Q1 2023 Inspire Medical Systems Inc Earnings Call

May 2, 2023

Operator: Good afternoon. My name is Dilem, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Inspire Medical Systems First Quarter 2023 Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there'll be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. I'll now hand the conference call to your first speaker, Ezgi Yagci, the Vice President of Investor Relations at Inspire. You may begin the conference.

Speaker 1: Good afternoon, my name is Dilem and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Inspire Medical System's first quarter 2023 conference call. All lines have been placed in mute to prevent any background noise. After the speakers remarks, there'll be a question and answer session.

Speaker 1: To ask a question during the session, you will need to first start 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please first start 1-1 again. I'll now hand the conference call to your first speaker, as Guyajar, the Vice President of Investor Relations at Inspire. You may begin the conference.

Ezgi Yagci: Thank you, Dilem, and thank you all for participating in today's call. Joining me are Tim Herbert, President and Chief Executive Officer, and Rick Buchholz, Chief Financial Officer. Earlier today, we released financial results for the three months ended March 31, 2023. A copy of the press release is available on our website. On this call, management will make forward-looking statements within the meaning of the federal securities laws. All forward-looking statements, including, without limitation, those relating to our operations, financial results, and financial condition, investments in our business, continued effects of the COVID-19 pandemic, full year 2023 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.

Speaker 2: Thank you, Dilem, and thank you all for participating in today's call. Joining me are Tim Herbert, President and Chief Executive Officer, and Rick Beaholz, Chief Financial Officer. Earlier today, we released financial results for the three months ended March 31, 2023. A copy of the press release is available on our website.

Speaker 2: financial results and financial condition, investments in our business, continued effects of the COVID-19 pandemic, for year 2023 financial and operational outlook, and improvements in market access are based upon our car estimates and various assumptions.

Speaker 2: These statements involve material risks and uncertainties that could cause actual results or events to materially differ. Accordingly, you should not place undy reliance on these statements.

Ezgi Yagci: Please see our filings with the Securities and Exchange Commission, including our Form 10-Q, which was filed with the SEC earlier this afternoon, for a description of these risks and uncertainties. Inspire disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. This conference call contains time-sensitive information and speaks only as of the live broadcast today, 2 May 2023. With that, it is my pleasure to turn the call over to Tim Herbert. Tim?

Speaker 2: Please see our filings with the Securities and Exchange Commission, including our Form 10Q which was filed with the SEC earlier this afternoon, for a description of these risks and uncertainties. For more information, visit us at www.fema.gov

Speaker 2: 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 information that may be used

Speaker 2: and speaks only as of the live broadcast today, May 2, 2023. With that, it is my pleasure to turn the call over to Tim Herbert. Tim?

Tim Herbert: Thank you, Ezgi, and thanks everyone for joining our business update call for Q1 2023. As always, we first and foremost reiterate our commitment to patient outcomes and to ensure that each patient has the best possible experience with Inspire therapy. During today's call, we will provide an update on our Q1 results and discuss our updated outlook for the full year 2023. To start, we want to highlight a very important milestone in the Inspire story. Today marks the fifth anniversary of our IPO, and what a tremendous 5 years it has been. Since our IPO, the company has surpassed 40,000 patients treated with Inspire therapy, grown to over 800 employees, introduced many therapy improvements, highlighted by the 2-incision surgical approach, received a dedicated CPT code for reimbursement, and most recently, received approval for pediatric patients with Down syndrome.

Speaker 3: Thank you, Eski. And thanks everyone for joining our business update call for the first quarter of 2023.

Speaker 3: As always, we first inform most reiterated our commitment to patient outcomes and to ensure that each patient has the best possible experience with Inspired Therapy.

Speaker 3: During today's call, we will provide an update on our first quarter results and discuss our updated outlook for the four year 2023.

Speaker 3: To start, we want to highlight a very important milestone in the Inspire story.

Speaker 3: Today marks the fifth anniversary of our IPO and what a tremendous five years it has been. Since our IPO, the company has surpassed 40,000 patients treated with inspired therapy.

Speaker 3: grown to over 800 employees, introduced many therapy-improved vests highlighted by the two incisions surgical approach, received a dedicated CPT code for reimbursement, and most recently received approval for pediatric patients with Down syndrome.

Tim Herbert: To celebrate this momentous occasion, along with the FDA approval of our pediatric Down syndrome indication, we had the privilege to ring the opening bell at the New York Stock Exchange last Thursday, and we were joined by Jesse Rivera, the first pediatric patient with Down syndrome to receive Inspire therapy nine years ago, and we all celebrated as Jesse rang the bell. With that, let's review our results. In Q1, we generated revenue of $127.9 million, representing an 84% increase compared to Q1 2022. This 84% growth rate represents our highest quarterly growth rate post the COVID pandemic. Our growth continues to be driven by higher utilization at existing centers and is complemented by the activation of new centers.

Speaker 3: To celebrate this momentous occasion, along with the FDA approval of our pediatric Down Syndrome indication, we had the privilege to ring the opening bell at the New York Stock Exchange last Thursday, and we were joined by Jesse Rivera, the first pediatric patient with Down Syndrome to receive...

Speaker 3: inspired therapy nine years ago, and we all celebrate it as Jesse rang the bell.

Speaker 3: with that

Speaker 3: With that, let's review our results.

Speaker 3: In the first quarter, we generated revenue of $127.9 million, representing an 84% increase compared to the first quarter of 2022.

Speaker 3: This 84% growth rate represents our highest quarterly growth rate post the COVID pandemic.

Speaker 3: Our growth continues to be driven by higher utilization at existing centers and is complemented by the activation of new centers.

Tim Herbert: Given the strong momentum we are seeing in our business, we now expect full year revenue to be in the range of $580 to 590 million, a 42% to 45% increase compared to 2022. In Q1, we continued to increase our capacity by adding 68 new implanting centers in the US, ending the quarter with a total of 973. For the remainder of 2023, we continue to expect to activate 52 to 56 centers per quarter. Regarding the US sales team, we created 17 new sales territories in Q1, bringing our total to 242. For the remainder of 2023, we continue to expect to add 12 to 14 sales territories per quarter.

Speaker 3: Given the strong momentum we are seeing in our business, we now expect full year revenue to be in the range of $580 to $590 million, a 42 to 45% increase compared to 2022.

Speaker 3: In the first quarter, we continue to increase our capacity by adding 68 new and planning centers in the U.S., ending the quarter with a total of 973. For the remainder of 2023, we continue to expect to activate 52 to 56 centers per quarter. Regarding the U.S. sales team, we created 17 new sales territories in the first quarter, bringing our total to 242.

Speaker 3: For the remainder of 2023, we continue to expect to add 12 to 14 sales territories per quarter.

Tim Herbert: In Q1, the number of visitors to our website surpassed 3.4 million, which is significant. The website is the introduction for patients and the source of the growth in therapy adoption. In January 2022, we initiated our first national media campaign, which resulted in a one-time spike in website visitors, surpassing the 3.4 million in Q1, but the current volume has us in a very strong position entering 2023. From these visits, we had over 19,000 physician contacts and have steadfastly improved our conversion of contacts to patients receiving therapy. Of note, our team has implemented several services to enhance the patient experience, including a patient nurturing program, whereby we are leveraging our significant patient database to re-engage and help patients in their Inspire therapy journey through proactive outreach.

Speaker 3: In the first quarter, the number of visitors to our website surpassed 3.4 million, which is significant. The website is the introduction for patients and the source of the growth in therapy adoption.

Tim Herbert: Secondly, our digital scheduling pilot continues to make strides, and we are currently experiencing a 30% improvement in physician appointments in the pilot centers compared to traditional phone and email scheduling through our Advisory Care program, and are adding technology to support the next wave of participating centers. Further, we continue to focus on improving process time, including scheduling of sleep studies, and one tool is our collaboration with Agnomi, which is showing great promise to date. Finally, our focus continues towards increasing surgeon capacity, and we see signs of improvement in the patient pathway, and specifically by reducing the time from patient contact to implant, which continues to be approximately 6 months. Moving on, our international business continues to expand, growing 15% in Q1 over the prior year, despite ongoing headwinds from unfavorable exchange rates.

Speaker 3: through proactive outreach. Secondly, our digital scheduling pilot continues to make strides, and we are currently experiencing a 30% improvement in physician appointments in the pilot centers compared to traditional phone and email scheduling through our Advisor Care Program, and are adding technology to support the next wave of participating centers. Further, we continue to focus on improving process time, including scheduling of sleep studies and sleep management.

Speaker 3: and one tool is their collaboration with Agnomi, which is showing great promise to date.

Speaker 3: And finally, our focus continues towards increasing surgeon capacity and we see signs of improvement in the patient pathway and specifically be by reducing the time for patient contact to implant which continues to be approximately six months.

Tim Herbert: There were several positives in our international business during the first quarter, including the strong performance in Germany, the Netherlands, and Switzerland. We finalized countrywide reimbursement in Belgium and have increased our commercial efforts there. Furthermore, we hired a country manager in France in anticipation of the formal listing of the recently announced countrywide reimbursement in that country. In Asia, we had strong sequential growth from the fourth quarter of 2022. We continue to be pleased with the progress in Singapore and completed our first 2 cases in Hong Kong. In Japan, we transitioned to a direct sales organization, launched Inspire.jp, and see good momentum with strong patient outcomes and growing patient flow. Turning to R&D. We continue to work on the qualification of our fifth generation Inspire neurostimulator.

Speaker 3: There were several positive international business during the first quarter, including the strong performance in Germany, the Netherlands, and Switzerland. We finalized country-wide reimbursement in Belgium and have increased our commercial efforts there. Furthermore, we hired a country manager in France in anticipation of the formal lifting of the recently announced country-wide reimbursement in that country. In Asia...

Speaker 3: We had strong sequential growth from the fourth quarter of 2022. We continue to be pleased with the progress in Singapore and completed our first two cases in Hong Kong.

Speaker 3: We had strong sequential growth from the fourth quarter of 2022. We continued to be pleased with the progress in Singapore and completed our first two cases in Hong Kong. In Japan...

