Q3 2021 Inspire Medical Systems Inc Earnings Call

November 2, 2021

This is the operator today's conference is scheduled to begin shortly please continue to standby. Thank you for your patience.

Today's conference is scheduled to begin shortly please continue to standby. Thank you for your patience.

[music].

Good afternoon, My name is Peter and I'll be your conference operator today at this time I would like to welcome everyone to the inspire medical systems Q3, 2021 conference call.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Thank you Megan wrote camp director of financial reporting at inspire you may begin the conference.

Thank you all for participating in today's call. Joining me are Tim Herbert President and Chief Executive Officer, Eric <unk>, Chief Financial Officer.

Earlier today, we released financial results for the three and nine months ended September 32021, a copy of the press release is available on our website.

On this call management will make forward looking statements within the meaning of the federal Securities laws, all forward looking statements, including without limitation those relating to our operations financial results and financial condition investments in our business continued effects of the COVID-19 pandemic full year 2021 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 materially differ accordingly, you should not place undue reliance on these statements.

See our filings with the Securities and Exchange Commission, including our quarterly report on Form 10-Q filed with the SEC today for a description of these risks and uncertainties.

Inspire disclaims any intention or obligation, except as required by law to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise.

This conference call contains time sensitive information and speaks only as of the live broadcast today November <unk> 2021, and with that it is my pleasure to turn the call over to Tim Herbert Tim. Thank you Meghan and thanks, everyone for joining the call today for our third quarter 2021 business update.

I am pleased to report today that the inspire team once again delivered extremely strong results in the third quarter as we continue to focus on commercial execution and leveraging the increased number of hospitals and the afcs offering inspire therapy.

This increased capacity provided additional flexibility during the quarter, especially with the regional challenges of the Covid resurgence.

In addition, our improved process of connecting patients with health care providers, including through our adviser care program has steadfastly increase the number of patient consultation regarding inspire therapy.

First revenue results were very strong in the third quarter, we generated worldwide revenue of $61 $7 million, which was an increase of 72% compared to the third quarter of 2020.

This growth was driven by several factors, including.

The increased patient demand for inspire therapy, our ability to improve patient access to care with our adviser care program.

The increased capacity and performance at new and existing centers, the positive reimbursement environment for inspire therapy and finally, the significant impact the pandemic had have procedures in 2020.

Due to the continued spread of the Delta variant during the third quarter, we experienced an impact on our business in many regions across the U S.

However.

Since our centers are geographically distributed across the country and not overly concentrated in any one particular area the impact was localized and therefore minimized.

In addition, the rise in Covid cases move through the impacted areas relatively quickly with normalized procedure volumes resuming in a relatively short order.

Another important factor minimizing COVID-19 related impacts in these areas was our ability to work with them planning centers to schedule procedures at new centers and shift some procedures to regional hospital and ASC is less affected by the resurgence.

Additionally, inspire is not considered an elective procedure and many hospitals.

That back coupled with the consideration that inspire is an outpatient procedure provided additional flexibility for implanting centers to continue to perform inspire cases.

With this progress we continue to have confidence in the outlook for our business. During the remainder of 2021 as such we are increasing our full year 2021 revenue guidance to a range of $219 million to $221 million from our previous guide.

<unk> of $210 million to $213 million.

This guidance represents an increase of 90% to 92% over full year 2020 revenue.

Okay.

As always.

I would like to reiterate that our primary focus remains on the patients to ensure that each and every one has the best possible all come from inspire therapy.

Our ongoing research and clinical programs are tracking patients progress inexperience with inspire therapy.

As an example.

Is the adhere registry, which is planned to enroll 5000 patients currently we have over 3400 patients enrolled at during the third quarter. The investigators published the results of the first 1800 patients and reported clinically relevant reductions in AA Jai and quality of life.

Measures as well as the patient satisfaction score exceeding 90%.

We remain committed to the ongoing research to further improve patient outcomes.

With that let's now get into the detail surrounding the third quarter beginning with capacity.

During the quarter, we added 68, new U S implanting centers.

Ending the period with a total of 603.

This is well above our prior guidance of adding 48 to 52, new centers, we continue to experience growing demand for new centers as well as physicians seeking to add inspire therapy to their practices.

With this continued strong demand.

We are increasing our guidance and now expect to open 52 to 56, new centers during the fourth quarter of the year.

This increase in new centers includes a growing number of <unk>, which offer a more efficient care setting and now make up 20% of our total U S centers.

We will continue to add both hospitals N S. He's going forward and expect to see a growing percentage of inspire procedures being performed in the afcs.

Regarding the U S sales team, we created 11, new sales territories in the third quarter, bringing our total to 141 and we expect to maintain the strong pace during the fourth quarter. Therefore, we are increasing our guidance and now expect to add 11 to 12, new territories in the <unk>.

Fourth quarter.

We also increased the number of field clinical representatives by adding 10, ending the third quarter with 71.

Further we remain dedicated to scaling our sales management and training teams to optimize our ongoing expansion and focus on the strong patient outcomes and center productivity.

As such during the third quarter, we expanded the number of area Vice presidents from four to seven and created two zone senior Vice President new positions that oversee the area Vice presidents.

We are proud that all of these positions were filled with promotions from inside the organization.

This is our ongoing planned cadence to scale the U S business in a controlled manner to grow the adoption of inspire therapy, while maintaining quality and again strong patient outcomes.

Regarding productivity as expected growth between new and existing centers has shifted such that a higher percentage of the growth is attributed to existing centers.

Now more specifically through the first nine months of 2021, approximately 70% of our growth was the result of increased procedures at existing centers and approximately 30% has run from newly added centers.

Again, we need to be careful with these percentages due to the significant impact the pandemic had on procedures in 2020, we believe that our growth will be more balanced moving forward.

As part of growing center utilization, we need to continually improve our ability to assist interested patients with making a connection with a qualified health care provider.

To start the outreach programs continue to be very effective in generating interest in inspire therapy, primarily through the inspire sleep dot com website.

We have recently changed the inspire site to provide more educational content to ensure patients have a good understanding of inspire therapy as well as the process of working with their health care provider to discuss and be prescribed inspire therapy.

For the first nine months of 2021, the number of visitors to our website was approximately $5 3 million an increase of 45% year over year.

From these visits we had approximately 72000 physician contacts representing a significant 69% year over year increase.

Now there are two contributing elements to these physician contacts.

One is through community health talks and the second is through our adviser care program.

After tracking these for some time, we characterized the community health taxes more educational and more most appointments originated from the adviser care program.

