Q1 2022 Inspire Medical Systems Inc Earnings Call
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Good day and thank you for standing by welcome to the inspire medical assistance Q1, 2022 financial results and business update conference call. At this time, all participants are in listen only mode.
After the Speakers' presentation there'll be a question and answer session to ask a question. During the session you will need to pass at Star one on your telephone we used to be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would like to hand, the conference over to your speaker today.
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Thank you all for participating in today's call. Joining me are Tim Herbert President and Chief Executive Officer, and Rick <unk>, Chief Financial Officer earlier today, We released financial results for the three months ended March 31, 2022, 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.
<unk> and our business continued effects of the COVID-19, pandemic full year 2022 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.
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.
Conference call contains time sensitive information and speaks only as of the live broadcast today may three 2022 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 first quarter 2022 business update.
First today is the fourth anniversary of our initial public offering and we wish to recognize and thank all the shareholders who have supported inspire therapy, which has helped almost 25000 patients address their obstructive sleep apnea.
With that we are pleased to report on a very strong first quarter with a 72% revenue growth over the same period last year.
In this first quarter, our business did experience the expected seasonality, but similar to 2021, we experienced the additional challenge from a resurgence in Covid cases.
However, the pandemic impact dissipated as we moved through the quarter and inspire procedures quickly rebounded across the U S and Europe to drive the strong results.
Our commercial execution leverage both the existing centers as well as the newly activated hospitals and ambulatory surgical centers in.
In addition, we continue to improve the process of connecting patients with health care providers through our adviser care program as well as our expanded direct to consumer advertising campaign.
Thereby creating a greater number of appointments for patients seeking inspire therapy.
In the first quarter, we generated worldwide revenue of $69.4 million again, representing a 72% increase compared to the first quarter of 2021.
Seasonality and the Covid resurgence negatively affected procedure volumes early in the quarter, but volumes rebounded nicely as the quarter progressed.
As such we have confidence in the outlook of our business for the remainder of 2022.
Due to the momentum in the second half of the first quarter the positive trends in implant activity and the planned expansion in the number of implanting centers in new territories.
Therefore, we are increasing our full year 2022 revenue guidance to a range of $336 million to $344 million from our previous guidance of $318 million to $226 million.
This guidance represents an increase of 44% to 47% over full year 2021 revenue of $233 4 million.
As always I would like to reiterate that our primary focus remains on patient to ensure that each and every one has the best possible outcome from inspire therapy.
With that let's now get into the details surrounding the first quarter beginning with capacity.
During the quarter, we added 74, new U S implanting centers ending the period with a net total of 733 centers.
Similar to what we have reported over the past several quarters the rate of growth of new ambulatory surgical centers is slightly higher than that of hospitals.
At the end of the first quarter AFC is made up 22% of all U S centers.
The number of centers is net of the 25 inactive centers deactivated in the first quarter as discussed during our Q4 earnings call.
We will continue to monitor and ensure the field team is focused on accounts that can provide the greatest benefit to patients moving forward for the rest of the year. We continue to expect to add between 52 and 56 centers per quarter.
Regarding the U S sales team, we created 17, new sales territories in the first quarter, bringing our total to 174.
While this was ahead of our guidance, we continue to expect to add 11% to 12, new territories per quarter during the remainder of 2022.
We also increased the number of field clinical representatives by adding 2014.
And in the first quarter with 93.
During the rest of the year, we will continue to scale, our sales management and training teams to optimize our ongoing expansion.
And to focus on strong patient outcomes to the center productivity.
This builds upon the changes that we implemented early during the first quarter, where we expanded our U S sales leadership team, which now includes eight area Vice presidents and 30 regional managers.
As the team grows more comfortable with their roles, we expect higher productivity, resulting in more inspire procedures, while maintaining and improving patient outcomes.
Turning to reimbursement in coding the new CPT codes for inspire have been in place since January one which has allowed payers in implanting centers to get the new code implemented into their systems.
There are always some logistical issues when transitioning to the new codes, but the inspire team did a great job with training implanting centers and working with payers to ensure a smooth transition.
These new codes for both the inspire procedure as well as the drug induced sleep endoscopy.
Will be an important benefit for inspire therapy and have a long term impact.
Finally, with the increased cost of components and materials inspire is implementing a 5% price increase for all centers in the U S. Beginning in May.
We have contractual pricing agreements with all U S centers and therefore, the price increase will be phased in over the next several quarters and therefore, we expect the impact on 2022 revenue will be minimal.
Inspire has not had a price increase for four years, while the facility reimbursement has increased approximately 9% over this time period.
Our growth continues to focus around utilization improvements at existing centers.
And setting utilization targets for newly activated centers.
Paramount to this is improving our ability to assist interested patients with making a connection with a qualified health care provider.
Importantly.
Our outreach programs continue to be very effective in generating interest in inspire therapy, primarily through the inspire sleep dot com website.
For the first quarter the number of visitors to our website was approximately $4 7 million an increase of 170% year over year and from these visits we had approximately 24000 physician contacts.
Note. These physician contacts represent the calls and emails to the adviser care program or directly to a physician's office and does not include participation in community health talks.
As we now have broader geographic position and facility coverage across the United States.
We have adapted our direct to consumer project to include National TV advertising buys.
This is a key driver behind the significant growth in web activity, especially very early in the year.
