Oventus Appendix 4D and Half Year Report for 31 December 2016

Review of Operations and Expected Future Developments
Review of Operations and Expected Future Developments
Sydney, Mar 2, 2017 AEST (ABN Newswire) - During the half-year the principal activities of Oventus Medical Ltd (ASX:OVN) (the Company) consisted of the commercialisation and distribution of the O2Vent(TM) T, in Australia, as well as development of a pipeline or products to treat segments of the snoring and sleep and apnoea market. These segments include those that do not comply or adhere to existing treatment options due to nasal obstruction and/or inability to utilise the CPAP mask.

Review of Operations

The significant factors underlying the operating performance were as follows:

1. A pilot marketing launch has been initiated in Australia for the O2Vent(TM) T. As a result the Consolidated Entity earned $255,236 in revenue in the 6 months to December 2016.

2. This Australian launch will now be scaled up following the training of more dentists and the collaboration with two dental corporates that were signed in October and December 2016.

3. The O2Vent(TM) T was submitted to the FDA as a 510k and was subsequently cleared for market release (announced 26th September 2016). Five pilot or Beta clinical sites have been set up and the first of these sites have now started delivering appliances. These orders will be taken by the Consolidated Entity's new US subsidiary Oventus Medical USA.

4. The Consolidated Entity announced the completion of the first detailed physiological pilot study (24th January 2017) into the effect of the O2Vent T on pharyngeal pressure swings, which cause the airway to collapse in Obstructive Sleep Apnoea and as a Continuous Positive Airway Pressure (CPAP) interface. The study resulted in encouraging data in a small sample size (n=4) which supports the benefit of the airway in reducing pressure swings, collapsibility and CPAP pressure requirements. This indicates the use of the O2Vent T as a CPAP alternative either as a standalone appliance, or in combination with CPAP using it as a strapless CPAP interface. The trial will progress to the next stage to confirm initial findings in a larger cohort and will be mainly funded by the CRC-P.

5. The Consolidated Entity has implemented a state of the art cloud-based Enterprise Resource Planning (ERP) system which links the Consolidated Entity's current and future operational subsidiaries to the Oventus Medical financial management system. The ERP system includes manufacturing, patient and customer management and Advanced Partner Centres (APC) (for individual clinical sites) that accesses only their own Patient records. The APC is compliant with HIPAA (Health Insurance Portability and Accountability Act) - a key requirement for managing patient records in the US.

6. The Consolidated Entity's Quality Management System has received both ISO13485 and MDSAP (Medical Device Single Audit Program) accreditation (announced on 10th January 2017 and 8th February 2017 respectively). ISO13485 is recognised globally as the best quality practice within the medical device industry. These certifications are a key requirement for major markets including Europe, the United States of America, Canada, Japan and Australia.

7. A new machine for polishing appliances has now been received and installed - it is currently being commissioned. Once commissioned its use is expected to increase the efficiency of production.

8. The Consolidated Entity announced (1st February 2017) a product correction recall for 191 O2Vent T appliances manufactured between 1st September 2016 and 30th November 2016. The correction is related to the Adjuster Assembly component of the device that allows adjustment of the screw and hook for appropriate titration. The correction was identified through post-market surveillance data after 12 devices were returned to the Consolidated Entity (representing 6% of the devices manufactured during the period). These devices are being recalled as a precautionary measure, to be checked and if necessary, reworked in production with an improved manufacturing process. The manufacturing process that contributed to the correction has now been addressed, and all devices manufactured after 30th November 2016 have been checked and verified as safe and in full working order. The devices that have been recalled for correction, represent a small percentage of the devices that have been manufactured and delivered to patients. The recall will not be material to revenue or cash flow.

9. A number of new products have advanced through the R&D process. All are anticipated to be completed and transferred to manufacturing for regulatory clearance over the next 6 to 9 months. These include new appliance designs including a version with a compliance sensor for monitoring when the patient is using the appliance and a connector system to allow combination therapy with CPAP - with and without an on-board sleep test. A research and development project for the 3D printing of inserts is progressing with a focus on developing end to end digital workflow and suitable materials printed by state of the art equipment. When implemented this is anticipated to lead to a significant reduction in production costs compared to the current manufacturing process.

Expected Future Developments

The following factors are likely to affect the results of the Consolidated Entity in the future:

1. Uptake and acceptance of the O2Vent range of products by patients and clinicians in various geographical locations.

2. Partnerships for clinical delivery and distribution in various geographies.

3. Additional clinical evidence/clinical trial results which highlight the benefit of the airway for a range of patients.

4. Being able to scale manufacturing to meet demand.

5. Additional products developed and cleared by regulators that can treat a wider range of patients including those that are intolerant of CPAP masks or in the future, as a first line of treatment for specific severe sleep apnoea patients.

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About Oventus Medical Ltd

Oventus Medical Ltd (ASX:OVN) is a Brisbane based medical device company that is commercialising a unique treatment platform for the treatment of sleep apnoea and snoring. Unlike other oral appliances or CPAP interfaces, the Oventus devices have a unique and patented airway within the treatment platform that allows air to flow to the back of the mouth unobstructed while maintaining an oral seal and stable jaw position, bypassing multiple obstructions from the nose, soft palate and tongue, reducing airway collapsibility and managing mouth breathing while maintaining a stable airway. They are particularly designed for the many people that have nasal obstructions and consequently tend to mainly breathe through their mouth. While it may seem counterintuitive, this technology actually manages mouth breathing by converting it to device breathing and normalising ventilation. The O2Vent is designed to allow nasal breathing when the nose is unobstructed, but when obstruction is present, breathing is supplemented via the airways in the appliance.



Dr Mel Bridges
M: +61-413-051-600

Kyahn Williamson
WE Buchan
T: +61-3-9866-4722
E: kwilliamson@buchanwe.com.au

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