SomnoMed: Q3 result 2016

SomnoMed's North American sales are shooting the lights out, but less so in Germany.

SomnoMed has announced another impressive result with revenue increasing 32% to $11.1m for the three months to 31 March.

Total unit sales of SomnoMed’s custom-made mouthguards to treat sleep apnoea came to 13,997, up 16%. Most of the growth arrived in North America, where sales increased 28%. Executive chairman Dr Peter Neustadt said that this was particularly pleasing due to a sharp increase in US private health insurance premiums and deductibles in the first few months of 2016, which increased the effective price of treatment.

The company’s push into new European and Asian markets also made some headway with sales increasing 17% and 10% respectively. Sales were particularly strong in Nordic and Southern Europe (including Sweden, Norway, France and Italy), though were lacklustre in German speaking countries, Belgium and the Netherlands.

Licensee sales fell 45% and now represent only 7% of total North American sales as the company focuses on direct sales, rather than licencing its SomnoDent device to third parties. The company continues to invest in various growth initiatives, such as factory upgrades and 14 sales hubs, which reduced SomnoMed’s cash pile from $7.4m to $6.4m.

SomnoMed’s share price has almost doubled since we upgraded the stock in SomnoMed: A future mini-ResMed? on 5 Feb 14 (Speculative Buy – $1.33). Though our original investment case remains on track, SomnoMed is still a relatively young company with well-resourced competitors. Bumps in the road are to be expected. We highly recommend locking in profits as the share price rises and that you note our maximum portfolio weighting of 2%. HOLD

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