As such moving forward, we will report on the physician context only through the adviser care program is this provides greater accuracy. When we were looking at appointments and their and therapy conversion rates.

We will certainly continue to support community health talks is this provides the physicians the opportunity to speak with several potential patients in a live group session or via zoom meeting to answer questions that they may have a bonds for therapy.

Focusing on the performance of our adviser care program. We ended 2020 with approximately 180 of our centers using the ACP.

And today, we have over 450 centers on the ACP through the first nine months of 2021. This equates to approximately 13500 contacts generated through the adviser care program alone.

As we noted on our last call. We launched the second version of our ACP and the third quarter with a new larger and more experienced vendor with a major call centre in San Antonio Texas.

This vendor provides improved scalability patient community communication and data tracking.

Most newly activated centers start immediately on the ACP, while existing centers are added through a phased approach.

Okay.

Let's transition to reimbursement and coating.

The new dedicated category one code for inspire therapy now has received its number designation and that is 64582.

This code is for closed loop stimulation and covers all elements of the inspire procedure and as a result, we believe we will ensure reliable coverage and payment. Moreover, because this code is for closed loop stimulation. It does that describe the therapies are all potential competitors.

The new code will formally take effect on January one 2022.

As a fresh update.

CMS just released the commentary regarding the final old PPS rules in fact, the data files have not yet been uploaded but will be shortly.

Just as a backdrop the newest wear category one code.

64582 was approved to replace the original category one CPT code 64568.

Back in July CMS proposed a lower ASC payment for the new code, but after reviewing the process we realized they did not meet the connection between the two category one code.

As such the inspire team met with the CMS review panel following release of these proposed rules and the panel voted unanimously to recommend recalculating, the new ASC payment using the data available on the prior year's inspire implants.

From the commentary issued this afternoon.

CMS has confirmed that they are accepting the panel recommendation and we'll await for the final reimbursement calculation.

This commentary includes the removal of the multiple procedure discount, which should not have been checked with the original proposal.

Further regarding hospital payments the new CPT code continues to map to the same level five neuro ambulatory procedure code or APC CMS.

CMS proposed a 2022 payment for this APC to increase by 3% for National average Medicare payment of just over $30000.

Finally, our new category. One code was also approved for the drug induced sleep endoscopy procedure. The proposed reimbursement for a dise procedure increase of physician payment from $68 in 2021.

$214 in 2022, a 67% increase.

Moving on <unk>.

Europe also had a strong quarter driven by increased procedure volumes, particularly in Germany, and the Netherlands.

Following changes in the reimbursement policy in the Netherlands, We have started training new implanting centers in that country.

We expect growth of inspired to continue in Europe, especially as there has been very limited impact from Covid in recent months.

In Asia.

We are happy to report the first product have been shipped to Japan in support of the initial implants, which are still planned for later this year.

Entry into Japan remains very restricted based on Covid, but we are working with the authorities to have our leading therapy trainer entered into the country to support the initial cases and to reside in Tokyo for the ongoing launch of inspire therapy.

Our partner, Japan Lifeline has identified several additional centers, which will be trained and become operational in 2022.

Switching gears to R&D.

The adoption of the two incision implant procedure, which was approved earlier. This year is essentially complete as 99% of the inspire procedures are being performed using the two incision procedure.

On the product development side.

The team has completed the testing and this week, we formally submitted to the FDA all requests for full body MRI compatibility.

The FDA was involved during the extensive MRI evaluation process and we expect approval within the 180 day review window.

The next priority is FDA approval of the new patient remote which we're targeting for later this year.

This new device incorporates Bluetooth technology allows information from the implanted neuro stimulator and the patient remote to be uploaded to the inspire cloud via patient smartphone.

Inspire cloud as our cloud based patient management system, and we continue to expand the number of centers in the U S and in Europe, who are using this tool.

The new patient remote significantly adds utility to inspire cloud and we will be conducted a limited launch in the first quarter of 2022 to fully test the interconnectivity and collect feedback from the patients and physicians we plan full launch of the new patient remote in the second quarter.

The next step of our overall digital program is to upgrade our physician programmer and this project is already in process. This.

This project will allow the programmer to also connect with inspire cloud, which is key to the end goal of providing remote patient programming, which we are targeting for 2023.

Longer term the design work for our fifth generation inspire a neuro stimulator continues to progress.

Once approved we expect <unk> to be commercially available in late 2023, the inspire five device, we will utilize the existing existing form factor with plans to maintain the average 11 year battery life without the need for recharging.

The inspire five neurostimulator will provide several enhancements and most notably will eliminate the pressure sensing lead.

All setting will be inside the neuro stimulator, using an accelerometer to measure respiration.

Collectively these technology enhancements will only further strengthen patient outcomes as well as improve patient and physician experience with inspire therapy.

Finally, I'd like to highlight the recent launch of our first ever patient experience report an initiative that provides greater visibility and transparency into clinically reported outcomes and device related treatment benefits with inspire therapy. This patient experienced report is available.

<unk> on our website.

In summary.

We continue to experience significant momentum in all key aspects of our business and our aggressive approach to operating in a COVID-19 environment has resulted in continued growth in the adoption of inspire therapy.

Our focus on patient outcomes, and our unique ability to reach and educate potential patients provides us.

<unk> in the continued growth of inspire.

To reiterate our core focus for 2021 is to increase utilization at our existing centers as well as to increase capacity by opening and training new centers and an important aspect of the anticipated increase in utilization and capacity is the continued expansion of our adviser.

Our program.

We remain extremely excited about our future prospects and are confident that we have the appropriate strategy in place to drive long term shareholder value.

With that I'd like to turn the call over to Rick for his review of our financials.

Thanks, Tim.

As Tim noted the inspire team delivered a robust third quarter and first nine months of the year.

Total revenue for the third quarter of 2021 was $61 7 million a 72% increase from the $35 8 million generated in the third quarter of 2020.

U S revenue in the third quarter was $58 3 million, an increase of 76% from the $33 1 million generated in the prior year period.

The growth in the U S reflects a large.

Flex a number of factors, including a larger number of implanting centers.

Broad commercial policy coverage.

100% Medicare coverage and went effective in June 2020, and an increased number of territory managers.

In the third quarter European revenue increased 24% to $3 4 million.

The U S average selling price in the third quarter was $23 $900, which was consistent with the prior year period.

The European ASP was $23 500 during the quarter compared to $23 300 in the third quarter of 2020.

Gross margin in the third quarter improved to 86% compared to 85, 5% in the prior year period.

Due to manufacturing efficiencies and higher sales volume will.

We continue to expect our full year gross margin to be in the range of <unk>, 85% to 86%.

