Travis Steed, the medical device analyst at Bank of America. Next up, at the Las Vegas Healthcare Conference, we have Inspire Medical. We've got the whole dream team here: Tim, Rick, and Ezgi. Without further ado, do you want to open up with anything, or I can jump into questions?
No, I'll jump in. Tim Herbert, the Chairman and CEO of Inspire, really thank you very much for having us again this year. We're really excited about this, have a chance to talk to quite a few people. We've got a lot of things to get to today with Inspire, great stories. The update from our earnings call last week is we have launched Inspire 5.
Okay.
We are live, so it's available to all the patients in the United States. We need to kind of work through the steps to get product available at the sites, but that's a big change. We're very excited. We've worked many years on this new platform, and I'm pretty excited to get it going here. Do you want to introduce yourself?
Yeah, Rick Buchholz, CFO. Happy to be here. Very excited about the rest of 2025 and the launch of Inspire 5. We're ready to go, and we're just getting started with the low penetration that we have and excited for the future.
Ezgi Yagci, Vice President, Investor Relations.
Maybe to start out, big picture, you guys have been here a long time. We've all been around the company a long time. You've kind of gone from rapid growth to what I'd call more mature, but growth still. And higher growth, more profitable now. Where's Inspire at in its kind of growth journey today? At this point, where do you kind of see Inspire looking back and kind of looking forward?
Sure. I mean, it's been a great journey since approval back in 2014, doing the IPO in 2018, and really getting to a point now where we continue to see strong growth, and we're very excited about that. Now having Inspire 5 as a tool to really focus in on, it's going to make some significant changes to really help patients, really help surgeons to be able to increase their own capacity. We are going to keep investing in growth. I think that's a really important step. We get to do it by also delivering profitability, and I think that's an important part of a responsible company. Yeah, no, we want to keep leaning into the growth aspects of it. We'll talk to you a little bit about what we're doing with 5 as we kind of roll this out.
Now that we're launched, we're going to do a little bit more patient marketing, an increase in our direct-to-patient marketing, as well as an increase in direct emails to patients who have given us their information, and continue to expand Inspire going forward.
I guess in Q1, it was actually a really strong quarter. Growth was 23%, really strong, good operating leverage, and first time in Q1 had positive earnings. I think that's a pretty impressive benchmark for a company. I think the focus from the call was kind of what you saw at the end of the quarter with some of the patient warehousing and stuff like that. Coming out of Q1, kind of big picture, where do you think the business was? Anything to kind of call out on some of the patient warehousing and kind of what you saw at the end of the quarter?
Sure. I think Q1 is always our seasonality call. We come off the fourth quarters, which are always strong, primarily driven by the commercial insurance or the high deductible insurance plans and people really pushing to get their procedures done before the end of the year. We always start out a little bit soft in January. That's our seasonality. That's when we conduct our national sales meeting, and we tend to ramp back up February and March. We did so and delivered on a very strong quarter in the first quarter of 2025 here. As we progressed late in the year, we also, in concert with that, were doing our limited market release of the Inspire V system.
As we worked longer into the quarter, we were able to add additional sites because we were not going to launch the product until we had sufficient inventory to be able to launch it and support supply for the rest of the year. Now, of course, we are so happy to announce that we have launched. As we got late into March and then early into April, we started to see a little bit more patients saying, "You know what? I want Inspire, but I am going to wait for V." We started to see that. Usually, we have time when we are scheduling our cases, so it does not really have a big impact in the first quarter.
We saw that kind of going in, and we knew we were going to have a little bit of warehousing going into the second quarter, not to mention the transition of going from 5 to 4 and with a little bit of inventory burned down as well. That second quarter would be our transition quarter, but really sets us up for an exciting second half of the year.
You said Inspire 5 is fully launched now. What was the update? When did that happen? I guess it was this week.
Yesterday was the date.
Okay.
We had an earnings call last week, and the team's all aware that yesterday was a formal launch date of 5.
What does that mean, though? Like it's fully launched?
That means all the sites, Inspire 5 is available to them. They need to get their contract updated. We have pricing contracts with all of our centers. What we need to do is just a short addendum to add a new serial number for the Inspire 5 device. It is the same system-level pricing. We do not need to go back through the value-add committee, and they could just do a contract execution, and then they are able to order Inspire V product. We do train the surgeons, and we do that right on their site with just a tablet where they take themselves through a training. Really, it is a more simplified procedure than before. Simply put, they no longer implant the pressure sensing lead. It is an easier procedure for them. We also updated the physician programmer.
