Hello, and welcome to our fireside chat with Vivos Therapeutics. I'm your host, Joe Kim, Senior Healthcare Analyst at Water Tower Research. Today I'm joined by co-founder and CEO Kirk Huntsman and CFO Brad Amman. Vivos is a commercial-stage medtech company. They're focused on the treatment of sleep-related breathing disorders, and that includes conditions like obstructive sleep apnea and snoring. The stock trades on the Nasdaq under the ticker VVOS. Before we get started with today's fireside chat, I'd like to turn it over to Brad, who will be providing Vivos' disclosures regarding forward-looking statements. Brad?
Good morning, everyone. Before we begin today's fireside chat, we would like to remind everyone that today's call will be containing certain forward-looking statements from our management made in accordance with the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended, concerning future events such as the actual impact of our current strategic and business plans on our future results of operations. As is customary, the content of today's fireside chat will be governed by this language. In addition, during today's fireside chat, we may discuss certain non-GAAP financial measures. These non-GAAP financial measures exclude certain unusual or non-recurring items that management believes impact the comparability of periods referenced.
Please refer to the risk factors and other disclosures in our Form 10-K for the year ended December 31, 2023, our Form 10-Q for the quarter ended September 30, 2024, and our other filings with the SEC, all of which are accessible on the Investor Relations section of Vivos' website as well as the SEC website. Now I'll turn it back over to Joe.
Thanks for that, Brad. As always, you can find our research on the company on Water Tower's website at watertowerresearch.com, and that includes our recent initiation of coverage on Vivos. Now I'd like to welcome Kirk to the fireside chat. Kirk, thank you for joining us today.
Glad to be here, Joe. Thanks for having me.
Of course. This is our first fireside chat with you and Vivos, but I wanted to remind our audience that we've had Kirk on our Small Cap Spotlight podcast in September, and we discussed their recent FDA clearance and monitored severe pediatric OSA. That episode is available on our website if you are interested in listening to that. Kirk, I think it's a good place to start for anyone new to the Vivos story, if you could provide some introductory comments and a brief company overview.
I'd be glad to. Thank you. As you know, Joe, we are engaged in a battle with a disease that is really nothing short of an epidemic globally. We're talking about obstructive sleep apnea, breathing, and sleep-related disorders. These things afflict over 1 billion people on planet Earth. If you think about just the scope and the size of this, it's really difficult to imagine very many other conditions that plague as many people on this planet as breathing and sleep disorders. We're talking about one out of eight people walking around having difficulty with their breathing or their sleep or both. The interesting aspect of it is that after many, many years of addressing this issue, trying to address this issue, the medical community has really not come up with a great solution.
Vivos steps into this situation and says, "Hey, wait a minute, we have a really novel approach to this. It's an approach that gets to the root cause." We will talk about this throughout the course of things tonight. Just as an orientation, what Vivos is bringing to a very, very large marketplace is an opportunity to actually fix the root cause of many of these disorders and give people a way to heal and give them the way to do that in an affordable, accessible, and lasting way. It is really an exciting mission for us to be on. We do view what we do as not just a great business, but also a great opportunity to serve mankind. That is pretty much the Vivos story in a nutshell right there.
That's great to hear. I was talking about your products, your oral appliances. To start off, let's talk about the more recent events where you are shifting your marketing model from one that was different on an operational focus. Could you talk about how this change affects first, maybe the number of patients you can now access that have OSA and what type of deals that you're making to convert to this new model?
Yeah, that's a big question with a lot of different things in it. Let me just sort of break this down for those who may be new to the Vivos story. We came to the market with a novel technology that's an oral appliance device, in fact, a whole line of oral appliance devices. These devices have been given some unique clearances. There are over 200 different oral appliances on the market today. They're all basically the same thing. They all do exactly the same thing. The only differentiated technology is the technology that Vivos has. That technology involves a biomechanical remodeling of the human airway. What we're doing here is we are actually repositioning the tissues.
