Q2 2023 Inspire Medical Systems Inc Earnings Call
Okay.
Yeah.
Good afternoon, My name is dilemma and I'll be your conference operator today at this time I'd like to welcome everyone to the inspire medical systems second quarter 2023 conference call. All lines have been placed on mute to prevent any background noise.
After the speakers remarks, there'll be a question and answer session I'll now hand, the call over to your first speaker Esky Gotcha, Vice President of Investor Relations at inspire you may begin the conference.
Thank you Joanna and thank you all for participating in today's call. Joining me are Tim Herbert President and Chief Executive Officer and Mike.
Our Chief Financial Officer earlier today, we released financial results for the three and six months ended June 32023, a copy of the press release is available on our website.
On this call management will make forward looking statements within the meaning of the federal Securities laws.
Forward looking statements, including without limitation those relating to our operations financial results and financial condition investments in our business full year 2023 financial and operational outlook.
And changes 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.
You should not place undue reliance on these statements.
Please see our filings with the Securities and Exchange Commission.
<unk>, our Form 10-Q, which was filed with the SEC earlier. This afternoon for a description of these risks and uncertainties inspire disclaims.
Claims 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.
Only as of the live broadcast today August one 2023 with that it is my pleasure to turn the call over to Tim Herbert Tim.
Thank you Eric and thanks, everyone for joining our business update call for the second quarter of 2023.
As always we start with our commitment to patient outcomes and to ensure that each patient has the best possible experience with inspire therapy.
As of the end of the second quarter over 46000 patients have been treated with inspire therapy.
Over the past week, we shared some exciting announcements with the additions of Carlson Wetherbee as our Chief strategy Officer and Dr. <unk> as our Chief Medical Officer.
As we continue to expand our business, we need strong leadership to guide the team with our focus on increasing the adoption of inspire therapy in the obstructive sleep apnea market.
OSA is a large and underpenetrated market and we see many years of sustained healthy organic growth ahead of us.
Carlton joins us from Medtronic, where he was general manager of the spinal division. He brings a wealth of talent and experience that will be invaluable as we continue to scale our business.
Dr. <unk> is a board certified physician with extensive business and leadership experience, including direct experience with inspire as a board director.
She will lead as far as clinical program provide executive oversight to ensure high quality patient outcomes and serve as a liaison for the E&P and sleep physician communities.
In connection with her appointment Dr. <unk> will transition from her current role of inspire board of directors.
We look forward to Carlton insurances contributions toward our mission of serving the many patients with untreated OSA.
With that let's review our results in the second quarter, we generated revenue of $151 1 million.
Representing a 65% increase compared to the second quarter of 2022.
Our growth continues to be driven by higher utilization at existing centers and is complemented by the activation of new centers.
Given the strong momentum we are seeing in our business. We now expect full revenue to be in the range of $600 million to $610 million up 47% to 50% increase compared to 2022.
In the second quarter, we continued to increase our capacity to support the strong demand for inspire therapy by adding 72, new implanting centers in the U S M.
Ending the quarter with a total of 1045 centers.
For the remainder of 2023, we continue to expect to activate 52 to 56 centers per quarter.
Regarding the U S sales team.
We COVID-19, new sales territories in the second quarter, bringing our total to 261 we.
We continue to expect to add 12 to 14.
<unk> sales territories per quarter for the remainder of 2023.
In the second quarter, the number of visitors to our website surpassed $2 9 million.
From these visits we had over 12000 physician contacts and even with the typical summer slowdown in contact we steadfastly improved our conversion of patients receiving therapy.
We continue to make numerous changes to our website to enhance how patients engage with our adviser care program and we have a new website design in the works for later this year.
Further we are continuing to increase the use of digital scheduling for inspire.
Consultation through our ACP.
We previously mentioned one of the limiting factors to the adoption of inspire therapy.
Is the capacity of Emt surgeons performing the procedure.
To this end, we are focusing on providing robust training programs to new physicians and reducing the time required to qualify and support patients through the entire inspire journey.
We believe that both of these focus areas will provide implanting surgeons with additional time to perform inspire procedures.
One example to improve the patient experience and reduce the time burden of the surgeons is there ongoing predictors study, which is designed to replace a drug induced sleep endoscopy or dice.
With an office based airway exam.
We have completed the data quality checks from the first 300 patients and are actively enrolling the second group of 300 patients with a higher BMI.
We will be moving towards preparing a publication from the first dataset and expect that these results will be presented in the fall.
Another example relates to the growing adoption of the sleep sync patient management system.
Sleep sync is designed to streamline the patient journey from initial contact through diagnosis system implant at post procedural longitudinal patient management.
The utility of this platform continues to improve as is highlighted by the recent launch of the inspire Bluetooth enabled patient remote which is the link between the patients device and sleep centers.
The next step is our new physician programmer called the slip sent programmer, which was approved by FDA in the second quarter and will formally launch in the U S. In early 2024.
The sleep St programmer allows physicians and their staff to log in for their own computer to access the programming screens and view all patient activity stored in the sleep sync system.
Once launched this technology will remove the necessity for inspired to provide tablets as part of the physician programming system.
And will pave the way for future remote patient programming.
Staying with product development.
The inspire five team is excited to announce the submission of our PMA supplement to the FDA.
Subject to the Fda's review process, we expect approval in early 2024.
Recall inspire five incorporates the sensor inside the neuro stimulator, using an accelerometer to measure respiration.
And we will eliminate the need for their pressure sensing lead.
Further <unk>.
Inspire five as a platform device, which will enable firmware upgrades transitioning to inspire six and beyond.
