Company Overview
Vivos Therapeutics, Inc. (NASDAQ: VVOS) is a leading medical technology company that has pioneered innovative, non-invasive treatments for obstructive sleep apnea (OSA) and related sleep-disordered breathing conditions. With a steadfast commitment to improving the lives of millions suffering from these prevalent health issues, Vivos has developed a comprehensive suite of proprietary oral appliances and therapeutic protocols that have demonstrated remarkable success.
History and Corporate Structure
Founded in 2007 as BioModeling Solutions, Inc., an Oregon limited liability company, Vivos has a rich history of innovation and growth. The company incorporated in Oregon in 2013 and later underwent a significant transformation through a share exchange agreement in 2016. This agreement involved BioModeling, First Vivos, Inc. (a Texas corporation), and Vivos Therapeutics, Inc. (initially a Wyoming corporation). The transaction was structured as a reverse acquisition, with BioModeling as the acquirer for financial reporting and accounting purposes. In August 2020, Vivos reincorporated from Wyoming to become a domestic Delaware corporation.
Core Business and Products
Vivos' core business revolves around its comprehensive suite of proprietary oral appliances and therapeutic treatments designed to non-surgically address maxillofacial and developmental abnormalities of the mouth and jaws. These conditions are closely associated with breathing and sleep disorders such as OSA and snoring in adults. The company offers three distinct clinical pathways or programs to providers: Guided Growth and Development, Lifeline, and Complete Airway Repositioning and Expansion (CARE). Each program combines specific oral appliances with tailored therapeutic treatments to meet the unique needs of different patient populations.
The Guided Growth and Development program utilizes the Vivos Guide and PE x appliances along with adjunctive, non-company therapies such as CO2 laser treatments and other therapies designed for treating palatal growth and expansion in pediatric patients. The Lifeline program features a selection of mandibular advancement devices (MADs) like the Versa and Vida Sleep, which are FDA 510(k) cleared for mild-to-moderate OSA in adults, as well as the patented Vida appliance, which is FDA 510(k) cleared for the alleviation of temporomandibular joint dysfunction (TMD) symptoms, bruxism, migraine headaches, and nasal dilation.
Revenue Model
The company's revenue model has traditionally been centered around enrolling dentists in its Vivos Integrated Practice (VIP) program, which provides comprehensive training, educational resources, and support services. VIPs then utilize Vivos' products and services to treat patients in their own practices. Additionally, Vivos generates revenue through the sale of its oral devices and preformed guides, known as appliances or systems, to VIP dentists and OSA patients. The company also offers a range of diagnostic and support products and services, including home sleep testing, medical billing services, and training and continuing education programs for dental and medical providers treating OSA or related conditions.
The Vivos Method
Vivos' flagship product, The Vivos Method, is a groundbreaking, multi-faceted approach that combines customized oral appliances with a range of adjunctive therapies. These include myofunctional therapy, chiropractic treatment, laser treatments, and other modalities designed to address the underlying anatomical and physiological factors contributing to OSA. The company's proprietary devices, such as the DNA, mRNA, and mmRNA appliances, have received FDA 510(k) clearance for the treatment of mild to severe OSA and snoring in adults, as well as moderate to severe OSA in children.
The Vivos Method may also include adjunctive myofunctional, chiropractic/physical therapy, and laser treatments that, when properly used with the CARE appliances, constitute a powerful non-invasive and cost-effective means of reducing or eliminating OSA symptoms. In a small subset of a study, the data has shown that The Vivos Method can reverse OSA symptoms in a large portion, up to 80%, of patients.
Competitive Advantage
One of Vivos' key differentiators is its emphasis on addressing the root causes of sleep-disordered breathing, rather than merely managing symptoms. The Vivos Method aims to remodel and expand the oral and maxillofacial structures, effectively reducing or eliminating the need for lifelong, palliative treatments like continuous positive airway pressure (CPAP) machines. This non-surgical, patient-centric approach has garnered significant attention and praise from both healthcare professionals and patients.
Strategic Pivot
However, in mid-2024, the company underwent a strategic pivot, shifting its focus towards a new marketing and distribution model based on strategic alliances with sleep testing and treatment centers.
