Competition among medical device companies that develop, market and sell equipment to treat and manage patients' obstructive sleep apnea conditions is fierce with ResMed (RMD) currently holding the title of global leader, holding 62% of the market, according to Jefferies.
ResMed is the top manufacturer of continuous positive airway pressure (CPAP) machines and bilevel positive airway pressure devices (BiPAP) machines. The company has competition from several firms, such as Inspire Medical Systems (INSP) and New Zealand-based Fisher & Paykel Healthcare.
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Koninklijke Philips' (PHG) Philips Respironics exited the market in June 2021 after a recall of its CPAP, BiPAP and medical ventilator devices. No date for a return to the market has been revealed.
But some companies like medical technology company ProSomnus (OSAP) believe their personal, precision intraoral medical devices, are a novel non-invasive option as a treatment for obstructive sleep apnea, a serious and chronic respiratory disease that impacts a patient's sleep, breathing and health.
The company claims that patient discomfort and lack of effective end-user education have resulted in substantial non-adherence rates for CPAP devices. It believes patients with mild to moderate obstructive sleep apnea would prefer its less invasive alternative precision devices.
The company, however, has had difficulty convincing enough patients to try its products.
ResMed
ProSomnus files Chapter 11 bankruptcy to reorganize
ProSomnus on May 7 filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware after finalizing a restructuring support agreement that would reduce the debtor's prepetition secured obligations by $27 million and hand common equity to the company's subordinated noteholders.
The debtor listed over $26.3 million in assets and $52.89 million in debts in its petition.
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The debtor owes $17.5 million in senior convertible notes, $3.39 million in senior exchange notes, $5.3 million in subordinated convertible notes, $12.1 million in subordinated exchange notes, $4 million in bridge notes and $3.3 million in unsecured debt.
The debtor is seeking $13 million in debtor-in-possession financing from the sponsoring noteholders to ensure it has access to new money and cash collateral to fund operations and the Chapter 11 case. The DIP would provide $7 million in new money with $2.5 million available on interim approval and $4.5 million on final approval. It would also roll in $4 million in outstanding bridge notes and $2 million in outstanding senior notes.
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Sponsoring noteholders include investment funds CrossingBridge Low Duration High Yield Fund, Destinations Low Duration Fixed Income Fund, Intrepid Income Fund, Cohanzick Absolute Return Master Fund, Leaffilter North Holdings, Destinations Global Fixed Income Opportunities Fund, RiverPark Strategic Income Fund, Cedarview Opportunities Master Fund, SMC Holdings II and Cetus Capital VI.
The sponsoring noteholders also committed to provide exit financing consisting of about $9 million new capital with a purchase of new equity.
ProSomnus was established in 2006 as DTI Holdings Inc. and MicroDental Inc., which operated a chain of dental laboratories. The lab businesses were sold in October 2016 and ProSomnus Sleep Technologies was formed to operate a sleep apnea business that the company started in 2014. The company went public in a de-SPAC transaction in December 2022.
The Pleasanton, Calif.-based debtor generated $27.7 million in total revenue in 2023, an $8.3 million or 43% increase over the year ended Dec. 31, 2022. The company employs 129 workers in the U.S., two in Canada and 11 in Europe.
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