Whereby further product enhancements such as auto activation will be introduced.
From our research clinical and regulatory viewpoint in the second quarter, we received FDA approval to expand our indication to include patients with an <unk> up to 100 events per hour up from $65 and raised the BMI warning in the labeling from 30 to 40.
Furthermore, we are happy to announce that the adhere registry has met its target of 5000 patients and moving forward patients will be enrolled into the adhered to all registry.
Which will be integrated into the sleep sync system and included as part of our broader software release later this year.
A quick comment on reimbursement as the new of the New proposed <unk> rules were recently published and showed an increase to the national Medicare payments to hospitals of about $1000 to 3300 $55.
And an increase for <unk> of about $300 to $25470.
We also highlight the significant increase in the reimbursement of the <unk> procedure, which increased from $180.
Two $1639 for the Medicare facility payment.
We do see a slight reduction in the physician payment proposed but this is tied to the overall RV year rate, which typically rebounds by the final November rules.
Today.
<unk> continued to make up about 23% of our total number of centers.
But longer term, we continue to see the inspire therapy migrate more to the ASC setting.
But this is challenged by the varying Medicare reimbursement rates in different states.
We also have seen a stronger rebound in Medicare cases over the last two quarters and with the Medicare reimbursement rates lower especially in the South this is limiting Medicare cases to the hospital outpatient setting.
Well, we are able to obtain sufficient or time and hospitals are long term programs will focus on ASC reimbursement and education for <unk> as we see this as an efficient site of service for the inspire procedure.
Finally, while we are very happy with the strong Medicare rebound, we expect that the balance will shift more heavily towards commercial cases, as we progress through the year.
Switching over to our international business.
The European team achieved a very successful second quarter growing 81% over the prior year.
This robust growth was driven by a strong performance in Germany.
And supported by the Netherlands and Switzerland.
We are very excited about the strength, we're seeing in Belgium, which finalized countrywide reimbursement earlier this year and look forward to building momentum in the quarters ahead.
We're also excited about a new country manager in France, and we continue to prepare for a full market launch there pending the final reimbursement announcements expected later this year.
Finally, we have made progress with reimbursement in the United Kingdom and expect additional patients receiving inspire therapy in this region.
In Asia, we are seeing great momentum in Singapore with procedure, showing significant growth significant growth both sequentially and year over year in.
In Japan, we continued to advance our efforts of going direct by hiring and training additional team members.
<unk> completed the Japanese website and are seeing increased activity with physicians and active centers.
Regarding operations, we continue to make progress with the production ramp of the silicon based stimulation and certain leads.
We remain in a challenged position with the sensor manufacturing yields. However, we have incorporated our recent manufacturing change and expect to grow inventory as we move through the quarter.
We remain in a positive inventory position with short term plans in place to grow to our goal of one quarter of safety stock by year end.
We feel good about our inventory position and our other products.
In summary, we.
We continue to see significant momentum in our business, we remain focused on patient outcomes and physician education to continue the adoption of our therapy.
We will continue to increase utilization at our existing centers.
We're adding capacity by opening new centers.
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.
For his review of our financials.
Thank you Tim and good afternoon, everyone total revenue for the second quarter was $151 1 million or 65% increase from the $91 4 million generated in the second quarter of 2022.
U S revenue in the second quarter was $144 7 million and.
An increase of 65% from the $87 9 million in the prior year period.
The primary growth driver in the U S with higher utilization at existing centers.
Other growth drivers include. The addition of new implanting centers are continuing direct to consumer marketing and a higher number of territory managers.
We are pleased to announce revenue outside the U S increased to $6 3 million, which is an 81% increase year over year on a reported basis, while units sold outside the U S grew 72%.
Okay.
The U S average selling price in the second quarter was 25000 compared to 24100.
In the prior year period.
The increase reflects our 5% price uplift that began in may of 2022.
We expect the U S asps to remain steady at the current level.
DSP outside the U S was 22100 during the quarter compared to 21 in the second quarter of 2022.
Gross margin in the second quarter was 83, 9% compared to 84, 5% in the prior year period, primarily due to additional manufacturing costs of sensors and lower yields prior to process enhancements as well as higher cost of certain component parts partially.
Offset by the price increase which is now fully in effect.
Total operating expenses for the second quarter were $143 4 million, an increase of 57% as compared to $91 2 million in the second 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 9 million in the second quarter compared to 297000 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 second quarter was $12 million compared to $14 5 million net loss in the prior year period.
The net loss per share was <unk> 41.
Compared to 53 in the second quarter of 2022.
The net loss for the second quarter includes $3 million of R&D expenses associated with prelaunch inventory related to inspire five that is expensed for accounting purposes.
The weighted average number of shares outstanding for the second quarter was $29 2 million.
We expect the third quarter weighted average shares outstanding to be approximately $29 4 million.
Given our continued operating leverage improvement, our cash and investments increased to $467 million at June 30.
From $452 million at March 31.
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 onto updated 2023 guidance.
Given the strong momentum we are seeing in our business. We now expect full year revenue to be in the range of $600 million to $610 million, an increase from our previous guidance of $580 million to $590 million.
This updated revenue guidance represents 47% to 50% growth compared to full year 2022 revenue.
Similar to prior years as we progressed through the second half of the year, we generally see increased seasonality in the fourth quarter as patients and physicians attempt to schedule inspire procedures before high deductible health plans reset at the beginning of the year.
We continue to expect full year gross margin to be in the range of <unk>, 83% to 85%.
