Inspire Medical Systems, Inc. (INSP) September 2026 Conference Transcript

All right. Welcome back. I'm Larry Beigelson, the Medical Device Analyst at Wells Fargo, and it's my pleasure to host this fireside chat with the management team from Inspire Medical. With us, we have Chairman and CEO Tim Herbert and CFO Matt Osberg. So welcome, Tim and Matt. Thanks for being here.

Larry, thank you for having us once again. It's always a pleasure to be up here in Boston with you.

Well, it's a pleasure to have you. So I think Tim's going to run through a few slides, and then we'll jump into questions.

Yeah, I thought we'd take the opportunity just to kind of show a couple slides, just to kind of get everybody grounded here a little bit, and really just highlight, I mean, we're the first and only innovative closed-loop Neural Stem technology for OSA. You can see on the summary the progress that we have made with a large opportunity, a strong technology, and we've treated over 140,000 patients since our approval back in 2014. This is a busy slide, but it's important to talk through our technology, because as we get surrounded in the challenges that we may have in the market, it's about taking care of the patients and the outcomes. And last year, we launched the Inspire 5 system, and the outcomes have been very strong. We talk about the necessity to do closed-loop stimulation. The airway is most susceptible to collapse when the patient inhales, and that's when we provide synchronous stimulation along that. To do that, we sense when the patient's breathing, and with Inspire 5, we've incorporated that using an accelerometer that's inside the can, and during our clinical study we conducted in Singapore, you can see on the upper right-hand slide there that 87% of our stimulation is synchronized with respiration. That allows us to take the outcomes to the next level. And outcomes are not just AHI, but what you're going to hear more about as we move forward is hypoxic burden. And that's the challenge that the body faces with oxygen desaturated during the night, and that has direct linkage with cardiovascular health which we just started to show that the data that's being published by academic centers across the United States so the Inspire 5 device has a reduced work for surgery because it no longer has a pressure sensing lead and that's incorporated and it's a it's predominantly all the implants so far this year I'm gonna ask Matt to comment Yeah, so our second quarter, although we declined year over year in revenue,

we were pleased that we beat our expectations both on the top and bottom line. As we called out, the decline was primarily driven by some of the coding and reimbursement issues that we've been experiencing in the first half of the year. We were also pleased we were able to continue to expand gross margin, as we saw in the first quarter as well. really that's through the mix of our of our new inspire 5 technology that came out onto the market in the middle of last year and as we were able to deliver expectations they're higher than expectations in their second quarter we're also able to raise our guide top and bottom line for the rest of the year as well so really pleased with the second quarter we also announced project Horizon we're able to find some efficiencies in our organizational structure in our supply chain and rededicate approximately 30 million dollars of investment capacity into revenue generating activities that we think as we start to ramp up the back half of this year and into next year will help give us some tailwinds as we look to the top line growth for next year. Thanks.

Couple of catalysts coming up I know Larry's gonna really get into a little bit more detail when we get into the questions but we want to highlight that reimbursement we have both short near and long-term solutions the short term is really understanding the challenges that were with the coding this year and the coding change going away from 64568 back to 64582 to the C codes and I think as you've been tracking our story for the first half of the year you've watched the evolution of the code and we're at the point where we're starting to reduce the friction, and centers have knowledge on how to bill a procedure, how to confidently get paid, and the payment is consistent with payment they had in previous Midterm, we're looking to carry forward into 27. There is some positives proposed for increases in site reimbursement that I think is really positive, and really the long-term solution is the new CPT code, and that is being reviewed next week at the AMA meeting and we're prepared to be able to be at that meeting and we'll track that. The results of that will be disclosed probably three weeks when the minutes of that meeting come out. In the middle, again, I just highlighted the benefits of Inspire 5 and the clinical data coming out. What's most important is really looking at the hypoxic burden and the benefits of the cardiovascular data and then as as matt mentioned on project horizon is looking at our organization not stopping innovation focusing our innovation on the projects that will have a good return inspire six as an example sleep sync other technologies that will have a strong return but allowing us to really focus uh initial 30 million dollars on growth initiatives as we move into 2027 we expect to be back in a growth phase so a lot of exciting things talked a little bit about the reimbursement just to highlight that you can see the C codes are now in place they were put in place back in April but it takes time for them to ripple through the system in fact they were just put in place with the WISER system which of course is the program that's run in six states over the last couple months so really a continual effort but now we're at the point where we really have the reduction in the in the friction with coating and we can get centers back to ramping up as we go forward you can see as we move down the second bullet on the bottom the only two of the max require a dash 52 modifier today the other five max have been stable and that really helps with centers when they work through their their coating process to be able to know how to build that quick looking at the just the schedule how this all kind of flows out is that here we are today it's September the AMA meeting is scheduled for next week to review that new CPT code we're gonna watch the OPPS rules they come out on November 1st there or thereby around that when CMS announces the final reimbursement for the centers and both hospitals and ambulatory surgical centers we expect that very early in November if the CPT code is approved or decided on next week we'll know that in three weeks that code will take effect January 1st of 2028 so a lot happening in expanding our clinical experience and strengthening the inspire value proposition inspire 5 really took the first step by incorporating the sensor into the can and being able to improve outcomes which move forward into the physiologic changes what we're measuring with hypoxic burden and now demonstrating long-term cardiovascular health that's going to have a significant impact on our business moving forward okay you can kind of read through the rest of those and we'll kind of leave it there here we're just highlighting Project Horizon again and how we've identified 30 million of efficiencies in our organization and how we can focus those back into growth catalyst including expanding patient access to care improving patient flow and and really supporting other patients with strong outcomes moving forward so kind of ran through those quickly because I know you want to get into a lot of detailed questions, but really wanted to put the highlight on there that we've worked so hard over the first half of the year to really focus on the coding and getting clarity around that and really reducing the friction around the coding and reimbursement so we can get back into our business of focusing on patient care and really taking advantage of what we've done introducing inspire five and the benefits that we've seen with five and really be able to increase and focus growth initiatives as we move forward. Very helpful. Now I have a neck, a neck because it's a little hard to see the slides from here.

