Q4 2022 Inspire Medical Systems Inc Earnings Call
Speaker 1: You you.
Speaker 2: The conference will begin shortly. To raise and lower your hand during Q&A, you can dial star 1-1. The conference will begin shortly.
Speaker 3: Good afternoon. My name is Josh and I'll be your conference operator today. At this time, I would like to welcome everyone to the Inspire Medical Systems 4th quarter and full year 2022 conference call. All lines have been placed on mute to prevent any background noise. After the speakers are marked, there will be a question and answer session. Thank you.
Speaker 4: I'll now hand the call over to your first speaker, Edgy Yajda, the Vice President of Investor Relations at Inspire. You may begin the conference. Edgy, you may begin the conference.
Speaker 5: Thank you, Josh, and thank you all for participating in today's call. Joining me are Tim Herbert, President and Chief Executive Officer and Reviewable's Chief Financial Officer. Earlier today, we released financial results for the three and 12 months ended December 31, 2022.
Speaker 6: 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 security block, all forward-looking statements including without limitations those relating to our operations, financial results, and financial conditions.
Speaker 7: Investments in our business continue to factor the COVID-19 pandemic for your 2023 financial and operational outlook and improvements and market access are based upon our current estimates and various assumptions.
Speaker 8: 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.
Speaker 9: Please see our filings with the Securities and Exchange Commission, including our annual report on Form 10-K to be filed with the SEC by February 14 for a description of these risks and uncertainties.
Speaker 10: 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.
Speaker 11: February 7, 2023.
Speaker 12: With that, it is my pleasure to turn the call over to Tim Herbert. Tim?
Speaker 13: Thank you, Elkis, and thanks everyone for joining our business update call for the fourth quarter and four year 2022.
Speaker 14: We are excited to report our first profitable quarter and a solid finish to a very strong year with significant progress across all elements of our business.
Speaker 15: As always, we first and foremost reiterate our commitment to patient outcomes and to ensure that each patient has the best possible experience with an inspiring therapy.
Speaker 16: During today's call, we will highlight many accomplishments from 2022 that demonstrate our ongoing focus on the patient, including improvements in access to therapy, technology advancements, and planned activities to broaden the population that can benefit from INSPIRE.
Speaker 17: We will also discuss our outlook for full year 2023.
Speaker 18: We completed many important milestones in 2022, and there are now over 36,000 patients who have received Inspired Therapy.
Speaker 19: During the year, we received FDA approval of full body MRI compatibility and launched our silicone-based stimulation and substance needs along with the Bluetooth enabled patient remote.
Speaker 20: Further, we made significant progress with our digital platform, including major updates to the Inspire SleepSync patient management system and the Inspire Sleep app.
Speaker 21: We also initiated a pilot of a digital scheduling tool which we believe will significantly enhance patient access to care through our advisor care program.
Speaker 22: In addition, we submitted important indication expansions to the FDA, including for the pediatric population with Down syndrome and for patients with a high apnea hypodnic index.
Speaker 23: We raised over $240 million in cash, as noted previously, and in the fourth quarter we achieved profitability for the first time, all of which gives us confidence as we enter 2023.
Speaker 24: with that, let's review our results.
Speaker 25: In the fourth quarter, we generated revenue of $137.9 million, representing a 76% increase compared to the fourth quarter of 2021.
Speaker 26: For the full year of 2022, revenue total $407.9 million, a 75% increase compared to full year 2021.
Speaker 27: Our growth continues to be driven by higher utilization at existing centers and supported by the activation of new centers.
Speaker 28: During the fourth quarter, we experience challenges with our supply chain and the demand for the Silicon Bay's sensing and stimulation needs all paid our ability to provide product due to issues with scaling the production budget.
Speaker 29: These challenges have been resolved and we are increasing our inventory levels. Despite these challenges, we were successful in providing product for all scheduled procedures in the fourth quarter.
Speaker 30: Historically, we have experienced seasonality in the first quarter due to the reset of high deductible health plans at the start of the year.
Speaker 31: While this remains the case, the first quarter of 2023 may see slightly less seasonality due to the supply chain issues in the fourth quarter.
Speaker 32: With that said, we expect full year revenue to be in the range of $560 to $570 million, a 37 to 40% increase compared to 2022.
In the fourth quarter, we continue to increase our capacity by adding 61 new and planning centers, ending the year with a total of 905 centers.
