Q1 2023 Inspire Medical Systems Inc Earnings Call

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 the mute to prevent any background noise. After the speakers remarks, there'll be a question and answer session.

Speaker 2: To ask a question during the session, you will need to press Star 1-1 on your telephone. You will inherit an automated message advising your hand is raised. To withdraw your question, please press Star 1-1 again. I'll now hand the conference call to your first speaker, Ezgi Yaja, the Vice President of Investor Relations at Inspire. You may begin the conference. I'll hand the conference call to your first speaker, Ezgi Yaja, the Vice President of Investor Relations at Inspire.

Speaker 3: Thank you, Dilem, and thank you all for participating in today's call. Joining me are Tim Herbert, President and Chief Executive Officer, Enric Bewholes, Chief Financial Officer. Earlier today, we released financial results for the three months and in March 31st, 2023.

Speaker 4: A copy of the press release is available on our website. On this call, management will make forward-looking statements within the meeting of the federal security laws, all forward-looking statements, including without limitation those relating to our operations, financial results and financial condition, investments in our business, continue the effects of the COVID-19 pandemic.

Speaker 5: Full year 2023 financial and operational outlook and improvements in market access are based upon our current estimates and various assumptions.

Speaker 6: 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 7: Please see our filings with the Securities and Exchange Commission, including our Form 10-K ey which was filed with the SEC earlier this afternoon for a description of these risks and uncertainties.

Speaker 8: Inspired, it claims any intention or obligation except as required by law to update or revise any financial projections or forlooking statements whether because of new information, future events or otherwise. This conference call contains time sensitive information.

Speaker 9: and speaks only as of the live broadcast today, May 2nd, 2023. With that, it is my pleasure to turn the call over to Tim Herbert. Tim?

Speaker 10: Thank you, Eskid. And thanks everyone for joining our business update call for the first quarter of 2023.

Speaker 11: As always, we first and foremost reiterate our commitment to patient outcomes and to ensure that each patient has the best possible experience with inspired therapy.

Speaker 12: During today's call, we will provide an update on our first quarter results and discuss our updated outlook for the full year 2023.

Speaker 13: To start, we want to highlight a very important milestone in the Inspire story.

Speaker 14: Today marks the fifth anniversary of our IPO and what a tremendous five years it has been.

Speaker 15: Since our IPO, the company has surpassed 40,000 patients treated with inspired therapy.

Speaker 16: grown to over 800 employees, introduced many therapy-improved vests highlighted by the two incisions surgical approach, received a dedicated CPT code for reimbursement.

Speaker 17: And most recently, we received approval for PD-AIDS patients with Down syndrome.

Speaker 18: 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.

Speaker 19: The first pediatric patient with Down syndrome to receive inspired therapy nine years ago.

Speaker 20: and we all celebrated as Jesse rang the bell.

Speaker 21: With that, let's review our results. In the first quarter, we generated revenue of $127.9 million, representing an 84% increase compared to the first quarter of 2022. This 84% growth rate represents our highest quarterly growth rate post the COVID pandemic. Please.

Speaker 22: Our growth continues to be driven by higher utilization at existing centers and is complemented by the activation of new centers.

Speaker 23: 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 percent increase compared to 2022. In the first quarter, we continue to increase our capacity by adding 68 new implanting centers in the U.S., ending the quarter with a total of 973. For the remainder of 2023, we continue to increase our capacity by adding 48 new

Speaker 24: we continue to expect to activate 52 to 56 centers per quarter.

Speaker 25: Regarding the U.S. sales team, we created 17 new sales territories in the first quarter, bringing our total to 242. For the remainder of 2023, we continue to expect to add 12 to 14 sales territories per quarter.

Speaker 26: 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 sorts of the growth in therapy adoption.

Speaker 27: In January of 2022, we initiated our first national media campaign, which resulted in a one-time spike in website visitors, surpassing the $3.4 million in the first quarter.

Speaker 28: From these visits, we had over 19,000 physician contacts and have steadfastly improved our conversion of contacts to patients receiving therapy. Of notes, 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 and their inspire therapy journey through proactive outreach.