Total operating expenses for the third quarter were $62 9 million, an increase of 55% as compared to $40 5 million in the third quarter of 2020.

This increase was due to the expansion of our sales organization increased direct to consumer marketing programs.

Continued product development efforts and general corporate costs.

The increase in operating expenses is reflective of our ongoing plan to achieve continued growth and investments in key commercial and development initiatives.

Our net loss for the third quarter was $10 3 million compared to the $10 4 million net loss in the prior year period.

The net loss per share for the third quarter was 38.

Compared to a net loss of 39 per share in the third quarter of 2020.

Okay.

The weighted average number of shares outstanding for the third quarter was $27 3 million.

We anticipate that the weighted average number of shares for the fourth quarter will be approximately $27 4 million.

As of September 30, our cash and investments totaled $222 million.

This strong cash position allows us to remain focused on executing our growth strategy of increasing procedure volume at existing centers and training and opening new implanting centers.

Okay.

With that said our strong performance in implant trends provide us confidence in our outlook for the remainder of the year.

Therefore, as we look forward to the fourth quarter, we are increasing our full year 2021 revenue guidance to a range of $219 million to $221 million from our previous guidance of $210 million to $213 million.

This revised guidance represents 90% to 92% growth over full year 2020 revenue of $115 4 million.

In summary, we are significant and sustainable momentum throughout our business.

And we remain well positioned to achieve long term growth.

We're extremely pleased with our performance in the first three quarters of the year and are excited to continue executing on our growth strategy.

With that our prepared remarks are concluded Peter can you. Please open up the call to questions.

Okay.

Take you to ask a question you will need to press star one on your telephone.

So we draw your question Christa pound key.

By law, we compile the Q&A roster.

And your first question will come from Jon Block with Stifel. Your line is open.

Great. Thanks, guys. Good afternoon, just two for me first.

Rick or Tim maybe if you can just talk to the <unk> cadence if I take the sort of new mid point of $220 million for 'twenty, one it implies <unk> $65 million for the fourth quarter, which is off but it is only up modestly sequentially from the third quarter and that cadence seems different than the past years. So maybe can you.

Talk to her address.

It seems just like a little bit of a conservative three 2% to 421 growth rate.

By ongoing momentum new centers et cetera, and then I'll just ask my follow up.

Very good now we remain confidence we think we're going to have a very good fourth quarter.

We always put out guidance as you know that we're very careful about we still watch for Covid and so we make sure we protect against that but we have good momentum with opening new centers and with our adviser care program and we had a pretty strong increase of our guidance.

Okay Fair enough I'll shift gears, Tim maybe just for you.

Broadly CPAP what are you hearing what are you seeing it seems like <unk> is actually having trouble filling the additional demand.

Commentary, so I would just love any thoughts on how you see this playing out and what your conviction is that you might actually see a tailwind from this today versus when the news first broke whatever that was three or four months ago. Thanks.

We know from the call center that patients identify themselves as as.

Users of our restaurant X product and they are affected by the recall. So we do know that there are patients coming into our pipeline. We don't have a specific percentage or a number of the impact of that but.

But we are tracking that to see.

How broadly that reads across but we certainly know there are patients coming in right now and looking for an alternative therapy and there are patients that simply.

With what's transpired just do not want to go back to CPAP.

Fair enough I'll follow up offline guys. Thank you great job.

Thanks.

And your next question will come from Robbie Marcus with Jpmorgan. Your line is open.

Robbie Marcus your line is open.

Please check your line if you remove it.

Yeah.

I will come back to Ravi.

And moving to our next question, we have Daniel and Sophie with SBB Leerink. Your line is open.

Hey, good afternoon, guys. Thanks, so much for taking the question congrats on a really good day wondering thanks for thanks for letting me on the call.

I could ask the question just one question, it's somewhat COVID-19 related but really about the hospital labor shortages and just curious how you are factoring first of all.

Youre one of the few companies reported that reported thus far that hasnt really called that out as a very meaningful impact. So I'm curious what you are did see in Q3 and sort of how you're thinking about that over the next few months and then I have one follow up.

Yes. It is a serious concern and we talked on our last earnings call. Our Covid was already present in Florida, and starting to move up the coast and did affect different regions across the country. So we did experience covered just like everybody else that add a lot of that is both hospitalization patients but it is.

Because of the staffing shortages and simply the staff that are in the hospitals are required to take care of the COVID-19 patients and just are not able to take care of.

Other cases, including inspire what we have been able to do in some regions is we now have access to ambulatory surgical centers and so we're able to move some some of the cases to the ASC, including opening up additional agencies.

And as we get larger we also have more flexibility to move cases, two suburban hospitals, if you will where they're not.

We don't have such a significant impact because of Covid. So no we dealt with Covid just like everybody else did but we.

We stayed aggressive to be able to take care of the patients patients remained motivated to receive inspire therapy and we found alternative ways to be able to.

Get the procedures completed that's going to continue into the fourth quarter Theres. No question about it everybody knows that you have the same staffing issues and kind of reflect back into jobs initial comment.

Q4 cadence, but we were going to work contained very hard to be able to take care of the patients then and find alternative approaches to scheduling their cases at suburban sites or afcs.

Okay. That's helpful. And then my follow up was around the number of centers added I mean I appreciate that.

Reimbursement situation will get clarified over the next in the coming.

Weeks months whatever it is.

The fact that you guys added tillman so many centers in the quarter with that reimbursement uncertainty plus COVID-19 to me it seems pretty compelling I mean can you talk a little bit about some of the drivers of sort of what's driving these centers to come online how quick and then the second part of that question sorry.

Multiple questions I wanted to say how quickly they can ramp up.

Sort of your higher volume centers. Thanks, so much yeah.

Good day, and a very great question.

Number one.

We just don't have enough centers out there having just over 600 is still very low.

<unk> penetration in the overall number of hospitals and ambulatory surgical centers available in the United States. So we will continue to be aggressive in opening new centers, hence we significantly increased our guidance at opening centers in the fourth quarter and we are ramping up our overall sales team as well as our training team to be able to.

To increase the cadence of opening new centers.

Asps are a key focus to that as we mentioned we're up to 20% of our centers are now <unk> I think there is confidence and CMS already mentioned in the commentary that they are accepting of the panel recommendation to recalculate. The ASC payment I think that they had confidence all along.

If that was going to happen or they could at least continue with commercial cases until we have a significant number of ambulatory surgical centers open up in the fourth in the third quarter.

And part of that also is within national contract that we have in place we continue to work through.

The overall number of centers that that those corporations.