We work through an oral appliance device, and we're repositioning the tissues of the oral cavity and redeveloping them in such a way that it actually ends up targeting the size, the shape, the functionality of the airway, which sits right behind it. As we reposition, which dentists have been doing for a long time, right? The unique aspect of what we do is that we leverage the orofacial tissues of not just the oral cavity, but the entire maxillofacial complex, this lower third of our face. We reposition those tissues in such a way that the airway just pops open. It's a fascinating technology. It's all done nonsurgically. It's all mediated through an oral appliance. It was natural for us to come to this marketplace focused on dentists.
We really believe that dentists had the patients, they had the interest level, they had the ability to just really lead the charge in addressing this issue because they were seeing the same patients that are showing up in the sleep specialty clinics and getting tested for OSA. Those patients still have teeth, and those patients are showing up twice a year in the dental office. It was a natural, it seemed to us at least, a natural thing for the dentist to be delivering this. It turns out that the dentists are really intimidated of this. They really have not carried the water the way we expected them to. They are more focused on dental things, as they should be, than really addressing a medical condition, such as a serious medical condition, such as obstructive sleep apnea.
Therefore, what happened here was that we began to explore what other channels of distribution, what other opportunities there were. In November of 2023, we garnered through the FDA an unprecedented clearance to treat severe sleep apnea. All the other oral appliances in the world have only been given clearances to treat mild or moderate. The very easiest kind of sleep apnea to sort of address was given to them. Because of the different mechanism of action, which our technology employs, we were given a, and also because of a lot of data that we published in medical journals and dental journals, all these different things that our devices are doing something radically different.
What happens here is that we get this clearance in November of 2023 that says Vivos appliances, what we call our CARE devices, are now cleared to treat all levels of sleep apnea. That sent shockwaves through the entire industry because the only other non-invasive treatment option for sleep apnea had historically been a CPAP, some type of a CPAP machine, CPAP being the continuous positive airway pressure devices that are ubiquitous, right? Everybody knows somebody who's wearing a CPAP or whatever. What happened was that all of a sudden, the medical community sat up and took note and said, "Hey, wait a minute. There's a new kid on the block here who has something that's not just another oral appliance device." The medical community has embraced us like no other.
This is a really important aspect of things because at that same time, we were making a strategic decision to pivot our model towards going directly to the medical community. After all, it's in the sleep testing centers, it's in the sleep clinics, it's in the medical community, the cardiologists, all these people that are dealing with sleep apnea patients. It's in that community where all these patients actually reside and where the doctors have to deal with it. It's not like dentistry where this is a sideshow, sidebar type thing. In the medical community, they've got the millions and tens of millions of patients in their practices that are dealing with this, and the patients need a solution.
As we have gone to the medical community, it has been really, really great to see the way that they have embraced us, the way that they have really adopted this as part of their regimen. As we give patients the choice of how they want to be treated, they pick Vivos. We will talk about that as we go. I want to just, the drivers for Vivos were primarily a sole reliance on dentistry was not working, not working to allow us to scale our business model. This pivot where we are not only going to the medical community, but we are actually involved in the actual delivery of the treatment. We are actually hiring the dentists, hiring the physicians, the sleep specialists. They will work for Vivos in a vertically integrated model where we will be swimming in the deep end of the economic pool, so to speak.
Before, with a case, there was a limited amount. We would deliver an appliance to the doctor who would mark it up several times over and deliver that to the patient. Our role and our margins, our opportunity to profit off of each and every case that we delivered was limited. Now all of a sudden, we now have a dramatic multiple, four to five X of what we had before is available to us in this new model. We can talk more detail about that. The reasons for the pivot are access to more patients, access to better economics, and the ability to deliver what amounts to a lifesaving treatment plan in many cases or lifesaving treatment to many, many more people around the world. That's what's driving us.
Yeah, that's very helpful and great details. It leads to a lot of questions. I think when we look at the competitive landscape, you talked about CPAPs being the dominant player because they're in front of physicians and the medical community. How do you compete against this entrenched, and you call it the gold standard for OSA treatment? How do you compete against that when you're in front of a physician?