National buys are significantly more cost effective.
Active and simply provide greater exposure to a potential patient base and include many areas in the U S where there has not been any media activity.
The growth in web activity leads patients to connect with our adviser care program or ACP, which now serves approximately 80% of our centers.
We intend to continue to expand our ACP throughout 2022, which will include many technology advancements to improve our ability to assist patients make appointments as well as to help them through the overall process.
With the number of calls and a growing experience with the ACP. We now have a significant dataset to determine the key sticking points for patients along the process.
Notably is the number of patients who have not had a sleep study for over two years as required by Medicare and many of the commercial insurance payers. We also realized that it can be challenging for patients to quickly obtain another sleep study.
Therefore, we are working with our sleep physicians to improve this process and have also begun implementing technologies to add capacity in sleep centers.
Recently, we announced partnerships with two private digital health companies and so data in <unk>, which will further these efforts.
And so data increases fleet capacity and efficiency with their FDA approved sleep study analysis platform pencil sleep.
Using artificial intelligence and fell asleep automates, the scoring and analysis of in lab in home sleep testing, allowing clinician time to focus on patients.
I'll sleep is available in over 500 sleep centers in the United States analyzing over 30000 sleep studies per month and many inspired centers are already using this technology.
<unk>.
Is an early stage startup built by physicians to increase access to sleep apnea care by shifting diagnosis and treatment from the clinic to patients' homes.
At the core is the economic App, which provides the interface between the patient and the physician, allowing clinicians to see and manage patients from any location.
Following a digital consultation the physician can order a home sleep study two sent directly to the patient.
Generally the patient can receive a completed sleep evaluation and clinician follow up and just a few days.
Moving on our international business had a strong quarter driven by increased procedure volumes in Europe .
We remain very optimistic about our European prospects, particularly in Germany.
While our international business is not subject to as much seasonality as in the U S. We did experienced procedure delays due to Covid, Germany early in the quarter.
As with the U S. We have seen a strong rebound late in the first quarter and we expect this momentum to carry forward throughout the year.
The team is excited about completing our initial procedures in the United Kingdom during the first quarter and have several additional procedures schedule.
We continue to refine the reimbursement in the UK and we will begin training additional centers.
Most recently we.
We have been notified that inspire therapy has been approved for country wide reimbursement in France.
This is a very positive step following years of developing the clinical evidence necessary.
We will work with their friendship <unk> over the next few quarters to determine the proper reimbursement level as we plan for a broader launch of inspire therapy in France.
In Japan, we remain excited about the opportunity along with our partner, Japan Lifeline continued to train additional physicians. Following the first inspire implants performed at Tokyo University in February .
Multiple physician teams are now screening for potential patients at about 10 hospitals in Japan.
As I stated on our last call we have entered into agreements with distribution partners in Singapore and Hong Kong.
Our initial focus is introducing inspire therapy in Singapore, working with physicians at Singapore General Hospital.
We are pleased to announce that our partner <unk> has played the initial order for product and the first implants are scheduled for late May.
Physicians continue to discuss inspire with other patients as we expect several more implants, yet in the second quarter.
While Singapore is active the team will continue to initiate inspire program in Hong Kong.
As well as start the early planning in South Korea.
In Australia, we continue to work with the authorities in establishing reimbursement in that country.
Turning to R&D.
We are very optimistic about our new Bluetooth enabled patient remote that was approved by the FDA in December as we said previously this new version allows information from the implanted neurostimulator and the patient remote to be uploaded to the inspire cloud via patient smartphone, making it easier.
<unk> to monitor and inspire patients.
We remain in the soft launch period to provide us with a full system level test of the patient remote and inspire cloud interface.
We continue to plan for a full product introduction at the American Academy of Sleep Medicine meeting in June .
The inspire cloud patient management system continues to expand as we add centers in the U S and in Europe , We expect inspire cloud will become an important tool for physicians to monitor patient experiences and outcomes.
Later this year, we expect to submit our upgraded physician program for FDA review.
This new program or connect with inspire cloud and is key to the next step of providing remote patient programming.
During the fourth quarter of 2021, we formally submitted our request for full body MRI compatibility to the FDA.
We continue to interact with the agency during the review and are confident that we will receive approval within the 180 day review period.
This approval will not require any changes to the existing inspire system.
Longer term we can.
Continue work on the design for our fifth generation neuro stimulator. The inspire five device will eliminate the pressure sensor and incorporate something inside the neuro stimulator using accelerometer to measure respiration.
We continue to target FDA approval in late 2023.
In summary, we continue to experience significant momentum in all key aspects of our business and our focus on patient outcomes and physician education support our confidence in the continued growth of inspire.
Our core focus for 2022 remains increasing utilization at our existing centers as well as increase the capacity by opening and training new centers.
The continued expansion of our call center and investments in our DTC campaign support these initiatives.
We remain extremely excited about the 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.
Tim noted the inspire team delivered a strong first quarter.
Total revenue for the first quarter of 2022 was $69 4 million, a 72% increase from the $44 million generated in the first quarter of 2021.
U S revenue in the first quarter was $66 4 million, an increase of 76% from the $37 8 million in the prior year period.
In the first quarter revenue from outside the U S increased 14% to $3 million.
The growth in the U S reflects several factors, including a larger number of implanting centers expanded direct to consumer marketing and an increased number of territory managers and field clinical representatives.
