A wake-up call at Restore

"He snores like a sheep giving birth," declares an attractive, pony-tailed wife on Restore Medical Incorporated's newly revamped website. "It's like a dying alien."

Her husband playfully protests: "Oh, c'mon!"

The video clip, set to a jazzy soundtrack, features three snore-challenged couples -- and has the feel of an eHarmony commercial. But the Roseville-based company's anti-snoring device is more about keeping your soulmate -- even though he may snore like a foghorn -- than finding one.

The video clip and website are small -- but telling -- parts of the company's new strategy to market its Pillar Palatal Implant System directly to patients. It's grounded on the hope that sleep-deprived consumers (or their partners) will pay about $1,500 out of pocket for the treatment, as do patients who pay cash for breast implants, LASIK procedures and cosmetic dentistry.

"These are products that address a quality-of-life or lifestyle issue," said Robert Paulson, Restore Medical's president and chief executive. "You're not selling a product, you're selling an outcome."

Restore Medical's $32 million initial public offering last year was widely anticipated in Minnesota. But its first year as a public company has not been a fruitful one for investors.

After the May 2006 public offering at $8 a share, Restore Medical's stock closed at 98 cents a share on Tuesday, 3 cents away from a 52-week low. The company recently has replaced three top executives and the bulk of its sales force as it overhauls the way it sells the device not only to doctors, but to would-be consumers.

Medicare or private insurers pay for many medical devices, such as heart stents or artificial hips. Because the Pillar system is considered a cosmetic procedure, insurers generally do not cover it, so the company devised a strategy beyond consumers to sell the device: target the specialists performing the procedure, as well as their office workers who do the billing.

"There's a big market-development component to this," Paulson said of the new strategy. "It's not like a sales rep can show up in the OR and say [to a doctor], 'Here, we have a new angioplasty catheter,' or, 'Here's how my new widget is better.'"

Three polyester implants

The Pillar system has been cleared by the Food and Drug Administration to treat snoring and mild- to moderate-obstructive sleep apnea, a disorder characterized by interruptions in breathing during sleep, sometimes hundreds of times a night.

About 25,000 Pillar procedures have been performed worldwide. It involves placing three polyester implants into the soft palate at the back of the throat, providing structural support. The stiffening of the soft palate reduces tissue vibration that can prompt snoring and tissue collapse that may obstruct the upper airway and cause obstructive sleep apnea.

The outpatient procedure is usually done by an ear, nose and throat doctor, a specialty that has not traditionally focused on treating sleep disorders, according to Paulson.

"It's now becoming more and more of their practice," he said. "If you look at plastic and cosmetic surgeons and dentists, they don't have a problem asking people to pay. So we not only have to build a relationship with the physician, but the practice also. It's a different kind of sales call for our reps."

Dr. Al Aly, a spokesman for the American Association of Plastic Surgeons, said that "if a procedure is worth it enough for the patient, then those with the financial means pay." He said most plastic surgeons are paid up-front for elective procedures, as opposed to setting up a payment plan.

New sales force

Restore Medical has 20 U.S. sales representatives; they have an average tenure of four to five months with the company. "It will take several more months before they deliver to the top line," wrote Deutsche Bank analyst Tao Levy in a May note to investors.

The restructured sales and marketing strategy has affected the company's income statement. In the first six months of the year, sales were $2.2 million, compared with $3.6 million for the same period of 2006, a 38 percent decline. The company reported a net loss for the period of $7.7 million, compared with a loss of $5.2 million in the first half of 2006.

The company's marketing strategy is also targeting snoring consumers and their partners. For example, the revamped website features a "Snore-o-gram" e-mail that "lets the snorer in your life hear what you hear." The e-mail missive compares a partner's snoring with a sound effect -- options include sawin' logs, a foghorn, horse, pig or freight train.

Phil Nalbone, an analyst for RBC Capital Markets, described the company as "a work in progress" in an August note to investors. "If any company is going to make a mark in the treatment of sleep disordered breathing, it will be Restore," he wrote.

Janet Moore • 612-673-7752

Janet Moore • jmmoore@startribune.com