CORPORATE EXECUTIVES NEED NO SPIN DOCTORS WHEN IT'S TIME TO ISSUE GLOWING COMMENTS ABOUT THE SLEEP TEHRAPY AND DIAGNOSTIC PRODUCTS MARKET. ALL THEY HAVE TO DO IS TELL THE TRUTH: BUSINESS IS GOOD-AND PROJECTED TO GET EVEN BETTER.

ACCORDING TO RESEARCH FIRM THETA REPORTS, 30 MILLION U.S. RESIDENTS MAY HAVE OBSTRUCTIVE SLEEP APNEA, YET 95 PERCENT OF THEM ARE UNDIAGNOSED. ADDITIONALLY, 25,000 INFANTS ARE AFFECTED ANNUALLY WITH RESPIRATORY DISTRESS SYNDROMES.

Celine Bernard, a medical device analyst for Frost & Sullivan, is currently studying the continuous-positive-airway-pressure market. Without the benefit of final numbers, she predicts double-digit growth in CPAP sales for 1999. About 150,000 CPAPs were sold in 1998, according to industry estimates.

"When you find a niche with that kind of growth, you want to participate," says Jerry Mattys, vice president and general manager of Mallinckrodt Inc.'s alternate site ventilation and respiratory sleep business. "We've made an additional investment in the segment and look for it to pay off in the coming years."

Therapeutic products for sleep apnea patients are the biggest growth area. Mallinckrodt, which late last year released the GoodKnight 418 CPAP, estimates revenues for the total CPAP market last year at $160 million.

The more sophisticated bi-level CPAP is a popular part of that market, but Bernard says reimbursement pressure from the Health Care Financing Administration could change that. "My guess is that the bi-level systems will slow down, and the CPAPs will be stronger," she says.

While upgrading the therapeutic attributes of their products, manufacturers are also responding to the need to document results of patient use. Rich Kocinski, Sunrise Medical's respiratory products division president, cites a shift toward outcomes in designing sleep products.

"We have a modem system on our standard CPAP that measures compliance," he says. "We need to show that the patient is using the equipment or payers won't pay. This way, you don't have to buy a separate unit to track compliance."

If sleep therapy is a niche market, Fisher & Paykel is targeting a niche of the niche. The company previously manufactured a humidifier that attaches to a CPAP but in April released a combination humidifier/CPAP.

"In part, it is a reimbursement issue, but we also know that 50 percent of the CPAP market needs humidification because of noncompliance," says Jon Clausen, Fisher & Paykel product manager. "Our product replicates the human nose and addresses the discomfort some patients experience with a CPAP that does not have humidification.

"We see the sleep therapy market increasing dramatically over the next five years," Clausen adds, "and we'd like to get a slice of it."

There is plenty of competition. Nidek Medical is hoping to carve out a 6 percent market share by the end of the year. "We are heavily invested in the sleep market," says Gregg Gaskins, vice president of sales and marketing, "because we see big potential revenue and income. We see the market doing nothing but growing. We're a small player, but up-and-coming."

Despite the keen focus on growing this market niche, product development is not taking a backseat with manufacturers.

A small but critical component of CPAPs is the mask, which can be a source of frustration for users. The discomfort it might cause sometimes results in noncompliance.

Mask manufacturers are working to minimize these problems. Respironics released the Profile custom nasal mask in March. When heated with hot water, the inner layer of the mask can be customized to precisely fit the user's facial contours, the company says, adding that a better fit reduces air leakage and improved comfort should lead to a better night's sleep.

ResMed offers the Mirage mask with a silicone overlay that the company says allows for an airtight seal without feeling tight on the face. It also makes the Humidaire, which heats air with a humidifier to minimize chances of a dry or runny nose associated with the cool, dry air of CPAPs.

"With this new technology, we should see usage of CPAPs increasing significantly," says Deirdre Stewart, vice president of clinical education and training.

SleepNet, a CPAP mask specialist, uses a soft gel cushion for its masks that minimizes the chances for skin breakdown, according to Cindy Poltack, international account manager.

Although CPAPs offer high levels of relief for a compliant patient, Mallinckrodt deals with noncompliant patients by offering an alternative-the QuietKnight oral appliance, which pulls open the jaw to allow better airflow. HC