Q2 2020 Inspire Medical Systems Inc Earnings Call
Inspired therapy remains high even during this covered period.
And beyond this.
Hospitals and physicians have lost significant revenues due to the pandemic and are motivated to schedule patients and get impact is 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 the proposed increase of $850 to this code if approved which should be released in October.
Moreover, as I've said on our last call the average payment to surgeons for and inspire implants increased by about $450. Following the finalization of the Medicare policies or local coverage determination or lcds.
This increase is further work to implant assessing 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 five succeed 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 has 100% Medicare coverage in 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 us and provide some impactful changes such as increasing the PMI 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.
But the most recent positive coverage decision was received from signal, which provides health insurance coverage for approximately 16 million members in the U.S.
In the second quarter, our internal reimbursement team supported 566 prior authorization submission.
Submission. 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 positive.
The approval rate has dramatically increased due to 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 2000.
The 19th.
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 us implanting centers.
The number of new centers was limited as we were not able to schedule implant procedures and therefore 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 and 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 lses.
And focus on training and contracting at these centers as a reminder, recruiting additional agencies will remain a focus moving forward as inspire as an outpatient procedure and as I said earlier the reimbursement will then FCS 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 a 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 include increased throughout the remainder of the year.
In Japan, we are driving towards a reimbursement decision and remain actively engaged with the authorities. There. We continue 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 commercial.
Launch in 2021.
We also continued to achieve Progressors 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 over say and the positive 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 continued 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 for using the tool.
As I noted earlier, we recently launched the inspire app on patient smartphones as an educational tool and the second version release 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 that design activity for our fifth generation inspire renewals stimulator continues.
As about as I've said previously we anticipate that this will be a multiyear effort to develop the inspired by device and obtain regulatory approval.
We are actively conducting feasibility trials with several technology innovations, which will make the inspire five neurostimulator 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 plan 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.
As detailed review of our financials.
Thanks, Tim as Tim noted, despite the ongoing colgan 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 us 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 Colgate 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 continued 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 us 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 a normal pre coal vid healthcare environment implant activity has increased over the last several weeks.
With that said, we are 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 expects 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 a pandemic persists and this could have an impact on our ability to achieve these projections.
In summary, despite the impact 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 an amicable easily Goldman Sachs. Please go ahead Sir.
Well, thanks, and hey, good afternoon.
It's actually start with the with the guidance and 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 today. It looks like we would get something like maybe flattish growth third quarter, and then up to 25% plus range in the fourth quarter. If you agree with that at the right way to think about the guidance and then it 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 at you talk to generally they 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 they're ramping 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 look the way you're describing guidance is directionally correct. We want to continue to keep getting closer to normal in Q3, and really be able to help a lot of people.
When we get into the fourth quarter and so I think that we have good tied confidence and the guidance and directionally in the way that you're describing that as well what's going to be at a process to work through Q3 into Q4.
And again and as my follow up but maybe focus on the south just as kind of a.
Learning experience for you is we've seen infections right and in many of these southern states way, 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 in the ability of these facilities to continue procedures are just would love to get color on and do it that specific regions, where we see infections at high level today.
Absolutely well I have the honor and 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 up there with the region and what confidence they haven't specifically, we've met with that 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 into one region, I'd say that they're saying.
Some challenges there Adam 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 Fcs 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 I will watch in those patients to enroll get them scheduled 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 that 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.
New demand that you anticipate over the rest of the year do you have any sense for that.
Oh I'd be a just a rough estimate Bob I'll start on you and I talked months ago. When we started talking about the four buckets, we call them groups of patients here and to make sure that we just didn't work through the backlog and also we didn't have enough patients to be able to continue going forward. So that's why we continued the direct to consumer.
We're in a lot of the television going forward to bring patients to the web site.
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 in 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 their implant as soon as possible.
Did I indirectly as to answer your question.
Yeah, Yeah no no. That's helpful. I mean, it just I know those hard numbers to come by but just wondering.
Again, how much is kinda visible versus new business you need to win in mid may be one of the way of kind of running conferences and any chance you provide revenue for July just to be conservative you don't see where you are out of ER as of July you know again normally wouldn't ask whether it's a unique circumstances like you know I don't I don't have in front me, but I've been a key.
