CHAD sells O2 biz to Inovo

Sunday, November 25, 2007

CHATSWORTH, Calif. - CHAD Therapeutics plans to sell its oxygen conserver business to Naples-Fla.-based Inovo for $5.25 million in cash, the manufacturer announced last week. CHAD will focus future efforts on the sleep-disordered breathing market.

"Uncertainty regarding Medicare reimbursement has contributed to operating losses at CHAD in recent quarters and clouded the outlook for the near term future of the company's oxygen therapy business," stated President and CEO Early Yager. "Given the many attractive growth opportunities we see in the multi-billion dollar sleep disorder market, we have decided to sell the oxygen conserver business in order to focus exclusively on the proprietary medical devices we are developing for the diagnosis and treatment of obstructive sleep apnea."

Per the deal, which awaits stockholder approval, CHAD would retain assets related to its TOTALO2 system and in-home oxygen transfilling business. During a transition period that would end no later than 2008, Inovo would operate CHAD's facility and reimburse the manufacturer for rent, employees, transition-related services and other costs.

Inovo designs, develops and manufactures oxygen flow control products that are private labeled for leading distributors and manufacturers in the home respiratory, hospital and emergency medical markets.

CHAD hopes to receive 510K clearance from the FDA to market its initial sleep device early next year. Additionally, it plans to submit 510k applications for two other devices in 2008.

Products in development include FloChannel, a sleep diagnostic device targeted for use in sleep laboratories that can independently monitor left and right nasal airflow, oral airflow and snoring; and FloPAP, a therapeutic device that can monitor and control left and right nasal airflows individually to create a comfortable equalizing airflow through respiration.

"We believe that our sleep products offer unique features that can improve the diagnosis and treatment of obstructive sleep apnea," Yager stated. "With three products now in an advanced stage of development, a clear roadmap of additional product development opportunities based on our propriety technology and a sound marketing plan, we believe we have the opportunity to build CHAD's position in this large and growing industry."

For the quarter ended Sept. 30, 2007, CHAD reported net sales of $3.21 million compared to $4.98 million for the same quarter last year. It reported a net loss of $1.35 million for the quarter compared to a net loss of $371,000 last year.