Q2 2020 Inspire Medical Systems Inc Earnings Call
[music].
Greetings and welcome to the inspired medical systems incorporated second quarter 2020 conference call.
At this time, all participants are listen only mode.
A question and answer touching will follow the formal presentation.
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As a reminder, this conference is being recorded.
All I can turn the conference over to your host Mr. Paul Arndt.
Managing director of lifestyle Advisors. Please go ahead Sir.
Thank you operator, and thank you all for participating in today's call. Joining me today, our Tim Herbert President and Chief Executive Officer, and Rick Bucholtz, Chief Financial Officer role.
Earlier today inspire released financial results for the three and six months ended June 30, 2020 <unk>.
A copy of the press release is available on the company's website.
I'd like to remind you that on this call management will make forward looking statements within the meaning of the federal Securities laws.
All forward looking statements, including without limitation operations financial results and financial condition investments in our business continued effects of the covert 19 pandemic full year 2020 financial and operational outlook and improvements in market access are based upon our current estimates and various assumptions.
These statements involve material risks and uncertainties that could cause actual results or events to mature to materially different accordingly, you should not place undue reliance on these statements.
CR filings with the Securities Exchange Commission, including our quarterly report on form 10-Q filed with the FCC today for a description of these risks and uncertainties inspired disclaims any intention or obligation except as required by law to update or revise any financial projections or forward looking statements whether be.
Because of new information future events or otherwise.
This conference call contains time sensitive information and speaks only as of the live broadcast today Tuesday August 420 20.
And with that I'll now turn call over to Jim Herbert Tim.
Thank you Paul and thanks, everyone for joining the call today for our second quarter of 2020 business update.
I'd like to begin by emphasizing how very proud I am not the inspire team and now all they stuck together through all of the challenges experienced during the second quarter, resulting in a strong close.
More importantly, we're now in a very strong position to continue the ramp in the second half of the year.
As expected the impact of the culprit 19 global health pandemic lets felt throughout the second quarter with the postponement of a significant number of implant procedures in both the U.S. and in Europe.
Even with these delayed cases for the second quarter. Our worldwide revenue was $12.2 million, which was a decrease of 32% as compared to the second quarter of 2019.
We realize that covert will be with us for some time.
But our recent experiences have shown that health care providers have adapted and identified safe methods to continue to treat patients.
In fact with the reason surgeon covert cases, we have had only a few centers suspend inspire procedures.
As such and plan activity has significantly increased over the last couple of months.
To put this in perspective at the end of April only 2% of our centers, we're conducting implant procedures.
At the end of May this never increased to 24% by the end of June 51% of our incentives were conducting implants.
Well the dead as early it suggests more than 60% have implanted in July and we're working with all centers to get them scheduling cases.
We do know the great majority of centers are conducting office visits once again.
This encouraging trend provides us with confidence in the outlook for our business for the remainder of the year. Therefore, we are now able to provide new full year 2020 revenue guidance I'd between 88 and $92 million.
Of course, as you know the operating environment for surgical procedures continues to evolve as covance persist and even spiked in some regions. So while we're confident in our guidance. We will continue to monitor the impact of the pandemic.
Rick will get into specifics later, but we're also reiterating our guidance on gross margins as well as the key operating metrics of opening new centers and territories.
Let's discuss what's driving our positive outlook for the business.
At the core is the quick ramp of centers performing inspire implants as well as many patients in the process of receiving inspired therapy.
During the pandemic period. The team remains focused on very active with health care providers to ensure that facilities in patients were prepared once cases were able to be scheduled we previously discussed how we're concentrating our on four distinct patient groups.
The first group are those patients, whose cases had to be postponed due to coal bed.
And we are achieving excellent success and rescheduling these procedures.
The second group of patients had completed their work up and obtained insurance approval.
But we're not able to scheduled turnaround plan and again, we're now successfully scheduling these cases.
The third group of patients were unable to complete their final assessment required for insurance prior authorization, which is the drug induced sleep endoscopy as you recall also they've been to ask me procedures were also postponed.
The positive news it that is that all centers performing inspire implants are also performing the sleep adopt would be procedures and therefore continuing to build their practices.
The final group of patients are those new to inspire therapy, and whose initial contact with their health care providers was through newly adopted virtual tools, such as community Hell talk zone or Microsoft teams and their initial appointments, we're using tele medicine.
The key focus of the inspire team was to ensure that once we started implanting centers that the ramp could continue without facing any gap or slowdown a procedure is due to not appropriately building the pipeline during the pandemic.
What we're experiencing is that our patients are clearly committed to addressing their obstructive sleep apnea.
They have been theorists they've study tried but are unable to benefit from sea Pep taken the time to learn about inspired therapy worked with their physician to ensure they are good candidate obtained insurance approval.
And are now committed to moving ahead with the Enspire procedure.
As we review some of the key initiatives from the second quarter. What was most critical for US was to stay active in educating new patients, creating this awareness was largely due to the direct to consumer activities. We continued during the quarter.
With stay at home orders in place, we initially limited spending on radio and focus more on digital communication, including Google ads on Facebook.
We leveraged a revised television campaign, focusing on our smaller markets that were not as significantly impacted by the pandemic.
