Q1 2024 Inspire Medical Systems Inc Earnings Call
Good afternoon, My name is Dillon and I'll be your conference operator today at this time I'd like to welcome everyone to the inspire medical systems first quarter 2024 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.
Dillon: I'll now hand, the call over to your first speaker.
Dillon: The Vice President of Investor Relations at inspire you may begin the conference.
Dillon: Thank you Joanna and thank you all for participating in today's call. Joining me are Tim Herbert Chairman, and Chief Executive Officer, and Vicki Holt Chief.
Dillon: Chief Financial Officer.
Earlier today, we released.
Speaker Change: Actual results for the three months ended March 31st 2020 for a copy of the press release is available on our website.
Speaker Change: On this call management will make forward looking statements within the meaning of the federal Securities laws.
Speaker Change: All forward looking statements, including without limitation.
Speaker Change: Tour operations financial results and financial condition investments in our business.
Speaker Change: Our 2024 financial and operational outlook and changes in market access.
Speaker Change: Based upon our current estimates and various assumptions.
Speaker Change: Statements involve material risks and uncertainties that could cause actual results or events.
Speaker Change: Different.
Speaker Change: Accordingly, you should not place undue reliance on these statements.
Speaker Change: Please see our filings with the Securities and Exchange Commission, including our Form 10-Q, which we filed with the us.
Speaker Change: For a description of these risks and uncertainties.
Speaker Change: In spite of screens.
Speaker Change: 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.
Speaker Change: Yeah.
Speaker Change: Live broadcast today may.
Speaker Change: 2024 with that it is my pleasure to turn the call over to Tim Herbert Tim.
Timothy P. Herbert: Thank you Keith and thanks, everyone for joining our business update call for the first quarter of 2024.
Timothy P. Herbert: We always start our earnings call by reiterating our commitment to delivering.
Timothy P. Herbert: And consistent patient outcomes.
Timothy P. Herbert: Our mission is to put the patient first.
Timothy P. Herbert: We are thrilled that over 65000 patients have been treated with inspire therapy today.
Timothy P. Herbert: Last week, we celebrated a major milestone with the 10 year anniversary of the FDA approving inspire therapy.
Speaker Change: This is only the beginning and in the years ahead, we look forward to advancing the technology and growing therapy adoption for the many patients with untreated obstructive sleep apnea.
Speaker Change: With that let's review ours our result.
Speaker Change: In the first quarter, we generated revenue of $164 million, representing a 28% increase compared to the first quarter of 2023.
Speaker Change: First quarter U S revenue totaled $155 $8 million or 25% increase over the same period last year.
Speaker Change: This revenue growth reflects increased physician and patient awareness increased market penetration in existing centers as well as expansion into 66, new implanting centers in the United States and 11, New U S sales territories.
Speaker Change: Outside the U S revenue increased 141% to $8 $2 million.
Speaker Change: We're very happy to report a strong rebound in Europe, and primarily in Germany.
Speaker Change: It's even derogation late in the fourth quarter.
Speaker Change: But there is some process has allowed us to continue to grow the adoption of inspire therapy.
Speaker Change: We continue to work diligently to obtain EU M. B R approval, which we expect to receive in mid 2024.
Speaker Change: On our last earnings call, we indicated more pronounced seasonality of mid to high teens in the first quarter and the team worked diligently and delivered revenue growth within the expected range, while holding seasonality to 15%.
Speaker Change: With the strong start and our outlook for the remainder of the year, we are increasing our 2020 for revenue guidance to $783 million to $793 million, which represents 25% to 27% growth over 2023 revenue of 600.
Speaker Change: $24 8 million.
Speaker Change: Our net loss for the first quarter was $10 million compared to the $15 $4 million in the <unk>.
Speaker Change: Prior year period.
Speaker Change: Representing a net loss per share up 34% compared to 53 cents in the first quarter of 2023.
Speaker Change: As our business continues to mature we expect further operating leverage and now expect to be profitable for the full year 2024.
Speaker Change: Therefore, we are initiating first time diluted net income per share guidance.
Speaker Change: 10 to 20 cents for the full year 2024.
Speaker Change: Torching, our discussion to a few key market developments first the surmount OSA trial result results reinforced our view that GOP ones will be complementary to our market opportunity and may provide a mechanism for protect for potential patients to reduce their weight.
Speaker Change: Qualify for inspire therapy.
Speaker Change: As a baseline inspire therapy is currently designed to treat ton based collapse with stimulation of the hypoglossal nerve.
Speaker Change: Patients with a higher BMI are more likely to experience lateral wall collapse of the airway, which is not effectively treated with hypoglossal nerve stimulation.
Speaker Change: If they experienced a lot of Warcraft these higher BMI patients.
Speaker Change: As the patients tend to surmount OSA trial, who had a mean BMI of 39 Gen.
Speaker Change: Generally would not qualify for inspire therapy.
Speaker Change: Therefore, with the headline results of this amount OSA trial, we believe many of the patients who experienced significant weight loss, including those who benefit from the use of GOP ones are likely to experience a reduction there lateral wall collapse, which would allow them to qualify for inspire.
Speaker Change: We look forward to reviewing the detailed study results when they become available.
Speaker Change: Unrelated note.
Speaker Change: With regards to the sleep endoscopy procedure, which is used to identify patients that are candidates for inspire therapy.
Speaker Change: We have completed the enrollment in quality assurance portion of the predictor study that is intended to identify a new approach to replace sleep endoscopy for a subset of patients.
Speaker Change: We are early in the data and that data analysis phase and we are identifying the populations that have predominantly tongue base obstructions.
Speaker Change: Without surprising consistent with this amount OSA results previously discussed.
