Shareholder Roadshow

Hello fellow OVeNers

I attended the shareholder roadshow earlier in the week and thought it was a good opportunity to put all my notes down in a clear & coherent post.

Commercialisation

Dr. Chris was extremely pleased as to the speed & effectiveness of the commercialisation of their new, potentially market leading, technology & the speed of adoption within the Lab-in-Lab clinic for which they have pioneered.

At present they have 29 customer sites signed up, each committing to a minimum monthly order quantity of 20 units, per clinic, per month.

What is bullish here is that a lot of commentary was added with respect to a lot of those sites wanting to ramp up well above and beyond the minimum quotas very quickly which will add to demand for the product down the track.

The forward pipeline of customer sites (Slide 27) is also very strong. Since the FDA approval (Sept) they have a further:
- 9 groups that have been issued contracts
- 10 groups under NDA
- 38 groups in discussion.

A question was asked if the 'group' means a single clinic & Chris advised that these groups have MANY clinics. Not only that, these abovementioned groups are their 'bread & butter' small non-national clinics they're talking to. And this revenue funnel is worth >USD 20m in annualised revenues

They are also in discussions with many large, national groups which have demand for well over 100 clinics and they've entered 3 pilots with these some of these groups. These contracts will have a very long lead time & clearly by the size of the clinics involved would be truly transformational.

Given their size, they're undergoing trials in to these national clinics to test integration etc...

The Device Pricing (to OVN)

Each device sold is worth US600 upfront to OVN and then US200/p.a.

The lifecycle of each device is 3 years, so each device is worth $1200 per patient to OVN.

Note that the renewal of these devices is pretty much automatic (via another consultation to the sleep physician or dentist - whomever provided the original device) & the the $600 upfront & $200 p.a. is renewed.

The cash flow per patient is essentially for the life of the patient under treatment (given there's no cure for sleep apnoea, its for the life of the patient) - I didn't realise this & its very bullish given an annuity income stream

For the patient & the sleep physician / dentist - the device is covered by a US CPT code which reimburses US$2,400 per device

This is huge as the US Medical Insurance Industry is essentially paying for 80% of the device...

Competition

Resmed is the clear competitor in the space with their CPAP device. However the shortcomings of CPAP, compared to OVN have been well documented & presented in many slide decks (and the most recent one is no exception).

The tolerability of CPAP is the issue - it's essentially a pain in the posterior to use & hence patients drop out of care

Resmed trialed an oral appliance device a few years ago, but then shelved that project for whatever reason (Chris didn't recall).

OVN is the only highly effective, non-invasive OSA treatment in the world... this was a powerful statement

Share Price Commentary

The recent share price movements were discussed in the presentation and Chris was saying that a major US fund was buying the stock while it was aggressively moving up.

Also, he mentioned that one single (High Net Worth) shareholder was responsible for the selling which triggered the chart to breakdown and then for most retail punters to exit via their stop losses.

Once they discovered who was selling it down, it was too late as they had finished. Chris wanted to organise a block trade to clear that HNW investor out, but again it was too late.

He stipulated that since that investor, all the selling has been retail via CommSec & E-Trade - having a quick look at the broker data also backs up his claim... Remember, trust but validate

Outlook

The outlook is bright for OVN, the devices are literally flying off the shelves.

Their main headache is within Implementation. They're going to hire a couple of more headcounts within their Implementation teams to expedite the rollout even further - the demand is there, they're only constrained by the number of hours in the day.

Chris mentioned (from a newsflow perspective) they're not going to bother coming to market every time they sign a clinic as their expectation is to sign 1-2 clinics per week with their current headcount and this is considered day-to-day business. He said they will provide a commercialisation update twice per quarter (Once in the formal 4C and then another mid-quarter). I like this approach as it begins to show scale/trends. Obviously any major, highly material multi-site groups will warrant an announcement of its own.

I came away from the presentation extremely bullish (and bought more shares too) as IMO the SP down here is a gift for what they're looking at implementing with their demand going forward. Chris was extremely confident at generating significant revenues next year as things gather steam and they're looking at cash flow positive in mid-late 2020 which will then further propel the business in to another league