During the latter half of the second quarter, we resumed radio and TV initiatives in our larger market as the impact of coal that lessened in those areas. We're also utilizing our website and virtual tools to help patients connect with physician and in many cases through the use of Tele medicine.
In the first half of 2020.
The number of visitors to our website was 2.6 million.
Which is a robust increase of 45% year over year.
In addition over 28000 physician contacts were established via the website, representing an increase of 47% year over year.
Moreover, in order to increase the percentage of patients reaching out to health care providers, resulting in an inspire implant.
We continued to expand our call center concept called the inspire advisory care program.
As we've said before previously.
The primary purpose of the advisory care program is to assist patients in connecting with the appropriate healthcare provider based on those specific needs, which in turn should improve our overall conversion rate.
We have seen positive results from the advisor care program to date. So we expanded it to include 77 centers and expect to continue expanding the program throughout the year.
We also recently launched the inspire asleep app, which is which in combination with our inspire cloud is the basis of our digital patient management system.
This system will continuously be enhanced and the first version of the of the App of the App allows patients to learn about inspire therapy. It connects them within inspire trend physician.
This past week, we lots of the second version of the App, which interact with inspire cloud and enables the collection of clinical data such as patient quality of life and satisfaction questionnaires.
So it is clear that the patient interest and inspire therapy remains high even during this covert period.
Beyond this hospitals and physicians have less significant revenues due to the pandemic and are motivated to schedule patients and get implants moving again.
The good news here is that inspired therapy is considered a high margin procedure for hospitals due to the reimbursement levels for the outpatient procedure.
As we previously discussed the National average Medicare payment increased to 29000 at the beginning of 2020.
And commercial reimbursement is approximately 1.4 times the Medicare payment.
The proposed 2021 outpatient payments were released today with a proposed increase of $850 to this code if approved which should be released in October.
Moreover, as I said on our last call the average payment to surgeons, Brian inspire implants increased by about $450. Following the finalization of the Medicare policies or local coverage determination or lcds.
This increase is for the work to implant the sensing lead which is the add on code 046 60.
And previously did not carry any payment.
The average Medicare reimbursement for the based code of six four or 568 was approximately six to $800 and therefore this increase of $450 is significant for the surgeons.
The proposed 2021 rule reduces the base code surge and payment by just $48 if approved.
Let's stay with market access or reimbursement, where we continue to execute on our two key strategies, which are to expand the number of positive written coverage policies.
And concurrent with this process continued to obtain individual prior authorizations.
First the major accomplishment in the second quarter was a significant progress we achieved with Medicare.
I am pleased report that all seven of the Medicare administrative contractors or Max have now issued and implemented their final lcds and inspire have 100% Medicare coverage and all 50 states.
There are approximately 40 million Medicare patients and an additional 20 million lives under commercially sponsored Medicare plans known as Medicare advantage.
The inclusion criteria in the Lcds are very consistent across the U.S. and provide some impactful changes such as increasing the B.M.I. limit from 32 up to 35.
In addition, we currently have 56 positive policies from commercial health care plans.
Representing approximately 182 million covered lives.
As a point of reference we had approximately 125 million covered lives at this time last year.
We continue to expect that our momentum with these positive coverage policies will continue throughout 2020.
The most recent positive coverage decision was received from Cigna, which provides health insurance coverage for approximately 16 million members in the U.S.
And the second quarter.
Our internal reimbursement team supported 566 prior authorization submission submissions. This compares to 735 submissions in the second quarter of 2019 and 929 submissions in the first quarter of this year.
When the sleep endoscopy procedures were suspended back in March this slowed the number of patients able to submit for an insurance pre approval.
As we mentioned these patients are again scheduling their endoscopy and we have already experienced an uptick in prior authorization submissions.
The news regarding prior authorization approvals is also a positive.
The approval rate has dramatically increased due to a large number of commercial insurance policies.
In fact 541 patients received an approval in the second quarter, which represents a modest 7% decrease compared to the 579 approvals in the second quarter of 2019.
Along with the increased approval rate. The median time for an insurance approval is now down to approximately 11 days.
From 25 days in 2019.
Given our improved reimbursement environment. These metrics will likely become less meaningful in evaluating the overall progress of our business going forward and as we've previously stated we did not intend to continue to report on them. After this year.
In the second quarter, we added 16, new U.S. implanting centers.
The number of new centers was limited as we were not able to schedule implant procedures and therefore, we have several sites that will start in the second half of the year.
Further during the pandemic period, we took the time to retrain, all implanting centers and review the current state of these centers.
The process resulted in the de activation of 15 centers for reasons, such as surgeons relocating.
As well as where the location no longer has an active any effective team to manage and inspired therapy program.
Even though this is a relatively small number of centers. We believe this action allows or sales marketing and clinical teams to focus their efforts on centers that we'll have attractive returns for our business.
Therefore, with 16, new centers and 15 deactivated centers. We ended the period with a total of 328 centers in the U.S.
We will continue to identify new centers, including ambulatory centers surgical centers are FCS and focus on training contracting at these centers as a reminder, recruiting additional efficiencies will remain a focus moving forward as inspire as an outpatient procedure and as I said earlier the reimbursement would then.
Sees has improved.
Moving on we created nine new territories during the quarter.
Which brings our total 10 91 territories in the U.S.