Speaker Change: Our initial focus with their predictive study is a patient with a lower BMI, who may not have significant lateral wall collapse, and therefore not require a sleep endoscopy.
Speaker Change: We will continue the analysis and move forward with towards the peer reviewed publication.
Speaker Change: <unk> us to work with payers to update their policies.
Speaker Change: Staying with our R&D activity, we are happy to report that the inspire five submission is in review with the FDA.
Speaker Change: Assuming approval we are on track for a soft launch in 2024 and a full launch in 2025.
Speaker Change: The team is focused on our operational readiness, which includes ensuring proper inventory levels prior to fall launch.
Speaker Change: Further we continue to make enhancements to our technology as evidenced by the commercial launches of our telecom basically the Bluetooth patient remote the ongoing investments in our sleep <unk> digital platform and most recently the FDA approval of our new physician programmer, which.
Speaker Change: Connect directly with the sleep se platform.
Speaker Change: Highlighting our market development activities, we continue to advance our medical education program and year to date, we had over 100 slipped out at close to 200 anti residents at 10th hour inspired training programs.
Speaker Change: Further we continue to increase our presence at primary care and cardiology conferences to drive increased awareness of inspire therapy.
Speaker Change: Our direct to consumer awareness programs continue to be excellent and provides a strong pathway for patients to connect with a proper health care providers.
Speaker Change: Key to our success is our continuous improvement of our tools to assist the patient journey.
Speaker Change: It is important to note.
Speaker Change: That we have the first and only FDA approved closed loop neuro stimulation system to treat obstructive sleep apnea.
Speaker Change: And over the past 17 years have built very strong clinical evidence with nearly 6000 patients worldwide and detailed compelling real world evidence, including over 280 peer reviewed publications.
Speaker Change: And a strong reimbursement presence with over 260 million covered lives in the United States.
Speaker Change: We continue to advance therapy adoption of clinical evidence, including expansion of therapy indications to increase the number of patients who could benefit from inspire therapy.
Speaker Change: And its fire, we have built a world class team and crew.
Speaker Change: Using a direct commercial organization in the United States and numerous global markets.
Speaker Change: We have also invested heavily in research and development commercial infrastructure reimbursement direct to consumer campaigns medical education programs at clinical trainers to drive continued awareness and adoption of inspire therapy, while focusing on and improving upon.
Speaker Change: Our strong patient outcomes.
Speaker Change: In summary, we remain focused on the patient to continue that growth and adoption of inspire therapy. We will continue to execute our growth strategy of increasing utilization at existing centers, while adding capacity by opening new centers.
Speaker Change: As we celebrate the 10 year anniversary of our FDA approval, we remain excited about our future prospects and are confident that we have the appropriate strategy in place to drive long term stakeholder value.
Speaker Change: With that I'd like to turn the call over to Rick for his review.
Rick: Of our financials.
Rick: Thank you Tim and good afternoon, everyone.
Rick: Revenue for the first quarter was $164 million or 28% increase from the $127 9 million generated in the first quarter of 2023.
Rick: U S revenue in the first quarter was $155 8 million, an increase of 25% from the $124 5 million in the prior year period.
Rick: Revenue outside the U S was $8 2 million, which is at 141% increase year over year.
Rick: The global average selling price was consistent year over year and with the previous quarter and we expect asps to remain at this level for the remainder of 2024.
Speaker Change: Given the potential of new entrants in the future. We do not expect to continue to report this metric going forward.
Rick: Gross margin in the first quarter was 84, 9% compared to 84, 4% in the prior year period.
Rick: The increase was driven by improved manufacturing efficiencies and higher volumes.
Rick: Total operating expenses for the first quarter were $154 5 million, an increase of 21% as compared to $127 5 million in the first quarter of 2023.
Rick: 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.
Rick: Interest and dividend income totaled $5 9 million in the first quarter compared to $4 3 million in the prior year period.
Rick: This higher income was driven by higher interest rates on our increased cash and investment balances compared to a year ago.
Rick: Net loss for the first quarter was $10 million compared to $15 4 million in the prior year period, representing net loss per share of <unk> 34 <unk>.
Rick: Compared to 53 in the first quarter of 2023.
Rick: The weighted average number of shares outstanding for the first quarter was $29 6 million.
Rick: We expect our full year diluted shares outstanding to be $34 million.
Rick: Our total cash and investments were $469 million at March 31, and was consistent with our December 31 balance.
Rick: The strong cash position allows us to remain focused on executing our growth strategy of increasing procedure volumes at existing centers, while training and opening new implanting centers.
Rick: We continue to expect to generate positive cash flow for the full year 2024.
Rick: Moving on to 2024 guidance with the strong trends we are seeing in our business. We now expect full year revenue to be in the range of $783 million to $793 million.
Rick: Representing an increase of 25% to 27% compared to full year 2023 revenue.
Rick: We expect full year gross margin to be in the range of 83% to 85%.
Rick: We continue to expect to activate 52 to 56, New U S centers and established 12 to 14, New U S sales territories during each remaining quarter in 2024.
Rick: While we are early in our adoption and we'll continue to expand our footprint by opening new centers and territories. We believe profitability is a more relevant metric and tracking our financial performance going forward.
Rick: With that said starting in 2025, we will guide to revenue growth and earnings per share and as such we will no longer provide center or territory guidance metrics.
Rick: Given the strong momentum in our business and our improving leverage we expect the diluted net income per share for the full year 2024 will be between 10 to 20 <unk> per share.
Rick: Yes.
Rick: In conclusion, our strong performance and business momentum provide us with confidence in our outlook for the remainder of 2024 with that our prepared remarks are concluded you may now open the line for questions.
Rick: Sir.
