Inspire Medical Systems (INSP), the sole provider of FDA-approved neurostimulation technology for obstructive sleep apnea (OSA), has seen its stock surge after issuing an optimistic Q2 revenue guidance and raising its FY24 revenue forecast. This positive outlook follows a strong Q1 earnings report in early May, suggesting continued momentum driven by high patient demand.
- For Q2, INSP projects revenue of $195.9 million, representing an estimated year-over-year growth of about 30%. The updated FY24 revenue forecast is now $788-$798 million, up from $775-$785 million, indicating a 27% increase at the midpoint.
- INSP's Inspire implant offers significant advantages over the current leading therapy for OSA, CPAP (continuous positive airway pressure), which involves wearing a facial mask connected to a hose and pump. Many patients find CPAP uncomfortable, leading to low compliance and increased risk of OSA-related health issues like high blood pressure, heart failure, stroke, or coronary heart disease.
- Due to low compliance with CPAP, there is growing awareness and adoption of the minimally-invasive Inspire System. INSP launched 66 new implant centers in the U.S. last quarter, reflecting increased market penetration.
- In Europe, INSP experienced a rebound in Q1 after receiving derogation late in Q4, allowing continued growth in Inspire therapy adoption. The derogation enabled INSP to ship silicon-based leads to countries including Germany, Switzerland, Netherlands, and Belgium, resulting in a 141% revenue surge outside the U.S. to $8.2 million in Q1.
- Higher adoption and volumes have led to greater manufacturing efficiencies for INSP, expanding gross margins by 50 basis points year-over-year in Q1 to 84.9%. These healthy margins, combined with strong top-line growth, are pushing INSP towards profitability. The company forecasts EPS of $0.10-$0.20 for FY24 and expects to be profitable for the full year.
The main takeaway is that the Inspire System continues to gain traction, taking market share from cumbersome CPAP systems. The future looks promising, especially with the upcoming soft launch of the upgraded Inspire V system later this year.