I hate to say this, but look, sleep apnea first appeared in the medical literature just 60 years ago. If you think about in the history of mankind's warfare against disease and sickness and all these sorts of things, that battle goes back centuries. Sleep apnea has only been identified as a discrete disease and condition for 60 years. It has only been 40 years since CPAP came along. In the late or mid-1980s is when CPAP, basically the first CPAP units came to market. Yet here we are today, 40 years later, and the so-called gold standard has not changed. It is as if we have a horse and buggy solution to travel.
It is all we have had, even though there are automobiles along the way, it is like, because we have always done a horse and buggy to get to the store and back, that is what we are going to do. We come along and say, "Hey, wait, you know what? You do not have to accept that if you have obstructive sleep apnea, you now have a life sentence to ride in that horse and buggy every night for the rest of your life. You have a third rail option to actually, with Vivos, in less than 12 months, we can often reverse and sometimes even completely fix and resolve the sleep apnea." The patients do not ever have another intervention. We have treated over 60,000 patients, and I cannot even count on one hand the number of patients that we have retreated. This is a really important thing.
When you think about how do we compete against this massive monolithic thing called CPAP? Everybody hates it. Nobody wants to ride around in the horse and buggy. They'd rather have that nice Ferrari that gets them there to the store and back in style. That's really what the contrast could not be more appropriate there because nobody drives a 40-year-old car. Nobody rides in a horse and buggy, and yet in medicine, because of tradition and because it's been designated as the gold standard, what a lot of people really don't even know is that in 2021, the FDA came out and had a massive series of recalls beginning in 2021. Ever since, they've recalled millions and millions. I've heard numbers up to 10 million CPAP units have been recalled because people were reporting serious adverse health events, pneumonia and cancer and all kinds of things.
561 deaths were reported directly attributable to CPAP. The FDA finally said, "You know what? We can't have this." They pulled all these CPAPs off the market, and patients went, "Okay, now what do we do?" Here we are at Vivos raising our hand going, "Okay, here we are at third rail option." Finally, the FDA gives us this clearance and another one last year for kids. We've got a unique set of circumstances here where we have the ability to leverage a unique market opportunity by going direct to those patients when they first get diagnosed with sleep apnea and have a voice at the table there.
To me, it sounds like you need more awareness. That is essential to your new marketing strategy because you have a product that I know you can't say it, but it potentially could be a cure because you stop using it and the benefits stay. It appears to be permanent. Can we talk about your first strategic alliance and how that's going? You mentioned before that you have made a partnership with a Colorado-based sleep center.
Yeah. No, we're very excited. The name of that group is V ivos Health, and we're excited about our strategic alliance with Vivos. We're excited about what it portends. We have sort of been slow-walking this through the first several months of this alliance to make sure that we have all of our ducks in a row and that everything is, there's a whole new series of systems and software and equipment and things that have to be sort of reconfigured in order to facilitate our model, which we have put in place now. We've trained dentists. We've been starting to see this. The good news is that when patients are presented with all their treatment options, at a rate of two to one, they're preferring Vivos right now.
We have had experience in the past, which gives us reason to think that that can go as high as four to one. When that happens, though, we're talking about just in Colorado, the opportunity to grow our revenue streams by multiples over what they've historically been here at Vivos. That's just in one market with one sleep group. There are 2,500 of those kinds of companies around the country that operate off of a very low margin and high volume dependent model for their profits and their revenue. They're anxious to hear from us. This first one is going extremely well, to your point. It's right now just about to kick into gear here in Q1, where we're starting to see the real ramp-up start to take place.
A lot of preparation, a lot of groundwork being laid in the latter half of 2024. Now, as we turn the corner to 2025, we should start to see some of the revenue accretions taking place and start to see that really build, and the profit will follow.
I hope that I could ask you for a little bit more detail on the patient's journey. I know that you can't talk about anything you haven't disclosed before on the strategic alliance, but if you could tell us from when the patient gets diagnosed at the medical center to them reaching you for you to put their options in front of them. What's that financial impact? Maybe if you could expand on that a little bit more.
