The market for devices that treat obstructive sleep apnea is highly competitive, with companies vying for dominance in the rapidly evolving healthcare space. According to Jefferies, ResMed (RMD) currently holds the title of global leader, commanding 62% of the market with its CPAP and BiPAP devices. Despite formidable competition from firms like Inspire Medical Systems (INSP) and Fisher & Paykel Healthcare, ResMed remains at the forefront.
However, the industry was shaken in 2021 when Philips Respironics, a division of Koninklijke Philips (PHG), exited the market following a significant recall of its CPAP, BiPAP, and ventilator devices. Their return is still uncertain, leaving a gap for other players to exploit.
ProSomnus Offers a Precision-Based Solution
ProSomnus (OSAP), a relatively smaller player in this sector, offers a unique alternative: personal, precision intraoral devices designed to treat obstructive sleep apnea non-invasively. They argue that discomfort and poor education about the usage of CPAP devices contribute to high non-adherence rates. ProSomnus believes that their precision devices can better serve patients with mild to moderate conditions.
Despite their promising solution, the company has faced challenges convincing patients to adopt their technology over established devices.
ProSomnus Files for Chapter 11 Bankruptcy
On May 7, ProSomnus filed for Chapter 11 bankruptcy in Delaware after securing a restructuring support agreement. This agreement aims to reduce the company’s secured obligations by $27 million and hand over common equity to the company’s subordinated noteholders. In their filing, the debtor disclosed over $26.3 million in assets and $52.89 million in debt.
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The bankruptcy petition lists significant financial obligations, including:
- $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
- $3.3 million in unsecured debt
To ensure operations and the bankruptcy case are funded, ProSomnus is seeking $13 million in debtor-in-possession (DIP) financing from the sponsoring noteholders, which include CrossingBridge Low Duration High Yield Fund, Cohanzick Absolute Return Master Fund, RiverPark Strategic Income Fund, and others.
Funding a Path Forward
ProSomnus intends to secure exit financing worth approximately $9 million through a new equity purchase. This funding, combined with the DIP financing, is expected to help the company reorganize and find a sustainable path forward.
ProSomnus, established in 2006 and known as DTI Holdings Inc., initially operated dental laboratories. It later pivoted to the sleep apnea business and went public in 2022 through a de-SPAC transaction. Despite filing for bankruptcy, the Pleasanton, California-based company managed to generate $27.7 million in revenue in 2023, marking a significant increase from the previous year. With a workforce of 142 employees across North America and Europe, ProSomnus is positioned to navigate its current financial challenges with the help of the restructuring process.
