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What changed in Inspire Medical Systems, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Inspire Medical Systems, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+514 added−454 removedSource: 10-K (2024-02-09) vs 10-K (2023-02-10)

Top changes in Inspire Medical Systems, Inc.'s 2023 10-K

514 paragraphs added · 454 removed · 380 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

145 edited+28 added−26 removed198 unchanged
Biggest changeAdditionally, in July 2022, the Inspire system received Breakthrough Device Designation from the FDA for application to increase the upper limit of AHI to up to 100 events per hour from the original 65 events per hour, and to raise the BMI warning for patients with a BMI of up to 40 from the previous limit of 32. 20 Table of Contents Our research and development team focuses on the products currently under development, including our clinical studies that include efforts to improve patient selection, expand indications, and simplify patient management, as well as feasibility studies in which we are evaluating new ways to deliver neuromodulation for OSA therapy and different design configurations to enhance product functionality for future generations of the Inspire system.
Biggest changeOur research and development team focuses on our products currently under development, including our clinical studies involving efforts to improve patient selection, expand indications, and simplify patient management, as well as feasibility studies in which we are evaluating new ways to deliver neuromodulation for OSA therapy and different design configurations to enhance product functionality for future generations of the Inspire system.
Government Regulation Our products and our operations are subject to extensive regulation by the FDA and other federal and state authorities in the U.S., as well as comparable authorities in the European Economic Area ("EEA") and Japan, and in Australia (where our products are approved for sale but where we have not yet commercialized them).
Government Regulation Our products and our operations are subject to extensive regulation by the FDA and other federal and state authorities in the U.S., as well as comparable authorities in the European Economic Area ("EEA"), Japan, and in Australia (where our products are approved for sale but where we have not yet commercialized them).
The FDA may condition PMA on some form of post-market surveillance when deemed necessary to protect the public health or to provide additional safety and efficacy data for the device in a larger population or for a longer period of use.
The FDA may condition PMA on some form of post-market surveillance when deemed necessary to protect public health or to provide additional safety and efficacy data for the device in a larger population or for a longer period of use.
The FDA regulates the development, design, non-clinical and clinical research, manufacturing, safety, efficacy, labeling, packaging, storage, installation, servicing, recordkeeping, premarket clearance or approval, import, export, adverse event reporting, advertising, promotion, marketing and distribution, and import and export of medical devices to ensure that medical devices distributed domestically are safe and effective for their intended uses and otherwise meet the requirements of the FDCA.
The FDA regulates the development, design, non-clinical and clinical research, manufacturing, safety, efficacy, labeling, packaging, storage, installation, servicing, recordkeeping, premarket clearance or approval, import, export, adverse event reporting, advertising, promotion, marketing and distribution, and import and export of medical devices to help ensure that medical devices distributed domestically are safe and effective for their intended uses and otherwise meet the requirements of the FDCA.
SleepSync™ and our app are initial steps in establishing interconnectivity between the patient and their healthcare provider with a long-term plan to improve outcomes by tracking patient activity and adherence, and monitoring for any issues with device use. Additional Indications We have sought and continue to seek to expand the approved indications for our Inspire therapy.
The SleepSync™ platform and our app are initial steps in establishing interconnectivity between the patient and their healthcare provider with a long-term plan to improve outcomes by tracking patient activity and adherence, and monitoring for any issues with device use. Additional Indications We have sought and continue to seek to expand the approved indications for our Inspire therapy.
Similarly, we are subject to regulations and product registration requirements in many foreign countries in which we may sell our products, including in the areas of: • design, development, manufacturing, and testing; • product standards; • product safety; • product safety reporting; • marketing, sales, and distribution; • packaging and storage requirements; • labeling requirements; • content and language of instructions for use; • clinical studies; • record keeping procedures; • advertising and promotion; • recalls and field corrective actions; • post-market surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury; 29 Table of Contents • import and export restrictions; • tariff regulations, duties, and tax requirements; • registration for reimbursement; and • necessity of testing performed in country by distributors for licensees.
Similarly, we are subject to regulations and product registration requirements in many foreign countries in which we may sell our products, including in the areas of: 30 Table of Contents • design, development, manufacturing, and testing; • product standards; • product safety; • product safety reporting; • marketing, sales, and distribution; • packaging and storage requirements; • labeling requirements; • content and language of instructions for use; • clinical studies; • record keeping procedures; • advertising and promotion; • recalls and field corrective actions; • post-market surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury; • import and export restrictions; • tariff regulations, duties, and tax requirements; • registration for reimbursement; and • necessity of testing performed in country by distributors for licensees.
Environmental, Social, and Governance As our business continues to grow and develop, we recognize the importance of making responsible business decisions for the benefit of all of our stakeholders, including our stockholders, customers, employees, partners, the communities in which we work and live, as well as the planet.
Environmental, Social, and Governance As our business continues to grow and develop, we recognize the importance of making responsible business decisions for the benefit of our stakeholders, including our stockholders, customers, employees, partners, the communities in which we work and live, as well as the planet.
We plan to expand our sales and marketing organization and seek to recruit and train exceptionally talented sales representatives in existing and new markets in the U.S. and in Europe to help facilitate further adoption and broaden awareness of our Inspire therapy.
We plan to continue to expand our sales and marketing organization and seek to recruit and train exceptionally talented sales representatives in existing and new markets in the U.S. and in Europe to help facilitate further adoption and broaden awareness of our Inspire therapy.
These include: • establishment registration and device listing with the FDA; • QSR requirements, which require manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation, and other quality assurance procedures during all aspects of the design and manufacturing process; 25 Table of Contents • labeling and marketing regulations, which require that promotion is truthful, not misleading, fairly balanced, provide adequate directions for use, and that all claims are substantiated, and also prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling; FDA guidance on off-label dissemination of information and responding to unsolicited requests for information; • clearance or approval of product modifications to 510(k)-cleared devices that could significantly affect safety or effectiveness or that would constitute a major change in intended use of one of our cleared devices, or approval of a supplement for certain modifications to PMA devices; • medical device reporting regulations, which require that a manufacturer report to the FDA if a device it markets may have caused or contributed to a death or serious injury, or has malfunctioned and the device or a similar device that it markets would be likely to cause or contribute to a death or serious injury, if the malfunction were to recur; • correction, removal, and recall reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health; • complying with the new federal law and regulations requiring Unique Device Identifiers (UDI) on devices and also requiring the submission of certain information about each device to the FDA’s Global Unique Device Identification Database (GUDID); • the FDA’s recall authority, whereby the agency can order device manufacturers to recall from the market a product that is in violation of governing laws and regulations; and • post-market surveillance activities and regulations, which apply when deemed by the FDA to be necessary to protect the public health or to provide additional safety and effectiveness data for the device.
These include: • establishment registration and device listing with the FDA; • QSR requirements, which require manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation, and other quality assurance procedures during all aspects of the design and manufacturing process; • labeling and marketing regulations, which require that promotion is truthful, not misleading, fairly balanced, provide adequate directions for use, and that all claims are substantiated, and also prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling; FDA guidance on off-label dissemination of information and responding to unsolicited requests for information; • clearance or approval of product modifications to 510(k)-cleared devices that could significantly affect safety or effectiveness or that would constitute a major change in intended use of one of our cleared devices, or approval of a supplement for certain modifications to PMA devices; • medical device reporting regulations, which require that a manufacturer report to the FDA if a device it markets may have caused or contributed to a death or serious injury, or has malfunctioned and the device or a similar device that it markets would be likely to cause or contribute to a death or serious injury, if the malfunction were to recur; • correction, removal, and recall reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health; • complying with the laws and regulations requiring Unique Device Identifiers (UDI) on devices and also requiring the submission of certain information about each device to the FDA’s Global Unique Device Identification Database (GUDID); • the FDA’s recall authority, whereby the agency can order device manufacturers to recall from the market a product that is in violation of governing laws and regulations; and • post-market surveillance activities and regulations, which apply when deemed by the FDA to be necessary to protect public health or to provide additional safety and effectiveness data for the device.
We select our suppliers to ensure that our Inspire system and its components are safe and effective, adhere to all applicable regulations, are of the highest quality, and meet our supply needs.
We select our suppliers to help ensure that our Inspire system and its components are safe and effective, adhere to all applicable regulations, are of the highest quality, and meet our supply needs.
If the FDA determines that we failed to comply with applicable regulatory requirements, it can take a variety of compliance or enforcement actions, which may result in any of the following sanctions: • warning letters, untitled letters, fines, injunctions, consent decrees, and civil penalties; • recalls, withdrawals, or administrative detention or seizure of our products; • operating restrictions or partial suspension or total shutdown of production; • refusing or delaying requests for 510(k) marketing clearance or PMAs of new products or modified products; • withdrawing 510(k) clearances or PMAs that have already been granted; 26 Table of Contents • refusal to grant export or import approvals for our products; or • criminal prosecution.
If the FDA determines that we failed to comply with applicable regulatory requirements, it can take a variety of compliance or enforcement actions, which may result in any of the following sanctions: • warning letters, untitled letters, fines, injunctions, consent decrees, and civil penalties; • recalls, withdrawals, or administrative detention or seizure of our products; • operating restrictions or partial suspension or total shutdown of production; • refusing or delaying requests for 510(k) marketing clearance or PMAs of new products or modified products; • withdrawing 510(k) clearances or PMAs that have already been granted; • refusal to grant export or import approvals for our products; or • criminal prosecution.
The results from multiple clinical studies, which include seven sponsored and more than 90 independent clinical studies that evaluated several thousand patients, have shown that our Inspire therapy provides statistically significant and sustained reduction in the severity of patients’ OSA, improvement in sleep-related quality of life and reduction in snoring, as well as high patient compliance rates and a strong safety profile.
The results from multiple clinical studies, which include seven sponsored and more than 100 independent clinical studies that evaluated several thousand patients, have shown that our Inspire therapy provides statistically significant and sustained reduction in the severity of patients’ OSA, improvement in sleep-related quality of life and reduction in snoring, as well as high patient compliance rates and a strong safety profile.
Violation of any of the federal and state healthcare laws described above or any other governmental regulations that apply to device manufacturers may result in significant penalties, including the imposition of significant civil, criminal and administrative penalties, damages, disgorgement, monetary fines, imprisonment, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, 31 Table of Contents reputational harm, diminished profits and future earnings, additional reporting requirements and/or oversight if the entity becomes subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and curtailment of operations.
Violation of any of the federal and state healthcare laws described above or any other governmental regulations that apply to device manufacturers may result in significant penalties, including the imposition of significant civil, criminal and administrative penalties, damages, disgorgement, monetary fines, imprisonment, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, additional reporting requirements and/or oversight if the entity becomes subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and curtailment of operations.
To commercialize our Inspire system, both in the U.S. and Europe, we focus on physician and patient awareness and adoption of our Inspire therapy. To achieve this, our commercialization strategy primarily consists of our direct sales force engaging in sales efforts and promotional activities focused on ENT physicians and sleep centers and highlighting our compelling clinical data and value proposition.
To commercialize our Inspire system, in the U.S., Europe, and Japan, we focus on physician and patient awareness and adoption of our Inspire therapy. To achieve this, our commercialization strategy primarily consists of our direct sales force engaging in sales efforts and promotional activities focused on ENT physicians and sleep centers and highlighting our compelling clinical data and value proposition.
Mean AHI was reduced from 33.0 events per hour to 10.2 events per hour and mean ESS score improved from 11 to 6 over the same period. Overall satisfaction with Inspire therapy was reported by patients to be 90%, with 92% of patients reporting that they would choose the procedure again.
Median AHI was reduced from 33.0 events per hour to 10.2 events per hour and median ESS score improved from 11 to 6 over the same period. Overall satisfaction with Inspire therapy was reported by patients to be 90%, with 92% of patients reporting that they would choose the procedure again.
The STAR trial was completed and published in the New England Journal of Medicine in 2014 and we received PMA in 2014. Additionally, the device was CE marked for commercialization in Europe in 2010. We continue to invest in advancing our Inspire system with the goal of providing patients more effective and less invasive therapy for OSA.
The STAR trial was completed and published in the New England Journal of Medicine in 2014 and we received PMA in 2014. Additionally, the device was CE marked for commercialization in the EU in 2010. We continue to invest in advancing our Inspire system with the goal of providing patients more effective and less invasive therapy for OSA.
We believe we have a significant first mover advantage and momentum over future competitors, as physicians have treated more than 36,000 patients with Inspire therapy. • Significant body of strong clinical data. We have developed a significant body of clinical data that demonstrates the safety and effectiveness, therapy adherence, and long-term sustained benefits of our Inspire therapy.
We believe we have a significant first mover advantage and momentum over future competitors, as physicians have treated more than 60,000 patients with Inspire therapy. • Significant body of strong clinical data. We have developed a significant body of clinical data that demonstrates the safety and effectiveness, therapy adherence, and long-term sustained benefits of our Inspire therapy.
Large-scale Insights of Over Three Million Patient Nights from Inspire SleepSync™ Patient Database Showing Real-World Results Inspire SleepSync™ patient management system helps physicians track therapy usage and outcomes, and the results of the first three million patient nights of data were presented by Dr. Jordan Weiner at the 2022 American Academy of Otolaryngology conference and Dr.
Large-scale Insights of Over Three Million Patient Nights from Inspire's SleepSync™ Patient Database Showing Real-World Results Inspire's SleepSync™ patient management system helps physicians track therapy usage and outcomes, and the results of the first three million patient nights of data were presented by Dr. Jordan Weiner at the 2022 American Academy of Otolaryngology conference and Dr.
We believe that the primary competitive factors in the OSA treatment market are: • company, product, and brand recognition; • product safety, efficacy, reliability, and durability; • quality and volume of clinical data; • effective marketing to and education of patients, physicians, and sleep centers; • product ease of use and patient comfort; • sales force experience and access; • product support and service; • technological innovation, product enhancements, and speed of innovation; • pricing and revenue strategies; • procedure costs to patients; • effectiveness of reimbursement teams and strategies; and • dedicated practice development and clinical training teams.
We believe that the primary competitive factors in the OSA treatment market are: • company, product, and brand recognition; • product safety, efficacy, reliability, and durability; • quality and volume of clinical data; • effective marketing to and education of patients, physicians, and sleep centers; • product ease of use and patient comfort; 22 Table of Contents • sales force experience and access; • product support and service; • technological innovation, product enhancements, and speed of innovation; • pricing and revenue strategies; • procedure costs to patients; • effectiveness of reimbursement teams and strategies; and • dedicated practice development and clinical training teams.
None of our employees is subject to a collective bargaining agreement or represented by a trade or labor union. We consider our relationship with our employees to be good. Code of Business Conduct and Ethics Inspire is committed to conducting business in accordance with the highest ethical standards and applicable laws.
None of our employees are currently subject to a collective bargaining agreement or represented by a trade or labor union. We consider our relationship with our employees to be good. Code of Business Conduct and Ethics Inspire is committed to conducting business in accordance with the highest ethical standards and applicable laws.
In parallel, a subset of our 25-person reimbursement team, which we refer to as our market access team, is focused on assisting patients and physicians in obtaining prior authorization approvals from commercial payors on a case-by-case basis in advance of treatment with our Inspire therapy.
In parallel, a subset of our 28-person reimbursement team, which we refer to as our market access team, is focused on assisting patients and physicians in obtaining prior authorization approvals from commercial payors on a case-by-case basis in advance of treatment with our Inspire therapy.
Treatment with Inspire Therapy Patient Selection Inspire therapy is indicated for patients with moderate to severe OSA (AHI of 15 to 65) who do not have significant central sleep apnea and do not have a complete concentric collapse of the airway at the soft palate level.
