Inspire Medical Systems, Inc. (NYSE:INSP) Q1 2023 Earnings Call Transcript

Page 9 of 10

Rick Buchholz: Hey Suraj, it’s Rick. So, to your point, overall utilization is up from a year ago. It is down a little from Q4 because we have seasonality, but as Tim mentioned, it progressed nicely up on a quarterly basis. If we don’t give the details, but on a high level, if you look at our — the four quartiles on utilization in the first quarter from a year ago, all of those quartiles are up from a year ago on number of procedures that are completed. We do and then not looking specifically at the numbers, but when we bring a new center on, expectations are just different than they used to be. Several of the older vintages or classes we’re used to the three incision approach and reimbursement was not as in a good position as it is now. So now that we have the two incision approach, full reimbursement, good CPT reimbursement for the physician, there’s just a different expectations. So, we expect those new centers coming on board to, to get higher utilization faster.

Tim Herbert: Very good. Okay. Let’s address high BMI. First in the United States, we do not — the FDA did not limit BMI. So yes, you are correct. High BMI is not a factor for Inspire, although they have a warning in the labelling that says we do not have data on patients who have a BMI higher than 32. The new warning that is in review with the FDA is going to change that saying we do not have data on patients who have a BMI higher than 40. So it’s only changing a warning. It doesn’t change the indication and you are correct that high BMI patients are approved in the United States for Inspire therapy. Now the key though is we must identify which patients have the proper anatomy or proper collapse that is supported by any hypoglossal nerve stimulation system, including Inspire.

We know hypoglossal nerve stimulation stimulates the Gena glasses muscle that moves the tongue forward. But the component of collapse in high BMI patients is a combination of tongue-based collapse and lateral wall collapse that presents to what we all know as complete concentric collapse. We can now stimulate the hypoglossal nerve and clear that component of the obstruction, but the high BMI patients will remain or continue to have obstructions on the lateral wall. So while they may have improvements in their sleep, they won’t get improvements in those patients that are tongue-based only because of the residual clouds from a lateral wall.

Operator: Thank you. And I show our last question comes from the line of Michael Polark from Wolfe Research. Please go ahead.

Michael Polark: Hey, good afternoon. Thanks for sneaking me in. I have a question on Gen 5 launched next year. When that goes into the market, what evidence will you have to present to physicians and patients that the synchronicity of the two component system approximate is better than a three component system? You mentioned better reliability, so sounds like with testing it’ll be even better than the three component system. But I guess what would you have on paper at the time of launch to persuade physicians and patients that that’s the case?

Tim Herbert: Sure, thanks Mike. We do have a clinical study we did, and what we’re able to do is take existing patients who have Inspire 4 and we can use a second system, which is external with using an accelerometer to measure capture during the inventory phase of respiration. And this is the clinical evidence that went to the FDA that’s been reviewed by them a couple times already to show that the accelerometer, which has been used in rate responsive pacing for years for respiratory detection, provides a cleaner respiratory signal. And our improved algorithm is going to improve synchronicity by providing stimulation synchronous with the inspiratory phase of respiration. So we’ve already been able to demonstrate that with existing patients and provided that information to the FDA.

Page 9 of 10