Behind the Term Sheet: Investing in to Bring Better Sleep to the Growing OSA Market

April 7, 2022
North America

“Sleep is a basic human need, like eating, drinking, and breathing,”

 –  Dr. Vivek Murthy, U.S. Surgeon General

According to the American Academy of Sleep Medicine, a startling 26% of U.S. adults aged 30 to 70 suffer from obstructive sleep apnea (OSA) and an estimated 80% of cases are currently undiagnosed. This means that 24 million Americans suffer from this serious issue who are likely under-treated. OSA is a disease of intermittent pauses in breathing caused by an obstruction in the airway. The risks related to OSA are heightened for an aging population with increasing rates of obesity and other factors that were accelerated during the Covid-19 pandemic. 

At Cathay Capital, we built our global investment firm to help companies from North America, Europe, Asia, Latam to Africa navigate the opportunities of globalization and sustainable transformation to make a positive impact. One area we have been looking at is the increasingly important issue of sleep wellness and its impact on overall health. 

This is why we’re particularly excited about our recent investment in, the top D2C (Direct-to-Consumer) internet retailer of sleep apnea products in the world – serving the $3.7 billion market for OSA equipment. With an impressive and sustained growth trajectory, we see as an important innovator in OSA and the wider sleep wellness space. 

“Sleep is the foundation of health and wellness, and allows every patient to have access to the necessary tools for their treatment so they can live safer, happier and healthier lives. We’re honored to partner with the Cathay Capital team to further our mission of bringing better sleep to people around the world. In the Cathay team, we’ve found shared values, a global platform, an entrepreneur-friendly approach, and fellow healthcare innovators who genuinely care about making the world a healthier, better place.”

–       Johnny Goodman, Co-Founder and CEO of 

The Growing OSA Market & the E-Commerce Effect 

To address sleep issues, a sleep study is always ordered before treatment begins – either through polysomnography (PSG) or a home sleep apnea test (HSAT). The most popular OSA treatment option (prescribed around 90% of the time) is continuous positive airway pressure (CPAP) therapy, which uses an air blower to force constant and continuous air through the nose or mouth. Proven benefits of CPAP therapy are more restful, uninterrupted sleep; mitigation of serious apnea-related health risks (e.g., type 2 diabetes, strokes, heart attacks and higher risk of cancer); minimized snoring; increased daytime energy and concentration; as well as reduced fatigue and headaches.

The market for OSA equipment is expected to increase at a compound annual growth rate of more than 6% from 2021 to 2028 in the U.S. and globally.  And the cash-pay segment, making up 10% of the market, is expected to grow at 10-12% annually. This is largely due to increased awareness aided by innovations around at-home sleep tests and importantly – better accessibility through e-commerce channels.

The e-commerce model for CPAP machines and accessories – focusing on cash-pay customers or those paying out of pocket – has been key in making OSA treatments more widely available to patients while avoiding the issues stemming from the complex and frequently convoluted insurance process. It enables customers to choose from a broad product assortment with rapid fulfillment for critical items along with greater convenience, customer support and engagement compared to larger distributors and local providers that focus primarily on insurance reimbursement.

On the other hand, insurance typically only covers select products, which usually doesn’t include (or only partially covers) higher functionality or specialty machines with strict guidelines limiting resupply/replacement orders for consumable items such as masks and tubing. Many insurance plans also monitor patients’ machine usage during a trial period before coverage is confirmed – which can be dropped in case of non-compliance. 

Enter CPAP – at the Intersection of E-Commerce & Health eliminates these limitations and friction points with greater selection and flexibility for customers to get what they want, when they want it. Through its D2C e-commerce website, it offers a comprehensive suite of products including Positive Airway Pressure (“PAP”) machines, supplies, accessories and convenient at-home sleep tests – along with specialty items such as travel CPAP machines which are typically not covered by insurance. 

In addition, the site includes convenient pre-configured prescription forms and auto-prescription options enabling customers to easily submit or request prescriptions for machines and masks. And its recent Magento eCommerce platform implementation provides enhanced capabilities to offer personalized shopping experiences and drive additional site traffic. boasts leading market share within D2C customer segment. As 95% of distribution comes from D2C, the company almost exclusively serves cash-pay patients – positioning them well in a market set for rapid growth fueled by increasing patients’ comfort towards medical purchases online, higher deductible health plans and greater use of health savings plans. And with the majority of sleep apnea cases being undiagnosed, the cash-pay segment of the at-home medical equipment market will see favorable tailwinds. 

At Cathay, we see as an opportunity to invest in a strong platform at the intersection of healthcare and consumer e-commerce with runway for multiple avenues of growth. This includes expansion in the sleep apnea space as well as broader opportunities as a sleep wellness platform in light of the increasing awareness around sleep health issues.  

Parting Thoughts – Strong Roots, Poised for Growth

When we met Johnny Goodman, we knew we had found the right partner: a founder and CEO with over 20 years of experience in OSA, but a passionate leader who could see the immense opportunities still ahead of the company. The rest of the executive team is equally impressive, bringing a wealth of experience from e-commerce to web development, customer support, warehouse management and beyond. 

We’re pleased to support as it enters its next stage of growth. By leveraging our experience, resources and strong global ecosystem across the e-commerce and healthcare spheres, we’ll look to accelerate development of the company’s digital infrastructure and product offerings. We’re taking several steps to ensure success, including bringing Jay Steinfeld – well known in the retail industry for building transformational D2C brands – onto the board. We will also leverage his experience in acquiring complementary companies to further build the CPAP family. Through this and other initiatives, we’ll help advance the company’s leadership not only in CPAP equipment, but in the broader market serving the increasingly important space of sleep wellness. 

With this partnership, is transitioning from a family-owned operation to having strong institutional support from Cathay – enabling their vision to be more easily and quickly achieved while becoming a true global leader.