But thanks for going through that, Tim. And it sounds like you're making a lot of good progress. So I like the way, you know, obviously let's start with coding reimbursement. A couple follow-up questions. You know, I like the way you laid it out on the Q2 call, short-term, mid-term, long-term. Right. Starting with the short-term, you talked about providing education and support to customers. Where are you in the process of educating centers?

Well, we want to work with all of our centers to give them the information they need so they can code the procedures and depending upon what their payers are, if they're Medicare, a commercial, or a Medicare Advantage. And we did detailed training programs, starting with the highest utilization sites and kind of working through that list, making very good progress. The majority of the sites in the U.S., I think they know how to build a code today. We still want to continue doing more of our detailed education with them and make sure that there's any clarification that they need. It is a little bit of a challenge for sites in that they may code commercials differently than Medicare. And Medicare, we all know they use a C code for the procedure, and then the professional fee is coded under 64582. And that's pretty clear now across the board, and that really has reduced that friction. As far as commercial payers, they are prior authorized. And during the prior authorization process, the CPT code is on that prior auth form, so when it's approved, it really provides clarity to the center so they know how to build that procedure. So making very good progress with that, gaining confidence from the centers where we can start rebuilding the ramp at the centers and reigniting or opening up new openings for patients to see physicians and get scheduled for their procedures.

That's good to hear. And you also talked about continuing to see improved trends in key data points, such as prior authorization submissions. Has that continued and why is that important?

Well, those are our key leading indicators, and so we're able to kind of work from the beginning of the funnel and patients who come to our website and those that work through our systems, like our advisor care program, which is our call center, to help patients understand, inspire, and to be able to make that first appointment with a health care provider. And we also support the centers in preparing prior authorizations, as you mentioned. And we can track the centers and the progress of those prior authorizations. And so when we set our guide on our Q2 call, we knew that the indices were supportive of that. And we continue to work towards that. We continue to see promising signs with the prior authorizations, with the pipeline. But now what we need to do is keep building the utilization, the confidence around the coding.

That's helpful. Turning to the midterm, you talked about CMS proposing higher facility rates for the hospital in AAC settings, up 12% to 15%. Any idea, like if you looked at precedent, how likely it is the proposed rates are finalized, and what the implications would be?

Well, I think a couple things. The initial proposal from July was hospital increase of 12% for Medicare cases, and I think that's wonderful. I think more important in there is the ASCs were proposed to go up 15%, and that is really what the challenge is because when they do geographic adjustments for INSPIRE procedures, it limits some ASCs from being able to do INSPIRE-5 procedures. This increase really kind of helps that, to help us build a greater focus towards ambulatory surgical centers into the future. You know, we don't want to handicap where the final rule will be in November. We anticipate an increase. Will it be at that same level? We don't know. We don't want to touch that. I know CMS is doing their own work to get to their final resolution. We'll watch for that. We expect that right around November 1st and be able to adjust as we move into the new year. The final rule, if it does post early November, will become effective January 1st of 2027. So all the work that we've done with the coding clarity up to this point in 26 will really carry over and then have the added benefit if we're able to get an increase in center reimbursement.

