Cathay Capital Group, which invests in healthcare, technology and e-commerce providers, will announce later Wednesday morning that it has made a strategic investment in CPAP.com, an internet retailer of continuous positive airway pressure (CPAP) equipment for people who suffer from obstructive sleep apnea, for undisclosed terms. Partner Andre Puong shared Cathay’s strategy behind the deal with PE Hub.
The sleep apnea market is estimated at $3.5 billion. Although awareness of respiratory problems has increased during the pandemic, 80 percent of people who suffer from sleep apnea are not diagnosed, according to Puong. CPAP.com has “lots of upside to grow, just from a public health standpoint.”
While many consumers are reimbursed by insurance companies, there is also a large cash pay segment of the market that operates outside the insurance model.
“There are many reasons why one would be in the cash pay market,” Puong explained. “The product offerings from insurance plans is not the one the end user always wants or needs; with durable medical equipment to stay reimbursed, patients have to stay compliant, which creates a market for people who don’t want to go through the insurance channel; and the online channel has been growing faster than general market of distribution.”
Puong sees potential for growth. “This investment is at the intersection of consumer healthcare and e-commerce, and there is the potential to increase the online customer base with improved customer experience,” he said. “Then there are all the enablers of the e-commerce ecosystem that we can improve on, as we know that area very well.”
Puong expects to build on innovations that CPAP.com has already implemented, such as a subscribe-and-save feature on the target’s website.
“We made a significant investment, cashing out some shareholders, but partnering with current shareholders and the CEO to improve, expand and grow the business,” said Puong. “We will have support for M&A based growth, to enter categories adjacent to CPAP machines and accessories. We also have on eye on expanding to the broader category of sleep wellness.”
He added that technology will play a major role. “This space is very much the old razor and blade model, so you need to buy the machine and then the mask, hose and cleaning supplies,” Puong said. “We want the customers to return to us for all of their needs and make that experience better every time.”
Founded in 2007, Cathay manages over $4.2 billion in assets and has completed more than 220 buyouts and platform investments, growth and venture capital investments. The firm has offices in New York, San Francisco, Paris, Shanghai, Munich, Beijing and Singapore.