anddrive market volum
32、e.theprevalence of sdB in type 2diabetes is staggering.theoverall global prevalence oftype 2 diabetes is similar to the prevalence of sdB,although far fewer patientssuffering from sdB havebeen identified when compared with diabetics.that means there is anopportunity to address thepopulation of patie
33、nts withdiagnosed diabetes,andalso diagnose them for sdB.In fact,the Internationaldiabetes Federation has issued a consensus statementsuggesting that all type 2 diabetic patients be evaluatedfor sdB.the literature alsoshows that by treating theirsdB,we can help patientsimprove their cardiovascularhe
34、alth as well as potentiallyimprove glycemic control.We are currently supportinga multinational clinical trial todemonstrate that effectiveuse of CpAp in these populations will bettercontrol HbA1c levels,a critical indicator for diabetesmanagement.We are alsoworking closely with companiesthat have ac
35、cess to diabeticpatients in order to morequickly and efficiently educate these patients andtheir physicians.In addition to stimulatingmarket expansion in 2009,the ResMed team also expanded our market share.We have gained market shareby leveraging an experiencedteam and an unparalleledproduct range.o
36、ur patentedeasyBreathe technology underpinned growth inCpAps,ApAps and VpApbi-levels this past year.Withthe launch of swift lt,swift lt for Her and Activalt,we added to our continuingsuccess in the patient inter-face segment.the VsIII introduction provided stabilityand new growth opportunitiesin an
37、expanding ventilationmarket.the industry-leadingquietness and performanceof the VpAp IV st proveda huge success as wegained significant marketshare in the non-invasiveventilation market.And justas excitingwe believe ourcurrent product pipeline iseven more robust than whatwe launched in the pastyear.
38、during fiscal year 2010and beyond,we haveplanned a series of productlaunches that will provide exciting growth opportunitiesfor ResMed in both new andexisting market segments.Fiscal 2010 promises to bean exciting year for ResMed.the continued flow of positive clinical data linkingsdB to dangerous an
39、dcostly co-morbidities,the simplification of the diagnostic pathway in selected markets,the increased efforts to educateand engage primary carephysicians in coordinationwith our sleep physicianpartners,and an excitingschedule of new product introductions all bode wellfor both market expansionand mar
40、ket share growth.We look forward to keepingour shareholders updatedthroughout the fiscal year aswe both drive and leveragethese opportunities.I want to take this opportunityto thank all of our more than3,000 employees worldwidefor their commitment toquality,their passion and enthusiasm.It is their d
41、ailycontributions that allowResMed to serve millions ofpatients across the globe.The momentum continues as we wrapped up our second decade in the business of developingand commercializing innovative treatments for SDB and other respiratory disorders.Kieran T.GallahuePresident and CEOResMed 2009 Annu
42、Al RepoRt/5RM-3723_FINAL:Layout 1 10/1/09 12:25 PM Page 5Sleep DisorderBreathing and MortalityModerate to severesleep apnea is inde-pendently associatedwith a greater than six-fold increase in the riskof all-cause mortality.A recent study fromJohn Hopkins Universityshowed that severesleep apnea rais
43、es therisk of dying early by46%.People with severebreathing disordersduring sleep were morelikely to die from a variety of causes thansimilar people withoutsuch sleep disorders.Sleep Apnea and Type 2 DiabetesAverage medical expenditures amongpeople with diagnoseddiabetes were 2.3times higher thanwha
44、t expenditureswould be in the absence of diabetes.The International Diabetes Federationconsensus statementon sleep apnea published last yearconcluded that type 2diabetics should beevaluated to determineif SDB is present andthey went on to notethat CPAP treatmentis the gold standardtherapy.Impacting
45、OccupationalHealth and SafetyRegulationsDrivers with sleepapnea have a six-foldincreased risk for crash.Drivers withsleep apnea are moredangerous than drunkdrivers.Treating all U.S.drivers suffering fromsleep apnea would save$11.1 billion in collisioncosts and save 980 lives annually.RM-3723_FINAL:L
46、ayout 1 10/1/09 12:25 PM Page 6CardiovascularDiseases Linkedto Sleep-RelatedDisordersCardiovascular diseaseaffects 80 million U.S.adults,with direct andindirect costs of over$475 billion.Heart failure alone affects2.5%of the U.S.population and costs$37.2 billion per year in direct and indirectcosts.
47、The prevalenceof sleep apnea in patients with congestiveheart failure is over80%.In 2008,the European Society ofCardiologists recom-mended treatment withCPAP for patients withacute and chronic heartfailure diagnosed withsleep apnea.Sleep Apnea andObesity TrendsMore than one-third ofU.S.adults,over 7
48、2 million people,areobese.Obesity-relateddiseases account fornearly 10%of all medical spending in theU.S.or an estimated$149 billion a year,double the cost just 10 years ago.A clinicalstudy in 2004 showedthat SDB is prevalent inover 77%of peoplewho are obese.RM-3723_FINAL:Layout 1 10/1/09 12:25 PM P
49、age 78/RESMED 2009 AnnuAl REPORTBoard of Directors:(left to right)Michael A.Quinn,Ronald A.Taylor,Richard Sulpizio,Kieran T.Gallahue,Peter C.Farrell,Chairman,Christopher Roberts,Gary Pace,and John WarehamExecutive Team:(left to right)Brett Sandercock,CFO,David Pendarvis,Senior VP,OrganizationalDevel
50、opment and General Counsel,Kieran T.Gallahue,President/CEO,Stein Jacobsen,COO,Europe,and Rob Douglas,COO,Asia Pacific ResMed LeadershipReplacement Pages 10/2:Layout 1 10/2/09 5:45 PM Page 4UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-KX ANNUAL REPORT PURSUANT TO SECTION
51、 13 OR 15(d)OFTHE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended June 30,2009Commission file number:001-15317RESMEDINC.(Exact name of registrant as specified in its charter)DELAWARE(State or other jurisdiction of incorporation or organization)98-0152841(IRS Employer Identification No.)9001
52、 Spectrum Center Blvd.San Diego,CA 92123United States of America(Address of principal executive offices)(858)836-5000(Registrants telephone number,including area code)Securities registered pursuant to Section 12(b)of the Act:TITLE OF EACH CLASSCommon Stock,$0.004 Par ValueName of each exchange upon
53、which registeredNew York Stock ExchangeSecurities registered pursuant to Section 12(g)of the ActNoneIndicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the SecuritiesAct.Yes x No Indicate by check mark if the registrant is not required to file reports p
54、ursuant to Section 13 or 15(d)of theAct.Yes No x Indicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that theregistrant was required to file s
55、uch reports),and(2)has been subject to such filing requirements for the past 90days.Yes x No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site,if any,every Interactive Data File required to be submitted and posted pursuant to Rule 405 of
56、Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant wasrequired to submit and post such files).Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulations S-K(S 229.405 ofthis Chapter)is not con
57、tained herein,and will not be contained,to the best of registrants knowledge,indefinitive proxy or information statements incorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K Indicate by check mark whether the registrant is a large accelerated filer,an accelerate
58、d filer,a non-acceleratedfiler or a smaller reporting company.See the definitions of“large accelerated filer,”“accelerated filer”and“smaller reporting company”in Rule 12b-2 of the Exchange Act.Large accelerated filer x Accelerated filer Non-accelerated filer Smaller reporting company Indicate by che
59、ck mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No x The aggregate market value of the voting and non-voting common equity held by non-affiliates of registrant as ofDecember 31,2008(the last business day of the registrants most recently completed s
60、econd fiscal quarter),computed by reference to the closing sale price of such stock on the New York Stock Exchange,wasapproximately$2,985,718,000.All directors,executive officers,and 10%stockholders of registrant areconsidered affiliates.At August 12,2009,registrant had 75,544,678 shares of Common S
61、tock,$0.004 par value,issued andoutstanding.This number excludes 6,701,925 shares held by the registrant as treasury shares.Portions of the registrants definitive Proxy Statement to be delivered to shareholders in connection with theregistrants 2009 Annual Meeting of Stockholders,to be filed subsequ
62、ent to the date hereof,are incorporated byreference into Part III of this report.CONTENTSCautionary Note Regarding Forward Looking Statements2Part IItem 1Business2Item 1ARisk Factors19Item 1BUnresolved Staff Comments27Item 2Properties27Item 3Legal Proceedings27Item 4Submission of Matters to a Vote o
63、f Security Holders27Part IIItem 5Market for Registrants Common Equity,Related Stockholder Matters and IssuerPurchases of Equity Securities28Item 6Selected Financial Data30Item 7Managements Discussion and Analysis of Financial Condition and Results ofOperations32Item 7AQuantitative and Qualitative Di
64、sclosures About Market and Business Risks44Item 8Consolidated Financial Statements and Supplementary Data47Item 9Changes in and Disagreements with Accountants on Accounting and FinancialDisclosure48Item 9AControls and Procedures48Item 9BOther Information50Part IIIItem 10Directors,Executive Officers
