All right, Larry, we're live?
Good. Hi. Welcome back. I'm Larry Biegelsen, the Med Tech Analyst at Wells Fargo, and it's my pleasure to host this session with the management team from Inspire Medical. With us, we have Rick Buchholz, the CFO and Carlton Weatherby, the Chief Strategy Officer. It's gonna be a fireside chat. If anybody has a question, just raise your hand and we'll call on you. Rick and Carlton, thanks so much for being here.
Thanks for having us, Larry.
Thanks for having us.
Yeah. Thank you.
Rick, let's start off with the outlook you provided on the Q2 call. At the time, you were comfortable with consensus in the third and fourth quarter. Are you still comfortable with those figures since they've climbed a bit, I think, since the earnings call?
Yeah. Thanks again for having us, Larry. We do not see a material change in those estimates, and at the time of our earnings call, we did state that we believe Q3 and Q4 consensus revenue is reasonable. So yes, we're still comfortable with the second half of the year guidance.
When we look at the raised 2024 guidance, it still seems a bit conservative, especially in Q3, given your aspiration to increase utilization quarter- over- quarter. Talk about what's assumed in your second-half outlook for things like the Inspire V launch, competition, price, and, you know, so what are some of the puts and takes in the guidance?
Sure. So what's implied in our second half of the year guidance is our typical fourth quarter seasonality, driven by the high deductible health plan contribution that leads to a strong fourth quarter, as well as the footprint expansion of adding 52-56 new centers and the addition of 12-14 new sales territories per quarter. We are also hiring additional field clinical reps to help with case coverage as well as site training, so we're gonna continue that. We have not assumed the Inspire V launch in our guidance at all. We're expecting pricing to be flat for the rest of the year, and we don't expect any competition until 2025 at the earliest.
With that being said, we'd like to separate guidance from utilization, when we have those conversations, but it is our aspiration to increase utilization both sequentially and year- over- year.
Understood.
Okay.
Rick, what about the key puts and takes for 2025?
Right. It's still early in 2024 , and we are just starting our 2025 planning, but as we sit here today, at this point in time, we believe that 2025 revenue consensus is reasonable, but there's a lot of moving parts that give us confidence in 2025 , so some of the items that we have confidence in for 2025 include our continued commercial expansion of increasing penetration at existing centers, as well as adding new implanting centers, the continued targeted direct-to-consumer programs that have been very effective for us. The commercial payers continue to adjust their policies to expand for the expanding indications of AHI and BMI. We're also excited about our recent news on France, and so the OUS contribution of France and the UK will help drive 2025 revenue.
In addition, you know, we believe that there's an influx of GLP-1 patients that will lose weight and thereby qualifying for Inspire therapy on a longer-term basis. The launch of Inspire V will also help in 2025 . The continued progress where we're making with the PREDICTOR study that Carlton will touch on. And then finally, pending any approval in 2025 , we may see some competitive trialing in certain academic centers, but given the uncertainty around coding and reimbursement, we think that might be pretty limited in the early years.
That's helpful, but we'll get to predictor in a bit, if that's okay.
Right.
Rick, one other financial question. Probably the biggest surprise, you know, on the Q2 call was the margins and the raised guidance for, you know, earnings. We back into an operating margin in Q4, just under 9% for Q4 of this year, based on the guidance. Is that a good starting point for, you know, 2025 in terms of profitability, or how should we be thinking about the pace of improving operating leverage over the next few years?
Yeah, great question. So as I mentioned earlier, we have seasonality in the fourth quarter, so we generally have a stronger Q4 with the high deductible plans that reset then in the first quarter. And so I would not straight-line Q4 operating margin as a starting point for 2025 . But with that being said, we're gonna continue to invest in therapy adoption in 2025 , but you can expect that we'll have improved profitability on an annual basis over 2024 . But I'd also specify that that does not mean we're gonna be profitable in every quarter, because we do have seasonality that we've seen over the past several years. And to your point on longer term, we believe that we can reach about 30% operating profit margin on a long-term basis.
No revenue, kind of, you're not saying at a certain revenue point?
Correct. Not at a certain revenue level, but on a long-term basis.
Right.
We expect to get there.