At the end of the fourth quarter, ambulatory surgical centers made up 23% of U.S. centers.
And in 2023, we expect to continue to activate 52 to 56 centers per quarter.
Regarding the USL scene, we created 16 new sales territories in the fourth quarter, bringing our toll to 225 territories.
We are increasing our guidance in 2023 and expect to add 12 to 14 sales territories per quarter compared to 10 to 12 per quarter in 2022.
In 2023, we will continue to scale our sales management and training teams to optimize our ongoing expansion and to focus on strong patient outcomes and center productivity.
As such, we modified our incentive compensation for the field organization to focus on how your utilization at existing centers.
We will continue to enhance our ability to connect interested patients with a qualified healthcare provider.
Our outreach programs are very effective in generating interest in inspired therapy primarily through the inspiredsleep.com website.
For the full year of 2022, the number of visitors to our website surpassed 13 million.
an increase of 86% year-over-year.
And from these visits, we had over 78,000 physician contacts.
Of note, these physician contacts represent the calls and emails to an advisor care program or directly to a physician's office and do not include referrals directly from a patient's health care provider.
From a U.S. reimbursement perspective,
The final rules for 2023 were published in November and came in generally as expected, providing a stable reimbursement outlook for health care providers.
Moving on, our international business continues to make strides, growing 28% in the fourth quarter over the prior year despite ongoing headwinds from unfavorable exchange rates.
During the quarter, international revenue was less than 3% of global revenue, highlighting the significant growth in the US market.
There were many positives in our international business during the fourth quarter, including the strong performance in Germany, the Netherlands and Switzerland.
Furthermore, following many years of working with the French authorities, we are in the final process to have Inspire listed on the French registry in early 2023 at reimbursement rates consistent with the rest of the world.
and the team continues preparations for a commercial launch there. In Singapore, our flagship programs continue to perform at productivity levels consistent with U.S. Centers.
We also see momentum in Japan with multiple cylinders during first procedures in the fourth quarter that have also completed or booked additional cases in the first quarter.
In Hong Kong, we expect to complete our first procedures in February , and in Australia we have resubmitted for reimbursement and should have a determination later this year.
Turn it to R&D.
We recently submitted our SleepSync Physician Programmer for FDA review. This new programmer connects with our next generation SleepSync digital health platform, which is a key step toward providing remote patient programming.
Longer term, we continue to work on the design of our fifth generation Inspire neural stimulator. The Inspire 5 device will eliminate the pressure sensing need and incorporate the sensor inside the neural stimulator using an accelerometer to measure respiration.
We have finalized the design and we are conducting operational and production qualification.
We are still targeting FDA in FDA approval in late 2023, but depending upon the FDA review cycle, this could move into early 2024.
Finally, we continue to conduct research and clinical trials to increase the number of patients who can benefit from an inspire therapy.
In the fourth quarter, we finished enrolling the first 300 patients in our predictor study, which is the first step to replacing the requirement for drug-induced sleep and doc speed procedure with an office-based measurement for patients with a BMI less than 32 and and continue our plans for initial readout of the data in 2023.
In summary, we are experiencing significant momentum in all aspects of our business. We remain focused on patient outcomes and physician education to continue the adoption of our therapy.
In 2023 and beyond, we will continue to increase utilization that are existing centers while adding capacity by opening and training new centers.
The ongoing expansion of our call center and investment in our DTC campaign support these initiatives and we're seeing enhanced productivity from these efforts.
which is driving our improved financial performance.
Finally, the many R&D achievements in 2022 highlight our commitment to improving patient outcomes and enhancing both the patient's and healthcare providers' experience with inspired therapy.
We remain extremely excited about our future prospects and are confident that we have the appropriate strategy in place to drive long-term stakeholder value.
With that, I'd like to turn the call over to Rick for his review of our financials.
Thank you, Tim, and good afternoon, everyone. The total revenue for the fourth quarter was $137.9 million.
a 76% increase from the $78.4 million generated in the fourth quarter of 2021.
US revenue in the fourth quarter was 134.3 million, and increased the 78% from the 75.6 million in the prior year period.
The growth in the U.S. reflects several factors, including higher utilization at existing centers,
the addition of new implanting centers, expanded direct to consumer marketing, and a higher number of territory managers.
Revenue outside the US increased to 3.6 million, which is a 28% increase year-over-year on a reported basis. While units sold outside the US through 43% year-over-year.