Treatment with Inspire Therapy Patient Selection Inspire therapy is indicated for patients with moderate to severe OSA (AHI of 15 to 100) who do not have significant central sleep apnea and do not have a complete concentric collapse of the airway at the soft palate level.
The results of the STAR trial, our phase III pivotal clinical trial that served as the basis for the FDA approval of our PMA application, were published in the New England Journal of Medicine , and the results of additional clinical studies have been published in more than 240 peer-reviewed publications.
The results of the STAR trial, our phase III pivotal clinical trial that served as the basis for the FDA approval of our PMA application, were published in the New England Journal of Medicine , and the results of additional clinical studies have been published in more than 280 peer-reviewed publications.
A significant body of clinical data, which includes a publication in the New England Journal of Medicine , multiple publications in leading respiratory, ear, nose and throat ("ENT") and sleep medicine journals, and more than 240 peer-reviewed publications, supports the safety and efficacy of Inspire therapy.
A significant body of clinical data, which includes a publication in the New England Journal of Medicine , multiple publications in leading respiratory, ear, nose and throat ("ENT") and sleep medicine journals, and more than 280 peer-reviewed publications, supports the safety and efficacy of Inspire therapy.
A dug candidate produced by Apnimed is entering a Phase 3 clinical trial to assess the viability of its pharmaceutical to treat OSA. We believe other emerging businesses are in the early stages of developing neurostimulation devices or early-stage pharmaceutical approaches.
A drug candidate produced by Apnimed is entering a Phase 3 clinical trial to assess the viability of its pharmaceutical to treat OSA. We believe other emerging businesses are in the early stages of developing neurostimulation devices or early-stage pharmaceutical approaches.
Notified bodies are independent organizations designated by EU member states to assess the conformity of devices before being placed on the market. A notified body would typically audit and examine a product’s technical dossiers and the manufacturers’ quality system.
Notified bodies are independent organizations designated by EU member states to assess the conformity of devices before being placed on the market. A notified body would typically audit and examine a product’s technical dossiers and the manufacturer’s quality system.
We plan to expand our reach to markets in new regions, such as Australia, Hong Kong, South Korea, and China. We plan to strategically invest in new markets based on our assessment of market size and opportunity and prospects for compelling reimbursement coding and coverage.
We plan to expand our reach to markets in new regions, such as Australia, South Korea, and China. We plan to strategically invest in new markets based on our assessment of market size and opportunity and prospects for compelling reimbursement coding and coverage.
Deborah Goss at the 2022 American Association of Sleep Medicine meeting. These data, the largest to date evaluating outcomes from Inspire therapy, show the results of 16 Table of Contents 3.7 million patient-nights in 12,017 patients across 491 practices. These data showed that, in real-world use, Inspire therapy continued to show highly effective outcomes similar to the early clinical trials.
Deborah Goss at the 2022 American Association of Sleep Medicine meeting. These data, the largest to date evaluating outcomes from Inspire therapy, show the results of 3.7 million patient-nights in 12,017 patients across 491 practices. These data showed that, in real-world use, Inspire therapy continued to show highly effective outcomes similar to the early clinical trials.
Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the federal Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all its facts and circumstances.
Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct 31 Table of Contents per se illegal under the federal Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all its facts and circumstances.
Results from our STAR trial demonstrated that 80% of patients continue to use Inspire therapy on a nightly basis five years after initial treatment. • Similar outcomes and usage as CPAP. Several independent clinical studies demonstrating Inspire therapy has similar improvements in symptoms, and similar nightly usage as CPAP. • Minimally invasive outpatient procedure.
Results from our STAR trial demonstrated that 80% of patients continue to use Inspire therapy on a nightly basis five years after initial treatment. • Similar outcomes and usage as CPAP. Several independent clinical studies demonstrating Inspire therapy has similar improvements in symptoms, and similar nightly usage as CPAP. 13 Table of Contents • Minimally invasive outpatient procedure.
Physicians have treated more than 36,000 patients with Inspire therapy at over 1,000 medical centers across the U.S., Europe, and Asia. Sleep apnea is a serious and chronic disease that negatively impacts a patient’s sleep, health, and quality of life. OSA is the most common form of sleep apnea.
Physicians have treated more than 60,000 patients with Inspire therapy at over 1,300 medical centers across the U.S., Europe, and Asia. Sleep apnea is a serious and chronic disease that negatively impacts a patient’s sleep, health, and quality of life. OSA is the most common form of sleep apnea.
We have been successful in obtaining prior authorization approvals from most commercial payors for the Inspire device and procedure. Historically, commercial payors cover approximately 70% of Inspire implants in the U.S.
We have been successful in obtaining prior authorization approvals from most commercial payors for the Inspire device and procedure. Historically, commercial payors cover approximately 65% to 70% of Inspire implants in the U.S.
In addition, 91% of patients reported a better experience than CPAP. This same study demonstrated comparable outcomes across five disease severity groups. 15 Table of Contents Inspire Therapy Improves Patient Symptoms Similarly as CPAP In 2021, the Cleveland Clinic published on the first comparison of patient-reported outcomes between Inspire therapy and CPAP.
In addition, 91% of patients reported a better experience than CPAP. This same study demonstrated comparable outcomes across five disease severity groups. 16 Table of Contents Inspire Therapy Improves Patient Symptoms Similarly as CPAP In 2021, the Cleveland Clinic published the first comparison of patient-reported outcomes between Inspire therapy and CPAP.
While there is an opportunity to continue to improve the adoption of Inspire therapy in minority populations, given the higher incident rates and under diagnosis in these groups, we believe these two analyses provide additional evidence that Inspire therapy is equally effective across race and ethnicity.
While there is an opportunity to continue to improve the adoption of Inspire therapy in minority populations, given the higher 17 Table of Contents incident rates and under diagnosis in these groups, we believe these two analyses provide additional evidence that Inspire therapy is equally effective across race and ethnicity.
However, all medical devices placed on the EU market must meet the essential requirements, including the requirement that a medical device must be designed and manufactured in such a way that it will not compromise the clinical condition or safety of patients, or the safety and health of users and others .
However, all medical devices placed on the EU market must meet the essential requirements, including the requirement that a medical device must be designed and manufactured in such a way that it will not compromise the clinical condition or safety of 28 Table of Contents patients, or the safety and health of users and others .
We seek to recruit sales representatives with strong sales backgrounds, direct experience developing markets with new technologies, and core knowledge of medical device coding, reimbursement, and the prior authorization process. In our Asian markets, we rely on our distribution partner for local sales and promotional activities.
We seek to recruit sales representatives with strong sales backgrounds, direct experience developing markets with new technologies, and core knowledge of medical device coding, reimbursement, and the prior authorization process. In certain Asian markets, we rely on our distribution partners for local sales and promotional activities.
As in the U.S., reimbursement decisions can change, resulting in the elimination or reduction of reimbursement payments, which could adversely affect our financial results and our ability to invest in and grow our business. We currently have country wide reimbursement in Germany, the Netherlands, Switzerland, and Japan.
As in the U.S., reimbursement decisions can change, resulting in the elimination or reduction of reimbursement payments, which could adversely affect our financial results and our ability to invest in and grow our business. We currently have country wide reimbursement in Germany, the Netherlands, Switzerland, Belgium, the United Kingdom, and Japan.
We share co-exclusive rights with Medtronic under this license; however, Medtronic may not exercise its rights unless we make an assignment for the benefit of our creditors, file or have filed against us a bankruptcy petition or go into receivership.
We share co-exclusive rights with Medtronic under this license; however, Medtronic may not exercise 23 Table of Contents its rights unless we make an assignment for the benefit of our creditors, file or have filed against us a bankruptcy petition or go into receivership.
All manufacturers placing medical devices into the market in the EU must comply with the EU medical device vigilance system. Under this system, serious incidents and Field Safety Corrective Actions (“FSCAs”) must be reported to the relevant authorities of the EU member states.
All manufacturers placing medical devices into the market in the EU must comply with the EU medical device vigilance system. Under this system, serious incidents and Field Safety Corrective Actions (“FSCAs”) must be 29 Table of Contents reported to the relevant authorities of the EU member states.
The image below depicts the location of the Inspire system under the patient’s skin: A pressure sensing lead is used to monitor the patient’s breathing. Our proprietary algorithm tracks breathing patterns and the neurostimulator delivers electrical stimulation at the start of inspiration.
The image below depicts the location of the Inspire system under the patient’s skin: 10 Table of Contents A pressure sensing lead is used to monitor the patient’s breathing. Our proprietary algorithm tracks breathing patterns and the neurostimulator delivers electrical stimulation at the start of inspiration.
Additionally, we received a certificate of conformity for commercialization of our Inspire system in Europe in 2010 which allowed us to affix the CE mark on our device. Japan's MLHW approved Inspire therapy to treat moderate to severe OSA in 2018 and was formally added to the Japan National Health Insurance Payment Listing in 2021.
Additionally, we received a certificate of conformity for commercialization of our Inspire system in the European Union ("EU") in 2010 which allowed us to affix the CE mark on our device. Japan's MLHW approved Inspire therapy to treat moderate to severe OSA in 2018 and was formally added to the Japan National Health Insurance Payment Listing in 2021.
In addition to U.S. regulations, we are subject to a variety of regulations in the EEA governing clinical trials and the commercial sales and distribution of our products.
In addition to U.S. regulations, we are subject to a variety of regulations in the EEA governing clinical studies and the commercial sales and distribution of our products.
The goal of the program is to provide patients and health care providers with more timely access to qualifying devices by expediting their development, assessment and review, while preserving the statutory standards for FDA marketing authorization.
The goal of the program is to provide patients and health care providers with more timely access to qualifying devices by expediting their development, assessment and review, 26 Table of Contents while preserving the statutory standards for FDA marketing authorization.
Additionally, the American Taxpayer Relief Act of 2012, among other things, reduced Medicare payments to several providers, including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from three to 32 Table of Contents five years.
Additionally, the American Taxpayer Relief Act of 2012, among other things, reduced Medicare payments to several providers, including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.
Information on our website, including our Corporate Governance Guidelines, Code of Business Conduct and Ethics, ESG Report, and committee charters, is not part of this or any other report we file with, or furnish to, the SEC.
Information on our 36 Table of Contents website, including our Corporate Governance Guidelines, Code of Business Conduct and Ethics, ESG Report, and committee charters, is not part of this or any other report we file with, or furnish to, the SEC.
The approval process varies from country to country and the time may be longer or shorter than that required for FDA clearance or approval. FDA Premarket Clearance and Approval Requirements Unless an exemption applies, each medical device commercially distributed in the U.S. requires either FDA clearance of a 510(k) premarket notification or PMA.
The approval/certification process varies from country to country and the time may be longer or shorter than that required for FDA clearance or approval. 24 Table of Contents FDA Premarket Clearance and Approval Requirements Unless an exemption applies, each medical device commercially distributed in the U.S. requires either FDA clearance of a 510(k) premarket notification or PMA.
We plan to establish and strengthen our presence internationally. Our goal is to further increase sales of our Inspire therapy in existing international markets in Europe, including Germany and the Netherlands, and in the Asia Pacific region, including Japan and Singapore.
We plan to continue to establish and strengthen our presence internationally. Our goal is to further increase sales of our Inspire therapy in existing international markets in Europe, including Germany and the Netherlands, and in the Asia Pacific region, including Japan, Singapore, and Hong Kong.
As of December 31, 2022, we had 143 pending and registered trademark filings worldwide, some of which may apply to multiple countries. We also rely, in part, upon unpatented trade secrets, know-how and continuing technological innovation, and may in the future rely upon licensing opportunities, to develop and maintain our competitive position.
As of December 31, 2023, we had 175 pending and registered trademark filings worldwide, some of which may apply to multiple countries. We also rely, in part, upon unpatented trade secrets, know-how and continuing technological innovation, and may in the future rely upon licensing opportunities, to develop and maintain our competitive position.
The benefits of treatment with Inspire therapy have been consistent across seven sponsored and more than 90 independent clinical studies that evaluated several thousand patients and have been highlighted in more than 240 peer-reviewed publications. Data reported in these clinical studies also demonstrated a high level of overall patient satisfaction.
The benefits of treatment with Inspire therapy have been consistent across seven sponsored and more than 100 independent clinical studies that evaluated several thousand patients and have been highlighted in more than 280 peer-reviewed publications. Data reported in these clinical studies also demonstrated a high level of overall patient satisfaction.
Whether or not we have or are required to obtain FDA clearance or approval for a product, we will be required to obtain authorization before commencing clinical studies and to obtain marketing authorization or approval of our products under the comparable regulatory authorities of countries outside of the U.S. before we can commence clinical studies or commercialize our products in those countries.
Whether or not we have or are required to obtain FDA clearance or approval for a product, we will be required to obtain authorization before commencing clinical studies and to obtain marketing authorization, approval or certification of our products under the comparable regulatory authorities of countries outside of the U.S. or notified bodies before we can commercialize our products in those countries.
Certain changes to an approved device, such as changes in manufacturing facilities, methods, or quality control procedures, or changes in the design performance specifications, which affect the safety or effectiveness of the device, require submission of a PMA supplement.
Certain changes to an approved device, such as changes in manufacturing facilities, methods, or quality control procedures, or changes in the design performance specifications, which affect the safety or effectiveness of the 25 Table of Contents device, require submission of a PMA supplement.
Our failure to maintain compliance with the QSR or other applicable regulatory requirements could result in the shut-down of, or restrictions on, our manufacturing operations and the recall or seizure of our products.
Our failure to maintain compliance with the QSR or other 27 Table of Contents applicable regulatory requirements could result in the shut-down of, or restrictions on, our manufacturing operations and the recall or seizure of our products.
We have launched a cloud-based patient management system called SleepSync™ (formerly referred to as Inspire Cloud), which allows physicians to monitor patient compliance and more efficiently coordinate patient care, and in 2020, we launched the Inspire Sleep app 9 Table of Contents for patients' smartphones. In 2021, the FDA approved our new patient remote control which is Bluetooth® enabled.
We have launched a cloud-based patient management system called the SleepSync™ platform (formerly referred to as Inspire Cloud), which allows physicians to monitor patient compliance and more efficiently coordinate patient care, and in 2020, we launched the Inspire Sleep app for patients' smartphones. In 2021, the FDA approved our new patient remote control which is Bluetooth® enabled.
With the exception of pulse strength, the factory default settings are used in the majority of patients. The pulse strength is initially adjusted to the lowest level required to move the tongue forward without causing discomfort.
With the exception of pulse strength, the factory default settings are used in the majority of patients. The pulse strength is initially adjusted to the lowest level required to move the tongue forward.
The aforementioned EU rules are generally applicable in the European Economic Area (“EEA”) which consists of the 27 EU member states plus Norway, Liechtenstein, and Iceland. Brexit Since January 1, 2021, the Medicines and Healthcare Products Regulatory Agency (“MHRA”) has become the sovereign regulatory authority responsible for Great Britain (i.e.
The aforementioned EU rules are generally applicable in the EEA which consists of the 27 EU member states plus Norway, Liechtenstein, and Iceland. Brexit Since January 1, 2021, the Medicines and Healthcare Products Regulatory Agency (“MHRA”) has become the sovereign regulatory authority responsible for Great Britain (i.e.
Manufacturers based outside the UK need to appoint a UK Responsible Person that has a registered place of business in the UK to register devices with the MHRA. 28 Table of Contents On June 26, 2022, the MHRA published its response to a 10-week consultation on the post-Brexit regulatory framework for medical devices and diagnostics.
Manufacturers based outside the United Kingdom ("UK") need to appoint a UK Responsible Person that has a registered place of business in the UK to register devices with the MHRA. On June 26, 2022, the MHRA published its response to a 10-week consultation on the post-Brexit regulatory framework for medical devices and diagnostics.