Importantly, we did not slow our cadence of hiring territory managers to ensure we are in a strong position once cases were able to resume.
These new centers and territories will have beneficial impact on our long term growth and will drive continued growth in therapy adoption.
Regarding our international activity.
Patient flow was steady in Europe and continued to improve throughout the second quarter similar to the us and specifically in Germany and the Netherlands.
We expect that the number of schedule cases in Europe will continue to increase throughout the remainder of the year.
In Japan, we're driving towards the reimbursement decision and remain actively engaged with the authorities. There. We continued to meet with the Ministry of Labor Health and welfare to finalize the documentation process and expect to have a reimbursement decision in Japan. This year and plan for a limited comes.
It's a large in 2021.
We also continue to achieve progress with regulatory third authorities in Australia.
We expect to receive regulatory approval in that country in 2021 and are working to obtain reimbursement concurrently.
In the second quarter, the FDA approved and expanded age range for inspire therapy to include 18 to 21 euro patients.
Several commercial payers have already revise their policies to reflect this pediatric indication and we expect that others will follow suit throughout 2020.
We will continue conducting additional research on the specific characteristics of always say and the pediatric population, including our ongoing clinical study for adolescents with down syndrome.
Switching gears again.
Similar to the first quarter, our R&D expenses increased year over year in the second quarter as we continue to invest in enhancing our technology platform.
The inspire cloud project, our cloud based patient management system continues to progress with the addition of many centers in the us and in Europe, we're using the tool.
As I noted earlier, we recently launched inspire app on patient smartphones as an educational tool and the second version released this week interfaces with the inspire cloud.
These are just the first steps and establishing interconnectivity between the pace then their healthcare provider with a long term plan to improve outcomes by tracking patient activity and adherents and monitoring for any issues with device use.
We also have active projects to improve the physician programmer and the patient remote control.
Longer term the design activity for our fifth generation inspire neuro stimulator continues.
As about as I've said previously we anticipate that this will be a multiyear effort to develop the inspire five device and obtain regulatory approval.
We are actively conducting feasibility trials with several technology innovations, which will make the inspire five neuro stimulator stated the art and expect that it will further improve the performance of the system, including simplifying the implant.
Procedure.
In summary, we are aggressively focused on continuing to advance our business and planned activity is increasing and we are well positioned to assist pacing patients as they progress on their inspire therapy journey.
We remain focused on improving utilization and our conversion rate achieving further advancements in reimbursement that build upon our recent positive coverage decisions growing the body of clinical evensen evidence in support of inspired therapy and the continued development of our robust R&D platform.
We are extremely excited about our future prospects and are confident that we continue to be well positioned for long term success.
With that I'd like turn the call over to Rick.
For the detail review of our financials.
Thanks, Tim as Tim noted, despite the ongoing colvin pandemic and its impact on our second quarter financial results. We're excited about the outlook of our business for the remainder of 2020 and beyond.
Focusing on the results for the second quarter of 2020 total revenues were 12.2 million a 32% decrease from the 18 million generated in the second quarter of 2019.
You asked revenue in the second quarter was 11 million a decrease of 30%.
From the 15.8 million in the prior year period.
In the second quarter European revenue decreased 47% to 1.2 million.
Our U.S. average selling price in the second quarter was $23800, which was consistent with the prior year period.
The European ASP was 22200.
During the quarter as compared to $21900 in the second quarter of 2019.
Our gross margin in the second quarter was 84% compared to 82.8% in the prior year period. This modest improvement was primarily due to manufacturing efficiencies.
Which led to cost reductions with our third party contractors.
Despite the ongoing cobot pandemic, we have not experienced a disruption in our supply chain and we maintain sufficient levels of inventory.
Total operating expenses for the second quarter were 33 million, an increase of 43% as compared to 23.1 million in the second quarter of 2019.
This increase primarily due to the expansion of the U.S. and European sales organizations as well as increased direct to pay direct to patient marketing programs continued product development efforts and general corporate costs.
The operating expenses of 33 million in the second quarter were sequentially down by $1.5 million from 34.5 million in the first quarter of 2020.
In light of the ongoing uncertainties, we continue to take a thoughtful approach to our spending but expect operating expenses to increase as we returned to growth and remain focused on investing in our commercial and development initiatives.
Our net loss for the second quarter was 23.1 million compared to 7.7 million in the second quarter of 2019.
The diluted net loss per share for the second quarter of 2020 was 88 cents per share compared to 32 cents per share in the same period last year.
The decrease in revenue in the second quarter due to the pandemic negatively impacted the net loss in the second quarter. Despite our improved gross margin.
Importantly, we continue to operate from a position of financial strength.
We completed a successful equity financing in April which generated $124.7 million of net proceeds.
So we have a strong balance sheet, which enables us to execute our growth strategy, which is primarily focused on the U.S. market and with the objective of first increasing patient flow at existing centers and second training and opening new implanting centers.
As of June 32020, our cash and investments totaled 242.6 million.
The weighted average number of shares outstanding for the second quarter was 26.3 million.
We anticipate that the weighted average number of shares for the third quarter will be approximately 26.8 million.
As Tim mentioned, while we're not yet operating in a normal pre coal bid healthcare environment implant activity has increased over the last several weeks.