Speaker Change: As a reminder to ask a question you will need to press star one on your telephone.
Rick: Your question. Please press star one again.
Speaker Change: We ask that you. Please 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 standby, while we compile the Q&A roster.
Rick: And I show. Our first question comes from the line of Danielle <unk> from UBS. Please go ahead.
Danielle: Hey, good afternoon, guys. Thanks, so much for taking the question.
Danielle: Yes.
Danielle: Hi, just a quick question on the U S performance in the quarter less than 25% very very strong.
Danielle: Come in below expectations, I guess I don't know if you could comment a little bit.
Danielle: The Street was modeling.
Danielle: It looks like the sequential decline in utilization is actually less in Q1 versus Q4, then we have said before that for HCC.
Danielle: But maybe some of the.
Danielle: Medicare versus private pay mix and most importantly, anything you're seeing from the private pay side.
Danielle: For example, United California dynamic with them.
Danielle: Lee requiring sensitive documentation around financial sorry that was a lot of sites.
Danielle: Any more color on the U S.
Danielle: Thanks.
Speaker Change: Thanks, Danielle I think I got it.
Speaker Change: Yes.
Speaker Change: We did talk a little bit about the seasonality of the express expected in the quarter. We did have a strong Q1 last year offset with some of the silicon lead inventory that we're shipping and we knew we had a strong Q4 coming in as well. So we expect that the higher seasonality. The team did well the team held tight to come in where we expected.
Speaker Change: To be with a 15% seasonality.
Speaker Change: And we do see the utilization continuing to be strong as we move forward going into the year and therefore, we have confidence in being able to increase our guidance. We do understand the concerns over some of the private pay in the prior authorizations and specifically.
Speaker Change: United Healthcare with.
Speaker Change: Oral appliance therapy, we're tracking that very closely and with United.
Speaker Change: We work hard to document the prior authorizations going in and we don't see any significant pushback.
Speaker Change: At this point don't believe it has any impact on our business again, we feel we're in a good position moving forward for the rest of the year.
Speaker Change: Thank you.
Speaker Change: And I show. Our next question comes from the line of Robbie Marcus from Jpmorgan. Please go ahead.
Speaker Change: Hi, This is Allen on for Robbie I had I guess a bit of a follow up to the first question on the U S. Despite the U S experience is heightened seasonality.
Allen: Did Abbott raises the guide by let's say a fair multiple of be largely driven by O U S. So what are you seeing that gives you confidence.
Allen: Quarter to raise guidance by this much and should we think about that as coming from utilization Doc adds center ads.
Speaker Change: I think it's all of the above I think we do see good demand for the therapy across the board.
Speaker Change: Would you see uptick in utilization as we move through the year I think we did have confidence to increase the guide focusing more on the latter half.
Speaker Change: But I have confidence going forward with the.
Speaker Change: Demand for the product within the United States with the increased number of centers that we opened up in and continue to drive utilization.
Speaker Change: Thank you.
Speaker Change: And I show. Our next question comes from the line of Travis Steed from Bank of America. Please go ahead.
Travis Lee Steed: Hey, Thanks for taking my question I guess, why do you think U S Center utilization.
Travis Lee Steed: It's slow and it's kind of about even if you exclude the new centers this quarter.
Travis Lee Steed: Kind of in line with the second half of last year, which is when you had some of the prior off issue is it just really haven't seen any improvement there. So.
Speaker Change: So just curious is there something going on with the new centers, you're adding or older centers maturing.
Speaker Change: Or any kind of rep changes going on in.
Speaker Change: And also curious why youre no longer going to report the kind of the metrics, we use to track utilization right.
Speaker Change: Alright, I think.
Speaker Change: Utilization continues to be our focus and I think if you kind of look back to where we were back in the first quarter.
Speaker Change: We're pretty consistent where we were a year ago, when you take into effect the inventory shipments with <unk>.
Speaker Change: Silicon leads we know we always have seasonality as we come out of Q4 and moving into Q1, and we tend to start ramping back up and that again gives us the confidence to be able to.
Speaker Change: Kris.
Speaker Change: The guide as we move through the second half of the year I think as we kind of look at as we start maturing the company and we focus our reporting on revenue and now we're very happy to start reporting on and Canadian profitability for the company as we mature I think it's become less important for us to report on it.
Speaker Change: Number of centers, then and the number of new adds and there's all sorts of proprietary reasons for it to be able to do that as well, but I think that we're making sure that we provide the proper information for people to really be able to model the business and really feel profitability is going to be a key to two.
Speaker Change: Some people out there.
Speaker Change: Thank you.
Speaker Change: And I show. Our next question comes from the line of Adam <unk> from Piper Sandler. Please go ahead.
Adam: Hi, good afternoon, and thank you for taking the questions.
Adam: Wanted to start with a guidance question. So the raised guidance I wanted to just better understand are we are you guys attributing that primarily to the O U S business is that should we spread it across both U S and O U S. Just help us kind of think through that and then any color Tim that you are willing to provide.
Speaker Change: Q2 trends, thus far in the quarter.
Speaker Change: The Street at 188 million for Q2 consensus revenue curious if youre willing to give up a comment there as well, but I did have one follow up thanks, Okay that sounds good I think that.
Speaker Change: Well when we look at it we think good progress in Europe, we did have a little bit of a rebound effect with the derogation in Germany, which is strong, but we're seeing strong momentum.
Speaker Change: Going forward there too so the European team is performing very well as is the team in the United States. So I think there is a complementary element too.
Speaker Change: Growth in international revenue, which is wonderful.
Speaker Change: Yeah, Hi, Adam it's Rick I'll I'll add to that too.