The US average selling price in the Ford quarter was $24,900 compared to $23,900 in the prior year period.
The increase reflects our price uplift that began in May of 2022.
We expect US AST to remain steady at the current level.
The ASP outside the US was 20,400 during the quarter compared to 22,700 in the fourth quarter of 2021, which was driven by unfavorable exchange rates and a lower ASP for distributor sales in Asia. The US was 20,400 during the quarter compared to 22,700 in the fourth quarter of 2021, which was driven by unfavorable exchange rates and a lower ASP for distributor sales in Asia.
Growth margin in the fourth quarter was 83.9%, compared to 85.8% in the prior year period, primarily due to higher costs of certain component parts and additional costs associated with the transition to our new silicone-based leaves.
partially offset by the price increase that began in the second quarter.
Total operating expenses for the fourth quarter were $116.1 million.
an increase of 68% as compared to 69.1 million in the fourth quarter of 2021.
This planned increase was due to expansion of our sales organization.
Increase 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 long-term growth and to make investments in key areas of our business.
Interest and dividend income total 3.4 million in a fourth quarter compared to 15,000 in the prior year period.
This higher income was driven by higher interest rates on our increased cash balances.
We had no interest expense in the fourth quarter having paid off our outstanding debt in the third quarter of 2022. We are proud to announce our first profitable quarter in the history of NSPIRE. Debt income for the fourth quarter was $3.2 million.
compared to a $2.4 million net loss in a prior year period.
The diluted net income per share for the fourth quarter was 10 cents.
compared to the net loss per share of 9 cents in the fourth quarter of 2021. The wave average number of diluted shares outstanding for the fourth quarter was 28.9 million.
We expect Q1 weighted average shares outstanding to be approximately 29.1 million.
During the fourth quarter, we generated $24 million in cash and we ended the year with cash and investments totaling $451 million.
The strong cash position allows us to remain focused on executing our growth strategy of increasing procedure volumes at existing centers while training and opening new implanting centers.
For the full year 2022, revenue totaled $407.9 million, or a 75% increase in revenue.
over $233.4 million. US revenue was $394.8 million, or 79% year-over-year growth, while revenue outside the US totaled $13 million.
A 5% year-over-year growth despite foreign currency headwinds.
Net loss for the full year 2022 totaled $44.9 million compared to $42 million in 2021 with the net loss per share of $1.60 for 2022 compared to $1.54 in the prior year.
Moving on to 2023, we expect full-year revenue to be in a range of 560 to 570 million, a 37 to 40% increase compared to 2022.
Full year growth margin is expected to be in the range of 83-85 percent.
As Tim previously noted, we expect to activate 52 to 56 new centers per quarter and establish 12 to 14 new sales territories per quarter in 2023.
Given the prevalence of high-deductible health plans, we have historically seen seasonality in our business.
As Tim previously mentioned, we continue to expect revenue to step down sequentially in the first quarter of 2023 and will then increase throughout the year.
In conclusion, our strong performance and business momentum provide us with confidence in our outlook as we enter 2023.
With that, our prepared remarks are concluded. Josh, you may now open the line for questions.
Thank you. As a reminder to ask a question please press star 1 1 on your telephone and wait for your name to be announced. With dryer question please press star 1 1 again. Please limit yourself to one question and one follow-up.
Our first question comes from Travis Speed with Bank of America. You may proceed.
I agree on the profitability of this quarter. I think at the past, you said once you turn profitable, you wanted to stay profitable. So I don't know if this is the start of that, because looking at the street has over $2 in loss for earnings next year. Should that be closer to flat, slightly positive? No.
Yeah, let me comment. Hey, Travis. Let me comment first on the Rick kind of jump in. I think as we know We wanted to get to profitability. We know how important it is from a business standpoint I think moving forward it will continue to be a desire of the organization, but we also know that
In Q1, we do see seasonality there. So let me hand off to Rick there.
Yeah, so we did demonstrate some improved leveraging Q4 and we also expect in Q1 that we would lose some leverage just due to our normal revenue sea humanity.
But we do intend to show improving operating leverage as we progress throughout the year.
We're not changing our tone of profitability. We're going to continue to run our playbook, but it is important to understand that we do have a very different point of approach.
in determining our spending and our investments across our business.
our spending and our investments across our business.