With that said, we're providing new full year 2020 revenue guidance of between 88 and 92 million.
Which represents 7% to 12% growth from full year 2019.
We continue to expect full year 2020 gross margin guidance between 82 and 84%.
Furthermore, we reiterate our guidance to open 20 to 24, new centers per quarter and add six to seven new territories per quarter.
Our guidance is based on our current outlook. However, the operating environment for surgical procedures continues to evolve.
As the pandemic persists and this could have an impact on our ability to achieve these projections.
In summary, despite the in back impact of cobot on our business, we're confident that we're well positioned for sustained success.
With our strong balance sheet, we are aggressively executing our growth strategy and advancing our business.
With that.
Our prepared remarks are concluded.
Jerry could you please open up the call for questions.
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One moment, please while we poll for questions.
The first question is on and that he is only Goldman Sachs. Please go ahead Sir.
Thanks, and hey, good afternoon.
It's actually start with the with the guidance and see if we can get you to comment a little bit about how you're seeing the sequential cadence.
And whether you know if we kind of take a linear approach to they see it looks like we would get something like maybe flattish growth in third quarter, and then up to 25% plus range in the fourth quarter. If you agree with that that's the right way to think about the guidance and then it'd be really helpful. If you talk to your confidence in that.
Skew in the fourth quarter in particular, and what you're seeing in either backlog or new patient generation is as you talk to generally that give you the confidence that this is the right range.
Great. Thank you very much the.
As you saw from the numbers by monthly the number of centers that are becoming active jumping up from 25 to 52 up 60% in July we continue to see that wrapping and it is a combination of working through the backlog of existing patients that had to have their cases postponed but as we mentioned we.
Really worked hard to make sure we built practices in the pipeline. So we didnt have what we're calling on air GAAP or a leg. Once we started to ramp those procedures. So I think what the way you're describing guidance is directionally correct. We want to continue to keep getting closer to normal in Q3, and a really be able to help a lot of people.
When we get into the fourth quarter and so I think that we have good client confidence and the guidance and directionally in the way that you're describing that as well what's going to be a process to work through Q3 into Q4.
It gets it and as my follow up but maybe focus on the south I'm, just as kind of a.
Learning experience for you is we've seen infections rising in many of these southern states away, where your active and what you're learning from that it's obviously very different than what we saw in March April but.
Are you are you confident in what you're seeing any ability of these facilities to continue procedures are just would love to get color on and do it that specific regions, where we're seeing infections at high level today.
Absolutely well I have the honor of spending time with each of our regional managers an area of vice presidents at the end ever recorded a kind of get a good feeling for where they are there with or region and what confidence they haven't specifically, we've met with Texas in Arizona, and Florida and so.
Florida is one of the areas that is postponing cases, particularly in Miami and starting up the eastern coast, but we're continuing implants in Orlando and Jacksonville, and but we're monitoring that closely.
South Carolina has.
Challenge and a one region right there that there are saying.
Some challenges there and a couple centers in Houston.
But other than that we've been leaning forward been being creative and finding alternative ways for patients to get their devices, including as we talked earlier about opening up SCS.
And being able to go to the assay is that are owned by a lot of these same hospitals. So we're monitoring that closely but we think it's pretty limited at this time.
And with the we're watching those patients to enroll get them schedule back in those.
Centers as soon as possible.
Good stuff. Thanks, so much.
The next questions from Bob Hopkins Bank of America. Please go ahead Sir.
Okay, great. Thank you and good afternoon.
Thanks for the detailed just quick question on the guidance again for the back half could you give us a sense as to what percentage of the back half comes from kind of already identified in backlog procedures are scheduled procedures versus you know new demand that you anticipate over the rest of the year did you have any sense for that.
Oh I'd be a just a rough estimate five and I'll start with United months ago. When we started to talk about the four buckets and we call them groups of patients here and to make sure that we just didn't work through the backlog and also and we didn't have enough patients to be able to continue going forward. So that's why we continued the direct to consumer and a lot.
Out of the television going forward to bring patients to the website.
So I think what we're experiencing in June is really working through a great majority of the of the past cases, and that'll carry a little bit into Q3, but I think when you get into second half of third quarter. Most the fourth quarter, you're going to be ended the second third and more importantly ended the fourth group of patients.
And so we're not relying on the patients that have their case was postponed we want to be able to get them scheduled quickly and be able to get them theyre implant as soon as possible.
Did I indirectly as answer your question.
Yeah, Yeah. That's helpful. I mean, I know those hard numbers come by there just wondering.
Again, how much is kind of visible versus new business you need to win maybe one of the way it kind of running conferences any chance you provide revenue for July just so we can sort of see where you are.
As of July you know again normally wouldn't ask but it's a unique circumstances. Thank you know I don't I don't have in front me, but I mean, I can say that that is that a number of centers going up increased to 60% and were able to get.
Good all our time with our physician. So we're confident that we're going to have a good July and a good Q3 and are really focused on not stopping never continue to ramp all the way through Q4 as a matter was talking about with.
How do we look at at the guidance for the rest of the year.
Okay, and then just one other quick follow up on those 15 centers I assume goes we're a tiny percentage of revenues.