One example is our PREDICTOR study, which completed enrollment of 300 patients in 2022, which aims to remove the DISE requirement for patients less likely to have concentric collapse. Competition Our industry is subject to rapid change from the introduction of new products and technologies and other activities of industry participants.
One example is our PREDICTOR study, which completed enrollment of 600 patients in early 2024, and which aims to remove the DISE requirement for patients less likely to have concentric collapse. Competition Our industry is subject to rapid change from the introduction of new products and technologies and other activities of industry participants.
We intend to invest in existing and next generation technologies to further improve our products and clinical outcomes, optimize patient acceptance and comfort, and broaden the patient population that can benefit from our Inspire therapy.
We intend to invest in existing and next generation technologies to further improve our 9 Table of Contents products and clinical outcomes, optimize patient acceptance and comfort, and broaden the patient population that can benefit from our Inspire therapy.
Pursuing marketing of medical devices in the EU will notably require that our devices be certified under the new regime set forth in the EU Medical Devices Regulation when our current certificates expire. Medical Devices Directive In the EU, there is currently no premarket government review of medical devices.
Pursuing marketing of medical devices in the EU will notably require that our devices be certified under the new regime set forth in the EU Medical Devices Regulation. Medical Devices Directive In the EU, there is currently no premarket government review of medical devices.
Many EU member states have adopted specific anti-gift statutes that further limit commercial practices for our products, in particular vis-à-vis healthcare professionals and organizations.
Many EU member states have adopted 32 Table of Contents specific anti-gift statutes that further limit commercial practices for our products, in particular vis-à-vis healthcare professionals and organizations.
In addition, because OSA is sometimes diagnosed during other procedures, we have developed programs to help educate general practitioners and specialists in other fields, such as cardiovascular surgeons, electrophysiologists, and dentists, regarding our Inspire therapy. We have 225 sales territories in the U.S. and 12 in Europe.
In addition, because OSA is sometimes diagnosed during other procedures, we have developed programs to help educate general practitioners and specialists in other fields, such as cardiovascular surgeons, electrophysiologists, and dentists, regarding our Inspire therapy. We have 287 sales territories in the U.S. and 19 outside of the U.S.
Compensation and Benefits Our human capital strategies, initiatives, and outcomes are reviewed on a regular basis with our Board’s Organization and Compensation Committee to help align with the company’s overall business strategies. In 2022, the Committee engaged an independent consulting firm to assess the market competitiveness of our compensation programs and offerings.
Compensation and Benefits Our human capital strategies, initiatives, and outcomes are reviewed on a regular basis with our Board’s Organization and Compensation Committee to provide alignment with the company’s overall business strategies. The Committee has engaged an independent consulting firm to assess the market competitiveness of our compensation programs and offerings.
Our SEC filings are available to the public over the Internet at the SEC's website at http://www.sec.gov . We also make these filings available, free of charge, under the Investor Relations section of our website at www.inspiresleep.com as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the SEC.
We also make these filings available, free of charge, under the Investor Relations section of our website at www.inspiresleep.com as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the SEC.
Unlike the EU Medical Devices Directive and the AIMDD, the EU Medical Devices Regulation is directly applicable in EU member states without the need for member states to implement into national law. This aims at increasing harmonization across the EU.
Unlike the EU Medical Devices Directive and the AIMDD, the EU Medical Devices Regulation is directly applicable in EU member states without the need for member states to implement into national law. This aims at increasing harmonization across the EU. The EU Medical Devices Regulation became effective on May 26, 2021.
We sell our Inspire system to hospitals and ambulatory surgery centers ("ASCs") in the U.S. and in select countries in Europe through a direct sales organization, and we sell our Inspire system in Japan and Singapore through distributors. As of December 31, 2022, we had 225 sales territories in the U.S. and 12 in Europe.
We sell our Inspire system to hospitals and ambulatory surgery centers ("ASCs") in the U.S. and in select countries in Europe through a direct sales organization, and we sell our Inspire system in Japan and Singapore through distributors. As of December 31, 2023, we had 287 sales territories in the U.S. and 19 outside of the U.S.
We have a comprehensive patent portfolio to protect our intellectual property and technology, with rights as of December 31, 2022 to 66 issued U.S. patents, 43 issued foreign patents, 80 pending U.S. patent applications, and 73 pending foreign patent applications that cover aspects of our Inspire system and future product concepts.
We have a comprehensive patent portfolio to protect our intellectual property and technology, with rights as of December 31, 2023 to 80 issued U.S. patents, 55 issued foreign patents, 81 pending U.S. patent applications, and 79 pending foreign patent applications that cover aspects of our Inspire system and future product concepts.
We maintain, and all of our employees are expected to adhere to our Code of Business Conduct and Ethics (the “Code of Conduct”), which serves as the foundation of Inspire’s core values that drive our company’s culture. All 33 Table of Contents employees must certify they understand and comply with the expectations contained in the Code of Conduct.
We maintain, and all of our employees are expected to adhere to our Code of Business Conduct and Ethics (the “Code of Conduct”), which serves as the foundation of our company’s culture. All employees must certify they understand and comply with the expectations contained in the Code of Conduct.
(now Medtronic Public Limited Company), or Medtronic, in the early 1990s as a radio frequency controlled device that required an external apparatus to deliver electrical stimulation to the hypoglossal nerve. The first fully implantable, respiration-sensing, closed-loop Inspire system was developed shortly thereafter.
Research and Development Product Evolution and Next Generation Products The first Inspire device was developed by Medtronic Inc. (now Medtronic Public Limited Company), or Medtronic, in the early 1990s as a radio frequency controlled device that required an external apparatus to deliver electrical stimulation to the hypoglossal nerve. The first fully implantable, respiration-sensing, closed-loop Inspire system was developed shortly thereafter.
As of December 31, 2022, we had rights to 66 issued U.S. patents, which will expire between 2023 and 2040 assuming all required fees are paid, 80 pending U.S. patent applications, 43 issued foreign patents, and 73 pending foreign patent applications. Our patents cover aspects of our current Inspire system and future product concepts.
As of December 31, 2023, we had rights to 80 issued U.S. patents, which will expire between 2029 and 2041 assuming all required fees are paid, 81 pending U.S. patent applications, 55 issued foreign patents, and 79 pending foreign patent applications. Our patents cover aspects of our current Inspire system and future product concepts.
We have launched a cloud-based patient management system called SleepSync™, which allows physicians to monitor patient compliance and more efficiently coordinate patient care. In 2020, we launched the Inspire Sleep app for patients' smart phones.
We have launched a cloud-based patient management system called the SleepSync™ platform, which allows physicians to monitor patient 21 Table of Contents compliance and more efficiently coordinate patient care. In 2020, we launched the Inspire Sleep app for patients' smartphones.
The program, entitled “Humanity is our Superpower,” was launched in 2022. Following the program, leaders meet as a team and review ideas for creating an environment where inclusion prospers. During talent acquisition, our recruiting team reinforces with hiring managers the importance of seeking and engaging with diverse candidates.
The program, entitled “Humanity is our Superpower,” continued to expand in 2023. Following the program, leaders meet as a team and review ideas for creating an environment where inclusion prospers. During talent acquisition, our recruiting team reinforces with hiring managers the importance of seeking and engaging with candidates from all backgrounds.
The criminal False Claims Act prohibits the making or presenting of a claim to the government knowing such claim to be false, fictitious or fraudulent and, unlike the federal civil False Claims Act, requires proof of intent to submit a false claim. 30 Table of Contents The Civil Monetary Penalty Law imposes penalties against any person or entity that, among other things, is determined to have presented or caused to be presented a claim to a federal healthcare program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent, or offering or transferring remuneration to a federal healthcare beneficiary that a person knows or should know is likely to influence the beneficiary’s decision to order or receive items or services reimbursable by the government from a particular provider or supplier.
The Civil Monetary Penalty Law imposes penalties against any person or entity that, among other things, is determined to have presented or caused to be presented a claim to a federal healthcare program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent, or offering or transferring remuneration to a federal healthcare beneficiary that a person knows or should know is likely to influence the beneficiary’s decision to order or receive items or services reimbursable by the government from a particular provider or supplier.
We believe our patient outreach efforts have been effective in bringing potential patients to our website and facilitating contact with our clinical sites. During 2022, we had over 13.8 million visits to our website, which generated more than 78,000 contacts with physicians throughout the year. In 2020, we launched the Inspire Sleep app for patients' smart phones.
We believe our patient outreach efforts have been effective in bringing potential patients to our website and facilitating contact with our clinical sites. During 2023, we had nearly 13.4 million visits to our website, which generated approximately 65,000 contacts with physicians throughout the year. In 2020, we launched the Inspire Sleep app for patients' smartphones.
Our accumulated deficit as of December 31, 2022 was $324.3 million. Our Competitive Strengths We believe the continued growth of our company will be driven by the following competitive strengths: • First to market with an innovative, closed-loop, minimally invasive solution.
Our Competitive Strengths We believe the continued growth of our company will be driven by the following competitive strengths: • First to market with an innovative, closed-loop, minimally invasive solution.
STAR Trial (1) German Post-Market Study (1) ADHERE Patient Registry (2) TJUH and UPMC Evaluation (3) Number of Inspire therapy patients 124 97 56 1,963 97 Time following implantation 12 months 5 years 12 months 12 months 3 months AHI—Baseline 29.3 29.3 28.6 33.0 35.6 AHI—Therapy 9.0 6.2 9.5 10.2 6.3 ESS—Baseline 11 11 13 11 11 ESS—Therapy 6 6 7 6 6 FOSQ—Baseline 14.6 14.6 13.7 * * FOSQ—Therapy 18.2 18.7 18.6 * * Therapy compliance 86% daily; 93% 5+ days weekly 80% daily Average 39 hours per week; 89% ≥20 hours per week Average 5.6 hours per night Average >45 hours per week * Not measured (1) Median results (2) Mean results (3) Thomas Jefferson University Hospital ("TJUH") and University of Pittsburgh Medical Center ("UPMC").
The table below highlights key findings from certain of these studies and data from our ADHERE patient registry, including significant improvements in objective sleep measures and patient-reported quality of life measures, strong therapy compliance, and a favorable safety profile. 15 Table of Contents STAR Trial (1) German Post-Market Study (1) ADHERE Patient Registry (1) TJUH and UPMC Evaluation (2) Number of Inspire therapy patients 124 97 56 1,963 97 Time following implantation 12 months 5 years 12 months 12 months 3 months AHI—Baseline 29.3 29.3 28.6 33.0 35.6 AHI—Therapy 9.0 6.2 9.5 10.2 6.3 ESS—Baseline 11 11 13 11 11 ESS—Therapy 6 6 7 6 6 FOSQ—Baseline 14.6 14.6 13.7 * * FOSQ—Therapy 18.2 18.7 18.6 * * Therapy compliance 86% daily; 93% 5+ days weekly 80% daily Average 39 hours per week; 89% ≥20 hours per week Average 5.7 hours per night Average >45 hours per week * Not measured (1) Median results (2) Thomas Jefferson University Hospital ("TJUH") and University of Pittsburgh Medical Center ("UPMC").
Our team of Sleep Support Specialists educate and oversee local sleep lab titrations. These teams are critical to ensuring that outcomes continue to improve even as implant volumes increase around the world. • Promote awareness among patients, ENT physicians, sleep centers, and referring physicians.
Our team of Sleep Support Specialists educate and oversee local sleep lab titrations. We believe these teams are critical to ensuring that outcomes continue to improve even as implant volumes increase around the world. • Improve the customer experience.
A sleep study records a patient’s breathing, airflow, and blood oxygen levels before and after activating the device. Before activation, the patient experiences multiple periods of interrupted breathing, and oxygen levels repeatedly drop before the patient experiences a transient arousal that allows air intake.
Before activation, the patient experiences multiple periods of interrupted breathing, and oxygen levels repeatedly drop before the patient experiences a transient arousal that allows air intake.
Implantation The Inspire system is implanted under general anesthesia through two small incisions. One incision is under the lower jaw, where the stimulation lead is attached around a distal branch of the hypoglossal nerve that is responsible for forward movement of the tongue.
One incision is under the lower jaw, where the stimulation lead is attached around a distal branch of the hypoglossal nerve that is responsible for forward movement of the tongue.
This app is an educational tool for patients and also interfaces with SleepSync TM to allow physicians to collect clinical data from patients directly. We continue to enhance the functionality of this app as part of our overall digital platform development. Since launch, over 60,000 copies of the app have been downloaded to smartphones. Commercial Activities Outside of the U.S.
This app is an educational tool for patients and also interfaces with our SleepSync TM platform to allow physicians to collect clinical data from patients directly. We continue to enhance the functionality of this app as part of our overall digital platform development.
In the U.S., we have experienced, and may in the future experience, higher sales in the fourth quarter as a result of patients having paid their annual insurance deductibles in full, thereby reducing their out-of-pocket costs. Conversely, in the first quarter, many U.S. patients' insurance deductibles reset, requiring more out-of-pocket costs, which negatively impacts our sales during this period.
In the U.S., we have experienced, and may in the future experience, higher sales in the fourth quarter as a result of patients having paid their annual insurance deductibles in full, thereby reducing their out-of-pocket costs.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe may experience a number of events during that could adversely affect the costs, timing or successful completion of our clinical studies, including: • we may be required to submit an IDE application or similar application to the FDA or a foreign regulatory authority, which must become effective prior to commencing human clinical studies, and the FDA or foreign regulatory authority may reject our IDE or similar application and notify us that we may not begin investigational studies; • regulators and other comparable foreign regulatory authorities may disagree as to the design or implementation of our clinical studies; • regulators and/or IRBs, or other reviewing bodies may not authorize us or our investigators to commence a clinical study, or to conduct or continue a clinical study at a prospective or specific study site; • we may not reach agreement on acceptable terms with prospective contract research organizations ("CROs") and clinical study sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and study sites; • clinical studies may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical studies or abandon product development programs; • the number of subjects or patients required for clinical studies may be larger than we anticipate, enrollment in these clinical studies may be insufficient or slower than we anticipate, and the number of clinical studies being conducted at any given time may be high and result in fewer available patients for any given clinical study, or patients may drop out of these clinical studies at a higher rate than we anticipate; • our third-party contractors, including those manufacturing products or conducting clinical studies on our behalf, may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; • we might have to suspend or terminate clinical studies for various reasons, including a finding that the subjects are being exposed to unacceptable health risks; • we may have to amend clinical study protocols or conduct additional studies to reflect changes in regulatory requirements or guidance, which we may be required to submit to an IRB or other review bodies and/or regulatory authorities for re-examination; 61 Table of Contents • regulators, IRBs, or other parties may require or recommend that we or our investigators suspend or terminate clinical research for various reasons, including safety signals or noncompliance with regulatory requirements; • the cost of clinical studies may be greater than we anticipate; • clinical sites may not adhere to the clinical protocol or may drop out of a clinical study; • we may be unable to recruit a sufficient number of clinical study sites; • regulators, IRBs, or other reviewing bodies may fail to approve or subsequently find fault with our manufacturing processes or facilities of third-party manufacturers with which we enter into agreement for clinical and commercial supplies, the supply of devices or other materials necessary to conduct clinical studies may be insufficient, inadequate or not available at an acceptable cost, or we may experience interruptions in supply; • approval policies or regulations of FDA or applicable foreign regulatory agencies may change in a manner rendering our clinical data insufficient for approval or certification; and • our current or future products may have undesirable side effects or other unexpected characteristics.