So there's just a long runway that we have to be able to continue to.

Open additional centers and Theres motivated physicians at those centers as well as well as the administrators to get those centers opened up.

Does that answer your question yet a follow on on that.

No that.

That is perfect. Thank you so much.

You bet. Thank you.

Yeah.

And for next question, we now have Robert Marcus with Jpmorgan.

Great can you guys hear me okay, yes.

Yes, Ravi how.

Okay take too.

First off congrats on a great quarter.

Second I was hoping you could touch on.

And sorry, if I missed this I had to come off and on again.

There was the recall from Respironic in June we.

We saw RASM it have a benefit from it this quarter and obviously there they're much earlier and seeing any potential benefits, but theyre running into supply issues. So I'm wondering are you starting to see any benefits I realize it's probably more word of mouth and referrals and implants at this point and just how you're thinking about that over.

Next 612 24 months.

We certainly.

Have communications all with all of the centers and all of the physicians of course, all of our team in order to communicate with those patients.

They have a restaurant X device and are unable to benefit or use it anymore and they're looking for an alternative and and inspire is certainly a viable option for them. We do have several patients that have come through the call center identifying themselves as restaurant X patients. We also remember we still support patients with prior.

Authorizations and were able to identify those patients through the prior authorization process.

If theyre unable to continue with dress product and are looking for an alternative or we can't get them approved through the insurance pipeline. So we do have experience with patients from that now also remember that that <unk>.

Just occurring in July there is a period of time it takes patients to become educated to get.

To our website to get an appointment with the physician to get diagnosed and prep for inspire get through the insurance. So it's a several month process to transition from CPAP to inspire so we're still just at the early stages of.

Seeing that benefit but that will continue.

And the following year as well.

Okay.

Great and then just a follow up your business really.

Diverge from what we've seen from a lot of other companies, where third quarter was more materially impacted and seeing lagging.

Volume growth into fourth quarter. So you touched on this in the prepared remarks, but I'd love to just hear.

What's driving this is how you were able to manage so much better than a lot of other peers. Even those that are outpatient focused it seems like you've been able to weather the storm a lot better with just love any thoughts or insight into that.

Absolutely at the top.

It's all about motivated physicians and motivated patients and patients who have untreated obstructive sleep apnea.

Significant challenge with quality of life and so if they are unable to benefit from CPAP and you mentioned the respironic challenges there.

They are motivated to find alternatives and so we work with those patients and the healthcare providers to find the different Ah.

Approach for inspire.

The next key is.

We mentioned in the prepared remarks that inspire isn't really considered an elective procedure and a lot of centers, because we our disease state management and because of that we get a little bit more priority in scheduling cases, and we are purely outpatient. So we don't take up a hospital bed. Although was denounced Danielle mentioned there are challenged.

As with staffing issues that we do have to overcome but with our increased number of centers that gave us the flexibility to move many of these cases to ambulatory surgical centers.

<unk> is example in Houston, we could move them to some of the suburban hospitals that aren't necessarily the main COVID-19 centers that had did.

It didn't have the same staffing challenges. So we just have a little bit more flexibility.

To take care of those patients and we stayed very aggressive to find alternative approaches. So we really give our our team a lot of credibility to not.

Not give up or continue to keep pushing for the patient and finding an alternative.

Great I appreciate the color thanks, a lot.

You bet Ravi.

Okay.

And your next question will come from Chris Pasquale Guggenheim. Your line is open.

Thanks, and congrats on a really strong result, Tim I know it's safe.

To get.

Any early thoughts you have on your 'twenty two outlook for most of our companies. We're looking at easy comps across several quarters next year really hard to say that about you guys given the momentum you've had and how many centers you've added. So how are you thinking about the sustainability of the trends that youre talking about here for <unk>.

As the calendar rolls over.

Well the first clue. We gave you in the prepared remarks is we're scaling our sales management team.

And we added another structure with senior Vice President <unk>.

Managing zones, we can kind of ran out of words, there, but having.

Having zelle and senior Vice presidents in each of them, having three to four area Vice presidents each of them will have an area of business manager, which will continue to focus on opening new centers and then each of those area Vice president of having a number of our regional managers to be able to continue to grow. So we just plan on the <unk>.

Going scaling of our operations again, we mentioned, we only have 600 centers today, but we've increased our guidance going into the fourth quarter here. We expect that we're going to continue to stay very aggressive at opening new centers.

But the other side of it that we talked about that really is having an impact is our ability to communicate.

With potential patients and get them to the adviser care program and our ability to get them appointments with the physicians and the centers and we believe that we're going to be able to improve our conversion rates going into 2022, and so as Rick mentioned, we have a program that is sustainable and so we're going to be aggressive.

<unk> and continuing to find ways to make our therapy available for.

Patients, who need an alternative therapy in an especially with CPAP, where it is today that there is certainly an opportunity there we're excited about our international prospects as well as specifically with <unk>.

Japan with the first order going out.

As well as the first implant scheduled so lot's going to happen in Japan, and in Europe, and other parts of the world.

Thanks, that's helpful and maybe I'll just piggyback on that last point. It is exciting to see you guys finally getting into Japan.

Would love an update on where things stand in Australia, which was another market that you guys have talked a lot about.

And also any developments on the pediatric front that seems to have kind of fallen down the list a little bit with all the other stuff you're working on.

Absolutely Australia, we are working with them on the submission of the reimbursement we're working directly with the physicians now.

And the Minister So we'll have an update later it privately in 'twenty two on that front that does have regulatory approval, but again were.

I have taken the same approach in Japan that were.

We're pretty strict about global pricing and making sure that reimbursement is appropriate for ourselves and physicians as we open up into new territories. So we're in that process of working with Australia on that before we jump into pediatrics I will say that we are doing more strategic work now that we're starting in Japan too.

Look where is our next step and is it looking at Singapore looking into Hong Kong, and even South Korea, and long long term mainland China.

Starting to do a little bit of strategic planning a lot of those fronts and look forward to talking more about that in 2022.

Pediatrics it hasn't gone away <unk> remains an important factor for us that's why we do what we do and the benefits at the kids are seeing is tremendous and keeps us very motivated to find alternatives. The studies are open and we continue and enroll patients. There we are opening additional centers.

The majority of the impacts continue to be at mass eye and ear infirmary in Boston, but we are opening other centers to do more studies, we are doing a post approval based on the.

Approval received from the FDA lowering it down to 18 to 21, but our goal is to get that age down to 13 to 15 and not just for children with down syndrome, but for a broad spectrum of pediatric patients. So we do have another study ongoing I am talking about the persistence.