Speaker 3: We transition to a direct sales organization. Launchinspire.jp

Speaker 3: and see good momentum with strong patient outcomes and growing patient flow.

Speaker 3: Turn it to R&D.

Tim Herbert: The Inspire five device will eliminate the pressure-sensing lead and incorporate the sensor inside the neurostimulator using an accelerometer to measure respiration. We continue operational and production qualification, as well as integration with the Inspire digital tools, specifically SleepSync. The testing is continuing as planned, and the team is committed to submitting our application to the FDA by the end of this quarter. Given normal FDA review cycles, including time to respond to FDA questions, this could move approval into early 2024. Our SleepSync system continues to make progress since the launch of the Bluetooth-enabled patient remote, and we have experienced significant adoption in the number of users of SleepSync, along with strong growth in the number of connected patients currently in the system.

Speaker 3: We continue to work on the qualification of our fifth generation Inspire Neural Stimulator.

Speaker 3: The Inspire 5 device will eliminate the pressure sensing lead.

Speaker 3: We continue operational and production qualification, as well as integration with the Inspire digital tools, specifically SleepSync. The testing is continuing as planned, and the team is committed to submitting our application to the FDA by the end of this quarter. Given normal FDA review cycles, including time to respond to FDA questions, this could move approval into early 2024.

Speaker 3: Our sleep sink system continues to make progress since the launch of the Bluetooth enabled patient remote.

Tim Herbert: Another example of the expanded utility of SleepSync is the next release will incorporate the second version of our ADHERE patient registry. The current ADHERE registry is within 200 patients of the 5,000 patient cap, and moving forward, patients will be enrolled into the ADHERE 2.0 registry, which will be integrated into SleepSync. Subsequent digital programs will incorporate a sleep monitoring device and remote patient programming. Regarding operations, we continue to make good progress with the production ramp of the silicone-based stimulation and sensing leads. We are in an improved inventory position and growing the inventory levels to our goal of one quarter of safety stock. Inventory levels are strong for all other components, including the Inspire four neurostimulator, the patient remote, and the physician programmer. In summary, we are experiencing significant momentum in all aspects of our business.

Speaker 3: programs will incorporate a sleep monitoring device.

Speaker 3: and remote patient programming.

Speaker 3: Inventory levels are strong for all other components, including the Inspire for Nero Simulator, the patient remote, and the physician program. In summary, we are experiencing significant momentum in all aspects of our business. We remain focused on patient outcomes and position education to continue the adoption of our therapy. In 2023 and beyond, we will continue to increase utilization of our existing centers.

Tim Herbert: 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 at our 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 are seeing enhanced productivity from these efforts, which is driving our improved financial performance. 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.

Speaker 3: while adding capacity by opening and training new centers. Beyond going expansion, a recall 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.

Speaker 3: We remain extremely excited about our future prospects and our confidence that we have the appropriate strategy in place to drive long-term stakeholder value.

Speaker 3: With that, I would like to turn the call over to Rick for his review of our financials.

Rick Buchholz: Thank you, Tim, and good afternoon, everyone. Total revenue for Q1 was $127.9 million, an 84% increase from the $69.4 million generated in Q1 2022. US revenue in Q1 was $124.5 million, an increase of 87% from the $66.4 million in the prior year period. The primary growth driver in the US was higher utilization at existing centers. Other growth drivers include the addition of new implanting centers, expanded direct-to-consumer marketing, and a higher number of territory managers. Revenue outside the US increased to $3.4 million, which is a 15% increase year-over-year on a reported basis, while units sold outside the US grew 24% year-over-year.

Speaker 3: expanded direct-to-consumer marketing, and a higher number of territory managers. Revenue outside the U.S. increased to $3.4 million, which is a 15% increase year-over-year on a reported basis, while units sold outside the U.S. grew 24% year-over-year. The U.S. average selling price in the first quarter was $25,000 compared to $23,800 in the prior year period. The increase reflects our 5% price uplift that began in May of 2022. We expect the U.S. ASP to remain steady at the current level.

Rick Buchholz: The US average selling price in Q1 was $25,000, compared to $23,800 in the prior year period. The increase reflects our 5% price uplift that began in May 2022. We expect the US ASP to remain steady at the current level. The ASP outside the US was $21,000 during the quarter, compared to $22,200 in Q1 2022, which was driven by unfavorable exchange rates and a lower ASP for distributor sales in Asia. Gross margin in Q1 was 84.4%, compared to 85.6% in the prior year period, primarily due to higher costs of certain component parts, partially offset by the price increase that began in May 2022.

Speaker 3: The ASP outside the US was 21,000 during the quarter compared to 22,200

Speaker 3: Gross margin in the first quarter was 84.4% compared to 85.6% in the prior year period, primarily due to higher costs of certain component parts partially offset by the price increase that began in May of 2022. Total operating expenses for the first quarter were $127.5 million, an increase of 69% as compared to $75.4 million in the first quarter of 2022.

Rick Buchholz: Total operating expenses for the first quarter were $127.5 million, an increase of 69% as compared to $75.4 million in the first quarter of 2022. This planned 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 long-term growth and to make investments in key areas of our business. Interest and dividend income totaled $4.3 million in the first quarter, compared to $34,000 in the prior year period. This higher income was driven by higher interest rates on our increased cash balances compared to a year ago. Net loss for the first quarter was $15.4 million, compared to a $16.7 million net loss in the prior year period.

Speaker 3: This planned increase was due to the expansion of our sales organization, increase direct to consumer marketing programs, continued product development efforts, and general corporate costs.

Speaker 3: 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 totaled $4.3 million in the first quarter compared to $34,000 in the prior year period.

Speaker 3: This higher income was driven by higher interest rates on our increased cash balances compared to a year ago.

Speaker 3: Net loss for the first quarter was 15.4 million compared to a 16.7 million net loss in the prior year period.

Rick Buchholz: The net loss per share for Q1 was $0.53, compared to the net loss per share of $0.61 in Q1 of 2022. The weighted average number of shares outstanding for Q1 was 29.1 million. We expect the Q2 weighted average shares outstanding to be approximately 29.2 million. Given our continued operating leverage improvement, our cash and investments increased to $452 million during Q1 from $451 million at year-end. This 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. Moving on to updated 2023 guidance.

Speaker 3: We expect the second quarter weighted average shares outstanding to be approximately 29.2 million. Given our continued operating leverage improvement, our cash and investments increase to 452 million during the first quarter from 451 million at year end. 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 implant centers. Moving on to updated 2023 guidance. Given the strong momentum we are seeing in our business

Rick Buchholz: Given the strong momentum we are seeing in our business, we now expect full-year revenue to be in the range of $580 to 590 million, an increase from our initial guidance of $560 to 570 million. This updated revenue guidance represents 42% to 45% growth compared to full-year 2022 revenue. We continue to expect full-year gross margin to be in the range of 83% to 85%. As Tim noted, we expect to activate 52 to 56 new centers per quarter and establish 12 to 14 new sales territories per quarter in 2023. In conclusion, our strong performance and our business momentum provide us with confidence in our outlook for the remainder of 2023. With that, our prepared remarks are concluded. Dulem, you may now open the line for questions.

Speaker 3: We now expect full year revenue to be in the range of $580 to $590 million.

Speaker 3: an increase from our initial guidance of 560 to 570 million.

Speaker 3: This updated revenue guidance represents 42 to 45% growth compared to full-year 2022 revenue.

Speaker 3: We continue to expect full year gross margin to be in the range of 83 to 85 percent.

Speaker 3: As Tim noted, we expect to activate 52 to 56 new centers per quarter and establish 12 to 14 new sales territories per quarter in 2023.

Speaker 3: In conclusion, our strong performance and our business momentum provide us with confidence in our outlook for the remainder of 2023. With that, our prepared remarks are concluded. Dulem, you may now open the line for questions.

Operator: Thank you, sir. As a reminder, to ask a question, you will need to press star one one on your telephone. To withdraw your question, please press star one one again. We ask that you keep your questions to no more than one, but please feel free to go back into the queue, and as time permits, we'll be more than happy to take your follow-up questions at that time. Please stand by while we compile the Q&A roster. I show our first question comes from the line of Robbie Marcus from JP Morgan. Please go ahead.

Speaker 1: As a reminder to ask a question, you will need to press star 11 on your telephone.

Speaker 1: We'll be more than happy to take your full-up questions at that time.

Speaker 1: Please stand by while we compile the Q&A roster. And I show our first question comes from the line of Robbie Marcus from JP Morgan. Please go ahead. Oh, great. Thanks for taking the questions and congrats on another great quarter. Thanks, Robbie. We'll give you a follow up too if you want it. Now I'm going to, I'll ask just one question. I've asked you about center growth and all of that before. So really just looking out a little bit here and thinking forward to when Inspire 5 comes.

Robbie Marcus: Oh, great. Thanks for taking the questions, and congrats on another great quarter,

Rick Buchholz: Thanks, Robbie. We'll give you a follow-up, too, if you want it.

Robbie Marcus: No, I'm gonna. I'll ask just one question. I've asked you about center growth and all of that before. So really just looking out a little bit here and thinking forward to when Inspire five comes. And just wanted to get your thoughts on what the organization can do now ahead of the launch to lay the groundwork and drive even better, you know, procedure utilization at centers, better patient awareness, and make that more of a step function than an incremental type of product launch. Thanks a lot.

Speaker 1: Just want to get your thoughts on what the organization can do now ahead of the launch. To lay the groundwork and drive even better, you know, proceed after utilization at centers, better patient awareness, and make that more of a step function than an incremental type of product launch. There's a lot of data inside where poison could get greater evocancy. So, do you think we can follow thatforce?

Rick Buchholz: Well, that's a great question. I can go a lot of different areas with this. I think the key will continue to be on the funnel and improving our SleepSync to be able to handle patients as they enter the program and help them with their patient journey. We're having several tools that we're implementing as part of SleepSync that is working alongside the Advisory Care program. We've mentioned some of the tools, such as improved timing to get sleep studies, electronic scheduling, even electronic tools to help them gain referrals in. But when we move to Inspire five, we see improvements in OR time. That's gonna provide some more efficiencies for the surgeon capacity to be able to add additional cases in a given day.