You talked about when you're going through the slides, you talked about being back in growth mode in 27. Evan, do you expect to be in growth mode no matter what happens with the hospital and ASC facility rates?

Yeah, when we first stated that, we realized where we are as a company, where we are with reducing the friction again, repeating that term on the coding. And we made a statement we expect to get back to growth. And I think that even with the existing reimbursement, we'll be able to achieve that.

But if it goes up 12% to 15%, for example, it would be incremental positive.

Well, we're going to start doing our work and planning for next year, and we'll come back to you when we set guide for next year. But we certainly do expect to be back to a growth situation next year.

That's helpful. You know, the long term is the Category 1 CPT code for Inspire 5. You talked about it today. You've talked about it in detail on the Q2 call. I think you gave a lot of helpful color on the changes you made I guess as we sit here today Just a simple question your level of confidence.

You have a positive outcome Well, I'm confident we've done everything to be prepared for the meeting and I think that we've reviewed the meeting in May I think we understood questions that were there. We've Worked across industry with societies to understand what questions are there what challenges are there are our team is ready the The presenters are making sure they understand what questions or concerns the panel may have, and it's up to the AMA panel. It happens, the meetings are next week, and so, again, not going to handicap that, but certainly want to stress that we are as prepared as could be to support that meeting and to answer any questions that the AMA panel may present.

That is helpful. Well, then, switching coding and reimbursement. Did we exhaust that topic?

No, I think that's fine. I think I used the word, you know, reduced friction how many times. But that's what it's all about. It's making sure that facilities and physicians understanding what the codes are they can use and understand that the reimbursement levels are consistent where they were the prior year and are comfortable and confident moving forward and bringing patients back in.

Reduced friction. Reduced friction. Okay, one more time. Tim, clinical data, you're really leaning into the cardiovascular data with Inspire. The studies that you cite are non-randomized. So how much, my question is, how much traction do you think registry data can get?

I think the key to the cardiovascular data, it's large sample sizes and it's long-term review of data. And it's from multiple sources. and that's typically how we capture comorbidity and cardiovascular health and risks of reductions in the risks of cardiovascular health I think the universities that are publishing are using the Trinetix database we're going to be publishing data where we went to a third-party payer to use their health care providers what's important they're not they are large-scale registries but they're multiple sources of data and they were reporting back consistent data outcomes and what we can do from inspire 5 the linkage between the two is the term I talked about with hypoxic burden it's not just measuring sleep severity using a hi apnea hypoxic index it's really understanding what are the underlying challenges of untreated obstructive sleep apnea and that is the oxygen desaturation that your body experiences during the night and the number of events and it's not just the number of events that you have but it's the prolonged time of those events and the depth of the desaturation that the O2 in your blood experiences with those and if you combine the area under the curve. That calculation is the hypoxic burden. That has direct linkages to the risk to be a category 1, 2, 3, 4, 5. And even that we went back to our STAR trial, we recalculated all those patients, even the non-responders, and they showed a significant reduction in cardiovascular risk. And I know one of the highlights of the year is you host us for your spotlight call. We're able to go through this in great detail to really show the impact that we can have on objective measures that can show cardiovascular health, but now we have multiple databases with large sample sizes comparing us against CPAP and, of course, against no treatment and really showing long-term cardiovascular health. So we are making sure that we're communicating this to the cardiovascular physicians, make sure they understand the necessity to treat the underlying sleep apnea along with the cardiovascular challenges that they're facing with their patients. I think that you're going to hear us talk quite a bit about this, and we're going to be really leaning into this as we move forward.

That's helpful. So switching gears to Project Horizon, you touched upon it a little bit. Maybe flesh that out a little bit more. What are you going to be doing differently from what you've done historically?