Sleep apnea and adolescence and as they go from 13% to 15 and mature what happens to their sleep apnea does itself resolved. We don't believe it does but thats still one of the arguments that we have with the FDA and we're running that study so yet again, it's not a huge market, but it's a very.

<unk> market and we're continuing our work on that front.

Thanks.

You bet, Chris Thank you.

Your next question will come from Amit <unk> with Goldman Sachs. Your line is open.

Okay. That's the scope for me and thanks for taking the question.

Okay.

Alright, I think maybe the question has been asked a lot of different ways I think maybe if I could drill in just one more time and ask about progression throughout the quarter and kind of the implications for <unk>.

The question is basically.

Did you see an impact earlier in the quarter and how did things shape up towards the end of the quarter would have you seen so far in October that's kind of informing where your guidance is that right now for <unk>.

We did see an impact in Q3.

And we saw it regionally and we started rotating.

Brian.

At the beginning of quarter, we start talking about it starting in Miami and everybody track the news and you saw where Covid travel it went up the coast and and when Miami worked through it then it was up across the three cities right Tampa Orlando Jacksonville moved into Atlanta across to New Orleans again, then they had to deal with.

Hurricane.

A lot of challenges there by the end of Texas and continued going west and backup North. So every region had to deal with Covid and the key is being flexible to be able to.

Overcome the challenges and get the cases rescheduled in the timely manner. So we don't lose those patients and this is going to continue on through the fourth quarter, we all know it.

Again, Danielle mentioned of the staffing challenges that we have across the country.

And again, we've got to make sure that inspired stays at the top of the focus and with that we want to be careful about where we put that guidance number out for Q4, we have confidence in our business.

Going forward, we have we're not slowing down our cadence of expanding number of centers expanding territory managers and in fact, we're talking about increasing it with our guidance. So we will continue to work forward and make sure that we always put out those guidance numbers that.

Carefully selected to make sure that we're able to achieve that.

That's great. Thanks, so much.

Actually maybe a two parter on the reimbursement front multitasking elaborate here, but it looks like the rock recommended or tried to comment <unk>.

For a slight increase from from the PFS rate that was initially proposed in CMS disagreed with those commenters.

So if you could maybe speak to any any feedback that you received from physicians during that interim period between the proposed and the final and if you expect this to be kind of a point of emphasis or if youre kind of content with where things are at from the PFS side.

Secondary question is on kind of the ASC front and if you saw anything from a sort of confusion or market confusion standpoint that may have temporarily slowed.

The rate of adoption on that front I. Appreciate that you gave us some numbers that looks still pretty pretty strong, but maybe a little bit of a deceleration versus what you've given.

I don't know about the physician reimbursement I think I can the RV used that they proposed a really strong we're okay with that the physician payment reimbursement rate.

Actually went down.

This year and Thats across the board that's just not for E&P. That's a resurgence. So I think that usually comes back that's a little bit of a valve of Congress, but that's all out of my expertise bottom line I think $870 from National average Medicare payment will sustain and we'll wait till the final data comes out and see what <unk>.

<unk> there as far as <unk>.

<unk> is being affected by.

The ruling now it hasnt affected antibody yet because it doesn't take effect until January one.

2022, and make discontinued business as usual and they have national contracts with the commercial payers. So don't really think it's affected.

Adoption of our impact as of yet and we'll wait till we see the final numbers in.

Still not too concerned going into 2022, we think will continue to expand the number of asc's or whatever the number is.

Okay. Thanks for the question.

Thank you.

Your next question will come from that.

<unk> with Wells Fargo.

Good afternoon. Thanks for taking the question just two for me one of the inspire.

What are the can you hear me okay.

Yes, very well Larry how are you.

What are the milestones to the late 2023 U S approval and I had one follow up.

While the first step is is.

We're going to sit down with the FDA in December and and show them, our whole project plan and show him all of our plans, including how we collect the data around inspire five and get the fda's feedback on the program.

We're going to continue with all the development I have seen fully functional units and we're going to be going into detailed testing of those units to make sure that they are.

Pass all the qualification testing in the.

Key milestone is remember the FDA gets a year to review that and so when we're talking late 'twenty three we need to have that submission into the FDA in 2022, and we remain on target to do that but we'll know more in December because we're being very transparent with the FDA and our whole program and this will be the second time.

That we sat down with the FDA to review the project plan.

Okay, Let me ask about the Philips recall I guess, it's a two part question one is are.

If you see a benefit are you going to call it out.

Because you've been asked a few times on this call. If you see the benefits. So are you going to try to quantify it because it sounds like you have some information you could you could try and more importantly, what do you think the long term implications are.

I mean, this is a pretty big deal.

For example, do you think this could be a catalyst to remove CPAP failure as a requirement for inspire therapy long term. Thanks for taking the question.

Thank you very much Gary I think if you really look at it as a real big.

Big picture, what we think is important here is sleep physicians really have to address this with their patients and they don't have an option to provide an alternative therapy farm there.

They are really becoming more aware of inspire therapy and being able to address that and talk to their patients about inspire and so we're making sure that we're taking advantage of the time to communicate with all of the sleep physicians to make sure that they have all the knowledge they need that is turning the cruise ship as your as you are.

Referring to when we're talking about where inspires sits in the therapy ladder, but right now I think the key is making sure that the physicians have the right information to be able to take care of their patients and be able to communicate with them. We will continue to track as best as possible the inbound of patients who are <unk>.

<unk> by the recall and make sure that were available to help them get to a health care provider and get them insurance approval and get them inspire therapy. So they can be treated these patients are motivated and really the long term is a lot of these patients after having this information given to them simply do not want to go back to to CPAP.

So we do think it's going to have a long term positive impact on inspire and we're making sure that we're prepared to handle that.

Thank you.

Thank you Larry.

Okay.

Your next question will come from Adam meter with Piper Sandler.

Hey, Dan Hey, Rick Congrats on another great quarter here and thanks for taking the questions a couple of pipeline.

<unk>.

<unk> side, so first a multi parter I think I heard you say you made the submission for full body MRI labeling with FDA and you expect 180 day review time, hopefully I have that right just any sense for how much of a gating item.

MRI labeling has been thus far do you think this could be another tailwind to growth or is it more just kind of continuing the evolution of technology, improving patient experience and then secondly, with the new Bluetooth enabled remote.

Just wondering if theres going to be any kind of noticeable impact ASP dynamics are our margins and then I had a follow up.

Got it.

MRI were available for.

Head coils and for lower extremities, and so it's really not been a showstopper is just one of those ongoing developments and it's not like we're changing the implant. It hardware. What it is you just need to go through a series of <unk>.