I'd say that that you said a number of centers going up increased to 60% and were able to get a good all our time with our physicians. So we're confident that we're going to have a good July and a good Q3.
And I really focused on on not stopping never continue to ramp all the way through Q4 as a matter was talking about with or 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.
But just.
Cures 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 in a very small percentage of the total but just curious if there any additional color there and then I'll drop that yeah. So I'll, let you absolutely. So during a pandemic trade we routinely retrain our centers because we have updated implant 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 time, we spending at.
Those centers and the great people, they take or a patients. We appreciate that but if they're not really active and they don't have the support team to be able to support inspired 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 capitals 15th.
It was weren't really contributing implants in revenue anyways, but now we get to clean it up and sort of a territory managers don't waste mindshare or you're even time with those centers, where we can drive those patients to the active in an effective centers.
Great. Thank you.
Thanks, Bob.
We have a question from Richard Newitter SVB Leerink. Please go ahead Sir.
Hey, Ken can a senior counsel ranch. So quick question I wanted to start just back from the guidance I think you had said in your prepared remarks.
In the area Red Accidently surgery.
Centers have limited there for Seadrill now I guess just.
Falling alliance question on guidance.
What degree in and potential for.
Centers limiting he is baked into the 80 to 92 million and then I'll have a hot.
I think we account for that and that 80 to 92, we know that several low centers aren't able to schedule cases today.
They're not waiting too long and we don't expect is 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 AOCF.
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 an we're going to find solutions to be able to work through that we thing.
Got it Okay, and then you mentioned, Dan Ethan Allen Kinda back nicely.
And can you appreciating that kind of they see it sounds pretty small percentage of your business could you just need again that this and hair remind that you know what percentage of your businesses today, and then kind of how you expect that to potentially of all over the second half and into 21.
With Colgate potentially being an incremental tailwind on top of that improve 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 Fcs.
I think the reimbursement is gotten little bit stronger the new proposed rules today also increased the average Medicare payment for AMC is for 2021. So there is little bit more incentive for the it seems to be able to get started so I think it's relatively small today, but the it'll have more.
Orphan importance going into the year, and then really when you start getting to 21 and beyond is really going to see more of a percent of our business and present over and plants being driven.
And conducted in SCS and not 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 FCS and so assist.
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.
We have a question from Chris Pasquale Guggenheim. Please go ahead Sir.
Thanks.
In the overall trends are encouraging, but 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 have a 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 was.
Weve centers in those regions would just love any thoughts you have there.
Yeah first up does that number the gave you is active implants. Those are those are implants that event performed.
And so I think that there's a greater percentage that have in implant schedule.
So as an example, the VA is there still shutdown veins have not started yet and that's going to take a little the time to kind of get them going although that's a small probably 5% of our business Saul.
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 from you on one hand, it is eliminate number of the percent of centers that have already performed an implant I took a greater number have them schedule and that's 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 on your conversion rate in some places where you've had it for a little while would it be seen there.
Well early on we started that call center on the first week of March in New York, and Houston of all places right and that's right when the pandemic, yet and so it pretty much stop New York and then what we did it was that we added several additional centers to start collecting some information.
And to start a 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 run a report those but above three quarters of the patient set of we're now getting to clinics for apartments are in fact qualified patients.
And one of the concerns the 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 well we need to get them to a steep position where they can get their initial diagnostic and they can try up.
Oh My God. They can try a C. Pap unit and then noise several of those we'll circle back and what we want do is kind of tree eyes, the calls coming in and make sure qualified patients who are ready get apartments 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. We have 328. So we're just at the beginning just said about a fit to 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 ER to improve the process, we will keep ramping new centers as we work through the rest of the year.
Thanks.
Thanks, Chris.
Yeah.
We have a question from Jon Block Stifel. Please go ahead Sir.
Great. Thanks, guys good afternoon.
Let's turn to build on a couple earlier question, but just want to take a step back it out some of the drop ratio locations that you expect to experience from coal to community maybe over simplify but other patients you expected to undergo upper airway assuming 2020, the beginning of the year.
What are you seeing now do you believe you're going to ultimately recapture 80% was 90% plus I'm just curious what you're hearing from yourselves 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 as make.
