Sonendo, Inc.

What they do

Sonendo develops and manufactures the GentleWave System, a Class II FDA-cleared medical device platform for root canal therapy. The system uses a proprietary combination of fluid optimization, acoustic energy, and fluid dynamics to clean and disinfect root canals without removing tooth structure. The company sells consoles and single-use procedure instruments (PIs) primarily through a direct sales force in the U.S. and Canada, targeting high-volume dental practices.

Revenue drivers

• Procedure instruments (PIs) — Recurring revenue from single-use instruments used in each GentleWave procedure; generated $5.1 million in Q3 2024, flat year-over-year, and is the largest revenue segment.
• GentleWave consoles — Upfront sales of the GentleWave System console; generated $1.9 million in Q3 2024, a 10% decrease from Q3 2023, with a double-digit console backlog at quarter-end.
• Other product revenue — Includes accessories, disposables, and other products; generated $1.1 million in Q3 2024, a $0.1 million year-over-year increase.

Recent performance

For Q3 2024, Sonendo reported total revenue of $8.0 million, down 2% year-over-year, with GAAP gross margin improving to 41.2% from 10.8% in Q3 2023, partly due to lower manufacturing and warranty costs and a prior-year asset impairment. Operating loss narrowed to $7.5 million from $17.4 million, and free cash flow burn fell 59% to $4.3 million. For the first nine months of 2024, revenue was $23.4 million with a net loss of $27.2 million from continuing operations. The company had cash and short-term investments of $17.3 million and $17.8 million in term loan principal as of September 30, 2024.

Strategy

Management is executing a 'strategic reset' focused on driving adoption of the GentleWave System by expanding the installed base of consoles and maximizing recurring PI revenue through increased utilization. They plan to grow their sales and clinician support teams and expand direct-to-clinician digital marketing efforts to drive adoption. The company also intends to pursue international marketing authorizations and other market access initiatives. Priorities include continued investment in research and development, regulatory affairs, and clinical studies for future product generations.

Risks

• Going concern risk — The company has incurred significant net losses and expects to continue losing money, requiring additional financing to fund operations and planned growth.
• Cash and debt constraints — With only $17.3 million in cash and short-term investments and $17.8 million in term loan principal outstanding as of September 30, 2024, liquidity is limited relative to ongoing cash burn.
• Competitive and strategic uncertainty — Sonendo was not the winning bidder for Biolase in a bankruptcy auction, and management is evaluating financing options and strategic alternatives, creating uncertainty about the company's future direction.
• Dependence on new product development — Future growth depends on successful development and regulatory clearance of next-generation products, which faces inherent clinical and regulatory risks.

Outlook

Management expects to continue incurring net losses for the next several years and will require additional financing to fund operations and growth. They plan to invest in sales and marketing, research and development, and international expansion. The company is evaluating strategic and financing alternatives and will update stakeholders as decisions are made.