Biggest changeWe may experience a number of events during that could adversely affect the costs, timing or successful completion of our clinical studies, including: 64 Table of Contents • we may be required to submit an IDE application or similar application to the FDA or a foreign regulatory authority, which must become effective prior to commencing human clinical studies, and the FDA or foreign regulatory authority may reject our IDE or similar application and notify us that we may not begin investigational studies; • regulators and other comparable foreign regulatory authorities may disagree as to the design or implementation of our clinical studies; • regulators and/or IRBs, or other reviewing bodies may not authorize us or our investigators to commence a clinical study, or to conduct or continue a clinical study at a prospective or specific study site; • we may not reach agreement on acceptable terms with prospective contract research organizations ("CROs") and clinical study sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and study sites; • clinical studies may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical studies or abandon product development programs; • the number of subjects or patients required for clinical studies may be larger than we anticipate, enrollment in these clinical studies may be insufficient or slower than we anticipate, and the number of clinical studies being conducted at any given time may be high and result in fewer available patients for any given clinical study, or patients may drop out of these clinical studies at a higher rate than we anticipate; • our third-party contractors, including those manufacturing products or conducting clinical studies on our behalf, may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; • we might have to suspend or terminate clinical studies for various reasons, including a finding that the subjects are being exposed to unacceptable health risks; • we may have to amend clinical study protocols or conduct additional studies to reflect changes in regulatory requirements or guidance, which we may be required to submit to an IRB or other review bodies and/or regulatory authorities for re-examination; • regulators, IRBs, or other parties may require or recommend that we or our investigators suspend or terminate clinical research for various reasons, including safety signals or noncompliance with regulatory requirements; • the cost of clinical studies may be greater than we anticipate; • clinical sites may not adhere to the clinical protocol or may drop out of a clinical study; • we may be unable to recruit a sufficient number of clinical study sites; • regulators, IRBs, or other reviewing bodies may fail to approve or subsequently find fault with our manufacturing processes or facilities of third-party manufacturers with which we enter into agreement for clinical and commercial supplies, the supply of devices or other materials necessary to conduct clinical studies may be insufficient, inadequate or not available at an acceptable cost, or we may experience interruptions in supply; • approval policies or regulations of FDA or applicable foreign regulatory agencies may change in a manner rendering our clinical data insufficient for approval or certification; and • our current or future products may have undesirable side effects or other unexpected characteristics. 65 Table of Contents Patient enrollment in clinical studies and completion of patient follow-up depend on many factors, including the size of the patient population, the nature of the study protocol, the proximity of patients to clinical sites, the eligibility criteria for the clinical study, patient compliance, competing clinical studies and clinicians’ and patients’ perceptions as to the potential advantages of the product being studied in relation to other available therapies, including any new treatments that may be approved for the indications we are investigating.
We expect that our operating expenses will continue to increase as we continue to build our commercial infrastructure, invest in research and development, and develop, enhance, and commercialize new products. As a result, we expect to continue to incur operating losses for the foreseeable future and may never achieve profitability.
We expect that our operating expenses will continue to increase as we continue to build our commercial infrastructure, invest in research and development, and develop, enhance, and commercialize new products. As a result, we may continue to incur operating losses for the foreseeable future and may never achieve profitability.
Departments of Justice, Commerce, State and Treasury and other federal agencies and authorities have a broad range of civil and criminal penalties they may seek to impose against corporations and individuals for violations of economic sanctions laws, export control laws, the U.S.
The U.S. Departments of Justice, Commerce, State and Treasury and other federal agencies and authorities have a broad range of civil and criminal penalties they may seek to impose against corporations and individuals for violations of economic sanctions laws, export control laws, the U.S.
Failure to comply with applicable regulations could jeopardize our ability to sell our products and result in enforcement actions such as: warning letters; fines; injunctions; civil penalties; termination of distribution; recalls or seizures of products; delays in the introduction of products into the market; total or partial suspension of production; refusal to grant future clearances, approval, or certifications; withdrawals or suspensions of current approvals, resulting in prohibitions on sales of our products; and in the most serious cases, criminal penalties.
Failure to comply with applicable regulations could jeopardize our ability to sell our products and result in enforcement actions such as: warning letters; fines; injunctions; civil penalties; termination of distribution; recalls or seizures of products; delays in the introduction of products into the market; total or partial suspension of production; refusal to grant future clearances, approval, or certifications; withdrawals or suspensions of current approvals or certifications, resulting in prohibitions on sales of our products; and in the most serious cases, criminal penalties.
Entities that are found to be in violation of HIPAA as the result of a breach of unsecured PHI, a complaint about privacy practices or an audit by the U.S. Department of Health and Human Services, or HHS, may be subject to significant civil, criminal and administrative fines and penalties and/or additional reporting and oversight obligations.
Entities that are found to be in violation of HIPAA as the result of a breach of unsecured PHI, a complaint about privacy practices or an audit by the U.S. Department of Health and Human Services ("HHS"), may be subject to significant civil, criminal and administrative fines and penalties and/or additional reporting and oversight obligations.
While our suppliers and contract manufacturers have generally met our demand for their products and services on a timely basis in the past, we cannot guarantee that they will in the future be able to meet our demand for their products or prevent delays in the delivery of their products, which could be adversely affected due to, for example, natural and man-made disasters, public health emergencies such as the COVID-19 pandemic, product quality issues, other catastrophic events, the macroeconomic environment including supply chain constraints, higher inflation and interest rates, the nature of our agreements with our contract manufacturers, our relative importance to such manufacturers as a customer or a contract manufacturer's decision to discontinue or reduce the level of business they conduct with us.
While our suppliers and contract manufacturers have generally met our demand for their products and services on a timely basis in the past, we cannot guarantee that they will in the future be able to meet our demand for their products or prevent delays in the delivery of their products, which could be adversely affected due to, for example, natural and man-made disasters, public health emergencies such as COVID-19, product quality issues, other catastrophic events, the macroeconomic environment including supply chain constraints, higher inflation and interest rates, the nature of our agreements with our contract manufacturers, our relative importance to such manufacturers as a customer or a contract manufacturer's decision to discontinue or reduce the level of business they conduct with us.
These provisions provide, among other things, that: • our board of directors has the exclusive right to expand the size of our board of directors and to elect directors to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; • our board of directors is divided into three classes, Class I, Class II and Class III, with each class serving staggered three-year terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors; • our stockholders may not act by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; 69 Table of Contents • a special meeting of stockholders may be called only by the chair of our board of directors, our chief executive officer or a majority of our board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; • our amended and restated certificate of incorporation prohibits cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • our board of directors may alter certain provisions of our bylaws without obtaining stockholder approval; • the approval of the holders of at least two-thirds of the shares entitled to vote at an election of directors is required to adopt, amend or repeal our bylaws or repeal the provisions of our amended and restated certificate of incorporation regarding the election and removal of directors; • stockholders must provide advance notice and additional disclosures in order to nominate individuals for election to the board of directors or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of our Company; and • our board of directors is authorized to issue shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror.
These provisions provide, among other things, that: • our board of directors has the exclusive right to expand the size of our board of directors and to elect directors to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; • our board of directors is divided into three classes, Class I, Class II and Class III, with each class serving staggered three-year terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors; • our stockholders may not act by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • a special meeting of stockholders may be called only by the chair of our board of directors, our chief executive officer or a majority of our board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; • our amended and restated certificate of incorporation prohibits cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • our board of directors may alter certain provisions of our bylaws without obtaining stockholder approval; • the approval of the holders of at least two-thirds of the shares entitled to vote at an election of directors is required to adopt, amend or repeal our bylaws or repeal the provisions of our amended and restated certificate of incorporation regarding the election and removal of directors; • stockholders must provide advance notice and additional disclosures in order to nominate individuals for election to the board of directors or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of our Company; and • our board of directors is authorized to issue shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror.
Although we try to ensure that our employees and consultants do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed intellectual property or personal data, including trade secrets or other proprietary information, of a former employer or other third party.
Although we try to ensure that our employees and consultants do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed intellectual property or personal information, including trade secrets or other proprietary information, of a former employer or other third party.
If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA, other regulatory authorities and notified bodies from conducting their regular inspections or audits, reviews, or other regulatory activities, it could significantly impact the ability of the FDA, other regulatory authorities or notified bodies to timely review and process our regulatory submissions, which could have a material adverse effect on our business.
If a prolonged government shutdown occurs, or if global health concerns prevent the FDA, other regulatory authorities and notified bodies from conducting their regular inspections or audits, reviews, or other regulatory activities, it could significantly impact the ability of the FDA, other regulatory authorities or notified bodies to timely review and process our regulatory submissions, which could have a material adverse effect on our business.
The GDPR also imposes conditions on obtaining valid consent for cookies, such as a prohibition on pre-checked consents and a requirement to ensure separate consents are sought for each type of cookie or similar technology. Recent European court and regulator decisions are driving increased attention to cookies and tracking technologies.
The GDPR also imposes conditions on obtaining valid consent for cookies, such as a prohibition on pre-checked consents and a requirement to ensure separate consents are sought for each type of cookie or similar technology. Recent European court and regulator decisions and guidance are driving increased attention to cookies and tracking technologies.
This strategy is subject to a number of risks, including: • difficulties in staffing and managing our international operations; • increased competition as a result of more products and procedures receiving regulatory approval or otherwise free to market in international markets; • longer accounts receivable payment cycles and difficulties in collecting accounts receivable; • reduced or varied protection for intellectual property rights in some countries; • trade export restrictions, trade regulations, and foreign tax laws; • fluctuations in currency exchange rates; • foreign certification and regulatory clearance or approval requirements; • difficulties in developing effective marketing campaigns in unfamiliar foreign countries; • customs clearance and shipping delays; • political, social, and economic instability abroad, terrorist attacks, and security concerns in general; • preference for locally produced products; • potentially adverse tax consequences, including the complexities of foreign value-added tax systems, tax inefficiencies related to our corporate structure, and restrictions on the repatriation of earnings; • the burdens of complying with a wide variety of foreign laws and different legal standards; and • increased financial accounting and reporting burdens and complexities.
This strategy is subject to a number of risks, including: • difficulties in staffing and managing our international operations; • increased competition as a result of more products and procedures receiving regulatory approval or otherwise free to market in international markets; • longer accounts receivable payment cycles and difficulties in collecting accounts receivable; • reduced or varied protection for intellectual property rights in some countries; • trade export restrictions, trade regulations, and foreign tax laws; 45 Table of Contents • fluctuations in currency exchange rates; • foreign certification and regulatory clearance or approval requirements; • difficulties in developing effective marketing campaigns in unfamiliar foreign countries; • customs clearance and shipping delays; • political, social, and economic instability abroad, terrorist attacks, and security concerns in general; • preference for locally produced products; • potentially adverse tax consequences, including the complexities of foreign value-added tax systems, tax inefficiencies related to our corporate structure, and restrictions on the repatriation of earnings; • the burdens of complying with a wide variety of foreign laws and different legal standards; and • increased financial accounting and reporting burdens and complexities.
Risks Related to Our Common Stock The market price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for purchasers of our common stock The market price of our common stock is likely to be highly volatile and may fluctuate substantially due to many factors, including, for example: • the volume and timing of sales of our products; • the introduction of new products or product enhancements by us or others in our industry; • disputes or other developments with respect to our or others' intellectual property rights; • our ability to develop, obtain regulatory clearance or approval for, and market new and enhanced products on a timely basis; • regulatory actions with respect to our therapy or those of our competitors or companies perceived to be similar to ours; 68 Table of Contents • product liability claims or other litigation; • changes in physician, hospital, healthcare provider practices; • quarterly variations in our results of operations or those of others in our industry; • media exposure of our products or of those of others in our industry; • changes in governmental regulations • changes in the structure of healthcare payment systems; • changes in earnings estimates or recommendations by securities analysts; and • general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors.
Risks Related to Our Common Stock The market price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for purchasers of our common stock The market price of our common stock is likely to be highly volatile and may fluctuate substantially due to many factors, including, for example: • the volume and timing of sales of our products; • the introduction of new products or product enhancements by us or others in our industry; • disputes or other developments with respect to our or others' intellectual property rights; • our ability to develop, obtain regulatory clearance or approval for, and market new and enhanced products on a timely basis; • regulatory actions with respect to our therapy or those of our competitors or companies perceived to be similar to ours; • product liability claims or other litigation; • changes in physician, hospital, healthcare provider practices; • quarterly variations in our results of operations or those of others in our industry; • media exposure of our products or of those of others in our industry; • changes in governmental regulations • changes in the structure of healthcare payment systems; • changes in earnings estimates or recommendations by securities analysts; and • general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors.
Such factors may include, for example, seasonal variations in our sales or required postponements of elective surgical procedures effected during a health crisis, as was the case with the COVID-19 pandemic.
Such factors may include, for example, seasonal variations in our sales or required postponements of elective surgical procedures effected during a health crisis, as was the case with COVID-19.
The success of any new product offering or product enhancements to our Inspire system will depend on several factors, including our ability to: • properly identify and anticipate physician and patient needs; • develop and introduce new products and product enhancements in a timely manner; • avoid infringing upon the intellectual property rights of third-parties; • demonstrate, if required, the safety and efficacy of new products with data from preclinical studies and clinical studies; • obtain the necessary regulatory clearances, approvals or certifications for expanded indications, new products or product modifications; • be fully FDA-compliant with marketing of new devices or modified products and be fully compliant with foreign requirements to market our new devices or modified products; • provide adequate training to potential users of our products; 40 Table of Contents • receive adequate coverage and reimbursement for procedures performed with our products; and • develop an effective and dedicated sales and marketing team.
The success of any new product offering or product enhancements to our Inspire system will depend on several factors, including our ability to: • properly identify and anticipate physician and patient needs; • develop and introduce new products and product enhancements in a timely manner; • avoid infringing upon the intellectual property rights of third-parties; • demonstrate, if required, the safety and efficacy of new products with data from preclinical studies and clinical studies; • obtain the necessary regulatory clearances, approvals or certifications for expanded indications, new products or product modifications; • be fully FDA-compliant with marketing of new devices or modified products and be fully compliant with foreign requirements to market our new devices or modified products; • provide adequate training to potential users of our products; • receive adequate coverage and reimbursement for procedures performed with our products; and • develop an effective and dedicated sales and marketing team.
Any potential intellectual property litigation also could force us to do one or more of the following: • stop making, selling or using products or technologies that allegedly infringe the asserted intellectual property; • lose the opportunity to license our technology to others or to collect royalty payments based upon successful protection and assertion of our intellectual property rights against others; incur significant legal expenses; • pay substantial damages or royalties to the party whose intellectual property rights we may be found to be infringing; • pay the attorney’s fees and costs of litigation to the party whose intellectual property rights we may be found to be infringing; • redesign those products that contain the allegedly infringing intellectual property, which could be costly, disruptive and infeasible; and • attempt to obtain a license to the relevant intellectual property from third parties, which may not be available on reasonable terms or at all, or from third parties who may attempt to license rights that they do not have.
Any potential intellectual property litigation also could force us to do one or more of the following: • stop making, selling or using products or technologies that allegedly infringe the asserted intellectual property; 69 Table of Contents • lose the opportunity to license our technology to others or to collect royalty payments based upon successful protection and assertion of our intellectual property rights against others; incur significant legal expenses; • pay substantial damages or royalties to the party whose intellectual property rights we may be found to be infringing; • pay the attorney’s fees and costs of litigation to the party whose intellectual property rights we may be found to be infringing; • redesign those products that contain the allegedly infringing intellectual property, which could be costly, disruptive and infeasible; and • attempt to obtain a license to the relevant intellectual property from third parties, which may not be available on reasonable terms or at all, or from third parties who may attempt to license rights that they do not have.
Risks Related to Our Business We have incurred significant operating losses since inception, we expect to incur operating losses in the future and we may not be able to achieve or sustain profitability. We have incurred net losses since our inception in 2007.
Risks Related to Our Business We have incurred significant operating losses since inception, we may incur operating losses in the future and we may not be able to achieve or sustain profitability. We have incurred net losses since our inception in 2007.