As Tim discussed we.
We did experienced some typical seasonality in our business in the first quarter and Covid created some early quarter headwinds.
The U S average selling price in the first quarter was 23800, which was consistent with the prior year period.
The ASP outside the U S was 22200 during the quarter compared to 24400 in the first quarter of 2021, which was driven primarily by exchange rates.
Gross margin in the first quarter improved to 85, 6% compared to 85, 2% in the prior year period due to manufacturing efficiencies and higher sales volume.
Total operating expenses for the first quarter were $75 4 million.
An increase of 51% as compared to $50 1 million in the first quarter of 2021.
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 drive continued growth and to make investments in key areas of our business.
Our net loss for the first quarter was $16 7 million compared to $16 2 million in the prior year period.
The net loss per share for the first quarter was <unk> 61 per share nearly consistent with the net loss per share of <unk> 60 in the first quarter of 2021.
The weighted average number of shares outstanding for the first quarter was $27 5 million.
We anticipate that the weighted average number of shares for the second quarter will be approximately $27 6 million.
Moving to the balance sheet as of March 31, our cash and investments totaled $213 million.
This strong cash position allows us to remain focused on executing our growth strategy of increasing procedure volumes at existing centers and training and opening new implanting centers.
Yeah.
As we stated earlier, while business conditions have improved we continue to monitor the impact of the pandemic as we did experience some challenges in January and early February .
However, our strong performance and recent implant trends provide us with confidence and outlook our outlook for the remainder of the year.
Therefore, we are increasing our full year revenue guidance to a range of $336 million to $344 million.
From our previous guidance of $318 million to $326 million.
This revised guidance represents 44% to 47% growth over full year 2021 revenue.
In summary, the key metrics throughout our business remains strong and we are well positioned to achieve significant long term growth.
We're extremely pleased with our first quarter performance and are excited to continue executing on our growth strategies.
With that our prepared remarks are concluded.
Cindy can you. Please open up the call for questions. Thank.
Thank you to ask a question you May press star one on your telephone keypad.
And our first question comes from the line of Jay.
Steve.
From Bank of America. Your line is now open.
A little more color on March and April .
How you thought about Covid and your full year guidance and I know you don't give Q2 guidance, but should we expect a little bit more of a sequential uptick this quarter given the COVID-19 impact in Q1, just any color on that would be helpful. Travis We missed your how are you. We Miss you read at the beginning can you repeat.
Yes.
To get a little more color on March and April and how those are shaping up versus early Q1, and how you thought about COVID-19 impact in the full year guidance.
And any sense for Q2.
Absolutely.
As we mentioned January always starts a little slow, especially with our seasonality, but COVID-19 really was focused in the first six weeks in the U S and in Germany, and so we had a strong rebound in second half of February and March and so that really allowed us to.
Up our guidance the key to it is the in March we saw a little bit of a rebound, making up those cases and the real growth started in April , but we really like the momentum.
We are careful about COVID-19, but we haven't really built in another concern that we're going to have another COVID-19 resurgence but.
We're comfortable where we stand with our ability to connect the patients with the health care providers.
Alright, Great and then I'd love to get a little more color on the price increase that youre putting through.
I'm, assuming that's just U S based price increases and any feedback from your customers.
The offset how are you thinking about some of the cost pressures that youre seeing on your side of the business.
Sure so as we've talked about Travis.
<unk> started the price increase this week actually on May <unk>.
And it's really more of a long term.
That impact in 2023, we provide.
Guidance on annual basis through 2022, but the increase will be phased in over the next several quarters, because we have fixed formal pricing agreements in place with all of our customers.
And so.
We have seen some increased costs of our components and of our materials.
But again those increases have not been significant.
So with that said, we have not really encountered pricing pressure on our gross margins and so we're going to maintain our gross margin guidance of 85% to 86% for 2022 and still a little too early to comment on 2023, but we'll update you as we get closer to the end of the year.
Great. Thanks, Congrats on the quarter. Thanks.
Thanks, Joe.
Next question from Robbie Marcus from Jpmorgan. Your line is now open.
Thanks, and I'll add my congratulations as well on a nice quarter. Thanks.
Thanks Ravi.
It's great to get the <unk>.
Stats on patients visiting the website and it's great to see that it's starting to bear some fruit from the national advertising program.
What we can tell from that is sort of the feedback you're getting from patients and from physicians about the continued CPAP supply shortage and.
And manufacturing issues that the two of them are having for different reasons and.
And how it's impacting new patients moving into the clinic seeking out inspire so anything you could add there and if there is I know you've talked about in past quarters had difficult. It is to quantify if there is any.
Even qualitative quantification you could add that'd be great. Yes, that's exactly what it is it is we do get feedback from the call Center, we do get feedback from physicians that they are seeing an increase in patients.
Looking for therapy, because of the shortage of CPAP and they extended the recall that Philips is dealing with so we know it's having an impact we are certainly communicating now nationally and really focusing on those patients that are unable to benefit from CPAP, which includes.
Those patients on a recall and as we said before we can get those patients approved with their insurance companies. So we're certainly out community.
Communicated with those patients as best as we can we know it does have a positive impact now as it will going forward, but I think the real positive long term.
Paradigm change that we're seeing as we are now seeing sleep physicians.
