Somnomed propels itself towards the market

Sydney-based company Somnomed is preparing to list on the ASX later this month, with an IPO expected to raise AUD$12 million through the sale of 40 million shares at $0.30 per share.

The money raised will be used to propel the company's first product, a mandibular advancement splint (MAS) device used to treat snoring and obstructive sleep apnoea (OSA), onto the market. Clinical trials conducted by the department of respiratory and sleep medicine at the St George Hospital in Sydney have shown that the device was able to successfully treat these conditions, and the company has been selling the devices since the beginning of the year.

"The capital raised will allow us to take it to the next level, expand the marketplace and make the public aware that the device is available," said CEO John Diddams.

Diddams said the device was complementary to rather than in competition with the continuous positive airway pressure (CPAP) devices developed by companies like ResMed, and would be targeted at snorers and the mild-to-moderate segment of the OSA market.

"It's a lot more comfortable and patient friendly than other devices and therefore the patient is more likely to be compliant," he said. The company plans to use part of the funds to establish production facilities with an initial annual production of 5000 customised devices, in addition to establishing accreditation programs for dentists, who will prescribe and fit the devices to patients. Patients will be able to approach dentists directly for the device, or be referred to an accredited dentist by their GP, respiratory or sleep specialist. Conversely, where necessary, dentists will be able to refer severe OSA sufferers to an appropriate medical practitioner for further diagnosis and treatment.

Somnomed has granted patents for the device in Australia, New Zealand and the USA, and applications are pending in other jurisdictions including Canada, Europe and Japan. But while the company plans to expand into lucrative markets in the US, Europe and Japan, Diddams said it would initially start by identifying potential strategic partners and opportunities in these markets.

"We want to establish the business and protocols in Australia before going overseas," Diddams said. "It's an enormous market and we want to make sure we approach it correctly."

The closing date for the IPO is August 20, 2004, and ASX listing is scheduled for August 27. The offer has been underwritten by biotech-savvy investment bank eG Capital.