Oventus Medical's (ASX:OVN) entry into the US

Interviews

by Rachael Jones

Oventus Medical Limited (ASX:OVN) founder, Managing Director and CEO, Dr Chris Hart discusses the company's sales push into the US, new product development and changes in the treatment of sleep apnoea.

Rachael Jones:
Hello, I'm Rachael Jones for the Finance News Network. Joining me today from Oventus Medical Limited (ASX:OVN) is founder, MD and CEO, Dr Chris Hart. Chris, welcome back to FNN. 

Dr Chris Hart: Thanks Rachael, thanks for having me.

Rachael Jones: Now first up, could you start by telling us how Oventus Medical (ASX:OVN) is progressing?

Dr Chris Hart: Well look, I think we've made incredible progress since we spoke last. We have gone from being what was essentially a mouth guard company, and now I think we are really an airway management company. So we have evolved from one product to a platform of technology. That really is extending the effectiveness of oral appliances and also making continuous positive airway pressure (CPAP) more tolerable. 

Rachael Jones: Now before we talk about your product, can you tell us about the instance and health effects of chronic snoring?

Dr Chris Hart: Look, chronic snoring is a sign of a more sinister underlying disease. But chronic snoring, probably 50 per cent of adults would suffer from chronic snoring. It is a sign of obstructive sleep apnoea. And in terms of obstructive sleep apnoea (OSA), round about 34 per cent of adult males and 17 per cent of adult females would suffer from OSA. It is a very serious disease with some very serious long-term health effects.

In the short term, it can cause increased risk of accident, workplace health and safety, and loss of productivity. In the long term, hypertension, diabetes, cardiovascular risks, and depression. Now the economic costs and the health economic costs are in the multi-billion dollars just in Australia alone. It is a massive problem.

Rachael Jones: And now let's talk about the O2Vent. Can you bring us up to date on sales?

Dr Chris Hart: Where formerly we were a mouth guard company selling to dentists, I think we really are making a transition now to being an airway management company engaging in the sleep channel. That is reflected by the fact that we are also moving from an Research and Development (R&D) based company to a go-to-market and a sales-oriented company.

We have been selling in Australia for the last two years, and we have sold a number of devices, 2,000 to 3,000 devices in Australia. We piloted in the US last year. We signed a global distributor in Modern Dental for the dental channel. And with this particular treatment, the dentist is where the device is delivered, but the gatekeepers of the technology are actually the sleep physicians. So now we are starting to work with sleep physicians to write the prescriptions and refer the patients to the dentist to pick up the device.

So we would expect to see increasing sales and revenue in the last quarter of this calendar year, but more likely significant growth through calendar year 2019. And I think we are still aiming to reach cashflow positive at the backend of next calendar year.

Rachael Jones: And what can you tell me about product development?

Dr Chris Hart: We started, as I said earlier, as a mouth guard company two years ago. We had a mouth guard with a 3D-printed airway, or a second nose. And we showed in our clinical studies that that was increasing the effectiveness of mouth guards.

We then started to look at, "Well, how can we apply this as a CPAP interface?" And we also showed recently that we can eliminate the need for full face masks and reduce the pressure requirements when we use our O2Vent as a CPAP interface or as an adjunct to CPAP.

In developing that, we needed to develop a way to control airflow not just as it goes in at very low resistance to reduce collapsibility, but also to control the bleed. When we did that, we developed a valve that lives within that 3D-printed airway, and it is called a positive-end expiratory pressure valve, which is a big name. But the PEEP valve means that when patients now breathe out, it is actually working as a micro CPAP within the duckbill. So it's inflating and stabilising the airway as the patient breathes.

So our first objective was to make oral appliances more effective, and we have done that. We then wanted to eliminate the need for full face mask, which we also achieved, although we haven't launched that product yet. And now it turns out, for the vast majority of patients, over three-quarters of patients, we may not need CPAP anymore. And in fact, we have almost doubled the success rate of oral appliance therapy by incorporating this airway and now these valves within our O2Vent devices. So it really has been a remarkable evolution, and some would say a revolution in terms of the technology.

Rachael Jones: Excellent. Now let's take a look at your finances and the share price. What is your current cashflow position, and how far can this take you?

Dr Chris Hart: Well at the moment, we had just under AUD$10 million in the bank at June 30 2018. Our cash burn historically has been around AUD$2 million a quarter, and it is at the moment as well. Having said that, as I mentioned earlier, we're moving from being an R&D-focused company into a go-to-market company. And our addressing the US market in particular, we are hoping to grow revenues over the other side of the Pacific.

As we do that, we are going to wind in our R&D costs, which will bring down our fixed costs, and we are becoming more scalable as well. So we would expect that with growing revenues next year and rationalising our cost base in the first quarter of next year, we should see ourselves start to generate a stronger balance sheet through the backend of next year. As we have said before, we still are aiming to be cash positive towards the backend of the calendar 2019. That is off the back of controlling costs and growing sales.

At the moment, we have a very strong balance sheet. We have got great investor support, and we are very comfortable with where we are at as a company and where we are going.

Rachael Jones: And can you provide a comment on the share price?

Dr Chris Hart: At the moment, I think we are significantly undervalued. I think if you look at where we are now compared to where we were two years ago, we have created a phenomenal amount of value in our technology and in our IP and our clinical evidence. And now also we have a great go-to-market strategy and team in the US. We really are poised for significant revenue growth over the next twelve to eighteen months. So I would say that we are a great buying opportunity at our current share price.

Rachael Jones: And to the last question now, Chris. Is there anything that you'd like to mention that we haven't covered?

Dr Chris Hart: I think it's been a long time since there's been a very innovative approach to the management of this very serious disease. And I think this is a great innovation that has the potential to help tens of millions of patients. I was one of those patients, and I have certainly helped thousands of them myself. And we're very excited to be able to bring a lot of those patients back into care.

Rachael Jones: Dr Chris Hart, thanks for the update.

Dr Chris Hart: Thank you.


Ends