More earlier in the process talking about alternative therapies and that really is driven by the fact that they just don't have the CPAP to be able to provide their patients. So at the upcoming ASN meeting American Academy of sleep Medicine in June where we are.
Really going to be emphasizing that.
At that point with the sleep physicians are making sure that they are aware.
Uh huh.
There are alternative therapies and internally, we call that program win with sleep and making sure that this community sleep physicians are certainly aware of inspire and where they can refer their patients to be able to receive inspire.
Great and maybe just as a follow up another really nice quarter in center adds here and what's a difficult quarter just.
With the backdrop of Oklahoma crime.
Maybe talk about the pipeline you have on new centers the enthusiasm.
And is it predominantly asc's or or are you also seeing some.
Non ASC centers as well thanks.
Well right now, we're saying, 22% of our centers or <unk> and after cleaning up a little bit it's.
A little bit of an increase but it's pretty consistent with where we were in the fourth quarter, meaning that while ASC. They are opening at a slightly higher rate we're still.
Very active in and opening hospitals and.
Really private broadening out with some of the national campaigns, we have with <unk>.
And Allison.
The larger hospital systems, but also getting into the community hospitals as well. So we'll continue the focus on bolt, there's a lot of enthusiasm out there.
To be able to take care of patients and certainly we have the demand from the patient standpoint, and with the national awareness campaigns. It really kind of exciting areas that that previously they just didn't have any TV and it didn't have any of the awareness programs and so we're really able to kind of reached.
Much broader.
<unk> group and that translates into additional centers that want to make sure that they offer and so.
Prior therapy.
Great. Thanks, a lot guys. Thanks Ravi.
Your next question from Amit Hazan from Goldman Sachs. Your line is now open.
This was full for me. Thanks, Thanks for taking the questions as always.
Frankly, I think maybe circle back to <unk> question, and then ask Rick to provide a little bit more a reminder, on kind of the relationship you guys have with your contract manufacturer.
We heard some increases in component prices, but I believe that there's sort of a.
Duration of our time parameter in which the contract manufacturer can can potentially raise a tense you guys. So is the pricing increase related to kind of our perspective.
Price increase that Youre expecting from your contract manufacturer, even though the Gm's, obviously strong in this quarter and for the year can you can you give us a little bit more context for that one sure we think that well we always hold.
At least a one quarter safety stock a product if not much greater than that and so as we start moving forward, we won't see those impacts.
Private until later in the year if in fact, they exist we're going to continue to work closely with our suppliers to make sure that that we control those costs, but we know that there are some material costs going up and Thats what started the the cost increase but again, we don't think thats going to really affect us to later in the year and we don't think it's going.
To have a effect on the gross margin and that's why we're holding guidance on that.
But we're working closely with our contract manufacturers and yes. These are.
Multi year agreements that we have with them.
Okay.
Really helpful back back to the topline into guidance.
I thought it was interesting that the pruning the 25 centers inactive and reiterating of the territory and the center assumptions for the year. Despite lifting the topline that's obviously an implication on utilization per center, but.
Is there more pruning to be done on you guys as kind of forward view and then I guess just a quick third one if I can.
Visibility of the pipeline do you feel like there was any sort of remaining backlog excess backlog that gives you increased confidence to raise by so much more than the beat in the quarter. Thanks. So much for taking the questions as always have absolutely I think going back to the incentives. We always we continually monitor our centers and physicians do move.
And when they move it does that a physician to replace them that center, it's difficult for that to continue so we will.
Put them on hold so we will continue to monitor centers to make sure that they're as productive as as they absolutely can be so no. It's not just a onetime thing that clean to prune 25, I think it's an ongoing thing and we don't see a significant number going forward, but there's always changes in folks.
At centers and we want to have the most productive centers moving forward. So again, a lot of excitement with centers and we do are able to kind of see the pipeline I think for the most part we worked through a lot of the rebound from January and patients that had to have their cases suspended but theyre private Ed.
I'm sure there is some in Europe , but.
Also at different parts of the U S to get them rescheduled, but we're really seeing.
Strong growth from the web activity from the context from the adviser care program that gives us the confidence with the momentum to increase.
<unk>.
The guidance.
Thanks for question two yes, that'd be great. Thanks.
You bet Phil.
Your next question from Daniel unhealthy from SBB Leerink. Your line is now open.
Hey, good afternoon, guys. Thanks, so much for taking the question Hi, Danielle.
Hi, Tim I was hoping you could talk a little bit about a little bit more about how new centers are ramping so asp's are becoming a bigger piece of the new centers that you're bringing online every quarter.
Just wanted to get a sense of whether you're seeing ASC ramp faster than prior centers or slower or any color. You can give there and then I have one follow up okay. Absolutely. We do see excitement a lot of times new centers are driven by our physicians need to increase capacity to do more cases in our hospitals.
They may be limited by the number of or days that they would have and so oftentimes we will open up.
Amatory surgical center for physician groups. So they have multiple sites of service and that does give them the flexibility to schedule additional cases and build their own capacity on the other hand, we also have new centers, where they are building new teams of sleep physicians e&ps.
At hospitals.
And oftentimes they may also have an ambulatory surgical center.
To build open up brand new programs.
We have fellows programs educational programs that teach the graduating ent's if you will.
At inspire and we let the existing inspire.
Centers said.