That was approved last year, but that really kind of streamlines the programming approach and the intraoperative testing. There are some features in there that make it a little bit easier. Once they have the contract done, they can start communicating with patients, and we will have them burn down their Inspire 4 inventory. For the most part, that's not many units at all the sites. We expect a smooth transition.
Does that fix the patient warehousing aspect then if everybody has Inspire 5 available?
I think that does. The centers can call those patients back saying, "I know you were waiting for Inspire V. It's now available. Let's set up an appointment." They come back in and enter the funnel. They still have to have the first appointment, be screened, sleep endoscopy, work through insurance, and get it scheduled for an implant. It is a little tight to see how many of those will still get implanted in the second quarter, but we will be seeing those out third quarter and through the year.
Okay. Because you're going to get guidance for Q2, it's admitted to high single digits sequential growth, just like 211 to 219. I think the street's at 215. What were the assumptions in that range? Because it feels like if Inspire 5 is fully launched now, that range could be a little bit better at this point.
I think we want to make sure that we looked at the transition period. And so now that we're launched, to get through the contracts, get through the training, and to be able to get the patients there for a schedule and work through the Inspire 4 inventory. But then you still use the second quarter as a transition and still have confidence as we go into Q3 and Q4. Taking a little bit longer to do the launch, it gave us the opportunity with the limited market release to really get the experience and get the payers on board as well.
By getting the payers on board, meaning that they were part of the limited launch, and we're able to work prior authorizations, we're able to get their policies updated such that when we now do this broader launch, that insurance isn't going to encumber patients transferring over to Inspire V.
Why was the assumption, take the Q2 revenue and move it to Q4 and not to Q3?
Just to make sure we had the right step up as we kind of work. We know that we're going to increase our direct-to-patient marketing. And people who see awareness now come to our website. There's a time period. Usually, it's up to six months from coming to the website, the call center, to getting implant. So increasing that, that naturally is implants in the fourth quarter. So kind of it's a good steady step up to really bring Inspire 5 online.
Okay. One question that we've gotten a lot is why it felt so sudden, the patient warehousing inventory stuff. You kind of said for a while it wasn't going to happen, and then it seemed to happen pretty quickly. It's like, why was that such a sudden change in late March?
I think that as time went on, again, we did our national sales meeting in January. That's when we trained the salesforce on Inspire V. We really opened the second site in the limited market release right after that. Most of the LMR limited market release was going through the February-March timeframe. We added numerous sites geographically positioned, make sure that we had both academic sites as well as some of our highly implanting community health or commercial sites. It created more awareness. We were not going to launch 5 until we had the proper stability of the manufacturing, good yields, as well as proper inventory levels to make sure that we could support implants for the rest of the year. That added time gave us the added experience with the payers and with the centers, but it also created awareness.
With that awareness, that's when we started to see more patients saying, "You know, I think I'm going to wait till 5." They'll come in to a doctor and they'll say, "I want Inspire, but I want the 5." Right? Okay, and doctors communicate a little bit more with some patients. That's when we really started to see it late March, early April that, yeah, there are patients who are going to wait. Once we get the launch completed, they can get scheduled with their physicians and prepare for receiving Inspire V.
It sounds like it was more on the patients delaying, not the doctors saying, "Hey, let's wait here.
I think it's probably a little of both. I think there may be some doctors who would communicate with some of their patients. Yeah, we think it's probably a balancing act, but probably more so the patients kind of hearing about it and want to wait.
When did they want to wait for Inspire V? Like, the benefit for those patients, like, what was it about Inspire V?
New improved, I think. I think the word gets all because when we talk at conferences here and at different meetings, and people are astute and they read and they look at the benefits of Inspire V. As we talk today, we're so excited about the new technology and not having ENT, ear, nose, throat surgeon putting a sensor in the pressure wall or into the chest wall is really a game changer. It is really a platform technology that lets us move to the next steps with Inspire, Inspire 6 and 7, 8, bringing SleepSync on board. I think people hear about the excitement we have with the new technology, and it is really a new beginning for Inspire. We're very excited about that.
As Rick said in his opening comment, at the national sales meeting, our theme was, "We're just getting started." Inspire V is really the tool to be able to take that next step.
When you think about the kind of the step up in Q4, the confidence in getting these cases rescheduled, I know in the past, capacity has been a challenge and just kind of been delays in getting cases rescheduled that have been missed. How are we getting the confidence that these cases are going to get rescheduled this year into Q4 and the doctors are all going to get trained and ready for Inspire V?