Well, I think let's start across the organization. We looked at where do we have efficiencies. Now, we've grown very quickly since our FDA approval in 2014, and now is an opportunity to be able to look at the organization and where do we have some redundancies that we can help combine resources to be more efficient, but then take our investments such as in R&D and really focus on the projects that can really have a strong return. Inspire 6, perfect example that we're in the development right now. That's going to take the Inspire 5 that we talked about and add in a feature that is sleep detection. So when you fall asleep, the device turns itself on at night and the patient no longer uses the remote. The importance of that is we are now increasing therapy adherence. That's the next step in driving overall patient outcomes. We will continue to invest in our digital programs on SleepSync. One example is centers can now, we always support centers on their prior authorizations, as we mentioned. They can submit that data through SleepSync now. We're starting to make that a streamlined approach. We'll have a new app coming out for the patients that really help them be a part of their procedure. now we're streamlining our operations to be able to really focus to improve our yields and improve our efficiencies and operations and that allowed us to identify 30 million that we can put back and identify into areas that can help us drive growth and a lot of examples in that is both the beginning of the pipeline we can excite that but we can also improve efficiencies of helping patients make that first appointment. And we do still see quite a drop-off in patients trying to make an appointment and not being able to connect with a health care provider. We'll continue work such as with cardiovascular education to drive patient flow. Private practice physicians are working significantly with patients on GOP-1s and need to make sure that as they come back for their reviews that they're tracking is the sleep apnea resolved and do they need to be seen for additional therapies because if now we showed with cardiovascular health that they must be treating the moderate to severe sleep apnea so many elements that we'll be talking about in the future to apply that 30 million for additional growth that's helpful maybe we can get Matt involved I mean right give Tim a little bit of a break there yeah so for Q3 you guided to you I think Q2 Matt you said earlier you were down about seven and a

half percent year-over-year Q3 you guided to eight to ten percent year-over-year decline in revenue I think it implies a similar decline for Q4 and on the Q2 call you talked about improving prior authorization trends growing experience with coding changes which suggests that procedure volumes improving Tim talked We talked about reduced friction once or twice today. So my question is, why shouldn't we expect sequential improvement in revenue growth in the second half of the year?

Yeah, yeah, so obviously, as you're looking at there, the comparisons year over year, and you've got the math right, what we're really focused on is, how are we sequentially improving our revenue dollars, right? And we tried to call out Q2 is what we think the low point for dollars are in the year, and then stepping up in Q3, and And then the implied guide would be a larger step up in Q4, which we've typically seen comes some of our seasonality. So for all the reasons you said, we think those are the things that continue to help us step up sequentially as we move through the rest of the year.

Okay, so it's more of the sequential seasonality change that we typically see.

Yes, yeah.

Typically, I know Q4 is always up above Q3. What is it usually, Q2 to Q3? it's really it's generally pretty flat between q2 and q3 generally q1 we have a high percentage of our Medicare cases and then q4 we have a high percentage of our commercial cases which our biggest seasonality step up is usually in q4 and then Tim we we talked about 27 already I don't know if you have anything you want to add to that you see where consensus sits today maybe you know what are some of the puts and takes anything you would point out that the streets missing or or Matt now I think we a lot we talked about is is reducing friction of the coding getting confidence with the coding ideally we're

hopeful that we'll get an increase in in site reimbursement that'll help and that will really help us kind of leverage back to the clinical evidence that we're seeing with inspire 5 and and the cardiovascular health and and implementing a lot of our improvements we talked about with Project Horizon. So again, focus on getting back to growth in 2027. We'll be working through our planning as we kind of work through the year to come out with our guide on what we're going to do next year.

And Matt, margins, you know, mid 80% gross margin, you know, you turned profitable a few years ago. So how should we think about profitability leverage at Inspire?

Yeah, so I mean, obviously, starting with our gross profit margins, this year we've been able to expand as we increase the mix of five versus four, and that's great, but obviously with those type of margins, when we can generate revenue again, and we can really fuel the bottom line from an operating margin perspective. So throughout this year, as we've seen the pressure early on on our revenue, We've taken a lot of steps to be thoughtful about our spending, prioritize our spending, make sure we're spending against the highest ROI, making sure we're driving revenue generating activities. So we want to keep that discipline, that mentality as we start to step in and move into growth phase, like Tim said. And then I think there's high opportunities for us to continue to drive operating margin improvement as we drive revenue growth. And international was actually pretty good in Q2. anything noteworthy there anything any inflections that we should be aware of nothing unusual you know I think they've got a little bit more season now just because the business is a little bit smaller and it's split up between some different countries they can have different dynamics on in there you know I think they improved from q1 so that was nice to see but you know nothing specifically I would call out in q2 and Tim inspire stick sounds like an exciting product what are the what's the clinical and regulatory pathway very similar to five and and five as you know that we're able to use an accelerometer to collect information we can use patients as their own control and that

was the clinical evidence that was put together and presented to the FDA to that supported the approval six is a lot of the same inspire six is a firmware software upgrade to inspire 5 only and it's really algorithm development of making sure that we have detection of sleep to be able to activate the device and it's going and validating those algorithms is really the clinical approach and we'll use the same approach we did with 5 and we're in discussions with FDA on that already we are not ready to submit we're still in the development of those algorithms and and the validation portion of it but as we progress through that we'll be submitting to the FDA and then they'll be have a chance to do their review.