Good color and so it's for aspects so something maybe in the 30% range is that a good starting point and Incurious if you would hold that if revenues come in higher than expected for the year Or if you would also kind of grow aspects upside with revenue upside over the course of the year and then the other
Follow up was on the comment on inspire 5 you mentioned, I think move into early 2024. I don't know if there was a change or something that driven drove that comment. Or if it was just more of a caveat.
I'll start, try to sew.
As we did demonstrate that the revenue did outpace operating expenses in the fourth quarter, we're not going to guide on bottom line, which means also operating expenses at this time. And so we're going to continue to make thoughtful, disciplined investments, but we're really focused on driving that top line.
again, to protect for supply chain. So always a little bit of a challenge to work the schedule to get all the testing done and get the submissions in, but we're still going to be pushing really hard to get the approval by the end of 23, but we can see it slide into early 24 if the cycle is tight.
Okay, let's start. Thanks for the questions. Thank you, Travis.
Thank you.
Our next question comes from Robbie Marcus with JP Morgan. You may proceed.
Yeah, thanks for taking the questions and grats on a really nice quarter.
Hey, Bobby. Hey. Maybe starting with the guide, you know, you're coming off a really good growth year. Your guidance in terms of growth is still a really healthy rate for 2023, but a pretty significant decline in growth rate versus 2022.
And by my math, it kind of looks like center utilization might be flat to down in the implied guide for 23. So anything other than your usual conservatism here that we should be thinking about implied in the guidance.
By my math, it kind of looks like center utilization might be flat to down in the implied guide for 23. So anything other than your usual conservatism here that we should be thinking about implied in the guidance as we start the year.
Yeah, we want to be very consistent on how we put our guidance out there, how we look at the business at the beginning of the year. We already mentioned in the note that we want to continue to drive utilization to actually improve utilization at existing centers, in fact, to the point of...
additional incentives in there for the sales team. So again, yes, we want to be careful putting guide out early on. We like to position that the company is in and really have been across the board with all of our milestones.
Got it. And then while not a huge part of sales today, the international Concentrency Growth Number and Fourth Quarter was really impressive and a big step up from third quarter it looked like.
How should we think about the cadence of international throughout 2023? And can this be starting to become a material contributor? Thanks.
Thank you very much, Harvey. I think we're very excited about International and we know it's just days away before getting confirmation from the French authorities that we will be listed on the registry as an accepted product, fully reimbursed in France. And we're recruiting a country manager there, so we think perhaps we're going to have a good year.
We think Belgium will follow that as well as the Netherlands is set up to have a strong year in 2023.
Germany and then on top of that even the UK has started doing cases too. So we like what's happening in Europe and the other side Singapore, Hong Kong will be doing the first case in just a few weeks.
And Japan is really starting to up to a little bit. So I think it's going to be a measure of success with the growth in...
international, but the keeping is still hovering around the 3% market as far as global revenue and we're not going to take our foot up the pedal on the United States and want to continue that grow utilization and really focus on the US market as well. So while I think you'll see continued growth internationally.
Our after-sits continues to be on the US market.
our emphasis continues to be on the US market. Really helpful, thanks a lot. Thanks, Armin.
Thank you.
Our next question comes from Adam Mater with Piper Sandler. He may proceed.
Hi, Tim. Hi, Rick. Hope you can hear me okay and congratulations on the nice finish to the year. Maybe just to start, I wanted to ask about direct to consumer expense and realize there's no guidance on OpEx. Bye.
Just remind us kind of where 2022 DTC spend came in and how investors should think about spending 23 and then just longer term kind of, you know, direction where this could go.
Sure. Hey Adam, it's Rick. So we continue to make investments in DTC, which is very important for our pipeline. We talked about over 13 million.
visit to our website and 78,000 physician contacts. And so it's a very important part of our business.
In the fourth quarter our DT spend was about $21 million.
That's relatively flat over the third quarter but we're going to continue to increase that. Year over year in 2022 we spent $74 million.
fly it over the third quarter, but we're going to continue to increase that year over year in in 2022 we spent 74 million in 2022.
That was up.
About 55% over 21 where we spent 48 million
We're going to continue to make those investments and grow our investments in VTC, but that growth will slow. It will be less than 55%, but we're not giving specific guidance around what might be right now.