Patient then just this last week, we met with over 50.
Emt Fellows many are graduating in when they graduate they go to their hospital and they opened up their new inspire et cetera, because they have so much inspire experience. So the pipeline is very strong for opening new centers as we talked about we're just barely penetrated and the number of centers that one day will be offering inspire so long way to go there are various.
Cited above that.
Got it and then as you think about the utilization at centers and jet.
Generally speaking ASC I think are more efficient and pushing procedures through then in hospitals and more focus as well how should we think about the mix of procedure volume going through Asce's firsthand hospital.
Evolving over the next year or two in and.
Does it matter at all when it comes to your ability like Youre, taking price for example, so pricing and contracting or.
Does that not matter. Thanks, so much what theres always over to kind of answer it in reverse order, there's always different contracting rules with ASC is as far as <unk> and third party payers right.
And they need to excuse me, it's specifically contract that so we do provide assistance.
To ambulatory surgical centers. So they have the data necessary to work with United healthcare to Aetna to their primary payers to make sure that they have the proper reimbursement and then from Medicare standpoint.
The Medicare rates in ambulatory surgical centers or less in hospitals, so that can put some challenges in those.
Those areas that don't have high reimbursement rates down in the south as an example, so we need to work with those season, what they do for the most part does it just make sure that they have balanced between the commercial cases, and Medicare cases to make sure that it's economical for the ASC and we're able to to do that.
So I think.
What's the what was the first part of your question.
Oh, just the evolving mix because ASP, presumably are more efficient.
Doing procedures and potentially I think could get utilization higher tell me, if I'm thinking about that incorrectly.
If the mix will change over time that the procedure is not just centers.
The procedures being done at ASP versus hospital, and whether that matters. So I'm not sure I think were still growing with the number of ASE is being at 22 I think the overall number of procedures is still growing but maybe not there yet.
ASP is do provide us the flexibility the key to it going back to the two incision implant and reducing the over time as we do see more.
Surgeons scheduling three cases in a day and that is another way that really allows them.
To grow their capacity and they just have more flexibility in scheduling at the ASC versus.
Competing for or time at some of the larger hospitals.
Okay. Thank you.
You bet. Thank you.
And our next question from Richard <unk> from <unk>. Your line is now open.
Hi, Thanks for taking the questions and congrats on the good quarter guys. Thanks rich.
Maybe just to start off on the ASP question.
<unk> been getting I think you said earlier on that ASC growth or your growth in ASP.
Was slightly higher than the growth that you're experiencing hospitals with the utilization and efficiency. As you just highlighted there that makes sense I'm curious should we expect that that delta the divergence of growth rates to continue to expand.
Just trying to get a sense of how correlated.
The ASC adoption is going to be the utilization growth.
I think as we said kind of.
But we do expect that there'll be a day that you will see 50% of the centers being afcs and even 50% of the procedures.
Conducted an ASC because inspire lends itself, so well to the outpatient setting and that will be a trend I think will continue to grow and we will continue to drive growth.
Moving forward.
Okay.
Yes.
The trend of growth within the ASC setting now that growth rate relative to.
The hospital setting is that growth rate going to continue to accelerate you think relative to the non ASC portion of your install but yes to the hospitals are larger medical centers I do think that growth rate will continue to grow and the other reason to say that as it is.
It's easier logistics and working contractually to work through the value committee to be able to open up an ASC.
I'll ask Rick to comment on <unk>.
<unk> of <unk>.
Penetration, we have with some of the larger payers like ASC and USPI and it's a lot easier and easier for us to open up those centers that allows us to open up quicker.
Hi, Rich we've talked about those seven national agreements that we have and those those agreements cover about 1100 centers.
Last quarter, we were about 15% penetrated.
In those centers, we won't get into all of them, but we're still under 20%.
Of those agreements of those.
Centers under National agreement, So that gives us continued confidence that we have a strong pipeline of center additions going forward.
Okay. Thanks for that.
On the International front, you guys have a lot of irons in the fire here they might not all.
All common contribute all at once in 'twenty two but.
As I think about Hong Kong, Singapore, obviously, Japan, gaining steam.
Now France.
Germany picking up.
<unk> I guess looking into 2023.
And beyond it feels like the international momentum could really be starting to near an inflection point can you help to help.
Help us size or quantify.
That is correct me if I'm you know.
Thank you.
Is it wrong to kind of your 2023 as a step function potentially in the growth rate for international.
But it just seems like there's too many things starting to combine that.
That wouldn't be the case would love a little more color there I think thats fair I think today we're dominated.
With the performance in Germany.
And Germany is makes of them, it's great majority of all of our international.
Revenue.
The contribution to global revenue is down.
Down to mid single digits, now and we want to be able to turn that now we don't want to slow down in the United States revenue growth and we've just talked about how we're just in the early stages of penetration there, but we certainly want to increase international and not be just in Germany, we didn't touch on the Netherlands, but they have a great <unk>.
Through in their reimbursement and we're opening additional centers there we've always been limited to just two centers. So nothing is going to have growth, we're expecting a decision in Belgium, Austria, Switzerland, and now having a breakthrough in France, and the UK really kind of give some excitement to the European team.
Albeit each of those takes their own time to be able to ramp that growth, but I think it's fair to say.
Yes, it is going to have.
