Interview with: J. Robert Paulson Jr., President, CEO and Director - featuring: their innovative medical devices to treat sleep disordered breathing, including their proprietary Pillar® Palatal Implant System, which is the only implantable device to treat the soft palate component of snoring and mild to moderate obstructive sleep apnea.
|Restore Medical, Incorporated (REST-NASDAQ)|
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Restore Medical Is Building On Their Vision
Of Becoming A Market Leader In The Treatment Of Snoring And Obstructive
Please tell us about your basic products and services.
What is the actual product and what is your revenue model?
you selling the device?
they come together?
there many competing procedures?
What choices do doctors have in treating patients, and why are the choosing
the Pillar® Procedure?
Most upper airway surgical procedures are
performed by Otolaryngologists (Earn, Nose & Throat surgeons or ENTs) using
a “single-level approach”. As the clinical evidence has continued to evolve
over the past several years, more and more ENTs are recognizing that in
order for the efficacy rates of sleep apnea surgical approaches to improve,
they need to address multi-level upper airway obstruction by performing
combination or staged procedures to treat the multiple areas of obstruction.
The surgical treatment of sleep disorders is very much an evolving field in terms of approach. The number of patients that are diagnosed with obstructive sleep apnea or snoring continues to increase, due in no small part to the aging of our population. As we age, our tissue loses tone and elasticity, which can contribute to the fluttering or collapse of tissue that can cause or contribute to snoring and obstructive sleep apnea. In addition, conditions like obesity and excessive alcohol consumption can affect a person’s sleep and contribute to both obstructive sleep apnea and snoring.
For obstructive sleep apnea, health insurance typically covers both an overnight sleep study and CPAP therapy. Most health insurance policies require a patient to fail CPAP therapy before upper airway surgical procedures are covered. While Restore is in the process of working with the American Academy of Otolaryngology to obtain reimbursement for our Pillar Procedure to treat obstructive sleep apnea, the cost of the Pillar Procedure is not covered by most health insurance policies, and patients typically pay for the Pillar Procedure “out-of-pocket”.
The vast majority of medical plans consider snoring to be a cosmetic procedure, and, typically, the cost of snoring procedures is not covered by insurance. Therefore, if a sleep study determines a person does not have sleep apnea but merely snore, then any therapy they choose to receive, be it CPAP or a surgical procedure, is going to be considered cosmetic and they will have to pay for that therapy “out-of-pocket”. The Pillar Procedure is a clinically proven and effective, in-office procedure to treat the soft palate component of snoring and obstructive sleep apnea that can be performed in a physician’s office in approximately 20 minutes using only local anesthetic, allowing people to resume their normal diet and activities the same day. To date, we have completed 22 clinical studies on more than 850 patients, and the results of these studies consistently demonstrate both efficacy and sustained results.”
With the aging of the population, are people seeking out treatment for
snoring and are they willing to pay for it?
People are willing to pay for outcomes, and we consider the Pillar Procedure to be another example of a lifestyle medicine product that can help people to improve the quality of their lives. The key is how the Pillar Procedure is positioned with potential consumers - people are not paying for the procedure, they are paying for an outcome - the reduction or elimination of their (or their bed partner’s) snoring. In large part, the decision to seek treatment for snoring is driven by the bed partner. Often times, the person who snores is not bothered by their snoring but instead, it is the bed partner who is disturbed and loses an hour or more of sleep a night. Frequently, loud snoring can end up driving the bed partner to sleep in a different room, severely damaging the intimacy of a marriage or relationship.
One of the challenges of the snoring market is that many physicians do not consider snoring to be a medical condition. That position certainly is debatable as there is increasing clinical evidence that snoring is part of a continuum of sleep disorders, and continuous snoring over a period of years often evolves into sleep apnea. However, regardless of whether snoring is considered to be a medical condition, it clearly is a lifestyle and quality-of-life issue. If a bed partner is so disturbed by snoring that couples end up sleeping in different rooms, people are willing to pay for a procedure that can alleviate that condition and allow them to return to sleeping together as a couple.”
you market to physicians or the public, and how does that work?
The next step is this process requires the physician to have a practice that welcomes these potential patients, educates patients about their treatment options, and then convert this interest into procedures. One of our biggest challenges has been that historically, most of the procedures performed by ENTs are reimbursed under current health insurance policies. In contrast, patients are required to pay for the Pillar Procedure out-of-pocket, and in addition to educating patients about their treatment options, physicians must inform their patients that they will be required to pay for the procedure.
This evolution of practice has occurred in other lifestyle medicine markets. Consider how dental practices have changed over the past ten years. Dental insurance coverage changed in a couple of ways; first, as reimbursement rates fell, patients were required to pay for all or a portion of their care; second, patients were required to pay the dentist directly, and wait for reimbursement from their insurance company. As a result, dentists were required to evolve their practice and not only learn to ask patients to pay for procedures, but they also began offering additional treatments or procedures to supplement their revenue streams. You go into most dental practices today, and you not only get your teeth cleaned or cavities filled, but you also have the option to purchase any number of different products or procedures to whiten or straighten your teeth, or improve your smile – all of which is paid 100% by the patient, out-of-pocket. Today, dentists generate a significant portion of their practice revenue from providing lifestyle/quality of life outcomes that people pay for out-of-pocket.