In March 2010, the Affordable Care Act (the "ACA") was enacted in the U.S., which made a number of substantial changes in the way healthcare is financed by both governmental and private insurers.
In 2010, the Affordable Care Act (the "ACA") was enacted in the U.S., which made a number of substantial changes in the way healthcare is financed by both governmental and private insurers.
If our systems are damaged or cease to function properly due to any number of causes, ranging from catastrophic events to power outages to security breaches, and our business continuity plans do not effectively compensate on a timely basis, we may experience interruptions in our operations, which could have an adverse effect on our business.
If our systems are damaged or cease to function properly due to any number of causes, ranging from catastrophic events to power outages to security breaches, and our business continuity plans do not effectively compensate on a timely basis, we may experience interruptions in our operations, which could have an adverse effect on our business and financial condition.
Our information technology systems and those of our third-party service providers, vendors, strategic partners and other contractors or consultants are vulnerable to damage or interruption from computer viruses and malware (e.g. ransomware), natural disasters, terrorism, war, telecommunication and electrical failures, hacking, cyberattacks, phishing attacks and other social engineering schemes, malicious code, employee theft or misuse, human error, fraud, denial or 46 Table of Contents degradation of service attacks, sophisticated nation-state and nation-state-supported actors or unauthorized access or use by persons inside our organization, or persons with access to systems inside our organization.
Our information technology systems and those of our third-party service providers, vendors, strategic partners and other contractors or consultants are vulnerable to damage or interruption from computer viruses and malware (e.g. ransomware), natural disasters, terrorism, war, telecommunication and electrical failures, hacking, cyberattacks, phishing attacks and other social engineering schemes, malicious code, employee theft or misuse, human error, fraud, denial or degradation of service attacks, sophisticated nation-state and nation-state-supported actors or unauthorized access or use by persons inside our organization, or persons with access to systems inside our organization.
In Europe, we are subject to the requirements of the GDPR (and national laws implementing the GDPR) because we are “established” in certain EU countries and we are processing personal data of individuals located in the EU and EEA in the context of these establishments, as well as offering of goods to, and/or monitoring the behavior of, individuals in the EU and EEA in connection with our clinical investigations.
For example, in Europe, we are subject to the requirements of the GDPR (and national laws implementing the GDPR) because we are “established” in certain EU countries and we are processing personal data of individuals located in the EU and EEA in the context of these establishments, as well as offering of goods to, and/or monitoring the behavior of, individuals in the EU and EEA in connection with our clinical investigations.
While the number of physicians prescribing our Inspire therapy has increased, there is a significant group of physicians who have not yet adopted our Inspire therapy, and additional physicians may choose not to adopt our Inspire therapy for a number of reasons, including, for example: • lack of availability of adequate third-party payor coverage or reimbursement; • lack of experience with our products and with upper airway neurostimulation as a treatment alternative; • our inability to convince key opinion leaders to provide recommendations regarding our Inspire therapy, or to convince physicians, patients, and healthcare payors that our Inspire therapy is an attractive alternative to other treatment options; • perceived inadequacy of evidence supporting clinical benefits or cost-effectiveness of our Inspire therapy over existing alternatives; • a perception among some physicians of patients’ inability to tolerate the surgical procedure required to implant our Inspire system; • liability risks generally associated with the use of new products and procedures; and • the training required to use new products.
While the number of physicians prescribing our Inspire therapy has increased, there is a significant group of physicians who have not yet adopted our Inspire therapy, and additional physicians may choose not to adopt our Inspire therapy for a number of reasons, including, for example: • lack of availability of adequate third-party payor coverage or reimbursement; • lack of experience with our products and with upper airway neurostimulation as a treatment alternative; • our inability to convince key opinion leaders to provide recommendations regarding our Inspire therapy, or to convince physicians, patients, and healthcare payors that our Inspire therapy is an attractive alternative to other treatment options; • perceived inadequacy of evidence supporting clinical benefits or cost-effectiveness of our Inspire therapy over existing alternatives; • challenges in obtaining prior authorization; • a perception among some physicians of patients’ inability to tolerate the surgical procedure required to implant our Inspire system; • liability risks generally associated with the use of new products and procedures; and • the training required to use new products.
HIPAA requires covered entities and business associates to develop and maintain policies with respect to the protection of, use and disclosure of PHI, including the adoption of administrative, physical and technical safeguards to protect such information, and certain notification requirements in the event of a breach of unsecured PHI.
HIPAA requires covered entities and business associates to develop and maintain policies with respect to the protection of, use and disclosure of protected health information ("PHI"), including the adoption of administrative, physical and technical safeguards to protect such information, and certain notification requirements in the event of a breach of unsecured PHI.
We are subject to the FDA’s medical device reporting regulations and similar foreign regulations, which require us to report to the FDA and foreign regulatory authorities when we receive or become aware of information that 55 Table of Contents reasonably suggests that one or more of our products may have caused or contributed to a death or serious injury or malfunctioned in a way that, if the malfunction were to recur, it could cause or contribute to a death or serious injury.
We are subject to the FDA’s medical device reporting regulations and similar foreign regulations, which require us to report to the FDA and foreign regulatory authorities when we receive or become aware of information that reasonably suggests that one or more of our products may have caused or contributed to a death or serious injury or malfunctioned in a way that, if the malfunction were to recur, it could cause or contribute to a death or serious injury.
In addition, regardless of merit or eventual outcome, product liability claims may result in: • costs of litigation; • distraction of management’s attention from our primary business; • the inability to commercialize our Inspire system or new products; • decreased demand for our Inspire system; • damage to our business reputation; • product recalls or withdrawals from the market; • withdrawal of clinical study participants; • substantial monetary awards to patients or other claimants; or • loss of sales.
In addition, regardless of merit or eventual outcome, product liability claims may result in: • costs of litigation; • distraction of management’s attention from our primary business; 46 Table of Contents • the inability to commercialize our Inspire system or new products; • decreased demand for our Inspire system; • damage to our business reputation; • product recalls or withdrawals from the market; • withdrawal of clinical study participants; • substantial monetary awards to patients or other claimants; or • loss of sales.
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding 73 Table of Contents voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.
If clinical studies of our future products do not produce results 60 Table of Contents necessary to support regulatory clearance or approval in the U.S. or foreign approval or certification, with respect to our current or future products, elsewhere, we will be unable to expand the indications for or commercialize these products and may incur additional costs or experience delays in completing, or ultimately be unable to complete, the commercialization of those products.
If clinical studies of our future products do not produce results necessary to support regulatory clearance or approval in the U.S. or foreign approval or certification, with respect to our current or future products, elsewhere, we will be unable to expand the indications for or commercialize these products and may incur additional costs or experience delays in completing, or ultimately be unable to complete, the commercialization of those products.
Our ability to accurately forecast demand for our 41 Table of Contents Inspire system could be negatively affected by many factors, including our failure to accurately manage our expansion strategy, product introductions by competitors, an increase or decrease in customer demand for our Inspire system or for products of our competitors, our failure to accurately forecast customer acceptance of new products, unanticipated changes in general market conditions or regulatory matters, and weakening of economic conditions or consumer confidence in future economic conditions.
Our ability to accurately forecast demand for our Inspire system could be negatively affected by many factors, including our failure to accurately manage our expansion strategy, product introductions by competitors, an increase or decrease in customer demand for our Inspire system or for products of our competitors, our failure to accurately forecast customer acceptance of new products, unanticipated changes in general market conditions or regulatory matters, and weakening of economic conditions or consumer confidence in future economic conditions.
Furthermore, our contract manufacturers could require us to move to another one of their production facilities or use alternative materials or components. Any of these events could require that we obtain a new regulatory authority approval before we implement the change, which could result in further delay and which may not be obtained at all.
Furthermore, our contract manufacturers could require us to move to another one of their production facilities or use alternative materials or components. Any of these events could require that we obtain a new regulatory authority approval or notified body certification before we implement the change, which could result in further delay and which may not be obtained at all.
Any such access, disclosure, or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, and damage to our reputation. In addition, we accept payments for our sales through credit and debit card transactions, which are handled through a third-party payment processor.
Any such access, disclosure, or other loss of information could result in regulatory action or investigation, legal claims or proceedings, liability under laws that protect the privacy of personal information, and damage to our reputation. In addition, we accept payments for our sales through credit and debit card transactions, which are handled through a third-party payment processor.
Any of these actions could significantly and negatively affect supply of our products. If any of these events occurs, our reputation could be harmed, we could be exposed to product liability claims and we could lose customers and experience reduced sales and increased costs.
Any of these actions could significantly and negatively affect supply of our products. If any of these events occur, our reputation could be harmed, we could be exposed to product liability claims and we could lose customers and experience reduced sales and increased costs.
In addition, the FDA regulates exports of medical devices from the U.S. While the regulations of some countries may not impose barriers to marketing and selling our products or only require notification, others require that we obtain the approval of or certification by a specified body (e.g., notified bodies in Europe).
In addition, the FDA regulates exports of medical devices from the U.S. While the regulations 58 Table of Contents of some countries may not impose barriers to marketing and selling our products or only require notification, others require that we obtain the approval of or certification by a specified body (e.g., notified bodies in Europe).
As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future. 70 Table of Contents General Risk Factors Changes in U.S. and foreign tax laws could have a material adverse effect on our business, cash flow, results of operations and financial condition.
As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future. General Risk Factors Changes in U.S. and foreign tax laws could have a material adverse effect on our business, cash flow, results of operations and financial condition.
Integrating any business, product or technology we acquire could be expensive and time-consuming, disrupt our ongoing business and distract our management. If we are unable to integrate any acquired businesses, products or technologies effectively, our business will be adversely affected. In addition, any amortization or charges resulting from the costs of acquisitions could increase our expenses.
Integrating any business, product or technology we acquire could be expensive and time-consuming, disrupt our ongoing business and distract our management. If 47 Table of Contents we are unable to integrate any acquired businesses, products or technologies effectively, our business will be adversely affected. In addition, any amortization or charges resulting from the costs of acquisitions could increase our expenses.
To enforce compliance with the healthcare regulatory laws, certain enforcement bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. Responding to 57 Table of Contents investigations can be time-and resource-consuming and can divert management’s attention from the business.
To enforce compliance with the healthcare regulatory laws, certain enforcement bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. Responding to investigations can be time-and resource-consuming and can divert management’s attention from the business.
We perform substantially all of our research and development and back-office activity at a single location in Golden Valley, Minnesota. The majority of our finished goods inventory is maintained at a third party location in Tennessee. Our facility, equipment and inventory would be costly to replace and could require substantial lead time to repair or replace.
We perform substantially all of our research and development and back-office activity at two locations in Golden Valley, Minnesota. The majority of our finished goods inventory is maintained at a third-party location in Tennessee. Our facility, equipment and inventory would be costly to replace and could require substantial lead time to repair or replace.
If we fail to develop or maintain positive relationships with our distributors, including in new markets, fail to manage, train or incentivize these distributors effectively, or fail to provide distributors with competitive products on attractive terms, or if these distributors are not successful in their sales efforts, or if we are unable to successfully transition to a direct sales force in markets previously served by distributors, we may not achieve expected revenues or may have a reduction in revenue and our operating results, reputation and business would be harmed.
If we fail to develop or maintain positive relationships with our distributors, including in new markets, fail to manage, train or incentivize these distributors effectively, or fail to provide distributors with competitive products on attractive terms, or if these distributors are not successful in their sales 49 Table of Contents efforts, or if we are unable to successfully transition to a direct sales force in markets previously served by distributors, we may not achieve expected revenues or may have a reduction in revenue and our operating results, reputation and business would be harmed.
If one or more CPAP device manufacturers successfully develop a CPAP device that is more effective, better tolerated or otherwise results in better compliance by patients, or if improvements in other second-line therapies make them more effective, cost effective, easier to use or otherwise more attractive than our Inspire therapy, sales of our Inspire system could be 38 Table of Contents significantly and adversely affected, which could have a material adverse effect on our business and financial condition and results of operations.
If one or more CPAP device manufacturers successfully develop a CPAP device that is more effective, better tolerated or otherwise results in better compliance by patients, or if improvements in other first or second-line therapies make them more effective, cost effective, easier to use or otherwise more attractive than our Inspire therapy, sales of our Inspire system could be significantly and adversely affected, which could have a material adverse effect on our business and financial condition and results of operations.
Similarly, in an effort to decrease costs, physicians may also reuse our Inspire system despite it being intended for a single use or may purchase reprocessed Inspire systems from third-party reprocessors in lieu of purchasing a new Inspire system from us, which could result in product failure and liability.
Similarly, in an effort to decrease costs, physicians may also reuse our Inspire system despite it being intended for 57 Table of Contents a single use or may purchase reprocessed Inspire systems from third-party reprocessors in lieu of purchasing a new Inspire system from us, which could result in product failure and liability.
We have designed our disclosure controls and procedures to provide reasonable assurance that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.
We have designed our disclosure controls and procedures to provide reasonable assurance that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the rules 74 Table of Contents and forms of the SEC.
We must inform the notified body that carried out the conformity assessment of the medical devices that we market or sell in the EU and the EEA of any planned substantial changes to our quality system or substantial changes to our medical devices that could affect compliance with the general safety and performance requirements laid down in Annex I to the EU Medical Devices Regulation or cause a substantial change to the intended use for which the device has been CE marked.
Once devices are certified under the EU Medical Devices Regulation, we must inform the notified body that carried out the conformity assessment of the medical devices that we market or sell in the EU and the EEA of any planned substantial changes to our quality system or substantial changes to our medical devices that could affect compliance with the general safety and performance requirements laid down in Annex I to the EU Medical Devices Regulation or cause a substantial change to the intended use for which the device has been CE marked.
Our ability to execute our growth strategy and become profitable will therefore depend upon the adoption by patients, physicians, and sleep centers, among others, of our Inspire therapy to treat moderate to severe OSA in patients who are unable to use or get consistent benefit from CPAP.
Our ability to execute our growth strategy and become profitable will therefore depend upon the adoption by patients, physicians, and sleep centers, among others, of 37 Table of Contents our Inspire therapy to treat moderate to severe OSA in patients who are unable to use or get consistent benefit from CPAP.
See Part I, Item 1. "Business — Government Regulation." These laws and regulations, among other things, constrain our business, marketing and other promotional activities by limiting the kinds of financial arrangements, including sales programs, we may have with hospitals, physicians or other potential purchasers of our products.
See Part I, Item 1. "Business — Government Regulation." 60 Table of Contents These laws and regulations, among other things, constrain our business, marketing and other promotional activities by limiting the kinds of financial arrangements, including sales programs, we may have with hospitals, physicians or other potential purchasers of our products.
The patent positions of medical device companies, including our patent position, may involve complex legal and factual questions, and, therefore, the scope, validity and enforceability of any patent claims that we may obtain cannot be predicted with certainty. Patents, if issued, may be challenged, deemed unenforceable, invalidated or circumvented.
The patent positions of medical device companies, including our patent position, may involve complex legal and factual 67 Table of Contents questions, and, therefore, the scope, validity and enforceability of any patent claims that we may obtain cannot be predicted with certainty. Patents, if issued, may be challenged, deemed unenforceable, invalidated or circumvented.
These reports include safety and effectiveness information about the device after its approval. Failure to submit such reports, or failure to submit the reports in a timely manner, could result in enforcement action by the FDA. Following its review of the periodic reports, the FDA might ask for additional 53 Table of Contents information or initiate further investigation.
These reports include safety and effectiveness information about the device after its approval. Failure to submit such reports, or failure to submit the reports in a timely manner, could result in enforcement action by the FDA. Following its review of the periodic reports, the FDA might ask for additional information or initiate further investigation.
The U.S. federal government and various states have adopted or proposed laws, regulations, guidelines and rules for the collection, distribution, use and storage of personal information of individuals.