Sure that in the interim period, when we continued the direct to consumer that we don't have a big follow fall off in the number of calls a number of patients in the center, that's where it's really difficult to track those numbers.
But the other call center, we get some evidence that we're able to capture those patients.
And and with the use of virtual tools and Tele medicine, 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.
2.62, plenty right people come to the web site and 26000 people reach out to a doctor sold 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 center city ramping you gave a helpful. Helpful metric, 60% in July active in plan is there a common denominator on the centers. It's strictly just the geographic argument is that the tenor argument I'm just trying to figure.
60%.
Or some news at a much higher utilization of upper airway stem relative to just to some of the other centers. Maybe you can just talked about them.
Yeah, I can talk to add without really talking about coal that I'd say, 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's there's always a range of utilization and Randy Bad our Chief commercial officer always talks about how many centers can you get doing two implants, a month and really just how would 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 schedule in those cases are quickly and there's other still just wrapping 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 you just maybe as far be it occurred after the maybe just to be more straightforward to 60 unit per cent of centers in your opinion today accounted for 40% of your overall volume.
80% of your overall volume again, just trying to figure out.
Where they were skewed in terms of utilization of your overall basis.
That's a very good question I don't have that answer I don't think it add no way could exceed 40% by 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 are 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.
In question from Adam Major 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 a decision from those payers one at a follow up.
The we know from anthem, we better 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've stressed 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 and new studies come now we're going to surely gift that to them as soon as those are accepted which is only additional ever.
That ends for the safety and efficacy, but we do think anthem is working on it and Oh, 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 of time.
Before.
Humana Red policy. The other key players in there that we don't have policy, yet a Florida Blue is we've been working with them and first calls the Mac in Florida is on the capital, Florida Blue We know that they are a reviewing and believed to be writing policy and engineering theater or hard all.
The inspire employees have Blue Cross Blue shield of Minnesota, which doesn't cover but I've looked at all my shoulder. We can see their office and we'll continue to work them. Very however, we believe that they're going to be run a policy in the very near future as well.
Okay, that's very clear thanks for the color there, Tim and I just for the follow up maybe I'd, maybe I'll ask you about new account adds so you're guiding to new centers of but I think it was 20 to 24 per quarter for the back half. The year can you just talked about your line of business by line of visibility there on new center as well.
And I'm just I'm wondering how the BAF process has maybe been impacted with cold to 19, just just any color there would be great. Thank you so much.
Absolutely. Thank you very much out of the.
Well, our visibility has been pretty good lately because there's so many centers that were very active and wanted to get it activated in the second quarter were unable to do that because they couldnt schedule. Their first cases. So those are the centers that will get up and running earlier 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 or the vacs you referenced have continued to work during the cold period right. There were 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 of 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 and 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 or.
We need to that and I were 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 essentially.
So we've gone through the value analysis committee on a on a network wide basis.
And they have a 150 different hospitals as loans 38 to cease and so we don't have to go through that process, we just need to find and interested in tea 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 although value analysis committee as large standalone hospitals.
Okay very helpful. Thank you.
Exactly.
We have a question from Larry Biegelsen Wells Fargo. Please go ahead Sir.
Hey, guys. Thanks for taking my question.
Yeah I understand.
Hey, Tim when it come back to the 60% number sorry to beat a dead horse, but two part question. One is what's the guidance assume what percent.
Ah Ah Senator 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 I guess, we deactivated 15 centers, so I'm going to challenge the field on Randy that does that number is going be 100% or the centers will be and planning 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 at.
Give and again the only challenge we may have is if covert persist and some of these hobspot regions, but we believe that they will be able to start schedule. The cases or they will find an alternative to be able to do there may be at AMC. The second part of your question was in regards to a drug induced.
I've been das compete and put some color behind that.
Early on in the covert period. It was scored as our high risk procedure because of the aerosol because when you use a nasal school.
You can excite the airborne pathogenic Colgate and makes a little bit riskier for the health care providers.
About a month or six weeks ago that was actually downgraded the aunties alphaform procedures to make it a more save procedure and it was downgraded to just a moderate risk into with guides to use.
