Biocurious: Tag-team leadership helps sleep device maker Somnomed regain its bite

• Somnomed has a leading global share of the oral sleep device market, but its performance has lagged over the years
• CEOs Karen Borg and Amrita Blickstead have presided over a financial recovery
• Oral appliance therapy can be a cheaper alternative to mask-and-pump sleep apnoea therapies

When Somnomed (ASX:SOM) CEOs Karen Borg and Amrita Blickstead took the reins of the dental sleep appliance maker in February last year, they had some basics to sink their teeth into.

While Somnomed had a leading global market share, service levels left much to be desired.

“Our customers were not very happy,” Borg says.

“Our turnaround times were not good and as a result they definitely were sampling competitor offerings.”

Somnomed also wasn’t shooting the lights out financially and its balance sheet was “unattractive”.

One of the duo’s first actions was to launch a $22.6 million capital raising, enabling high-cost debt to be retried.

“Most of the time was spent communicating the need to address the debt in the organisation and I don’t think the market disagreed with us,” Borg says.

The back-to-basics approach looks to have worked, with Somnomed shares gaining around 165% over the last year.

A sleeping giant?

The Sydney-based Somnomed is a global leader in the oral appliance therapy (OAT) sector. Think posh, bespoke mouthguards.

Somnomed sells in 20 countries and has treated around one million patients. These including failed users of ResMed (ASX:RMD)-style continuous positive airway pressure (CPAP) therapy and previously untreated sufferers.

Sold under the Somnodent range, Somnomed’s current devices work by pushing the lower jaw slightly forward, keeping the airway open at all times.

Somnomed’s priority now is to roll out Rest Assure, the first connected OAT device.

“Patients can look at the download in the morning and see if their sleep apnoea has improved,” Borg says.

Tag team divvies up the tasks

A biomedical engineer, Blickstead was chief operating officer of eBay’s local ops for a decade.

Borg was CEO of Catholic Healthcare and held senior roles at Resmed and Johnson & Johnson. She is on the board of the ASX-listed Optiscan (ASX:OIL).

Both CEOs already sat on the Somnomed board.

Co-CEO arrangements are unusual: for a start, egos need to be parked for the arrangement to be effective.

Borg handles ‘front of house’ commercial activities and global marketing.

Ms Blickstead is responsible for the ‘back office’ stuff, such as manufacturing and finances.

“We worked out where our respective strengths were and what was practical,” Borg says.

The Somnomed difference

For many people, one mouthguard looks pretty much the same as another.

The cheap ‘boil and bite’ available at chemists or Mr Mouthguard might suffice for sports protection – but won’t cut it for sleep apnoea.

The bespoke Somnodent devices involve the dentist scanning the patient’s mouth and creating an impression, which is then sent for fabrication.

“Our products are milled and made from acrylic and coated with a proprietary material to make it softer,” Borg says.

Rather like Resmed’s masks, Somnodent has multiple iterations.

Somnomed’s most popular, Somnodent Avant uses straps to join the lower and upper parts of the device, rather than less comfortable hinges.

Somnomed’s devices are also used to prevent bruxism – teeth grinding – which affects about 20% of the population.

Sizing the prize

The total sleep apnoea market is worth about US$9 billion annually, but currently OAT accounts for about 5% of that.

Not surprisingly, CPAP dominates the sector as a first-line therapy.

When used, CPAP is highly effective. So too is grandpa’s hearing aid – when he actually turns it on.

CPAP therapy is notorious for poor patient compliance, given the discomfort factor of sleeping with a mask and pump.

This is especially the case for people who sleep on their tummies, or who are claustrophobic.

OAT therapies are most useful for cases of mild to moderate sleep apnoea. Ideally, this cohort will at least try oral therapy before starting CPAP.

“The fundamental opportunity is to look at the people … failing CPAP therapy,” Borg says.

Who pays?

While reimbursement practices vary from region to region, the Somnodents generally are paid for by private insurance or the direct public system.

Locally, private health insurers foot the bill. Dentists must prescribe the devices for reimbursement to apply.

Somewhat unusually for a medical device, Europe is Somnomed’s biggest market and that’s because of “better and mature” reimbursement.

Some European countries treat a mandibular device as a first-line sleep apnoea therapy.

In the US the devices are reimbursed by Medicaid, private insurers and Veterans Affairs network.

“I don’t think any healthcare provider says they are as reimbursed as they would like to be,” Borg says.

“But based on customer engagement, [current reimbursement] is adequate.”

Rest Assure(d), it works

Borg says Rest Assure is “transformational”, because it allows clinicians to confirm the therapy is effective.

“The compliance information means that insurers and reimbursers can be sure that patients are complying with the therapy.”

The FDA approved the compliance tracking aspects of Rest Assure in October last year, but has asked for more clinical data to confirm efficacy.

The company hopes to launch a trial by the end of 2025, enrolling 65 patients at two US locations.

Management expects the study to complete in June 2026. After that, the company will work on a US Food and Drug Administration approval application under the 510k (predicate device) route.

“This will be the first product that will allow data to be transmitted,” Borg says.

“We believe not only will it be significant, but it will lift all boats as it communicates that the therapy is effective.”

Resmed has adopted a similar ‘connected care’ approach in the CPAP category.

Improving financials

Somnomed chalked up revenue of  $111.5 million for the year to June 2025, up 22%.

The company also reported a net loss of $3.45 million but managed sharply higher earnings before interest tax depreciation and amortisation (ebitda) of $9.2 million.

Geographically, Europe contributed revenue of $61.4 million, just over half of total turnover and 17% higher than previously.

North America contributed $43 million, up an “exceptional” 31%.

The Asia Pacific region chipped in $7 million, up 11% with Australia contributing 80% of this regional tally.

Somnomed has guided to current financial year revenue of $119 million to $126 million – 10% higher at the midpoint – and ebitda of $10 million to $12 million (22% higher at the midpoint).

Except for a small low-interest Europe debt facility, Somnomed is debt free.

Fat-busting drugs are a ‘tailwind’

It’s accepted that as people lose weight, their sleep apnoea will decline. More controversial is the degree to which Ozempic-style GLP-1 drugs maintain weight loss.

Borg says the popularity of GLP-1s is “definitely a tailwind” for Somnomed.

That’s because sleep apnoea patients are likely to be recategorised from severe sleep apnoea to mild and moderate, thus become eligible for OAT.

“Not only do you get a new wardrobe, but you also get new therapies,” Borg says.

Somnomed is carrying out “some activity” with Eli Lilly, which owns the GLP-1 drug tirzepatide.

The local Therapeutic Goods Administration and the FDA both have approved the drug, sold as Zepbound in the US and Mounjaro here.

“But they can only address sleep apnoea at a high level and a mechanical  solution is still needed for the patient.”

Getting back to basics

Borg says “good things” should happen for investors.

“We are focused on getting our house in order and keeping it simple,” Borg says.

“We are improving margins and all of those things you would expect an organisation to do.”

Given the company listed in 2004, it’s about time, too.

Broker Canaccord dubs Somnomed as “the best medtech turnaround the ASX has seen in living memory”.

Peer Morgans suggests Somnomed could embark on some M&A, or, conversely, receive a takeover offer.

Failing that, Somnomed will tap the global opportunity of 1.38 billion sleep apnoea sufferers in its own right – and management won’t get caught napping on the job.