I just was curious for a little more color there whether that was you guys sort of giving up on them or them. According to procedures and again I assume is not a big deal on a very small percentage of the total but just curious as to any additional color. There and then I'll drop that yet so that you absolutely. So during that pandemic trade, we routinely retrain our centers because we have updated yes.
Fat procedures updating procedures on programming patient selection and then when we push that trading out to centers, we can do that virtually and the centers and the physicians actually sign off on that and how we started that whole process. We look for centers I really haven't done and plans over the last year. We said, okay, let's look at us how much.
This time, we spending at those centers and the great people, they take or patients. We appreciate that but if they're not really active and I don't have the support team to be able to support inspire program. We went back and talk to the territory managers and talk to the centers and determined that now is not the right time for them so to your point.
Yeah, those 15 centers weren't really contributing implants in revenue anyways, but now we get to clean it up and so the territory managers don't waste mindshare or you are even time with those centers that we can drive those patients to the active and and effective centers.
Great. Thank you.
Thanks Bye.
We have a question from Richard Newitter SBB Leerink. Please go ahead Sir.
Hey, Ken anything on her edge. So quick question I wanted to start just back from the guidance I think you had said in your prepared remarks.
Indeed.
Banner.
Well I guess.
Following Orion.
What degree and potential for.
Dan or limiting taken baked in to the 80 to 92 million <unk>.
I think we account for that and that 80 to 92, we know that several of those centers are unable to schedule cases today.
But there are not waiting too long and we don't expect it's going to be a long period of time before we can help those patients and help them get scheduled to get their procedure and as I mentioned in Texas. We're trying to move several of those cases to ASEAN, what I did mention as Arizona was another hotspot in California, and we're now seeing any slowdown there so.
We are confident now and the guidance that we gave you and we're going to find solutions to be able to work through that we thing.
Okay, and then you mentioned Nancy.
Question can you.
Preceding that kind of they see it down pretty small percentage.
Could you may begin that that then or remind that you know what percentage of your business today.
And then.
Hello.
21.
Colgate potentially being an incremental tailwind.
Reimbursed.
Yeah, I think it's probably still less than 10% of our business today as we even start up when we started looking at new centers in the third quarter I think you'll see an uptick in SCS.
I think the reimbursement has gotten a little bit stronger the new proposed rules. Today also increased the average Medicare payment for assay is for 2021. So there is little bit more incentive for the assay is to be able to get started so I think it's relatively small today, but the it'll have.
More of an important going in through the year and then really when you start getting to 21 and beyond is when you're going to see more of a percent of our business and present of our implants being driven.
And conducted in SCS, and then necessarily because of the covert pandemic I think it's a natural step for outpatient procedure like ours. If you take the spinal cord stimulator sacred nerve stimulator.
Technology is maybe half to two thirds of those cases are performed in SCS and so assist of efficient way to be able to treat patients I think now that reimbursement has been for the most part lock Dan It's a natural progression to move to asses.
Thanks for taking my question.
Thank you.
Yes, good question from Chris Pasquale Guggenheim. Please go ahead Sir.
Thanks.
Tim the overall trends are certainly encouraging honestly im a little surprised at 40% of your customer base still hasn't come back online at this point on the one hand, that's good because it means those that have are quite productive, but do you. The sense for why the sites that are still down having come back or they prioritizing other types of patients first or is there an issue.
With sleep centers in those regions were just any thoughts you have there.
Yes, first up deal with a number that gave you as active implants. Those are those are implants that event performed.
And so I think that there's a greater presented that have in implant schedule.
So as an example, the VA is there is still shutdown veins have not started yet and it's going to take a little bit time to kind of get them going although that's a small.
5% of our business so.
I think it's going to continue to grow Chris I think the number of of procedures that are actually number of centers that are conducting office visits is very high.
Those that are doing tele medicine, our high those screening patients I think sleep studies are increasing significantly.
Although a lot of those are being done with home sleep testing.
So yes, I guess why on one hand is eliminate number of the percent of centers that have already performed an implant I think a greater number have them schedule and thats why we have confidence leaning forward that that number is going to grow quickly.
Okay and.
And then can you share some early data on the impact the call centers having.
Version rate in the places, where you've had it for little while would it be seen there.
Well early on we started that call center on the first week of March in New York in Houston Evolve places right and that's right when the pandemic hit and so it pretty much stop New York and then what we did it was we added several additional centers to start collecting some information.
And to start.
Debugging the system to find out what works well what percentage of.
Phone calls to the call center can we convert to appointments.
And we're still working through those numbers are going to report those but about three quarters of the patients that we are now getting to clinics for appointments are in fact qualified patients and one of the concerns early on is that patients that were just making appointments. They weren't qualified for inspire they needed help and we want to.
Get them to a different healthcare provider, but a lot of people have never had a sleep study before what we need to get them to escape position, where they can get their initial diagnostic and they can try out.
Malls guar they can try a C. Pap unit and then noise. Several those we'll circle back and what we want to do is kind of tree as the calls coming in it makes your qualified patients who are ready get appointments with the.
Health care providers that that prescribed inspire so lot more to come on data there, but we're up to 77, which well how many centers that we have 328. So we're just at the beginning just at about a fifth of the centers dolls, we have a ways to go but we've had a chance to really take a lot of phone calls debugged the system really identify.
What's working well and we've made a lot of corrections to.