This shift has been a game-changer for Vivos, as it has allowed the company to expand its reach and better align its interests with those of referring medical professionals. Under the new model, Vivos collaborates with sleep clinics to offer patients a comprehensive suite of treatment options, including Vivos' proprietary oral appliances. This approach has been met with remarkable success, with initial pilot programs reporting that 8 out of 10 newly diagnosed OSA patients preferred Vivos' oral appliance therapy over CPAP, and chose the company's flagship CARE devices over traditional oral appliances by a ratio of 5 to 1.
In June 2024, the company announced a strategic marketing and distribution alliance with Rebis Health Holdings, an operator of multiple sleep testing and treatment centers in Colorado. This new model differs from VVOS's previous focus on enrolling dentists in its VIP program and is expected to increase revenue and reduce customer acquisition costs going forward.
Financials
Vivos' financial performance has been a mixed bag in recent years, with the company reporting revenue of $13.8 million and a net loss of $13.6 million for the fiscal year ended December 31, 2023. The third quarter of 2024 saw a 17% increase in total revenue compared to the same period in 2023, driven by higher sales of Vivos appliances and guides. Gross profit also increased by 34% in the third quarter, with gross margin expanding to 60% from 53% in the prior-year period.
For the nine months ended September 30, 2024, the company reported total revenue of $11.33 million, an increase of 7% compared to the same period in 2023. This increase was driven by a $0.83 million, or 17%, increase in product revenue, partially offset by a $0.05 million, or 1%, decrease in service revenue. Gross profit for the nine-month period was $6.92 million, with a gross margin of 61%.
The company's operating expenses have been a key area of focus, with Vivos successfully reducing these costs for nine consecutive quarters. In the nine months ended September 30, 2024, operating expenses decreased by 21% compared to the same period in 2023, primarily due to lower professional fees and a reduction in personnel-related compensation. Operating loss for this period decreased by 36% compared to the same period in 2023.
Liquidity
Vivos' balance sheet has also undergone significant improvement, with the company reporting $6.3 million in cash and cash equivalents as of September 30, 2024, compared to $1.6 million at the end of 2023. This enhanced liquidity position was bolstered by a $7.5 million equity investment from an affiliate of New Seneca Partners, a leading private equity firm, as well as a $3.8 million registered direct offering in September 2024.
The company's debt-to-equity ratio stands at 0.21, with a current ratio and quick ratio both at 1.44, indicating a relatively stable short-term financial position.
Future Outlook
Looking ahead, Vivos is poised for continued growth and expansion. The company's recent FDA clearance to treat moderate to severe OSA and snoring in children, as well as the issuance of new CPT codes by the American Medical Association covering all Vivos CARE oral medical devices, are expected to drive increased adoption and reimbursement for its products.
Furthermore, Vivos' strategic pivot towards the sleep center alliance model holds significant promise. The company's initial pilot programs have demonstrated strong patient preference for its oral appliance solutions, and Vivos is actively pursuing additional collaborations and potential acquisitions of sleep medicine practices to fuel its national expansion objectives.
Vivos expects revenue to continue building as early as the fourth quarter of 2024 and into 2025 as they roll out their new strategic alliance model. For every 100 OSA patients per month that start Vivos treatment under the new model, the company expects to realize top-line revenues of nearly $8 million annually. Vivos anticipates becoming cash flow positive from operations by the middle of 2025.
Risks
Risks facing Vivos include potential supply chain disruptions, regulatory hurdles, and the company's continued reliance on VIP enrollments, which may decline as the new alliance model gains traction. Additionally, the highly competitive nature of the sleep apnea treatment market and the potential for new entrants or technological advancements could pose challenges to Vivos' growth trajectory. The company has cautioned that the fourth quarter of 2024 may be a transition period as they shift their focus to this new model.
Conclusion
In conclusion, Vivos Therapeutics is a pioneering medical technology company that has positioned itself at the forefront of the fight against obstructive sleep apnea. With its innovative, non-invasive treatment solutions, strategic alliances, and a strengthened financial position, Vivos is poised to disrupt the sleep apnea market and improve the lives of millions of patients worldwide. The company's diverse portfolio of oral appliances, treatment protocols, and supporting products and services, combined with its focus on innovation, research, and strategic partnerships, aims to drive continued growth and adoption of its comprehensive solutions in the years ahead.