Rick: So historically, we have experienced seasonality in the first quarter and then as far as the compensate the composition of our full year revenue that generally builds throughout the year. So I would say that the increase in the guidance.
Rick: It should be mainly seen in the second half of the year.
Speaker Change: I got it guys I apologize I guess I'm a little confused so the guidance raise this is attributable to both the U S and O U S business going forward, which you kind of spread it across.
Speaker Change: Both of those.
Rick: Geographies is that correct.
Speaker Change: Yes.
Speaker Change: There will be.
Speaker Change: From a from a.
Speaker Change: All U S perspective.
Speaker Change: We're not we don't give quarterly guidance from O U S and U S perspective, but we did see some catch up.
Speaker Change: In the first quarter.
Speaker Change: Outside the U S. We did have a strong first quarter, but we expect to see some of the additional catch up into 2024, but to a little bit lesser extent so.
Speaker Change: We're not we're not guiding towards any sequential growth outside of the U S. But we we look forward to.
Speaker Change: Continued good numbers outside the U S.
Speaker Change: Okay. Thanks, Thanks for that guys and if I may just with the follow up wanted to ask you about surmount OSA.
Speaker Change: Data came in pretty much as expected down the fairway.
Speaker Change: I did want to ask how youre thinking about any potential.
Speaker Change: The impact to the patient funnel either in the back half of 'twenty four 'twenty five.
Speaker Change: Are you hearing anything in the field.
Speaker Change: From docs are reps.
Speaker Change: Well folks look to potentially try a GOP want before going forward with and inspire procedure or do you think theres going to be no impact to the funnel. Thanks again for taking the questions. Thanks Anthony.
Speaker Change: Yes, so we talked to all of our dogs when we talk to appeal, we do hear discussions around the GOP wants and we know that patients with a higher BMI tend to get screened out with the sleep endoscopy here.
Speaker Change: And there are patients who have reported being able to use the GOP wanted to be able to lose weight and therefore qualify for inspire so very early early days.
Speaker Change: But we do get positive reports on that and look forward to continuing to focus on that.
Speaker Change: As we move through the rest of the year.
Speaker Change: Thank you.
Speaker Change: And I show. Our next question comes from the line of Cowen <unk> from Morgan Stanley. Please go ahead.
Cowen: Thanks for taking the question guys.
Cowen: Just on the recent commercial insurance updates I know some of the policies kicked in in March. So curious to hear about any early interest or momentum you've seen from those high BMI nahi patients as well as the pediatric down syndrome population as well now they are in scope for coverage just any color on initial progress that would be great. Thanks. Thank you very much.
Cowen: We see more progress with the high ehi the high Avnet kept part Nick Index.
Cowen: Because that's a natural step for those patients to be able to receive approval and we're able to move some of the prior authorizations and process to print to bring them in and then move that forward with the high BMI approval remember that's just a change to the warning to allow patients with a BMI up to 40, but it's still very important that we treat.
Cowen: Tongue based collab versus lateral wall and we do today is still used sleep endoscopy to screen those out so not that significant of an impact with the high BMI, yet, but thats something as we just talked about with the GOP ones that perhaps we can leverage that to take advantage there and the fund news is with the pediatric population as a group.
Speaker Change: That we really care about we continue to grow the awareness there and we are opening up additional.
Speaker Change: Two of those hospitals to be able to participate with inspire so we're starting to see some movement.
Speaker Change: With that population as well.
Speaker Change: Thank you.
Speaker Change: Sure.
Speaker Change: Next question comes from the line of David Ross Scott.
Speaker Change: From Baird. Please go ahead.
Speaker Change: Hey can.
Speaker Change: Can you guys hear me Alright, yes, Gary.
Speaker Change: Great. Thanks for taking the questions I wanted to follow up on the kind of profit or the deposits kind of profit guidance that you gave for the full year, maybe just wondering what some of the bigger drivers are behind that I know you talked about.
Speaker Change: More.
Speaker Change: Targeted kind of DTC spend in 2024 previously wondering how big of a piece.
Speaker Change: That is and when we think about the cadence of that through the year should we expect that to be more backend loaded where you have a pretty positive Q4 that kind of outweighs the losses in the rest of the year or do you think in Q3 have the potential to deliver a positive quarter as well.
Speaker Change: Hey, David It's Rick I'll take I'll take that question so.
Rick: Yes in the first quarter.
Rick: DTC spend was $26 million.
Rick: A little bit increase over year over year, but as we've talked about in the past and in 2023, we spent about 100 $100 million in DTC.
Rick: And as we mentioned with the increased demand.
Rick: From patients physicians, and adding new centers will continue those investments, but again that rate will really be moderate.
Rick: Nearly flat for 2024, because we are focusing on more targeted digital advertising to go after qualified patients.
Rick: Hopefully improve that that conversion so from a.
Rick: From a profitability standpoint, as we continue to increase revenue DTC spend will be flat versus 2023.
Speaker Change: R&D will continue to spend.
Speaker Change: High teens percentage of revenue.
Speaker Change: And so that that leverage will be gained in.
Speaker Change: Increased utilization.
Speaker Change: And so we put forth a new the new.
Speaker Change: The new guidance and that we're excited about which is a bottom line of 10 to 20 earnings per share in the bottom line.
Speaker Change: We mentioned before that we would be profitable for the second half of the year and now we're guiding to profitability for the full year, but we haven't broken down and which quarter. You know that we turned that corner, but we're excited about the ability to be profitable for the year.
Speaker Change: Thank you.
Speaker Change: And I show. Our next question comes from the line of Anthony Petrone from Mizuho. Please go ahead.
Anthony Charles Petrone: No. Thanks for get US adherence afternoon hope everyone's doing well.
Anthony Charles Petrone: One dynamic on in the U S to explore a little bit just the sort of push out of inspire five.