As Tim noted, we expect to activate <unk> 52 to 56, New U S centers per quarter and established 12 to 14, New U S sales territories per quarter for the remainder of 2023.
In conclusion, our strong performance and business momentum provide us with confidence in our outlook for the remainder of 2023.
With that our prepared remarks are concluded.
You May now open the line for questions.
Thank you Sir.
As a reminder to ask a question you will need to press star one on your telephone.
To withdraw your question. Please press star one again.
We ask that you keep your questions to no more than one question and one follow up and if time permits we'll be more than happy to take more questions. Please.
Please standby, while we compile the Q&A roster.
Yeah.
Your line is open John .
Hey, guys, it's John from Stifel I didn't hear the beginning but maybe I'll go.
<unk>.
Good afternoon, guys are beginning either John but great to have you all area I figure, Tim I'd, just jump in and what the heck.
Both up.
I'm going to ask both upfront.
<unk> one there is certainly a lot of chatter or concern so Tim maybe sort of big picture. How do you view this playing out for the company as Pam and as the funnel altered materially to the upside or the downside arguably from your view and then the second question, maybe more specific to the quarter P&L.
Following you guys for a while and internationally usually doesn't get a lot of play, but that's a big growth number I know you've been working on the opportunity for some time was there anything specific to the second quarter or is this arguably an inflection point for the <unk> business that you see going forward. Thanks.
You bet. Thank you.
GOP margin concerns.
We're happy with GOP, one we think it's complementary to inspire again.
Very specifically discuss that the inspire mechanism of action is to move the tongue based forward. We don't address lateral wall collapse that is associated with higher BMI patients.
That that St. Yet we've talked about this before when we patients go on a GOP one dragging they lose weight they tend to lose.
Wait and the next or comprehensive which is addressed by lateral wall collapse, which is outside of our mechanism of action. Therefore, if we can get higher BMI patients to lose weight. It will relax the lateral walls.
And there'll be predominantly tongue base obstruction, which is highly effectively treated with inspire by stimulation of the hypoglossal nerve. So again two different mechanisms of actions being treated by GOP, one and inspire and very complementary to each of them we do.
Do have our own research project to address lateral wall collapse, but thats a longer term.
Solution.
But in the meantime, if we can see progress with the GOP, one drugs, helping patients lose weight and moving them towards the inspire indication it's going to be highly beneficial at this point, it's a little early so we havent seen a lot of movement out in the field, we don't hear a lot of feedback from our physicians, but we welcome.
<unk>.
The opportunity to take care of the patients as they start to lose weight.
International is exciting and I think we've seen some great progress internationally as we.
John you've been following inspire for quite some time and what we've always said is we don't make strong investments in our country until we've established a reimbursement pathway in that country.
And in the case of Germany, we have had great success, there and as we are coming.
Well after Covid now, we're seeing a strong rebound, Germany had a very good quarter, the Netherlands overcame some reimbursement challenges and are opening up new centers, which provides growth there, but the exciting news is in Belgium that completed the.
Countrywide reimbursement they will have a stronger second half as they start to schedule their cases.
And we already have the announcement, our countrywide reimbursement in France, and we expect the new coding to come out relatively soon so we can do a full lots there so lot going on in the international markets, we really like whats happening and the team is well organized and then in the Asia market second part as we said is doing well and.
Going direct in Japan is really starting to have.
So a good progress and we look forward to reporting more activity there in the future. So thank you very much.
Great color.
Thank you.
And I show. Our next question comes from the line of Robbie Marcus from Jpmorgan. Please go ahead.
Oh, great and congrats on a really nice quarter here.
Maybe to start.
You've recently had the label updated.
You can treat more episodes per night more severe.
Sleep apnea and the BMI raised to 40 can you talk about what Youre seeing is an impact in the field and how much. This can really increase your.
Your addressable market and I guess it.
You touched on in the last with <unk>, but I imagine it probably helps a whole lot with the combination of the two going forward.
Absolutely and thanks, Ravi as far as the label updates go also remember we recently received a pediatric ruble for.
Down syndrome, and that that is going along well and we're opening up more children.
Facilities most of those facilities are already tied in with existing inspired centers, where we can take care of the kids.
The label update for Ehi is a pretty immediate introduction because.
This is not a lot of options for those patients that have a higher <unk> index above 65 growing up to 100.
So that really helps us getting approval with the insurance company. So that's a pretty immediate return we're going to see a little bit.
Increase in procedures right there.
We got to be a little bit careful about because just bringing in BMI patient who up to a BMI of 40.
As a little dangerous because the probability of them, having lateral wall collapse, which again that presents as a complete concentric collapse. When you do a dice procedure and remember we treat.
<unk>.
Tung base obstructions with anterior posterior with the time moving forward.
So with a higher BMI, we're being very careful to not fill the appointment books.
Of the anti surge as with high BMI patients, who won't qualify for inspire anyways.
Those are the patients that will be good patients to get on the GOP. One drugs. If you will to help them lose some weight relaxed the lateral walls and allow us to assess if there are time based collapse that can be properly treated with inspire so to summarize.
The AI is going to be a indication expansion I think in the past we've talked about it being about a 10% increase over our published Tam BMI, we're going to be careful the bulk of their current system doesn't treat lateral wall, but we now have the advantage of the GOP want to be able to address that market as well.
<unk>, albeit they need to lose the way first.
First and we know that takes a little bit of time with the drugs.
Great and.
Maybe one on spending there was clearly you called out I think it was $3 million or so and inspire five.
Buildup in inventory in R&D accounts for a lot of the step up.