This same type of change that is underway in the treatment of sleep disorders that affect the quality of life for millions of people. For example, while CPAP, is a very effective therapy for obstructive sleep apnea, data demonstrates that 50% or more of the people who receive CPAP decide to not use the machine even though they are suffering from the significant disorder that affects their overall health. These patients are seeking alternative treatments, and are willing to pay for alternatives that provide effective outcomes. For example, some sleep dentists and Oral Maxillo Facial physicians offer oral appliances to treat sleep apnea for non-compliant CPAP patients. Oral appliances are orthodontic-like devices that advance the jaw and tongue to prevent the tongue-base collapse that can cause or contribute to obstructive sleep apnea.
Even with the various upper airway surgical procedures offered by ENTs to treat snoring and obstructive sleep apnea, there is a definite trend and desire on the part of both physicians and patients to seek procedures that are less invasive, and that is where the Pillar Procedure fits in very well. Because the soft palate is a primary contributing factor for more than 80% of people suffering from snoring and obstructive sleep apnea, a minimally invasive approach to treat the soft palate is important and desirable.”
What is the financial picture like today?
These elements require the adoption of changes in both clinical algorithms as well as clinical practice patterns. It not enough simply to be interested in treating sleep; a physician must be committed to offering patients minimally invasive in-office treatment options. A successful practice also requires a mindset that embraces a “self-pay” approach and recognizes that people are willing to pay for outcomes. Other lifestyle medicine markets such as Lasik, cosmetic surgery and dentistry, have demonstrated a proven methodology that we are now bringing to the sleep market. Another element of a successful lifestyle medicine practices that physicians provide their patients with financing options to pay for elective procedures. Again, we do not have to “reinvent the wheel” – financing organizations like Care Credit provide physicians with “turn key” financing programs for their patients.
Our ability to provide physicians with these various elements of practice development requires a sales force that can effectively provide consultative support to individual practices. This consultative approach not only requires our sales reps to be knowledgeable about the clinical applications of the Pillar Procedure, but they also need to understand and be able to educate physicians on how the Pillar Procedure fits into a combination procedure approach to treat multi-level upper airway obstruction. These practice development skills also include educate physicians and their staffs on how to present treatment options to patients, how to set up their practices, and how to, consistently and effectively, convert patient interest into procedures.
Another important element of practice development is helping physicians to increase the flow of sleep patients into their practices. There are a number of different tools and programs that we use, including programs such as “community health talks” that are designed to raise awareness of sleep disorders, and treatment options, with potential patients and their bed partners, as well as screening current patients for sleep disorders. As an ENT, every patient they see has a condition that affects their upper airway – most ENTs do not ask their patients if they are suffering from a sleep disorder. By definition, if 25% of Americans suffer from some form of snoring or sleep apnea, then the percentage of patients coming into ENTs’ office will be even higher because everyone that goes into an ENT’s office has an upper airway issue between their head and their neck of one form or another. So while a patient may come in because they have a sinus infection, if properly screened, the physician also will have an opportunity to learn if they also snore, and if so, educate the patient about minimally invasive treatment options they offer that can be done in the physician’s office.”
physicians are resistant to change?
Historically, there has not been a lot of technology innovation in the ENT space practice; the basic practice of ENTs is to excise and remove tissue. While there have been advancements and improvements in cutting technology and tools used to remove tissue, there has not been a lot of innovation in procedures or approaches that involve implants. Our challenge then has been both to convince physicians to change their clinical practice pattern, as well as introducing an innovative implantable device in a market segment where there has not been much history of early adoption.”
closing, why should investors be interested now?
By way of example, approximately 2.5 million
patients a year undergo sleep studies. Approximately 1.5 million of these
individuals are diagnosed with obstructive sleep apnea and prescribed CPAP,
and 50% of those people do not comply with their CPAP therapy. That means
there are 750 thousand patients a year that are dropping out of CPAP therapy
and looking for alternatives. On the other side of those 2.5 million sleep
studies, one million people a year are told they don’t have sleep apnea and
just snore or they have mild sleep apnea but aren’t willing to go on CPAP
therapy. Capturing 20% of the people who are diagnosed annually and do not
comply with their CPAP therapy represents a market opportunity of more than
$100 million for Restore Medical. Similarly, those 1 million patients a year
that are told they do not have sleep apnea and only snore, Pillar implants
represent an opportunity to address a significant lifestyle issue. Capturing
15% of this group of these individuals that only snore or have mild
obstructive sleep apnea represents a similar and incremental market
opportunity of more than $100 million annually. No matter how you evaluate
sleep disorders, the market opportunity is huge, and the Pillar Procedure is
a proven, clinically effective, minimally invasive treatment option – the
opportunity will be driven by increased awareness and market adoption.”
“The Pillar Procedure is a clinically proven and effective, in-office procedure to treat the soft palate component of snoring and obstructive sleep apnea that can be performed in a physician’s office in approximately 20 minutes using only local anesthetic, allowing people to resume their normal diet and activities the same day.” - J. Robert Paulson Jr.
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