Speaker 29: Our digital scheduling pilot continues to make strides, and we are currently experiencing a 30% improvement in physician appointments in the pilot centers.

Speaker 30: compared to traditional phone and email scheduling through our Advisor Care Program.

Speaker 31: Furthermore, we hired a country manager in France in anticipation of the formal listing of the recently announced country-wide reimbursement in that country. In Asia, 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, we transitioned to a direct sales organization, launch Inspire.JPJP.

Speaker 32: We continue to work on the qualification of our fifth generation Inspire Neurostimulator. The Inspire 5 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.

Another example of the expanded utility of sleep sink is the next release will incorporate the second version of our ad here patient registry. The current ad here registry is within 200 patients of the 5000 patient cap and moving forward, patients will be enrolled into the ad here 2.0 registry which will be integrated into sleep sink. Subsequent digital programs will incorporate a sleep monitoring device?

Another example of the expanded utility of sleep sink is the next release will incorporate the second version of our ad here patient registry. The current ad here registry is within 200 patients of the 5,000 patient cap and moving forward, patients will be enrolled into the ad here 2.0 registry which will be integrated into sleep sink. Subsequent digital programs will incorporate a sleep monitoring device and remote patient programming.

Regarding operations, we continue to make good progress with the production wrap 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. We will continue to make good progress with the production wrap of the silicone-based stimulation and sensing leads.

Inventory levels are strong for all other components including the Inspire 4 Neural Stimulator, the Patient Remote, and the Position Programmer.

In summary, we are experiencing significant momentum in all aspects of our business. We remain focused on patient outcomes and physician education to continue the adoption of our therapy.

in 2023 and beyond.

opening and training new centers.

Beyond going expansion, a recall 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. Thank you, Tim, and good afternoon, everyone. Total revenue for the first quarter was 127.9 million, and 84% increase from the 69.4 million.

generated in the first quarter of 2022. US revenue in the first quarter was $124.5 million.

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.

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. 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

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. The net loss per share for the first quarter was $53,000 compared to the net loss per share of $61,000 in the first quarter of 2022. The weighted average number of shares outstanding for the first quarter was $29,000.

2023 guidance.

$380 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 growth 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.

To withdraw your question, please press star 11 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. 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.

So really just looking out a little bit here and thinking forward to when Inspire 5 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. 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 that is working alongside the advisor care program. We've mentioned some of the tools such as improved time-in-a-get sleep studies.

electronic scheduling, even electronic tools to help them gain referrals in. 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 will be able to drive further improvements and outcomes. And specifically, we like to 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 than require them to do a drug-inducinated endoscopy. So all of those in composite.

are going to be coming together at the same time frame as we launch Inspire 5, allowing us just to continue the increased utilization of the therapy. Great. Thanks a lot. Appreciate it. Congrats again. Thanks, Robbie.

And I show our next question comes from the line of Danielle and toffee from UBS. Please go ahead 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 that You know now two weeks

if it didn't even better than expected if we, better than it was if that wasn't still an issue. Thanks so much.

Oh thanks Daniel. I think that we've been pretty good with the sleep studies and with the

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.

But I think because we have some advanced planning with line-up side 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 NT surge and time in the operating room to do procedures. And if we could continue to improve...

to focus more on the surgeon themselves who are doing the procedure, but the support staff is obviously very necessary, but with our advanced plan we can work through that.

more on the surgeon themselves who are doing the procedure, but the support staff is obviously very necessary, but with our advanced plan, we can work through that. Okay, got it. Super helpful. Thank you so much.

Thank you Daniel. Thank you. As a reminder, we ask that you please skip your questions to know 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 film my congratulations on another strong quarter. I'll add both up front. Rick just the usual question on just how to think about Revenukated for the rest of the year.

And then Tim, I just love to get your reaction on the preliminary mix olidate that 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.

Hey Larry, this is Rick. 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 at the beginning of the year. We're excited about the opportunity. We haven't changed our guidance strategy.