But maybe just give us an update on how youre thinking about balancing the great topline growth versus.
Margin leverage and views on profitability going forward. Thanks, a lot.
Yeah, Hey, Ravi it's Rick So yes, we are.
We understand profitability is important.
And we continue to create leverage in our P&L, but our real focus is top line growth and growing the adoption.
So we do invest in a disciplined manner, we continue to do that.
We've made investments in DTC R&D in all areas of our business, but we have been improving our leverage on our with our operating expenses.
R&D is 20% of revenue it was 20% of revenue in the first quarter.
We've talked about we expect that to be in the high teens or so, but we're making.
Tremendous investments as Tim talked about in the prepared remarks.
But we actually in the second quarter.
Given the current macro supply chain environment, and our confidence in inspire five approval in 2024, we are purchasing some inspire five components now but for accounting purposes. It must be recorded as R&D expense I don't mean to get into the fine details of that but but that accounted for 200.
Basis points of our R&D as a percentage of revenue.
That being said stock based compensation is a big number.
In the quarter it was.
Nearly $22 million.
And so taking that out we've generated cash we're cash positive by.
By $15 million, so profitability will come we havent changed our tone on that but we're really focused on the long term topline growth.
Great. Thanks for taking the questions.
Thanks Ravi.
Thank you.
And our next question comes from the line of Danielle <unk> from UBS. Please go ahead.
Hey, good afternoon, everyone. Thanks, so much for taking the question congrats on a really strong quarter, it's great to see.
Just wanted to ask a follow up question on the.
Medicare the shift in patients a little bit away from Medicare patients given that proposed payment.
Payment physician payment.
So the first question I have is what percentage.
For patients today are Medicare and then what percentage of overall OSA patients are Medicare and also how we should think about this going forward is this really meaningful or is this just you guys being cautious.
Sure Hi, Danielle I think Medicare.
Historically, our blend has always been about 65% to 70% commercial 25% to 30% Medicare at about 5%.
VA or military and that probably purposely doesn't add up to a 100, but as we've seen in the last couple of quarters you saw good Medicare rebound.
Usually in Q1, we see heavy Medicare because we have the high commercial in Q4 again going back to the high deductible insurance plans.
So in Q1 Q2, we just saw a higher percent not quite 50%, but approaching it from Medicare. So while that's really exciting for that population. It does put some challenges to the reimbursement in ASC and Thats kind of what we're highlighting we're able to handle and cover those cases all in.
Hospital setting or in <unk> in the north but that does present a longer term challenge as we progress into Q3, and certainly into Q4 as Rick highlighted it becomes more weighted towards commercial cases, because again the high deductibles.
Really kind of drive the fourth quarter. So I would expect our percentages to move back to more traditional ratios.
And then overall of surface sleep apnea is a young person's disease and then the clinical studies. The average age of our studies were down at 54.
During the early commercial years of course reimbursement easier with Medicare.
Rise is up a little bit, but we think that it should be back in the <unk>.
Average age in the fifties remember now we have the pediatric approval. The youngest person is really just single digits years of age. So it were across the board on treating patients but.
For the most part I think that we want to keep our ratio is focused on the commercial side.
Certainly complementary with the Medicare and ours provide service to the VA.
And military.
Okay got it and then Empire guys. Congrats on that once that is approved should we think about that as a gradual rollout or how should we think about building capacity of inspire five ahead of that ahead of a launch and potential impact to margins. There. Thanks, so much guys.
Thanks, Dan out Danielle I think people are excited about inspire five obviously.
The removal of the pressures have been late as both improvement for the patient.
It is mesa procedure more comfortable for our ear nose and throat surgeons to perform it gives.
Often the patient and improve reliability.
Even though we are a small number of revision surgeries.
The culprit for most of those is that pressures thats in late so we want to be able to get this out broadly in the market as soon as we can.
Once approved I'm sure will do a small pilot study just to make sure. It is.
Works well with all of the sleep sync system, the new remote.
And the adoption into the market and.
By midyear, we expect to go full launch on this and we believe once launched it will be a very quick.
Transition across the board.
Thank you all.
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.
Hey, Thanks, a lot congrats on a good quarter, maybe the hospital outpatient reimbursement became out recently, there was a big uptick in Dise procedures.
And a few things with the reimbursement.
Going up on the replacement of the need to be replaced just curious how youre seeing that alright that was expected and how that should play out.
In the business.
Hi, Thank you I think the.
The sleep endoscopy increase in reimbursement was a nice surprise, we know that they have been working on that when they initially came out at just $180 or what it was.
Does.
Very disappointingly low.
For a 15 minute procedure and it wasn't worth hospitals or ASC to be able to do that procedure, but moving that up I think it actually brought the economics from the actuals over the last couple of years kind of drove that calculation and getting it to $1600 really is going to be beneficial.
<unk>.
For the centers, providing that dies procedure.
Then again on the other hand, as we got done talking with our predictors study, we want to reduce the reliance on dice anyways to be able to go to the office exam, we'd rather have the.
The e&ps and the sweet spot that time doing implant procedures, rather than data so very happy about the reimbursement there and I'm sure all of the centers and <unk> will be equally excited when that takes effect in November .
As far as the.
Increased to the hospital and ASC payment for the inspire procedure that's tied to the overall.
<unk> ambulatory procedure code and again very happy with the continued.
Increase in <unk>.
That's been pretty steady of an increase year over year for the last.
Several years. So again it just continues to move north and Thats really good for the hospital and ASC, but we just have to address.
The Medicare.
E payments in the south.