Our significant growth in the revenue, which we are very happy about and not to mention the Asia team is excited to doing the the first implants in Singapore, yet. This month this is a pretty.
Pretty exciting.
Great if I could just squeeze one more in Rick just opex, how do we think about the <unk>.
Relative to the <unk> opex levels for the rest of the year, increasing and at what pace.
Comparable to our previous quarters.
From a dollar perspective.
Okay. Thanks, a lot.
And your next question from Jon Block.
Stifel. Your line is now open.
Thanks, Great, Hey, Tim and Rick <unk> well maybe.
Maybe the first one Tim just if you can talk about the national advertising initiative how are you.
Pink that's going it seems like the web it's really increase but what about the quality of those web had do you believe they are converting well further downstream and any thoughts on early sort of returns on that sort of bigger initiatives that you guys kicked off earlier this year.
Early in the year, when we started the national campaigns.
We cover every territory of Watson, So we turned everything on for the first couple of weeks, that's why it's just tremendous.
<unk> web hits early in the year and then what we do as we go into a cyclic mode in different parts of the U S will go like two weeks out two weeks out so it's not a continuous run and that's how we build efficiencies into it what we've also done on the web pages.
Introduce some additional filters to help patients determined if there are good candidates and to get them to the right.
Physician, so we do have a.
Question in there a little survey on their experience with CPAP on their on their history before they call. The adviser care program, we go directly to.
A physician's office that they're able to kind of see if there are good candidates and that helps improve the quality of the candidates.
Going to the centers and really help the long term conversion rates. If you will so we're trying to do some things on the web activity as well as with the adviser care program to get more quality.
Individuals to the centers.
Got it got it very helpful. And then maybe I'll take another shot from sort of an odd.
Opex for an EBITDA perspective, you know last quarter, you guys during the quarter and adjusted EBITDA, and obviously that was <unk> and <unk> you always have a seasonal component, but when we think about exiting 'twenty two or even full year 'twenty three and I don't get any push back on you guys from topline growth, but there is some more about the sustainability of turning the quarter. So when we're <unk>.
Exiting 'twenty two any thoughts on recapturing EBITDA positive profile of what about full year 23 is that the year, where we can see turning the corner on a full year basis for adjusted EBITDA. Thank you.
Yes.
We won't comment really on 2023, John just because we provide guidance for this year, but.
And we've said this before too is profitability is important but we are still so very early in the penetration of potential centers.
And the potential number of procedures that.
We're really focused on making those investments by adding new centers, adding new territory managers.
And making other investments that will drive.
Several quarters and years of revenue growth rather than really optimizing our P&L.
To produce net net income in the short term and so we did have more leverage in the fourth quarter, we have seasonality and the impact of.
Of Covid in the first quarter, so but year over year, we did show a little bit of.
Leverage compared to the first quarter, a year ago and so we know it's important we will continue to focus on our growth strategies and drivers and we're maintaining our gross margin range of $85 to 86, and so we'll be watching that and.
We know it's important.
Fair enough thanks, guys.
Cindy there.
Yes.
Your next question from Lee Wang.
Basketball cycle. Your line is now open.
Hi, its lei, calling in for Larry Thanks for taking my question.
So you had really strong growth obviously for Q1 are you expecting a positive momentum to continue can you talk about any.
Bottleneck through rate limiting factor.
Production of the devices.
Just given the supply constraints, we've heard otherwise the copper industry.
Yes, so we.
We monitor that extremely closely the advantage. We have is we really only have four or five products right with the neuro stimulators and the stimulation leads and.
The neuro stimulator and the.
Sensor are two components a lot of custom.
Ponant in there that we have a good supplier. So we don't have too much risk there, but we do have standard.
Electrical components.
That can be challenging for everybody. So there had been a couple of circumstances that we've had to identify.
Placement parts and have gone to the FDA to get a 30 day.
Approval and that's gone very well and we are managing several quarters out to make sure that we stay on top of it but the team's doing really a good job. This goes back to the start of the Covid way back in in 2020, when we started looking at.
Where are our sites of manufacturing what is our supply chain for electrical components as well as raw materials are also.
<unk>, if you're not on top of it.
Some of the plastics that we used in the patient remote housing as an example, and but were able to overcome that because we do hold the safety stock and we're working out several quarters in advance, but yes. We have the same challenges of everybody I. Just think our team is really strong and have really been on top of it and have been able to maintain.
Our safety stock.
Got it and I think you mentioned earlier that you have at least one quarter of.
<unk> in place, yes is that right, okay, great and then I'm not sure. If you mentioned this earlier, Tim So inspire has obviously improved for post.
CPAP, but just given the CPAP supply issue in the market have you seen instances where patient.
Patients were permitted to leapfrog that and move to inspire system directly.
Okay, maybe a little bit I think we're careful with that because they just.
I don't know if its called leapfrogging, because they just don't have a CPAP device that they can benefit from so in essence, they are not able to receive benefit and so therefore, they qualify for inspire what youre also kind of hinting at a little bit is when does inspire.
Move up to therapy later, it would be more of a first line therapy and that day will come, but but we need to do some more development and.
Conduct some additional clinical studies to be able to get that but in the meantime.
Your point is strong that we are changing the paradigm of sleep physicians and their talk about inspire a much quicker.
And then they had in the past and maybe Thats a forest function because they just don't have a CPAP.