Okay. That's a really, really good question. I think once people begin to understand sort of the nature of this, they'll begin to see the merit of our strategic pivot and our new model. What happens is, though, let's just say that you're a guy, you're having some sleep issues, you're not breathing, maybe sleeping, maybe your wife's elbowing you saying, "Stop that snoring," or, "Go to the next room," or whatever. All of those things lead a patient, male or female, of all ages, right, to go to their primary care physician, to go to their cardiologist, to go to their internist, to go to the pediatrician and say, "Something's not right, and I don't know what it is. I don't have any energy. I feel fatigued. I have brain fog. I have chronic hypertension. I have chronic diabetes.
I have all these things that are now known to be coexistent. We use the term comorbid, but coexistent with obstructive sleep apnea. Your physician is going to give you a script that says, "I'm going to give you a script to get a test." It used to be that to get tested for sleep apnea, you had to schlep yourself over to a sleep lab, and you had to get wired up with 100 different wires, and you had to sleep in front of strangers. You can imagine doing that with a five-year-old, right? It was a very difficult, very costly process. Because it costs so much to get sleep tested, the payers, the insurance companies put up all these barriers to having that happen. Nowadays, technology in the diagnostic side of things has allowed the cost to drop by over 90%.
If you think about what that means, that means that a lot more patients have access to being tested. One of the things I mentioned earlier was that there's a billion people running around on the world with obstructive sleep apnea, but I didn't say that 90% of them, up to 90%, are undiagnosed and therefore untreated. A lot of it had to do with the difficulty of diagnosis. Technology has now solved that. In just the last three or four or five years, technologies have come to the market that have driven that cost down so dramatically. What happens is that a patient now gets tested. Let's just say you got your test. What's going to happen is after your test is done, you'll do that in your own home now. You no longer have to go to a sleep lab.
There are sleep labs still available. Testing centers exist in every market, but you can do your test at home in the comfort of your own home, and then you will get a consult with a board-certified sleep specialist who will read the test results and render a diagnosis. You will then know, "Do I have sleep apnea and how severe it is, or if there's other kinds of conditions that show up in your test?" At that point, you go back to your original doctor, or you get a prescription from that sleep doctor that says, "You need treatment, and I'm going to give you a recommendation for CPAP, oral appliance therapy, or possibly a rehabilitative therapy like Vivos." Those prescriptions are then given back. You go back to your doctor, and you consult with your doctor, say, "What do you think?
Which way should I go?" And then you have a choice to make. If Vivos has a seat at the table at that juncture, we have the opportunity to say, "You don't have to wear a CPAP every night for the rest of your life. You do not have to do that. You do not have to wear a mandibular advancement device every night for the rest of your life." Within 9-12 months, we can actually rehabilitate, restore your airway, and give you an opportunity to have dramatically reduced symptoms, to have much better free breathing and a non-collapsible airway or an airway that is at least less prone to collapse. All of those things leave those patients feeling better, feeling more energetic, feeling like they have truly gotten a rejuvenating sleep every night. That is what patients want.
When we present that kind of a treatment path to patients, like I said, today, two to one in our actual empirical data. Historically, we've seen in some of our experiments, some of our testing pilots that we've done, up to four to one. We think we can get that to four to one, where the hundreds of thousands of patients in this country that get tested for sleep apnea will have the opportunity to have a four to one likelihood that they're going to pick Vivos over every other option that's on the table because it's now being presented to them. That's really the patient journey. That's how they get it.
Now, what I haven't mentioned is that we have this group of people that we call treatment navigators that we actually deploy to help patients answer their questions, give them all their options, let them pick, let them choose, help them navigate the insurance, what their payer is going to pay. We are kind of helping to facilitate this. Honestly, we see this as giving us access to hundreds of thousands of patients. Really, literally, I mean, the numbers go pretty far. As you know, though, you've done the math here. They go north pretty quickly on what we're able to do.
Right. It sounds like it's all in front of you, and it's a matter of bringing this out to physicians and patients. You have your first strategic alliance, and I know you have plans to expand. Are you waiting until how this Colorado-based alliance works out before signing on new deals? Are you navigating through agreements right now? You talk about the progress of extending your reach.
