CHAD can't sleep

Sunday, November 9, 2008

CHATSWORTH, Calif. - Attempts by CHAD Therapeutics to crack the sleep market have hit a wall.

The manufacturer, which sold its conserver business to Inovo earlier this year, announced in late October that it was suspending operations due to lack of funding.

"It doesn't surprise me, because I think sleep is an expertise," said an industry source. "Also, you have to think about how big and powerful Respironics and ResMed are, and how others like Invacare and DeVilbiss haven't been able to make a serious dent in the market."

CHAD recently secured a $2 million investment from a private equity firm, but discord among the manufacturer's officers and former officers over back salary and severance obligations caused the firm to take back its offer, according to a Oct. 29 release.

The news comes only months after Dormio Tech, its sleep division, announced FDA approval for its FloChannel, "the only diagnostic device that independently monitors left and right nasal air flow," according to a July 29 release. CHAD planned to begin shipping FloChannel in September.

Before introducing FloChannel to the market, CHAD had shopped the device around "to all the big sleep companies and some not so big sleep companies," said an industry source.

"What they were told was, 'You put it out there and see what happens, and if it turns out you're right about this product, come back and we'll talk," said the source.

CHAD was able to garner interest from healthcare providers, including a major university hospital in California, said an industry source, but in the end, a lack of funding was its undoing.

"I don't know that they were able to get enough units manufactured," said the source. "With additional funding, they may have been able to get them out there. It wasn't a matter of their technology being faulty."

Attempts to reach CHAD CEO Earl Yager were unsuccessful.

In its Oct. 29 release, CHAD stated that "the company is exploring other potential funding sources, but current prospects are not promising." It goes on to state, "the board of directors is considering appropriate actions, including liquidation of the company under Chapter 7 of the federal bankruptcy law."