Covid-19 pandemic urges a sudden spike in ventilator production

GlobalData Healthcare 11 May 2020 (Last Updated May 11th, 2020 09:15)

Covid-19 pandemic urges a sudden spike in ventilator production

The Covid-19 pandemic has created a surge of ventilator production. According to GlobalData analysis, approximately 75,000 more ventilators are needed to meet demand in the US. On 2 April, the US invoked the Defense Production Act to meet the increased demand for ventilators. Additionally, domestic ventilator manufacturers saw a sharp revenue boost due to increased ventilator sales.

On 8 April, the Trump administration ordered 30,000 ventilators for $489.4M from the car manufacturer General Motors (GM) under the Defense Production Act. GM designed the V+Pro ventilator model, which is an improved version of the VOCSN ventilator produced by Ventec, to speed up and optimise production. The new model uses fewer parts, is cheaper and easier to use, and can be built faster, while still maintaining all the necessary features needed for critically ill patients. Additionally, General Electric (GE) and Ford Motor will produce 50,000 ventilators for $336M under the act. Ventilators produced at GE and Ford Motor are licensed from a small company, Airon Corp. Airon’s ventilator design uses even fewer parts than the stripped-down Ventec model being produced by GM and consequently is faster and easier to make.

The sudden demand for ventilators driven by the pandemic has also affected domestic medical equipment manufacturers. ResMed reported that ventilator production has tripled from last year; the company posted profits of $163.1M ($1.12 per share) on sales of $768.5M for its third fiscal quarter, compared to $662.2M in the same period last year. Furthermore, the company continues to follow its long-term strategy of developing digital health technologies and out-of-hospital management software, which is crucial for the health and safety of medical workers. Although ResMed saw an increase in ventilator sales, other products, such as sleep devices, were negatively impacted by the pandemic. For now, it is unclear whether the ventilator sales will offset the decrease in revenue from sleep devices.

GlobalData experts do not expect a drastic long-term upsurge in revenue for many companies due to the products in high demand carrying a lower margin, as newcomers and veterans of the ventilator industry are constantly developing more efficient models and optimising production of ventilators in order to stay competitive in the market and boost investors’ confidence.