65、and Corporate Governance51Item 11Executive Compensation51Item 12Security Ownership of Certain Beneficial Owners and Management and RelatedStockholder Matters51Item 13Certain Relationships and Related Transactions and Director Independence51Item 14Principal Accounting Fees and Services51Part IVItem 1
66、5Exhibits and Consolidated Financial Statement Schedules52SignaturesS-1As used in this 10-K,the terms“we”,“us”,“our”and“the Company”refer to ResMed Inc.,a Delawarecorporation,and its subsidiaries,on a consolidated basis,unless otherwise stated.-1-PART ICautionary Note Regarding Forward-Looking State
67、mentsThis report contains or may contain certain forward-looking statements and information that are basedon the beliefs of our management as well as estimates and assumptions made by,and informationcurrently available to our management.All statements other than statements regarding historical facts
68、are forward-looking statements.The words“believe,”“expect,”“anticipate,”“intend,”“seek,”“will,”“will continue,”“estimate,”“plan,”“future”and other similar expressions generally identify forward-looking statements,including,in particular,statements regarding the development and approval ofnew product
69、s and product applications,market expansion,pending litigation,and the development ofnew markets for our products,such as cardiovascular and stroke markets.These forward-lookingstatements are made pursuant to the safe harbor provisions of the Private Securities Litigation ReformAct of 1995.You are c
70、autioned not to place undue reliance on these forward-looking statements eachof which applies only as of the date of this report.Such forward-looking statements reflect the viewsof our management at the time such statements are made and are subject to a number of risks,uncertainties,estimates and as
71、sumptions,including,without limitation,and in addition to thoseidentified in the text surrounding such statements,those identified in Item 1A“Risk Factors”andelsewhere in this report.In addition,important factors to consider in evaluating such forward-looking statements includechanges or development
72、s in social,economic,market,legal or regulatory circumstances,changes inour business or growth strategy or an inability to execute our strategy due to changes in our industryor the economy generally,the emergence of new or growing competitors,the actions or omissions ofthird parties,including suppli
73、ers,customers,competitors and governmental authorities,the impact offuture developments related to the product recall,and various other factors subject to risks anduncertainties which could cause actual results to materially differ from those projected or implied inthe forward-looking statements.Sho
74、uld any one or more of these risks or uncertainties materialize,orthe underlying estimates or assumptions prove incorrect,actual results may vary significantly fromthose expressed in such forward-looking statements,and there can be no assurance that the forward-looking statements contained in this r
75、eport will in fact occur.ITEM1BUSINESSGeneralWe are a leading developer,manufacturer and distributor of medical equipment for treating,diagnosing,and managing sleep-disordered breathing and other respiratory disorders.Sleep-disordered breathing,or SDB,includes obstructive sleep apnea,or OSA,and othe
76、r respiratorydisorders that occur during sleep.When we were formed in 1989,our primary purpose was tocommercialize a treatment for OSA developed by Professor Colin Sullivan.This treatment,nasalContinuous Positive Airway Pressure,or CPAP,was the first successful noninvasive treatment forOSA.CPAP syst
77、ems deliver pressurized air,typically through a nasal mask,to prevent collapse of theupper airway during sleep.Since the development of CPAP,we have developed a number of innovative products for SDB andother respiratory disorders including airflow generators,diagnostic products,mask systems,headgear
78、and other accessories.Our growth has been fuelled by geographic expansion,increased awareness ofrespiratory conditions as a significant health concern among physicians and patients,and our researchand product development efforts.-2-We employ approximately 2,900 people and sell our products in over 7
79、0 countries through acombination of wholly owned subsidiaries and independent distributors.Our web site address is .We make our periodic reports,together with anyamendments,available on our web site,free of charge,as soon as reasonably practicable after weelectronically file or furnish the reports w
80、ith the Securities and Exchange Commission.Corporate HistoryResMed Inc.,a Delaware corporation,was formed in March 1994 as the ultimate holding companyfor our Americas,Asia-Pacific and European operating subsidiaries.On June 1,1995,we completedan initial public offering of common stock and on June 2
81、,1995 our common stock commencedtrading on the NASDAQ National Market.On September 30,1999 we transferred our principal publiclisting to the New York Stock Exchange,or NYSE,trading under the ticker symbol RMD.OnNovember 25,1999,we established a secondary listing of our common stock via Chess Deposit
82、aryInstruments,or CDIs,on the Australian Stock Exchange(now known as the Australian SecuritiesExchange),or ASX,also under the symbol RMD.Ten CDIs on the ASX represent one share of ourcommon stock on the NYSE.On July 1,2002,we converted our ASX listing status from a foreignexempt listing to a full li
83、sting.Our Australian subsidiary,ResMed Holdings Limited,was originally organized in 1989 by Dr.PeterFarrell to acquire from Baxter Center for Medical Research Pty Limited,or Baxter,the rights tocertain technology relating to CPAP treatment as well as Baxters existing CPAP device business.Baxter had
84、sold CPAP devices in Australia since 1988,having acquired the rights to the technology in1987.Since formation we have acquired a number of operating businesses including:Name of EntityDate of AcquisitionDieter W.Priess MedtechnikFebruary 7,1996Premium Medical SARLJune 12,1996Innovmedics Pte LtdNovem
85、ber 1,1997EINAR Egnell ABJanuary 31,2000MAP Medizin Technologie GmbHFebruary 16,2001Labhardt AGNovember 15,2001Servo Magnetics Inc.May 14,2002John Stark and AssociatesJuly 24,2002Respro Medical Company LimitedJuly 2,2003Resprecare BVDecember 1,2004Hoefner Medizintechnik GmbHFebruary 14,2005Saime SAM
86、ay 19,2005Pulmomed Medizinisch-Technische Gerte GmbHJuly 1,2005PolarMed Holding ASDecember 1,2005Western Medical MarketingOctober 4,2006Respicure Medsys PVT.LTDApril 30,2009Segment InformationWe believe that,given the single market focus of our operations solely in the sleep-disorderedbreathing sect
87、or of the respiratory medicine industry,and the inter-dependence of its products,weoperate as a single operating segment.See Note 16 Segment Information of the Notes to Financial-3-Statements(Part II,Item 8)for financial information regarding segment reporting.Financialinformation about our revenues
88、 from and assets located in foreign countries is also included in thenotes to our consolidated financial statements.The MarketSleep is a complex neurological process that includes two distinct states:rapid eye movement,orREM,sleep and non-rapid eye movement,or non-REM,sleep.REM sleep,which is about
89、20-25%oftotal sleep experienced by adults,is characterized by a high level of brain activity,bursts of rapid eyemovement,increased heart and respiration rates,and paralysis of many muscles.Non-REM sleep issubdivided into four stages that generally parallel sleep depth;stage 1 is the lightest and sta
90、ge 4 is thedeepest.The upper airway has no rigid support and is held open by active contraction of upper airway muscles.Normally,during REM sleep and deeper levels of non-REM sleep,upper airway muscles relax andthe airway narrows.Individuals with narrow upper airways or poor muscle tone are prone to
91、temporary collapses of the upper airway during sleep,called apneas,and to near closures of the upperairway called hypopneas.These breathing irregularities result in a lowering of blood oxygenconcentration,causing the central nervous system to react to the lack of oxygen or increased carbondioxide an
92、d signaling the body to respond.Typically,the individual subconsciously arouses fromsleep,causing the throat muscles to contract,opening the airway.After a few gasping breaths,bloodoxygen levels increase and the individual can resume a deeper sleep until the cycle repeats itself.Sufferers of OSA typ
93、ically experience ten or more such cycles per hour.While these awakeningsgreatly impair the quality of sleep,the individual is not normally aware of these disruptions.Inaddition,OSA has recently been recognized as a cause of hypertension and a significant co-morbidityfor heart disease,stroke and dia
94、betes.Scientists estimate that one in five adults have some form of obstructive sleep apnea.In the UnitedStates alone,this represents approximately 40 million people.Despite the high prevalence of OSA,there is a general lack of awareness of OSA among both the medical community and the generalpublic.
95、It is estimated that less than 10%of those with OSA have been diagnosed or treated.Manyhealthcare professionals are often unable to diagnose OSA because they are unaware that suchnon-specific symptoms as excessive daytime sleepiness,snoring,hypertension and irritability arecharacteristic of OSA.Whil
96、e OSA has been diagnosed in a broad cross-section of the population,it is predominant amongmiddle-aged men and those who are obese,smoke,consume alcohol in excess or use muscle-relaxingand pain-killing drugs.A strong association has been discovered between OSA and a number ofcardiovascular diseases.