The U.S. federal government, various states, and foreign governments have adopted or proposed laws, regulations, guidelines and rules for the collection, distribution, use and storage of personal information of individuals.
We have, and we may in the future, receive letters or other threats or claims from third parties inviting us to take licenses under, or alleging that we infringe, their patents. 65 Table of Contents Moreover, we may become party to future adversarial proceedings regarding our patent portfolio or the patents of third parties.
We have, and we may in the future, receive letters or other threats or claims from third parties inviting us to take licenses under, or alleging that we infringe, their patents. Moreover, we may become party to future adversarial proceedings regarding our patent portfolio or the patents of third parties.
The first to file provisions limit the rights of an inventor to patent an invention if not the first to file an application for patenting that invention, even if such invention was the first invention. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business.
The first to file provisions limit the rights of an inventor to patent an invention 71 Table of Contents if not the first to file an application for patenting that invention, even if such invention was the first invention. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business.
Our products are also subject to similar state regulations and various laws and regulations of foreign countries governing manufacturing. 54 Table of Contents Our third-party manufacturers may not take the necessary steps to comply with applicable regulations, which could cause delays in the delivery of our products.
Our products are also subject to similar state regulations and various laws and regulations of foreign countries governing manufacturing. Our third-party manufacturers may not take the necessary steps to comply with applicable regulations, which could cause delays in the delivery of our products.
In the EU and the UK, informed consent is required for the placement of a cookie or similar technologies on an individual’s device and for direct electronic marketing.
In the EU and the UK, informed consent is required for the placement of certain cookie or similar technologies on an individual’s device and for direct electronic marketing.
If we are forced to 37 Table of Contents lower the price we charge for our products, our gross margins will decrease, which could have a material adverse effect on our business, financial condition, and results of operations, and impair our ability to grow our business.
If we are forced to lower the price we charge for our products, our gross margins will decrease, which could have a material adverse effect on our business, financial condition, and results of operations, and impair our ability to grow our business.
Our existing cash, cash equivalents, short-term investments and revenue will be sufficient to meet our capital requirements and fund our operations for at least 12 months. However, we have based these estimates on assumptions that may prove to be incorrect, and we could spend our available financial resources much faster than we currently expect.
Our existing cash, cash equivalents, short-term investments and revenue will be sufficient to meet our capital requirements and fund our operations for at least 12 months. However, we have based these estimates on 50 Table of Contents assumptions that may prove to be incorrect, and we could spend our available financial resources much faster than we currently expect.
The primary customers for our products are hospitals and ASCs. Our customers typically bill various third-party payors to cover all or a portion of the costs and fees associated with the procedures in which our products are used and bill patients for any deductibles or co-payments.
Our customers typically bill various third-party payors to cover all or a portion of the costs and fees associated with the procedures in which our products are used and bill patients for any deductibles or co-payments.
Because the 43 Table of Contents competition for their services is high, we cannot ensure that we will be able to hire and retain additional personnel on favorable or commercially reasonable terms, if at all. Failure to hire or retain qualified sales and reimbursement personnel would prevent us from expanding our business and generating revenue.
Because the competition for their services is high, we cannot ensure that we will be able to hire and retain additional personnel on favorable or commercially reasonable terms, if at all. Failure to hire or retain qualified sales and reimbursement personnel would prevent us from expanding our business and generating revenue.
Sales in markets outside of the U.S. accounted for approximately 3.2%, 5.3%, and 8.0% of our revenue for the years ended December 31, 2022, 2021, and 2020, respectively. Our strategy is to increase our international presence in Europe, including Germany and the Netherlands, as well as other international markets, such as Japan, Singapore, Hong Kong, and Australia.
Sales in markets outside of the U.S. accounted for approximately 3.0%, 3.2%, and 5.3% of our revenue for the years ended December 31, 2023, 2022, and 2021, respectively. Our strategy is to increase our international presence in Europe, including Germany and the Netherlands, as well as other international markets, such as Japan, Singapore, and Hong Kong.
If we raise additional funds through collaboration and licensing arrangements with third-parties, it may be necessary to relinquish some rights to our technologies or our products, or grant licenses on terms that are not favorable to us. 49 Table of Contents Furthermore, we cannot be certain that additional funding will be available on acceptable terms, if at all.
If we raise additional funds through collaboration and licensing arrangements with third-parties, it may be necessary to relinquish some rights to our technologies or our products, or grant licenses on terms that are not favorable to us. Furthermore, we cannot be certain that additional funding will be available on acceptable terms, if at all.
Because of its recent commercial introduction, in particular in Singapore, our Inspire system has limited product and brand recognition, particularly in new markets. In addition, demand for our Inspire system may decline or may not increase as quickly as we expect.
Because of its recent commercial introduction, in particular in Hong Kong, our Inspire system has limited product and brand recognition, particularly in new markets. In addition, demand for our Inspire system may decline or may not increase as quickly as we expect.
The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities.
The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information 61 Table of Contents it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities.
If we do not adequately protect our intellectual property and proprietary technology, competitors may be able to use our 63 Table of Contents technologies or the goodwill we have acquired in the marketplace and erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability.
If we do not adequately protect our intellectual property and proprietary technology, competitors may be able to use our technologies or the goodwill we have acquired in the marketplace and erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability.
“Business — Government Regulation.” The expansion in the government’s role in the U.S. healthcare industry may result in decreased profits to us, lower reimbursement by payors for our Inspire system, and/or reduced medical procedure volumes, all of which may have a material adverse effect on our business, financial condition and results of operations.
See Part I, Item 1. “Business — Government Regulation.” The expansion in the government’s role in the U.S. healthcare industry may result in decreased profits to us, lower reimbursement by payors for our Inspire system, and/or reduced medical procedure volumes, all of which may have a material adverse effect on our business, financial condition and results of operations.
Even if we 42 Table of Contents are able to find replacement suppliers or third-party contract manufacturers, we will be required to verify that the new supplier or third-party manufacturer maintains facilities, procedures, and operations that comply with our quality expectations and applicable regulatory requirements.
Even if we are able to find replacement suppliers or third-party contract manufacturers, we will be required to verify that the new supplier or third-party manufacturer maintains facilities, procedures, and operations that comply with our quality expectations and applicable regulatory requirements.
Compliance with these requirements is a prerequisite to be able to affix the European Conformity (“CE”) mark to our products, without which they cannot be sold or marketed in the EU. See — Government Regulation.
Compliance with these requirements is a prerequisite to be able to affix the European Conformity (“CE”) mark to our products, without which they cannot be sold or marketed in the EU.
Even if our future products are cleared or approved in the U.S., commercialization of our products in foreign countries would require approval by 62 Table of Contents regulatory authorities or certification by notified bodies in those countries.
Even if our future products are cleared or approved in the U.S., commercialization of our products in foreign countries would require approval by regulatory authorities or certification by notified bodies in those countries.
We may not receive the necessary approvals or certifications for our future products or expanded indications, and failure to timely obtain necessary approvals or certifications for our future products or expanded indications would adversely affect our ability to grow our business.
Risk Factors — We may not receive the necessary approvals or certifications for our future products or expanded indications, and failure to timely obtain necessary approvals or certifications for our future products or expanded indications would adversely affect our ability to grow our business.”).
In addition, the FDA may not approve our products for the indications that are necessary or desirable for successful commercialization or could require clinical studies to support any modifications. Similar requirements may apply in foreign jurisdictions where we market our products.
In addition, the FDA may not approve 55 Table of Contents our products for the indications that are necessary or desirable for successful commercialization or could require clinical studies to support any modifications. Similar requirements may apply in foreign jurisdictions where we market our products.
Many of the companies against which we compete may have competitive advantages with respect to primary competitive factors in the OSA treatment market, including, for example: • greater company, product, and brand recognition; • superior product safety, reliability, and durability; • better quality and larger volume of clinical data; • more effective marketing to and education of patients, physicians, and sleep centers; • greater product ease of use and patient comfort; • more sales force experience and greater market access; • better product support and service; • more advanced technological innovation, product enhancements, and speed of innovation; • more effective pricing and revenue strategies; • lower procedure costs to patients; • more effective reimbursement teams and strategies; • dedicated practice development; and • more effective clinical training teams.
Many of the companies against which we compete may have competitive advantages with respect to primary competitive factors in the OSA treatment market, including, for example: • greater company, product, and brand recognition; • superior product safety, reliability, and durability; • better quality and larger volume of clinical data; • more effective marketing to and education of patients, physicians, and sleep centers; • greater product ease of use and patient comfort; • more sales force experience and greater market access; • better product support and service; • more advanced technological innovation, product enhancements, and speed of innovation; • more effective pricing and revenue strategies; • lower procedure costs to patients; • more effective reimbursement teams and strategies; • dedicated practice development; and • more effective clinical training teams. 40 Table of Contents Most of the other OSA treatments against which we compete have a greater penetration into the OSA treatment market.
If we are not effective in addressing ESG matters relevant to business, including 50 Table of Contents meeting stakeholder expectations regarding relevant ESG goals, practices, initiatives, commitments, performance and/or public disclosures, our reputation and financial results may suffer.
If we are not effective in addressing ESG matters relevant to business, including meeting stakeholder expectations regarding relevant ESG goals, practices, initiatives, commitments, performance and/or public disclosures, our reputation and financial results may suffer.
For example, over the last several years, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities.
For example, over the last several years, the U.S. government has shut down several times and certain regulatory 66 Table of Contents agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities.
We currently sell our Inspire system through a direct sales force that targets ENT physicians and sleep centers in the U.S. and Europe, and also utilize various direct-to-consumer marketing initiatives, including paid online search, radio, television, social media, and online videos. In Japan and Singapore, we sell our products through a distributor.
We currently sell our Inspire system through a direct sales force that targets ENT physicians and sleep centers in the U.S., Europe, and Japan, and also utilize various direct-to-consumer marketing initiatives, including paid online search, radio, television, social media, and online videos. In certain Asia Pacific markets, we sell our products through distributors.
We bear the risk of warranty claims on our Inspire system. We may not be successful in claiming recovery under any warranty or indemnity provided to us by our suppliers or vendors in the event of a successful warranty claim against us by a customer or that any recovery from such vendor or supplier would be adequate.
We may not be successful in claiming recovery under any warranty or indemnity provided to us by our suppliers or vendors in the event of a successful warranty claim against us by a customer or that any recovery from such vendor or supplier would be adequate.
While we do not believe that we have experienced any significant system failure, accident or security breach to date, if such an event were to occur, it could lead to unauthorized access, disclosure and use of non-public information, including information from our ADHERE patient registry or other patient information we create, receive, maintain or transmit, including with respect to our Inspire Cloud, SleepSync™, or the Inspire Sleep app, which are governed by HIPAA and other laws.
While we do not believe that we have experienced any significant system failure, accident or security breach to date, if such an event were to occur, it could lead to unauthorized access, disclosure and use of confidential information, 48 Table of Contents including personal information from our ADHERE patient registry or other patient information we create, receive, maintain or transmit, including with respect to our Inspire Cloud, SleepSync™ platform, or the Inspire Sleep app, which may be governed by HIPAA and other laws.
Other factors that may cause fluctuations in our quarterly and annual results include, but are not limited to: • changes in coverage policies by third-party payors that affect the reimbursement of procedures using our products; • timing of new product offerings, acquisitions, licenses or other significant events by us or our competitors; • unanticipated pricing pressure; • the hiring, retention, and continued productivity of our sales representatives; • our ability to expand the geographic reach of our sales and marketing efforts; • our ability to obtain regulatory clearance, approval, or certification for any products in development or for our current products for additional indications or in additional countries outside the U.S.; • results of clinical research and studies on our existing products and products in development; • delays in receipt of anticipated purchase orders; and • positive or negative coverage in the media or clinical publications of our products or products of our competitors or our industry.
Other factors that may cause fluctuations in our quarterly and annual results include, but are not limited to: • changes in coverage policies by third-party payors that affect the reimbursement of procedures using our products; • challenges experienced by patients in obtaining positive coverage and reimbursement decisions from payers, including necessary prior authorization approvals in advance of treatment; • timing of new product offerings, acquisitions, licenses or other significant events by us or our competitors; 42 Table of Contents • unanticipated pricing pressure; • the hiring, retention, and continued productivity of our sales representatives; • our ability to expand the geographic reach of our sales and marketing efforts; • our ability to obtain regulatory clearance, approval, or certification for any products in development or for our current products for additional indications or in additional countries outside the U.S.; • results of clinical research and studies on our existing products and products in development; • delays in receipt of anticipated purchase orders; and • positive or negative coverage in the media or clinical publications of our products or products of our competitors or our industry.
Violations of the FCPA, OFAC restrictions, the Bribery Act or other export control, anti-corruption, anti-money laundering and anti-terrorism laws or regulations may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could have a material adverse effect on our business, financial condition and results of operations. 48 Table of Contents We bear the risk of warranty claims on our Inspire system.
Violations of the FCPA, OFAC restrictions, the Bribery Act or other export control, anti-corruption, anti-money laundering and anti-terrorism laws or regulations may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could have a material adverse effect on our business, financial condition and results of operations.
As a result, we could be at a competitive disadvantage. Additionally, these fixed costs may slow our ability to reduce costs in the face of a sudden decline in demand for our Inspire system, which could have a material adverse effect on our business, financial condition, and results of operations.
Additionally, these fixed costs may slow our ability to reduce costs in the face of a sudden decline in demand for our Inspire system, which could have a material adverse effect on our business, financial condition, and results of operations.
For these reasons, in the event we experience a change of control, we may not be able to utilize a material portion of the NOLs, research and development credit carryforwards or disallowed interest expense carryovers, even if we attain profitability.
For these reasons, in the event we experience a change of ownership within the definition of Section 382 of the Code, we may not be able to utilize a material portion of the NOLs, research and development credit carryforwards or disallowed interest expense carryovers, even if we attain profitability.
We rely on third-party distributors to effectively distribute our products in certain markets. We depend or expect to depend in the future on qualified distributors for the marketing and selling of our products in certain markets. Currently, the markets in which we market and sell our products through distributors include Japan, Singapore, and Hong Kong.
We depend or expect to depend in the future on qualified distributors for the marketing and selling of our products in certain markets. Currently, the markets in which we market and sell our products through distributors include Singapore and Hong Kong.
The increasing and evolving focus on sustainability and environmental, social, and governance initiatives from regulators and stakeholders could increase our costs, harm our reputation and adversely impact our financial results.
The increasing and evolving focus on sustainability and environmental, social, and governance initiatives from regulators and stakeholders could increase our costs, expose us to new risks, harm our reputation and adversely impact our financial results.
These facilities may be harmed or rendered inoperable by natural or man-made disasters, including, but not limited to, tornadoes, flooding, fire, power outages, and public health crises, which may render it difficult or impossible for us to perform our research, development and commercialization activities for some period of time.
These facilities may be harmed or rendered inoperable by natural or man-made disasters, including, but not limited to, tornadoes, flooding, fires and other events, including climate change-related severe weather or disasters, power outages, and public health crises, which may render it difficult or impossible for us to perform our research, development and commercialization activities for some period of time.
The FDA and foreign regulatory agencies regulate, among other things, with respect to medical devices: design, development and manufacturing; testing, labeling, content and language of instructions for use and storage; clinical studies; product safety; establishment registration and device listing; marketing, sales and distribution; pre-market clearance, approval, and certification; record keeping procedures; advertising and promotion; recalls and field safety corrective actions; post-market surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury; post-market approval studies; and product import and export.
The FDA and foreign regulatory agencies regulate, among other things, with respect to medical devices: design, development and manufacturing; testing, labeling, content and language of instructions for use and storage; clinical studies; product safety; establishment registration and device listing; marketing, sales and distribution; pre-market clearance, approval, and certification; record keeping procedures; advertising and promotion; recalls and field safety corrective actions; post-market surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury; post-market approval studies; and product import and export. 53 Table of Contents The regulations to which we are subject are complex and have tended to become more stringent over time.