Okay, understood. Thanks for the color there. And then just for the follow-up, you guys give helpful color and guidance on.
new account ads. I'm curious if you are able to share some color in planning positions for account. You know, are there metrics you can share there? And how do you think about those trends going forward? There's clearly a lot of demand for your product. So, wondering how you think about the importance of not just growing the account base, but also the number of docs that existing centers. Thanks for taking the question.
Absolutely, Adam. Great to hear from you. Thank you. It continues to be a focus and it's one of the fastest ways to be able to increase capacity at and existing centers to add a surgeon. And so we'll continue with a focus on that. We don't have specific metrics.
here, but it is one of the key methods.
to work with centers to either grab additional OR time for the existing surgeons.
But to also just train their partners to be able to have additional OR time because we know the demand certainly is there. So we'll continue to look forward and try to find some specifics on that, but it is certainly a key factor for our field team to be able to grow capacity. Thank you.
Thank you.
Thank you. Thank you.
Thank you.
Alright, this question comes from Rich New Weather with Pruis e-mail Proceed.
Thanks for taking the questions and congrats on another really great quarter of solid finish of the year. I wanted to maybe just start off on the 1-2 seasonality comments in the context of the 4Q impact you called out on the last year.
supply issues and maybe some deferral into the 1Q. You know, typically you see, I think
in the last few years about a 10% or low teens percentage decline for Q to one Q. It sounds like you're suggesting that might be a little bit less than normal. So, A, is that correct that the 10% or less of a sequential decline or less than historical is a good way to think about it? Can you quantify what?
What you think that supply push out procedure, you know, demand push out might have been?
Yeah, let's go back and talk a little bit about what we're talking about first. The first I think we're continuing, we've always kind of talked about like a 12% seasonality as we moved into Q1, but when we're talking about these stimulation leads, we remember we're in the third quarter when we transition from
the polyurethane production line to the silicone production line. We built up a safety stock polyurethane, then we had to stop and purge the line and get them back up and running. And we did that, but we have to be able to get up to volume, and then the process of scaling is when we ran into some of the challenges. So we went to
more of a just-in-time delivery to support cases and would be holding some power level orders or things like that. We were able to fulfill and closely track with schedule procedures to make sure that we had all those products ready to go.
And for cases that get scheduled in January and part of the adjustment time system, some of those may ship in January . So probably not a big number, but certainly wanted to bring awareness to that and that the seasonality still exists.
But with the supply chain challenges, it might offset that a little bit, but just to make everybody aware of that.
But the good news is the inventories are growing and the production lines are scaling up.
Okay, that's all pull. Got it. So it sounds pretty minor. You know, normal seasonality is probably a good way to think about it.
And then just on the account opportunity, I think you're right under a thousand centers right now in planting centers. You've talked in the past about – I know it's very high level, but I think something in the tune of the order of magnitude of 4,000.
accounts in the US that you could theoretically get and I think you've also said there's 4,000 ASCs out there. Can you maybe just refresh our memory on kind of how you see that a thousand install base, you know, progressing towards some account opportunity and what is the right account opportunity?
Yeah, good question. So yeah, when we took that 4000 and 4000 got to a total of 8000 and then we just assumed about a third of those centers would have a capability or would be doing Inspire and that put our target market at 2400 and I think over the last couple quarters we've been spending more time evaluating that.
because we've been recognizing in smaller communities, physicians are sending up centers that don't require patients to take long drives into more of the larger city centers. So I think we're going to continue to evaluate that. I think the number of centers that we can move to.
will far exceed the 2,400. And we've already demonstrated in some towns and Idaho, Montana, even in that law of Jackson, Wyoming, that there are very productive accounts in these smaller communities. And we can really leverage the community doctors to be able to offer and inspire.
and have more community-based care. So I think that story continues to evolve and we will continue to increase the number of centers capable of treating patients with INSPIRE.
Thank you very much.
Thank you.
Our next question comes from Larry Beigleson with Wells Fargo. You may proceed.
Good afternoon. That's for taking the question. Tim and Rick and Eski. I wanted to ask on the guidance and the new indications and label changes. Tim, what are you assuming for the timing? You know, down, H-I-B-M-I.
and any impact that you're assuming in the guidance.
Got it. I think we're very optimistic with the pediatric population with Down syndrome. I think that we've been working closely with the FDA to answer questions that they have. They've come and done audit on the clinical data so we know that they're progressing in their review as well.