Tim Herbert: Well, that's a great question. I can go a lot of different areas with this. I think the key will continue to be on the funnel and improving our SleepSync to be able to handle patients as they enter the program and help them with their patient journey. We're having several tools that we're implementing as part of SleepSync that is working alongside the Advisory Care program. We've mentioned some of the tools, such as improved timing to get sleep studies, electronic scheduling, even electronic tools to help them gain referrals in. But when we move to Inspire five, we see improvements in OR time. That's gonna provide some more efficiencies for the surgeon capacity to be able to add additional cases in a given day.

Speaker 3: Thanks a lot. That's a great question. I can go a lot of different areas with this. I think the key will continue to be on the funnel and improving our sleep sync to be able to handle patients as they enter the program and help them with their patient journey. And we're having several tools that we're implementing as part of sleep sync.

Speaker 3: that is working alongside the Advisor Care Program. We've mentioned some of the tools, such as improved timing to get sleep studies, electronic scheduling, even electronic tools to help them gain referrals in.

Speaker 3: But when we move to Inspire 5, we see improvements in OR time that's going to provide some more efficiencies for the surge in capacity to be able to add additional cases in a given day. Then further, we'll be able to drive further improvements in outcomes and specifically Give restricted Linkages

Rick Buchholz: Then further, we'll be able to drive further improvements in outcomes, and specifically, like the reimbursement... I'm sorry, the reliability improvements that we expect to see by incorporating the sensor inside the can and really thereby, moving forward. And I'm sure later on, we'll talk about the progress that we're making with the predictor study to even improve sleep surgeons' time by finding different ways that require them to do a drug-induced sedated endoscopy. So all of those in composite-

Tim Herbert: Then further, we'll be able to drive further improvements in outcomes, and specifically, like the reimbursement... I'm sorry, the reliability improvements that we expect to see by incorporating the sensor inside the can and really thereby, moving forward. And I'm sure later on, we'll talk about the progress that we're making with the predictor study to even improve sleep surgeons' time by finding different ways that require them to do a drug-induced sedated endoscopy. So all of those in composite-

Speaker 3: We like the reimbursement, I'm sorry, the reliability improvements that we expect to see by incorporating the sensor inside the can, and really thereby moving forward. And I'm sure later on we'll talk about the progress that we're making with the predictor study to even improve sleep surgeons time by finding different ways.

Tim Herbert: ... are going to be coming together at the same time frame as we launch Inspire five, allowing us just to continue the increased utilization of the therapy.

Speaker 3: then require them to do a drug-induced sedated endoscopy. So all of those in composite are going to be coming together at the same time frame as we launch INSPIRE V, allowing us just to continue the increased utilization of the therapy.

Rick Buchholz: Great. Thanks a lot. Appreciate it. Congrats again.

Tim Herbert: Thanks, Robbie.

Operator: Thank you. As a reminder, to ask a question, you need to press star one one on your telephone. And our next question comes from the line of Danielle Antalffy from UBS. Please go ahead.

Speaker 1: Great. Thanks a lot. Appreciate it. Congrats again. Thank you. As I reminded to ask a question, you need to press star 11 on your telephone.

Speaker 1: And I show our next question comes from the line of Danielle and Talfi from UBS. Please go ahead.

Operator: Hey, good afternoon, guys. Thanks so much for taking the question. Congrats on another really strong quarter and great, great start to the year. Just a question from me on thinking about sort of the staffing constraints that we've been going through. Feels like that, you know, now, two weeks or so into Medtech earnings, they've eased quite a bit, but your guys' pathway is, is very different with the whole sleep study and, and, the, the requirements there. So just curious if you're still seeing any pressure there and how that's evolving, and could, could the quarter have been even better than expected if we... Or better than it was, if, if that wasn't still an issue? Thanks so much.

Danielle Antalffy: Hey, good afternoon, guys. Thanks so much for taking the question. Congrats on another really strong quarter and great, great start to the year. Just a question from me on thinking about sort of the staffing constraints that we've been going through. Feels like that, you know, now, two weeks or so into Medtech earnings, they've eased quite a bit, but your guys' pathway is, is very different with the whole sleep study and, and, the, the requirements there. So just curious if you're still seeing any pressure there and how that's evolving, and could, could the quarter have been even better than expected if we... Or better than it was, if, if that wasn't still an issue? Thanks so much.

Speaker 4: Hey, good afternoon, guys. Thanks so much for taking the question. Congrats on another really strong quarter and great start to the year. Just a question for me on thinking about sort of the staffing constraints that we've been going through feels like, you know, now two weeks or so into MedTech earnings, they've eased quite a bit. But your guys' pathway is very different with the whole sleep study and

Speaker 4: and the requirements there. So just curious if you're still seeing any pressure there and how that's evolving and could the quarter have been even better than expected if we, or better than it was if that wasn't still an issue. Thanks so much. Oh, thanks, Danielle. I think that we've been pretty good with the sleep studies and with the.

Tim Herbert: Oh, thanks, Danielle. I think that we've been pretty good with the sleep studies and with the line of sight that we have for patients in the process. We're able to schedule them in advance, and so we're able to work around the staffing issues quite well, and therefore, we're able to achieve that 84% growth in the quarter, which is tremendous, and the number of patients that we're able to help is really extraordinary. So I think the staffing issues is present for sure, but I think because we have some advanced planning with line of sight of our patients, we're kind of able to manage that with our centers. And I do think our limiting factor tends to be more of the ENT surgeon time in the operating room to do procedures.

Speaker 3: the line of sight that we have for patients in the process. We're able to schedule them in advance, and so we're able to work around the staffing issues quite well, and therefore we're able to achieve that 84% growth in the corridor, which is tremendous, and the number of patients that we're able to help is really extraordinary. So I think the staffing issues is present for sure.

Tim Herbert: And if we could continue to improve surgeon capacity, that really is the limiting factor that could have made our quarter even greater, if we had, if we had more, surgeon time. So when we look at staffing, I think we kind of focus more on the surgeon themselves who are doing the procedure, but the support staff is obviously very necessary. But with our advanced planning, we can work through that.

Speaker 3: is the limiting factor that could have made our corridor even greater if we had more surgeon time. So when we look at staffing, I think we kind of focus more on the surgeon themselves who are doing the procedure, but the support staff is obviously very necessary, but with our advanced plan, and we can work through that.

Operator: Okay, got it. Super helpful. Thank you so much.

Danielle Antalffy: Okay, got it. Super helpful. Thank you so much.

Tim Herbert: Thank you, Danielle.

Operator: Thank you. As a reminder, we ask that you please keep your questions to no more than one question and one follow-up. Thank you. And I show our next question comes from the line of Larry Biegelsen from Wells Fargo. Please go ahead.

Speaker 4: Okay, got it. Super helpful. Thank you so much.

Speaker 5: super helpful. Thank you so much. Thank you Daniel.

Speaker 1: Thank you. As a reminder, we ask that you please skip your questions to no more than one question and one follow-up. Thank you. And I show our next question. Comes from the line of Larry Biggleson from Wells Fargo. Please go ahead. Good afternoon. Thanks for taking the question and I'll I feel Mike.

Larry Biegelsen: Good afternoon. Thanks for taking the question, and I'll echo my congratulations on another strong quarter.

Tim Herbert: Hey, Larry.

Larry Biegelsen: I'll ask both up front. Rick, just the usual, you know, question on just how to think about revenue cadence for the rest of the year. And then, Tim, I'd just love to get your reaction on the preliminary Nyxoah data we saw. And at a high level, Tim, just to follow on Robbie's question, how you're thinking about preparing for competition eventually in the market? Thanks for taking the questions.

Speaker 3: I just love to get your reaction on the preliminary mix all the data we saw. And at a high level to follow on Robbie's question, how you're thinking about preparing for competition eventually in the market? Thanks for taking the questions. Thank you.

Rick Buchholz: Yeah. Hey, Larry, this is Rick. So yeah, we're really excited and proud of the results achieved by the team in Q1, and we did increase our guidance from our initial guidance at the beginning of the year. We're excited about the opportunity. We haven't changed our guidance strategy, and we're gonna continue to focus on increasing utilization at existing centers where we see that, as well as add additional centers. And so if you take the increase in guidance, it's gonna be really ratable throughout the entire year.

Speaker 6: Hey Larry, this is Rick.

Speaker 3: So, yeah, we're really excited and proud of the results achieved by the team in the first quarter. And we did increase our guidance from our initial guidance beginning of the year. We're excited about the opportunity. We haven't changed our guidance strategy.

Speaker 3: and we're going to continue to focus on increasing utilization at existing centers where we see that as well as add additional centers. And so if you take the increase in guidance, it's going to be really readable throughout the entire year.

Tim Herbert: Okay, good, Larry. As far as releasing of early data, I think anybody who's been in med tech knows that early release of a phase 3 pivotal study is pretty unorthodox, and that's not sure what the purpose was by doing that, but it's a very limited release, and it's very hard to make any judgments from the data that was released. And maybe it's because there isn't a lot of other data available, and so it's all they have to be able to put that out. It doesn't matter until the final numbers are available a year from now and what the FDA says when they assess that data. So that's all we're gonna really comment on that. As far as competition, we know we're gonna have competition in the future.

Speaker 7: Okay, good, there he, um...

Speaker 7: As far as releasing of early data, I think anybody who's been in MedTech knows that

Speaker 7: Early release of a Phase III pivotal study is pretty unorthodox and that's not sure what the purpose was by doing that But it's a very limited release and it's very hard to make any judgments from the data that was released

Speaker 7: And maybe it's because there isn't a lot of other data available, and so it's all they have to be able to put that out. It doesn't matter until the final numbers are available a year from now, and what the FDA says when they assess that data. So that's all we're going to really comment.

Tim Herbert: What we've been able to do to show the benefits for patients in this market is tremendous. The market is extremely large, and it's open to having viable and good competition that has therapies that can help patients. I think that, on the horizon, that will happen. But in the meantime, Larry, we're developing our technology to improve physician and patient experience. Inspire five is a perfect example of a therapy that's gonna be leading edge, one of the best, if not the best, neurostimulator in the world today.