Right. Right. Okay, let's switch gears to commercial activities. You're expecting 52 to 56 new centers per quarter in the second half. The recent run rate is higher. Why do you expect this slow down in new center adds?
Sure, I'll start with that and echo Rick in saying thank you, Larry, for having us. It's been a great meeting so far and really engaging discussions. So as we think about our sales force expansion, we don't have a target number in mind in terms of what level of territory managers we'll have across the country. As you know, we have kind of a national footprint, and there's ample opportunities across many markets for us to have what I call greenfield territory additions. And so we're still investing heavily in our sales force. Last quarter, we had a record high of 81 centers that we added. We have guidance, as Rick alludes to, of 52-56 per quarter, which we tend to exceed, and we'll continue to assess as we go into our annual operating planning.
In terms of why it would slow down, I think there's two arms of that. One is, how do we think about the ample opportunity within new markets and continuing to invest in the team? The other is getting smarter in the way that we launch new accounts. And as we look across the Pareto chart of our utilization and implanting centers, we have different tiers and different quadrants that are implanting at different rates. And we're able to look at the data and be predictive, and over time, kind of see patterns that we want to recognize to get smarter in terms of the new accounts we've launched.
And so what we're building in is criteria to ensure that we're launching the right way and we're being more selective in the sites we've launched, ensure that they have a few things in place. One is administrative support. There's buy-in for this program to be a priority for the institution, and that they're willing to make investments in people, resources to continue to grow the program. Secondly, is ensuring that we have this connection and a trusted partnership across ENT and sleep, both those who are doing the procedure as surgeons, but also those who are referring and managing the patients across the board, ensuring that the patients have the best experience and the best outcome. And finally, ensuring that there is a strong and robust pipeline of patients, so that there's a steady flow and a cadence that ensures there's confidence and credibility.
And so as we build in and get smarter around what launches should look like to ensure they hit the ground running, but we'll be more selective over time. But again, given the guidance that we give, 52-56, we expect to meet or exceed that going forward.
That's helpful. International, Rick, you touched upon it. You had a nice quarter in Q2. I think it was at $8 million... What was it, $8 million?
Eight million.
Up almost 70% year- over- year. You gave a range for the year of 3%-4% of revenues I think. It's a big range, actually, you know, when you do the math.
Mm-hmm.
With France coming on, do you feel like you could be closer to the high end of that range?
I'd still stick with the 3%-4% range for OUS. The U.S. is growing so quickly that it's hard to keep up outside the U.S. But we're very encouraged by France. We're just starting the commercialization efforts there. We have a commercial team on the ground, and so that will be, you know, one of the components of driving 2025 revenue is France, as well as the U.K. We're very proud of the team in Europe, and they're continuing to do a wonderful job with execution in Germany.
Good to hear. All right. So look, Inspire V, you know, is approved. So that's an exciting opportunity for the company. So why don't we, you know, talk about that a little bit? Just maybe talk about, you know, the soft launch, and what you hope to accomplish.
We're equally excited, Larry, about the Inspire V approval last month, and now we're getting into what we call the commercial and operational readiness phase, to introduce this new product to the market. And a part of that is what we've described as a soft launch on the back half of this year, and a lot goes into that. But think of this as our ability to make sure we're getting real-time feedback, from users to incorporate that into the training and preparation for full launch later in the year. And so we're going through the process with our commercial leadership team, selecting sites based on a number of different criteria. And then we'll be learning from them real time to ensure that, we're ready to hit the ground running when we have ample inventory and we get moving forward.
But Inspire V is a valuable product for us in the market for many reasons. On one end, as you know, it, we've said it, it reduces the time of the procedure, so we're taking out this costly component of the system, but also, one of the elements of the procedure that is trickier and extends the time. And so we're going from what we say is, on average, sixty to ninety minutes to do the implant procedure, to forty-five to sixty minutes. And so the time saving in itself creates increased throughput over time and efficiency.
On the other end, as we talk about removing that sensing lead, which is an unnatural part of the procedure for many ENTs, because you're operating in the intercostal muscles, also removes some of the cognitive angst or burden associated with doing this procedure, especially for head and neck surgeons, and so what we're hearing is this increases the willingness of many new implanters, ENTs included, to now take on the opportunity to add Inspire to their practice, which is a really important part of, we think about the growth that Inspire V can drive, and so we're excited about that opportunity.
