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#Absolutely.
<UNK>, we'll give an update next quarter as we really start to roll that out.
The point I was making on this call is that we've now got the quality to a level that we like, and that we are launching it now not only to the US, but our global sales forces over the coming quarter.
And as you know, the sale cycle on POCs is an S-curve, and you start to ramp that up this quarter, but we'll give an update in 90 days as to the progress on that.
Thanks for the questions, <UNK>.
There are two factors involved in SG&A.
One is the absorption of some of the acquisitions we've made, and that has contributed to the SG&A.
And in addition to that, as you noted, we're launching two new masks in Europe, and we plan to launch them in the Americas.
And these things that we prepare for, we've done them many times, but you do prepare for them in terms of the marketing promotional and capabilities, and so on.
So, those two factors of the acquisitions and the preparations for new product launches were both factors in the SG&A.
I'll take the second part of that, and I'll hand it to <UNK> for the first part of that and the broader GM review, and what's going on there.
With regard to pricing, we haven't seen anything out of the ordinary in pricing.
There's obviously ---+ we don't break it out in detail here, but what I'd say is we've seen what we've seen traditionally in year-on-year price deltas.
In our US and other markets.
Throughout the whole CB process, it's been very visual and open, as to what the new prices will be, and we've been working with our customers as soon as prices were announced six months ago, not as they start to go into play during this July-August-September quarter.
So, pretty steady as she goes, in terms of historic price deltas there.
<UNK>, do you want to provide a little more color for <UNK> with regard to what's happening there with GM.
Sure.
So even though the product mix continued to be unfavorable for us, it's certainly moderating.
That headwind has definitely moderated in this quarter, which is good.
The other thing, also ASVs, which is a pretty big headwind, our ASVs returned to a growth trajectory, and that's helping us on the product mix piece of this.
It's not a headwind now.
The biggest component there, I think, has been driving through on the margins being manufacturing and procurement, and really getting some traction on those cost-out programs.
We've been running all the time, but it's becoming more evident because of that product mix moderating.
So, that's working through.
As you know, the first 12 months, we couldn't really work on it.
We were concentrating or focusing on just meeting demand.
But as we have worked through the last 12 months, we've been really able to ratchet up that program, and the team has done a great job working through on the various cost-out programs, particularly for the platforms.
And that's definitely now flowing through on the gross margin.
I guess the other one, obviously, the Brightree acquisition is a meaningful contributor, as well.
Some of these headwinds are perhaps turning into tailwinds, so we are seeing that come through on the gross margin.
The Brightree growth in that low to mid teens, low teens area.
Good solid double-digit growth.
It's 80% to 90% plus recurring revenue there, <UNK>, so the Brightree business is a very solid and strong recurring revenue business.
It's providing incredible value to providers, automating the process flows for inventory management, clinical informatics management, revenue cycle management, in terms of ensuring payment, and also even managing physician scripts.
So, when you think about the synergistic value, if you'd like, between a customer who's operating on ResMed's Air Solutions for patient engagement through myAir and physician engagement through AirView, and now HME engagement through Brightree, there are many of those workflows that you can look to if you are removing costs from the front end of patient engagement and the back end of inventory management, that there can be synergies in saving those costs for the HME provider.
So, we're working with all our customers who use both Air Solutions, Brightree, and particularly those who use both, to really help them garner those savings in their own operating costs, to improve their own P&L, and free up more of their own cash flow, to then reinvest in better patient care and drive adherence rates up, of the likes of what we have seen in the myAir study and the U-Sleep study, where we were able to achieve 80%-plus adherence rates.
That is a win for the patient obviously, but it's also a win for the physician getting the patient on therapy, and to the provider, in terms of keeping that sleep apnea patient on good therapy and ongoing resupply.
Thanks for the questions, <UNK>.
And both of those, actually, over to <UNK> <UNK>, our President and COO.
Thanks, <UNK>.
The R&D increase largely has been around bringing the acquisitions in, and the engineering work that we want to do, to make sure quality is right and really synchronizing the roadmaps and making sure everything's on track.
We're committed to innovating in our industry, and we see the R&D program continuing apace.
We've got a lot more things on our roadmap than what we can actually do, and a lot more plans and ideas, and anything we can invest sensibly into the R&D program, we will.
Onto your other question regarding Curative, you're asking about any differences from how the early integration program went.
We were really encouraged with Curative and its position in the Chinese market.
The whole Chinese economy has had some interesting developments and changes, and things going on like anti-corruption trials and stuff like that have made the market continue to be interesting.
We still see a huge opportunity there, just in terms of the number of untreated patients.
Both in obstructive sleep apnea, and also in the number of untreated COPD patients, in the standard of care there.
We're making great progress on the integration program.
We're very happy with the role of a few key players that we've got in China at the moment.