Yeah, I think that's the exciting part of it. I think the physicians or the surgeons in the limited market release have pretty much universally come back with such positive feedback on the experience of implanting the device or not implanting the pressure sensing lead. We'd like to see that excitement around there and them wanting to do more. By us increasing our patient marketing throughout the year and bringing additional patients forward, that's going to really help the surgeons really understand that they need to do more cases. The reduced OR time gives them capacity to do more cases in a given case day. It also shows them the number of people that are wanting Inspire therapy, and it's time for them to train their partners. You can no longer say that this is the Inspire doctor in our practice. Not anymore.
We need to say we're going to have multiple doctors that take care of Inspire patients. We're going to train not only the surgeons, existing surgeons, and to encourage them to do more cases, but we're going to show them the demand. Without pushing the pressure sensing lead, be able to train additional surgeons in their practice and, of course, continue to open up new centers as we continue on. When we open those new centers, we want to make sure that there's multiple surgeons there. The focus as it was last year, as it is this year, is continue to keep growing capacity for 5, but now we're doing it without the pressure sensing lead.
Just stepping back, like you assumed a kind of a destock of inventory in the guidance, but wouldn't that kind of restock too with Inspire V over the next few months?
Absolutely. I think it's a little bit more of the timing. If they're doing some more of the destocking forward, some of those actually come back and get procured in Q3, right? It's really the timing of that and just working through the transition of working down the 4. I think you'll see a lot of sites will kind of transition slowly and do 4 and 5 at the same time. They'll still keep offering 4 to some patients if they want to go that way.
Why would the patient want to go with 4?
Patients that are coming in for therapy and for their experience, I'm not sure they see a great difference in 4. And depending upon how the physicians want to work it with reimbursement, they may use 4 for some patients and 5 for others.
Okay. That just kind of leads me to the next question on kind of the doctor fee reimbursement. It's like I think one of the first things I was taught when I first joined MedTech was follow the money. Why is this not going to have some sort of impact? What are you seeing kind of in the field with doctors? Is that some reason why they might still do some 4s and some 5s here and there?
We're going to ask that question as we get going. We'll ask that question, how many of those surgeons are still doing Inspire 4 for the $200 to place the pressure sensing lead? I think the answer is going to be very, very few. I think the key is going to be, you always follow the money. There's a pretty good trade-off here when we're asking, again, an ear, nose, throat surgeon to not place a sensor in the chest wall. It is a significantly reduced work, and the reimbursement is commensurate with the reduction of that work. It is fair payment on a per minute basis. That allows them to do more cases in a day. By doing more cases in a day, they can actually generate additional income for their practice. I think it's going to be a real positive trade-off.
I think they're going to have really great confidence by placing the Inspire V because it's really more in their sweet spot. The pressure sensing lead has always been kind of a little bit of that awkward part of the procedure, right? I think that also is going to open a door for some surgeons who in the past didn't want to do Inspire, but without the sensing lead, now they feel comfortable kind of coming back to that. We are going to sit and monitor that closely. Inspire 4 is going to be available for a period of time as we do the transition, and we'll monitor how many of those surgeons are actually going to choose to do so.
Following the money also means that there's an increased payment in ambulatory surgical centers associated with the new code too, where it increases the payment at ASCs by $1,000. It may be an impetus for surgeons to say, you know what, we're going to do some more cases in the ASC now. That also gives them a flexibility of scheduling and can help them also balance their own schedule and be able to take care of more patients. There's a positive trade there too.
What's the mix again? Remind us of ASC outpatient.
I think right now we're about 24% of our centers are ASCs, but probably less than 20% of the procedures are done in an ASC. That's what I think we want to push as we kind of work into 2025 and even further into 2026 to make this more available because it's so conducive to an ASC setting, especially now with the reduced OR time and simplifying the procedure dramatically with Inspire V.
Are you seeing evidence of doctors adding more cases per day with Inspire V yet?
A little early. I think that in discussions with the doctors in the limited market release, we think that yes, that's true and they can see the ability to do so. Again, pretty early with the number of centers that are doing 5 so far.
What are you seeing about the time savings in the initial launch for procedure? Because you've got the pre-op and post-op and stuff like that, but the procedure time, how are the time savings showing up that you've seen in the initial launch?
I think the actual surgical time we're seeing is reduced. I think that we always talk about the averages being 60-90 minutes. We're going down to 45-60 minutes. We do know that a lot of our top surgeons are much less than that in the 30-minute range, but they've been doing a lot of cases and they're seeing improvements themselves. I think what sets them apart is how they do the pre-op and the post-op and how much time they spend not only just the day of surgery, but as the surgeons come in. How do we build those efficiencies into their practices? One of the evidence we always talk about is APPs or advanced practice providers who are PAs that can educate the patients and they can do some of the post-op and they can do the programming.