Speaker 7: on that. As far as competition, we know we're going to have competition in the future. What we've been able to do to show the benefits for patients in this market is tremendous. The market is extremely large and it's open to having viable and good competition that has therapies that can help patients.

Speaker 7: And I think that on the horizon that will happen. But in the meantime, Larry, we're developing our technology to improve physician and patient experience. Inspire 5 is a perfect example of a therapy that's going to be leading edge one of the best if not the best neural stimulator in the world today.

Tim Herbert: To be able to take care of patients, reduce OR time, improve reliability by eliminating the sensor, improving outcomes, and then tying that into our patient outcomes with the SleepSync system, I think we're gonna be in very strong position, for several years, probably until the time we'd even expect to see any competition if they pass their trials anyways. But thank you.

Larry Biegelsen: Thank you, Tim.

Operator: Thank you. And I show our next question comes from the line of Travis Steed from Bank of America Securities. Please go ahead.

Speaker 1: any competition if they pass their trials anyways. But thank you. Thank you, Tim. Thank you. And I show our next question comes from the line of Travis Speed from Bank of America Securities. Please go ahead. Hey, thanks for taking the question and congrats on a good quarter. Maybe to quickly follow up on Larry's competition question, maybe how would you think about the weight loss drugs and that competitive environment? And then the other question I'd have is just when you think about the higher revenue guide, how you're thinking about the optics guide within that, if you are, would have the optics go up a little less than revenue and just kind of overall thoughts on margins and prices?

Travis Steed: Hey, thanks for taking the question, and congrats on a good quarter. Maybe to quickly follow up on Larry's competition question, maybe how would you think about the weight loss drugs and that competitive environment? And then the other question I'd have is just, when you think about the higher revenue guide, how you're thinking about the OpEx guide within that, if you would have the OpEx go up a little less than revenue, and just kind of overall thoughts on margins and profitability, again, for this year. Thank you.

Tim Herbert: Fantastic. Let me talk, touch base on the weight loss drugs coming out, and then Rick will touch base on OpEx. We really like the weight loss drugs, and the challenge that we have as a therapy is our treatment is for tongue-based obstructions, and it doesn't address lateral wall. No hypoglossal nerve stimulation system can treat lateral walls because we stimulate the genioglossus, which is a tongue movement that moves it forward. Lateral wall collapse is related to higher BMI. And so if we have patients that can lose 20, even 30% weight loss with some of the new injectable drugs, we think that's really a positive and really complementary to Inspire. That weight loss will reduce lateral wall collapse, but it doesn't address tongue-based collapse.

Speaker 7: higher BMI. And so if we have patients that can lose 20 even 30% weight loss with some of the new injectable drugs, we think that's really a positive and really complementary to inspire. That weight loss will reduce lateral wall collapse.

Tim Herbert: So the two of us need to work in concert together to be able to treat the higher BMI populations, and we really look forward to the day when we get more patients that can have relief from their high BMI to bring them down into the group that we can treat with Inspire. So I think it's really complementary, and it's very... And we're quite encouraged by the development of those drugs. I hand off to Rick here for a discussion of OpEx.

Speaker 7: but it doesn't address tongue-based collapse. So the two of us need to work in concert together to be able to treat the higher BMI populations and really look forward to the day when we get more patients that can have relief from their high BMI to bring them down into...

Speaker 7: the group that we can treat with INSPIRE. So I think it's really complimentary and we're quite encouraged by the development of those drugs.

Rick Buchholz: Yeah. Hey, Travis. As we've trended the last several quarters, the revenue growth has outpaced the OpEx growth. And so with the new revised guidance of 42% to 45% for revenue on our updated guidance for the full year for 2023, we expect the OpEx to be less than that growth of revenue. Not significantly, but just maybe a little bit less than our revised updated guidance. And then, as far as profitability, we're not changing our tone on profitability. We know it's important, but we're gonna continue to run our playbook. I just want people to understand that we do have a disciplined approach in our spending and our investments across our business, and we demonstrated profitability in the Q4 of 2022.

I'll hand off to Rick here for a discussion of OPEX. Yeah, hey, Travis. As we've trended the last several quarters, the revenue growth has outpaced the OPEX growth. And so with the new revised guidance of the new OPEX growth, we've seen a lot of growth in the last few quarters. And so with the new revised guidance of the new OPEX growth, we've seen a lot of growth in the last few quarters.

42 to 45 percent for revenue on our updated guidance for the full year for 2023. We expect the OPEX to be less than that growth of revenue.

Not significantly, but just maybe a little bit less than our eyes updated guidance.

And then as far as profitability, we're not changing our tone on profitability. We know it's important, but we're going to continue to run our playbook. I want people to understand that we do have a disciplined approach in our spending and our investments across our business. And we demonstrated profitability in the fourth quarter of 2022.

Rick Buchholz: We're not guiding to profitability at this time, and we did lose some of that leverage in the first quarter because of our seasonality. But as we progress through the year, our plan is to show some improvement on that operating leverage.

We're not guiding to profitability at this time, and we did lose some of that leverage in the first quarter because of our seasonality. But as we progress through the year, our plan is to show some improvement on that operating leverage.

we're not guiding to profitability at this time and we did lose some of that leverage in the first quarter because of our seasonality. But as we progress through the year, our plan is to show some improvement on that operating leverage. Great, thanks a lot.

Travis Steed: Great. Thanks a lot.

Operator: Thank you. And I show our next question comes from the line of Jon Block from Stifel. Please go ahead.

Thank you. And I show our next question comes from the line of John Bock from CIFUL. Please go ahead. Great, guys. Thanks. Good afternoon. I'll be reason why it occupant will enteragin

Jon Block: Great, guys. Thanks. Good afternoon. I'll also ask both mine up front. I guess, you know, was 1 Q clean from an end-user demand perspective, or was there a small benefit from inventory levels rebuilding a bit, Tim? I just wasn't really sure based on the inventory comments. It actually seemed like inventory could still be below normal levels, so any clarity there would be helpful. And then the number of centers were particularly solid, you know, well above our estimates. So maybe just talk about the types of centers that are coming on board. Importantly, what's being done to ramp them quicker than previously? And then I didn't hear a % of ASCs, so if you got that handy, I'll take that from you guys. Thank you.

Jonathan Block: Great, guys. Thanks. Good afternoon. I'll also ask both mine up front. I guess, you know, was 1 Q clean from an end-user demand perspective, or was there a small benefit from inventory levels rebuilding a bit, Tim? I just wasn't really sure based on the inventory comments. It actually seemed like inventory could still be below normal levels, so any clarity there would be helpful. And then the number of centers were particularly solid, you know, well above our estimates. So maybe just talk about the types of centers that are coming on board. Importantly, what's being done to ramp them quicker than previously? And then I didn't hear a % of ASCs, so if you got that handy, I'll take that from you guys. Thank you.

levels rebuilding a bit, Tim. I just wasn't really sure based on the inventory comments. It actually seemed like inventory could still be below normal levels, so any clarity there would be helpful. Then the number of centers are particularly solid, well above our estimate. Maybe just talk about...

The types of centers that are coming on board, importantly, what's being done to ramp them quicker than previously, and then I didn't hear a percent of ASCs, so if you got that handy I'll take that from you guys. Thank you. Got it. Thanks very much. Yeah, there's a little bit of that carryover from the first quarter. There's no question about it. As we talked about our fourth quarter call that we were on allocation to make sure that we supported every in-plant that was scheduled, and from that we were able to achieve that.

Tim Herbert: Got it. Thanks very much. Yeah, there's, there's a little bit of that carryover from the Q1, there's no question about it. As we talked about our Q4 call, that we were on allocation to make sure that we supported every implant that was scheduled, and from that, we were able to achieve that, but there's a little bit of carryover. But even the carryover is relatively small, and even with taking that into account, we, we were still close to 80% growth in the quarter, but certainly, that exists. I'm sorry. Our inventory position is improved, and we have that line up and running and ramping, and so we're able to support all orders right now with positive inventory today, and we're gonna continue to grow that forward.

But there's a little bit of carryover, but even the carryover is relatively small and even with taking that into account, we were still close to 80 percent growth in the quarter, but certainly that exists. Our inventory position is improved and we have that line up and running and ramping.

And so we're able to support all orders right now with positive inventory today, and we're going to continue to grow that forward. As far as the number of centers that we experienced, we did get an increase to 68, which is phenomenal. The percent has increased about 17%, which is 8%.

Tim Herbert: As far as the number of centers that we experienced, we did get an increase to 68, which is phenomenal. The percent ASCs at this point is now 24, 24%. So a little bit of an uptick from the prior quarter, which is good because ASCs will continue to grow slightly faster than the hospital setting, which we will continue to grow as well. So I think just opening up the new quarter, we'll able to spend some time on opening new centers, and that's why we have that 68, and we'll continue to be able to scale the number of centers that we open over the quarter. But for the meantime, we're just leaving our guidance where it was.

ASCs at this point is now 24, 24%. So a little bit of an uptick from the prior quarter, which is good because ASCs will continue to grow slightly faster than the hospital settings, which we will continue to grow as well. So I think just opening up the new quarter, able to spend some time on opening new centers and that's where I lead.

have that 68 and we'll continue to be able to scale the number of centers that we open over the quarter but for the meantime we're just leaving our guidance where it was.

Jon Block: Thanks, guys.

Jonathan Block: Thanks, guys.

Tim Herbert: Thanks, John.

Operator: Thank you. And I show our next question comes from the line of Adam Maeder from Piper Sandler. Please go ahead.

Thanks, guys. Thanks, John . Thank you. And I'm sure our next question comes from the line of Adam Nader from Piper Sandler. Please go ahead.

Adam Maeder: Hi, Tim. Hi, Rick. Thank you for taking the questions, and congrats on the nice start to the year. Wanted to start on a couple of the label expansion opportunities, you know, specifically raising the upper limit of AHI, and then also the change to the language around BMI from the current label. Just any latest thoughts on timing? And then I have a follow-up. Thanks.

