Compumedics distribution deal set to net millions

Sleep disorder specialist Compumedics has signed a deal with German medical manufacturer Draeger for distribution of its monitoring and diagnostic products.

The deal, estimated likely to generate over $AUD10 million in sales over the next three years, sets the seal of global approval on the Melbourne-based company. Compumedics gained FDA approval for its Somte portable monitor technology earlier this year.

"This relationship is important for both Compumedics and Draeger Medical as we team up to provide a range of high quality and high technology sleep products for the European market," said David Burton, Compumedics' executive chairman.

Burton said the deal marked the next stage in the company's strategy to market products into the broader diagnostic field, with promising prospects beckoning in both the cardiovascular and stroke fields.

"Studies in the US and Australia have indicated that some 50 per cent of heart congestion failures have sleep breathing disorders too. That is significant, and means that being able to monitor heart as well as sleep breathing to international gold standard is a real advantage for cardiologists using our products," he asserted.

"We see our strategy as being a latent one, in fact we have been working on these things for 17 years, but this deal with Draeger reflects the importance of our products."

Burton noted additional studies had also found a high correlation between strokes and sleep irregularities, an area the company is now actively looking into as a potential diagnostic tool avenue.

"The market for smart devices is now getting towards the commoditisation stage, with Taiwanese masks being sold for $5. Our key differentiator is our software, and the depth and accuracy of our algorithms," he said.

Even before the Draeger announcement, Compumedics was regaining momentum it lost last year after it had to create its own US operation when its distributor there ran into problems not of Compumedics' making.

In Japan, Compumedics products are distributed through medical equipment maker Teijin, a major shareholder in the Melbourne-based company which listed in a $15 million IPO in 2000.

Compumedics' revenues this financial year are tipped to reach $AUD30 million, compared with $17 million last year. Highlighting its turnaround, Compumedics achieved a slight profit in the half year to December 31 compared with a $2.2 million loss in the previous half. Its US sales have been growing at an average rate of 100 per cent every six months and early this year Somte was approved for sale by the US Food and Drug Administration.

It is likely Somte will lead the company's portfolio into Europe, but other lines such as the Siesta and E-Series platforms will also benefit from the deal, and expand its profile in the home health care, clinic and sleep laboratory markets.

The European sleep market is the second largest in the world after the US, and is growing at over 10 per cent per annum, indicating a good future for players in that arena.

Draeger will market and distribute Compumedics' products throughout Germany, France, Belgium, the Netherlands, Luxemburg, United Kingdom, Ireland, Austria and Switzerland. The agreement also provides for co-operative development of new products, possibly including diagnostic devices.

-- Additional reporting by Pete Young