And so we're optimistic that that should happen in the first half of the year, which I think is really exciting. As far as the high AHI and the warning for BMI, I think that also is progressing. We're working with the FDA again and a little bit earlier stage.
So that'll take a little bit longer to be able to get that approval, but certainly confident that that's coming through and it does have the proper designation to help accelerate the review at the FDA. So we expect both of those in the near future and should have
impact on the business. We did try to kind of build that into the guide that we put forward. I think the in both of those populations, it'll be a little bit of a slow up kick as we get awareness out there. And to be able to incorporate that into the existing practices. The good news is a lot of the pediatric hospitals and the children's hospitals are.
that's near and dear to our heart and we're working with the societies and the parent the family groups to be able to build awareness of that.
Just one follow-up on pediatric doubt. Why do you think the uptake will be low there? They're relatively well organized community, if you will. I think the clinical need seems pretty high here.
You know, you've been working on this for a while. Why do you expect the uptake in that population to be slow? Thanks for taking the questions. Thank you, Larry. I think we've been working on it for years and you've seen the clinical studies and the enrollment in those studies and still...
a relatively small number of patients have received Inspire in that pediatric group. I think it's just a new therapy and a new option for the families and the doctors to be able to understand. So I think this is going to be an educational process like any new indication or like any new therapy or in
introducing InspireNT into any new country. It's just always just a little bit of a slow adoption curve as as people learn about the therapy and become comfortable with it and increase the prescription of the therapy.
Fair enough. Thanks a lot. Thanks, Greg.
Thank you.
Our next question comes from John Bach with people he may proceed. Thanks, guys. Good evening. With maybe first word for you, even he's been done on the border. I'm calcant around 15 million. I just don't have the cash flow statement. So maybe just your thoughts on around 15 million. And then they're so.
I believe you guys would be even down positive for full year 22. Maybe just provide your thoughts on how that would look or trend for full year 23.
Yeah, so stock-based compensation was about 15 million. So in rough terms, John .
We're about 18 million roughly in EBITDA positive for the fourth quarter.
So, that stock-based compensation expense has increased.
along our all facets of our business, R&D, sales and marketing, and so on. And so with that, we expect that, you know, we'll lose leverage in the first quarter with our seasonality, but then gain that back as we progress throughout the year. But again, we don't, we're not providing any guidance on, on, on, on, topics or bottom line at this time. Nope, I got it, but I guess maybe just as a follow up to that, you know, if you were even up out of the full year 22, which you just confirmed and you expect leverage.
not for 1Q, but over the course of 23, we can just sort of draw our own conclusions from there. Is that a fair statement? That's fair. Okay. Perfect. And then, Tim, just talk to us, if you don't mind, on the ASCs a little bit. I think it came in, again, 23%. Is that representative as a percent of the overall procedures? And maybe more importantly,
overall driver for utilization for Inspire Longer Terminal. Thanks.
for utilization for Inspire longer term. Thanks.
I think we continue to be excited about it. I think this may be a little bit more of a post-COVID phenomenon where the hospitals are really active again. And so while we're still at 23%, we're still growing the number of ASGs, but we're growing the number of hospitals as well. And that's not too surprising. I do think the
utilization impact that we're seeing is part of the factor of the ASCs. I think right now we're running maybe 20% of our procedures are done in ASCs, even though ASCs make up 23% of the centers. What that means is they're taking more of their fair share of the...
So that's really good to see the utilization growing in both of us, but particularly in ASEs. As we continue to progress, I think we'll continue to look for further sites of service.
But as we know, the reimbursement in hospitals continues to be very, very strong and our ability to garner OR time to take care of the patients continues to grow and that is evidenced by the increased utilization across the board. So we're not taking our focus off ASCs, but we continue to
leverage all the hospitals that want to participate with Inspire as well. Got it. Thanks guys.
Thanks, sir.
Thank you.
Our next question comes from Mike Pollock with Wolf Research. You may proceed.
Good evening. Thank you for taking the question. First topic, the comment on modifying incentive compensation for your field force.
to focus on higher utilization at existing centers. I guess, can you level that? Is this a notable change? Is it a subtle change? What did the framework look like before? What does it look like now? And I guess, why make this change for 2023?