97、Recent studies have shown that SDB is present in approximately 80%ofpatients with drug-resistant hypertension,approximately 72%of patients with type 2 diabetes andapproximately 80%of patients with congestive heart failure.In relation to diabetes,recent studiesindicate that SDB is independently assoc
98、iated with glucose intolerance and insulin resistance.Sleep-Disordered Breathing and Obstructive Sleep ApneaSleep-disordered breathing encompasses all physiological processes that cause detrimental breathingpatterns during sleep.Manifestations include OSA,central sleep apnea,or CSA,and hypoventilati
99、onsyndromes that occur during sleep.Hypoventilation syndromes are generally associated with obesity,chronic obstructive lung disease and neuromuscular disease.OSA is the most common form of SDB.Sleep fragmentation and the loss of the deeper levels of sleep caused by OSA can lead to excessivedaytime
100、sleepiness,reduced cognitive function,including memory loss and lack of concentration,-4-depression and irritability.OSA sufferers also experience an increase in heart rate and an elevation ofblood pressure during the cycle of apneas.Several studies indicate that the oxygen desaturation,increased he
101、art rate and elevated blood pressure caused by OSA may be associated with increased riskof cardiovascular morbidity and mortality due to angina,stroke and heart attack.Patients with OSAhave been shown to have impaired daytime performance in a variety of cognitive functions includingproblem solving,r
102、esponse speed and visual motor coordination,and studies have linked OSA toincreased occurrences of traffic and workplace accidents.Generally,an individual seeking treatment for the symptoms of OSA is referred by a generalpractitioner to a specialist for further evaluation.The diagnosis of OSA typica
103、lly requires monitoringthe patient during sleep at either a sleep clinic or the patients home.During overnight testing,respiratory parameters and sleep patterns may be monitored,along with other vital signs such as heartrate and blood oxygen levels.Simpler tests,using devices such as our Apnealink,o
104、r our automaticpositive airway pressure devices,monitor airflow during sleep,and use computer programs to analyzeairflow patterns.These tests allow sleep clinicians to detect any sleep disturbances such as apneas,hypopneas or subconscious awakenings.We estimate that there are currently around 3,000
105、sleepclinics in the United States,a substantial portion of which are affiliated with hospitals.The number ofsleep clinics has expanded significantly from approximately 100 such facilities in 1985.Existing TherapiesBefore 1981,the primary treatment for OSA was a tracheotomy,a surgical procedure to cu
106、t a hole inthe patients windpipe to create a channel for airflow.Most recently,alternative treatments haveinvolved either uvulopalatopharyngoplasty,or UPPP,in which surgery is performed on the upperairway to remove excess tissue and to streamline the shape of the airway,implanting a device to addsup
107、port to the soft palate,or mandibular advancement,in which the lower jaw is moved forward towiden the patients airway.UPPP alone has a poor success rate;however,when performed inconjunction with multi-stage upper airway surgical procedures,a greater success rate has beenclaimed.These combined proced
108、ures,performed by highly specialized surgeons,are expensive andinvolve prolonged and often painful recovery periods.CPAP,by contrast,is a non-invasive means of treating OSA.CPAP was first used as a treatment forOSA in 1980 by Dr.Colin Sullivan,the past Chairman of our Medical Advisory Board.CPAPsyst
109、ems were commercialized for treatment of OSA in the United States in the mid 1980s.Today,use of CPAP is generally acknowledged as the most effective and least invasive therapy for managingOSA.During CPAP treatment,a patient sleeps with a nasal interface connected to a small portable airflowgenerator
110、 that delivers room air at a positive pressure.The patient breathes in air from the flowgenerator and breathes out through an exhaust port in the interface.Continuous air pressure applied inthis manner acts as a pneumatic splint to keep the upper airway open and unobstructed.Interfacesinclude nasal
111、masks and nasal pillows.Sometimes,when a patient leaks air through their mouth,afull-face mask may need to be used,rather than a nasal interface.CPAP is not a cure and therefore,must be used on a nightly basis as long as treatment is required.Patient compliance has been a major factor in the efficac
112、y of CPAP treatment.Early generations ofCPAP units provided limited patient comfort and convenience.Patients experienced soreness from therepeated use of nasal masks and had difficulty falling asleep with the CPAP device operating at theprescribed pressure.In more recent years,product innovations to
113、 improve patient comfort andcompliance have been developed.These include more comfortable patient interface systems;delaytimers that gradually raise air pressure allowing the patient to fall asleep more easily;bilevel air flow-5-generators,including Variable Positive Airway Pressure,or VPAP systems,
114、which provide differentair pressures for inhalation and exhalation;heated humidification systems to make the airflow morecomfortable;and autotitration devices that reduce the average pressure delivered during the night.Business StrategyWe believe that the SDB market will continue to grow in the futu
115、re due to a number of factorsincluding increasing awareness of OSA,improved understanding of the role of SDB treatment in themanagement of cardiac,neurologic,metabolic and related disorders,and an increase in home-baseddiagnosis.Our strategy for expanding our business operations and capitalizing on
116、the growth of theSDB market consists of the following key elements:Continue Product Development and Innovation.We are committed to ongoing innovation indeveloping products for the diagnosis and treatment of SDB.We have been a leading innovator ofproducts designed to more effectively treat SDB,increa
117、se patient comfort and encourage compliancewith prescribed therapy.For example,in 1999 we introduced the Mirage Full Face Mask.This maskconforms to the patients facial contours,creating a more comfortable and better seal.In 2002,weintroduced the AutoSet Spirit flow generator,our second-generation au
118、totitrating device that adapts tothe patients breathing patterns to more effectively treat OSA.In 2003,we introduced the MirageActiva nasal mask,with active cushion technology.In 2004,we introduced the Mirage Swift nasalpillows system,a less obtrusive,lightweight,and flexible alternative to nasal ma
119、sks.In 2005,weintroduced the S8 range of CPAP,a small flow generator with optional integrated humidification.In2007,we introduced the Mirage Quattro,a full face mask that offers dual-wall cushion with spring airtechnology which accommodates movement during sleep,and the Mirage Liberty,which combines
120、our nasal pillow technology in a full face mask product with a minimalist design.In 2008,welaunched several new patient interfaces including the Mirage Micro,a new generation nasal maskwith a microfit dial and the Swift LT which offers a pillow system for additional support and comfort.In 2008,we al
121、so launched an updated version of our S8 flow generator and the VPAP Auto,a newbi-level device incorporating our new motor technology including the easy-breathe waveform.In2009,we launched Activa LT and the Swift LT for Her,which was the first nasal pillow productreleased that is designed and market
122、ed specifically for female patients.We believe that continuedproduct development and innovation are key factors to our ongoing success.Approximately 11%ofour employees are devoted to research and development activities.In fiscal year 2009,we invested$63.1 million,or 7%of our revenues,in research and
123、 development.Expand Geographic Presence.We market our products in over 70 countries to sleep clinics,homehealthcare dealers and third party payers.We intend to increase our sales and marketing efforts in ourprincipal markets,as well as expand the depth of our presence in other geographic regions.Inc
124、rease Public and Clinical Awareness.We intend to continue to expand our existingpromotional activities to increase awareness of SDB and our treatment alternatives.Thesepromotional activities target the population with predisposition to SDB as well as primary carephysicians and specialists,such as ca
125、rdiologists,neurologists and pulmonologists.In addition,we alsotarget special interest groups,including the National Stroke Association,the American HeartAssociation and the National Sleep Foundation.During fiscal years 2009,2008 and 2007,we donated$3.5 million,$2.0 million and$Nil,respectively,to t
126、he ResMed Foundation in the United States,and the ResMed Foundation inAustralia,to further enhance research and awareness of SDB.The contributions to the Foundationsreflect ResMeds commitment to medical research into sleep-disordered breathing,particularly thetreatment of obstructive sleep apnea.-6-
127、Expand into New Clinical Applications.We continually seek to identify new applications of ourtechnology for significant unmet medical needs.Recent studies have established a clinical associationbetween OSA and both stroke and congestive heart failure,and have recognized SDB as a cause ofhypertension
128、 or high blood pressure.Research also indicates that SDB is independently associatedwith glucose intolerance and insulin resistance.We have developed a device for the treatment ofCheyne-Stokes breathing in patients with congestive heart failure.In addition,we maintain closeworking relationships with
129、 a number of prominent physicians to explore new medical applications forour products and technology.In 2007 we received Food and Drug Administration,or FDA,clearanceand launched a new product in the United States for the treatment of respiratory insufficiency due tocentral sleep apnea,mixed apnea a
130、nd periodic breathing,called the Adapt SV.The Adapt SV uses atechnology known as adaptive servo-ventilation and was first made available to a select group of U.S.key opinion leader sites beginning in the third quarter of fiscal year 2006.Adapt SV,utilizes anadvanced algorithm to calculate a patient-
131、specific minute ventilation target and automatically adjustspressure support to maintain the target.We believe this technology has allowed physicians tosuccessfully treat complex breathing disorders in some patients who had previously tried and failedtraditional positive airway pressure therapy.Leve
132、rage the Experience of our Management Team.Our senior management team has extensiveexperience in the medical device industry in general,and in the field of SDB in particular.We intendto continue to leverage the experience and expertise of these individuals to maintain our innovativeapproach to the d
133、evelopment of products and increase awareness of the serious medical problemscaused by SDB.ProductsOur portfolio of products for the treatment of OSA and other forms of SDB includes airflowgenerators,diagnostic products,mask systems,headgear and other accessories.Air Flow GeneratorsWe produce CPAP,V
134、PAP and AutoSet systems for the titration and treatment of SDB.The flowgenerator systems deliver positive airway pressure through a patient interface,either a small nasalmask,nasal pillows system,or full-face mask.Our VPAP units deliver ultra-quiet,comfortable bilevel therapy.There are two preset pr
135、essures:ahigher pressure as the patient breathes in,and a lower pressure as the patient breathes out.Breathingout against a lower pressure makes treatment more comfortable,particularly for patients who needhigh pressure levels or for those with impaired breathing ability.AutoSet systems are based on
136、 a proprietary technology to monitor breathing and can also be used inthe diagnosis,treatment and management of OSA.CPAP and VPAP flow generators accounted forapproximately 58%,50%and 52%of our net revenues in fiscal years 2009,2008 and 2007,respectively.With the acquisition of Saime SAS in May 2005
137、,we increased our presence in the Europeanhomecare ventilation market.The VS and Elise range of products are sophisticated,yet easy to usefor physicians,clinicians and patients.We believe these devices compliment our VPAP III,VPAPAdapt SV and Autoset CS2 for patients who need ventilatory assistance.