Moray evaluations to show that the amount of energy absorbed by the needs or the heat.

Generated from the procedure is and isn't harmful or the current induced by the electromagnetic fields.

Isn't that challenge. So we have gone through that testing and FDA is always kind of aware of that testing going in the kind of help review those procedures.

And we'll continue to move forward, but the data looks good and I think it always is another positive for patients that said if I can't have an MRI. Okay. Well, then I might hold off a little bit I think it just removes one more obstacles, which is very positive right.

What was your second question around Adam.

Yeah. Thanks, Tim So the second question was just on the Bluetooth enabled remote.

And if theres going to be any impact to ASP dynamics or our margins.

Yes, we're reviewing that right now it certainly does add another level of utility to the inspire cloud and the patient in the physician's ability to manage those patients going forward. So we're looking at that very closely and we'll keep you informed on that but yes.

Yes.

Something that we want to really consider right now.

Okay fair enough I'll leave it there thanks so much.

Okay. Thank you.

Your next question will come from Michael <unk> with Baird. Your line is open.

Hey, Good evening, just two quick one follow up on the MRI question.

We will have a full body labeling for one five Tesla and three Tesla or one five Tesla for now.

I don't know I think it's one five for now and we're continuing those evaluation by one and a half is in the majority of MRI machines anyway. So.

Not a lot you are going to give me the three tests of a calculus. One five so I think that provides functional settings. The real key to it is making sure that when you get the qualified settings that they are usable meaning you can do.

Proper MRI to get the proper resolution that the proper energy levels and that's in effect, what we did get qualified.

The follow up was on Japan, I heard in the prepared remarks that the first shipments have been made does that mean theres and revenue from Japan in this quarter or in the fourth quarter or will revenue only be recognized when patients are implanted under the distributor model.

Now with a distributor we recognize revenue when we ship it to the distributor and so the first units have been shipped in and we will book revenue in the fourth quarter. Okay.

Thank you very much.

Okay.

Your next question will come from Ravi Misra with <unk> capital. Your line is open.

Hi, Good evening, Hi, Tim Hi, Rick.

So I'll just ask both my questions upfront I guess first congratulations to all of the sales force numbers that were promoted.

Just kind of.

Sales territory expansion.

Can you talk to US you know you've been kind of tracking above your your guidance for the last several quarters at least I think since IPO actually how should we be thinking about that kind of on an ongoing basis.

Do we kind of.

Bring that down is this kind of a new level for the next kind of four or five quarters.

I guess the second related to that is how do we think about utilization as it goes between the ASC and the hospital on kind of how you see that trending going forward and maybe one last one.

Really good kind of free cash flow and profitability quarter.

Against very strong growth. So is this the kind of new spend normal that we should expect Rick thanks, guys.

Very good Alright, let me do expansion and then Rick can talk to talk about.

Cash.

We want to continue expanding our sales force.

And we are setting the structure to be able to continue that expansion.

We added a level of senior Vice President managed area Vice President.

And we reward our talented people by having them move up and have a more influential position in the organization by becoming area Vice presidents or regional managers.

And field clinical reps moving into territory manager positions and that's something that we're just very proud of and we will continue I think the cadence is going to continue we're going to stay aggressive we're still.

When you look at the number of centers being 600 is very low and.

The penetration of the overall number of centers that we need to get to to be able to serve the demand that we're getting from all the patients you talked about $5 3 million web hits, So we need to continue to grow that.

Going forward and we're going to keep staying aggressive on that.

As far as P&L cash I'll hand that off to Rick Yeah, Hey, Ravi.

Regarding.

Profitability and cash.

We really don't want to talk about breakeven just because it's a moving target.

We're still very early in the penetration of potential procedures in implanting centers and we have accelerated our commercial footprint with the addition of new territories as well as additional centers. So we're really focused on making investments that's going to that will drive.

Years of revenue growth rather than optimizing our operations.

Operations to produce net income.

But with that said, we actually did increase our cash position at the end of the third quarter from the second quarter. A couple of drivers. There included we did see improvement in our accounts receivable collections actually.

And we also benefited from we had $3 $8 million of proceeds from the exercise of stock options, which helped the cash increased but.

I would be careful there because we do have some variability in our burn rate.

Given the timing of DTC payments as well as development payments and those can fluctuate on a quarterly basis.

And so.

We will continue to make investments we're leaning forward and so we do expect that we will continue to burn cash going forward, but we did have.

Our strong Q3 from that perspective.

Yes.

Okay, and then just that last one on the ASC utilization versus hospitals. Just can you just help us think about how you expect that to track I know there was kind of a shifting of cases from towards the ASC this quarter, but in general.

Where do we have in general.

Instead of splitting them between hospital and ASC, we kind of split it between.

Hospitals recently trained and opened versus some of the.

The older ones that have been opened 2014, 15 16 and the key is that we've really changed a lot of our training we've improved their ability to have patients flow through the new centers over the last couple of years you remember they open and they haven't had to deal with the challenges of prior authorization that we all remember.

From just three four years ago, right and so they are coming onboard with the ability to get.

Higher utilization right upfront and they start with a higher level of expectation and so both hospital and ASC is just have that ability to start at a much higher.

Utilization rates. So we're happy about that I do think AFC will continue to.

Grow as part of the implant and I think hospitals are going to protect against that and so they're going to also make sure there's plenty of or time for physicians to performance by our cases. So again, our focus is really to kind of keep a balance between growth and utilization as well as growth at new center.

And new centers will include both hospitals and <unk>.

Asc's.

Yeah.

Peter are you there.

Yes, Sir and your next question will come from Suraj Kalia with Oppenheimer.

Yeah.

Good afternoon, Tim can you hear me all right.

Yes, how are you.

Perfect Tim Congrats on a great quarter, a couple of questions I will just throw them right upfront in the interest of time.

Person to feel cases, where you're successful in moving too.

Regional hospitals or other ASC is.

Just given everything going on with Covid.

Yes, that's that's that's tricky because it's all regional and its all rotating right and so it is difficult, but I would take a very small percentage actually.

Had to be relocated but if you're attacked us too.

The territory managers and area Vice presidents in Florida. They would argue that they had a significantly greater number of cases, they add relocate there as in possibly Houston.

Then they did up here in Minneapolis right. So the Mayo is able to kind of continue on a pure Minneapolis. So I think again in the affected regions you had a greater percent, but I don't have a real number I can hand to you.

Got it.

Tim You mentioned at least correct me if I got these numbers wrong.

$5 3 million hits on the website 72000.

<unk> consults and the math is roughly about 2500 or so implants in the quarter.