Therefore they can have the surgeons really focus on doing what surgeons do. They are the only ones that can actually do surgery. We are spending a lot of time training APPs and teaching efficiencies in the practice such that it allows the surgeons to build capacity and do more cases and generate more revenue by focusing their efforts in the OR. Anything to add on that, APPs?
No, I think that's right. We've trained about 400 inception to date. We have monthly programs where we train APPs. As Tim mentioned, they're typically physician assistants or nurse practitioners, and they can really do, I mean, basically they can do everything for our patients besides the actual DICE and the procedure itself. They've been a tremendous help.
Are you starting to see kind of more block time for your procedure? That's kind of an initiative too. It's like you get like one day a week in a center and getting more time with your procedure.
The top centers definitely do that. They set up, this is going to be Inspire Day. It really works because while the surgeon knows they're coming in, today is going to be Inspire Day. Everybody else in the center also knows, right? The OR staff knows exactly what trays to have in there. The coding and the billing people know what codes they're going to be billing on that day. It really builds efficiencies into the practice. As we get into 5 and they can see what the actual surgical times or the procedure times are, and they know how long it takes them to clean a room. We know that then they can start planning accordingly and adding cases based on their direct experience they have with doing the procedures.
A lot of times we'll have surgeons be able to have two rooms side by side and they'll go from one room to the next, alternating as they're cleaning a room, they're doing another case. I think there are two doctors in the U.S., they were each able to do nine cases in a day by going to different rooms. Most recently, a surgeon in Hamburg, Germany did 12 cases in one day. And that was with Inspire 4, right? And it's meant to not highlight the achievement. That's impressive, obviously, but it's looking at the trends of where this is going. If we can keep the block days, now we can make sure that we maximize those days and schedule a number of cases. With the OR days, we'll see centers doing even more than that.
I think that will become more the norm in the future because it is such an efficient way. If you take it to our staff, think about how efficient it is to be able to have our field clinical reps come to a site for a full day rather than doing a case and driving across town to cover another case and driving after that. It builds efficiencies across the board.
Is this what's given you the confidence to come out and say utilization is going to continue to move higher in this business?
I think, yeah, because we want to focus on those centers that are delivering the highest utilization and bring centers on board that are expected to come on board and hit a certain utilization because we know if you hit a certain utilization, your outcomes improve because everybody's practiced. Everybody knows their role. Everybody knows how to do the procedure and knows what to have in place, know how to program the device, know how to communicate with patients. The high utilization really kind of is the most effective approach.
When you think about the, I guess one question, in the past you've talked about bringing other kind of doctors in, non-ENT doctors. Is it still a little early for that? What's the kind of the pathway to start increasing centers through that direction?
We purposely have not pushed that until now we've launched 5. We are going to go to the ENTs first. We want to make sure that they expand the capacity within their own practice, but also train their partners. How this has been successful is the ENTs have partnered with us finding general surgeons or oral surgeons that can come on board and do procedures. They are skilled surgeons that can handle the procedure even more so now that, again, we do not have the pressure sensing lead in the chest wall. It kind of really opens the door. We want to keep doing that in concert with the ENTs because we want them to step up. We want them to train their partners first, but that is certainly an avenue that we can go down that pathway as well.
When you think about the margin progression here going forward, how are you balancing the, we need to keep growing this business, but also get profitable? Because growth has decelerated every year a little bit, which is fine if margins are moving higher, but it's kind of a titration you've got to work. How are you thinking about that kind of titration between growth deceleration every year versus the margin upside?
Yeah, we're still early, just getting started. We're continuing to make large investments. R&D is running mid-teens. We are getting leverage off our SG&A line. We expect with improved utilization, we'll continue to increase our leverage. The efficiencies with Inspire V for existing surgeons will help with utilization as well as adding new centers, new doctors, adding a second surgeon or a third surgeon at another center. Our customer acquisition costs are coming down. We're continuing to spend DTC. It's a little bit lower in the first quarter because of the impending launch of Inspire V. Now that we're launched, we're going to increase that sequentially and year over year going forward. With that, we're still going to have improved margin within 2025 and even stronger on a long-term basis.
The decision to kind of go back and increase DTC, was it just related to Inspire V or was it like, hey, we pull back on DTC and we probably pull back a little too far, let's step up a little bit more?
