INSP Q4 is another blowout

I have been occasionally reporting on Inspire Medical (INSP) for some time now, but it has been a stock existing at the edge of Sauldom, as it has had revenue growth that was slightly less than some of our other companies, was affected by COVID, and is not SAAS. It hasn’t seemed that there was much interest on this board. Going in to the earnings announcement yesterday, I was not planning to report here on the company, as I don’t want to fill this board will posts considered OT. However, they kind of knocked it out of the park last quarter (again) and their revenue growth has been great, so I thought it would still be interesting to a lot of people here. Perhaps consider taking a new look at the company if you have dismissed it before.

Inspire is a medical device company that makes one product: a neurostimulator that is implanted in an outpatient surgery that helps patients with sleep apnea. It is only prescribed for patients that are not successful or compliant with using CPAP machines, and for non-central apnea. They currently have the only approved device of this type in the US and have been expanding rapidly, primarily in the US, but also Germany and a few other countries.

What I want to call attention to today is the Q4 revenue growth, which reached 71% over the year-ago quarter. This puts it inline with some of our other great companies. Yearly revenue growth was much more modest at 41%, but note that they had severely impacted revenues in the 1st and 2nd quarters due to COVID. In fact, 2020 Q3 revenue growth was also about 72% versus the year ago quarter, but at least some of this was due to the backlog of 2020 Q2 surgeries that were delayed due to the COVID outbreak, so it was hard to judge whether this was really representative of growth going forward. But management doesn’t think that Q4 was much affected by a COVID backlog, so the 71% they posted appears to represent their legit growth rate.

Some other highlights from this earnings report:

Gross margin was 84%! (a lot like our other companies) and management guided to a similar gross margin for next year.

Operating loss was the lowest it has been in 2 years.

The number of surgical centers (hospitals, ambulatory surgical centers, etc.) that perform the implant surgery increased to 425, which is 55 more than last quarter and 126 more than a year ago. Growth in the numbers of implants comes from a combination of increasing numbers of centers and increases in the number of surgeries performed at each center, so this growth gives more credence to the high rate of revenue growth we are seeing.

Management is guiding to ~62% revenue growth for 2021 (but they always beat guidance!!)!

It looks to me that they are firing on all cylinders, but I would be happy to see any alternative interpretations.
-lemur (long INSP)



I have held a position in INSPIRE for a couple of years. I think the application has many preferred alternatives to current CPAP technologies and machines, largely, the convenience it provides in providing a solution that doesn’t include wearing a mask at night. I think most would prefer.

The company is currently a $7B company, so my question has been, what is the ultimate TAM?

It’s all about runway.

Long and Holding,
Just a Fool

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JAFbrblev wrote: The company is currently a $7B company, so my question has been, what is the ultimate TAM?

Well, the company lists its US market TAM as $10B. They show their calculation of this in their investor presentation (available on their website). Essentially, they account for the proportion of adults that have non-central apnea, are not CPAP-compliant, and don’t have other anatomy challenges that prevent implantation.

My familiarity with Inspire is anecdotal, so take it FWIW.

I have sleep apnea and have used CPAP for several years now. I looked into this device, maybe two years ago as my wife and I like to travel and lugging the CPAP about is a pain, especially in the hinterland of China.

In any case, I decided against the surgery to install the device for a number of reasons. First, (and my memory is not certain on this) I don’t think it was covered by Medicare at the time. That may have changed since I looked at it, but it’s quite expensive and the cost was a deterrent.

But maybe more important, the success of the the therapy was rather iffy, and once installed, they had limited ability to “tune” it to the specific needs of the patient. Humans are not uniform, although we all have a lot in common, we’re also each one of us unique. The overall success rate of this therapy did not seem encouraging at the time.

Admittedly, there has been an intervening couple of years (maybe more) and a lot of that may have changed. Actually, now that you’ve reminded me of the option, I might investigate again. If it’s viable, for sure, it’s a lot more convenient than a CPAP.

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Hi Brittlerock:
My understanding is that medicare coverage for Inspire is now universal in all 50 states. But this is something they have been working on for the last two years, so it probably was not covered when you looked at it. Actually, this is another important development for the company: they have been trying to get coverage from Medicare and major health insurance providers for the last couple years, and have now gotten most of the major insurers on board (Anthem sticks out as a major insurer that does not automatically cover it, although Inspire works with patients to get pre-authorization from Anthem and other insurers, often with success).
As for therapy success, I don’t know if I can answer your concern. There are certainly many studies showing substantially decreased apnea-hypopneic index, although that doesn’t necessarily mean that apneic events are knocked down as well as with CPAP (but remember also, that this is currently only approved for CPAP-non-compliant patients). I believe there is some fine-tuning available in the form of the strength of the stimulation, but maybe there is still some variation person-to-person that can limit success.