We've got Justin Leong, who is heading up our Asia growth markets group, and Jason Sun, who has remained as the CEO of the Curative subsidiary.
Together, they are bringing together the team of Curative and ResMed, and we're the major player in treating sleep disorder breathing and long-term ventilation in China, and we've got lots of good plans to further develop that.
Thanks for the questions, <UNK>.
Clearly, we've got some really good early data from the control product launches of F20 in Europe, and in the US markets in these controlled product launches, where we've had customers looking at the product, and putting it on patients, seeing how the set-up goes for a provider, and working with physicians so that they can see the change of care.
The F20 is a fabulous full face mask, one of the best I've seen that ResMed has produced.
And I think, as you look over the next number of quarters, this thing is going to be a real winner for us.
To your second part about upgrading our gross margin guidance, I'll let <UNK> go into that in more detail, but at a high level, yes, there's a combination of ASV, as <UNK> said earlier ---+ ASV has turned from a headwind now to tailwind.
Mask growth is at its nadir here, as we transition from two-year-old mask product to brand-new mask product, and both of those tailwinds, in terms of positive GM contributions.
<UNK>, any further color on that for GM.
We try to look at that and try to factor that in.
As you know, on gross margins, it's always hard to predict, because you've got ASP movements, FX, product mix, geographic mix, what we do in manufacturing procurement, what happens with how the acquisitions scale, so we put all that in.
I guess we are getting more confident in the range there on the margin.
Certainly, we saw some really good improvements on the margin in Q1.
Clearly we look to build on those.
In terms of product mix, to the extent, though, that the mask growth accelerates, and we think these masks will be successful, and we do think we'll get share back with these masks, and clearly that's going to be supportive of the gross margin.
And then it depends on relative mix of devices versus masks and so on.
Certainly the expectation is those new masks will be supportive of the gross margin.
You'd have to think that.
Thanks for the question, <UNK>.
I'll take the second part, and hand the first part to <UNK>, to talk about some of the features of the F20.
Yes, with regard to pricing, we work very carefully with our customers in each of the 100 countries we are selling to, and each market we launch into.
This is some very innovative technology in these multiple mask technologies that we're bringing to market, and we are certainly working with customers to understand that value, and ensure the price appropriately in line with that value.
So, I see it rolling in, as we traditionally have, with our mask launches at appropriate pricing, that takes account of the value but also takes account of the realistic nature of the markets in which we are selling in the healthcare world.
<UNK>, do you want to take the second part.
Or the first part.
These masks are really about comfort and seal, and ease of use.
Our early testing ---+ all of our mask development programs are heavily involved with working with patients, and trying ideas, and working through, it's derivative, it keeps going.
We believe the F20 and the M20 have really superior seal and that they just don't leak, and that they're more comfortable and easy to use than earlier masks.
To your question of cannibalization, the market will fall out as to what are the preferences, and people will have to develop their preferences over time for that.
So, that will all take some time to fall out, but we are extremely excited about the response that we've already had on these masks.
What I'd add on there is if there's any cannibalization, there's cannibalization of some of our competitors' positions in full face and nasal.
We will not only keep growing the market, as we are with Dr.
Oz, and reaching out to get new patients in, but I think we will be taking some good share in these categories, as we launch this amazing new mask technology.
It was still up.
We are not going to break it out in detail, but what I said earlier I'll say again, which is the sleep market is growing mid to high single digits, where the devices are growing at mid single digits, masks scoring at high single digits.
We held share in our sleep devices.
Thanks for the question.
With regard to mask growth, revenues and volume, we don't break out pricing deltas.
What we acknowledged in the prep remarks, and I'll say again, we lost some share in masks in the quarter.
If masks are growing at high single digits in the US market, and we're growing at 0 or 1, then we losing some share.
We're very confident with the new masks we are launching today ---+ yesterday in Europe and over this quarter, we plan to launch them again in the US, and beyond in global markets, that we will get back to not only strong market but above market growth, as I alluded to earlier.
These are great masks that will move us up there.
So, we're seeing good market growth of mid to high single digits in masks and there's always price declines to play in there, so you've got low double-digit growth in volumes of masks in the market, that really hasn't changed from Q4 to Q1.
It is more about the product lifecycle of our two-year-old masks and the brand-new ones that are just coming to market.
Yes, clearly, we have a very large investment in the infrastructure with healthcare informatics and Air Solutions.
There's a much more direct relationship between the informatics and the connected care, and the value we provide to the device growth.
We've seen that very strong for now eight quarters since the launch of Air Solutions, AirSense 10 and AirCurve 10.
There is a connection to masks, clearly it's often linked, when you think about it, all the way through to resupply programs.
We have ResMed Resupply, we have Brightree Connect, and we have a number of offerings in the US market.
A number of different offerings for customers in EMEA and APAC, where the go-to-market models that are different.