Hi Tim, hi Rick, thank you for taking the questions and congrats on the nice start to the year. Wanted to start on a couple of the label expansion opportunities, specifically raising the upper limit of AHI and then also the change to the language around BMI from the current label.

Tim Herbert: Absolutely. We've been working with the FDA. We answered the question. In the past, we've been talking about process, how these PMA supplements go, and they're 180 days, but the FDA asks questions at day 100. We have received the questions, responded to those questions. It's back in review with the FDA. We see promise moving towards approval, and we think that approval is coming in the very near future. I think the high AHI is really the benefit for patients in that submission. Remember, the submission includes both AHI and BMI. The high AHI, right now those patients just don't have any other alternative, and so that's a natural fit for them to be able to fit right into Inspire.

Just any latest thoughts on timing, and then I had a follow-up. Thanks. Absolutely. We've been working with the FDA. We answered the question. In the past, we've been talking about process, how these PMA supplements go, and they're 180 days, but the FDA asks questions at day 100.

We have received the questions, responded to those questions. It's back in review with the FDA. We see promise moving towards approval, and we think that approval is coming in the very near future. I think the high AHI is really the benefit for patients in that submission. Remember this mission includes both.

AHI and BMI. The high AHI, right now those patients just don't have any other alternative and so that's a natural fit for them to be able to fit right in to INSPIRE. The limitation really goes back to the early days of the clinical study.

Tim Herbert: The limitation really goes back to the early days of the clinical study, so there's no reason to really have an upper limit on AHI. I also think that we'll be able to quickly garner reimbursement support or coverage from both commercial payers and Medicare, to be able to really take care of that population. We can get those patients approved through the appeal process, but this is gonna really streamline their patient experience and be able to get those patients in insurance approval quite quicker. As far as the high BMI, while that presents a good opportunity, it also is something we need to be careful about. Because remember, with the higher BMI, it introduces the concept of lateral wall collapse, and that's what's very difficult to treat with hypoglossal nerve stimulation.

So there's no reason to really have upper limit on AHI. I also think that we'll be able to quickly garner reimbursement support or coverage from both commercial payers and Medicare to be able to really take care of that population. We can get those patients approved through the appeal process.

Tim Herbert: Patients will get improvements because we'll take care of the Tongue-Based Collapse, but they won't get a total improvement to the satisfaction that, that we desire. So we're gonna want those higher BMI patients to address that Lateral Wall Collapse before they're gonna be eligible. That being said, we do have our own work going on and to advance our system to stimulate, to take care of Lateral Wall Collapse, but pretty early to talk about that right now.

And that's what's very difficult to treat with hypoglossal nerve stimulation. Patients will get improvements because we'll take care of the tongue base collapse, but they won't get a total improvement to the satisfaction that we desire. And so we're gonna want those higher BMI patients to address that lateral wall collapse before they're gonna be eligible. That being said, we do have our own work going on and to advance our system to stimulate, to take care of lateral wall collapse, but.

Adam Maeder: Okay, that's great color, Tim. Thanks for that. And maybe switching over to Rick and the P&L. Just had a quick question on R&D spend in the quarter, which saw, you know, a healthy step up. So I guess first, you know, what drove the increase? You know, where are those dollars, you know, being spent? And how do we think about kind of cadence and of R&D spending going forward? Is this kind of the new base to work from? Thanks so much for taking the questions.

pretty early to talk about that right now. Okay, that's great color, Tim. Thanks for that. And maybe switching over to Rick and the P&L, just had a quick question on R&D spending the quarter, which saw a healthy step up. So I guess first, what drove the increase?

You know, where are those dollars, you know, being spent? And how do we think about kind of cadence of R&D spending going forward as this kind of the new base to work from? Thanks so much for taking the questions. Yeah, hey, Adam. I know that increase is up in R&D.

Rick Buchholz: Yeah. Hey, Adam. Part of that increase is up in R&D. It was about 20% of revenue. That historically has been in that 15% to 20% of revenue, and it has increased just year over year and sequentially. Just is really a function of the timing of entering that full qualification of Inspire five. And so we will continue to make R&D investments in the future, and so we expect R&D to continue to be in that mid-teens range as we exit 2023.

It was about 20% of revenue that historically has been in that 15 to 20% of revenue and

It has increased just year over year and sequentially, just really a function of the timing of entering that full qualification of Inspire 5. And so we will continue to make R&D investments in the future. And so we expect R&D to continue to be in that mid-teens range as we exit 2023.

just year over year and sequentially, just really a function of the timing of entering that full qualification of Inspire 5. And so we will continue to make R&D investments in the future. And so we expect R&D to continue to be in that mid-teens range as we exit 2023.

Adam Maeder: Thanks, Rick.

Operator: Thank you. And I show our next question comes from the line of Richard Newitter from Truist Securities. Please go ahead.

Thank you. And I show next question comes from the line of Richard Newider from Truist Security. Please go ahead. All right. Thanks for taking the questions. Two quick ones for me and congrats on the quarter. One, just the first Rick following up on the profitability line of questioning here.

Tim Herbert: Hi, thanks for taking the questions. Two quick ones from me, and congrats on the quarter. One, just the first, Rick, following up on the profitability line of questioning here. You know, I think last quarter, you said that you do think that adjusted EBITDA on a year-over-year basis will be higher than it was in 2022, based on your comments around OpEx growth being below the top line growth rate. It sounds like all of that should still be intact. I just want to make sure that, you know, we're thinking about that correctly, and that would imply positive adjusted EBITDA, excluding stock-based comp still. Is that fair?

Richard Newitter: Hi, thanks for taking the questions. Two quick ones from me, and congrats on the quarter. One, just the first, Rick, following up on the profitability line of questioning here. You know, I think last quarter, you said that you do think that adjusted EBITDA on a year-over-year basis will be higher than it was in 2022, based on your comments around OpEx growth being below the top line growth rate. It sounds like all of that should still be intact. I just want to make sure that, you know, we're thinking about that correctly, and that would imply positive adjusted EBITDA, excluding stock-based comp still. Is that fair?

I think last quarter you said that you do think that adjusted EBITDA on a year-over-year basis will be higher than it was in 2022 based on your comments around OPEX growth being below the top line growth rate. It sounds like all of that should still be intact. I just want to make sure that we're thinking about that.

Rick Buchholz: That is fair, and that's accurate. When you look at EBITDA, it was about a $900,000 loss for Q1, compared to a $6.1 million EBITDA loss in Q1 2022. And the big driver there is stock-based compensation was $18 million in the quarter, and so still accurate comment.

Tim Herbert: That is fair, and that's accurate. When you look at EBITDA, it was about a $900,000 loss for Q1, compared to a $6.1 million EBITDA loss in Q1 2022. And the big driver there is stock-based compensation was $18 million in the quarter, and so still accurate comment.

correctly and that would imply positive adjusted EBITDA excluding stock based comps still. Is that fair? That is fair and that's accurate. When you look at EBITDA it was about a $900,000 loss for the first quarter.

compared to a $6.1 million EBIT loss in the first quarter of 2022. And the big driver there is stock-based compensation was $18 million in the quarter.

Tim Herbert: Okay, very good. And then just thinking about, you know, competition, I know there is none in the US currently, but assuming a competitor gets there, I think they, they suggested they could use your... either your code or there would be potential modifier situations, with other codes that, that would get them kind of a, I don't want to use the word fast track reimbursement, but bypassing what you have to go through from a coding standpoint. I'd love to just hear what your view is, in light of some of those comments and any perspective you might have there. Thanks.

Richard Newitter: Okay, very good. And then just thinking about, you know, competition, I know there is none in the US currently, but assuming a competitor gets there, I think they, they suggested they could use your... either your code or there would be potential modifier situations, with other codes that, that would get them kind of a, I don't want to use the word fast track reimbursement, but bypassing what you have to go through from a coding standpoint. I'd love to just hear what your view is, in light of some of those comments and any perspective you might have there. Thanks.

And so, still accurate comment.

Okay, very good. And then just thinking about competition, I know there is none in the U.S. currently, but assuming your competitor gets there, I think they suggested they could use either your code or there would be potential modifier situations.

with other codes that would get them kind of a, I don't wanna use the word, fast-track reimbursement, but bypassing what you had to go through from a coding standpoint. I'd love to just hear what your view is and lie to some of those comments and any perspective you might have there. Thanks. Sure.

Rick Buchholz: Sure. Well, I think there's two people out there doing clinical studies. I think LivaNova's probably at the forefront of it, because they got more data-

Tim Herbert: Sure. Well, I think there's two people out there doing clinical studies. I think LivaNova's probably at the forefront of it, because they got more data-

Tim Herbert: Sure

Richard Newitter: Sure

Rick Buchholz: ... and more experience, and they already have an existing code, which is, remember the old 64568 that we were using with our add-on code?

Tim Herbert: ... and more experience, and they already have an existing code, which is, remember the old 64568 that we were using with our add-on code? So they already have a code with their implanted neurostimulator and stimulation lead that they're gonna be able to leverage as they go forward. As far as Nyxoah, that's that jury's out and they gotta go figure out what they're gonna do with their code. But that's up to CMS and not for Inspire to comment, but that's always a little more challenging than you say it's going to be.

Well, I think there's two people out there doing clinical studies. I think Livinova is probably at the forefront of it because they got more data and more experience and they already have an existing code, which is remember the old 64568 that we were using with our add-on code? So they already have a code with their implanted neurostimulator and stimulation lead that they're going to be able to leverage as they go forward.

Tim Herbert: ...So they already have a code with their implanted neurostimulator and stimulation lead that they're gonna be able to leverage as they go forward. As far as Nyxoah, that's that jury's out and they gotta go figure out what they're gonna do with their code. But that's up to CMS and not for Inspire to comment, but that's always a little more challenging than you say it's going to be. Now, that being said, both companies have to deal with coverage, which is their number one challenge. In order to get coverage, you need to have extensive data. And if you remember back, for us to get coverage, we had to publish large studies, and we had to publish five years of clinical data, and Aetna was the first one to go.