Inspire V, yeah. I think we purposely pulled back in Q1 a little bit in preparation because we knew the launch is coming. Now you're going to see that step up as we go through the year. A lot of that is gaining excitement around 5. It is not just for the patients, but it is creating awareness with the surgeons, the sleep physicians. Do not forget the family practice doctors who are the ones today dealing with the GLP-1s and the weight loss. They need to understand sleep apnea. They need to understand that there are other therapies out there other than CPAP. A lot of our referrals will come from the family practice docs. There is a lot of talk about PFA and the recurrent rates of atrial fib without treating the underlying sleep apnea significance. We are educating the cardiovascular docs as well.
The direct marketing is broader than just patients, although really patients is really key. Bringing them to the website, letting them know there is an alternative therapy out there that can help them with their sleep apnea.
What about Inspire 6? I know Minnis will ask about it now that Inspire 5 is out.
Five is out. Now we got to start looking for what's next. That's exciting though. Five is a platform for which we can build off of. Yes, we have the accelerometer inside the can to detect the respiration rates and the data that we're having and used with the FDA to get approval kind of shows that it's a more stable environment for respiratory detection and we'll be able to improve outcomes even further. It's a microprocessor-driven product as well. What that means is when we go to Inspire 6, it's only a software upgrade to an existing Five. The target for Inspire 6 is actually sleep detection. The device will know when you're sleeping. It'll know when you're awake. It'll turn itself off when you fall asleep.
If you get up to go to the bathroom in the middle of the night, it will pause itself. If you get up in the morning, it will shut itself off. This was all initially thought about with patients who have insomnia because it is so difficult for them to fall asleep, especially with the anxiety that my Inspire device is going to turn. I got to fall asleep quick and then they hit pause again. Now we can say with 6, you can just go ahead, just fall asleep and the device will turn itself on. One of the most important parts of any therapy, and it goes back to CPAP, and the reason we are so successful is because unfortunately people are not able to be compliant with CPAP and their adherence levels are low.
What we're doing in Inspire is we've really showed a very high level of adherence, but now with auto activation and with sleep, we're going to take adherence to the highest level, right? Just think about that. When the patient's asleep, the device is on. You don't have to worry about the patient pushing a button to turn the device on. That's really going to be a big significant boost. We can take this program even further. Eventually, we're going to have a device that's going to be auto titrating. SleepSync is going to be a program to manage these patients longitudinally. We're going to be able to do remote programming from a doctor's office to a patient's home. We are just at the very early stages of where we're going to be from a technology standpoint.
When you think about the profitability of this business and your not only patient acquisition costs, but patient management costs through the pathway, how is this pipeline that you're talking about going to help the margin outlook for this business?
I think what's really nice is when we get to SleepSync and we can start building more utility into that, it's going to really help the sleep physicians manage patients. When we work through this capacity that we're talking about with surgeons, and we will, now we're going to really show that the sleep physicians have to manage a lot of patients. SleepSync is designed to simplify that process. By us providing greater utility to it, we can help those sleep physicians in that process. That can be a subscription model as well. I think ResMed is pretty successful with that as well. That will also help be able to generate revenue, helping the sleep physicians manage the patients, having the patients understand where they are with their app and where they are with their own process.
That will just continue to grow the therapy.
Do you get more leverage on the sales reps as well? Revenue per rep probably moves higher in that regard.
In that regard, yes. We also want reps to really focus on fewer centers doing higher cases. That way they can be more efficient in their own practices and also be able to continue to increase their own productivity.
Are reps now going with the sleep doctors and helping the programming and kind of handholding on that end too?
We tend to like to have our field clinical reps do a lot of the case coverage, both in the operating room as well as training the sleep physicians and the APPs and the sleep practices to take care of the patients. What's important though is we always want them to do the programming. That's different from neurostim or pacemakers where the company would do all the programming for the customer. No, we teach. We teach our physicians on taking care of their own patients. Do your own programming. We're there to assist. We're there for technical guidance, but we really want them to drive independence as well.
I only got through half of my questions, but I'm not sure if there's anything else that you wanted to make sure to say before we end.
Oh, no, we were excited to come here today to announce that 5 is launched. We apologize for people we met with this morning that we did not tell you that because we held it to this moment. The team is really excited about 5. The team's excited about where we are going with Inspire. We are obviously very proud of where we have been. Last week we announced we treated our 100,000 patients with Inspire. We are so excited about that and driving outcomes to the point that we said what we are all about is we are just getting started. I do not know what you guys want to add.
Great. Thanks a lot.
Thank you for having us.
Yeah, of course. Thank you.
All right. Very good. Thanks.