So when you say submit you mean like file for approval.

File for yeah PMA supplement.

And I think you've talked about some potential timelines it sounds like that filing could occur in 27 with a launch in 28.

We're possibly we're we are definitely looking for the submission in 27 and we'll we'll kind of take a review on when we launch that.

Okay, so definitely it's a mission in 27.

We're trying to get a submission in 27.

Yes And the work you're doing like with the accelerometer and all that that would be done when well the accelerometer is is Well, that's already in the device.

That's for instance.

So we're so we're being able to evaluate the external that's ongoing as we speak Got it. Okay, so could this timeline be sooner rather than later?

I think our time is pretty good. We just laid that out there. Okay, it is so competition what are you seeing you have your first hypoglossal nerve stimulation competitor in the market what are you seeing from them what percent of centers are dual sourced I think we said it again today we're the first and only that has the closed loop capability we think that's essential for having the proper outcomes we know centers are going to trial other devices that's fine I think that we make sure we remind them of confidence that they have with inspire the outcomes they have with inspire the safety that we have with inspire revision rates were already very low and they just got better with inspire five because the pressure sensing lead was a causal effect for many um of the revisions that happened in the past so we're comfortable just kind of keep running our game we know a lot of as i say a lot of our centers will trial the other device, but I think the physicians, they understand what to expect from Inspire, they understand what to expect for outcomes for their patients and have confidence with that.

Anything different from your expectations on competitive trialing?

I think it's been pretty consistent with what we predicted. And their results for the top line results from their triple C trial access about a week to go any reaction to that data I think it's just a little bit too early I think I look at our predictor data which is patients under BMI under 32 there's not many patients that have a true complete concentric collapse all the patients I think in that top line we're all less than 32 and so we have to wait till that real data comes out I think it might be presented um at uh international sleep surgical society devil's in the details so we'll we'll kind of wait and see when we see a full data set not a top line anything new on glp1s glp1 a lot of progress i'm in progress with glp1s we know that patients come to their physician to get a glp1 to lose weight to look better feel better and the physician say well we should diagnose you for sleep apnea, because if you're diagnosed, your insurance company will cover if you have moderate to severe, and I think what that's going to do is continually increase the diagnostic rate of patients with moderate to severe sleep apnea. It's very important, as we've talked how much today about cardiovascular health, that that is addressed and resolved, and I think that a lot of our sleep physicians are prescribing GOP-1s, but they're being pretty prescriptive about it, And when they put them on a GLP-1, they may put them on a CPAP at the same time. As they track them a year later to see how they're doing with their sleep apnea, we know many won't be compliant to CPAP, unfortunately. They're going to need alternative therapy. So as we're working through the coding aspects and getting the RAMP back, I think the GLP-1s are continuing to grow the awareness of sleep, and you're seeing patients losing the weight, and we'll come back. we still believe that this will be a tailwind for the company.

That's helpful. Tim, four minutes left. I'll give you the amount of questions, which is rare. I know, shocker. But, yeah, I really appreciate you being here. I want to give you the last word. Maybe you can talk about reducing friction again.

No, I think that's, I think, thank you very much for that. I think that really is the highlight of what we worked on. And the first half of the year was really disruptive, as everybody is so aware of the change from 6, 4, 5, 6, 8, and the code that we used over 10,000 times in 2025 was just unavailable at the start of 2026. And we had to reinvent and re-identify how centers and physicians would be able to code the procedures. and we were able to work with CMS and CMS understood the challenges and quickly worked to put the C codes out and really give you know credit to CMS for understanding the situation and really taking an active role to get those C codes out and in place that really kind of helped reduce the friction I mean we We now have a clear pathway for the Medicare patients. And then the MACs also work closely with that to be able to incorporate those C codes, understanding do they want to use a modifier or not. Two of the MACs have put modifiers in place. Physicians in those areas are educated on how to handle those modifiers, what additional information is needed to minimize any reduction in the work that they performed or minimize a reduction in that reimbursement the other five macs have decided that they're not going to incorporate the modifier today but we're going to continue to work the medicare they can physicians can submit directly into into those macs and that really kind of helped that whole process so now that we're able to address a lot of the coding now we can start leaning in on the benefits of what Inspire 5 actually is and the benefits of the cardiovascular benefits and that's going to really help the overall prospects going forward. We are still very lightly penetrated in our overall target market and we're in a really strong position with the evidence that we have and with the experience that the patients have to really leverage that going forward. Perfect.

No, thanks for hosting us, Larry. Thank you very much.

Tim and Matt, thank you. Very good.