Okay. You know I have to be really careful about this. Let me be a little bit, I'll be a little bit vague in my answer, but let me just say this. We don't wait around for anything around here. We are aggressively pursuing all opportunities that come before us. We are deeply engaged in negotiations with additional groups that we believe will be extremely accretive to the things that we're trying to do around here. You'll see in the next weeks and months, you'll see announcements. You'll see as these things materialize, and given that they do materialize, you'll see us bringing forward announcements. It's not a few, right? One of the things I want to emphasize is that the sleep testing business has been assaulted by lower reimbursement rates.
Every year, these guys turn around, and the payers have cut their reimbursements. They've had technology that is just sort of leapfrogged. A lot of them, they used to have a footprint with a big investment in real estate because they had to have all these beds, and they had to have all this leased facility space to do all their polysomnogram testing, which requires in-lab overnight sleep testing. Now, you can do this by literally mailing a ring to a patient at home and then having that patient do a couple of nights and turn that ring back around. I mean, it's literally that easy to do nowadays. There is a lot of evolution. There is a lot of things going on.
The opportunity to explore new revenue sources and new opportunities to treat their patients better, a lot of these sleep doctors have come to us and said, "Thank goodness you guys are here. We have been waiting for some new technology to come along that gives our patients a viable alternative to CPAP." They hate CPAP. They do not want CPAP. We are tired of pushing them into CPAP, but the horse and buggy is the only mode of transportation that we have had. All our patients get CPAP today, but we could easily see converting all this to Vivos. If the kind of things that you are talking about, the kinds of things that you are saying about your products really materialize, and they are, then it is a no-brainer for them to pivot.
I think there's another important point you made earlier is that there's about a billion patients with OSA globally, and I think an estimated about 90 million adults and children in the U.S., but only 10-20% are diagnosed. The majority does not have a diagnosis for OSA. When you look at the market opportunity and the competitors, it doesn't have to be a zero-sum game. You don't have to compete head-to-head with CPAP. You could actually grow the market, if that's a present assumption, by diagnosing more patients. Want to get your opinion on that, but also with the introduction of the GLP-1s and the obesity drugs, Zepbound just got approved for sleep apnea in patients with obesity. How does that change the landscape, do you think? Not just for you, for CPAPs, but broadly.
Okay. Great question. There's a lot there. In my answer, if I don't respond to every aspect of that, just remind me, okay? Because you covered a lot of ground. Let's just talk a little bit about the phenomenon of obstructive sleep apnea and its origins and what they call in medicine the pathogenesis, right? Sleep apnea actually begins with a phenotype. You have Asian blood, Asian ancestry. Asians, an Asian phenotype, is genetically predisposed to greater incidence of obstructive sleep apnea. Why? Because the cranial structures of your face, of your brain, of your cranium are different than Caucasians and Asians and others. Each phenotype or genetic phenotype has a particular predisposition towards this. It begins actually prenatally in a lot of cases.
Irrespective of genetic phenotype, the condition of obstructive sleep apnea begins where there's something that goes wrong nutritionally or something that goes wrong with a traumatic birth even. You can have a patient who comes out after a traumatic birth, maybe there's forceps involved, maybe there's whatever, but if that child's cranium never really reshapes to the way it was supposed to be, it compromises that child's ability to breathe properly. That child will be handicapped throughout their life, not really knowing that because it's like a fish in water. They don't know anything different, but they'll never really realize that their airway has been compromised. We see in modern man, we see nutritional compromises in our food supply. We see a lack of breastfeeding of our children. We see other environmental factors that weigh in on creating this phenomenon of a breathing and sleep disorder.
Remember, breathing is the core pathology here, and it's really the breathing that compromises our sleep and causes our sleep to be disrupted, which in turn sort of cascades down into all the other comorbid coexisting conditions where we see rises in incidence of cancer and fibromyalgia and chronic fatigue and erectile dysfunction. I mean, you can go down and early onset Alzheimer's. All of those conditions happen because of that. Obesity plays a role, but sometimes the obesity arises because of the sleep apnea, not vice versa. Sometimes it's a developmental cranial structural condition of which obesity is one element. A lot of times there's a misnomer out there that the people that suffer with sleep apnea are all really high BMI, overweight males in their 40s and 50s and 60s, and that's just not the case.
