SomnoMed (ASX:SOM) is taking large strides across Europe laying foundations for growth in volume and sales of its oral appliances in the treatment of sleep apnea.
The company operates through its own distribution and sales organisations throughout 16 countries in Europe, selling its high quality SomnoDent device.
Perhaps missed by many investors is that now all of Northern, Central and Southern Europe are covered bySomnoMed to market and sell its oral devices - providing a strong beach-head to increase sales of its Continuous Open Airway Therapy (COAT) products.
The outlook for European sales volume and revenue growth in FY14/15 is strong. With gross margins of 67%, this provides the engine for strong growth in operating income after cost of goods sold.
*Sales volume and revenues accelerating*
This is evidenced in the raft of increased metrics of the business of late. However, it is not all about European growth.
The prize that is the U.S. market is also pushing sales to a new record.
Chairman Dr Peter Neustadt would have every right to feel confident marching into 2014/15 after the March quarter recorded the highest volume growth achieved in a March quarter for the last three years.
SomnoMed sales volume increased by 28.3% in Q3 2014, compared to the same quarter in the previous year. Total units sold for the three months to the end of March 2014 were 11,010.
After growth of 13.1% in Q1 and 23.6% in Q2, the growth of 28.3% achieved in Q3 confirms the trend ofSomnoMed’s accelerating sales volumes achieved in its global operation.
Total units sold for the nine months were 31,465 units, with growth of 21.8% over the same period in the previous year.
Total revenues generated during the third quarter amounted to $6.5 million and 50% more than in the previous year.
To date this brings the year to date revenues to a total of $19 million and is 43% up on last year.
*
U.S. market *
The Q2 growth improved to 10.1%, whereas Q3 produced a growth of 22.8%. In fact, volume achieved in the March quarter in the U.S. set a new sales record.
This is due to a number of programs in the dental and medical markets in the U.S., which were initiated during 2013 and are now show encouraging results.
The launch of the SomnnoDent Herbst, a higher quality product than its competitors and a differentiated Medicare product, has been successful and is likely to continue to show growing acceptance.
*European juggernaut gathers pace*
In many European countries, oral devices are suggested as the first line of treatment.
*
Sweden*
SomnoMed holds a market leading position in Sweden developed over the last five years in the custom made quality oral appliance market for sleep apnea.
SomnoMed entered Norway one year ago and started to offer SomnnoDent products in Denmark in late 2013.
*
Finland*
SomnoMed announced the commencement of operations in Finland, the last remaining market in Scandinavia and has entered into an agreement with a Helsinki based orthodontic laboratory to provide logistic and repair services.
SomnoMed has now blanketed all of Scandinavia with its own, dedicated sales and marketing team.
Scandinavia is a well advanced market when it comes to COAT™ treatment, which is well accepted as an alternative to the bulkier CPAP - a ventilator type machine and face mask that blows air down the airway.
Finland is one of the six remaining markets in Europe SomnoMed intends to enter and establish its own operation during the course of this year. This would achieve full coverage of the developed Northern, Central and Southern regions of Europe.
*UK - Ireland market*
An agreement was entered into with JJ Thompson (Orthodontic Appliances) Ltd in the UK to operate as the service laboratory and logistic hub for SomnoMed in the United Kingdom and Ireland.
JJT is one of the largest orthodontic laboratories in the UK and has also been appointed as an agent forSomnoMed offering the SomnoDent products to their client base of over 1,000 dentists.
SomnoMed will build its own sales and marketing operation to support the market entry expected to start selling product in the United Kingdom and the Republic of Ireland by middle of this year.
The United Kingdom and Ireland are amongst the last remaining countries SomnoMed is seeking to open this year, so as to reach full coverage of Northern, Central and Southern Europe.
The UK is essentially a non-reimbursed market for COAT™ and still dominated by CPAP.
However, there are signs of increasing interest in COAT™ as an alternative and more patient friendly treatment for obstructive sleep apnea.
A network of dentists will be developed and educated in dental sleep medicine and how to fit the SomnoDent device to patients.
*Spain and Portugal*
Marketing of the SomnoDent products will begin from 1st July in Spain and Portugal.
To support the operation in Spain, SomnoMed announced that it has entered into an agreement with Mondental, one of the leading orthodontic laboratories in Spain to provide handling and after sales service.
Mondental will sell the SomnoDent product line to its client base of more than 1,000 dentists in Spain and Portugal.
*
APAC*
In APAC, growth in Q3 came in at 17.3%, the highest growth achieved for several years. This is due to marketing initiatives in Australia and New Zealand, good growth in Japan and the results of our direct Korean operation started in November 2013.
*
The re-rating equation*
A recent Sydney study compared ResMed’s S8 CPAP to SomnoDent's oral devices on patients with moderate to severe sleep apnea. It found oral appliance therapies produced similar health outcomes, while patients were more likely to use them.
So the challenge is to convince more sleep physicians to recommend oral devices.
Oral devices make up less than 5 per cent of the sleep apnea device market in the U.S., which was dominated by ResMed’s mask-based devices.