We are engaging patients better than ever.
Patients are signing up to understand things like myAir, and as part of that, we are absolutely contacting patients to let them know when it's time for a new mask, and to push them through the system.
And so I do think that ---+ different markets of the world, there is different ways of doing that.
You are going to see, as you look forward over FY17, FY18, and beyond, a lot more interplay, not only between the informatics and device, informatics and the masks but also informatics and chronic disease management.
Keeping these patients out of hospital and providing holistic value to the healthcare system, by what we can do.
I'll take the second part, and the first part of it to <UNK>.
Sales of the Astral in terms of its use, it's pretty broad.
It's different in every market in the world.
In Germany, it's far more used as a life support ventilator and in the life support ventilation side.
In the US, it's split between Duchenne Muscular Dystrophy, neuromuscular disease and COPD.
With the changes in reimbursement that have been announced recently, and have been ongoing for a year plus in the COPD side, we've actually been focusing, since we have no entrenched sales in this field, saying to the customers, do you want non-invasive ventilation like an AirCurve 10, S, ST, bi-level type product or do you want Astral.
And for which types of patients would you choose this, working with physicians and providers to do that.
So, we're really partnering with our HMEs and with the physicians, to make sure and keeping the whole context of the healthcare economics that are involved, to make sure the right therapy goes on the right patient, and that it's sustainable over time.
So that's how we look at NIV, as well as LSV for neuromuscular disease and COPD.
As for the field safety notice, <UNK>.
Just a small bit of background on it.
We'd had a small number of reports of degraded battery performance, and there continues to be no adverse health effects from the degraded performance.
There were very clear mitigations for patients around it.
We felt it was the right thing to do, to put out the field safety notice, and alert ventilator-dependent patients and their caregivers about the issue, how they should mitigate the risks, and where appropriate, how to arrange for replacement battery.
It's a rolling replacement program.
It is proceeding well, and we are communicating closely on an ongoing basis with the customers for this.
We have to manage the patient populations very, very carefully, of course, with this type of device.
The program is running along to plan at this stage.
So, I'll take the first part, and I'll give the second part of the question to <UNK>.
The time to the full rollout, one thing, we're obviously very open here on a public conference call, but we don't want to give full indication to our competitors as to the date, the time, and the hour of launch of the F20 in each of the specific country markets.
I've talked broadly to the fact that we've launched in Western Europe yesterday.
This is available across major countries in Western Europe already, and that our plan is to launch into the Americas, and the US specifically this quarter.
But I don't really want go into any more granularity than that, for competitive reasons on this call, <UNK>.
But I can tell you this thing is going to take off, and it's going to be a very valuable mask as it rolls to each of those countries as we launch it.
<UNK>, do you want to, have a breakdown of the acquisition versus organic growth question.
Sure.
We mentioned that earlier, <UNK>.
Organic growth in revenue for us was 3% this quarter.
<UNK>.
We've broken down and given more details in terms of revenue, but we haven't gone down line by line, or segmentation out in terms of the acquisition.
So, we would prefer to keep it that way.
I will say ---+ in the 8-K on Brightree, for example, which is the largest acquisition by far, the ratios are not inconsistent with historical, so that will give you at least a sense of it.
<UNK>, I think the government has regularly looked at their spending in all parts of healthcare, whether it is in pharma or different areas of med tech.
Clearly, this is something that is important to make sure that the government's money is invested well.
There are 40 million to 60 million Americans who suffer from sleep apnea, and we've only got, who are suffocating, we've only got 6 million of them on therapy.
We need to get to the other tens of millions, and it needs to be done appropriately and economically.
We are partnering with every government where we do business to make sure that we can appropriately and economically diagnose and treat those patients, and keep them out of the hospital care system, because it's much less expensive to have a patient safely breathing at home, than badly breathing and needing to visit the ICU or CCU.
No, because there's basically positives and negative, right.
So it's going to be, in absolute terms, it's going to be, as I said, on top of that range.
We said I think 70 to 100, and it's toward the top of the range in terms of basis point contribution.
But then you have the impacts from ASP declines, you have negative impacts from product mix still flowing through.
But we had good contributions, very strong contribution from manufacturing and procurement improvements, and then also Brightree.
They are the four big elements that are flying in on the gross margins.
So it's a mix situation that you end up with.
Yes, absolutely, yes.
6% was the EMEA and APAC constant currency growth.
Yes.
Thanks a lot, Maryama.
In closing I want to thank the now more than 5,000-strong ResMed team from around the world for their commitment to changing the lives of millions of patients with every breath.
We remain focused on our long-term goal of improving 20 million lives by 2020, literally by giving a product that helps a patient who was suffocating or couldn't breathe before, breathe afterwards.
Thanks for your time today, and we'll talk to you again in 90 days.
<UNK>.