138、-7-The tables below provide a selection of products,as known by our trademarks,which have beenreleased during the last five years.CONTINUOUSPOSITIVEAIRWAYPRESSUREPRODUCTSDESCRIPTIONDATE OFCOMMERCIALINTRODUCTIONResMed S8 SeriesA small CPAP device with optional integratedhumidification.June 2005C-Seri
139、es TangoAn entry level CPAP device with optionalhumidificationMarch 2007ResMed S8 Series IIA small CPAP device with enhanced feature setto the original S8 Series,with improved patienttherapy comfort.The device has an optionalintegrated humidifier.April 2008S8 Elite(AutoScore)II(ROW,ex Japan)A small
140、CPAP device with enhanced feature setto the original S8(AutoScore),with improvedpatient therapy comfort.The device has anoptional integrated humidifier.September 2007S8 Elite II(US)A small CPAP device with enhanced feature setto the original S8 Elite,with further improvedpatient therapy comfort.The
141、device has anoptional integrated humidifier.April 2008S8 Escape II(US)A small CPAP device with enhanced feature setto the original S8 Escape,with further improvedpatient therapy comfort.The device has anoptional integrated humidifierJune 2008S8 Escape(Lightweight)II(ROW,ex Japan)A small CPAP device
142、with enhanced feature setto the original S8 Escape(Lightweight),withfurther improved patient therapy comfort.Thedevice has an optional integrated humidifierSeptember 2008-8-VARIABLEPOSITIVEAIRWAYPRESSUREPRODUCTSDESCRIPTIONDATE OFCOMMERCIALINTRODUCTIONVPAP Adapt SVThe newest and most highly evolved b
143、ileveldevice which uses adaptive servo-ventilationtechnology to treat patients with central sleepapnea,mixed apnea and periodic breathing.March 2006VPAP MalibuAuto-adjustingbileveldeviceutilizingthesmooth pressure waveform of the VPAP AdaptSV to achieve ultimate comfort for non-compliantCPAP users.A
144、pril 2007VPAP AutoAuto-bilevel device on the compact S8 platformutilizing the easy-breathe waveform and Autosetalgorithms.January 2008VPAP Adapt SV EnhancedRevised VPAP Adapt SV increasing pressurerange from 4-20 cmH2O to 4-25 cmH2O andAHI resporting.February 2008VPAP STSmall compact Bi-level ST dev
145、ice in an S8 boxwith VAuto for USJune 2008VPAP Auto 25Small compact Bi-level ST device in an S8 boxwith VAuto for USJune 2008VPAP III STA withQuickNavAn upgraded Bi-level device with alarm history,instant efficacy data and a large screen.July 2008VPAP S/VPAP IVBi-level device that provides S and CPA
146、P modeswith the pressure up to 25 cmH2O in a compactand convenient S8 design.September 2008VPAP IV ST#Small compact Bi-level ST device in an S8 boxwith VAuto for EuropeSeptember 2008S8 Auto 25Bi-level device that provides the Easy-Breathewave on the AutoSet algorithm and the pressureup to 25cm H2O i
147、n a compact and convenient S8design.October 2008#Sold outside United States only-9-AUTOMATICPOSITIVEAIRWAYPRESSUREPRODUCTSDESCRIPTIONDATE OFCOMMERCIALINTRODUCTIONAutoSet CS2*#Modular,automatic device specifically designedto normalizeventilationin congestive heartfailure patients with Cheyne Stokes r
148、espiration.The device has an optional integrated humidifier.August 2004S8 Autoset II(ROW,ex Japan)Premium auto-adjusting device in ResMeds S8Series II range,with improved patient therapycomfort.The device has an optional integratedhumidifier.September 2007S8 Autoset II(US)Premium auto-adjusting devi
149、ce in ResMeds S8Series II range,with further improved patienttherapy comfort.The device has an optionalintegrated humidifier.April 2008*Not cleared for marketing in the United States#Sold outside United States onlyVENTILATIONPRODUCTSDESCRIPTIONDATE OFCOMMERCIALINTRODUCTIONElise 150*#Ventilator devic
150、e that combines volumetric andbarometric ventilation modes with single ordouble limb circuit.June 2004Elise 370*#VentilatorforuseinIntensiveCareUnitcombining all conventional ventilation modes,diagnostic functions with external monitoringinterface for ventilation loops.September 2004Elise 250*#Venti
151、lator for use in transport and emergencysituations.April 2005Elise 150*#(Lyon)New software launch V2.50 incorporating CPAPmode and additional flexibility in settings.Forexample presetting 2 programs in both invasiveand non-invasive.November 2008VS III*#Pressuresupportandvolumeventilatorforinvasive a
152、nd non-invasive purposes so it can beused from the hospital to the home.Launched inFrance and Germany.December 2008*Not cleared for marketing in the United States#Sold outside United States only-10-Mask Systems and Diagnostic ProductsMask systems are one of the most important elements of SDB treatme
153、nt systems.Masks are a primarydeterminant of patient comfort and as such may drive or impede patient compliance with therapy.Wehave been a consistent innovator in masks,improving patient comfort while minimizing size andweight.Masks,accessories,motors and diagnostic products accounted for approximat
154、ely 42%,50%and 48%of our net revenues in fiscal years 2009,2008 and 2007,respectively.MASKPRODUCTSDESCRIPTIONDATE OFCOMMERCIALINTRODUCTIONMirage SwiftA light and unobtrusive nasal pillows masksystem.August 2004Silent PapillonMask*#A low noise nasal mask with simplified assembly.March 2005Hospital Fu
155、ll FaceMaskDisposable full face mask specifically designedfor hospital use.April 2005Hospital Nasal MaskDisposable nasal mask specifically designed forhospital use.April 2005Ultra Mirage IIAdvanced version of the Ultra Mirage NasalSystem with improved comfort and ease of fitthrough enhanced forehead
156、 pads and support.July 2005Meridian Nasal MaskA value line nasal mask that is simple yetcomfortable.February 2006Mirage Swift IIImproved design to reduce noise and airflowpattern.April 2007Mirage QuattroResMeds fourth generation full face mask,delivering an individualized fit for over 95%ofusers.Apr
157、il 2007Mirage LibertyA full face mask that seals individually at themouth and nose.With less skin contact and anopen field of vision,this unobtrusive mask feelslight on the face.May 2007Hospital NV FullFace MaskNon-vented version of hospital Full Face Maskdesigned for hospital ventilationOctober 200
158、7Micro MirageNasal mask equipped with Mircofit dial forpersonalized fitFebruary 2008Swift LTNasal mask offering pillow system for additionalsupport and stabilityJune 2008Activa LTNasal mask including Active Cell Technology ina lightweight version to help mitigate leak andoptimize patient comfortOcto
159、ber 2008Swift LT for HerNasal mask offering pillows systems with femalespecific design featuresNovember 2008*Not cleared for marketing in the United States#Sold outside United States only-11-We market sleep recorders for the diagnosis and titration of SDB in sleep clinics and hospitals.Thesediagnost
160、ic systems record relevant respiratory and sleep data,which can be analyzed by a sleepspecialist or physician who can then tailor an appropriate OSA treatment regimen for the patient.DIAGNOSTICPRODUCTSDESCRIPTIONDATE OFCOMMERCIALINTRODUCTIONApneaLink(MicroMesam)A portable Sleep Apnea screening devic
161、e for usebysleepprofessionalsandprimarycarephysiciansApril 2004ApneaLink+OximetryA portable Sleep Apnea screening device withoximetry measurementJune 2007ApneaLink Plus(US)A portable Sleep Apnea screening device withoximetry measurement and respiratory effortmeasurementJune 2009-12-Accessories and O
162、ther ProductsTo assist those professionals diagnosing or managing the treatment of patients there are datacommunications and control products such as the ResLink,ResControl,ResControl II,TxControl,ResScan and ResTraxx modules that facilitate the transfer of data and other information to and fromthe
163、flow generators.To enhance patient comfort,convenience and compliance,we market a variety ofother products and accessories.These products include humidifiers,such as the HumidAire,H2i andH3i,which connect directly with the CPAP,VPAP and AutoSet flow generators to humidify and heatthe air delivered t
164、o the patient.Their use helps prevent the drying of nasal passages that can causediscomfort.Other optional accessories include cold passover humidifiers,carry bags and breathingcircuits.DATA/PATIENTMANAGEMENTPRODUCTSDESCRIPTIONDATE OFCOMMERCIALINTRODUCTIONResScan v3.6Support for VPAP Auto 25,VPAP ST
165、,VPAP Sdevices;plus ability to export patient files to csvformat;optiontoswitchbetweenhPaandcmH2O units of measurement;patient list displayimprovements.July 2008ResScan v3.7Support for S8 Auto 25,S8 Escape II(ROW),S8AutoSet II w/EPR(ROW),S8 Escape II Autodevices;support for Vista Home Premium OS;sup
166、port for Japanese OS;enhancements to QuickStart feature.September 2008ResTraxx v13Support for using the GSM network for wirelesscommunicationbetweenResMedDataCentre(“RDC”)and S8 AutoSet II,S8 Elite II,VPAP-ST,VPAP Auto,VPAP Auto 25&VPAPS flow generators.S8 ResTraxx Centres forMedicareandMedicaidServ
167、ices(“GSM”)module released.October 2008ResTraxx v14Support for VPAP S devices;enhancements tocompliance reports to show CMS guidelinescompliance;ability to generate compliance reportdirectly by running a script on the database for agiven organization as a csv file.May 2009Product Development and Cli
168、nical TrialsWe have a strong track record in innovation in the sleep market.In 1989,we introduced our firstCPAP device.Since then we have been committed to an ongoing program of product advancementand development.Currently,our product development efforts are focused on not only improving ourcurrent
169、product offerings,but also expanding into new product applications.In 1999,we introduced the AutoSet T flow generator,an autotitrating device that adapts to thepatients breathing patterns to effectively prevent apneas.In 2001,we introduced our next generationautotitrating device,the AutoSet Spirit.T
170、he AutoSet Spirit is an autotitrating modular device withoptional integrated humidifier.In 2003,we introduced the Activa nasal mask using our patentedActive Cushion Technology.In 2004,we launched our Mirage Swift mask,a light and unobtrusive-13-nasal pillows mask system.Also,in 2004 we launched an i
171、mproved AutoSet CS 2(outside the UnitedStates only)to treat congestive heart failure patients with significant central sleep apnea.In 2006,welaunched the Adapt SV within the United States.This product is for the treatment of respiratoryinsufficiency due to central sleep apnea,mixed apnea and periodi
172、c breathing and uses a technologywhich we call adaptive servo-ventilation.We continually seek to identify new applications of our technology for significant unmet medicalneeds.SDB is associated with a number of symptoms beyond excessive daytime sleepiness andirritability.Recent studies have establis