As we grow our international presence and global operations, we will have increasing obligations to comply with trade and economic sanctions and other restrictions imposed by the U.S., the EU, and other governments and organizations. During the year ended December 31, 2022, approximately 3.2% of our total sales were made in EU member states, Japan, and Singapore. The U.S.
As we grow our international presence and global operations, we will have increasing obligations to comply with trade and economic sanctions and other restrictions imposed by the U.S., the EU, and other governments and organizations. During the year ended December 31, 2023, approximately 3.0% of our total sales were made in EU member states and certain Asia Pacific regions.
The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that: • any of our patents, or any of our pending patent applications, if issued, will include claims having a scope sufficient to protect our Inspire system; 64 Table of Contents • any of our pending patent applications will issue as patents; • we will be able to successfully commercialize our products on a substantial scale, if approved, before our relevant patents we may have expire; • we were the first to make the inventions covered by each of our patents and pending patent applications; • we were the first to file patent applications for these inventions; • others will not develop similar or alternative technologies that do not infringe our patents; any of our patents will be found to ultimately be valid and enforceable; • any patents issued to us will provide a basis for an exclusive market for our commercially viable products, will provide us with any competitive advantages or will not be challenged by third parties; • we will develop additional proprietary technologies or products that are separately patentable; or • our commercial activities or products will not infringe upon the patents of others.
The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that: • any of our patents, or any of our pending patent applications, if issued, will include claims having a scope sufficient to protect our Inspire system; • any of our pending patent applications will issue as patents; • we will be able to successfully commercialize our products on a substantial scale, if approved, before our relevant patents we may have expire; • we were the first to make the inventions covered by each of our patents and pending patent applications; • we were the first to file patent applications for these inventions; • others will not develop similar or alternative technologies that do not infringe our patents; any of our patents will be found to ultimately be valid and enforceable; • any patents issued to us will provide a basis for an exclusive market for our commercially viable products, will provide us with any competitive advantages or will not be challenged by third parties; • we will develop additional proprietary technologies or products that are separately patentable; or • our commercial activities or products will not infringe upon the patents of others. 68 Table of Contents We rely, in part, upon unpatented trade secrets, unpatented know-how and continuing technological innovation to develop and maintain our competitive position, which we seek to protect, in part, by confidentiality agreements with our employees and our collaborators and consultants.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties. Our principal office is located in Golden Valley, Minnesota, where we lease approximately 70,000 square feet of office space. We lease this space under non-cancelable operating lease agreements that expire May 31, 2028, with options to renew for one additional period of five years.
Biggest changeItem 2. Properties. Our principal offices are located in Golden Valley, Minnesota, where we lease approximately 106,000 square feet of office space. We also lease warehouse space adjacent to our principal office. We lease these spaces under non-cancelable operating lease agreements that expire May 31, 2035, with options to renew for two additional periods of five years each.
We intend to add new facilities as we grow, and we believe that suitable additional or substitute space will be available as needed to accommodate any such expansion of our operations. 71 Table of Contents
We intend to add new facilities as we grow, and we believe that suitable additional or substitute space will be available as needed to accommodate any such expansion of our operations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings. From time to time we may be involved in claims and proceedings arising in the course of our business. The outcome of any such claims or proceedings, regardless of the merits, is inherently uncertain. We are not party to any material legal proceedings. Item 4. Mine Safety Disclosures. Not applicable. PART II
Biggest changeItem 3. Legal Proceedings. From time to time we may be involved in claims and proceedings arising in the ordinary course of our business. The outcome of any such claims or proceedings, regardless of the merits, is inherently uncertain.
Added
The information contained in “Note 11 — Commitments and Contingencies” in the Notes to the Consolidated Financial Statements is incorporated by reference into this Item 3. 76 Table of Contents Item 4. Mine Safety Disclosures. Not applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeMay 3, December 31, Stock or Index Ticker 2018 2018 2019 2020 2021 2022 Inspire INSP $ 100.00 $ 169.14 $ 297.08 $ 752.96 $ 920.98 $ 1,008.33 NYSE Composite NYA 100.00 91.78 112.27 117.21 138.50 122.53 S&P Healthcare Equipment Select SPSIHE 100.00 97.68 119.57 158.82 164.09 125.46 Item 6. [Reserved] 73 Table of Contents
Biggest changeDecember 31, Stock or Index Ticker 2018 2019 2020 2021 2022 2023 Inspire INSP $ 100.00 $ 175.64 $ 445.18 $ 544.52 $ 596.17 $ 481.49 NYSE Composite NYA 100.00 122.32 127.70 150.90 133.50 148.17 S&P Healthcare Equipment Select SPSIHE 100.00 122.40 162.59 167.98 128.44 120.78 Item 6. [Reserved] 78 Table of Contents
The graph assumes an investment of $100 in our common stock at market close on May 3, 2018 and the reinvestment of dividends, if any. The comparisons in the table are not intended to forecast or be indicative of possible future performance of our common stock.
The graph assumes an investment of $100 in our common stock at market close on December 31, 2018 and the reinvestment of dividends, if any. The comparisons in the table are not intended to forecast or be indicative of possible future performance of our common stock.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock trades on the NYSE under the symbol “INSP." Holders As of February 3, 2023, there were approximately 16 holders of record of our common stock.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock trades on the NYSE under the symbol “INSP." Holders As of February 1, 2024, there were approximately 12 holders of record of our common stock.
Recent Sales of Unregistered Securities None. 72 Table of Contents Performance Graph The following graph illustrates a comparison of the total cumulative stockholder return on our common stock with the total return for (i) the S&P Healthcare Equipment Select Industry Index and (ii) the NYSE Composite for the period from May 3, 2018 (the date our common stock commenced trading on the NYSE) through December 31, 2022.
Recent Sales of Unregistered Securities None. 77 Table of Contents Performance Graph The following graph illustrates a comparison of the total cumulative stockholder return on our common stock with the total return for (i) the S&P Healthcare Equipment Select Industry Index and (ii) the NYSE Composite from December 31, 2018 through December 31, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeResults of Operations Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Year Ended December 31, Change 2022 2021 $ % (in thousands, except percentages) Revenue $ 407,856 $ 233,394 $ 174,462 74.7 % Cost of goods sold 66,115 33,279 32,836 98.7 % Gross profit 341,741 200,115 141,626 70.8 % Gross margin 83.8 % 85.7 % Operating expenses: Research and development 68,645 37,350 31,295 83.8 % Selling, general and administrative 320,688 202,615 118,073 58.3 % Total operating expenses 389,333 239,965 149,368 62.2 % Operating loss (47,592) (39,850) (7,742) 19.4 % Other (income) expense, net (3,324) 2,120 (5,444) (256.8) % Loss before income taxes (44,268) (41,970) (2,298) 5.5 % Income taxes 613 72 541 751.4 % Net loss $ (44,881) $ (42,042) $ (2,839) 6.8 % Revenue Revenue increased $174.5 million, or 74.7%, to $407.9 million for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Biggest changeOther (Income) Expense, Net Other (income) expense consists primarily of interest and dividend income, interest expense under our former credit facility, the impacts of foreign currency transactions and remeasurements, and gains and losses on investments. 83 Table of Contents Results of Operations Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Year Ended December 31, Change 2023 2022 $ % (in thousands, except percentages) Revenue $ 624,799 $ 407,856 $ 216,943 53.2 % Cost of goods sold 96,576 66,115 30,461 46.1 % Gross profit 528,223 341,741 186,482 54.6 % Gross margin 84.5 % 83.8 % Operating expenses: Research and development 116,536 68,645 47,891 69.8 % Selling, general and administrative 451,958 320,688 131,270 40.9 % Total operating expenses 568,494 389,333 179,161 46.0 % Operating loss (40,271) (47,592) 7,321 (15.4) % Other income, net (20,365) (3,324) (17,041) 512.7 % Loss before income taxes (19,906) (44,268) 24,362 (55.0) % Income taxes 1,247 613 634 103.4 % Net loss $ (21,153) $ (44,881) $ 23,728 (52.9) % Revenue Revenue increased $216.9 million, or 53.2%, to $624.8 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.
We expect research and development expenses to increase in the future as we develop next generation versions of our Inspire system and continue to expand our clinical studies to further expand positive coverage policies from private commercial payors in the U.S. and enter into new markets including additional European countries and the Asia Pacific region.
We expect research and development expenses to increase in the future as we develop next generation versions of our Inspire system and SleepSync™ and continue to expand our clinical studies to further expand positive coverage policies from private commercial payors in the U.S. and enter into new markets including additional European countries and the Asia Pacific region.
Our long-term cash requirements also will be significantly impacted by the level of our investment in commercialization, entry into new markets such as Hong Kong and Australia, whether we make strategic acquisitions, and competition. We cannot accurately predict our long-term cash requirements at this time.
Our long-term cash requirements also will be significantly impacted by the level of our investment in commercialization, entry and expansion into new markets such as Hong Kong and Australia, whether we make strategic acquisitions, and competition. We cannot accurately predict our long-term cash requirements at this time.
The non-cash charges consisted primarily of stock-based compensation, which increased mainly as a result of granting more stock options and restricted stock to more employees at a higher fair market value, as well as the introduction of performance stock unit grants.
The non-cash charges consisted primarily of stock-based compensation, which increased mainly as a result of granting more stock options and restricted stock units to more employees at a higher fair market value, as well as the introduction of performance stock unit grants.
We seek to maintain higher levels of inventory to protect ourselves from supply interruptions, and, as a result, we are subject to the risk of inventory obsolescence and expiration, which could lead to inventory impairment charges.
We typically seek to maintain higher levels of inventory to protect ourselves from supply interruptions, and, as a result, we are subject to the risk of inventory obsolescence and expiration, which could lead to inventory impairment charges.
In addition, patients in the U.S., Japan, and Singapore must have been confirmed to fail or be unable to tolerate positive airway pressure treatments, such as CPAP, and be 18 years of age or older, though there are no similar requirements for patients in Europe.
In addition, patients in the U.S., Japan, Singapore, and Hong Kong must have been confirmed to fail or be unable to tolerate positive airway pressure treatments, such as CPAP, and be 18 years of age or older, though there are no similar requirements for patients in Europe.
Financing Activities Net cash provided by financing activities was $235.1 million for 2022 and consisted and consisted primarily of proceeds from the offering of common stock of $243.8 million, as well as proceeds from the exercise of stock options of $12.1 million, and proceeds from the issuance of common stock from our employee stock purchase plan of $3.7 million, partially offset by $24.5 million in payments on our long-term debt obligation, which we prepaid in August 2022, and less than $0.1 million of taxes paid on net share settlement of RSUs.
Net cash provided by financing activities was $235.1 million for 2022 and consisted primarily of proceeds from the offering of common stock of $243.8 million, as well as proceeds from the exercise of stock options of $12.1 million, and proceeds from the issuance of common stock from our employee stock purchase plan of $3.7 million, partially offset by $24.5 million in payments on our long-term debt obligation, which we prepaid in August 2022, and less than $0.1 million of taxes paid on net share settlement of equity awards.
We sell our Inspire system to hospitals and ambulatory surgery centers ("ASCs") in the U.S. and in select countries in Europe through a direct sales organization and we sell our Inspire system in Japan and Singapore through distributors. Our direct sales force engages in sales efforts and promotional activities focused on ENT physicians and sleep centers.
We sell our Inspire system to hospitals and ambulatory surgery centers ("ASCs") in the U.S. and in select countries in Europe and Japan through a direct sales organization and we sell our Inspire system in Singapore and Hong Kong through distributors. Our direct sales force engages in sales efforts and promotional activities focused on ENT physicians and sleep centers.
On the other hand, our gross margin may decrease slightly to the extent our materials and labor prices increase due to supply chain issues and inflation, thereby increasing our per unit costs. However, our gross margin may also fluctuate from quarter to quarter due to seasonality and foreign currency exchange rates.
On the other hand, our gross margin may decrease slightly to the extent our yields decrease, or materials and labor prices increase due to supply chain issues and inflation, thereby increasing our per unit costs. However, our gross margin may also fluctuate from quarter to quarter due to seasonality and foreign currency exchange rates.
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020 For a discussion of our results of operations for the year ended December 31, 2021, including a year-to-year comparison between 2021 and 2020, refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2021.
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 For a discussion of our results of operations for the year ended December 31, 2022, including a year-to-year comparison between 2022 and 2021, refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2022.
We recognize revenues from sales of our Inspire system when the customer obtains control of the product, which occurs at a point in time, either upon shipment of the product or receipt of the product, depending on shipment terms. 76 Table of Contents Our revenue has fluctuated, and may continue to fluctuate, from quarter to quarter due to a variety of factors.
We recognize revenues from sales of our Inspire system when the customer obtains control of the product, which occurs at a point in time, either upon shipment of the product or receipt of the product, depending on shipment terms. Our revenue has fluctuated, and may continue to fluctuate, from quarter to quarter due to a variety of factors.
Revenue growth in the U.S. was primarily due to increased utilization, increased market penetration in existing territories, the expansion into new territories, increased physician and patient awareness of our Inspire system, and to a lesser extent, a list price increase that began to impact some U.S. customers in May 2022.
Revenue growth in the U.S. was primarily due to increased market penetration in existing territories, the expansion into new territories, and, we believe, increased physician and patient awareness of our Inspire system and, to a lesser extent, a list price increase that began to impact some U.S. customers in May 2022.
Our gross margin for 2022 was lower than in previous periods primarily due to inventory obsolescence charges associated with product introductions, additional costs associated with the transition of manufacturing lines to produce our new silicone-based leads, and higher costs of certain component parts which were impacted by inflation and supply chain issues.
Our gross margin in the second half of 2022 was lower than in previous periods primarily due to inventory obsolescence charges associated with product introductions, additional costs associated with the transition of manufacturing lines to produce our new silicone-based leads, and higher costs of certain component parts which were impacted by supply chain issues.
We expect SG&A expenses to continue to increase as we expand our commercial infrastructure to both drive and support our planned growth in revenue and as we increase our headcount and expand administrative personnel to support our growth and operations as a public company including finance personnel and information technology services.
We expect SG&A expenses to continue to increase as we expand our commercial infrastructure to both drive and support our planned growth in revenue and as we increase our headcount and expand administrative personnel to support our growth and operations as a public company including finance, legal, and human resources personnel and information technology services.
In the U.S., our products are shipped directly to our U.S. customers and Singapore distributor on a purchase order basis, primarily by a third-party vendor with a facility in Tennessee, although we do ship some products from our facility in Minnesota.
In the U.S., our products are shipped directly to our U.S. customers and to our Singapore and Hong Kong distributors on a purchase order basis, primarily by a third-party vendor with a facility in Tennessee, although we do ship some products from our facility in Minnesota.
Our gross margin may increase slightly to the extent our production volumes increase and we receive discounts on the costs charged by our contract manufacturers, thereby reducing our per unit costs, and when we implement price increases on our products, thereby increasing our revenue.
Our gross margin may increase slightly to the extent our production volumes increase and we receive discounts on the costs charged by our contract manufacturers, thereby reducing our per unit costs, and when we 82 Table of Contents implement price increases on our products, thereby increasing our revenue.
Other SG&A expenses include training physicians, travel expenses, advertising, direct-to-consumer promotional programs, conferences, trade shows and consulting 77 Table of Contents services, professional services fees, audit fees, insurance costs and general corporate expenses, including facilities-related expenses.
Other SG&A expenses include training physicians, travel expenses, advertising, direct-to-consumer promotional programs, conferences, trade shows and consulting services, professional services fees, audit fees, insurance costs and general corporate expenses, including facilities-related expenses.