Anthony Charles Petrone: Do you think there is maybe a little bit of pause that you saw in <unk>.
Anthony Charles Petrone: That could maybe extend.
Anthony Charles Petrone: In <unk> that can extend into <unk>, how does that dynamic play out in the quarter and have a quick follow up thank you.
Speaker Change: Sure No we don't see any delay we like with the progress, we're making with inspire five.
Speaker Change: And the packages probably put together and it's in review with the FDA and we're running our program targeting our soft launch later this year and for.
Anthony Charles Petrone: For a launch in 25, so we still remain very very.
Anthony Charles Petrone: Excited about the inspire five portfolio that we'll be launching.
Anthony Charles Petrone: And maybe just to level set going back a little bit to unitedhealthcare in the expanded.
Speaker Change: Coverage there they did have one.
Speaker Change: Sort of.
Speaker Change: Preemptive step with Mandibular repositioning devices. It seems like a minor step to us yet that label has greatly expanded the coverage has greatly expanded to match FDA. So maybe just a little bit on the push pull there you think theres any slight hiccup from mandibular.
Speaker Change: But on the flip side. It seems like this is a great app.
Speaker Change: An expansive opportunity just from overall coverage standpoint, so how does that push and pull play out through the remainder of the year with United specifically thanks.
Speaker Change: Thank you I think that's a very good observation that you make there and I think that we agree that the upside with the high haf's, specifically as well as to the pediatric population far outweighs the documentation that we put into the prior authorization for Mac <unk> advancement devices or oral appliance there.
Speaker Change: Therapy, and we think that that our team works to make sure that the health care provider.
Speaker Change: Have the proper documentation and the prior authorizations that go to United Healthcare. So we don't see a significant challenge.
Speaker Change: Documenting that the oral appliances, but we do see good upside with especially the high Hei and then secondarily with the pediatric population. So yes, great observation. Thanks.
Speaker Change: Thank you.
Speaker Change: And I show. Our next question comes from the line of Chris Pasquale from Nathan. Please go ahead ma'am.
Christopher Thomas Pasquale: Thanks, Hey, guys. One quick one on predictor, just any plans to present that data, we will disclose the headline results prior to the publication.
Christopher Thomas Pasquale: Sure, we would probably have a presentation down the road, where we stand today and with the timing of the ASM, which is the sleep meeting in June I don't think were going to be in a position to.
Speaker Change: Present, there, but we will be looking for a public conference.
Speaker Change: As we work public.
Speaker Change: Publication in parallel so we will still push for later in the summer or early fall, possibly with the AISI.
Speaker Change: ISS meeting, but we will look to get that information out as soon as we can.
Speaker Change: Okay.
Speaker Change: And then just circling back to surmount.
Speaker Change: When you think about your current patient population I know if you look at the adhere registry the average BMI was around 29.
Speaker Change: Do you think that's still an accurate reflection of your patients you're treating commercially since our label expansion has that shifted at all just want to draw a distinction between the patients that were in this study at baseline and who you guys are seeing on a day to day basis.
Speaker Change: I think I think good observation again, I think the patient and the BMI in the Star trial is consistent with the BMI that we saw in our 5000 patient adhere registry.
Speaker Change: It reflects patients that have a sleep endoscopy and do not have significant lateral wall collapse.
Speaker Change: Thats very consistent with the reports of the.
Speaker Change: Surmount OSA trial, who is the patient started with the PMI at 39. So you would expect those patients we predominantly lateral wall collapse and as they lose weight.
Speaker Change: They can relax that Ed and expose the tank based class that so effectively treated with inspire so I think very very good consistency.
Speaker Change: From the data that we saw and really look forward to seeing additional data.
Speaker Change: When it comes out hopefully this summer.
Speaker Change: Thanks, Tim.
Timothy P. Herbert: Thanks, Chris.
Speaker Change: Thank you.
Speaker Change: And I show. Our next question comes from the line of Richard <unk> from <unk> Securities. Please go ahead.
Richard: Alright, thanks for taking the questions maybe just first on inspire five.
Richard: Yes.
Richard: As the anticipated launch timing the same as it was the last time you provided an update and then just on inspire five how are you.
Richard: Thinking about or potentially.
Richard: Anticipating.
Richard: People, whether it's physicians or consumers waiting.
Richard: For the inspire five to come out relative to <unk>.
Richard: The existing solution I guess is there risk that that there is a delay in treatment.
Richard: However, transient that might be is that something that is contemplated in guidance or be something you've thought about and preparing for it.
Speaker Change: Thanks Rich the first answer to your first question is yes.
Speaker Change: And running our plan and in line with what we talked about at our last last earnings call never too is with the large yes. There is always a risk of <unk>.
Richard: Patients being aware of it but we will not be marketing. This program Intel that therefore launch and so we believe the risk of <unk>.
Richard: Warehousing, if you will or patients waiting for the new technology is going to be very very low we have this experience with past products that we have that we haven't experienced.
Richard: Any kind of delay from that perspective, but we're certainly aware of that certainly we'll monitor that but we do not believe thats going to have a significant impact as patients who have untreated moderate to very severe sleep apnea are are very motivated to receive therapy.
Speaker Change: Got it and maybe just one follow up on the.
Richard: What you are and aren't going to provide going forward. So it sounds like you guys are going to continue providing new account openings and utilization for the remainder of 'twenty four but starting in 'twenty five.
Richard: One we're going to provide new account openings and if.
Speaker Change: That's right.
Speaker Change: How are you going to.
Speaker Change: Help.
Speaker Change: Analysts and investment community understand what the utilization trend is in the business and what will you provide towards that end.
