8-K: Vivos Therapeutics to Acquire The Sleep Center of Nevada, Expanding OSA Treatment Access

Vivos Therapeutics is set to acquire The Sleep Center of Nevada, aiming to broaden the availability of its obstructive sleep apnea (OSA) treatments in the Las Vegas area.

Summary

• Vivos Therapeutics has entered into an agreement to acquire The Sleep Center of Nevada (SCN), the largest sleep center operator in Nevada.
• The acquisition aims to expand the reach of Vivos' non-invasive OSA treatments.
• The purchase price includes $6 million in cash, $1.5 million in Vivos common stock at closing, and a potential $1.5 million in Vivos common stock upon achieving a financial milestone.
• SCN sees approximately 3,000 new patients per month and has generated annual net revenues in the high seven figure range in recent years.
• Vivos intends to finance the cash portion of the acquisition through a senior debt facility and potential equity financing.
• The closing of the transaction is expected later in the current quarter or in the third quarter of 2025, subject to customary conditions.
• The acquisition aligns with Vivos' strategy to introduce its oral appliance treatments for OSA more directly to a larger patient population.
• SCN's physicians and nurse practitioners have tested and treated over 200,000 patients since 2019.
• Vivos anticipates SCN patients will prefer Vivos treatment options over CPAP.
• The company expects the acquisition to materially impact revenue and gross profits.

Sentiment

Score: 8

Explanation: The document expresses a positive outlook on the acquisition, highlighting its potential to increase revenue, expand market reach, and offer better treatment options for patients. The management comments and strategic rationale support a favorable sentiment.

Positives

• The acquisition is expected to significantly expand Vivos' market reach and revenue potential.
• SCN has a high patient volume and established infrastructure, which can enhance Vivos' case acceptance and market position.
• The transaction aligns with Vivos' strategic shift towards a more direct marketing and distribution model.
• SCN's existing revenues will be meaningfully augmented in several important ways, such as the expansion of diagnostic and consultative services and the sale of Vivos OSA treatment to SCN patients, all of which we expect to significantly reduce Vivos cash burn and move Vivos towards cash flow positivity.
• The acquisition provides access to a significant potential patient volume which is critical to executing on the new business model.
• The acquisition opens significant new growth opportunities for SCN's practice and better care options for their patients.

Negatives

• Vivos needs to secure financing for the cash portion of the acquisition, which may involve debt and/or equity financing.
• The closing of the acquisition is subject to customary conditions, including financing and audit, which could delay or prevent the transaction.
• The success of the acquisition depends on Vivos' ability to successfully integrate SCN's business and implement effective sales and marketing strategies.
• The additional $1.5 million in Vivos common stock is contingent on SCN achieving an agreed to financial milestone.

Risks

• Vivos may be unable to secure financing on favorable terms or at all.
• The integration of SCN's business may not be successful.
• Patients may not achieve the desired results from using Vivos products.
• Regulatory scrutiny and adverse publicity in the sleep apnea treatment sector could negatively impact Vivos.
• Vivos may be unable to secure additional financing on reasonable terms or maintain its Nasdaq listing.
• Market conditions could impact Vivos' business or ability to obtain financing.

Future Outlook

Vivos expects the acquisition to enhance case acceptance, diversify services, and strengthen its market position. The company anticipates SCN patients will prefer Vivos treatment options over CPAP and expects the acquisition to materially impact revenue and gross profits.

Management Comments

• Kirk Huntsman, Chairman and CEO of Vivos, stated, 'We believe this transaction will be a game-changer for Vivos, with the prospect of meaningfully adding to our revenues in the coming months through SCNs diagnostic and other services as well as adding thousands of patients as candidates for Vivos OSA treatment.'
• Michael Skaff, Managing Director of New Seneca Partners, stated, 'As an investor in and strategic advisor to Vivos, we are very excited about this transaction and its potential to materially expand and further validate the ongoing strategic shift in Vivos business model.'
• Dr. Prabhu Rachakonda commented, 'Sleep medicine has been waiting for many years for an alternative treatment for OSA that works to resolve the condition over a relatively short treatment time with potentially lasting effects. After looking carefully into Vivos appliance treatments, I believe the vast majority of our patients will choose Vivos over CPAP or other alternatives that they struggle with.'
• Dr. Tara Rachakonda said, 'As a sleep specialist and parent of a child with sleep apnea, Im particularly excited to expand our pediatric services with Vivos FDA-cleared DNA appliance treatment for children ages 6 to 17.'

Industry Context

The acquisition reflects a trend in the sleep apnea treatment industry towards offering more patient-friendly and effective alternatives to traditional CPAP therapy. Vivos is positioning itself to capitalize on the growing demand for non-invasive OSA treatments.

Comparison to Industry Standards

• The acquisition of a sleep center operator is a strategic move to control patient referrals and treatment pathways, similar to how some dental support organizations (DSOs) integrate various dental specialties.
• The focus on non-invasive OSA treatments aligns with the industry's shift towards personalized medicine and patient-centric care, contrasting with the one-size-fits-all approach of CPAP.
• The stated goal of reducing Vivos' cash burn and moving towards cash flow positivity is a common objective for growth-stage medical technology companies, comparable to efforts by companies like Inspire Medical Systems to achieve profitability.
• The strategic collaboration with New Seneca Partners mirrors the trend of private equity firms investing in and guiding the growth of innovative healthcare companies.

Stakeholder Impact

• Shareholders: Potential for increased revenue and market share.
• Employees: Integration of SCN employees into Vivos, potential for new opportunities.
• Customers: Access to a wider range of OSA treatment options.
• Suppliers: Potential for increased demand for Vivos products.
• Patients: Access to Vivos' non-invasive OSA treatments through SCN's network.

Next Steps

• Secure financing for the cash portion of the acquisition.
• Satisfy all closing conditions, including audit and third-party consents.
• Integrate SCN's business into Vivos' operations.
• Expand the range of diagnostic and therapeutic services offered to patients.
• Explore further expansions of the marketing and sales model.

Key Dates

Keywords

Vivos Therapeutics, The Sleep Center of Nevada, OSA, acquisition, sleep apnea, treatment, financing, oral appliance, healthcare