Yeah, I'll add onto that from the financial perspective. Part of our operational readiness is determining the pricing. We've not solidified that yet. That's one of the several components of our operational readiness. But what we stated on our most recent earnings call is that if pricing remains flat, it will still be slightly accretive on a gross margin perspective.
When do you expect the first implants, commercial?
We'll do a soft launch later this year, and we'll consider that on the back half, call it Q4. But full launch later into 2025 , as we take learnings from the soft launch and factor those into the full launch plans.
Full launch, if you're doing the soft launch later this year, how long will that last? You know, when can we expect the full launch?
... We haven't set a date, partly because we want to make sure we're taking the feedback from the soft launch, and that's fully factored into every element, including clinical training of our surgeons, the training of our field teams, elements of contracting. So there's a lot that goes into that that we're looking to make sure we have our arms around, and so haven't set a date yet, but early in the year is the target.
The reimbursement, Rick, the coding, is that - that's all in place?
Part of the strategy that is just equally important as the inventory side, and so we haven't nailed down what that strategy will be, but something that we're factoring in and we'll nail down by the end of the year on what exactly is that coding and reimbursement strategy for Inspire V.
Got it. And the inventory you talked about, you expect centers that have inventory of Inspire IV on hand to work that down?
Correct. Similar to our other product launches when we went from Inspire II to Inspire IV, as well as when we introduced the Bluetooth remotes and also going from polyurethane to silicone leads. Our customers don't have a lot of inventory on the shelves, and so we expect them to burn that down, as we complete and start the full launch of the 2025.
I can see, you know, how Inspire V increases utilization, the time savings. I've heard the same anecdotes, Carlton, that you talked about with, you know, the lead, the sensing lead.
Right.
Do you have any evidence this will bring new surgeons on board?
We do, and a lot of this is in conversations that we can have increasingly now with the product approved, with some of our KOLs or advisory committees who say, you know, they're excited to have increased throughput. But they also are excited for their partners today who are not doing the Inspire procedure, who are kind of sitting on the sidelines to now get trained and onboarded because it's less complex and shorter time in terms of the extent of the procedure. And so, we do see that being an important factor. More implanters, which removes some of the capacity constraints in the account, and adds more patients to be able to be treated within the community.
Rick, just before we move on, I just want to button up the coding part. Are you confident that the physician fee and the facility fee, the hospital and ASC, whichever code you go with, it's not gonna be meaningfully different from the payments-
That's correct.
that you have today?
That's correct.
Okay. You're confident in that?
Yes, that's an important point, Larry. Yes, both in, again, two arms of reimbursement. You have the facility fee, both hospital and ASC, and then you have the physician fee. And we're confident, regardless of the scenario, how it plays out, this will be at least net neutral, if not value accretive, to, on both sides of the equation for reimbursement.
Potentially value accretive. Okay, interesting and pricing, Rick, will that be determined for the soft launch or
That will be part of our launch plan.
Full launch?
Yep. Yes.
So we'll learn that with the soft launch or the full launch?
Full launch.
Got it. Okay. Carlton, I know you've been chomping on the bit to talk about PREDICTOR.
We're excited about PREDICTOR. It was this time last year when we had an initial subset of 300 patients, who we did an analysis on, and we saw some correlation to complete concentric collapse, type of BMI and pharyngeal width. What we said was we wanted to add more patients to that study for validation and power. Early this year, we included a closed enrollment of an additional 300 patients, and we've been doing that analysis internally. We're excited later this month at the ISSS meeting in Miami. We'll be presenting some data. Again, the underlying thesis or concept here is that we have this DISE procedure that is a step in the process for most patients and providers.
However, we think it's unnecessary for certain cohorts or phenotypes of patients who likely don't have complete concentric collapse. And so, what we're seeing and having conversations with payers on is, are there alternative measures or ways to assess the anatomy? And if so, can you remove this step of the process, being a DISE procedure, to get the patient to treatment sooner? And there's a lot of value to the patient. They, today, have to take a day away from work and home. They have to go under anesthesia, and they have to then be told after a 20-minute procedure that they're cleared for an implant therapy. For the physician, it also takes up time that they could be using to do the Inspire implant instead of doing multiple DISE procedures.