As far as Nixoa, that jury is out and they have to go figure out what they are going to do with their code. That is up to CMS and not for Inspirer to comment, but that is always a little more challenging than you say it is going to be. Now that being said, both companies have to deal with the

Tim Herbert: Now, that being said, both companies have to deal with coverage, which is their number one challenge. In order to get coverage, you need to have extensive data. And if you remember back, for us to get coverage, we had to publish large studies, and we had to publish five years of clinical data, and Aetna was the first one to go. Remember, that was back in 2018, I believe. That was four years after our FDA approval. So getting FDA approval does not bring you home. That allows you to enter the reimbursement phase of your business development. So long way to go.

Tim Herbert: Remember, that was back in 2018, I believe. That was four years after our FDA approval. So getting FDA approval does not bring you home. That allows you to enter the reimbursement phase of your business development. So long way to go.

Remember that was back in 2018, I believe that was four years after our FDA approval. So getting FDA approval is not bringing you home. That allows you to enter the reimbursement phase of your business development. So long way to go. Thank you.

Mike Polark: Thank you.

Richard Newitter: Thank you.

Tim Herbert: Thanks, Rich.

Operator: Thank you. And our next question comes from the line of Chris Pasquale from Nephron Research. Please go ahead.

Thank you. And actually, our next question comes from the line of Chris Pasquale from NIFRIN Research. Please go ahead.

Chris Pasquale: Hi, thanks, guys. Two questions. One, Tim, you talked about new services to improve the patient experience and, and proactively reaching out to patients. Can you talk about more about what you're doing there and what problem you're really trying to solve?

All right, thanks guys. Two questions. One, Tim, you talked about new services to improve the patient experience.

Tim Herbert: Uh-huh. Oh, absolutely. So we have a lot of patients that come from the Advisor Care program and have challenges getting appointments with the doctor because we either can't work through the phone or the email. We highlighted in the script that with our electronic scheduling, we're actually seeing a 30% improvement in the pilot centers. That means there's a significant number of patients that are just getting hung up in that process. So we're doing things such as a more organized emailing program to reengage them and help them through the process and get them back in the game and get them back connected to a healthcare provider that can take care of them.

proactively reaching out to patients. Can you talk a little bit more about what you're doing there and what problem you're really trying to solve?

Oh, absolutely. So we have a lot of patients that come from the advisor care program and have challenges getting appointments with the doctor because we either can't work through the phone or the email. We highlighted in the script that with our electronic scheduling, we're actually seeing...

a 30% improvement in the pilot centers. That means there's a significant number of patients that are just getting hung up in that process. And so we're doing things such as a more organized emailing program to re-engage them and help them through the process and get them back in the game and get them back connected to the patient.

Tim Herbert: That's just one example, but we have a significant number of other patients in our system over the many years that we've been working that continue to show interest in Inspire, and now we're gonna be proactively reaching out to them and really kind of just giving people a better chance to work through the process. Because the first couple of years, as effective as that direct-to-consumer has been, we all know the challenges of that conversion, and our tools are getting much better to be able to help more patients. So really, that whole team is really focused on just improving those different factors, and patient communication and electronic scheduling are the two leading programs.

a health care provider that can take care of them. That's just one example, but we have a significant number of other patients in our system over the many years that we've been working that continue to show interest and inspire. And now we're going to be proactively reaching out to them and really kind of just giving people a better chance to work through the process.

because the first couple years as effective as that direct-to-consumer has been.

We all know the challenges of that conversion and our tools are getting much better to be able to help more patients. So really that whole team is really focused on just improving those different factors and...

Chris Pasquale: That makes sense. Thanks. And then I'm just curious what was behind the decision to go direct in Japan and whether you expect that's gonna have a noticeable impact on implant activity there?

Patient communication and electronic scheduling are the two leading programs. That makes sense, thanks. And I'm just curious what was behind the decision to go direct in Japan and whether you expect that's going to have a noticeable impact on implant activity there. Yeah, absolutely. No, we love the partner that we have. They're great.

Tim Herbert: Yeah, absolutely. No, we love the partner that we have. They're great, great people. But it's a, it's an implanted product, and so if you think about every company that's successful in the United States and in Europe, they really have direct representation because you need to focus on the customer base, focus on those physicians to maintain their commitment and drive utilization. And it's very difficult for a distributor that will have 10, 12 products in their bag to be able to sell, to be able to provide the same level of commitment to the patients. And, being there for a couple of years, we saw the direction that that was heading, and we worked, you know, appropriately with our partner there, and we agreed the right thing to do was for us to just hire a direct force, and that's what we have done.

great people, but it's an implanted product. And so if you think about every company that's successful in the United States and in Europe , they really have direct representation because you need to focus on the customer base, focus on those positions to maintain their commitment and drive utilization.

And it's very difficult for a distributor that will have 10, 12 products in their bag to be able to sell to be able to provide the same level of commitment to the patients. And being there for a couple of years, we saw the direction that that was heading. And we worked

you know, appropriately with our partner there and we agreed the right thing to do was for us to just hire a direct force and that's what we have done. We have a country manager, we have the first sales reps were in Minneapolis last week as part of Inspire University.

Tim Herbert: We have a country manager. We have the first sales reps were in Minneapolis last week as part of Inspire University. You know how every quarter we go through and train all the new reps together, and it's great for them to come and be part of the new US sales force as well. We just authorized a new trainer today. We also have a marketing team. We opened up the website, and so we're showing great promise, and I think you're gonna see a little bit of a response when we start talking about Japan performance going forward.

You know how every quarter we go through and train all the new reps together and it's great for them to come and be part of the new US Salesforce as well. We just authorized a new trainer today. We also have marketing team. We opened up the website and so we're showing a great promise and I think you're going to see.

Chris Pasquale: Great. Thanks.

a little bit of a response when we start talking about Japan performance going forward.

Tim Herbert: Thank you.

bit of a response when we start talking about Japan performance going forward. Great, thanks.

Operator: Thank you. Our next question comes from the line of Matthew Mishan from Key Bank Capital Markets. Please go ahead.

Thank you. Thank you. And actually, our next question comes from the line of Matthew Mishant from KeyBank Capital Markets. Please go ahead. Afternoon, and congrats on the great quarter. Thank you. Can you talk a little bit about utilization trends into the next couple of quarters from $ artwork, please.

Matthew Mishan: Afternoon, and congrats on the great quarter.

Tim Herbert: Thank you.

Matthew Mishan: Can you talk a little bit about utilization trends into the next couple of quarters from coming off of Q1? I think as I'm, like, building out my model, I'm finding it difficult to kind of stay within your guidance range without keeping the utilization trends fairly, fairly modest into the next several quarters.

Tim Herbert: Absolutely. I think that we, as we showed, through last year, we had a consistent step up from Q1 of 1.3 up to a utilization of 2.0, in Q4. We always have seasonality, primarily in January, and so you see a little bit of a pullback in Q1, or I think it's about 1.7. So pretty consistent with past years, what we see going into Q1, and from here, our job is to stay focused and continue to grow the utilization going forward. We do believe that the majority of our growth in procedures and revenue will come from increased utilization, again, complemented by opening additional centers. But you're gonna see a plan just to continue to keep growing utilization through the year.

As we showed through last year, we had consistent step-up from Q1 of 1.3 up to a utilization at 2.0 on the fourth quarter. We always have seasonality primarily in January . So you see a little bit of a pullback in the first quarter, or I think it's about 1.7.

And so pretty consistent with past years, what we see going into the first quarter. And from here, our job is to stay focused and continue to grow the utilization going forward. We do believe that the majority of our growth in procedures and revenue will come.

from increased utilization, again, complemented by opening additional centers. But you're going to see a plan just to continue to keep growing utilization through the year. Some we haven't mentioned that we talked about previously, is we have changed the compensation structure.

Tim Herbert: Some we haven't mentioned that we talked about previously is we have changed the compensation structure with the territory managers to really focus on higher utilization at existing centers, and that modification's been well received by the team so far, and we'll continue to monitor that as we keep going forward.

with the territory managers to really focus on higher utilization at existing centers. And that modification has been well received by the team so far, and we'll continue to monitor that as we keep going forward.

[Analyst 1]: Excellent. And then just one clarification for me. I'm pretty sure I know the answer to it. The number of new centers you're adding, the 68 didn't pull from the 52 to 56 per quarter. It's that you're still expecting to do incremental 52 to 56 in Q2, Q3, and Q4?

Matthew Mishan: Excellent. And then just one clarification for me. I'm pretty sure I know the answer to it. The number of new centers you're adding, the 68 didn't pull from the 52 to 56 per quarter. It's that you're still expecting to do incremental 52 to 56 in Q2, Q3, and Q4?

Excellent. And then just one clarification for me. I'm pretty sure I know the answer to that. The number of new centers you're adding, the 68 didn't pull from the 52 to 56 per quarter. You're still expecting to do incremental 52 to 56 in 2Q, 3Q, and 4Q? Well, we always put our guide at 52 to 56 is what we...

Tim Herbert: Well, we always put our guide at 52 to 56, is what we said, and it takes time to open centers. But we do know centers will go, opening a new center can take anywhere from 3 to 6 months, depending upon if they have to go through the value add committee, or if they have to go with contracts and pricing agreements. So we have line of sight to the number of centers, and we will open centers when they're ready. And what that means is, that means everybody is trained, they've identified patients, and they're ready to do their first case. And so that's why we're able to kind of control that cadence a little bit, but we never know from a quarter-to-quarter basis where the endpoint is going to be.

of sight to the number of centers and we will open centers when they're ready and what that means is that means everybody is trained, they've identified patients and they're ready to do their first case.

Tim Herbert: And so that's why we're able to kind of control that cadence a little bit, but we never know from a quarter-to-quarter basis where the endpoint is going to be. We tend to be a little bit above the guide, as you see in the past, but that's why we're just kind of holding the guide steady.

And so that's why we're able to kind of control that cadence a little bit, but we never know from a quarter to quarter basis where the endpoint is going to be. We tend to be a little bit above the guide as you see in the past, but that's why we're just kind of holding the guide steady.