To improve the process will keep ramping new centers as we work through the rest of the year.
Thanks.
Thanks, Chris.
A question from Jon Block Stifel. Please go ahead Sir.
Great. Thanks, guys good afternoon.
Let's turn to build on a couple of questions, but just want to take a step back and ask him to drop ratio patients that you expect to experience from Colgate. So.
Maybe over simplify but other patients you expected to undergo upper airway, assuming 2020, the beginning of the year.
What do you see.
Ultimately recapture 80% was 90% plus Im just curious what you're hearing from your sales guys and then I've got a separate follow up.
Okay. So you're looking at patients who are already in the pipeline and being diagnostic that diagnosed and including those that may or may not have had their sleep endoscopy, we want to capture the great majority of those so if they are in a physician practice, we want to make sure that we stay on top of that.
What we're trying to do is make sure that in the interim period. When we continued the direct to consumer that we don't have a big fall fall off in the number of calls the number of patients in the center, that's where it's really difficult to track those numbers.
But the call center, we get some evidence that we're able to capture those patients.
And and with the use of virtual tools and telemedicine, we're able to build practices, but I think that periods. When when we probably saw the greatest fall off and then we're going to have to continue on but again remember we had 2.6 2.8 million people come to the website and 26000 people reach out to a doctor saw.
The patient interest remains very very high.
And we just have to stay on top of or gamma work with the centers and make sure we capture those patients.
Okay got it and then maybe as a follow up question and Chris alluded to this earlier, but I also want to ask about the centers that are ramping you gave helpful metric, 60% in July active implants.
Common denominator.
It's strictly just the geographic argue man is it.
I'm, just trying to figure out at the 60%.
Or some of those at a much higher utilization of upper Airways.
Relative to the some of the other centers, maybe you can just talk about them.
Yeah, I can tack that without really talking about cove. It I think if you look at the end. The 19, we talked about we add one center over 100 implants, we had several centers in the.
After 10, so there is there's always a range of utilization and Randy banner.
Chief Commercial officer always talks about how many centers can you get doing two implants, a month and really just start with that simple simple metric to be able to grow that number and it's still a little bit limited right. Now so of that 60% you have some centers who have.
Significant amount of all our time and I really scheduling those cases are quickly and as others still just ramping up so it's going to be a whole distribution across the board, but really utilization continues to be our key focus enhanced that's why we're even de activating those 15 sites.
Okay, and if I could just maybe as part b that could happen, maybe just to be more straightforward the 60% of centers in your opinion did they account for 40% of your overall volume.
We're set up your overall volume again, just trying to figure out where they were skewed in terms of utilization of your overall base.
That's a very good question I don't have that answer I don't think it add Norway could exceed 40%, but we'll go back and look at that I think it actually is a small percent because remember how many new centers, we opened last year and the new centers that were opening didnt conduct a lot of implants last year, but there there is set up to.
You really productive centers.
And so we also remember we ended the quarter with 91 territories. So we're really starting to get a good number territory managers out there who all have active centers and so we're really kinda.
Spreading it out and keeping utilization an important factor across all geography.
Got it very helpful. Thanks, guys.
Thank you John.
We have a question from Adam Nadir Hyper Sandler. Please go ahead Sir.
Hey, guys. Thanks for taking the questions.
Maybe just started just one on the reimbursement front.
And apologies if I missed this my prepared remarks, but but any update regarding either.
Anthem, our Humana just latest expectations there from when we might see decision from those payers on at a follow up.
The we know from anthem, we Bennett communication with them, we know that the American Academy of whole there in college, you, which is the and T. Society. We know that they have been in communication with Adam and really made sure that they stress what this isn't an important therapy for them to write policy on.
We believe that their annual review is between the end of August September and our cautiously optimistic they're going to write policy in that timeframe we.
Have a couple other papers, a new started coming out we're going to surely gift that to them as soon as those are accepted which is only additional evidence for the safety and efficacy, but we do thing anthem is working on it and.
We're cautiously optimistic Humana has a significant part of the business is Medicare advantage.
And by definition with the Lcds in place they must cover for Medicare advantage. So we also think it's just a matter a time.
Before.
Humana rights policy the other key players in there that we don't have policy yet.
Florida Blue is we've been working with and first caused the Mac in Florida is on the capital, Florida Blue We know that they are a reviewing and believed to be writing policy and then near and Dear to our hard all of the inspire employees have bluecross blueshield of Minnesota, which doesn't cover but I'm looking all my shoulder weakened.
Either office and we'll continue to work Im very however, we believe that they're going to be writing policy in the very near future as well.
Okay, that's very clear thanks for the color there Tim and then just for the follow up.
Hey, guys, maybe I'll ask you about new account adds so you're guiding to new centers I think it was 20 to 24 per quarter for the back half. The year can you just talked about your line of business line of visibility there.
Our New center ads, and then I'm just I'm wondering how the vac process has maybe been impacted with cold in 19, just just any color there would be great. Thank you so much.
Absolutely. Thank you very much Adam the.
Well, our visibility has been pretty good lately because there's so many centers that were very active and wanted to get.
Activated in the second quarter, we are unable to do that because they couldnt schedule. Their first cases. So those are the centers that will get up and running early in the third quarter, but we also have a group of other centers that have been in the process I think the value add committees of the vacs you referenced have.