Speaker Change: Right, that's correct and what we're going to be focusing on is our top line revenue growth as well as more importantly.
Speaker Change: Profitability going forward and we'll continue with discussions with you, but I think the focus is really going to be top line bottom line.
Speaker Change: <unk> to be consistent.
Speaker Change: Cross industry.
Speaker Change: Thank you.
Speaker Change: And I show. Our next question comes from the line of.
Richard: Sure.
Sink: Sink from RBC. Please go ahead.
Shirley: Great. Thank you. So much I was just wondering if you can talk about on slide five and predictors study readout.
Sink: <unk> gotten some pretty good feedback on it and very specifically on inspire five I was wondering if you had any big one potential impact in driving down operating times.
Richard: That could potentially increase utilization and then on the predict the study.
Richard: Just how meaningful could this be in speeding up that patient funnel and then just lastly, I was wondering if there's any updates on trends in OSA diagnoses I think previously you've called out a bunch of drivers like DLP ones <unk> BDC I think there's general increasing awareness amongst the <unk>.
Richard: Piece et cetera, So just anything you're seeing on the diagnosis front. Thank you for taking the questions.
Speaker Change: Fantastic I got them all okay. So with inspire five yes, we do expect to have a reduction in operating time.
Speaker Change: Operating room time for the surgeon, specifically because that will remove the pressure sensing lead which is now going to be incorporated inside the us.
Speaker Change: Inspire five neurostimulator, so it's one less product.
Speaker Change: The search it needs to.
Richard: <unk> and <unk>.
Richard: So we believe that that's going to have a significant reduction.
Richard: I have talked in the past of our average ore types are they being to between 60 and 90 minutes and we believe with inspire five it could go down to between 45 and 60 minutes. So a significant reduction in the time they've performed the procedure. So we think thats going.
Richard: To be very well accepted both for the patient as well as the surgeon secondly, as far as the patient funnel goes we know the time for a patient to contact a health care provider of go through the diagnostic process and get scheduled and receive inspire therapy takes a significant amount of time and a key part of it.
Richard: In the middle is to perform that drug induced sleep endoscopy, it could add anywhere from one to three months to the time, depending upon the scheduling of that specific surgeon. So we believe with predictor of we can identify a population of patients with low BMI that don't necessarily need to have a sleep endoscopy and it can add.
Richard: And alternative review that we can reduce the time for those patients we believe patients with the higher BMI likely we'll have to continue with sleep endoscopy, but we're going to keep working on the data analysis to be able to show that but hopefully in a significant number of patients we can show.
Richard: In improvement and the P.
Richard: Patient experience, meaning the time from contact to receiving therapy.
Richard: And then finally talking about the trends in obstructive sleep apnea, not only with the awareness that the GOP one drugs can create and those.
Richard: Elements, such as oil product television show really creates awareness of when those patients go to their general practitioner. They will be diagnosed for diabetes for heart failure and for obstructive sleep apnea. So we believe that will increase the.
Richard: The diagnostic rate of obstructive sleep apnea, secondly, patients are aware of how well they sleep, we have smart beds. There our watches that will coming out that will track the quality of your sleep. So generally to the society has become more aware of their quality of sleep and we believe that will just continue to increase.
Richard: The.
Richard: Awareness and the diagnostic rates for sleep apnea and therefore the.
Richard: Opportunity for inspire.
Speaker Change: Thank you.
Speaker Change: And I show. Our next question comes from the line of Jon Block from Stifel. Please go ahead.
Jonathan David Block: Thanks, guys and good afternoon.
Jonathan David Block: Maybe just the first one any update on other privates coal.
Jonathan David Block: <unk> coverage policies changing for the higher BMI AHRI any update there and do you expect most onboard.
Jonathan David Block: By the end of 2024, and then the follow up Rick just to shift gears, just curious about the guidance and profitability for the year you guys continue to be.
Jonathan David Block: A solid beat and raise story so, let's just say hypothetically the year ended at I don't know 825 million top line and not the $7 90 midpoint. How are you going to handle that do you see that flow through to the bottom line on the incremental dollar.
Rick: Or is it one of those things, where you sort of take that upside in <unk>.
Rick: I went back into the business I'm, just curious if that 10 to 20 cents should move higher proportionately to the potential upside to the revenue targets. Thanks, guys, Hey, Jon Let me take the first one and then hand off to Rick.
Rick: First the payers go we have an active program sending in communications out to each of the payers to make sure that they are aware of the FDA approvals for the new indication and encouraging them to.
Speaker Change: Excuse me update there.
Speaker Change: Their policies are making very good progress.
Speaker Change: We would like to have most of them.
Rick: <unk>.
Rick: Taken care of by the end of the year, Although Medicare is always challenging because with the Mac you have to run through a fixed process to be able to meet with CMS meet with the Max go through the update process to be able to get the policies updated and reviewed and implemented so Medicare is always a little bit of a delay getting.
Rick: Through there, but the commercial policies have responded quite well and we expect to continue to keep pushing that.
Rick: As we as you mentioned for the rest of the year, let me hand off to Rick.
Rick: Our profitability respond sure Hey, John.
Rick: First of all we have not changed our guidance philosophy.
Rick: And that goes across all of our guidance metrics.
Rick: But we also.
Rick: We're staying focused on improving center.
Rick: Capacity utilization and so as we continue to improve utilization.
Rick: What let it be knowing that we continue to make investments in our business for our long term growth.
Rick: Our revenue has.
Rick: Revenue growth has been outpacing our opex growth.
Rick: And we're excited to announce that be profitable for the full year on a GAAP basis.
Rick: As we continue to make those investments with our 84% gross margin and our opex not growing quite as fast as as revenue.