Tim Herbert: We tend to be a little bit above the guide, as you see in the past, but that's why we're just kind of holding the guide steady.

able to kind of control that cadence a little bit, but we never know from a quarter to quarter basis where the end point is going to be. We tend to be a little bit above the guide as you see in the past, but that's why we're just kind of holding the guide steady. All right, thank you.

[Analyst 1]: All right. Thank you.

Matthew Mishan: All right. Thank you.

Tim Herbert: Thank you.

Operator: Thank you. As a reminder, to ask a question, please press star one, one on your telephone. I show our next question comes from the line of Anthony Petrone from Mizuho Securities. Please go ahead.

Thank you.

Thank you. Thank you.

As a reminder, to ask a question, please press star 11 on your telephone.

Anthony Petrone: Thanks, and congratulations on a strong Q1 here. I have a couple of questions just on procedure implant time, and maybe, Tim, can you remind us where total implant time was with the 3 incision procedure and where it stands with 2 incisions? And then the follow-up to that would be, when we think about getting rid of the pressure sensing lead with Gen 5, where do you think procedure time can go with that platform? And I'll have-

And I show our next question comes from the line of Anthony Petroni from Missoujo Security. Please go ahead.

Thanks and congratulations on a strong 1q here. I have a couple of questions just on procedure implant time and maybe Tim can you remind us where total implant time was with the three incision procedure and where it stands with two incisions and then the follow-up to that would be when we think about

getting rid of the pressure sensing lead with Gen 5, where do you think procedure time can go with that platform? And I'll have... Yeah, thanks. And I'll come back to a follow-up. So, when we were doing, when we went to Inspire 2, the procedure time went from approximately two hours down to 90 minutes on average.

Tim Herbert: Absolutely.

Anthony Petrone: Yeah, thanks.

Tim Herbert: I'll come back to a follow-up. So when we were doing—when we went to Inspire 2, the procedure time went from approximately 2 hours down to 90 minutes on average. So in general, with this, the two-incision, we were at 90 minutes. Now, the top centers that have a high utilization, they have a lot of experience, they routinely run at about 60-minute procedure time today. So you can say the range of procedure time today with two-incision is between 60 and 90 minutes. When we go to Inspire 5, we will expect that to drop down to between 45 and 60 minutes, depending upon the experience of the surgeon. So it's gonna have both a benefit from implanting the sensing lead itself, but there also is improvement in our intraoperative testing.

So in general, with the two incisions, we were at 90 minutes. Now, the top centers that have a high utilization, they have a lot of experience, they routinely run at about 60-minute procedure time today. So you can say the range of...

procedure time today with two incisions is between 60 and 90 minutes. When we go to Inspire 5, we will expect that to drop down to between 45 and 60 minutes, depending upon the experience of the surgeon. So it's going to have both a benefit from implanting the sensing lead itself.

Tim Herbert: What's key to note here is remember that we do full operational testing in the operating room, so we know that the stimulation is moving the tongue forward, and we know that we can review the respiratory signal. So we know we have an operational system before we close. And that's, we're gonna be able to improve that time when we go to Inspire five as well. And you had a follow-up.

but there also is improvement in our intraoperative testing. What's key to note here is remember that we do full operational testing in the operating room so we know that the stimulation is moving the tongue forward and we know that we can review the respiratory signal, so we know we have an operational system before we close.

Anthony Petrone: No, it was very helpful. And maybe just a quick update on Philips. We tuned into ResMed last week, and Philips reported also last week, and there's still just a lot of opaqueness around that process with FDA, SEC, and DOJ. So just any kind of updates on what you're hearing around the Philips recall? Thanks.

And that's that we're going to be able to improve that time when we go to Inspire 5 as well. And you had a follow up. No, it was very helpful. And here's just a quick update on Philips. We tuned into ResMed last week and Philips reported also last week. And there's still just a lot of opaqueness around that process with FDA and SEC and DOJ. So just...

Tim Herbert: Yeah, I think... I mean, this has gone on for how many years now, and it's just an ongoing frustration by everybody. And, hopefully someday it'll resolve. From our viewpoint, what it's done, it's changed the paradigm for which sleep physicians look at treating sleep apnea. And they no longer are dedicated just to CPAP. They're opening up and saying: "What other methods do we have out there that can treat our patients?" And there's a prospect of a new drug, right? That could possibly take care of milder cases. They still have CPAP, but now they have Inspire, and they can, for patients that don't benefit from CPAP, they can quickly move on to Inspire, and we become part of the talk track earlier.

Just any kind of updates on what you're hearing around the Phillips recall. Thanks. Yeah, I think, I mean, this has gone on for how many years now and it's just an ongoing frustration by everybody. And hopefully someday it'll resolve. From our viewpoint,

What it's done is changed the paradigm for which sleep physicians look at treating sleep amia. And they no longer are dedicated just to CPAP. They're opening up and saying, what other methods do we have out there that can treat our patients? And there's a prospect of a new drug, right, that could possibly...

take care of milder cases, they still have CPAP, but now they have INSPIRE. And they can, for patients that don't benefit from CPAP, they can quickly move on to INSPIRE. And we become part of the TOCTRAC earlier. And that really is going to be the long-term paradigm change that is going to be the benefit to the patients that they become aware of.

Tim Herbert: That really is gonna be the long-term paradigm change that is gonna be the benefit to the patients, that they become aware of all the therapies earlier on in the process.

Anthony Petrone: Thank you so much. Congrats again.

Tim Herbert: Thank you.

of all the therapies earlier on in the process. Thank you so much. Congrats again. Thank you. Thank you. And I see our next question comes from the line of Suraj Kalia from Oppenheimer & Co., Inc. Please go ahead. Good afternoon, Tim. Can you hear me all right?

Operator: Thank you. And I show our next question comes from the line of Suraj Kalia from Oppenheimer & Co. Inc. Please go ahead.

[Analyst 1]: Good afternoon, Tim, Rick. Can you hear me all right?

Suraj Kalia: Good afternoon, Tim, Rick. Can you hear me all right?

Tim Herbert: Yes, Suraj, how you doing?

[Analyst 1]: Perfect. Congrats on a nice quarter. So Rick, one question for you and one question for Tim, and I'll ask both of them upfront. Rick, if I were to define new stores as one opened within the last 12 months, how would the new store same-store sales configuration look like in Q1? And Tim, forgive me, I got a little confused, so maybe you can help me here. So from a phenotype perspective, right, obese patients do have greater oropharyngeal collapse, you know, as a contributor to OSA. And hypoglossal nerve stim has been approved for high BMI. So is the notion now that HGNS cannot effectively target higher BMI, or is it that first you got to treat it with GLP-1s, let do the weight loss, and then HGNS, you know, can be used in the higher BMI category?

Suraj Kalia: Perfect. Congrats on a nice quarter. So Rick, one question for you and one question for Tim, and I'll ask both of them upfront. Rick, if I were to define new stores as one opened within the last 12 months, how would the new store same-store sales configuration look like in Q1? And Tim, forgive me, I got a little confused, so maybe you can help me here. So from a phenotype perspective, right, obese patients do have greater oropharyngeal collapse, you know, as a contributor to OSA. And hypoglossal nerve stim has been approved for high BMI.

Yes, Raj, how you doing? Perfect, congrats on a nice quarter. Sir Rick, one question for you and one question for Tim and the last both of them up front. Rick, if I were to define new stores.

As one opened within the last 12 months,

How would the new same-store stale configuration look like in Q1? And, Tim, forgive me, I got a little confused, so maybe you can help me here. So, from a phenotype perspective, right, obese patients do have greater…

oropharyngeal collapse, you know, as a contributor to OSA. And hypoglossal nerve stem has been approved for high BMI.

Suraj Kalia: So is the notion now that HGNS cannot effectively target higher BMI, or is it that first you got to treat it with GLP-1s, let do the weight loss, and then HGNS, you know, can be used in the higher BMI category? Thank you for taking my questions.

So, is the notion now that HMS cannot effectively target higher BMI, or is it that first you got to treat it with GLP ones, let's do the weight loss, and then HMS can be used in the higher BMI category? Thank you for taking my questions. Hey, Sir Rogers, Rick. So, to your point,

[Analyst 1]: Thank you for taking my questions.

Tim Herbert: Hey, Suraj, it's Rick. So to your point, overall utilization is up from a year ago. You know, it's down a little from Q4 because we have seasonality. But as Tim mentioned, it progressed nicely up on a quarterly basis. We don't give the details, but at a high level, if you look at our, the four quartiles on utilization in the first quarter from a year ago, all of those quartiles are up from a year ago on number of procedures that are completed. We do. And then not looking specifically at the numbers, but when we bring a new center on, expectations are just different than they used to be.

Rick Buchholz: Hey, Suraj, it's Rick. So to your point, overall utilization is up from a year ago. You know, it's down a little from Q4 because we have seasonality. But as Tim mentioned, it progressed nicely up on a quarterly basis. We don't give the details, but at a high level, if you look at our, the four quartiles on utilization in the first quarter from a year ago, all of those quartiles are up from a year ago on number of procedures that are completed. We do. And then not looking specifically at the numbers, but when we bring a new center on, expectations are just different than they used to be.

overall utilization is up from a year ago. It's down a little from Q4 because we have seasonality. But as Tim mentioned, it progressed nicely up on a quarterly basis. We don't give the details, but at a high level, if you look at the four quartiles on utilization in the first quarter from a year ago,

all of those quartiles are up from a year ago on number of procedures that are completed. We do, and then not looking specifically at the numbers, but when we bring a new center on, expectations are just different than they used to be.

Tim Herbert: You know, several of the older vintages or classes were used to the three-incision approach, and reimbursement was not as in a good position as it is now. So now that we have the two-incision approach, full reimbursement, good CPT reimbursement for the physician, there's just a different expectation. So we expect those new centers coming on board to get higher utilization faster. Very good. Okay, let's address high BMI. First, in the United States, we do not-- the FDA did not limit BMI. So yes, you are correct, high BMI is not a factor for Inspire.

Rick Buchholz: You know, several of the older vintages or classes were used to the three-incision approach, and reimbursement was not as in a good position as it is now. So now that we have the two-incision approach, full reimbursement, good CPT reimbursement for the physician, there's just a different expectation. So we expect those new centers coming on board to get higher utilization faster.