In terms of oral devices, SomnoMed’s SomnoDent is the market leader and better than ResMed’s own Narval CC.
SomnoMed received approval from the US Food & Drug Administration (FDA) for its SomnoMed Herbst device which has been introduced at a lower price point than the SomnoDent/G2 range to meet the Medicare market in the US.
More directly, with a small sales force dedicated to detailing sleep physicians, face to face this should assist the uptake of SomnoMed's products.
As will the SomnoMed Herbst device which provides a lower price point than the SomnoDent and is attractive to consumers in the U.S. covered by Medicare for the device.
Were the U.S. were to follow the lead of European countries such as Sweden, where oral devices are suggested as the first line of treatment then SomnoMed's current market valuation will look very light.
*Analysis*
Key to U.S. success will be to convince U.S. health insurance companies, sleep physicians and patients thatSomnoMed’s COAT products are a more effective and certainly more economically advantageous method to treat sleep apnea.
With oral devices accounting for less than 5 per cent of the sleep apnea device market in the U.S., in a market dominated by ResMed’s mask-based devices, the prize is there for SomnoMed.
Given that studies and anecdotal evidence point to patients embracing an oral appliance therapy as a more patient friendly and compliant therapy for obstructive sleep apnea than CPAP - the upside from current market cap of A$68 million to A$100 million ($2.20 share price target) looks more certain over the medium term.
As insurers are increasingly adopting oral devices for sleep apnea, we expect U.S. growth to pick up in 2015.SomnoMed is planning to sell 43 000, oral devices globally in fiscal 2014.
However, based on current growth and investment in marketing and education, SomnoMed could conceivably double that number in the next two years as it expands in the U.S.
Europe represents 40% of SomnoMed's global sales (16 countries) and is experiencing fast growth which should continue given entry into new markets across Europe.
Significantly, all of these European operations are managed directly by SomnoMed and its own sales operations.
SomnoMed had cash reserves of $3 million at 31 March 2014, with no debt.
Institutional fund manager Australian Ethical Smaller Companies Trust has acquired 6.4% of SomnoMed and clearly a believer.
We believe that SomnoMed is well managed, and will have similar success targeting physicians, where decisions on the treatment for sleep apnea are actually made.
Hence SomnoMed is now on the crest of a new wave of growth that will take it past a A$100 million company. And so taking it onto the investment menus of many more institutional fund managers.
At a market cap. of A$68 million which in global terms is relatively small, does not take into account either the fast growth of SomnoMed's products across Europe or increased uptake by physicians in the U.S.
*
*
*Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX “Small and Mid-cap” stocks with distribution in Australia, UK, North America and Hong Kong / China.* Reported by Proactive Investors 8 hours ago.
The company operates through its own distribution and sales organisations throughout 16 countries in Europe, selling its high quality SomnoDent device.
Perhaps missed by many investors is that now all of Northern, Central and Southern Europe are covered bySomnoMed to market and sell its oral devices - providing a strong beach-head to increase sales of its Continuous Open Airway Therapy (COAT) products.
The outlook for European sales volume and revenue growth in FY14/15 is strong. With gross margins of 67%, this provides the engine for strong growth in operating income after cost of goods sold.
*Sales volume and revenues accelerating*
This is evidenced in the raft of increased metrics of the business of late. However, it is not all about European growth.
The prize that is the U.S. market is also pushing sales to a new record.
Chairman Dr Peter Neustadt would have every right to feel confident marching into 2014/15 after the March quarter recorded the highest volume growth achieved in a March quarter for the last three years.
SomnoMed sales volume increased by 28.3% in Q3 2014, compared to the same quarter in the previous year. Total units sold for the three months to the end of March 2014 were 11,010.
After growth of 13.1% in Q1 and 23.6% in Q2, the growth of 28.3% achieved in Q3 confirms the trend ofSomnoMed’s accelerating sales volumes achieved in its global operation.
Total units sold for the nine months were 31,465 units, with growth of 21.8% over the same period in the previous year.
Total revenues generated during the third quarter amounted to $6.5 million and 50% more than in the previous year.
To date this brings the year to date revenues to a total of $19 million and is 43% up on last year.
*
U.S. market *
The Q2 growth improved to 10.1%, whereas Q3 produced a growth of 22.8%. In fact, volume achieved in the March quarter in the U.S. set a new sales record.
This is due to a number of programs in the dental and medical markets in the U.S., which were initiated during 2013 and are now show encouraging results.
The launch of the SomnnoDent Herbst, a higher quality product than its competitors and a differentiated Medicare product, has been successful and is likely to continue to show growing acceptance.
*European juggernaut gathers pace*
In many European countries, oral devices are suggested as the first line of treatment.
*
Sweden*
SomnoMed holds a market leading position in Sweden developed over the last five years in the custom made quality oral appliance market for sleep apnea.
SomnoMed entered Norway one year ago and started to offer SomnnoDent products in Denmark in late 2013.
*
Finland*
SomnoMed announced the commencement of operations in Finland, the last remaining market in Scandinavia and has entered into an agreement with a Helsinki based orthodontic laboratory to provide logistic and repair services.