CPAP devices to provide those patients but great observation.
Are you are you seeing Paris.
Being more.
On board with that tight.
Type of therapy.
CPAP is not available they are allowing patients to move inspire is that.
I guess as Youre seeing some patients doing that is that a tough process.
Most patients most payers will allow that and they are supportive of that because they know the need to treat patients with moderate to severe obstructive sleep apnea because the risks are so significant other payers will probably challenge it a little bit more to CFC paths available but.
Again, we have policies positive policies with most payers.
And they are supportive of inspire.
Great Thanks nice quarter.
Thanks, Matt.
And your next question from EDA meter from Piper.
Piper Sandler your line is now open.
Hi, Tim Hi, Rick Congrats on the quarter and thanks for taking the questions here I. Appreciate you squeezing me in.
Two quick ones for me first would just love to hear a little bit more about the partnership investment collaboration with the digital health companies.
Maybe just a little bit rationale behind those investments how quickly you think they can.
Expand capacity streamline the funnel and then I had one follow up on the pipeline. Thanks sure I think it goes back a little bit to what John was asking too about the conversion rates and how do we help people get through the pipeline.
And as we looked at that data one of the biggest stumbling blocks as they need to update it sleep study.
They haven't had one in two years and so then when we go back to sleep labs have capacity issues as well. So we just needed tools to be able to improve on that so and so data is better off for a while we've known about them. They are well known in the sleep community.
And like I say they are all in over 500 centers in many of our centers already use <unk> data it doesn't take over the sleep physicians job what it does is it makes them more.
Fishing, because it uses AI to automate the scoring and what they can also do is improve the quality of the scoring because if you're using a level III sleep device that doesn't have.
Sleep parameters, they can actually estimate the total sleep time and not just calculate total time embedded which is just two factors for ehi. So they the sleep physicians to actually get a higher reimbursement.
Because it's a better quality sleep score so we've Nash.
Natural for us to partner, we will interface.
Technology, and so the data will be able to plug into inspire cloud and as part of our long term digital development program to allow physicians to have quick access and easy access to patient management on an inspire cloud.
It's just a little earlier stage, but it was made by a sleep physician, who is skiing and couldnt see is patient. So we created an app to streamline that whole process.
We think that we're going to be running a pilot program with that as early as next week.
With some of our incentives to really help those patients who want to talk to a doctor about inspire but they don't have an updated sleep study, we need to find ways to really effectively and efficiently get those studies done.
Really helpful color, Tim and for the follow up just quickly on the pipeline first full body MRI labeling did I hear correctly that still tracking and just maybe refresh our refresh my memory is should we expect that kind of in the next couple of weeks then if it's a 180 days from the Q4 submission.
And then on the Gen. Five IPG I think I heard that was still tracking to late 'twenty three maybe just talk quickly about what.
Left to do there.
To submission to FDA.
Thanks, so much for taking the question so on the MRI, yes, we've been answering questions typically when you do a 180 day PMA supplement submission you typically get FDA questions around day 100, we have received those questions. We've responded to those questions in and we go into two clarifications.
And hopefully we can work interactively to solve the rest of those questions and we will see.
FDA come back and approve that here in the second quarter I don't think youre going to see it in the next couple of weeks, but that's still our target and pending any additional questions from the FDA, we expect to to stay on that FDA has been very very good about.
Doing reviews in a timely fashion.
They've been very interactive with us as well so we have a good relationship.
And hopefully we can answer all their questions and get the approval yet here in the second quarter, which will really be exciting and really good news for the patients because that goes back and that MRI approval will apply to any patient who has had that inspire device since the inspire four was lives maybe four years ago. So really good news not only for new patients.
Patients who have had inspire for quite some time the inspire five device the key.
<unk>.
Process right. There is the application specific integrated circuit, the ACP and we do have the second generation in house, we are evaluating that unit. So far things are good and if that comes through that's going to hold schedule and we're still looking at submitting to the FDA at.
At the end of this year.
So we have done three.
Pre subs or pre supplement meetings with the FDA on the inspire five and things have gone very well.
FDA is fully on board with our timing for submission and the work that we need to do now is really about lot of the engineering and production qualification and that's.
An extensive testing and we will take the rest of the year to be able to get it all get that all done, but yes were planning still to submit the end of the year.
Great. Thanks for the extra color, Tim you bet Adam.
Your next question from Michael Hallmark.
Wolfe Research your line is now open.
Good evening, just two quick ones.
Bridge on the guidance, 6% revenue increase to the forecast.
The contribution from the price increase versus <unk>.
<unk> volume it sounded like.
Price increases are going to phase in such that it's.
Maybe one or 2% of the guidance increase or is it even that much I just wanted to get the split on.
The increased outlook how much of that is the price increase versus volume, it's really not even that Mike.
Really minimal impact to 2022 as we sit here today, because we're just rolling that out and that will be phased in based on the pricing agreements with each of their customers again, it's more of a 2023.
Item, but we'll keep you posted on that as procedure growth.
Yes.
Primarily its volume growth.
And for the follow up is just a little bit of background. As you continue to generate all this inbound interest from your consumer outreach programs to the ACP I'm curious if you have any data.
Whether it would be first web.
Website visit or first ACP contact for a patient that successfully gets inspire how long is that lag I go to the website and I go through the whole process and I get inspire on average how long is that taking or the other measurement would be first first contact to ACP successfully get through the process get inspire.
