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SomnoMed Hits 200,000 Sleep Apnoea Patient Milestone

SomnoMed Limited (ASX:SOM) should trade higher today after exceeding the benchmark of 200,000 non-invasive medical devices fitted to patients to treat obstructive sleep apnoea since start of its operations in 2004.

SomnoMed is the leading global company in Continuous Open Airway Therapy, which uses an oral appliance to treat obstructive sleep apnoea.

These oral appliances, which fix the lower jaw forwards during sleep, are becoming an increasingly popular alternative to CPAP.

CPAP, which uses a stream of compressed air that is blown through a face mask to keep the airways open during sleep, is medically effective but rejected as too cumbersome and invasive by a great number of patients.

Patient compliance is a principal problem for CPAP makers and has not been resolved despite significant improvements of pumps, pressure control and the quality of masks.

SomnoMed's SomnoDent appliances have proven efficacy in 18 medical studies and has received regulatory approvals such as FDA, CE, TGA and others.

The company now operates in 26 countries in the three principal regions of Asia-Pacific, Europe and North America.

Recent research indicates that SomnoDent appliances can treat up to 80% of patients medically successfully, with most of the remaining 20% achieving measurable improvements.

Dr. Peter Neustadt, Executive Chairman of SomnoMed added:

"We are proud to have reached this milestone. It took us eight years to reach the first 100,000 patients and only two and a half years to reach the next 100,000. The last 50,000 devices were fitted in only 12 months."

"Whilst 200,000 SomnoDent devices fitted to patients is an important milestone, we believe it is only the beginning of our long-term growth. We expect this sales trend to continue with sales growth driven by a growing acceptance among medical specialists, increased levels of reimbursement by insurers and expansion into new markets."

"There are very few patients which will not see improvements in their conditions. This does not only manifest itself in a high compliance rate but also in an astonishing percentage of our patients volunteering to tell us how satisfied and happy they are with the results of the SomnoDent."

Analysis

There is blue sky ahead for SomnoMed as growth of its sleep apnoea products continues to build momentum, capitalising on the strong foundations already laid in global markets.

For the 2014 financial year, SomnoMed reported revenues of $25.92 million for the 2014 financial year, up 39.5% from the previous year.

In the September quarter, sales were 4,535 apnoea devices, and produced a growth of 25.2% year over year. September broke a number of records - being the highest sales volume achieved globally in any month and individual record results in all three global regions, with growth rates for the month of US +23.9%, Europe +27.1% and APAC/Japan +26.2%.

Volume is expected to grow in 2014/15 by 26.5% from 43,438 units and exceed 55,000 units. The first half is traditionally affected by the Northern summer holidays and should generate sales of around 25,000 units (+22% vs. same period in prior year). The second half should see further acceleration, with growth of 30% resulting in total unit sales for the second half of 30,000.

Forecast revenues in 2014/15 are expected to exceed $32.5 million and guidance expectation for 2014/15 is an EBITDA range between $2.0 and $4.0 million.

At the end of September 2014, SomnoMed held cash of $9 million.

Proactive Investors had a previous share price target guidance of $2.05 to $2.19 within 6-9 months which has been surpassed.

Based on current forecasts of unit sales growth and prices by SomnoMed, we have re-calculated revenue metrics and a new share price target forecast of $2.87 within six months.

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