Absolutely. Well, first off, it's an important part of the conversation for the field, especially the territory managers, but the management team shares in the same compensation structure. So they're all very consistent. We have different groups of people. We have the area of business managers that you know that focus on opening these centers.
but we have added components. In the past years, it's from based on what we call patients expecting therapy or more around patients in the prior authorization process. But as we continue to mature, it's important that we shift that from individual patient count to more utilization-hatsight. So we kind of switched over.
the parameter starting this year to really focus more on the utilization site. So I think we just presented that at the National Sales Meeting just a week ago. And the team's very excited about the progress that they made last year as well as the prospects moving forward.
My second one, if I may, the a leverage related question. You report S-GNA and Consolidated Line. I don't see a breakout and filings are the like of SNM versus GNA. I'm just curious, the USS kind of, the leverage that you're seeing in the model, is there a...
a variant worth calling out as to how your GNA spend is getting leveraged versus S&M.
If you could frame up where GNA is as a portion of total and is that getting materially better versus us and I'm aware they about trending the same. Any color there would be great. Thank you so much. Hey Mike, it's Rick. So we have demonstrated leverage across all those line items, R&D, GNA and filled in marketing.
as over the fourth quarter and throughout the year in 2022. Again, we're gonna lose that in Q1 with seasonality. But even R&D, we're continuing to make investments. R&D was 19% of revenue in the third quarter. That was 15%.
in the fourth quarter, GNA is in that 10 to 12 percent range. And we expect to continue to beat.
in that ballpark, in that range going forward.
you'll have the author online on your screen in this video as many times as Thanks.
Thank you.
Our next question comes from Chris Pasquale with Nefron Research. You may proceed.
Thanks, amongst the other members, got it.
I want to follow up on the question about the shift in incentive comp. The guidance for this year implies we add about as many sites in 23 as you did in 22. Just wanted to see how you square that with where you're incentivizing your team to spend their time. Maybe we're reading too much into that comment, but it seems like that could mean fewer center ads this year. But alright.
Well, I think we got the guy consistent from 22 to 23 because we still have our training team and the area of business managers to be able to focus on adding new centers and we're going to continue with that. We also previously talked about how the our growth has really been driven predominantly by increased utilization.
same store sales versus the contribution from new centers. And I think what we're kind of highlighting is we're going to continue down that pathway. And we want to keep focusing on growing utilization because centers that are able to do more procedures, they get better outcomes. They're more proficient in the procedure, they're proficient on managing the patients, they're better at...
patients. They're better at submitting the proper codes to get proper reimbursement. So centers that have high utilization are just so much more efficient and have higher patient outcomes. So we're going to continue with that trend and continue having territory managers.
ideally managed lot centers that are doing higher utilization.
Okay, that makes sense.
And then 78,000 physician contacts driven by your DTC effort is very impressive. You treated about 16,000 patients last year. So one out of every five people who raised their hand are actually getting an implant. Where are the stumbling blocks today that are causing patients to fall out of that funnel?
And you talk a little bit more about the digital scheduling tool you mentioned and whether that's part of the solution for trying to improve that yield.
Right, when we talk about the physician context, there's another sentence in there that talks about patients getting direct referrals from their own health care providers. That's not part of that number. And so there's always a little bit of specificity on where exactly the patients come from and is it truly one in five from the Advisor Care Program?
But how many patients see the ad, they'll go to the website, they'll be educated, but rather than going through the Advisor Care Program, they will contact their own health care provider or their own sleep physician saying, what do you think about Inspire? Will this work for me? And they actually will become a direct physician referral.
and that not coming from the advisor care program. So that's really an important part of the business as well. So we have to continue to educate sleep position. On the other side, we need to continue to improve the efficiency of the advisor care program. And we do have a pilot out there right now to be able to log directly in.
to the scheduling at Physicians Office. So when the advisor care program talks to a potential patient, determines that, excuse me, they are a good candidate.
that they can directly schedule in. So we have a handful of sites up and active, and we're really looking to further expand that program earlier in the year.
Thanks. Thanks.
Thanks guys.
Thank you.
Our next question comes from Matthew Reeshen with Keybank, you may proceed.
Hey Tim, hey Rick, thanks for taking the questions.