Great. Thanks thinks about and maybe you can talk about summer seasonality kind of cadence of the year Q3 Q4.
Any color on on both the revenue and the margins and spending that'd be helpful. Thank you.
Hey, Travis it's Rick.
As we've talked about we're really proud of the achievement of the team in the first half of the year and we talked about all the opportunities with some of the label changes and the change in the BMI warning.
And other catalysts.
As we have increased our guidance.
600 to 610.
And.
So we we.
We talked about the step that and I mentioned this in the prepared remarks that we generally see.
A strengthening in the in our year in the fourth quarter, given the commercial the commercial mix with physicians and patients attempting to schedule those.
Procedures before those high deductible plans reset at the beginning of the year.
We will continue to.
Increase our spending.
We have shown leverage we expect to improve that as we progress throughout the year.
And so we're excited about the second half of the year, but there will be a strengthening in the fourth quarter.
Great. Thanks, a lot and congrats again.
Thanks Charles.
Thank you.
And I show. Our next question comes from the line of Adam <unk> from Piper Sandler. Please go ahead.
Hi, Tim Rick and <unk>, Congrats on the next quarter and thank you for taking the questions.
I wanted to ask you about the <unk> business and apologies. If this was asked earlier in the Q&A.
Okay, but obviously a big increase sequentially.
$6 million. So the question is.
Is this kind of the new watermark what drove the performance.
Anything to call out from a competitive standpoint in Europe , and then I had a follow up thanks.
Sure.
I think it really is down to the performance of the inspire team.
The focus in Germany was really strong and drove most of that growth I also want to compliment the team in the Netherlands with opening new centers in the Netherlands.
Some we haven't been able to do for several years and also Switzerland, and the rest of dark market really dead.
Very very strong we haven't really seen the performance from Belgium, yet that's still.
Worth coming you're going to see with.
Implementation of the national.
Insurance coverage in Belgium, they're going to have a strong second half. So that's going to continue to move north I think the U K has done implants, but now we're able to open up additional centers in the UK, which is really promising and we previously announced that we were awarded countrywide ramp.
<unk> in France, but France is working through the coding set the CPT coding.
Equivalent in France to make sure that when they lay this out publicly and puts us on the registry that it will have the CPT codes in place, we expect that to happen post vacation time.
In Europe , and so that will do a full launch in the latter half of the year, which is really exciting for France, which is obviously one of the largest markets in Europe . So while we have good progress in Europe , I think the upside is still yet to come and it's really driven by the.
Yes.
The introduction of reimbursement.
And those countries and that's what's really going to continue to.
To drive the business.
No comment on competition I am not sure that has any kind of.
Impact on us over there.
But we are the team is really moving.
Very strong and later in the year I think youre going to start to see some progress over from Asia. As we've made mentioned Singapore is doing really well and Japan, we're just coming through the transition to a direct representation in that country and youre going to start seeing activity in Japan, which is really our focus.
In the Asia markets.
That's great color Jim. Thank you for the Fulsome response and for the follow up.
I guess I'll ask about the digital scheduling tool.
I am curious if you gave an update in terms of the number of U S centers that are now on.
That tool right now.
And just remind us the difference in utilization between centers that have that don't and then a second part would be just on the ASC mix.
This quarter can you provide an update there. Thank you.
Absolutely we are still in the pilot center of the digital scheduling, but probably about 60 plus centers are using the tool right now and that's really exciting because.
Because it is good for the patients they don't go through.
The.
Poor experience of getting voicemail at a center when we're trying to make.
Those appointments or we're going to continue to push that we're in we're entering the second phase of that where we can add additional centers partnering with our software company.
To interface into their digital scheduling so really like whats happening there I think some of the top centers, we're going to be pushing that obviously quicker with those centers with the higher utilization because that really just again.
<unk> that process.
Going forward.
And the second question.
E Mail ASC mix I think that comes down to just.
A little bit higher Medicare mix in the second quarter and Medicare tends to be dominated in the hospital setting, especially down salt, where they have the reduced Medicare rates, but as we progress back to.
Higher commercial rates as we've progressed through the quarter I think that youll see more and more progress with afcs, but it really is our long term vision that <unk> will be a key catalyst for driving the business. We need to continue to provide education to ASC is when they negotiate their contracts with commercial payers to make sure that they have the.
<unk> for inspire and we need to work on the reimbursement levels from.
From a Medicare standpoint, and the proper mix between commercial and Medicare in Afcs.
Thanks, again and congrats.
Thanks Anna.
Thank you.
And I show. Our next question comes from the line of Richard <unk> from <unk> Securities. Please go ahead.
Hi, Thanks for taking my questions guys nice job on the on another good quarter maybe.
My first question.
I know in the past you've talked about.
All of these initiatives that you have.
To increase throughput efficiency one of them is getting more physicians per an implanting center. So do you have an update on the on the kind of the percent of your centers are installed base that have more than one physician.
And then where do you think how should we think about that that over the next few quarters.
Yes, absolutely I don't have a specific number for you we know that continues to grow and as.
A primary factor when reps go and to make sure. We number one have a backup lose your backup if the surgeon goes away is unable to perform procedures as just a routine measure we want to always have a backup.
Other thing is we always look at a lot of resurgence have multiple sites of service. So they can do procedures at a hospital, but they also have a backup.
At ASC per Se latter surgeons have multiple hospitals and an ASC. So for the most part we're getting to the point, we have multiple surgeons in most facilities, but most surgeons also have multiple sites of service so kind of counteract itself from that standpoint, what we're really excited about both.
From E&P and sleep.