PE weren't performing those procedures. So the centers that are doing the implants equal number doing sleep and basket piece. So if the both procedures go hand in hand, and so as we open up the new centers, we're able to do sleeping dogs, we use and build the pipeline right alongside.
Thanks, that's helpful and Tim I'm, just one long term question are you ready and give them 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.
Well long term just real.
Top level.
We estimate there might be 4000 hospitals that might be 4008 Ks sees.
That's 8000 total and if we can be in a third of those that's about 2400.
They do that right.
Now, 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'd say, if 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 bit bullets, because we always control quality by controlling the patient outcomes AD buy advocate now we've increased the.
Just 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 scale the number of procedures at 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 lobby Misra earn Brean capital. Please go ahead Sir.
Hi, Tim Eirik. Thanks for taking the question so all that one of them.
Just wanted to close a center or just you gave us some color that they haven't done plans over the last year, just curious where they more recent to come online are these some of the older centers are kind of that vintage analysis that you've given us on prior calls.
Yeah that if there's a little bit of a spread but I know there's a couple of those centers our data all the way back to 2014, and there will be there'll be a group some of them and each year. Each number how we always talked about class there'll be some and every class going forward, but several of them its.
You know it might be you might have to shout, one down because the surgeon move but you 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 at two up to be successful and so some of these are the old legacy sites, you're right that we're closing down others are 'cause a surgeon just move cross Todd or across two different state, but the key the key to it as as we were.
On 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 should it sounds like we should expect some level of churn in that space today.
In the late 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 see 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 that 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.
Segment was what was the first question.
The first one with dispatches ongoing how to think about the churn to senior centers on a future based Oh, yeah. 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 be really kind of train retrained all the centers, we really kind of lean down the territory manager.
There is to identify those centers that we want to the spent time at no centers that it's not appropriate to so now it's not a high going churn that we're looking through you're always going to have a.
Oh physician move.
Or retire, but we always want to fill depth etcetera. So there's two 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.
Yeah, there's still some uncertainty as we ramped through.
The.
Starting up the sites after post Covance so of course, we're going to.
But be careful about what levers, we give you and it's probably going to show flat.
From a utilization standpoint, as we wrap up those centers and what can change well. The key is number one if this curve leveled 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 Ah Miami and the rest of Florida because of course, that's they don't they havent been able to go back and work on older 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.
Yeah.
Call center to be able to drive more patience 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 too.
Achieving even exceed that guidance that we're giving them.
Thanks.
Thanks Ryan.
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 really quick.
Just to touch on kind of some of the geographies that have not seen a recent brief walks in covert spikes in cases. So just curious about the current procedural volumes in the more normalized health care area is 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 are you thinking about some of the less impacted areas 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's 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 or 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 are really like what we're seeing their Philadelphia has always been one of our top see.
Ladies as far as Thomas Jefferson and new Pan and several other sites there they continue to grow and it's across the board were saying 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 cant remember the Medicare is having a relief.
Strong impact too because Medicare is now present.
Or Medicare policy is present in every single state and so these centers are confident that they're 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 that right.
We have a question from Mike OCC Oppenheimer. Please go ahead Sir.
Good afternoon, and thanks for squeezing me in here curious with relied on that.
HM Pall mall competitive landscapes, Cequent bleed excellent FDA approvals for its dream trial back in June.
Absolutely.
Well, we like investment and stimulation for sleep apnea pick that gets credibility to the.
Therapy, and I think that helps.
Stimulation for sleep apnea as a whole that being said, yes next or 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 published a 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 theres enough.
Our confidence in that data that they are starting out a new trial still believe they're probably four years away from many approval in United States. They are conducting sound 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 think it's I like what they got coronary 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 to keep our heads down to keep during our work.
Moving over has been pretty quiet, we haven't heard from them for a while because they have the interest system.
Okay very helpful. Maybe if I could just a couple of very quick housekeeping questions. Rick If you could just give us the European SP again and also if you guys have been updated total number patient implants I think it was 8200 or so on your last call. Thanks much.
Sure Mike on the DSP 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 killing.
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 President and CEO for closing remarks. Please go ahead Sir.
Thank you very much Jay 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.
Despite our team's commitment to pay sense remains unmatched and is most important element to our success.
Well, it's worse 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 and plant 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 our pace 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.
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