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SomnoMed granted U.S. Medicare approval for sleep device

Published: 13:04 23 Sep 2014 AEST

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SomnoMed’s (ASX:SOM) new SomnoDent® Herbst Advance Classic and Flex oral appliances received CMS approval today and were allocated the HCPCS Code of E 0486 for DME billing, allowing for a U.S. Medicare reimbursement.

SomnoMed’s shares are expected to trade higher on the news.

Medicare patients can now apply for specified reimbursement for the device and their treatment from 22nd September 2014 onwards.

The SomnoDent Herbst Advance devices were officially launched in the U.S. this month through SomnoMed’s network of sleep dentists.

Devices will also be available to the market through SomnoMed’s U.S. and Canadian licensees.

Patents were lodged for the SomnoDent Herbst Advance earlier this year in core markets. The products feature new components, which are designed to make fitting and titration of the device easier and more precise for dentists and patients.

The improvements are the first to be made to the widely distributed Herbst design in many years.

Reaction of key opinion leaders to the device following its showing at recent sleep medicine conventions has been positive and first orders are currently being processed.


Growing sales, growing profits

SomnoMed is continuing on its growth path with revenues for the 2014 financial year up 39.5% to $25.92 million from the previous year, its seventh straight year of growth.

EBITDA also rose 26.5% to $1.05 million due to positive sales trends of its sleep apnea products in North America, Europe and APAC throughout the year.

This could be just the beginning with the company forecasting that EBITDA will grow to between $2 million and $4 million in FY2015.

It expects its U.S. division, in which it invested $2 million in FY2014, to break even in the current financial year and for its new market entries in Europe to break even in the second half of FY2015.

Apnea unit sales trends in all three global regions were positive throughout the year.

Record fourth quarter sales of 12,000 units assisted SomnoMed in achieving full year unit sales of 43,438 units and a growth of 21% over the prior year.

Sales in Europe were particularly impressive, rising 41% year over year due to growing acceptance and reimbursement listings of oral appliance therapy in a number of countries.

Annual sales are expected to hit 55,000 units generating revenues of $32.5 million, which represents year on year growth of 26.5% and 25% respectively.

Notably, sales in the second half grew by 18% compared to 6.5% in the first half.


Capital Management

SomnoMed recently placed and completed an oversubscribed share purchase plan, raising around $7 million to double its production capacity, phase in digital equipment and fund working capital for growing operations.

The first component was placement of 3.7 million new shares priced at $1.50 each to sophisticated and professional investors to raise $5.55 million.

Significantly, chairman Dr. Peter Neustadt and other directors subscribed for $405,000 worth of shares.


Growing Demand


Demand for custom made oral appliances as an alternative treatment for treating sleep apnea is expanding worldwide.

This is due to increased awareness of sleep disordered breathing and simpler home sleep testing which drives the number of diagnosed patients, more clinical research uncovering the link between sleep apnea and other severe medical conditions, and patient non-compliance with CPAP devices.

In addition, the Frost and Sullivan Report has estimated that US market will grow from 180,000 - 200,000 patients fitted with a custom made oral appliance in 2013 to over 1 million patients in 2020.


Analysis


This latest development of Medicare approval in the U.S. for its new SomnoDent Herbst Advance devices will drive further sales as the cost to the end consumer is significantly reduced or eliminated.

Medicare patients can now apply for specified reimbursement for the device and their treatment from 22nd September 2014 onwards.

There is blue sky ahead for SomnoMed as growth of its sleep apnea products continues to build momentum, capitalising on the strong foundation already laid.

Shares are expected to move higher today.

 

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