Continue to work during the covered period right. There was still there were still still able to kind of push those through and so we do have line of sight remember last year. We also went and hired.
For area business managers, one for each of the area Vice President whose sole job. It was to hunt new centers and find centers that can drive utilization and really be able to treat a number of patients on we're just starting to see a lot of those centers start coming through in the second half of the year. So were very good visibility to.
That and we're pretty confident in the guidance that we're giving you that we'll be able to open that.
Yeah, Hey, Adam I like to add to that as well.
In addition, we we add.
Additional hospitals through some of these national agreements that we recently entered into such as Ascension.
So we've gone through the value analysis committee on a on a network wide basis.
And they have 150 different hospitals as well as 30 as Ses and so we don't have to go through that process, we just need to find and interested NT and get the patient flow going there also we are going to focus on SCS and those are standalone smaller facilities that really don't have.
As formal other value analysis committee as large standalone hospitals.
Okay very helpful. Thank you.
Thanks, Adam.
We have a question from Larry Biegelsen Wells Fargo. Please go ahead Sir.
Hey, guys. Thanks for taking the question.
Yes.
Hey, Tim when it come back to the 60% number sorry to beat the dead horse, but.
Two part question one is what's the guidance assume.
What percent.
Of centers are doing cases and.
And how much of an impediment is a sleep endoscopy test and I had one follow up.
Okay, Great I think by the end of the year again, we deactivated 15 centers, so I'm going to challenge the field on Randy that does that number is going to 100% of the centers will be implanting by the end of the year and that includes new centers that we'll be bringing on by the end of the year. So we're going to continue to ramp and we'll continue to get these centers active.
And again the only challenge we may have is if covert persist and some of these hotspot regions, but we believe that they will be able to start scheduling cases or they will find an alternative to be able to do that may be at assay. The second part of your question was in regards to a drug induced slip andaz.
Skippy and put some color behind that.
Early on in the covert period. It was scored as a high risk procedure because of the aerosol because when you use a nasal skol.
You can excite the airborne path agenda, Covidien makes a little bit riskier for the health care providers.
About a month or six weeks ago that was actually downgraded the empties out foreign procedures to make it a more save procedure and it was downgraded to just a moderate risk into with guidance to use.
He will perform in those procedures. So the centers that are doing the implants equal number are doing sleep endoscopy. So if the both because you just go hand in hand, and so as we open up the new centers, we're able to do to sleep andaz squeeze and build the pipeline right alongside.
Thanks, that's helpful and Tim just one long term question, you're adding six to new six to seven new territories per quarter for the remainder of 2020, what's your ultimate goal here. You know do you expect to continue to add is similar pace next year and where do you think you get to over the next few years. Thanks for taking the okay.
Long term just real.
Top level.
We estimate that might be 4000 hospitals that might be 4000 SCS and.
Thats 8000, total and if we can be in a third of those that's about 2400.
They do that right and we'd like our territory managers to manage between six to eight centers. So you'd end up being close to 400 territory managers.
I think we want to continue our cadence of growth because Larry back to the early days when we're talking to early on we continually add but we never bring on a big bullets, because we always control quality by controlling the patient outcomes AD buy advocate now we've increased the key.
It is because we've increased our are the size of our training team and we've been able to scale. Our training team just as we can scale the commercial team and scale the number of centers during the procedure and scaled the number of procedures that centers do so it all works hand in hand, but we have a long term view of where we want to go.
Thanks, so much too.
Thank you there.
Your next question is from Ravi Misra Fernberg capital. Please go ahead Sir.
Hi, Tim Eirik. Thank you for taking the questions. So.
One of them.
Just wanted that closed centers, just you gave us some color that they have done any plans over the last year, just curious where they more recent to come online or the some of the older centers.
Kind of that vintage analysis that you've given us on prior calls.
Yes that if theres, a little bit of a spread but I know there's a couple of those centers are Dave the other way back to 2014, and there will be there'll be a group some of them and each year. Each member how we always talked about class there'll be some and every class going forward, but some of them its.
You know it might be it might have to shut one down because the surgeon move but you've got a member you opening up another one.
Because that surgeon moved and so.
In the early days, we weren't as strict about training and identifying centers that had everything it took to be successful and so some of these are the old legacy sites, you're right that we're closing down others are because the surgeon just move crostata across two different state, but the key the key to it as as we.
One training through that the 15, probably work contributing much revenue anyways, and we want to be able to focus our energy on those centers that can build the utilization and can be able to increase the number of patients that they treat.
Great. Thanks, So just just a follow up on that.
Like we should expect some level of.
In that space in the in the future going forward and then maybe.
If I can add a 15 question or whatever you want to call. It to the guidance that you gave for the back half of the year I'm doing my math right.
Just the the patients treated for center to kind of get to the top end of your of your kind of guidance range assumes pretty much flat growth versus last year.
At a reasonable way to kind of think about it and what could take you beyond that I mean is this all virus related or is there anything else that could could drive you above that thank you.
Absolutely.
That's not what was the what was the first question.
The first one was just about just ongoing how to think about the churn just senior centers on a future based Oh, yes, Okay. I'm, sorry, I'm sorry, you got you got me on the second one I start thinking about that and I Miss first on the.