173、hed a clinical association between SDB and hypertension,stroke,congestive heart failure and diabetes.We support clinical trials in the United States,Germany,France,the United Kingdom,Italy,Switzerland and Australia to develop new clinical applications forour technology.We consult with physicians at
174、major sleep centers throughout the world to identify technologicaltrends in the treatment of SDB.New product ideas are also identified by our marketing staff,directsales force,network of distributors,manufacturersrepresentatives,customers and patients.Typically,our internal development staff then de
175、velops these ideas,where appropriate,into new products.In fiscal years 2009,2008 and 2007 we invested$63.1 million,$60.5 million and$50.1 million,respectively,on research and development.Sales and MarketingWe currently market our products in over 70 countries using a network of distributors,independ
176、entmanufacturersrepresentatives and our direct sales force.We attempt to tailor our marketing approachto each national market,based on regional awareness of SDB as a health problem,physician referralpatterns,consumer preferences and local reimbursement policies.See Note 16 Segment Informationof the
177、Notes to Financial Statements(Part II,Item 8)for financial information about our geographicareas.North America and Latin America.Our products are typically purchased by a home healthcaredealer who then sells the products to the patient.The decision to purchase our products,as opposed tothose of our
178、competitors,is made or influenced by one or more of the following individuals ororganizations:the prescribing physician and his or her staff;the home healthcare dealer;the insurerand the patient.In the United States,our sales and marketing activities are conducted through a fieldsales organization m
179、ade up of regional territory representatives,program development specialists andregional sales directors.Our U.S.field sales organization markets and sells products to homehealthcare dealer branch locations throughout the United States.We also market our products directly to sleep clinics.Patients w
180、ho are diagnosed with OSA andprescribed CPAP treatment are typically referred by the diagnosing sleep clinic to a home healthcaredealer to fill the prescription.The home healthcare dealer,in consultation with the referring physician,will assist the patient in selecting the equipment,fit the patient
181、with the appropriate mask and set theflow generator pressure to the prescribed level.Sales in North and Latin America accounted for 54%,49%and 53%of our net revenues for fiscalyears 2009,2008 and 2007,respectively.Europe.We market our products in most major European countries.We have wholly-ownedsub
182、sidiaries in Austria,Finland,France,Germany,Spain,Sweden,Norway,Netherlands,Switzerlandand the United Kingdom.We use independent distributors to sell our products in other areas ofEurope.Distributors are selected in each country based on their knowledge of respiratory medicine-14-and a commitment to
183、 SDB therapy.In each country in which we sell our products direct,a localsenior manager is responsible for direct national sales.In many countries in Europe,we sell ourproducts to home healthcare dealers who then sell the products to the patients.In Germany,we alsooperate a home healthcare company,i
184、n which we provide products and services directly to patients,and receive reimbursement directly from third party payers.Sales in Europe accounted for 38%,43%and 39%of our total net revenues for fiscal years 2009,2008 and 2007,respectively.Asia Pacific.We have whollyowned subsidiaries in Australia,H
185、ong Kong,Japan,New Zealand,Singapore,China and India.We use a combination of our direct sales force and independentdistributors to sell our products in Asia Pacific.Sales in Asia Pacific and the rest of the worldaccounted for 8%,8%and 8%of our total net revenues for the fiscal years 2009,2008 and 20
186、07,respectively.Other Marketing Efforts.We continue to pursue other suitable opportunities with professional andhealthcare associations to raise awareness of the co-morbidity of SDB in cardiovascular diseasepatients,including coronary artery disease,congestive heart failure,hypertension and stroke.W
187、e also continue to work to raise awareness of SDB in diabetes.Current research is increasinglyshowing an independent association between OSA and type 2 diabetes.Accordingly,we initiated astudy investigating the prevalence of OSA in the type 2 diabetic population.Due to the highprevalence of the SDB
188、and type 2 diabetes,we are now actively supporting the American Associationof Diabetes Educators and are in the process of setting up further initiatives to develop the SDBmarket in the diabetic population.ResMed is also reaching out to diabetes patients.Through ourpartnership with the American Diab
189、etes Association,a sleep laboratory is now present at everyDiabetes Expo meeting where patients have the opportunity to learn about diabetes self-management.In June 2008,the International Diabetes Federation(IDF)released a statement on SDB and type 2diabetes.The IDF Taskforce on Epidemiology and Pre
190、vention strongly recommended that healthprofessionals working in both type 2 diabetes and SDB adopt clinical practices to ensure that a patientpresenting with one condition is considered for the other.Furthermore,the IDF recommended thatpeople with type 2 diabetes should be screened for OSA particul
191、arly when they present classicalsymptoms such as witnessed apneas,heavy snoring or daytime sleepiness and poor workplaceperformance.We also announced a co-marketing agreement with LifeScan,a Johnson and Johnsoncompany,to increase the level of education and awareness of SDB in the diabetic population
192、.In September 2008,the European Society of Cardiologists published guidelines for the treatment ofacute and chronic heart failure.The guidelines noted that patients with symptomatic heart failurefrequently have sleep-related disorders(central or obstructive sleep apnea)and recommendedtreatment with
193、Continuous Positive Airway Pressure,or CPAP,for patients diagnosed withobstructive sleep apnea.In June 2008 the International Diabetes Federation issued a consensusstatement on sleep disordered breathing and Type 2 Diabetes,where the substantial value ofidentifying and treating diabetic patients suf
194、fering from sleep disordered breathing was recognizedand recommended.We believe that the increasing awareness among the co-morbidity specialistssupports the efforts and investment we are making in new markets,including diabetes and cardiology.ManufacturingOur principal manufacturing facility is loca
195、ted in Sydney,Australia and comprises a 155,000 squarefoot manufacturing facility.Our manufacturing operations consist primarily of assembly and testingof our flow generators,masks and accessories.Of the numerous raw materials,parts and components-15-purchased for assembly of our therapeutic and dia
196、gnostic sleep disorder products,most areoff-the-shelf items available from multiple vendors.We generally manufacture to our internal salesforecasts and fill orders as received.Over the last few years,the manufacturing processes have beentransformed along lean manufacturing guidelines to flow lines s
197、taffed by dedicated teams.Each teamis responsible for the manufacture and quality of their product group and decisions are based onperformance and quality measures,including customer feedback.We have a 43,000 square foot manufacturing facility in Paris,France.This facility is accredited toISO 13485
198、and is primarily responsible for the assembly of mechanical ventilators and associatedaccessories.We also manufacture high-quality electric motors for our flow generator devices at the ResMed MotorTechnologies Inc.facility which comprises a 72,000 square foot facility at Chatsworth,California.In Nov
199、ember 2008 we opened a 32,000 square foot manufacturing facility in Singapore tocomplement the Sydney manufacturing site.The plant commenced with the production of masks andin the fourth quarter of fiscal year 2009 a flow generator assembly line was commissioned.Our quality management system is base
200、d upon the requirements of ISO 9001,ISO 13485,FDAQuality System Regulations for Medical Devices and the Medical Device Directive(93/42/EEC).OurSydney,Australia and San Diego,California and Singapore facilities are each accredited to ISO 9001and ISO 13485.These three sites have third party audits con
201、ducted by the ISO certification bodies atregular intervals.Third-Party ReimbursementThe cost of medical care in many of the countries in which we operate is funded in substantial part bygovernment and private insurance programs.In Germany,we receive payments directly from thesepayers.Outside Germany
202、,although we do not generally receive payments for our products directlyfrom these payers,our success in major markets is dependent upon the ability of patients to obtainadequate reimbursement for our products.In the United States,our products are purchased primarily by home healthcare dealers,hospi
203、tals orsleep clinics,which then invoice third-party payers directly for reimbursement.Domestic third-partypayers include Medicare,Medicaid and corporate health insurance plans.These payers may denyreimbursement if they determine that a device is not used in accordance with cost-effective treatmentme
204、thods,or is experimental,unnecessary or inappropriate.The long-term trend towards managedhealthcare,or legislative proposals to reform healthcare,could control or significantly influence thepurchase of healthcare services and products and could result in lower prices for our products.Insome foreign
205、markets,such as Spain,France and Germany,government reimbursement is currentlyavailable for purchase or rental of our products,however,subject to constraints such as price controlsor unit sales limitations.In Australia and in some other foreign markets,there is currently limited orno reimbursement f
206、or devices that treat OSA.For example,the Medicare Prescription Drug,Improvement and Modernization Act of 2003(the 2003Act)reduced medical reimbursement for respiratory drugs and home oxygen to homecare providersand placed a freeze on current reimbursement levels for Durable Medical Equipment(DME)th
207、rough2008.As required by the 2003 Act,Medicare plans to implement competitive bidding of durablemedical equipment in 10 of the largest Metropolitan Statistical Areas(MSA)by the end of 2007,andin 80 of the largest MSAs by the end of 2009.In addition,the U.S.Congress passed the DeficitReduction Act of
208、 2005(2005 Act)in February 2006 which contained Medicare payment reductionsfor home oxygen equipment,and certain durable medical equipment classified by Medicare as capped-16-rental equipment.In August 2006,the Centers for Medicare and Medicaid Services published aproposed regulation to implement th