Specifically for the ACP is the 180 centers.

And maybe you mentioned this I must have missed it can you give us what the flow through looks like for these centers, maybe you could expand on how many implants were done at these ecp's in the quarter I remember hearing a 13000 word or something.

Any clarity would be great. Thank you Dan a question, Yeah, I know sorry, Suraj, so Dan confusion because it is there a bunch of numbers in there of the 70 72000 contacts that comes from two sources community health talks with really serve to be educational in those are patients that are not just quite ready yet and so they they may.

Make a formal appointment with a physician they need to think about it and then circle back eventually they come back through the website to the adviser care program.

Adviser care program, we mentioned had about 13050 contacts in the third quarter of.

The context that they handled directly.

And moving those patients forward too.

Make appointment so that's the part of the $72 and there is also a lot of centers that are still taking their own phone calls right. We had 450 centers on the ACP now and there is still a significant number that that take their own phone calls that were transitioning them over to the ACP as well.

As far as flow through yes, there is a significant number of patients that that.

Simply when they contact us they have.

They've never had a sleep study.

So they need that they need to be referred over to escape positioned to have a sleep study and they need to try CPAP first there are others that just don't qualify or they needed a different <unk>.

Physicians there are patients.

As you mentioned in the past that that.

When they learn about the technology theyre not ready right away and they want to think about it tomorrow and then there is those patients that are really knew what they are looking further understanding it we're able to educate them in a significant number are able to get to the physician and enhanced that's why we have the significant implant numbers and growth rates.

Thank you.

Absolutely Suraj.

Okay.

Alright. Thanks.

Okay.

Peter you got any others there.

I'm seeing no further questions at this time you May proceed sir.

Thank you very much. Thank you all for joining the call today as always I am grateful to the growing team of dedicated inspire employees for their enthusiasm hard work and continued motivation to achieve successful and consistent patient outcomes. The inspire team's commitment to patients remains unmatched in the the most important element to us.

Success I wish to thank all of our employees as well as the health care teams for their continued efforts as we remain focused on further expanding our business in the U S Europe and now Japan.

All of you on the call. We appreciate your continued interest and support of inspire and look forward to providing you with further updates in the coming months. Please.

Please stay safe and healthy thank you very much.

This concludes today's conference call. Thank you for participating you may now disconnect.

Okay.

[music].

Good afternoon, My name is Peter and I'll be your conference operator today.

At this time I would like to welcome everyone to the inspire medical systems Q3, 2021 conference call.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Thank you Meghan wrote camp director of financial reporting at inspire you may begin the conference.

Thank you all for participating in today's call. Joining me are Tim Herbert President and Chief Executive Officer, and Eric <unk>, Chief Financial Officer.

Earlier today, we released financial results for the three and nine months ended September 32021, a copy of the press release is available on our website.

On this call management will make forward looking statements within the meaning of the federal Securities laws.

Forward looking statements, including without limitation those relating to our operations financial results and financial condition investments in our business continued effects of the COVID-19 pandemic full year, 2021 financial and operational outlook and improvements in market access are based upon our current estimates and various.

Sure.

These statements involve material risks and uncertainties that could cause actual results or events to materially differ accordingly, you should not place undue reliance on these statements.

See our filings with the Securities and Exchange Commission, including our quarterly report on Form 10-Q filed with the SEC today for a description of these risks and uncertainties.

I am pleased to report today that the inspire team once again delivered extremely strong results in the third quarter.

We continue to focus on commercial execution and leveraging the increased number of hospitals and the afcs offering inspire therapy.

This increased capacity provided additional flexibility during the quarter, especially with the regional challenges of the Covid resurgence.

In addition.

Our improved process of connecting patients with health care providers, including through our adviser care program has steadfastly increase the number of patient consultation regarding inspire therapy.

First revenue results were very strong in the third quarter, we generated worldwide revenue of $61 $7 million, which was an increase of 72% compared to the third quarter of 2020.

This growth was driven by several factors, including.

The increased patient demand for inspire therapy, our ability to improve patient access to care with our adviser care program.

The increased capacity and performance at new and existing centers, the positive reimbursement environment for inspire therapy and finally, the significant impact of the pandemic had our procedures in 2020.

Due to the continued spread of the Delta variant during the third quarter, we experienced an impact on our business in many regions across the U S.

However, since our centers are geographically distributed across the country and not overly concentrated in any one particular area the impact was localized and therefore minimized.

In addition, the rise in Covid cases move through the impacted areas relatively quickly with normalized procedure volumes resuming in a relatively short order.

Additionally.

Inspire is not considered an elective procedure and many hospitals.

That back coupled with the consideration that inspire is an outpatient procedure provided additional flexibility for implanting centers to continue to perform inspire cases.

With this.

Progress, we continue to have confidence in the outlook for our business. During the remainder of 2021 as such we are increasing our full year 2021 revenue guidance to a range of $219 million to $221 million from our previous guidance of 210 two.

$213 million.

This guidance represents an increase of 90% to 92% over full year 2020 revenue.

Okay.

As always I would like to reiterate that our primary focus remains on the patients to ensure that each and every one has the best possible outcome from inspire therapy, our ongoing research and clinical programs are tracking patients progress and experience with inspire therapy.

As an example.

Life measures.

As well as our patient satisfaction score exceeding 90%.

We remain committed to the ongoing research to further improve patient outcomes.

With that let's now get into the detail surrounding the third quarter beginning with capacity during.

During the quarter, we added 68, new U S implanting centers.

Ending the period with a total of 603.

This is well above our prior guidance of adding 48 to 52, new centers, we continued to experience a growing demand for new centers as well as physicians seeking to add inspire therapy to their practices.

With this continued strong demand.

We are increasing our guidance and now expect to open 52 to 56, new centers during the fourth quarter of the year.

This increase in new centers and includes a growing number of ASC, which offer a more efficient care setting and now make up 20% of our total U S centers.

We will continue to add both hospitals NFC is going forward and expect to see a growing percentage of inspire procedures being performed in the ASC.

Fourth quarter.

We also increased the number of field clinical representatives by adding 10, ending the third quarter with 71.

Further we remain dedicated to scaling our sales management and training teams to optimize our ongoing expansion and focus on the strong patient outcomes and center productivity.

As such during the third quarter, we expanded the number of area Vice presidents from four to seven and created two zone senior Vice President new positions that oversee the area Vice presidents.

We are proud that all of these positions were filled with promotions from inside the organization.

This is our ongoing planned cadence to scale the U S business in a controlled manner to grow the adoption of inspire therapy, while maintaining quality and again strong patient outcomes.

