Vivos Therapeutics, Inc. (NASDAQ:VVOS) is a leading medical technology company at the forefront of innovative treatments for sleep-related breathing disorders, including obstructive sleep apnea (OSA) in both adults and children. With a strong focus on developing and commercializing highly effective proprietary products, Vivos is poised to disrupt the sleep apnea market and improve the quality of life for millions of patients worldwide.
Business Overview and History: Vivos Therapeutics was founded in 2016 with the mission of addressing the unmet need for effective, non-invasive, and comfortable treatment options for OSA. The company's origins trace back to 2007 when its predecessor, BioModeling Solutions, was established as an Oregon-based limited liability company. In 2013, BioModeling Solutions incorporated and subsequently entered into a share exchange agreement with First Vivos, Inc. and Vivos Therapeutics, Inc. in 2016, resulting in the current corporate structure and the Vivos Therapeutics brand. The company reincorporated in Delaware in 2020.
Vivos' flagship product, The Vivos Method, is a comprehensive suite of proprietary oral appliances and therapeutic treatments designed to non-surgically treat certain maxillofacial and developmental abnormalities of the mouth and jaws that are closely associated with breathing and sleep disorders. The company's innovative approach has led to the development of several distinct clinical pathways, including Guided Growth and Development, Lifeline, and the Complete Airway Repositioning and Expansion (CARE) program, each tailored to address the specific needs of diverse patient populations.
One of Vivos' key strengths is its comprehensive training and support programs for dental professionals. The company's Vivos Institute, an 18,000 square-foot facility located near the Denver International Airport, provides live and hands-on continuing education courses, equipping dentists and other healthcare providers with the necessary knowledge and skills to effectively deliver Vivos' treatment solutions to their patients.
Over time, Vivos expanded its product offerings and services to include diagnostic tools, training programs for dentists, and support services to help dentists incorporate the Vivos treatment into their practices. In the early years, Vivos faced challenges enrolling dentists in its Vivos Integrated Practice (VIP) program, which was initially the primary way the company generated revenue. The company worked to improve its training programs and support services to make it easier for dentists to adopt the Vivos treatment protocols. Vivos also had to navigate obtaining the necessary regulatory approvals from the FDA for its oral appliance products.
Despite these early challenges, Vivos was able to build a network of over 2,000 trained dentists worldwide who have used the company's products to treat over 45,000 patients. The company has also expanded its offerings over time, adding services like home sleep testing, practice management software, and orofacial myofunctional therapy to provide a more comprehensive solution for dentists and patients.
Financial Overview: Vivos Therapeutics has experienced significant growth in recent years, with total revenue reaching $13.8 million in 2023, down from $16.0 million in 2022 and $16.9 million in 2021. However, the company has yet to achieve profitability, reporting a net loss of $13.6 million in 2023, $23.8 million in 2022, and $20.3 million in 2021. The company's operating cash flow (OCF) for 2023 was -$11.95 million, with a free cash flow (FCF) of -$12.75 million.
For the most recent quarter (Q2 2024), Vivos reported revenue of $4.05 million, a 19% increase year-over-year, driven by a 28% increase in product revenue and a smaller increase in service revenue. The increase in product revenue was due to higher appliance and guide sales, while the increase in service revenue was primarily from higher VIP enrollment revenue, partially offset by a decrease in myofunctional therapy revenue. The net loss for Q2 2024 was $1.93 million, showing a 65% improvement year-over-year due to lower operating expenses, particularly general and administrative costs. The OCF for Q2 2024 was -$3.05 million, with an FCF of -$3.11 million.
The company's cash and cash equivalents position has fluctuated, standing at $6.9 million as of June 30, 2024, up from $1.6 million as of December 31, 2023, but down from $3.5 million at the end of 2022 and $24.0 million at the end of 2021. This liquidity position has raised concerns about the company's ability to fund its operations and strategic initiatives going forward.
Vivos' financial ratios provide further insights into the company's financial health. As of June 30, 2024, the company's current ratio stood at 1.18, indicating an improvement in its ability to meet short-term obligations compared to the end of 2023. The debt-to-equity ratio was 0.21, suggesting a more balanced capital structure than previously reported.
Liquidity: The company's liquidity position has shown some improvement, with cash and cash equivalents increasing to $6.9 million as of June 30, 2024. However, this trend still highlights the importance of Vivos' ability to secure additional financing or generate sufficient cash flow from operations to support its ongoing business activities and future growth initiatives. The company does not have any available credit lines disclosed, which could limit its financial flexibility.
Operational Highlights and Strategies: In 2024, Vivos Therapeutics made a significant strategic pivot by entering into a groundbreaking alliance with Rebis Health Holdings, LLC, an operator of multiple sleep testing and treatment centers in Colorado. This alliance marked a shift in the company's marketing and distribution model, moving away from a dental-only channel towards a more comprehensive, medical-based approach.
Under the new strategic alliance, Vivos is collaborating with Rebis to offer OSA patients a full spectrum of evidence-based treatments, including CPAP machines and the company's own advanced, proprietary, and FDA-cleared CARE oral medical devices, oral appliances, and additional adjunctive therapies. This revenue-sharing model has the potential to significantly expand Vivos' reach and patient base, as the company taps into the vast network of sleep clinics and medical professionals.