And so, as we talk about capacity, but also streamlining the process to get patients treated more quickly, this PREDICTOR data can help us inform and have conversations to get there more quickly. So we're excited about the outcomes and more to come later in this year.
That's helpful. So ISSS will be... Is that, you said, the full dataset?
ISSS, but we'll present some data, and it'll be likely an abstract.
Got it. Okay. So, so GLP-1, Rick, you talked about earlier, or Carlton, but you alluded to it, Rick, earlier, about 2025 starting to bring patients into the funnel. I guess the question is, you know, do you think in 2025 it starts to be a net positive? I mean, I think we can see how it expands the long-term TAM or the long-term opportunity. The question is just timing. You think that in 2025, it can be a net positive?
We do. And again, we've been consistent and over the last year of GLP-1 announcements and data and report outs, our take has been one, that it'll bring more patients into our funnel and to expand it, and that there'll be very few, if any, that fall out of the funnel. And so we think it'll be a positive starting in 2025 as a measure of increasing awareness of obstructive sleep apnea, just as a disease that needs to be treated for patients today that unfortunately aren't diagnosed. As you know, Larry, the diagnosis rate for obstructive sleep apnea is 20% on average. And so just the ability to increase the awareness and drive diagnosis is a net positive for us, let alone-...
See the patients today who unfortunately are screened out of being eligible for our therapy because they have too high of a BMI or that dreaded complete concentric collapse that we talk about a lot. And so what we're seeing already, both anecdotally, but also with data, some of which we put in the back of our earnings presentation, is there are patients who are going on a GLP-1, losing weight, seeing a reduction in the lateral wall collapse, and therefore being screened as eligible for Inspire therapy and getting treated. And that just reinforces our thesis from the beginning, that this will be a net positive and bring more patients into the funnel. And we do believe that's starting now and will be a tailwind going into 2025.
You can see, our average BMI is roughly about 29.
Right.
In those slides that we included in our earnings presentation, you can see that band of patients going under 35 BMI is increasing in that sample size. So that you know gives us continued encouragement that we're gonna continue to add patients.
And I guess just to follow up, why you don't expect a short-term slowdown in procedure demand as GLP-1s move into, you know, the OSA treatment paradigm?
We get that question often. If the more patients are coming into the funnel, does it take longer for them to get through it now that GLP-1's become an option? And our answer there is still no, and that's been validated. And the reason being is many of our sleep doctors are saying if a patient comes in with obstructive sleep apnea, they still need to address that disease. And although GLP-1s can be helpful and secondarily have a benefit, they don't wanna operate and just offer them that alone. So likely, we'll see it offered as a concomitant therapy, both CPAP and GLP-1, which doesn't delay the funnel for us because we're still the next option for them, assuming that they're non-compliant to the CPAP, which is today about 50% of patients.
And so no slowdown in terms of an added step in the process, just one that is, will be used simultaneously with the CPAP from our perspective.
Okay, and nothing since the data was presented at ADA, there's nothing anecdotal that you're seeing in the field today? It's a little early.
Still early. Still early, and mostly just one-off comments, but increasingly more data that we think is kind of validating our, our original positions, and which is exciting.
That's helpful. All right, competition. Rick, you touched upon that also earlier. How are you thinking about competition from other hypoglossal nerve stimulation technologies?
I'll start, and Rick, you can add on. Competition is, for us, helpful in the context that it validates the great work that Inspire has done for now over a decade, establishing a new therapy, building a new market. And as investors and innovators and entrepreneurs begin trying to find opportunities that come into it, it just reinforces that this team continue to do great work. What we're not gonna do is rest on our laurels, and as Inspire V being one example, we'll continue to invest in innovation and focus on breakthrough technologies while also monitoring what's new and different and coming from a competitive perspective. So, there are a few competitors who are closer.
We're still waiting and eager to see what their full data looks like, peer-reviewed publications, that speak to core elements of what we've shown in the past when it comes to outcomes, both in terms of the reduction of AHI, but also, some of the other elements that are really important, like device-related adverse events, as well as explant rates, and we just haven't seen that yet, and so eager to see that data. And for us, it's more of a, you know, when the data comes out, what that looks like in terms of competitors coming to the market. But we're excited to continue to expand our leadership position when that time comes. Rick, anything to add?
