Sleep Solutions steps up sales efforts

Tuesday, April 30, 2002

PALO ALTO, Calif. —Sleep Solutions pocketed $7 million last month in additional investment capital and began ramping up its sales force, initiating a full-court press to crack the home-sleep diagnostics market.

Investors included MedVenture Associates, Johnson & Johnson Development Corporation and Thomas J. Fogarty, M.D.

The FDA has cleared Sleep Solutions NovaSom QSG (formerly the Bedbugg) for unattended, unassisted in-home sleep studies.

"What investors see is that when you look at the brick and mortar sleep labs, the margins are very thin," said Mike Smith, vice president of sales and business development. "You have significant fixed costs that you can't overcome and it's exceptionally difficult to scale. If we got 1,000 orders today, we could do it. If a sleep lab got 1,000 orders, they'd have to backlog them for a year."

With the additional investment, Sleep Solutions, which formed in 1998 and is "working toward profitability," plans to hire four salespeople, bringing the company total to seven, and continue its R&D, said Gitte Knudsen Pope, director of marketing.

The company's sales efforts will key on managed care companies, the VA, U.S. Department of Defense and eventually doctors and patients. The fact that Medicare doesn't pay for in-home sleep studies doesn't bother Smith, who notes that the program beneficiaries represent only 10% of the sleep disorder market, estimated at roughly 18 million people.

When it comes to selling the service, Smith said, Sleep Solutions has a "compelling" cost and business advantage.

"We are telling them that we have technology that is just as accurate, if not more accurate, than a full in lab polysomnogram for testing OSA," Smith said. "And that we can provide this service to them at approximately a 50% discount from the in lab studies."

Once ordered by a physician, Sleep Solutions delivers its diagnostic system directly to the patient's home. After collecting up to three nights of sleep data, the system is returned to Sleep Solutions where the data is analyzed and a comprehensive Sleep Study report is sent to the referring physician for diagnosis. HME