Absolutely. Yeah, so I think this might be a little bit early to ask, but I think investors are encouraged about the improvements with the Inspire 5 once that gets through approval. Do you think, as it gets closer, like some positions will wait for it to be approved where it might actually delay?
you know, some implants? Great question. I don't think so. We see this in the past with the new remote with Bluetooth, with going to Silicon Leads, going to Inspire 4 from the Inspire 2. Now that's…
back in 2018, but we just don't see that slowed on. Once we have the patient flow and the patient's kids schedule, we'll just stay on the pathway. Inspire four, going to five. While it puts the sensing inside the can, it doesn't have a dramatic impact, such as like when it goes off.
future generations with auto-scripted tact or with auto-titration. So we don't expect to see any kind of slowdown and we know that demand continues to be strong.
Okay, excellent. And then follow up just the predictor study with initial readout in 2023. I think you mentioned that in industry presentation earlier this year, there was some data published from another study. Can you comment on what that showed and why that would be encouraging for the readout for predictor?
Yeah, absolutely. So we finished the first 300 in 2022. At the same time, Dr. Weiner is a physician in Arizona. I'll give him a shout out because his paper was published several weeks ago with the first 100 patients.
And we're getting the data now from the first 300 right now. It's in the quality stage, meaning that we get physician over read of the data for quality controls. We're writing that process. But we also know that there are through our patients with a higher BMI above 32. So we actually are entertaining the opportunity to.
continue that study and actually increase to maybe add another 300 patients go to 600 being able to widen the the number of patients that we can treat with that. So very active program. We're in the process of getting the quality control on the first 300 and we're looking to just continue and rolling patients.
because the data is we like what we see and we think that we might be able to treat even a higher BMI population. So you'll expect us to say that we'll be going to 600 patients soon.
All right, thank you very much.
Absolutely. Good to hear from you.
Thank you, and as a reminder, to ask a question, you will need to press star 11 on your telephone. Our next question comes from Siraj Khalil with Oppenheimer. You may proceed. Good afternoon, Tim. Can you hear me all right?
Yes, I enjoy you. I was at the send-mmons congrats on a nice finish to the year. Thank you. Forgive me, maybe I missed the new store, same store metrics provided. If I could ask specifically the 225 or so sites added last year.
How many implants did they do for the whole year?
So yeah, we are going to have that.
I get what you're asking. We don't have that specific numbers in front of those, but remember how we do new sites. And a new site is anybody who has opened up during the year. So any site that we open in the fourth quarter, obviously they were only able to do their first cases, correct? So they do one or two cases in November , December .
Anybody who opened up January 1st of 2022 is still in the same bucket of a new center and they have the opportunity to reorder right and do additional patients through the year. So some of those can be productive accounts by the time to get to the end of 2020.
So it's kind of the way that we establish centers and we establish them per year. So yeah, I don't really have the exact number of what percent of the cases were.
from the class of 2022.
Tim, how do you define account turnover?
First, let's define account. An account is a purchasing unit.
Right? That would be a hospital that orders product from us.
That's what we call a center. A center can have several different accounts per se. So there may be, kind of comes back down to who's on the website, right? We don't have one center on a website. We could have multiple centers on there, right?
But sometimes they'll go on hold if a surgeon moves. But go ahead. I guess, Tim, what I was really getting at, just trying to get my arms around, you'll have 905 sites exiting FY22. Great. But does 905 really imply that onboarding was, I don't know, pick a number, 1,100? And then some bled out for the various reasons that you've mentioned on calls in the past. They didn't do implants, you'll kick them out of the list and all that. And then you'll exit it at 905. So just kind of trying to understand what the turnover is.
How many don't come to the space? Very, very low. Very, very low. Yeah, and I don't think in the fourth quarter we really closed any sites.
So what you see is additive and 905 is the active number of centers and during COVID we reported, I think once we closed 15 sites, another time we closed like 12. By the way, some of those sites have a surge to move back in and are back in process. So we have very, very low turnover.
of a site once they become active. Now we want to continue to work with that site to be able to increase utilization. Doesn't mean a site if they're not productive or if they have too much of a backlog of patients that they're scheduling out too late.
We'll remove them from the website, but the website and an active set are two independent functions.
Gentlemen, thank you for taking my questions. It was good to hear from you.
Thank you. This concludes the Q&A session for the conference. I'd now like to turn the call back to Tim for any closing remarks. Thank you Josh and thanks for all for joining the call today. As always I'm 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 patient remains unmatched and is the most important element to our success. I wish to thank all of our employees as well as the healthcare teams for their continued efforts as we remain focused on further expanding our business.
the US, Europe , and in Asia. For 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 months ahead.
Please stay safe and healthy. This concludes today's conference call. You may now disconnect.
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