I don't think so I think we went through a onetime we really kind of train retrained all the centers, we really kind of lean down the territory managers to identify those centers that we wanted to spend time at no centers that it's not appropriate to so now it's about ongoing churn that we're looking through you're always going to have.
Physician move or retire, but we always want to build depth etcetera. So there is to surgeons or a third surge and to be able to continue on a program. So I don't think you're going to expect a lot of that churn going forward.
As far as the guidance go.
Yes, there is still some uncertainty as we ramped through.
The.
Starting up the sites after post Covance so of course, we're going to.
Be careful about what numbers, we give you and it's probably going to show flat.
From a utilization standpoint, as we ramp up those centers and what can change well. The key is number one if this curve levels off that's going to really help and be able to get more cases into the centers.
We want to be able to open up.
Miami and the rest of Florida because of course, that's they don't they havent been able to go back and work on other Medicare cases, because remember the Medicare policy just came online in the May June timeframe. So there's still some things that we can work on we're going to keep driving the.
Call center to be able to drive more patients to centers can continue to increase that we're going back to our direct to consumer and we will start doing more television in the second half of the year and focus that on areas that are able to treat more patients. So we're being very creative to make sure that we.
All right good position to.
Achieving even exceed that guidance that were given now.
Thanks.
Thanks, Jeremy.
We have a question from.
Frank Taconite Lake Street capital markets. Please go ahead Sir.
Hey, Thanks, guys for squeezing me in here at the end I'll just keep it to one quick.
Just to touch on kind of some of the geographies that have not seen a recent reflux in.
Covance spikes in cases, so curious about the current procedure volumes in the more normalized health care areas. What are you seeing there on the both procedure side as well as dice procedures are you seeing.
Some of those returned to some pre kobin levels or how do you think about some of the less impact there is right now.
Well I mean, let's talk about New York Right, New York was so significantly impacted but right now in New York has the some of the lowest rates there and with very good controls, although the city has gone through a lot.
We're seeing a very good rebound there was saying some of the private centers, such as long Island Jewish or the Northwell system and the.
Over in Hackensack on that side and even in Manhattan. Those centers are coming back very strong and they have a strong backlog of patients to be able to take care of being able to schedule. Those cases, so really like what we're seeing their Philadelphia has always been one of our top cities as far as Thomas Jefferson.
In a new Pan and several other sites there they continue to grow and it's across the board were seeing increases in Arizona, and California, even the male clinic is very active and I don't want to leave out a city, but it's pretty much across the board, but you got to remember the Medicare is having a really strong impact too because.
Medicare is now present.
Or Medicare policy is present in every single state and so these centers are confident that theyre going to be paid for the Medicare cases, and that's really going to help those cases as well so it's pretty much across the board.
Great. Thanks, taking my question setback.
We have a question from Mike OCC Oppenheimer. Please go ahead Sir.
Good afternoon. Thanks for squeezing me in here curious with a bit.
HM.
Competitive landscapes sequentially excellent FDA approvals for its dream trial back in June.
Absolutely.
Well, we like investment and stimulation for sleep apnea, I think that gives credibility to the.
Therapy, and I think that helps the stimulation for sleep apnea as a whole.
That being said, yes next so it did get I'd approval to start their study in the United States.
I don't I think they still have a limited amount of data out there they did publish.
Paper out of Australia of.
I think they imply a 27 patients and show data on 21 of the 2021 of those patients. So very very early on having on a.
20 patients, but I'd like that there is enough.
Confidence in that data that they are starting out a new trial still believe they're probably four years away from many approval United States. They are conducting some clinical research and Europe as well I don't think they've started any of their commercial activity, we haven't seen it yet but I.
I think it's I like what the got going very they had some early feasibility and they're able to conduct more work, but again I think the private four years away from approval. So it's our job.
Keep our heads down to keep during our work I live in over has been pretty quiet, we haven't heard from them for a while because they have the anthera system.
Okay very helpful. Then if I could just a couple of quick housekeeping question. Rick If you could just give us the European ASP again and also if you guys haven't updated total number of patients implants, I think it was 8200 or so on your last call. Thanks much.
Sure Mike on the ASP for for Europe.
22200.
For the second quarter and that is compared to 21900 in the second quarter of 2019.
Great. Thank you have the total number of patients implanted.
Yeah 9100.
Great. Thanks, so much guys.
Hi, My thank you.
Ladies and gentlemen, this weve reached the end of the question and answer session and I'd like to turn the call back over to Mr. Robert.
And CEO for closing remarks. Please go ahead Sir.
Thank you very much there just quickly thanks, everybody for joining the call today as always im grateful to the growing team of dedicated inspire employees for their enthusiasm hard work and continued motivation to achieve strong and consistent patient outcomes.
The inspired teams commitment to pay sense remains unmatched and is most important element to our success.
Ill switch to thank all the employees as well as the health care teams for their continued valiant effort. During this pandemic and further focus as we wrap up implant activity. Once again have many sites in the United States in Europe for all of you on the call. We appreciate your continued interest in support of inspire and look forward to providing you with.
Further updates in the coming weeks and months.
Please stay safe and healthy thank you.
This concludes todays conference you may disconnect your lines at this time. Thank you for your participation.