As we have a very active fellows program, we want to capture the surgeons as they graduate and go forth into their first job to make sure that they are bringing their inspire experience with them and what we're doing is very actively training them before they start their job is to really focus on.
On making sure inspires part of their practice as they get going and we're doing that again, both with MTN sleep. We just finished our annual.
Fellows course.
We had quite a few e&ps I'm not sure the exact numbers on those of the E&ps that graduated this year, but we're looking about a 50% conversion of those surgeons being able to do inspire procedures in their first year and that same thing goes forward with.
Sleep physician, so we're going to continue to expand that program going forward and get inspired Todd Moore.
At the medical school level.
Great and then.
And of a generic question.
With respect to the utilization backdrop for a number of elective procedures out there. It's been strong in the first half above trend I know you guys are in a different situations. So underpenetrated into this huge tam, but I'm curious the extent to which you're seeing any kind of backlog or pent up demand that's continuing to come in.
In and support strong results.
You are what the outlook is it's in the contribution standpoint, as we move into the back half.
Yes, we are I think we're seeing.
Continued growth across all of our centers, obviously same store sales drove the growth in Q2 as it did in Q1.
And I think we'll continue to do so as we move forward.
Think that we're excited again about the pop that we saw with Medicare.
In the second quarter and I think.
That kind of overwhelmed a little bit more of the commercial cases, which will come on strong in the second half. So the demand continues to be there as you mentioned <unk>, we continue to be underpenetrated in that Tam.
We still have.
Limitations on the number of surgeons performing the procedure. So we still need to continue to address that and work the backlog of patients but.
Absolutely people want to have.
Step in and have their obstructive sleep apnea taken care of.
Demand from our direct to consumer continues to be.
Very effective our contacts are higher efficiency and conversions of patients through impact continues to be strong. We just got to continue to open up more or time by training and getting E&P to commit more of their time to these patients.
Thank you.
Thanks Rich.
Thank you.
And I show. Our next question comes from the line of Larry <unk> from Wells Fargo. Please go ahead.
Hi, its lei, calling in for Larry Thanks for taking my question congratulations on the quarter.
On the guidance.
Great.
Revenue in the full year revenue guidance by a little more than the beat.
That seems to imply in the second half your topline growth is closer to 30%.
Grew over 70% in the first half if.
If you can just talk about why the deceleration.
Is there something other than conservatism and just general confidence in the second half outlook and I have a follow up.
Yeah, Hi latest Rick.
We haven't changed our guidance strategy.
And so we put forth guidance that we believe in and we can stand, but sand behind we did talk about the mix of Medicare and commercial and so with that said, we expect a real strengthening of the commercial procedures as we enter into the fourth quarter. Despite that we're very proud.
Of the inspire team the first half of the year and we have increased it.
<unk> guidance so.
Really similar to previous years on how our revenue will what kind of rollout for the year.
Got it Okay and then just my second question Ken.
Can you talk about the new head of strategy that you just hired.
What will be his Paul okay.
The company has close to 500 million cash should we read that as perhaps an increased interest in expanding our portfolio either inside sleep apnea or even outside of sleep apnea. Thanks again.
Sure Great question, Carl said, it's a great talent and as we continue to grow.
We need that leadership to be able to scale, our business and death.
Definitely see where youre coming from that.
Our investments in the past our focus on technical tools that can help us grow the adoption of inspire that's not changing I think we're going to focus on.
We are building the inspire business to treat obstructive sleep apnea and nothing has changed there and yes, we have been.
Successful that making sure we have a strong balance sheet, but our focus today remains with obstructive sleep apnea and.
Leveraging tools as we have with agnomen anthro data to be able to help patients make appointments with physicians to integrate in with our sleep <unk> system, but again, we're keeping we're keeping our focus we're growing the adoption of inspire and Carlos is going to be just instrumental and helping us.
With our overall strategy plan and understanding what this organization looks like when we go to $1 billion 2 billion in annual revenue and what does the organism organization need to look like not only from our external team, but from our operational side, our clinical evaluation of our quality and our.
Overall company as a whole.
Yes.
Thank you.
Thank you.
And I show. Our next question comes from the line of Anthony Petrone from Mizuho Americas. Please. Please go ahead.
Alright, thanks, and congrats on another strong quarter here, maybe a quick one just on inspire five years just.
Just to sort of clarify the pricing strategy for for the latest Gen system as we look toward the rollout how will it stack up against the existing.
The existing systems out there and then a quick follow up would be when we look at the two themes of GOP ones potentially lowering BMI.
For even patients now contra indicated above 40, BMI, but what that label expansion up to 40 BMI. When you think of those two.
Out there now concurrently how many patients can then actually bring into.
The category, where they would be eligible for hypoglossal nerve stimulation. Thanks got it thanks very much as far as I inspire five comes out we're still.
Evaluating that on what our pricing strategy will be when we launch that it will be a change.
Because again, we wont be.
Moving selling pressure sensing lead either so a little bit of time, yet to come on that we're still doing ongoing evaluation every as I always said in the past we tend to do price increases with technology improvements and this is certainly a strong technology improvement not only with inspire five but it opens up platform, allowing.
As to go to six and seven and beyond.
So a lot more to come on that and we'll report back.
In the future as far as GOP one.
I don't know yesterday did.
Our call with a doctor that was very intriguing in regards to their take.
Take on what <unk> is going to do.
With.
Addressing inspire and how is it going to do with overall weight loss is very interesting disc.
A discussion.
What we're seeing is we know that when you get a BMI.
Above about 35%, we can screen out well over 33rd a third of the patients due to complete.