Regarding productivity as expected growth between new and existing centers has shifted such that a higher percentage of the growth is attributed to existing centers.

And more specifically through the first nine months of 2021, approximately 70% of our growth was the result of increased procedures at existing centers and approximately 30% has run from newly added centers.

Again, we need to be careful with these percentages due to the significant impact the pandemic had on procedures in 2020.

We believe that our growth will be more balanced moving forward.

As part of growing center utilization, we need to continually improve our ability to assist interest in patients with making a connection with a qualified health care provider.

To start the outreach programs continue to be very effective in generating interest in inspire therapy, primarily through the inspire sleep dot com website.

For the first nine months of 2021, the number of visitors to our website was approximately $5 3 million an increase of 45% year over year.

From these visits we had approximately 72000 physician contacts representing a significant 69% year over year increase.

Now there are two contributing elements to these physician contacts.

One is through community health talks and the second is through our adviser care program.

After tracking these for some time, we characterized the community the health taxes more educational and more most appointments originated from the adviser care program.

As such moving forward, we will report on the physician context only through the adviser care program. As this provides greater accuracy. When we were looking at appointments and their and therapy conversion rates.

We will certainly continue to support community health talks as this provides the physicians the opportunity to speak with several potential patients in a live group session or via zoom meeting to answer questions that they may have a bonds for therapy.

Focusing on the performance of our adviser care program. We ended 2020 with approximately 180 of our centers using the ACP.

And today, we have over 450 centers on the ACP through the first nine months of 2021. This equates to approximately 13500 contacts generated due to the adviser care program alone.

As we noted on our last call. We launched the second version of our ACP and the third quarter with a new larger and more experienced vendor with a major call centre in San Antonio Texas.

This vendor provides improved scalability patient community communication and data tracking.

Most newly activated centers start immediately on the ACP, while existing centers are added through a phased approach.

Okay.

Let's transition to reimbursement and coding.

The new dedicated category one code for inspire therapy now has received its number designation and that is 64582.

This code is for closed loop stimulation and covers all elements of the inspire procedure and as a result, we believe we will ensure reliable coverage and payment. Moreover, because this quota for closed loop stimulation. It does that describe the therapies are all potential competitors.

The new code will formally take effect on January one 2022.

As a fresh update.

CMS just released the commentary regarding the final <unk> rules in fact, the data files have not yet been uploaded but will be shortly.

Just as a backdrop the newest <unk> category one code.

Six four of $5 two was approved to replace the original category one CPT code six four of 568.

Back in July CMS proposed a lower ASC payment for the new code, but after reviewing the process we realized they did not make the connection between the two category one code.

From the commentary issued this afternoon.

CMS has confirmed that they are accepting the panel recommendation and we'll we'll await for the final reimbursement calculation.

This commentary includes the removal of the multiple procedure discount, which should not have been checked with the original proposal.

Further regarding hospital payments the new CPT code continues to map to the same level five neuro ambulatory procedure code or APC.

<unk> proposed a 2022 payment for this APC to increase by 3% for National average Medicare payment of just over $30000.

Finally, our new category. One code was also approved for the drug induced sleep endoscopy procedure. They are proposed reimbursement for a dise procedure increase of physician payment from $68 2021.

$214 in 2022, a 67% increase.

Moving on.

Europe also had a strong quarter driven by increased procedure volumes, particularly in Germany, and the Netherlands.

Following changes in the reimbursement policy in the Netherlands, We have started training new implanting centers in that country.

We expect growth of inspired to continue in Europe, especially as there has been very limited impact from Covid in recent months.

In Asia.

We are happy to report the first product have been shipped to Japan in support of the initial implants, which are still planned for later this year.

Entry ended Japan remains very restricted based on Covid, but we are working with the authorities to have our leading therapy trainer entered into the country to support the initial cases and to reside in Tokyo for the ongoing launch of inspire therapy.

Our partner, Japan Lifeline has identified several additional centers, which will be trained and become operational in 2022.

Switching gears to R&D.

On the product development side.

The team has completed the testing and this week, we formally submitted to the FDA our requests for full body MRI compatibility.

The FDA was involved during the extensive MRI evaluation process and we expect approval within the 180 day review window.

The next priority is FDA approval of the new patient remote which we're targeting for later this year.

This new device incorporates Bluetooth technology and allows information from the implanted neuro stimulator and the patient remote to be uploaded to the inspire cloud via patient smartphone.

Inspire cloud as our cloud based patient management system, and we continue to expand the number of centers in the U S and in Europe, who are using this tool.

The next step of our overall digital program is to upgrade our physician programmer and this project is already in process. This.

This project will allow the programmer to also connect with inspire cloud, which is key to the end goal of providing remote patient programming, which we are targeting for 2023.

Longer term the design work for our fifth generation inspire a neuro stimulator continues to progress.

Once approved we expect <unk> to be commercially available in late 2023, the inspire five device will utilize the existing existing form factor with plans to maintain the average 11 year battery life without the need for recharging.

The inspire five neurostimulator will provide several enhancements and most notably we will eliminate the pressure sensing lead.

All setting will be inside the neuro stimulator, using an accelerometer to measure respiration.

Collectively these technology enhancements will only further strengthen patient outcomes as well as improve patient and physician experience with inspire therapy.

Finally, I'd like to highlight the recent launch of our first ever patient experience report.

Initiative that provides greater visibility and transparency into clinically reported outcomes and device related treatment benefits with inspire therapy.

This patient experienced report is available on our website.

In summary.

Our focus on patient outcomes, and our unique ability to reach and educate potential patients provides us confidence in the continued growth of inspire.

Our program.

We remain extremely excited about our future prospects and are confident that we have the appropriate strategy in place to drive long term shareholder value.

With that I'd like to turn the call over to Rick for his review of our financials.

Thanks, Tim.

As Tim noted the inspire team delivered a robust third quarter and first nine months of the year.

Total revenue for the third quarter of 2021 was $61 7 million a 72% increase from the $35 8 million generated in the third quarter of 2020.

U S revenue in the third quarter was $58 3 million, an increase of 76% from the $33 $1 million generated in the prior year period.

The growth in the U S reflects a large <unk>.

Flex a number of factors, including a larger number of implanting centers.

Broad commercial policy coverage, 100% Medicare coverage that went effective in June 2020, and an increased number of territory managers.

In the third quarter European revenue increased 24% to $3 4 million.

The U S average selling price in the third quarter was 23, 900, which was consistent with the prior year period.

The European ASP was 23500 during the quarter compared to $23 300 in the third quarter of 2020.