In September 2024, Vivos received a crucial regulatory milestone – the first-ever U.S. Food and Drug Administration (FDA) 510(k) clearance to treat moderate to severe OSA and snoring in children using the company's DNA appliance. This groundbreaking approval positions Vivos to disrupt the pediatric OSA market, which is estimated to affect up to 10.1 million U.S. children aged 6-17.
Vivos has also made significant progress in streamlining its operations and reducing costs. The company has implemented a series of cost-saving measures, including workforce reductions, which have resulted in eight consecutive quarters of year-over-year decreases in operating expenses. As of the second quarter of 2024, Vivos' general and administrative expenses had decreased by 30% compared to the same period in the prior year.
The company operates primarily in the United States, focusing on the domestic market as a small-cap company. Vivos' business model is centered on driving revenue growth through dentist enrollments in its VIP program, sales of its proprietary oral appliances, and provision of various supporting services. The recent pivot towards partnerships with medical sleep clinics is expected to be a key growth driver going forward.
Product Segments and Revenue Streams: Vivos operates in two main product segments:
1. Oral Appliances and Devices: This segment includes the company's suite of proprietary oral appliances and therapeutic treatments designed to non-surgically treat maxillofacial and developmental abnormalities associated with breathing and sleep disorders. The flagship CARE program features patented DNA, mRNA, and mmRNA appliances that are FDA 510(k) cleared for mild-to-severe OSA and snoring in adults. Additionally, Vivos offers other mandibular advancement devices (MADs) such as the Versa and Vida Sleep, which are FDA 510(k) cleared for mild-to-moderate OSA in adults.
2. Service Offerings: This segment generates revenue from several areas, including VIP enrollments, Billing Intelligence Services, SleepImage home sleep testing services, and Myofunctional therapy services. The VIP enrollment service allows dentists to receive training on using Vivos' treatment modalities, while the other service offerings provide additional products and services to support dentists treating sleep-related conditions.
For the six months ended June 30, 2024, Vivos reported total revenue of $7.47 million, comprised of $3.65 million in product revenue (primarily from oral appliance and device sales) and $3.82 million in service revenue. The gross profit for this period was $4.59 million, resulting in a gross margin of 61%.
Industry Trends and Market Outlook: The oral appliance market for sleep apnea treatment is expected to grow at a compound annual growth rate (CAGR) of around 7-8% over the next 5 years. This growth is driven by increasing awareness and adoption of alternative treatments to CPAP machines. Vivos is well-positioned to capitalize on this trend with its innovative product offerings and expanding distribution network.
Financial Guidance and Future Outlook: While Vivos does not provide specific revenue or earnings guidance, the company has shared several positive indicators for its future performance:
- Vivos continues to anticipate attaining positive cash flow from operations in the foreseeable future. - The recently launched strategic alliance with a multi-center sleep clinic operation in Colorado is expected to positively impact Vivos' revenue growth. - The company is currently in negotiations with six other sleep testing groups and medical doctor-based sleep centers from around the U.S. who together see upwards of 5,000 OSA patients per month. - Vivos estimates that for every 100 OSA patients per month that it puts into Vivos treatment, it should realize top-line revenues of nearly $8 million annually with high profitability.
These strategic initiatives, combined with the company's cost reduction efforts and expanding product portfolio, position Vivos for potential growth and improved financial performance in the coming years.
Risks and Challenges: Despite Vivos' innovative products and strategic initiatives, the company faces several significant risks and challenges that could impact its future performance. The highly competitive nature of the sleep apnea treatment market, with established players like CPAP manufacturers, presents a constant challenge for Vivos to gain market share and drive adoption of its solutions.
The company's reliance on a network of dentists and healthcare providers to prescribe and administer its treatments also introduces operational and execution risks. Vivos' ability to effectively train, support, and incentivize these providers to consistently deliver its treatment protocols will be crucial to the company's success.
Additionally, Vivos' financial position and liquidity concerns raise questions about its ability to fund ongoing operations and invest in future growth initiatives. The company's ability to secure additional financing on favorable terms will be critical to its long-term sustainability.
Regulatory hurdles and the potential for adverse events or product safety issues also pose risks to Vivos' business. The company's continued success will depend on its ability to navigate the complex regulatory landscape and maintain a strong safety record for its products.
Conclusion: Vivos Therapeutics is at a critical juncture in its journey to revolutionize the sleep apnea treatment landscape. The company's innovative product offerings, comprehensive provider training programs, and strategic pivot towards a medical-based distribution model hold significant promise. The recent financial results, showing revenue growth and improved cost management, are encouraging signs of progress.
However, Vivos must continue to address its financial challenges, strengthen its competitive position, and execute flawlessly to capitalize on the vast opportunities in the sleep apnea market. The company's ability to successfully implement its strategic alliances with sleep clinics and expand its patient base will be crucial factors in driving future growth and profitability.
As the company continues to navigate the complexities of the industry, investors will be closely monitoring Vivos' ability to drive revenue growth, improve its financial profile, and solidify its position as a leader in the sleep apnea treatment space. With a clear strategic vision, a commitment to innovation, and a relentless focus on improving patient outcomes, Vivos Therapeutics is poised to make a lasting impact on the lives of millions suffering from sleep-related breathing disorders.