SomnoMed has now blanketed all of Scandinavia with its own, dedicated sales and marketing team.
Scandinavia is a well advanced market when it comes to COAT™ treatment, which is well accepted as an alternative to the bulkier CPAP - a ventilator type machine and face mask that blows air down the airway.
Finland is one of the six remaining markets in Europe SomnoMed intends to enter and establish its own operation during the course of this year. This would achieve full coverage of the developed Northern, Central and Southern regions of Europe.
*UK - Ireland market*
An agreement was entered into with JJ Thompson (Orthodontic Appliances) Ltd in the UK to operate as the service laboratory and logistic hub for SomnoMed in the United Kingdom and Ireland.
JJT is one of the largest orthodontic laboratories in the UK and has also been appointed as an agent forSomnoMed offering the SomnoDent products to their client base of over 1,000 dentists.
SomnoMed will build its own sales and marketing operation to support the market entry expected to start selling product in the United Kingdom and the Republic of Ireland by middle of this year.
The United Kingdom and Ireland are amongst the last remaining countries SomnoMed is seeking to open this year, so as to reach full coverage of Northern, Central and Southern Europe.
The UK is essentially a non-reimbursed market for COAT™ and still dominated by CPAP.
However, there are signs of increasing interest in COAT™ as an alternative and more patient friendly treatment for obstructive sleep apnea.
A network of dentists will be developed and educated in dental sleep medicine and how to fit the SomnoDent device to patients.
*Spain and Portugal*
Marketing of the SomnoDent products will begin from 1st July in Spain and Portugal.
To support the operation in Spain, SomnoMed announced that it has entered into an agreement with Mondental, one of the leading orthodontic laboratories in Spain to provide handling and after sales service.
Mondental will sell the SomnoDent product line to its client base of more than 1,000 dentists in Spain and Portugal.
*
APAC*
In APAC, growth in Q3 came in at 17.3%, the highest growth achieved for several years. This is due to marketing initiatives in Australia and New Zealand, good growth in Japan and the results of our direct Korean operation started in November 2013.
*
The re-rating equation*
A recent Sydney study compared ResMed’s S8 CPAP to SomnoDent's oral devices on patients with moderate to severe sleep apnea. It found oral appliance therapies produced similar health outcomes, while patients were more likely to use them.
So the challenge is to convince more sleep physicians to recommend oral devices.
Oral devices make up less than 5 per cent of the sleep apnea device market in the U.S., which was dominated by ResMed’s mask-based devices.
In terms of oral devices, SomnoMed’s SomnoDent is the market leader and better than ResMed’s own Narval CC.
SomnoMed received approval from the US Food & Drug Administration (FDA) for its SomnoMed Herbst device which has been introduced at a lower price point than the SomnoDent/G2 range to meet the Medicare market in the US.
More directly, with a small sales force dedicated to detailing sleep physicians, face to face this should assist the uptake of SomnoMed's products.
As will the SomnoMed Herbst device which provides a lower price point than the SomnoDent and is attractive to consumers in the U.S. covered by Medicare for the device.
Were the U.S. were to follow the lead of European countries such as Sweden, where oral devices are suggested as the first line of treatment then SomnoMed's current market valuation will look very light.
*Analysis*
Key to U.S. success will be to convince U.S. health insurance companies, sleep physicians and patients thatSomnoMed’s COAT products are a more effective and certainly more economically advantageous method to treat sleep apnea.
With oral devices accounting for less than 5 per cent of the sleep apnea device market in the U.S., in a market dominated by ResMed’s mask-based devices, the prize is there for SomnoMed.
Given that studies and anecdotal evidence point to patients embracing an oral appliance therapy as a more patient friendly and compliant therapy for obstructive sleep apnea than CPAP - the upside from current market cap of A$68 million to A$100 million ($2.20 share price target) looks more certain over the medium term.
As insurers are increasingly adopting oral devices for sleep apnea, we expect U.S. growth to pick up in 2015.SomnoMed is planning to sell 43 000, oral devices globally in fiscal 2014.
However, based on current growth and investment in marketing and education, SomnoMed could conceivably double that number in the next two years as it expands in the U.S.
Europe represents 40% of SomnoMed's global sales (16 countries) and is experiencing fast growth which should continue given entry into new markets across Europe.
Significantly, all of these European operations are managed directly by SomnoMed and its own sales operations.
SomnoMed had cash reserves of $3 million at 31 March 2014, with no debt.
Institutional fund manager Australian Ethical Smaller Companies Trust has acquired 6.4% of SomnoMed and clearly a believer.
We believe that SomnoMed is well managed, and will have similar success targeting physicians, where decisions on the treatment for sleep apnea are actually made.
Hence SomnoMed is now on the crest of a new wave of growth that will take it past a A$100 million company. And so taking it onto the investment menus of many more institutional fund managers.
At a market cap. of A$68 million which in global terms is relatively small, does not take into account either the fast growth of SomnoMed's products across Europe or increased uptake by physicians in the U.S.
*
*
*Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX “Small and Mid-cap” stocks with distribution in Australia, UK, North America and Hong Kong / China.* Reported by Proactive Investors 8 hours ago.