ProSomnus(OSA) - 2023 Q4 - Annual Report

Market Opportunity and Demand - The estimated cost of undiagnosed obstructive sleep apnea (OSA) was $149.6 billion in 2015, with approximately 80% of OSA patients undiagnosed[9]. - The failed CPAP opportunity is growing by 700,000 people in the United States each year, representing a significant market opportunity for ProSomnus[9]. - Approximately 1 billion people globally suffer from OSA, with 74 million in North America, and only 15-20% of sufferers in the U.S. currently diagnosed[17]. - Current CPAP therapy compliance is low, with only 35% to 65% of patients adhering to treatment due to discomfort and other issues[30]. - Approximately 7 million people in the U.S. with OSA have stopped using CPAP, representing a $4 billion opportunity for ProSomnus[37]. - The market for OSA treatments is driven by obesity and aging population trends, correlating with increased incidence and severity of the condition[37]. Product Efficacy and Patient Preference - ProSomnus devices have demonstrated efficacy on par with CPAP for patients with mild to moderate OSA, with a recent study showing twice the mean disease alleviation compared to CPAP[11]. - In a study, 100% of patients preferred ProSomnus intraoral devices over CPAP and other legacy dental products[11]. - The NOTUS3 clinical trial reported that 94% of mild and moderate OSA patients were successfully treated using a ProSomnus precision intraoral device[12]. - After six months, 85% of patients reported achieving their treatment goals with the ProSomnus device, and 97% reported a reduction in snoring[12]. - ProSomnus precision devices demonstrated a weighted average success rate of 93% in treating mild to moderate obstructive sleep apnea (OSA) across five studies with 326 unique patients[41]. - The study by Smith et al. reported a 98% success rate for mild to moderate OSA patients using ProSomnus devices[42]. - Compliance rates for ProSomnus devices were reported at 93.6% and 87.9% in two studies, with mean nightly usage of 7.2 and 7.4 hours respectively[44]. - An additional study showed that 89% of all patients and 98.5% of mild to moderate OSA patients achieved an Apnea-Hypopnea Index (AHI) of fewer than 10 events per hour[44]. - The efficacy of ProSomnus devices was further supported by a 62% mean reduction in OSA events reported in a study involving 26 patients[44]. Financial Performance - Revenue for the year ended December 31, 2023, was $27.7 million, an increase from $19.4 million in 2022, while net loss widened to $24.1 million from $7.1 million[16]. - The company has an accumulated deficit of $234.9 million as of December 31, 2023, including $45.2 million incurred since separating from MicroDental Laboratories[16]. - Total operating expenses increased to $46.758 million in 2023, up from $30.868 million in 2022, representing a 51.5% rise[248]. - Net loss and comprehensive loss for 2023 was $(24.095) million, significantly higher than $(7.145) million in 2022, marking a 337.5% increase[248]. - Cash used in operating activities was $(16.127) million in 2023, compared to $(10.239) million in 2022, reflecting a 57.5% increase in cash outflow[252]. - As of December 31, 2023, cash and cash equivalents totaled $6.4 million, down from $15.9 million in 2022, indicating a decrease of approximately 59.9%[244]. Regulatory and Compliance Challenges - The company must comply with numerous post-market regulatory requirements, including QSR requirements and medical device reporting regulations[67]. - The FDA may condition PMA approvals on post-market surveillance to ensure ongoing safety and effectiveness of devices[64]. - The company faces scrutiny under federal and state anti-kickback laws, which prohibit remuneration intended to induce purchases or recommendations of goods reimbursable under federal healthcare programs[75]. - The federal False Claims Act prohibits presenting false claims for payment to the government, with liability established without intent to deceive[76]. - The company must ensure compliance with various federal and state healthcare laws to avoid significant penalties, including civil and criminal penalties[79]. Research and Development - ProSomnus is developing a novel product to continuously monitor patients' physiological responses to better manage OSA[11]. - Research and development expenses were $4.8 million in 2023, up from $3.0 million in 2022, focusing on technology innovations and product development[55]. - The company is developing the RPMO2 OSA Device, which will monitor physiological parameters and is expected to submit a 510(k) Premarket Notification to the FDA in mid-2024[34]. Market Accessibility and Insurance Coverage - ProSomnus devices are covered by private medical insurance, Medicare, and public health insurance programs in many countries, enhancing market accessibility[17]. - The average reimbursement for intraoral appliance therapy ranges from $2,000 to $3,500 per patient by private insurance and $1,250 to $1,800 by Medicare[14]. - ProSomnus devices are estimated to cost 80% less than CPAP and 95% less than surgical options based on publicly available insurance reimbursement schedules[11]. Company Growth and Customer Retention - ProSomnus has experienced a 96% retention rate among its top 100 customers and a 33% revenue increase from these customers in 2023[17]. - The company aims to expand its North American direct sales organization and increase case volume from therapy providers and physicians[20]. - ProSomnus plans to increase its direct sales representatives from the current 16, which includes 12 in North America and 4 in Europe, to drive long-term revenue growth[47].