There are a lot of very thin, very fit, very dynamically active humans that also have obstructive sleep apnea. They do not fit the stereotype. That is one of the things that research has learned. When you ask me about the GLP-1s and all that sort of thing that is happening, I really do not see that as addressing any more than one sliver of the overall population. What you might have in many cases is a person that does not sleep properly, a person with a breathing and sleep disorder such as obstructive sleep apnea, at night, when their body is trying to restore and rejuvenate and they are trying to get that deep sleep, the body actually secretes cortisol, which leads to more, it leads to higher BMIs. It leads to the accumulation of adipose tissue in the body.
What happens is that they do not get the good release of human growth hormones. Sometimes it is the sleep apnea causing the obesity, not the obesity causing the sleep apnea. There is a really dynamic interplay that is a two-way street there that we are just now coming to understand. What I would say about that is we do not yet know all of the risks associated with these GLP-1 drugs over an extended period of time. I read the other day something about some really strong concerns about acute renal failure, right? Kidney disease and other things. There are just a lot of things we do not know. To the extent that those drugs help with patients whose sleep apnea arises because they are overweight, that is great. That helps them, and that is wonderful.
The vast majority of patients will not get a complete resolution even though they do lose weight. I don't really see it for the long haul for us. There are still no amount of weight loss is going to affect a person's lack of development in their cranium, their craniofacial structures, even now being associated with the proper functioning of all things, our hips and our pelvis. This breathing apparatus that goes up and down throughout our torso and whatnot is actually impacted by so many different aspects of it that the BMI is just one element of it.
No, I agree. I think I saw the data out there that as of two, three years ago, 50% of people with OSA were normal weight. There is a huge non-obesity driver in this condition. I think we've gone a little bit over the time that we allotted. I wanted to ask you this final question. Probably won't get a detailed answer from you, but would definitely love to have you back and have more discussion on your company. You have an earnings call coming up. What can you say on what we could expect for you guys to talk about on the earnings call?
That's a great question. Where I see things as the CEO of this company is I see Vivos at a true inflection point. As you know, we talked about the pivot, the strategic pivot, the fact that we've been sort of laying the groundwork here for a lot of things. There are a lot of things in our pipeline that are coming, some great announcements that we hope to be able to make and all that. I would see this as an inflection point. We'll talk about that. I think we'll start to see here as we move into 2025, the realization financially and in our numbers, you'll start to see the success of some of the things that we're talking about begin to flow through our financials. I think it'll become real.
I think we'll try to provide as much color as we can without getting into too many things that are sort of prospective. We're very, very excited. This is the coming out party for Vivos. This is the time in our history, in our company's evolution, when it's go time. For us, it's now we've proven that this pivot is viable. We've been proving it up here in Colorado. We've been proving it with our first sort of strategic alliance. Now it's time to execute that on a larger scale. We're up for it. We're ready to go. I think you'll hear more details around things like that. We may even have more. By that time, we should have some more concrete announcements that we could make for you.
Fantastic. We're looking forward to it. Kirk, thank you so much for this great conversation. Thanks for joining us today. For our viewers, thank you as well. To learn more about Vivos, please visit their website. You could access their research and the previous podcast with Kirk on Water Tower website. Lastly, I want to remind all listeners, the views expressed in this Fireside Chat may not necessarily reflect the views of WTR and are provided for informational purposes only. Fireside Chat may not be distributed or reproduced without the written consent of WTR and should not be considered research nor recommendation. WTR is an investor engagement firm, not a licensed broker or broker-dealer, market maker, investment bank, underwriter, or investment advisor. Additional disclaimers can be found at Water Tower Research. If you have any questions, please feel free to email me at doe.kim@watertower.com, research.com. Thanks again, everyone.