Yeah. As a reminder, we got approval in May of two thousand and fourteen. We got our first sizable commercial payer coverage in July of two thousand and eighteen, four years after FDA approval. And so, it wasn't not only our PMA clinical study, but it was also doing larger studies. We did a clinical study of 300 patients. That was really part of what I would put in air quotes of required for commercial payers, as well as, we did longer term studies, too. We had our three-year data and our five-year data, and then it wasn't until four years after we got approval when we started getting, securing all the commercial payers that we now have today, with really across, you know, broad-based coverage across the entire country.
So some of these coverage decisions are for hypoglossal nerve stimulation. So I guess the question is, you don't think that these competitors are gonna be able to piggyback on those coverage policies? I mean-
Now, now you're getting out of my pay grade.
Also, you would think, I mean, we've seen other categories. I can think of sacral neuromodulation when Medtronic came out, and, you know, they probably, I think they probably piggybacked on Medtronic. I don't know.
It could be, but, you know, we've been on the market for 10 years. We've done 75,000 procedures. We have about 6,000 patients under clinical studies, and so, we're really proud of our continued focus on high patient outcomes.
That, that makes sense. I'm just saying, do you think they'll be able to leverage the coverage?
Still TBD, and again, there's a lot of nuances as you think about, like, the actual descriptors of the code and how that maps to the actual product, and there's the experience that Inspire has had over the years, where you've seen that evolution as well, Larry, and so we don't want to diminish the prospect, and I like to say that Inspire has paved the way for many other players to come in. At the same time, we continue to set the bar high, both in terms of having 75,000 patients that have been treated, 6,000 patients plus that have been in our clinical trials, and again, launching new technologies and building a market, expanding our teams across every area of the business.
And so, we don't discredit the competition that is coming in, but we know that this, it's a hard work to do. It takes time, and the bar is getting higher and higher as we continue to expand the market and build out our portfolio.
You alluded to it, Carlton, earlier, about, you know, the DREAM trial at ISSS , what you'll be looking for. We've only seen kind of, you know, top-line results. What specifically are you, explants? What are you specifically looking for in the full data set?
I think one of the most important pieces is just the true clinical outcome improvement. We go back to our STAR trial, where the basis was based on what we call the Sher criteria, which is the reduction of AHI by 50% and below 20 being that baseline threshold. Seeing that they show clinical relevance with the outcomes is really important. Then it gets into the other elements of complication and adverse events that we're eager to see on. They've shown subsets in different types of studies, and some not run randomized, and so we try not to overreact to data until it's comprehensive and peer-reviewed.
And so we're again eager to see it, and I think not just us, but the market, both the providers, the patients, and the payers, because they make the most important decision on that. How good is the data to show that this is safe and efficacious? And I'd argue that the verdict's still out, but coming soon, so we're excited to see it.
I'm through with my questions. You guys are very efficient. So, I don't know, Rick, I'll give you or Carlton the last word here.
You want to go first, Rick?
No, go ahead.
I'll just reinforce something that comes up in meetings is that it's such a largely untapped opportunity, and GLP-1s, Rick mentioned, that is a vector to continue to grow the market, awareness, diagnosis, but there's other elements, so today, OSA is increasingly being added to the guidelines for other procedures. PFA, pulsed field ablation for atrial fibrillation, is one example where patients who have that condition are now being asked to get screened and treated for OSA. That brings more patients into the funnel, and today, as we look about consumer wearables, watches, more diagnostic assessment opportunities from those. Again, that brings more patients and people to be aware that this is a condition that needs to get treated, and the last thing I'll mention is home sleep studies.
In the past, sleep diagnosis and ultimately getting a sense of what the sleep study tells us had to go into a lab. Today, almost 2/3s of patients are going through a home sleep test, which is more convenient and doesn't rely on providers in the lab to have to take that on. And so all of these, we consider vectors that grow the market opportunity that we're leading in. So excited to see that and do our part to contribute to it.
Perfect. Thanks so much for being here.
Thank you.
Great.
So, Larry, are we off?