Sleepy Heads

Australian investors have done well out of sleep with ResMed’s market cap multiplying nearly 19x since 2002. Equitable Investors Dragonfly Fund’s best performed investment (at the time this was written), Rhinomed (RNO), has a different angle on sleep. So does a newer investment for the Fund, Oventus Medical (OVN). Both were contributors to the Fund’s positive performance in July.

RNO has a consumable nasal insert sold as a solution for mild sleep apnea but is also now emerging as a drug delivery platform. During July, RNO (a) released data showing its “Mute” nasal insert is the fastest growing product in its category in US drugstores; (b) received a CE Mark registering its “Pronto” nasal insert that releases vapour (essential oils) for Europe (having already received US FDA and Australian TGA approval); and (c) released its June quarter cashflow showing cash receipts up 150% year-on-year to $1.5m. As Figure 1 below shows, RNO has emerged as a rapidly growing product in US drug stores.

While RNO’s consumable device dilates the nose, OVN’s mouth insert acts like a “second nose”. In July, the Fund also participated in a capital raising for OVN. In its pitch, OVN set out the scope of its target market: 12% of US adults suffer from obstructive sleep apnoea (OSA, the most common type of sleep apnoea); that includes 6m adult patients in the US who are prescribed CPAP alone (CPAP devices such as those produced by ResMed pump air into a mask worn while sleeping) - of which 50-60% quit CPAP. So OVN sees 3m adults in the US requiring an alternative treatment that is more easily adhered to.

OVN has historically struggled finding a path to market due to the dominance and profitability of CPAP. But OVN has now established a US strategy that positions its device as more profitable and it is now signing up North American sleep centres.

 Figure 1: US Drug Store “Nasal Strip” market - 12 months to April 21, 2019

Source:, Rhinomed

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