Q1 2024 Earnings Summary
- Inspire V device is on track for launch and expected to reduce operating room time significantly: The upcoming Inspire V neurostimulator is anticipated to decrease the average operating room time from 60-90 minutes to 45-60 minutes by integrating the pressure sensing lead into the device, eliminating the need to implant an additional product. This reduction could enhance utilization and adoption rates among surgeons and patients.
- Expansion of insurance coverage with commercial payers updating policies by end of 2024: The company is actively working with payers to update their policies in line with new FDA approvals for expanded indications. Most commercial payers are responding positively, and Inspire aims to have most policies updated by the end of the year, potentially expanding the addressable market and driving growth.
- Expectation of full-year GAAP profitability in 2024 with improving operating leverage: Inspire announced that it expects to be profitable for the full year 2024, with revenue growth outpacing operating expenses. The company's 84% gross margin and slower growth in operating expenses relative to revenue indicate improving operating leverage and potential for sustained profitability.
- U.S. revenue growth came in below expectations, raising concerns that pressures from private payers and prior authorization requirements (such as UnitedHealthcare requiring documentation around oral appliances) may be impacting growth.
- The company is reducing transparency by no longer reporting certain operational metrics, such as the number of new centers and sales territories added, which could raise concerns about underlying trends in utilization and expansion, especially since sales territory additions were below the guided range this quarter.
- Potential competition from other therapies and devices may erode Inspire's market share, as competitors are releasing positive data and may highlight areas where Inspire has limitations (e.g., efficacy in both supine and non-supine positions), potentially challenging Inspire's competitive advantage.
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Profit Guidance
Q: What drives the positive profit guidance for the full year?
A: The company expects to achieve profitability for the full year, driven by increased revenue and flat $100 million DTC spend, focusing on more targeted digital advertising to improve conversion. R&D spending will remain at high teens percentage of revenue, and leverage will be gained through increased utilization. New EPS guidance is $0.10 to $0.20 per share. -
Guidance Raise
Q: Is the raised guidance due to U.S. or OUS performance?
A: The raised guidance is attributable to strong demand in both U.S. and international markets. The company sees good progress in Europe and expects the increase in guidance to be mainly seen in the second half of the year. -
Impact of GLP-1 Drugs
Q: Will GLP-1 drugs affect the patient funnel?
A: The company hears positive reports of patients using GLP-1 drugs to lose weight and qualify for Inspire therapy. While early, this could expand the patient population as high BMI patients become eligible. -
UnitedHealthcare Policy
Q: Does UnitedHealthcare's new requirements affect the business?
A: The company does not see significant challenges from UnitedHealthcare's documentation requirements for oral appliances. The upside from expanded coverage for high AHI and pediatric populations far outweighs any hurdles. -
Inspire V Launch
Q: Is Inspire V launch timing the same, and will patients delay treatment?
A: Yes, the Inspire V launch timing remains on plan. The risk of patients delaying treatment to wait for Inspire V is very low, as the company will not market it until full launch, and patients are motivated to receive therapy without delay. -
Operating Time Reduction
Q: Will Inspire V reduce operating times?
A: Inspire V is expected to reduce operating room time from 60–90 minutes to 45–60 minutes by eliminating the pressure sensing lead, enhancing both patient and surgeon experience. -
Patient Funnel Acceleration
Q: How will the PREDICTOR study impact the patient funnel?
A: The PREDICTOR study could reduce time to therapy by potentially eliminating the need for sleep endoscopy in certain low BMI patients, shortening the time from contact to receiving therapy by 1 to 3 months. -
Trends in OSA Diagnoses
Q: Any updates on obstructive sleep apnea diagnosis trends?
A: Increased awareness due to GLP-1 drugs, media attention, and wearable technology is leading to higher diagnostic rates of sleep apnea, expanding opportunities for Inspire. -
New Patient Populations
Q: Any early interest from high BMI and pediatric patients?
A: Progress is seen with high AHI patients moving through prior authorizations. Impact from high BMI patients is not significant yet, but the company is opening additional children's hospitals and seeing movement in the pediatric population. -
Changes in Reporting
Q: Why are you no longer reporting certain utilization metrics?
A: As the company matures and focuses on revenue and profitability, it considers reporting on the number of centers and new adds less important, partly for proprietary reasons. Profitability is key to helping model the business.