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.

As far as releasing of early data, I think anybody who has been in MedTech knows that ??

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.

And maybe it's because there isn't a lot of other data available, and so it's all they had 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 those.

therapies that can help patients. 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 gonna be leading edge, one of the best, if not the best neurostimulator in the world today. 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 a very strong position.

for several years, probably until the time we'd even expect to see any competition if they passed their trials anyways.

Thank you. Thank you.

Thank you. Thank you.

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

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 genia glaucis, which is the tongue movement that moves it forward. Lateral wall collapse is related to higher BMI. And so if we have patients that canari the

lose 20 even 30% weight loss with some of the new injectable drugs We think that's really a positive and really complimentary To inspire those that weight loss will reduce lateral wall class 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 the next phase of their life.

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.

hand off to Rick here for a discussion of OPEX. Yeah, hey Travis, as we we've trended the last several quarters that the revenue growth has has outpaced the OPEX growth and so with the new revised guidance of...

after 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. 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 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.

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 plans to show some improvement on that operating leverage.

Thanks a lot. Thank you. And I show our next question comes from the line of John from CIFIL. Please go ahead. Great, guys. Thanks. Good afternoon. I'll...

Also, I spoke mine up front. I guess it was one cue clean from an end user demand perspective.

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, well above our estimate. 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 percent of ASC, 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. We talked about our fourth quarter 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 were still close to 80% growth in the quarter, but certainly that exists. Our inventory position is improved and we have that line up and running and ramping. We are able to support all orders right now with a

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 ASCs at this point is now 24.

24% or 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, I'm 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.

Thanks, guests. Thanks, John .

Thanks, guys. Thanks, John . Thank you.

And I sure our next question comes from the line of Adam Nader from Piper Sandler. Please go ahead.

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.

Just any latest thoughts on timing and then I'll follow up. Thanks.

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 in to INSPIRE. The limitation really goes back to the early days of the clinical study, 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, but this is going to really streamline.

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 pretty early to talk about that right now. Okay, that's great color, Tim. Thanks for that. And maybe switching over to...

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.

Thanks, Rick. Thank you.

Thanks, Rick. Thank you.

And I show next question comes from the line of Richard Neuitter from truest security, please go ahead 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 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.

correctly and that would imply positive adjusted EBITDA excluding stock based comp 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 EBITDA loss in the first quarter of 2022. And the big driver there is stock-based compensation was 18 million in the quarter.

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

Still accurate comment.

Okay, very good. And then just thinking about competition, I know there is none in the US currently, but.

assuming your competitor gets there, I think they suggest that they could use your code or there would be potential modifier situations with other codes that would get them kind of a fast track reimbursement but bypassing what you have to go through from a coding standpoint. I would love to just hear what your view is.

and lied to some of those comments and any perspective you might have there. Thanks. Sure. 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. As far as Nixoa, that jury's out and they got to go figure out what they're going to do with their code.

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. trace that

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 Etna was the first one to go. Remember that I 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. Thanks, Reggie. Thank you. And I show next question comes from the line of Chris Pasquale from NIFRIN Research. Please go ahead.

All right, thanks guys. Two questions. One, Tim, you talked about new services to improve the patient experience and proactively reaching out to patients. You talk a little more about what you're doing there and what problem you're really trying to solve.

Two questions. One, Tim, you talked about new services to improve the patient experience and proactively reaching out to patients. You talked about 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 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. 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 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 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. 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, 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 years, we saw the direction that that was heading.

And we worked 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, we're 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 was 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.

Great promise and I think you're going to see a little bit of a response when we start talking about Japan performance going forward. Great, thanks. Thank you.

Thank you and I show next question comes from the line of Matthew Miss Haunt from Key Bank Capital Markets. Go ahead.

Can you talk a little bit about utilization trends into the next couple of quarters from coming off of 1Q? I think as I'm building out my model, I'm finding it difficult to kind of stay within your guidance range without keeping the...