209、e 2005 Act which could reduce Medicare reimbursement in 2007for oxygen equipment.Additional reimbursement reductions for home oxygen were proposed inPresident Bushs Fiscal Year 2007 budget proposal,and could also be enacted into law.Both thefederal government and state legislatures are considering o
210、ptions for containing growth in theMedicaid program.Even though we do not file claims or bill governmental programs and other third-party payers directlyfor reimbursement for our products sold in the United States,we are still subject to laws andregulations relating to governmental programs,and any
211、violation of these laws and regulations couldresult in civil and criminal penalties,including fines.In particular,the federal Anti-Kickback Lawprohibits persons from knowingly and willfully soliciting,receiving,offering or providingremuneration,directly or indirectly,to induce either the referral of
212、 an individual,or the furnishing,recommending or arranging for a good or service,for which payment may be made under a Federalhealthcare program such as the Medicare and Medicaid programs.The government has interpretedthis law broadly to apply to the marketing and sales activities of manufacturers a
213、nd distributors likeus.Many states have adopted laws similar to the federal Anti-Kickback Law.We are also subject toother federal and state fraud laws applicable to payment from any third-party payer.These lawsprohibit persons from knowingly and willfully filing false claims or executing a scheme to
214、 defraudany healthcare benefit program,including private third-party payers.These laws may apply tomanufacturers and distributors who provide information on coverage,coding and reimbursement oftheir products to persons who bill third-party payers.We continuously strive to comply with theselaws and b
215、elieve that our arrangements do not violate these laws.Liability may still arise from theintentions or actions of the parties with whom we do business or from a different governmentalagency interpretation of the laws.Service and WarrantyWe generally offer one-year and two-year limited warranties on
216、our flow generator products.Warranties on mask systems are for 90 days.In most markets,we rely on our distributors to repair ourproducts with parts supplied by us.In the United States,home healthcare dealers generally arrangeshipment of products to our San Diego facility for repair.We receive return
217、s of our products from the field for various reasons.We believe that the level ofreturns experienced to date is consistent with levels typically experienced by manufacturers of similardevices.We provide for warranties and returns based on historical data.CompetitionThe markets for our products are h
218、ighly competitive.We believe that the principal competitive factorsin all of our markets are product features,reliability and price.Customer support,reputation andefficient distribution are also important factors.We compete on a market-by-market basis with various companies,some of which have greate
219、rfinancial,research,manufacturing and marketing resources than us.In the United States,our principalmarket,Philips BV,who acquired Respironics Inc.,a previous competitor;DeVilbiss,a division ofSunrise Medical Inc.;Nellcor Puritan Bennett,a division of Covidien Ltd.;and Fisher&PaykelHealthcare Corpor
220、ation Limited are the primary competitors for our products.Our principal Europeancompetitors are also Philips,DeVilbiss,and Nellcor Puritan Bennett,as well as regional Europeanmanufacturers.The disparity between our resources and those of our competitors may increase as aresult of the trend towards
221、consolidation in the healthcare industry.In addition,our products competewith surgical procedures and dental appliances designed to treat OSA and other SDB related-17-respiratory conditions.The development of new or innovative procedures or devices by others couldresult in our products becoming obso
222、lete or noncompetitive,which would harm our revenues andfinancial condition.Any product developed by us that gains regulatory clearance will have to compete for marketacceptance and market share.An important factor in such competition may be the timing of marketintroduction of competitive products.A
223、ccordingly,the relative speed with which we can developproducts,complete clinical testing and regulatory clearance processes and supply commercialquantities of the product to the market are important competitive factors.In addition,our ability tocompete will continue to be dependent on the extent to
224、 which we are successful in protecting ourpatents and other intellectual property.Patents and Proprietary Rights and Related LitigationThrough our subsidiaries ResMed Limited,MAP Medizin-Technologie GmbH,ResMed MotorTechnologies Inc.,and ResMed Paris SAS,we own or have licensed rights to approximate
225、ly 400issued United States patents(including approximately 200 design patents)and approximately 500issued foreign patents.In addition,there are approximately 400 pending United States patentapplications(including approximately 80 design patent applications),approximately 780 pendingforeign patent ap
226、plications,approximately 1,000 registered foreign designs and approximately 90pending foreign designs.Some of these patents,patent applications and designs relate to significantaspects and features of our products.Of our patents,14 United States patents and 29 foreign patents are due to expire in th
227、e next five years,with 2 foreign patents due to expire in 2010,18 in 2011,1 in 2012,3 in 2013,and 5 in 2014;and 2United States patents in 2010,4 United States patents in 2011,2 United States patents in 2013,and 6United States patents in 2014.We believe that the expiration of these patents will not h
228、ave a materialadverse impact on our competitive position.We rely on a combination of patents,trade secrets,copyrights,trademarks and non-disclosureagreements to protect our proprietary technology and rights.Litigation may be necessary to enforce patents issued to us,to protect our rights,or to defen
229、d third-party claims of infringement by us of the proprietary rights of others.Patent laws regarding theenforceability of patents vary from country to country.Therefore,there can be no assurance thatpatent issues will be uniformly resolved,or that local laws will provide us with consistent rights an
230、dbenefits.Government RegulationsOur products are subject to extensive regulation particularly as to safety,efficacy and adherence toFDA Quality System Regulation,and related manufacturing standards.Medical device products aresubject to rigorous FDA and other governmental agency regulations in the Un
231、ited States and similarregulations of foreign agencies abroad.The FDA regulates the introduction,manufacture,advertising,labeling,packaging,marketing,distribution and record keeping for such products,in order to ensurethat medical products distributed in the United States are safe and effective for
232、their intended use.Inaddition,the FDA is authorized to establish special controls to provide reasonable assurance of thesafety and effectiveness of most devices.Non-compliance with applicable requirements can result inimport detentions,fines,civil penalties,injunctions,suspensions or losses of regul
233、atory approvals,recall or seizure of products,operating restrictions,refusal of the government to approve productexport applications or allow us to enter into supply contracts,and criminal prosecution.The FDA requires that a manufacturer introducing a new medical device or a new indication for useof
234、 an existing medical device obtain either a Section 510(k)premarket notification clearance or a-18-premarket approval,or PMA,before introducing it into the U.S.market.Our products currentlymarketed in the United States are marketed in reliance on 510(k)pre-marketing clearances as eitherClass I or Cl
235、ass II devices.The process of obtaining a Section 510(k)clearance generally requires thesubmission of performance data and often clinical data,which in some cases can be extensive,todemonstrate that the device is“substantially equivalent”to a device that was on the market before1976 or to a device t
236、hat has been found by the FDA to be“substantially equivalent”to such apre-1976 device.As a result,FDA clearance requirements may extend the development process for aconsiderable length of time.In addition,in some cases,the FDA may require additional review by anadvisory panel,which can further lengt
237、hen the process.The PMA process,which is reserved for newdevices that are not substantially equivalent to any predicate device and for high-risk devices or thosethat are used to support or sustain human life,may take several years and requires the submission ofextensive performance and clinical info
238、rmation.As a medical device manufacturer,all of our domestic and Australian manufacturing facilities aresubject to inspection on a routine basis by the FDA.We believe that our design,manufacturing andquality control procedures are in compliance with the FDAs regulatory requirements.Sales of medical
239、devices outside the United States are subject to regulatory requirements that varywidely from country to country.Approval for sale of our medical devices in Europe is through the CEmark process.Where appropriate,our products are CE marked to the European Unions MedicalDevice Directive.Under the CE m
240、arketing scheme,our products are classified as either Class I orClass II.Our devices are listed in Australia with the Therapeutic Goods Administration,or TGA,andin Canada with Health Canada.EmployeesAs of June 30,2009,we had approximately 2,900 employees or full time consultants,of whichapproximatel
241、y 1,200 persons were employed in warehousing and manufacturing,300 in research anddevelopment and 1,400 in sales,marketing and administration.Of our employees and consultants,approximately,1,200 were located in Australia,600 in North and South America,900 in Europe and200 in Asia.We believe that the
242、 success of our business will depend,in part,on our ability to attract and retainqualified personnel.None of our employees are covered by a collective bargaining agreement.Webelieve that our relationship with our employees is good.ITEM1A RISKFACTORSBefore deciding to purchase,hold or sell our common
243、 stock,you should carefully consider the risksdescribed below in addition to the other cautionary statements and risks described elsewhere,and theother information contained,in this Report and in our other filings with the SEC,including oursubsequent reports on Forms 10-Q and 8-K.The risks and uncer
244、tainties described below are not theonly ones we face.Additional risks and uncertainties not presently known to us or that we currentlydeem immaterial may also affect our business.If any of these known or unknown risks oruncertainties actually occurs with material adverse effects on us,our business,