Complete concentric collapse or lateral wall collapse is associated with a larger next conference as we go to a BMI of 37, even up to a 40, that's when you're going to screen, all 50% or higher.
And so if you can just look at the number of patients up there when we're able to help them with the GOP wanted to be able to lose weight and we relaxed the lateral wall component of their obstructive sleep apnea, that's going to have a significant impact on the inspire business. The key is going to be it will take time I think.
In your report highlighted that Theres not a lot of activity that you've seen to date, yet we haven't heard a lot subjectively from the field on progress made with GOP, one, but we do know that's coming.
In the future.
Thank you very much.
Thank you. Thank you.
And I show. Our next question comes from the line of David <unk> from Baird. Please go ahead.
Great Hi, thanks for taking the questions and congrats on the strong quarter here.
Just first on utilization in the U S. I am wondering maybe what's driving that what's driving that but when we think about kind of the bell curve of physicians that may be your centers, where may be towards the upper and middle land at lower end of this range is increasing utilization kind of coming from any one of those specific segments or is it more more or less broad.
Cross across the spectrum of centers and then when we think about maybe those towards the higher end of that range or are there still improvements utilization coming from those centers or are they approaching maybe some of a somewhat of a capping out kind of level.
Yes.
Hi, Thanks for the question I think we still have quite a ways to go as far as utilization, we can talk about the characteristics.
<unk>.
The higher end sites and the key characteristic is team.
And what that means is the surgeons can focus on those aspects of their practice.
And they can rely on sleep physicians, who will do a lot of the large.
<unk> General manager of the patients a lot of the programming of the device and saw the highest utilizing centers have multiple surgeons and they have a well defined team to know who does what with the patient and it's as easy for the patients to see their process through.
From the initial screening through the implant through the longitudinal patient management and SaaS kind of the key that we try to educate.
Kate the tier two and the tier three sites with as you kind of be able to have the team. We have great respect for our friends, who are those E&P surgeons, who are dual board certified in sleep medicine, because those are the early adopters they've been with us since the very beginning but they need to transition a little bit to have partnership with.
Sleep physicians and others other surgeons to really help them build their capacity and what's important here is we know centers with the highest capacities also have the highest patient outcomes, but thats natural because everybody at the facility knows their job everybody at the facility is experienced.
And they know what a good patient outcome is and so we keep pushing utilization and I think you highlighted that in your.
Initiation report on that as well so.
I think thats really kind of a key is we're going to keep pushing utilization as we move forward.
Okay, great. Thanks, just second one from us on the expanded HIA BMI levels. I know you guys provided some comments around the impact there, but I'm just thinking or wondering I guess more towards the top of the funnel I guess to the extent of which youre able to see.
If maybe you've heard anything anecdotal just around physicians.
More or less at the margin may be considering offering the therapy to a broader number of patients given that those labels have been bumped up a little bit. Thank you.
Thank you Hi, ehi absolutely.
We've made sure that physicians knew about the high na approval right away. We are working with the commercial payers on an update to their policies on that amongst other things, including the pediatric population as well.
The key is going to be that that's an important because those patients just don't have many other options as far as the high BMI as we've been talking about with the GOP. One we're being very careful about jumping too fast into the high BMI rang because those patients will have a higher probability of being screened out with the diaspora.
A seizure because their complete concentric collapse of the lateral wall collapse and those are the concerns of those locations. We think can benefit from the GOP one drugs are being very careful about BMI.
Pushing really hard on high hei, pushing very hard on pediatrics with down syndrome, and then we'll talk more in the near future about transition of dice to therefore predictor that'll also be a key component with payors.
Alright, great. Thank you.
Thank you.
Thank you.
And I show. Our next question comes from the line of Matthew <unk> from Keybanc. Please go ahead.
Okay, great. Thank you for taking the questions.
I wanted to talk a little bit that sleep sync.
And how many of these new centers that you're adding are also adopting sleeps, Inc. And then kind of where are they in like the cloth way what are some of the larger centers pathway.
Towards.
Reimbursement for remote patient monitoring.
Great question. Thank you very much.
The Bluetooth remote that was launched last year.
Really is the big change to sleep. It provided the utility of that system to directly interface the patients device with sleep.
Physicians and health.
Health care providers can now have a real time view of how those patients are doing when we open new centers as we have for the last several quarters new centers being trained are automatically put out sleep sync.
And our processes going back to the older centers that have been around for a while and starting to train them to add sleep sync to their process, but as far as new centers goes.
It's standard requirement right upfront, we train all of them to make sure. They are a part of it is necessary to have this direct communication and as we mentioned we already have the new physician programmer approved and we're going to launch that in the beginning of next year all of the actions taken with the physician programmer.
Automatically stored and sleep sync.
And all of the information from the patient remote from the implant product has transitioned via the patient smartphone to sleep sync and we're going to be introducing tools.
Such as.
Sensor that goes under patients mattresses to be able to record and monitor a patient's quality of sleep that'll be part of sleep sync we are interfacing with our minority investment in <unk> and <unk> data. So their data automatically uploads to sleep, saying and what <unk> is going to be.
<unk> is going to be all encompassing patient management tool, that's going to have not only the objective evidence for the quality of sleep.
But they'll also be able to input the subjective data from the patient how do they feel when they do a telemedicine right what kind of complaints do they have is everything working fine with them.
And then the next step after this with sleep sync is we're going to be able to start taking action from a physician's office to a patient's home with remote patient programming, that's going to be tremendous we're already working on that.
In house, we're already in communication with FDA as well on that so thats going to be a key step.
