Special Report: Respiri’s deal with Cipla will allow it to boost distribution of its wheezo asthma management device via direct pharmacy sales.

eHealth company Respiri (ASX:RSH) has struck a revised deal with its major pharmacy partner, as the company looks to drive distribution of its proprietary wheezo asthma management device.

Following its initial launch on October 21, Respiri said it received “valuable feedback” from its pharmacy partners around the price point for wheezo customers.

In the wake of those discussions, Respiri’s executive team has lowered the unit pricing from $299 to $99.50. In turn, Cipla agreed to increase its minimum initial purchase order to 7,000 units (up from 2,000).

Respiri shares rose by around three per cent following the announcement, to 16c.

In discussing the revision, Respiri said the reduction was a process of striking the right balancing act between unit margins and customer acquisition.

The revised price point will thus accommodate “a higher number of patients able to afford the upfront (or BNPL) cost of device acquisition”, the company said.

At the same time, Respiri is also increasing its monthly Software-as-a-Service fee by 24 per cent to $9.95 a month.

Monthly gross margins from its SaaS platform are expected to be in the range of 85 to 100 per cent, Respiri said.

The net change from the result isn’t expected to have a material impact on the revenue outlook, with Respiri reasserting its full-year earnings guidance of $6 to $8 million.

In September, Respiri struck a manufacturing partnership where its wheezo devices will be made in China for a fraction of the cost.

Devon Park, South Australia-based Entech Electronics is manufacturing the devices at its production facilities in Shenzhen, China, which has more than 200 staff.

Entech can build the market-leading wheezo device at less one-sixth of the cost that Respiri was paying before, the company says.

Respiri has also reached a supply agreement with Pharmacy Platform under which the leading pharmacy group will stock the wheezo devices in its 350 pharmacies across Australia.

A number of independent pharmacy groups are now stocking the device and Respiri is in discussions with more key pharmacy banner groups, the company says.

Intellectual property protected

Capping of a busy few months, Respiri also filed another patent in October on its wheezo algorithm to detect signs of asthma, after making improvements to the process over the last six months.

The additional IP obtained by the company relates to a method of processing recordings of a user’s breathing, where the algorithm processes the sound signal and marks periods containing pitch that’s characteristic of wheeze via the trachea while eliminating background noise.

Asthma is typically measured through a self-reported, subjective questionnaire – the ACQ5, (Asthma Control Questionnaire 5).

And Respiri’s wheeze-detecting device will be the first tool available for an objective assessment of a patient’s respiratory condition in the real world.

The effective of the wheezo device, which detects “wheeze” in asthmas patients and measures its severity, is backed up by clinical trial data.

Tests on 56 patients show the wheezo device detects wheeze at rates closely correlated a physician’s assessment using a stethoscope.

Strong cash balance

As previously reported, Respiri recently completed aa $12.5 million capital raising to a sustainable cash flow breakeven position by the second half of FY22.

The placement left Respiri with $14.5 million in cash, leaving it with a healthy cash balance to cover input manufacturing costs and generate strong recurring revenues.

This article was developed in collaboration with Respiri, a Stockhead advertiser at the time of publishing.

 This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.