What's the average time that you see in your data.
Great question.
Do you see from the first.
Contact to implant is on average about four months.
And so we can really get in and look at what are the key factors that are driving that if you think about.
We want patients patients when they would contact center to have an appointment certainly within the first 30 days and.
And then after they have that.
Initial appointment to get their sleep endoscopy procedure submit too.
The insurance company to get the prior authorization approval and then scheduled to the operating room time and the key to it is as most surgeons can try and get that done.
The 30 to 45 days for scheduling the surgery. So that's why we've got to keep pushing to build capacity and going to afcs and adding a third if not a fourth case and in a given day to reduce that time, we mentioned before another driver in there is the time it takes to get our new sleep study and that.
Kind of biases those averages and so thats. These technology partnerships are just tools to be able to to help that so we're going at every different element, but right now yes, it's running about four months and we want to get that shorter.
Thanks for the color.
Thanks, Mike.
And your last question comes from the line of Suraj Kalia of Oppenheimer.
Your line is now open.
Good afternoon, everyone. Congrats on the quarter, Tim can you hear me alright, yes.
Yes can hear you great. Thanks.
Perfect.
So Tim a lot of information provided roughly 2800 implants in the U S in the quarter.
If I could just drill down one layer more.
How does the split look between sleep certified orderly oncologist and general Otolaryngologist.
And maybe also if you could care to share how does the unit volume split look between <unk> versus the hospital setting I know, 22% of the number of sites, but I'm just curious how does the unit volume look like ASP.
Great question.
Let's go back to that first of all I've talked about.
Sleep <unk> or what we call dual board.
Certified Emt is meaning they have both their emt degree as well as they won't get boarded in sleep medicine.
Those are the sorts of lot of the very early early centers. So if you go back to the class of 14.
15, and the majority of the early adopters are those dual board certified sleep, but most recently as we start to transition to the larger payer systems.
Not so much the case and those are general e&ps partnering with sleep. So can't really give you specific numbers.
But I may have to go back and look those up but I think generally generally I don't think the dual board certified Ken can stack up to half we need to go back and look at that but I think early on in the early days it was more predominant.
Now you're just seeing so many more centers opening up in with the ASC is leading to your second question Youre, just seeing more general E&ps, who are very capable of doing the procedure, but they have a strong partnership with sleep to be able to manage the patients long term and those are the centers that really can be highly <unk>.
Reductive because they have a team effort, but I'll go back and look that up as far as the <unk> and hospitals, while we're at about 22% of the centers are <unk> I don't think 22% of the procedures are done in ASC, yet to date that is still up and coming.
Area I think it's.
We don't have that number in front of us either but I'm sure, it's probably approaching high.
High teens, but I think the majority is still done in hospitals today.
Fair enough and Tim if I could just throw this in.
I appreciate you guys taking my questions.
Let's say Suraj is in New Jersey area right. He's heard an add on on radio or TV for that matter for inspire great. What is the decision matrix.
It would be a bit suraj heater lands up at Mount Sinai.
The inspire procedure or another ESC, maybe affiliated or not.
Does the decision matrix work there Tim.
If I could sorry.
No go ahead finish.
I am just curious also when you all defined a new account.
How does how would the number of procedures by quote unquote, new account within the first three to six months tracking gentlemen, thank you for taking my questions and congrats Raj absolutely.
Decision process Suraj, when you'd see that and add new go to inspire sleep dot com website, new educate and watch the videos and decided you want to move forward you select the center that you want to go too because youll say find a physician in my area and Youll select if you want to go and Jersey. If you want to go over to Hackensack, If you want to depending upon.
Where you are if you want to go into the city to one of the academic centers, you actually selected and you call that phone number on there and when you come to the adviser care program program. It identifies that you are calling this specific ASC or this doctor. This.
This hospital and we work with you if you're a good candidate to get you set up with an appointment at that hospital.
Now there may be other circumstances, where that hospital doesn't see a specific insurance or or something like that and that will work with you to choose.
Our new center, but it is the patient chooses the Saturday that the adviser care program or Theres, a randomized element to it we do make sure that it's patient choice on where they go.
As far as the second question is we don't identify a new account until they have cases scheduled and ideally we want the center to have two or three cases scheduled and then the key is the time to the second group of patients and that's the key to growing utilization and getting them up and active is make sure that they have a pipe.
Line of patients not just we're going to do one two cases, how are they doing that start again, we need to build the team and build a process and be able to have.
The next group of implants done within the probably a month later, so it's always a tricky part like youre, highlighting there that to get centers up in active and get the utilization up quickly, but it always takes a little bit of a startup process.
Very good. Thank you I think thanks, Alright, I think thats, Sir our last question I just want to thank everybody for joining the call today as always are grateful to the growing team of dedicated inspire employees for their enthusiasm hard work and continued motivation to achieve successful.
And consistent patient outcomes inspire team's commitment to patients remains unmatched in the most important element to our success and 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 of our business in U S Europe and now.
In Asia for all of you on the call. We appreciate your continued interest in and support of inspire especially on this fourth anniversary of our IPO and look forward to providing you.
You with further updates in the months ahead, please stay safe and healthy and thank you very much.
And this concludes today's conference call. Thank you everyone. You may now disconnect.
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Yes.
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