Rick: Could we see improved leverage yes, but we're not guiding to that at this point.
Speaker Change: Thank you.
Rick: And I show. Our next question comes from the line of Mike <unk> from Leerink Partners. Please go ahead.
Mike: Hi, everyone. Thanks for taking my question.
Mike: First of all is there any scenario, where the secondary endpoints to surmount I want to say that we could see at Adi could make you or you've heard kols think DLP ones, maybe could have a more negative impact on the business.
Mike: From the top line.
Mike: Data that was put forward I think that's going to be.
Speaker Change: A little bit of a struggle if I understand the question I think we look forward to seeing the detailed data and it's hard to hypothesize on what that data is going to show, but I think if you look at the 51% reduction in AI in the specific or that was just therapy alone.
Mike: Sean I think that is pretty indicative of what we can expect as we come into the summer and that shows that they are able to help those patients with a higher BMI lose weight.
Mike: Thereby addressing their lateral wall collapse. So I think I think you'll see more of the same as we move into the summer months and be able to look at more specific detailed specifically with that different groups of BMI.
Mike: After they lose weight and then be able to look at the specifics.
Mike: <unk> reductions of different ranges of BMI. So really look forward to seeing that data. We believe that data is again going to be in line with what we've talked about to show that these GOP was will be complementary to inspire.
Speaker Change: Got it understood and then maybe just separately you mentioned the impact of some of the wearable devices, Yes, I know.
Speaker Change: Samsung got FDA approval for their watch earlier this year. It seems like you might get a commercial launch of that <unk> is there any consideration of that in your guidance and then to what extent does that represented a source of potential upside either near term or longer term.
Speaker Change: I don't think specifically we've included the new technologies into our guide I know, it's still early days for the watches to come out, but smart beds have been in existence for some time and I think our outreach programs are really key to driving.
Speaker Change: Our awareness and done and we continue to spend a lot of time with general practitioner that cardiologists are working our referral networks, which is the classic med tech marketing as well to continue to drive referrals. So we arent that specific into our guide to be able to.
Speaker Change: Pin down that were specifically dealing with the new technologies, but we do believe that they will have a positive impact in the future for sure.
Speaker Change: Got it thanks very much thank you.
Speaker Change: Thank you.
Speaker Change: And I show. Our next question comes from the line of Michael Sarcone from Jefferies. Please go ahead.
Michael Anthony Sarcone: Hey, good afternoon, and thanks for taking my question.
Michael Anthony Sarcone: Just one from me so on the competitive front.
Michael Anthony Sarcone: Got a competitor overseas they released some U S data.
Michael Anthony Sarcone: And it seems like theyre going to stress.
Michael Anthony Sarcone: Positive data or good results across both non supine in supine positioning as maybe a point of differentiation.
Michael Anthony Sarcone: They start detailing in the U S. Just wanted to.
Michael Anthony Sarcone: To get your take on.
Michael Anthony Sarcone: Have you had conversations with physicians.
Michael Anthony Sarcone: Physicians.
Michael Anthony Sarcone: Your thoughts on how meaningful that could be.
Michael Anthony Sarcone: Efforts or potential to counter detail those claims.
Michael Anthony Sarcone: We don't have to think it has any impact we've been talking about supine ehi with our physicians.
Michael Anthony Sarcone: 2007.
Michael Anthony Sarcone: When we launched inspire in fact when I.
Michael Anthony Sarcone: Worked on this project inside Medtronic back in the late Ninety's in 2000, and we're focused on supine ehi. So this is not a new phenomenon of gravity FX sleep apnea and when you laid supine gravity.
Michael Anthony Sarcone: Gravity pulls the tug back harder than if you lay on your side when we program our devices. We program worst case in other words in a supine.
Michael Anthony Sarcone: Supine position, so we know with certain levels of energy required to treat supine ehi, that's what programs or that's what patients are programmed at and then when they rollout to their side you might argue that they are being over stimulated and thats true because what we care about is making sure that.
Michael Anthony Sarcone: We have equal treatment at both <unk> and <unk>, we had specific items in that in our star trial. So.
Michael Anthony Sarcone: This is not.
Michael Anthony Sarcone: Not a concern we've been.
Michael Anthony Sarcone: Focused.
Michael Anthony Sarcone: Laser sharp focused on supine ehi since the day, we started the company.
Speaker Change: Thank you.
Speaker Change: And I show. Our next question comes from the line of Larry Big Olson from Wells Fargo. Please go ahead.
Speaker Change: Hey, guys. Thanks for taking the question one question from me and maybe it'll be a very short answer Rick good to see the profitability progress.
Speaker Change: Any broad strokes on profitability goals beyond this year and how should we be thinking about tax rate. Thank you.
Speaker Change: Right so for 2025.
Rick: Providing overall guidance here for 2025.
Rick: We're going to be profitable for 2024, and we're not expecting it to go backwards.
Rick: So we expect to be profitable for 2025 and thereafter.
Rick: And as far as the effective tax rate.
Rick: We'll give more color on that we have a lot of Nols that we will get to recognize on that and so for purposes of model will provide more clarity on effective tax rates.
Speaker Change: In a future call.
Speaker Change: Alright, thank you.
Speaker Change: Thank you.
Speaker Change: I show. Our next question comes from the line of Brett <unk> from Keybanc capital markets. Please go ahead.
Speaker Change: Hi, This is actually Liz on for Brent. Thanks, So much for taking the question.
Liz: Just one from me could you guys provide some.
Liz: Some updates on your broader DTC strategy and how its been progressing.
Liz: Absolutely.
Liz: Go back.
Liz: A couple of quarters, but we talked about refinement of our program and how we are.
Liz: Focusing our DTC more targeted to our demographic and thats been very successful we continue to grow GTT, but as Rick mentioned.
