Oventus Medical: A great way to play rising sleep apnea awareness

When the reboot of the TV sitcom Roseanne briefly graced our screens earlier this year, before its ignominious exit, it featured something that made me sit up and take notice: the patriarch of the Conner family, Dan Conner, played by John Goodman, was depicted in bed wearing the full face mask often used in CPAP therapy for obstructive sleep apnea. You know, the stuff that ResMed and Fisher & Paykel Healthcare are selling around the globe every day of the week these days. The Roseanne script writers never tried that gag when the show was last on air, in 1997. The 2018 reboot tells you that, in the 21 years since, sleep apnea awareness, at least in the US, has gone way up. And no wonder. We estimate that 20% of US adults today have some sort of obstructive sleep apnea, so it's getting difficult to plead ignorance about this widespread respiratory condition.

There are various ways to play the theme of rising sleep apnea awareness on the ASX. However the one I would like to recommend is Oventus Medical, the subject of the latest issuer-sponsored research report just out from NDF Research.

Since the origin of CPAP in the early 1980s there have been treatment solutions for obstructive sleep apnea, and these have created multi-billion-dollar companies such as the aforemention ResMed and Fisher & Paykel Healthcare. CPAP, however, while improving over time, is still relatively expensive and under-utilised thanks in part to patient discomfort, rendering it ineffective for many patients. Enter the simpler treatment modalities for mild and moderately affected patients, including mouthguard-like oral appliances, which have been growing in importance for the last 15 years. The race is now on for the optimal design of such a device, and a contender for the laurels is Oventus Medical with its O2Vent range. We believe that the ability of the newest O2Vent designs to interface with CPAP and EPAP provides a way to provide personalised treatment to get the best outcome for the individual patient in more than 80% of cases.

If our thesis on Oventus is right, this company could prove highly disruptive in the sleep apnea space. Indeed, the full face masks and straps you saw Dan Conner wearing on Roseanne could soon be history even for those seriously affected patients who still need CPAP, because Oventus's interface can dispense with these and still provide CPAP-style outcomes while markedly improving patient adherence.

We value Oventus at $0.52 base case and $1.46 optimistic case using a DCF-based approach. Our target price of $1.00 sits at the midpoint of our DCF range. We see Oventus being re-rated by increased sales and by further clinical data showing the superiority of the O2Vent ‘Sleep Treatment Platform’.

After the cancellation of the Roseanne reboot we'll never find out how Dan Conner went on CPAP in terms of his adherence to the therapy. However you can still read NDF Research's report on Oventus to get a sense of how Dan could have gone on that company's device, or the potential upside if Dan had bought the stock. Simply click here to access the report. We commend it to you.