Going forward.
Okay, Great and then the other one months on all of these new centers that you're adding is this really a push from your sales force or is it a pull from these kind of services. These centers basically asking you need to add this to our practice.
Where we are today, we're still up Paul.
We are do our direct to consumer yes, we are creating a brand.
And a lot of patients see that they come to our website.
While physicians see this as well we haven't mentioned this at all today.
But we get general practitioners.
Family practice doctors, they see those outreach programs as well they come to our website, saying my patients are going to ask me about this I need to know how to communicate with my patients. So we have a large.
Educational process with general practitioners are family practice doctors at heart attack to their patients and how to refer their patients to the emts and so today, we're still responding to outside demand that we need to have this in our in our practice.
And the first thing we do when we get an inbound call from our center.
As we kind of make them fill out an application I know thats out there again, but it's not what it is that the organizational form that helps them identify who's who in the zoo who's the anti who's the sleep physicians you have support from the C suite, we have a proper navigate or do we have the <unk> team, who is going to do sleep endoscopy how are you.
Tied into.
Youre asleep practices. So we're really kind of coordinate all of the key functions that are necessary for centers to come on board and be come onboard with the high utilization. So we're still in that early stage, where we're bringing on patients and we just don't have capacity and centers, yet we need that.
Or a capacity in and cities yet so we need to continue to grow the number of centers that we're training.
Thank you Tim.
Thank you.
Thank you.
And I'm sure. Our last question comes from the line of Suraj Kalia from Oppenheimer <unk> co. Please go ahead.
Hi, Tim can you hear me all right.
Yes, Suraj how are you good congrats on the quarter. So Tim I will thank you everyone.
All my questions quickly all of them directly to you.
On your comments on <unk> appreciate the color.
Maybe you can walk us through I look upon this as a two tailed curve right.
We're talking about high BMI getting pulled in and your comments about lateral collapse I appreciate that how do you look upon the net change because patients that are 30% to $35 47 is going to drop also.
So I'm curious how do you stratify what does the influx minus the outflux. So that's one question.
And the second question Tim Please.
Please stop me if I.
Ask me again, the second question would be what person to feel patients.
Currently are getting hypoglossal nerve stem, but haven't even tried CPAP.
Hum.
Remove programming component can you give us a specific example, where remote programming.
Has been done visitor to Neuromodulation anything and the reason I ask is general otolaryngologist at least our future you're going to have talked about this in the past also offline.
They're sort of disconnected with the with the programming component of it the $100. So I'm curious if you could the remaining time just walk me through sorry, yet through all of those and any question and answers to any questions would be great. Thank you gentlemen, those are all really really good let me walk through I kind of want to go on a reverse but I'm not going to okay BMI.
Influx of Alpha <unk>.
You have knowledge on this and that's why it's so key to talk about this it's a percent of patients with a high BMI that actually have a lateral wall collapse and as you highlight that everybody does and a lot of patients with a BMI of 37 only have ton based collapse until they will pass a sleep endoscopy and go.
Right on to inspire the challenge that you are highlighting is how many patients do you have to see that will actually pass a days.
To be able to move on to inspire and how much capacity did you eat up in that Ent's practice with patients that are unable to get inspire so it's a very good question and that's why we're being very careful with the high BMI. The good news is with predictor that airway exam, we can do a <unk>.
Soft review in an office setting to see if a patients likely to have lateral wall collapse and we're already in.
The next 300, so a lot more to come on that to really start stratify those groups.
I think the the GOP ones are going to take those patients with a lateral wall collapse of the complete concentric collapse.
And ideally now we need to see how this works on practice ideally lower their BMI.
And have them present really ideally as only a tongue based collapse.
So we need to track that going forward. Your second question was with what percent of our hypoglossal nerve stimulation patients have actually tried CPAP and the referring to this is with the Philips recall did we get a significant amount of patients that we're able to bypass CPAP and go right to inspire I think the real <unk>.
Answer to that.
It's probably not I think the great majority of our patients have all tried CPAP and I think that is a gate that the insurance companies always ask.
Im sure there is a small percent that have been able to go through because they are unable to get a CPAP machine because there wasn't.
Inventory there from resume there wasn't a inventory obviously from.
Phil is because of the recall, but I think historically I think very few.
A few of our patients actually get through bypassing CPAP. So I think.
It really has no impact on the inventory side neuro Mod I think Abbott has approval for some of their.
Diabetes products and so if you look at the way sleep sick is set up and we look at the screens of sleep.
They really are modeled after our good friends at AD resume and reservoir did a really good job with the bright tree system, having a patient management system that the sleep physicians don't how to manage their patients.
And if we could model our screens after those the sleep physicians will be comfortable using sleep sync and thats kind of the tool we're using and those are the sleep physicians those are the ones that manage the patients longitudinally and those are the ones that the remote program is is designed for now you may have <unk>.
Or do a board certified slip and they do the longitudinal management, but we're really kind of building sleep sync for the longitudinal management of their remote programming and FDA has approved that for implant products in the past. So we do have precedence.
For which to move forward with.
So thank you very very much on that Suraj I know, we're over time, but I just want to make one last note I want to thank you all for joining the call today as always I'm grateful to the growing team of dedicated inspire employees for their enthusiasm powered work and continued motivation to achieve successful and consistent pace.
Outcomes the inspire team the inspire 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 in Asia.
For all of you on the call. We appreciate your continued interest in and support of inspire and look forward to providing you with further updates and amounts ahead. Please stay safe and healthy. Thank you very much.
This concludes today's conference call you may now disconnect.
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