245、financial condition andresults of operations could be seriously harmed.In that event,the market price for our common stockwill likely decline,and you may lose all or part of your investment.Our inability to compete successfully in our markets may harm our business.The markets forour sleep-disordered
246、 breathing products are highly competitive and are characterized by frequentproduct improvements and evolving technology.Our ability to compete successfully depends,in part,on our ability to develop,manufacture and market innovative new products.The development of-19-innovative new products by our c
247、ompetitors or the discovery of alternative treatments or potentialcures for the conditions that our products treat could make our products noncompetitive or obsolete.Current competitors,new entrants,academics,and others are trying to develop new devices,alternative treatments or cures,and pharmaceut
248、ical solutions to the conditions our products treat.Additionally,someofourcompetitorshavegreaterfinancial,researchanddevelopment,manufacturing and marketing resources than we do.The past several years have seen a trend towardsconsolidation in the healthcare industry and in the markets for our produc
249、ts.Industry consolidationcould result in greater competition if our competitors combine their resources or if our competitors areacquired by other companies with greater resources than ours.This competition could increasepressure on us to reduce the selling prices of our products or could cause us t
250、o increase our spendingon research and development and sales and marketing.If we are unable to develop innovative newproducts,maintain competitive pricing,and offer products that consumers perceive to be as reliable asthose of our competitors,our sales or gross margins could decrease which would har
251、m our business.Our business depends on our ability to market effectively to dealers of home healthcareproducts and sleep clinics.We market our products primarily to home healthcare dealers and tosleep clinics that diagnose OSA and other sleep disorders.We believe that home healthcare dealersand slee
252、p clinics play a significant role in determining which brand of product a patient will use.Thesuccess of our business depends on our ability to market effectively to home healthcare dealers andsleep clinics to ensure that our products are properly marketed and sold by these third parties.We have lim
253、ited resources to market to approximately the 3,000 U.S.sleep clinics and the more than6,000 home healthcare dealer branch locations,most of which use,sell or recommend several brandsof products.In addition,home healthcare dealers have experienced price pressures as government andthird-party reimbur
254、sement has declined for home healthcare products,and home healthcare dealersare requiring price discounts and longer periods of time to pay for products purchased from us.Wecannot assure you that sleep clinic physicians will continue to prescribe our products,or that homehealthcare dealers or patien
255、ts will not substitute competing products when a prescription specifyingour products has been written.We have expanded our marketing activities to target the population with a predisposition to sleep-disordered breathing as well as primary care physicians and various medical specialists.We cannotass
256、ure you that these marketing efforts will be successful in increasing awareness or sales of ourproducts.Any inability to market effectively our products outside the U.S.could impact ourprofitability.Approximately half our revenues are generated outside the U.S.,in over 70 differentcountries.Many of
257、these countries have unique regulatory,medical and business environments,whichmay adversely impact our ability to market our products.If we are unable to market effectively ourproducts outside the U.S.,our overall financial performance could decline.Fluctuations in foreign currency exchange rates co
258、uld result in declines in our reported salesand earnings.Since our international sales and a significant portion of our manufacturing costs aredenominated in local currencies and not in U.S.dollars,our reported sales and earnings are subject tofluctuations in foreign exchange rates.We had foreign cu
259、rrency transaction losses in recent periodsand may have further losses in the future.We expect that international sales will continue to be asignificant portion of our business and that a significant portion of our manufacturing costs andresearch and development costs will continue to be denominated
260、 in Australian dollars.If we are unable to support our continued growth,our business could suffer.We haveexperienced rapid and substantial growth.As we continue to grow,the complexity of our operations-20-increases,placing greater demands on our management.Our ability to manage our growth effectivel
261、ydepends on our ability to implement and improve our financial and management information systemson a timely basis and to effect other changes in our business including,the ability to monitor andimprove manufacturing systems,information technology,and quality and regulatory compliancesystems,among o
262、thers.Unexpected difficulties during expansion,the failure to attract and retainqualified employees,the failure to successfully replace or upgrade our management informationsystems,the failure to manage costs or our inability to respond effectively to growth or plan for futureexpansion could cause o
263、ur growth to stop.If we fail to manage effectively and efficiently our growth,our costs could increase faster than our revenues and our business could suffer.If we fail to integrate our recent acquisitions with our operations,our business couldsuffer.During the past five fiscal years we have acquire
264、d Respicure,Western Medical Marketing,PolarMed,Pulmomed,Saime,Hoefner and Resprecare.We continue to integrate these acquisitionsinto our operations.The integration requires significant efforts from each company and we may find itdifficult to integrate the operations as personnel may leave and licens
265、ees,distributors or suppliers mayterminate their arrangements or demand amended terms to these arrangements.Additionally,ourmanagement may have their attention diverted while trying to integrate these companies.If we are notable to successfully integrate the operations,we may not realize the anticip
266、ated benefits of theseacquisitions.We are subject to various risks relating to international activities that could affect our overallprofitability.We manufacture substantially all of our products outside the U.S.and sell asignificant portion of our products in non-U.S.markets.Sales outside North and
267、 Latin Americaaccounted for approximately 46%and 51%of our net revenues in the years ended June 30,2009 and2008,respectively.We expect that sales within these areas will account for approximately 50%of ournet revenues in the foreseeable future.Our sales outside of North America and our operations in
268、Europe,Australia and Asia are subject to several difficulties and risks that are separate and distinctfrom those we face in our U.S.operations,including:fluctuations in currency exchange rates;tariffs and other trade barriers;compliance with foreign medical device manufacturing regulations;difficult
269、y in enforcing agreements and collect receivables through foreign legal systems;reduction in third party payer reimbursement for our products;inability to obtain import licenses;changes in trade policies and in U.S.and foreign tax policies;possible changes in export or import restrictions;andthe mod
270、ification or introduction of other governmental policies with potentially adverse effects.Government and private insurance plans may not adequately reimburse patients for ourproducts,which could result in reductions in sales or selling prices for our products.Ourability to sell our products depends
271、in large part on the extent to which reimbursement for the cost ofour products will be available from government health administration authorities,private healthinsurers and other organizations.These third party payers are increasingly challenging the pricescharged for medical products and services
272、and can,without notice,deny coverage for treatments thatmay include the use of the Companys products.Therefore,even if a product is approved formarketing,we cannot assure you that reimbursement will be allowed for the product,that thereimbursement amount will be adequate or,that the reimbursement am
273、ount,even if initially adequate,-21-will not subsequently be reduced.For example,in some markets,such as Spain,France and Germany,government reimbursement is currently available for purchase or rental of our products but is subjectto constraints such as price controls or unit sales limitations.In ot
274、her markets,such as Australia,thereis currently limited or no reimbursement for devices that treat sleep-disordered breathing conditions.Additionally,future legislation or regulation concerning the healthcare industry or third party orgovernmental coverage and reimbursement,particularly legislation
275、or regulation limiting consumersreimbursement rights,may harm our business.As we continue to develop new products,those products will generally not qualify for reimbursement,if at all,until they are approved for marketing.In the United States,we sell our products primarily tohome healthcare dealers
276、and to sleep clinics.We do not file claims and bill governmental programs orother third party payers directly for reimbursement for our products.However,we are still subject tolaws and regulations relating to governmental reimbursement programs,particularly Medicaid andMedicare.In addition to reimbu
277、rsement for our products,our customers depend in part on reimbursement bygovernmentandprivatehealthinsurersforotherproducts.Anyproposedreductionsinreimbursement,if they occur,may have a material impact on our customers.Any material impact onour customers may indirectly affect our sales to those cust
278、omers,or the collectibility of receivableswe have from those customers.Failure to comply with anti-kickback and fraud regulations could result in substantial penaltiesand changes in our business operations.In particular,the federal Anti-Kickback Law prohibitspersons from knowingly and willfully soli
279、citing,receiving,offering or providing remuneration,directly or indirectly,to induce either the referral of an individual,or the furnishing,recommending orarranging for a good or service,for which payment may be made under a federal healthcare programsuch as the Medicare and Medicaid programs.The U.