You know, several of the older vintages or classes were used to the three incision approach and reimbursement was not as in a good position as it is now. So now that we have the two incision approach...

full reimbursement, good CPT reimbursement for the physician. There's just a different expectation. So we expect those new centers coming on board to get higher utilization faster. Very good. Okay, let's address high BMI. First, in the United States, we do not...

Tim Herbert: Very good. Okay, let's address high BMI. First, in the United States, we do not-- the FDA did not limit BMI. So yes, you are correct, high BMI is not a factor for Inspire. Although they have a warning in the labeling that says, "We do not have data on patients who have a BMI higher than 32." The new warning that is in review with the FDA is going to change that, saying, "We do not have data on patients who have a BMI higher than 40." So it's only changing a warning. It doesn't change the indication. And you are correct that high BMI patients are approved in the United States for Inspire therapy. Now, the key, though, is we must identify which patients have the proper anatomy, or proper collapse that is supported by any hypoglossal nerve stimulation system, including Inspire.

The FDA did not limit BMI. So, yes, you are correct. High BMI is not a factor for INSPIRE, although they have a warning.

Tim Herbert: Although they have a warning in the labeling that says, "We do not have data on patients who have a BMI higher than 32." The new warning that is in review with the FDA is going to change that, saying, "We do not have data on patients who have a BMI higher than 40." So it's only changing a warning. It doesn't change the indication. And you are correct that high BMI patients are approved in the United States for Inspire therapy. Now, the key, though, is we must identify which patients have the proper anatomy, or proper collapse that is supported by any hypoglossal nerve stimulation system, including Inspire.

in the labeling that says we do not have data on patients who have a BMI higher than 32. The new warning that is in review with the FDA is going to change that thing. We do not have data on patients who have a BMI higher than 40. So it's only changing a warning. It doesn't change the indication in you are correct.

that high BMI patients are approved in the United States for INSPIRE therapy. Now, the key though is we must identify which patients have the proper anatomy or proper collapse that is supported by any hypoglossal nerve stimulation system including INSPIRE.

Tim Herbert: We know hypoglossal nerve stimulation stimulates the genioglossus muscle that moves the tongue forward, but the component of collapse in high BMI patients is a combination of tongue-based collapse and lateral wall collapse that presents to what we all know as complete concentric collapse. We can now stimulate the hypoglossal nerve and clear that component of the obstruction, but the high BMI patients will remain or continue to have obstructions on the lateral wall. So while they may have improvements in their sleep, they won't get improvements in, those patients that are tongue-based only because of the residual collapse from the lateral wall. Okay? Thanks, Suraj.

We know hypogloss nerve stimulation stimulates the genioglossus muscle that moves the tongue forward, but the component of collapse in high BMI patients is a combination of tongue base collapse and lateral wall collapse that presents to what we all know as complete concentric collapse.

We can all stimulate the hypoglossal nerve and clear that component of the obstruction, but the high BMI patients will remain or continue to have obstructions on the lateral wall. So while they may have improvements in their sleep, they may have a lot of problems with

They won't get improvements in those patients that are tongue-based only because of the residual clouds from the lateral wall.

don't get improvements in those patients that are tongue based only because of the residual clouds from the lateral wall. Okay?

Operator: Thank you. And I show our last question comes from the line of Michael Polark from Wolfe Research. Please go ahead.

Suraj Kalia: Thank you.

Operator: And I show our last question comes from the line of Michael Polark from Wolfe Research. Please go ahead.

Thanks, George. Thank you. And our last question comes from the line of Michael Pollak from Wolf Research. Please go ahead. Hey, good afternoon. Thanks for sneaking in. I have a question on Gen 5 launch next year. When that goes into the market, what evidence will you have to present to physicians and patients that, you know,

Mike Polark: Good afternoon. Thanks for sneaking me in. I have a question on Gen 5 launch next year. When that goes into the market, what evidence will you have to present to physicians and patients that, you know, the synchronicity of the two-component system approximates or is better than a three-component system? I mean, as you mentioned, better reliability, so it sounds like with bench testing, it'll be even better than the three-component system. But I guess, what will you have on paper at the time of launch to, you know, to persuade physicians and patients that that's the case?

Michael Polark: Good afternoon. Thanks for sneaking me in. I have a question on Gen 5 launch next year. When that goes into the market, what evidence will you have to present to physicians and patients that, you know, the synchronicity of the two-component system approximates or is better than a three-component system? I mean, as you mentioned, better reliability, so it sounds like with bench testing, it'll be even better than the three-component system. But I guess, what will you have on paper at the time of launch to, you know, to persuade physicians and patients that that's the case?

Tim Herbert: Sure. Thanks, Mike. We do have a clinical study we did, and what we're able to do is take existing patients who have Inspire four, and we can use a second system, which is external, with using an accelerometer to measure capture during the inspiratory phase of respiration. And this is the clinical evidence that went to the FDA that's been reviewed by them a couple times already. To show that the accelerometer, which has been used in rate-responsive pacing for years for respiratory detection, provides a cleaner respiratory signal, and our improved algorithm is going to improve synchronicity by providing stimulation synchronous with the inspiratory phase of respiration. So we've already been able to demonstrate that with existing patients and provided that information to the FDA.

to persuade physicians and patients that that's the case. Sure, thanks Mike. We do have a clinical study we did and what we're able to do is take existing patients who have INSPIRE-4 and we can use a second system which is the external.

with using an accelerometer to measure capture during the inspiratory phase of respiration. And this is the clinical evidence that went to the FDA that's been reviewed by them a couple of times already. To show that the accelerometer, which has been used in years, is suitable for Beats.

rate responsive pacing for years for respiratory detection, provides a cleaner respiratory signal, and our improved algorithm is going to improve synchronicity.

by providing stimulation synchronous with the respiratory phase of respiration. So we've already been able to demonstrate that with existing patients and provided that information to the FDA. So we're gonna have evidence with when we launch that we're gonna be able to show a benefit. And then secondly, by removing the...

Tim Herbert: So we're going to have evidence with, when we launch, that, we're going to be able to show a benefit. And then secondly, by removing the pressure sensor, it's just going to be an easier procedure for both the surgeon and the patient … as well as improvement in reliability, because we know that many of our revisions to date have been a result of that pressure sensor. So pretty confident in the device itself, and I already have data to be able to show that.

It's just going to be an easier procedure for both the surgeon and the patient, as well as improvement and reliability because we know that many of our revisions to date have been a result of that pressure sensor. So pretty confident in the device itself and I already have data to be able to show that. I appreciate that.

Mike Polark: Helpful. I appreciate that. If I can ask a follow-up? I thought your competitor's event, the most interesting part was one of the physicians that presented on different targets in the airway, the anterior cervicalis, specifically. And look, early stage stuff, who knows? But it seems intriguing, and my question for you is, is there stuff like this in your, in your R line, your research line, that you're thinking about? Just curious for any perspective on the different stimulation targets to promote different movements in the airways to potentially treat even more patients down the road.

Michael Polark: Helpful. I appreciate that. If I can ask a follow-up? I thought your competitor's event, the most interesting part was one of the physicians that presented on different targets in the airway, the anterior cervicalis, specifically. And look, early stage stuff, who knows? But it seems intriguing, and my question for you is, is there stuff like this in your, in your R line, your research line, that you're thinking about? Just curious for any perspective on the different stimulation targets to promote different movements in the airways to potentially treat even more patients down the road.

I thought your competitors event, the most interesting part was one of the positions that presented on different targets in the airway, the anti-surface collar specifically, and look, early stage stuff, who knows? But it seemed intriguing. And my question for you is, is there stuff like this in your R line, your research line that

you're thinking about, just curious for any perspective on that different simulation targets to promote different movements in their way to potentially treat more patients on the road. Absolutely, great question. Absolutely, we have our program going. We've already done several acute patients. We're gonna be moving into more of a chronic.

Tim Herbert: Absolutely. Great question. Absolutely, we have our program going. We've already done several acute patients. We're gonna be moving into more of a chronic study in the near term. And the concept is really around what we just discussed, after Suraj's question, about talking about the lateral wall collapse. And we mentioned that we have our own research study ongoing with this, and the Inspire five device does have the technical capability to have dual channels of stimulation. We will need mechanical modifications by adding a second port for a second stimulation lead.

study in the near term. And the concept is really around what we just discussed after Sriraj's question about talking about the lateral wall collapse. And we mentioned that we have our own research study going with this and the Inspire 5 device does have the technical capability to have dual channels of stimulation. We will need mechanical.

Tim Herbert: But we've identified an area that we want to stimulate to be able to take care of lateral wall collapse, and therefore take care of what we described as the high BMI patients, and really be able to find a good solution to take care of those patients. So you're gonna hear a lot more about that in the near future, but yeah, great question. We're very active with that.

modifications by adding a second port for a second stimulation lead. But we've identified an area that we want to stimulate to be able to take care of lateral wall collapse and therefore take care of what we described as the high BMI patients and really be able to find a good solution to

take care of those patients. So you're going to hear a lot more about that in the near future, but yeah, great questions. We're very active with that. Thank you.

So you're going to hear a lot more about that in the near future. But yeah, great questions. We're very active with that. Thank you.

Operator: Thank you.

Michael Polark: Thank you.

Tim Herbert: Thanks, Mike.

Operator: This concludes the Q&A session for the conference. I would now like to turn it back to Tim for any closing remarks.

Tim Herbert: Yeah. Thanks very much, and thank you 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 patients remain 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 in the US, Europe, and 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 the Q&A session for the conference. I would now like to turn it back to Tim for any closing remarks. Thanks very much, and thank you 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 patients remain 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 in the US, Europe , and Asia.

For all of you on the call, we appreciate your continued interest in support of Inspire and look forward to providing you with further updates in the months ahead. Please stay safe and healthy.

Operator: This concludes today's conference call. You may now disconnect.

This concludes today's conference call. You may now disconnect.

So that concludes today's conference call. Please disconnect.

Q1 2023 Inspire Medical Systems Inc Earnings Call

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