Liz: We stay pretty consistent with.
Liz: Where we were in 2023, and we're seeing revenue grow beyond that has for capturing leverage from our DTC program. We continue with both national TV buys as well as with social media, but now we're also getting into targeted digital placement that chart to be quite effective so.
Liz: The DTC program has evolved since our commercial approval 10 years ago, and 2014 and will continue to evolve as we learn more and find better ways to reach out to our specific patient population.
Speaker Change: Great. Thank you.
Liz: Yes.
Speaker Change: Thank you.
Liz: And I show. Our next question comes from the line of micro Polack from Wolfe Research. Please go ahead.
Michael K. Polark: Hey, good afternoon apologies, if I missed this but salesforce sales territory ads or accretion in the quarter was 11 I think the guide.
Michael K. Polark: For each quarter of the year was $12 2014, I see I see you reaffirmed the guide for the year, but I'm just curious in <unk> 11 versus.
Michael K. Polark: 12 months 2014 kind of is that just timing anything to flag, there and I asked because it seems like a slight <unk>.
Speaker Change: And trend that was a metric you had been guiding for a long time and you typically we're adding above the quarterly guide and this is a touch below so any color on this one would be helpful. Thanks observation, Michael I think the.
Speaker Change: It's just timing I think the we.
Speaker Change: We focus our new territory ads based on where we are adding new centers and where the need is and so we don't specifically target a number of.
Speaker Change: New territories per quarter, and so there's always as you know a little bit of fluctuation in there from quarter to quarter, but not.
Speaker Change: Not a lot of change there we reinforced our guide going forward and maybe just a little bit of timing and who is already in the first quarter to be able to add a new territory and we will continue that focus going forward.
Speaker Change: Sure.
Speaker Change: Did I jumped early did you have a follow up to Micah.
Micah: That was good thank you Tim.
Speaker Change: Correct.
Speaker Change: Thank you.
Speaker Change: And I'm sure. Our last question in the queue comes from Suraj Kalia from Oppenheimer and co. Please go ahead.
Suraj Kalia: Rick Tim can you hear me alright, yes, Suraj how are you.
Speaker Change: Hope everyone is well.
Suraj Kalia: Tim a couple of questions I'll pose them right away and hopefully you get the gist of it.
Suraj Kalia: First and foremost Tim in terms of supine non supine great.
Suraj Kalia: There was a recent paper highlighting quite low responder rates and ehi reduction that inspire supine versus non supine.
Suraj Kalia: So I guess, if you could help reconcile your comment about the dose.
Suraj Kalia: Current titration.
Suraj Kalia: Based on our supine position so.
Suraj Kalia: Help us understand why is the paper.
Speaker Change: It is that is one question in the <unk>.
Speaker Change: Second question quickly.
Speaker Change: I could.
Speaker Change: Understand.
Speaker Change: Consensus commentary about complementarity of clips to.
Speaker Change: OFC and I.
Speaker Change: Hypoglossal nerve and CPAP I get all that.
Speaker Change: Tim what I'd love to understand more is arent really looking at just one side of the coin severely obese coming into let's say the obese category.
Speaker Change: But by the same token the volume effect of overweight and obese patients.
Timothy P. Herbert: 10 times that of severe rate should we be looking at the other side of the coin also I'd love to get your perspective on that gentlemen, Thank you for taking my question. So thank you very much kind of box.
Speaker Change: Can I go back and look at that paper I think some of it was subjective evidence that was talked about.
Speaker Change: And that the core evidence, but yes, our focus is always around <unk> in fact in our clinical studies, we literally screened out patients who did not.
Suraj Kalia: Supine AHRI and.
Suraj Kalia: We're only two five so we evaluated that in the star trial, we've been evaluating that all the way through.
Suraj Kalia: It's very clear that super with gravity is more challenging to treat.
Suraj Kalia: We believe that Thats been a key focus for inspire.
Suraj Kalia: Beginning of the company and we will continue to focus on that going forward. Secondly on the GOP was been complementary it's about the mechanism mechanism of action I know we've talked about this.
Suraj Kalia: Quite a bit higher BMI patients to have more of a lateral wall collapse hypoglossal nerve stimulation is designed to treat tongue based obstructions not lateral wall collapse. So we know as the patients get a higher BMI that.
Suraj Kalia: The GOP was can be comp metrics to bring them.
Suraj Kalia: Two a lower BMI and relax the lateral walls and to your question. The belief is that I think what youll see from the surmount OSA trial is patients who have a lower BMI do not have the same level of HIV reduction.
Suraj Kalia: <unk> by the fact that the mechanism they don't have lateral wall collapse and GOP ones are not designed to treat.
Suraj Kalia: Tag based collapsed, that's what inspired dose that's how the two become copper.
Suraj Kalia: Complementary.
Suraj Kalia: To each other so.
Speaker Change: Thanks, very much for that Suraj.
Speaker Change: Yes.
Speaker Change: This concludes our Q&A session for the conference I would now like to turn it back to Tim for closing remarks.
Timothy P. Herbert: 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.
Timothy P. Herbert: And continued motivation to achieve successful.
Timothy P. Herbert: System patient outcomes.
Timothy P. Herbert: The team's commitment to patients remain unmatched and is the most important element to our success.
Timothy P. Herbert: 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.
Timothy P. Herbert: Europe and Asia.
Timothy P. Herbert: For all of you for all of you on the call. We appreciate your continued interest and support of inspire.
Timothy P. Herbert: We look forward to providing you with further updates in the months ahead. Thank.
Speaker Change: Thank you all very much.
Kris King: Kris King.
Speaker Change: This concludes today's conference call you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Okay.