280、S.government has interpreted this law broadlyto apply to the marketing and sales activities of manufacturers and distributors like us.Many statesand other governments have adopted laws similar to the federal Anti-Kickback Law.We are alsosubject to other federal and state fraud laws applicable to pay
281、ment from any third party payer.Theselaws prohibit persons from knowingly and willfully filing false claims or executing a scheme todefraud any healthcare benefit program,including private third party payers.These laws may apply tomanufacturers and distributors who provide information on coverage,co
282、ding,and reimbursement oftheir products to persons who do bill third party payers.Any violation of these laws and regulationscould result in civil and criminal penalties(including fines),increased legal expenses and exclusionsfrom governmental reimbursement programs,all of which could have a materia
283、l adverse effect uponour business,financial conditions and results of operations.Complying with Food and Drug Administration,or FDA,and other regulations is an expensiveand time-consuming process,and any failure to comply could have a materially adverse effecton the Companys business,financial condi
284、tion,or results of operations.We are subject tovarious federal,state,local and international regulations regarding our business activities.Failure tocomply with these regulations could result in,among other things,recalls of our products,substantialfines and criminal charges against us or against ou
285、r employees.Furthermore,our products could besubject to recall if the FDA or we determine,for any reason,that our products are not safe oreffective.Any recall or other regulatory action could increase our costs,damage our reputation,affectour ability to supply customers with the quantity of products
286、 they require and materially affect ouroperating results.For example,in April 2007 we announced a worldwide voluntary product recall ofapproximately 300,000 of our S8 flow generators manufactured between July 2004 and May 2006.We determined that there was a remote potential for a short circuit in th
287、e power connector.To date,no significant property damage or patient injury has been reported.The initial estimated cost of thisaction was$59.7 million which was recognized as a charge to cost of sales in the consolidated-22-statement of income year ended June 30,2007.During the year ended June 30,20
288、09 and June 30,2008 we recognized additional charges of$Nil and$3.1 million.These costs accounted for factorssuch as expected return rates for the affected units,unit replacement costs,legal,consulting,logisticaland temporary contractor expenses directly associated with the recall.We expect negligib
289、le additionalcosts associated with the recall and at June 30,2009 there is no remaining recall accrual.Product sales,introductions or modifications may be delayed or canceled as a result of FDAregulations or similar foreign regulations,which could cause our sales and profits todecline.Before we can
290、market or sell a new medical device in the United States,we must obtainFDA clearance,which can be a lengthy and time-consuming process.We generally receive clearancefrom the FDA to market our products in the United States under Section 510(k)of the Federal Food,Drug,and Cosmetic Act or our products
291、are exempt from the Section 510(k)clearance process.Wehave modified some of our Section 510(k)approved products without submitting new Section 510(k)notices,which we do not believe were required.However,if the FDA disagrees with us and requiresus to submit new Section 510(k)notifications for modific
292、ations to our existing products,we may berequired to stop marketing the products while the FDA reviews the Section 510(k)notification.Any new product introduction or existing product modification could be subjected to a lengthier,morerigorous FDA examination process.For example,in certain cases we m
293、ay need to conduct clinicaltrials of a new product before submitting a 510(k)notice.Additionally,we may be required to obtainpremarket approvals for our products.The requirements of these more rigorous processes could delayproduct introductions and increase the costs associated with FDA compliance.M
294、arketing and sale ofour products outside the United States are also subject to regulatory clearances and approvals,and ifwe fail to obtain these regulatory approvals,our sales could suffer.We cannot assure you that any new products we develop will receive required regulatory approvalsfrom U.S.or for
295、eign regulatory agencies.We are subject to substantial regulation related to quality standards applicable to itsmanufacturing and quality processes.Our failure to comply with these standards could have anadverse effect on our business,financial condition,or results of operations.The FDA regulatesthe
296、 approval,manufacturing,and sales and marketing of many of our products in the U.S.Significantgovernment regulation also exists in Canada,Japan,Europe,and other countries in which we conductbusiness.As a device manufacturer,we are required to register with the FDA and is subject toperiodic inspectio
297、n by the FDA for compliance with the FDAs Quality System Regulation(“QSR”)requirements,which require manufacturers of medical devices to adhere to certain regulations,including testing,quality control and documentation procedures.In addition,the federal MedicalDevice Reporting regulations require us
298、 to provide information to the FDA whenever there isevidence that reasonably suggests that a device may have caused or contributed to a death or seriousinjury or,if a malfunction were to occur,could cause or contribute to a death or serious injury.Compliance with applicable regulatory requirements i
299、s subject to continual review and is rigorouslymonitored through periodic inspections by the FDA.In the European Community,we are required tomaintain certain ISO certifications in order to sell our products and must undergo periodic inspectionsby notified bodies to obtain and maintain these certific
300、ations.Failure to comply with currentgovernmental regulations and quality assurance guidelines could lead to temporary manufacturingshutdowns,product recalls or related field actions,product shortages or delays in productmanufacturing.Efficacy or safety concerns,an increase in trends of adverse even
301、ts in the marketplace,and/or manufacturing quality issues with respect to our products could lead to product recalls orrelated field actions,withdrawals,and/or declining sales.-23-Off-label marketing of our products could result in substantial penalties.Clearance underSection 510(k)only permits us t
302、o market our products for the uses indicated on the labeling cleared bythe FDA.We may request additional label indications for our current products,and the FDA maydeny those requests outright,require additional expensive clinical data to support any additionalindications or impose limitations on the
303、 intended use of any cleared products as a condition ofclearance.If the FDA determines that we have marketed our products for off-label use,we could besubject to fines,injunctions or other penalties.Disruptions in the supply of components from our single source suppliers could result in asignificant
304、 reduction in sales and profitability.We purchase uniquely configured components forour devices from various suppliers,including some who are single-source suppliers for us.We cannotassure you that a replacement supplier would be able to configure its components for our devices on atimely basis or,i
305、n the alternative,that we would be able to reconfigure our devices to integrate thereplacement part.A reduction or halt in supply while a replacement supplier reconfigures its components,or while wereconfigure our devices for the replacement part,would limit our ability to manufacture our devices,wh
306、ich could result in a significant reduction in sales and profitability.We cannot assure you that ourinventories would be adequate to meet our production needs during any prolonged interruption ofsupply.We are subject to potential product liability claims that may exceed the scope and amount ofour in
307、surance coverage,which would expose us to liability for uninsured claims.We are subjectto potential product liability claims as a result of the design,manufacture and marketing of medicaldevices.In April 2007 we announced a worldwide voluntary product recall of approximately 300,000of our S8 flow ge
308、nerators manufactured between July 2004 and May 2006.We determined that therewas a remote potential for a short circuit in the power connector.To date,no significant propertydamage or patient injury has been reported.However,we would likely be subject to product liabilityclaims should any of these d
309、evices malfunction,resulting in injury to a patient or damage to property.Any product liability claim brought against us,with or without merit,could result in the increase ofour product liability insurance rates.In addition,we would have to pay any amount awarded by acourt in excess of our policy li
310、mits.Our insurance policies have various exclusions,and thus we maybe subject to a product liability claim for which we have no insurance coverage,in which case,wemay have to pay the entire amount of any award.We cannot assure you that our insurance coveragewill be adequate or that all claims brough
311、t against us will be covered by our insurance.Insurancevaries in cost and can be difficult to obtain,and we cannot assure you that we will be able to obtaininsurance in the future on terms acceptable to us or at all.A successful product liability claim broughtagainst us in excess of our insurance co
312、verage,if any,may require us to pay substantial amounts,which could harm our business.Our intellectual property may not protect our products,and/or our products may infringe onthe intellectual property rights of third parties.We rely on a combination of patents,tradesecrets and non-disclosure agreem
313、ents to protect our intellectual property.Our success depends,inpart,on our ability to obtain and maintain United States and foreign patent protection for ourproducts,their uses and our processes to preserve our trade secrets and to operate without infringingon the proprietary rights of third partie
314、s.We have a number of pending patent applications,and we donot know whether any patents will issue from any of these applications.We do not know whether anyof the claims in our issued patents or pending applications will provide us with any significantprotection against competitive products or other
315、wise be commercially valuable.Legal standardsregarding the validity of patents and the proper scope of their claims are still evolving,and there is noconsistent law or policy regarding the valid breadth of claims.Additionally,there may be third partypatents,patent applications and other intellectual
316、 property relevant to our products and technologywhich are not known to us and that block or compete with our products.-24-We face the risks that:third parties will infringe our intellectual property rights;our non-disclosure agreements will be breached;we will not have adequate remedies for infring
317、ement;our trade secrets will become known to or independently developed by our competitors;orthird parties will be issued patents that may prevent the sale of our products or require us tolicense and pay fees or royalties in order for us to be able to market some of our products.Litigation may be ne
318、cessary to enforce patents issued to us,to protect our proprietary rights,or todefend third party claims that we have infringed upon proprietary rights of others.The defense andprosecution of patent claims,including these pending claims,as well as participation in other inter-party proceedings,can b
319、e expensive and time consuming,even in those instances in which theoutcome is favorable to us.If the outcome of any litigation or proceeding brought against us wereadverse,we could be subject to significant liabilities to third parties,could be required to obtainlicenses from third parties,could be
320、forced to design around the patents at issue or could be requiredto cease sales of the affected products.A license may not be available at all or on commercially viableterms,and we may not be able to redesign our products to avoid infringement.Additionally,the lawsregarding the enforceability of pat
321、ents vary from country to country,and we cannot assure you thatany patent issues we face will be uniformly resolved,or that local laws will provide us with consistentrights and benefits.We are subject to tax audits by various tax authorities in many jurisdictions.From time to timewe may be audited b
322、y the tax authorities and are still subject to an ongoing German tax audit.Anyfinal assessment resulting from this audit could result in material changes to our past or future taxableincome,tax payable or deferred tax assets,and could require us to pay penalties and interest that couldmaterially adv
323、ersely affect our financial results.Our quarterly operating results are subject to fluctuation for a variety of reasons.Ouroperating results have,from time to time,fluctuated on a quarterly basis and may be subject to similarfluctuations in the future.These fluctuations may result from a number of f
324、actors,including:the introduction of new products by us or our competitors;the geographic mix of product sales;the success of our marketing efforts in new regions;changes in third party reimbursement;timing of regulatory clearances and approvals;timing of orders by distributors;expenditures incurred
325、 for research and development;competitive pricing in different regions;seasonality;the cost and effect of promotional and marketing programs;the effect of foreign currency transaction gains or losses;andother activities of our competitors.-25-Fluctuations in our quarterly operating results may cause
326、 the market price of our common stock tofluctuate.If a natural or man-made disaster strikes our manufacturing facilities,we will be unable tomanufacture our products for a substantial amount of time and our sales and profitability willdecline.Our facilities and the manufacturing equipment we use to
327、produce our products would becostly to replace and could require substantial lead-time to repair or replace.The facilities may beaffected by natural or man-made disasters and in the event they were affected by a disaster,we wouldbe forced to rely on third party manufacturers.Although we believe we p
328、ossess adequate insurancefor damage to our property and the disruption of our business from casualties,such insurance may notbe sufficient to cover all of our potential losses and may not continue to be available to us onacceptable terms,or at all.Delaware law and provisions in our charter and could
329、 make it difficult for another company toacquire us.Provisions of our certificate of incorporation may have the effect of delaying orpreventing changes in control or management which might be beneficial to us or our security holders.In particular,our Board of Directors is divided into three classes,
330、serving for staggered three-yearterms.Because of this classification it will require at least two annual meetings to elect directorsconstituting a majority of our Board of Directors.Additionally,our Board of Directors has the authority to issue up to 2,000,000 shares of preferredstock and to determi
331、ne the price,rights,preferences,privileges and restrictions,including votingrights,of those shares without further vote or action by the stockholders.The rights of the holders ofour common stock will be subject to,and may be adversely affected by,the rights of the holders ofany preferred stock that
332、may be issued in the future.The issuance of preferred stock may have theeffect of delaying,deferring or preventing a change in control,may discourage bids for our commonstock at a premium over the market price of our common stock and may adversely affect the marketprice of our common stock and the v
333、oting and other rights of the holders of our common stock.We may not be able to enforce the judgments of U.S.courts against some of our assets orofficers and directors.A substantial portion of our assets are located outside the United States.Additionally,two of our eight directors and three of our six executive officers reside outside theUnited States,along with all or a substantial portion of the
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