We always have seasonality primarily in January . You see a little bit of a pullback in the first quarter to I think it's about 1.7. Pretty consistent with past years, what we see going into the first quarter. 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. 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 with the territory managers to really focus on higher utilization at existing centers. That modification has been well received by the team so far and we'll continue to...

to monitor that as we keep going forward. 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 an incremental 52 to 56 in 223, 242.

Well, we always put our guide at 52 to 56 is what we said. It takes time to open centers, but we do know centers.

Opening a new center can take anywhere from three to six 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.

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 just kind of hold in the guide steady. All right. Thank you.

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 just kind of hold in the guide steady. All right, thank you. Thank you.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone. And I show our next question comes from the line of Anthony Petroni from Missoujo Securities. Please go ahead.

Thanks and congratulations on a strong 1 Q 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 to... Absolutely. 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. 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 testing lead itself, 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 rest of the respiratory Signal so we know we have an operational system before we close

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 just a quick update on Phillips. We tuned into ResMed last week and Phillips reported also last week and there's still just a lot of opaqueness around that process with

FDA and SEC and DOJ. So just any kind of updates on what you're hearing around the fill of tree call, 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 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 TOG track 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 all the therapies earlier on in the process.

Thank you so much. Congrats again. Thank you. Thank you. And I sure our next question comes from the line of Suraj Kalia from Oppenheim & Co., Inc. Please go ahead.

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. Rick, can you hear me all right?

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

As one opened within the last 12 months, how would the new store-stained, 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 phenodic perspective, right?

Obese patients do have greater oropharyngeal collapse, you know, as a contributor to OSC. And hypoglossal nerve stem has been approved for high BMI.

So is the notion now that HENs cannot effectively target higher BMI?

Or is it that first you've got to treat it with GLP1s, do the weight loss, and then HENs, you know, can be used in the higher BMI category? Thank you for taking my questions.

Hey, Sirajas 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. If we don't give the details, but at a high level, if you look at our...

specifically the numbers, but.

When we bring a new set of on, expectations are just different than they used to be.

you know, several of the older vintages or classes.

we're 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, 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 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, and you are correct that high BMI patients are approved in the United States for inspired therapy. Now the key though is we must identify which patients have the proper anatomy or proper collapse. We need to identify which patients have the proper anatomy or proper collapse.

that is supported by any hypoglossal nerve stimulation system, including INSPIRE. We know hypogloss nerve stimulation stimulates the geniolysis 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 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 won't get improvements in those patients that are tongue-based only because of the residual clouds from a lateral wall. Okay. OneHHHHHHHHHHh Nooooo

may have improvements in their sleep, they won't get improvements in those patients that are tongue-based only because of the residual clout from a lateral wall. Okay. Thanks, Oye.

Thank you. And our last question comes from the line of Michael Pollak from Wolf Research. Please go ahead. Good afternoon. Thanks for sneaking in. I have a question on Gen 5 launched next year. When that goes into the market, what evidence will you have to present to physicians and patients that relief may never be at risk? Sorry, um, yeah. This is Michael Pollak from Wolf Research.

the synchronicity of the two component system approximates better than the three component system. I mean, you mentioned federal liability, so it sounds like with testing, it'll be even better than the three component system. But I guess what would you have on paper at the time of on to persuade physicians and patients that that's the case? Sure, thanks Mike. We do have a clinical study we did and we're able to do.

is take existing patients who have Inspire 4, and we can use a second system, which is external, with using an accelerometer to measure captured 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...

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. 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. I appreciate that. If I can ask a follow-up. I thought your competitors event, the most interesting part was one of the positions that presented on different targets in the airwaves.

to promote different movements in their way to potentially create more patients on the road.

Absolutely. Great question. Absolutely. We have our program going. We've already done several acute patients. We're going to be moving into more of a chronic study in the near term. The concept is really around what we just discussed.

After Saraj'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 5 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. 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 questions. We're very active with that.

Thank you. 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 health care teams for their continued efforts as we remain focused on further expanding our business in the U.S., 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 today's conference call. You may now disconnect.