We have also made significant investments in clinical 75 Table of Contents studies to demonstrate the safety and efficacy of our Inspire therapy and to support regulatory submissions.
We have also made significant investments in clinical studies to demonstrate the safety and efficacy of our Inspire therapy and to support regulatory submissions.
The primary driver of this change was an increase of $72.9 million in compensation, including salaries, commissions, stock-based compensation, and other employee-related expenses, mainly as a result of increased headcount.
The primary driver of this change was an increase of $75.7 million in compensation, including salaries, commissions, stock-based compensation, and other employee-related expenses, mainly as a result of increased headcount.
Operating liabilities includes accrued expenses, which increased primarily due to accrued compensation, and accounts payable, which increased generally due to our increased business volume year-over-year and the costs to support the growth of our operations.
Operating liabilities include accounts payable, which increased generally due to our increased business volume year-over-year and the costs to support the growth of our operations, and accrued expenses, which increased primarily due to compensation and personnel-related costs.
Since our inception in 2007, we have financed our operations primarily through sales of our Inspire system, private placements of our convertible preferred securities, amounts borrowed under our former credit facility, and equity offerings of our common stock.
Our sales representatives do not maintain trunk stock. Since our inception in 2007, we have financed our operations primarily through sales of our Inspire system, private placements of our convertible preferred securities, amounts borrowed under our former credit facility, and equity offerings of our common stock.
The following area requires management estimates, assumptions, and judgments: Inventories Inventories are valued at the lower of cost or net realizable value, computed on a first-in, first out basis. We estimate the recoverability of our inventory by reference to internal estimates of future demands and product life cycles, including expiration of inventory prior to sale.
The following areas require management estimates, assumptions, and judgments: Inventories Inventories are valued at the lower of cost or net realizable value, computed on a first-in, first out basis. We estimate the recoverability of our inventory by reference to internal estimates of future demands, introduction of new products, and product life cycles, including expiration of inventory prior to sale.
There can be no assurance, however, that our business will continue to generate cash flows at historic levels. Beyond the next 12 months, our cash requirements will depend extensively on the timing of market introduction, and extent of market acceptance of, our Inspire system.
There can be no assurance, however, that our business will continue to generate cash flows at the same levels achieved in prior periods. Beyond the next 12 months, our cash requirements will depend extensively on the timing of market introduction, and extent of market acceptance of, our Inspire system.
As of February 10, 2023, we have secured positive coverage policies with many U.S. commercial payors, including virtually all large national commercial insurers, covering approximately 260 million lives in the U.S. In addition, all seven Medicare Administrative Contractors provide coverage of Inspire therapy when certain coverage criteria are met.
As of February 9, 2024, we have secured positive coverage policies with many U.S. commercial payors, including virtually all large national commercial insurers, covering approximately 260 million lives in the U.S. In addition, all seven Medicare Administrative Contractors published final policies in 2020 that provide coverage of Inspire therapy when certain coverage criteria are met.
For the year ended December 31, 2022, we generated revenue of $407.9 million with a gross margin of 83.8% and a net loss of $44.9 million, compared to revenue of $233.4 million with a gross margin of 85.7% and a net loss of $42.0 million for the year ended December 31, 2021, and revenue of $115.4 million with a gross margin of 84.7% and a net loss of $57.2 million for the year ended December 31, 2020.
For the year ended December 31, 2023, we generated revenue of $624.8 million with a gross margin of 84.5% and a net loss of $21.2 million, compared to revenue of $407.9 million with a gross margin of 83.8% and a net loss of $44.9 million for the year ended December 31, 2022, and revenue of $233.4 million with a gross margin of 85.7% and a net loss of $42.0 million for the year ended December 31, 2021.
Research and Development Expenses Research and development expenses consist primarily of product development, engineering, clinical studies to develop and support our products, regulatory expenses, quality assurance, testing, consulting services and other costs associated with the next generation versions of the Inspire system.
Research and Development Expenses Research and development expenses consist primarily of product development, engineering, clinical studies to develop and support our products, regulatory expenses, quality assurance, testing, consulting services, prelaunch inventory, and other costs associated with the next generation versions of the Inspire system and SleepSync™, a cloud-based patient management system.
Reimbursement in other countries can often be established through a combination of private (commercial insurance) and public funding sources, or at the hospital level through innovation budgets. 74 Table of Contents For the year ended December 31, 2022, 96.8% of our revenue was derived in the U.S. and 3.2% was derived outside of the U.S.
Reimbursement in other countries can often be established through a combination of private (commercial insurance) and public funding sources, or at the hospital level through innovation budgets. For the year ended December 31, 2023, 97.0% of our revenue was derived in the U.S. and 3.0% was derived outside of the U.S.
We believe that our existing cash and cash equivalents and available-for-sale securities, which totaled $451.4 million as of December 31, 2022, together with cash flow from operations, will provide liquidity sufficient to meet our cash needs and fund our operations and planned capital expenditures for at least the next 12 months.
We believe that our existing cash and cash equivalents and available for sale investments, which totaled $469.5 million as of December 31, 2023, together with cash flows from operations, will provide liquidity sufficient to meet our cash needs and fund our operations and planned capital expenditures for at least the next 12 months.
For example, in 2022, we received FDA approval for additional magnetic resonance imaging ("MRI") scan conditions for use with Inspire therapy. This full-body MRI approval expands the Inspire use labeling that previously allowed only head, neck, and extremity MRI scans.
In March 2023, we received FDA approval to offer Inspire therapy to certain pediatric patients with Down syndrome, and in 2022, we received FDA approval for additional magnetic resonance imaging ("MRI") scan conditions for use with Inspire therapy. This full-body MRI approval expands the Inspire use labeling that previously allowed only head, neck, and extremity MRI scans.
Our accumulated deficit as of December 31, 2022 was $324.3 million. We have invested heavily in product development. Our research and development activities have been centered on driving continuous improvements to our Inspire therapy.
Our accumulated deficit as of December 31, 2023 was $345.4 million. 80 Table of Contents We have invested heavily in product development. Our research and development activities have been centered on driving continuous improvements to our Inspire therapy.
Other drivers of the change to SG&A expenses included an increase in travel expenses of $7.2 million and an increase in general corporate costs of $6.3 million primarily due to office rent expense, insurance costs, bank fees, computer equipment and software, and consulting fees.
Other drivers of the change to SG&A expenses included an increase in travel expenses of $7.8 million and an increase in general corporate costs of $11.5 million primarily due to consulting fees, computer equipment and software, legal fees, bank fees, bad debt expense, and office rent expense.
For example, during the three months ended September 30, 2022, we recorded a charge of $2.8 million for obsolete inventory and component parts related to product introductions which were completed in October 2022, including the new silicone leads and the Bluetooth®-enabled patient remote.
For example, during 2022, we recorded a charge of $2.8 million for obsolete inventory and component parts related to product introductions, including the new silicone leads and the Bluetooth®-enabled patient remote.
Warehousing and shipping operations for our European customers are handled by a third-party vendor with a facility located in the Netherlands. Shipments of products to our Japanese distributor are handled from our facility in Minnesota. Customers do not have the right to return non-defective product, nor do we place product on consignment. Our sales representatives do not maintain trunk stock.
Warehousing and shipping operations for our European customers are handled by a third-party vendor with a facility located in the Netherlands, and warehousing and shipping operations for our Japanese customers are handled by a third-party with a facility in Japan. Customers do not have the right to return a non-defective product, nor do we place product on consignment.
These results reflect an increase in sales of our Inspire system of $173.9 million in the U.S. and an increase of $0.6 million outside of the U.S.
These results reflect an increase in sales of our Inspire system of $211.3 million in the U.S. and an increase of $5.6 million outside of the U.S.
In addition, marketing expenses 79 Table of Contents increased $31.7 million, primarily consisting of direct-to-consumer initiatives, including new national TV advertisements, which began airing in January 2022, and the expansion of our Advisor Care Program call center.
In addition, marketing expenses increased $36.3 million, primarily consisting of direct-to-consumer initiatives, including new national TV advertisements, which began airing in March 2023, and the expansion of our Advisor Care Program call center.
Gross margin was 83.8% for the year ended December 31, 2022 compared to 85.7% for the year ended December 31, 2021.
Gross margin was 84.5% for the year ended December 31, 2023 compared to 83.8% for the year ended December 31, 2022.
This change was primarily due to an increase of $15.5 million of compensation and employee-related expenses, mainly as a result of increased headcount and stock-based compensation expense, $15.5 million for incremental ongoing research and development costs, including ongoing development of the Inspire Cloud, the next generation Inspire neurostimulator and the physician programmer, and a $0.3 million increase in regulatory submissions and clinical studies expenses.
This change was primarily due to an increase of $21.7 million of compensation and employee-related expenses, mainly as a result of increased headcount and stock-based compensation expense and $20.8 million of incremental ongoing research and development costs, including ongoing development of the SleepSync™ platform and the next generation Inspire neurostimulator and physician programmer.
We plan to begin airing new television commercials in the first quarter of 2023. The objective of this outreach is to bring patients to our website, where they can find educational materials and videos on sleep apnea and the use and benefits of our Inspire therapy, contact information for physicians and clinical sites, and information regarding community awareness events.
The objective of this outreach is to bring patients to our website, where they can find educational materials and videos on sleep apnea and the use and benefits of our Inspire therapy, contact information for physicians and clinical sites, and information regarding community awareness events. Further, our team leverages the Inspire Sleep app for patient education.
Other (Income) Expense, Net Other (income) expense, net changed by $5.4 million, or 256.8%, to $3.3 million of income for the year ended December 31, 2022 compared to $2.1 million of expense for the year ended December 31, 2021.
Other (Income) Expense, Net Other (income) expense, net changed by $17.1 million, or 512.7%, to $20.4 million of income for the year ended December 31, 2023 compared to $3.3 million of income for the year ended December 31, 2022.
We have experienced and continue to experience supply disruptions which began during the COVID pandemic, but have managed to avoid any significant supply and inventory issues or delay in implant procedures due to those issues.
We have experienced and continue to experience supply disruptions that began during the COVID-19 pandemic, but to date we have managed to avoid major delays in implant procedures due to those issues.
Liquidity and Capital Resources As of December 31, 2022, we had cash, cash equivalents and available-for-sale securities of $451.4 million, an increase of $227.0 million from $224.4 million as of December 31, 2021. Working capital totaled $468.8 million as of December 31, 2022, an increase of $241.6 million from December 31, 2021.
Liquidity and Capital Resources As of December 31, 2023, we had cash, cash equivalents and available-for-sale debt securities of $469.5 million, an increase of $18.1 million from $451.4 million as of December 31, 2022. Working capital totaled $515.6 million as of December 31, 2023, an increase of $46.8 million from December 31, 2022.
If the performance goal is not met, no shares will be earned. If 200% of the PSUs outstanding as of December 31, 2022 are ultimately earned, the total stock-based compensation recognized over the three-year period ending December 31, 2024 will be $35.3 million.
If 200% of the PSUs outstanding as of December 31, 2023 are ultimately earned, the total stock-based compensation expense recognized over the three-year period ending December 31, 2024 will be $83.9 million.
Selling, General and Administrative Expenses SG&A expenses increased $118.1 million, or 58.3%, to $320.7 million for the year ended December 31, 2022 compared to $202.6 million for the year ended December 31, 2021.
Selling, General and Administrative Expenses SG&A expenses increased $131.3 million, or 40.9%, to $452.0 million for the year ended December 31, 2023 compared to $320.7 million for the year ended December 31, 2022.
Research and Development Expenses Research and development expenses increased $31.3 million, or 83.8%, to $68.6 million for the year ended December 31, 2022 compared to $37.4 million for the year ended December 31, 2021.
Research and Development Expenses Research and development expenses increased $47.9 million, or 69.8%, to $116.5 million for the year ended December 31, 2023 compared to $68.6 million for the year ended December 31, 2022.
Cost of Goods Sold and Gross Margin Cost of goods sold increased $32.8 million, or 98.7%, to $66.1 million for the year ended December 31, 2022 compared to $33.3 million for the year ended December 31, 2021.
Cost of Goods Sold and Gross Margin Cost of goods sold increased $30.5 million, or 46.1%, to $96.6 million for the year ended December 31, 2023 compared to $66.1 million for the year ended December 31, 2022.
Net cash used in operating activities was $20.1 million for 2021 and consisted of a net loss of $42.0 million, non-cash charges of $28.8 million, and increase in net operating assets of $6.9 million.
Net cash provided by operating activities was $11.6 million for 2022 and consisted of a net loss of $44.9 million, non-cash charges of $54.6 million, and a decrease in net operating assets of $1.8 million.
For further information, refer to “Risk Factors” in Part II, Item 1A of this Annual Report on Form 10-K. Components of Our Results of Operations Revenue We derive primarily all of our revenue from the sale of our Inspire system to hospitals and ASCs in the U.S., select countries in Europe, Japan, and Singapore.
Components of Our Results of Operations Revenue We derive primarily all of our revenue from the sale of our Inspire system to hospitals and ASCs in the U.S., select countries in Europe, Japan, Singapore, and Hong Kong.
The procedures performed to implant, revise, or explant our device are described for billing purposes in the U.S. with Category I Current Procedural Terminology (“CPT”) codes (64582, 64583, and 64584, respectively).
Reimbursement in other countries can often be established through a combination of private (commercial insurance) and public funding sources, or at the hospital level through innovation budgets. The procedures performed to implant, revise, or explant our device are described for billing purposes in the U.S. with Category I Current Procedural Terminology (“CPT”) codes (64582, 64583, and 64584, respectively).
This change was primarily due to an increase of $4.9 million in interest and dividend income due to higher interest rates on our higher cash and cash equivalents balances, a decrease of $0.4 million in interest expense due to the early termination of our credit facility, and an increase of $0.1 million in foreign currency translation and remeasurement gains due to exchange rates.
This change was due to an increase of $15.5 million in interest and dividend income due to higher interest rates on our higher cash, cash equivalents, and investment balances, and a decrease of $1.7 million in interest expense due to the early termination of our credit facility, partially offset by a $0.1 million change in foreign currency translation and remeasurement gains due to exchange rates. 85 Table of Contents Income Taxes We recorded a provision for income taxes of $1.2 million and $0.6 million for the years ended December 31, 2023 and 2022, respectively.
Overall revenue growth was primarily due to increased utilization, increased market penetration in existing territories, expansion into new territories, and increased physician and patient awareness of our Inspire system, and to a lesser extent, a list price increase that began to impact some U.S. customers in May 2022.
Overall revenue growth was primarily due to increased market penetration in existing territories, expansion into new territories, and, we believe, increased physician and patient awareness of our Inspire system, and to a lesser extent, a list price increase that began to impact some customers in May 2022, partially offset by ENT surgeon capacity constraints and reduced procedures as a result of the polyurethane-based lead shortage in Europe and the factors described under "Components of our Results of Operations - Revenue" above.
The increase in working capital was offset by the following factors: • a $15.2 million increase in accounts payable, generally due to our business volume and headcount growth from the prior year; • an increase of $13.9 million in accrued expenses which increased primarily due to compensation and personnel-related costs; and • a decrease of $5.3 million in inventory balances which decreased due mainly to increased sales demand and supply chain issues. 80 Table of Contents We proactively manage our access to capital to support liquidity and continued growth.
The increase in working capital was offset by the following factors: • an increase of $12.0 million in accounts payable, generally due to our business volume and headcount growth from the prior year; and • an increase of $4.9 million in accrued expenses which increased primarily due to compensation and personnel-related costs.
The non-cash charges consisted primarily of stock-based compensation, which increased mainly as a result of granting more stock options to employees at a higher fair market value. The remainder of the non-cash charges included depreciation and amortization, non-cash lease expense, stock issued for services rendered, accretion of the debt discount, and amortization of the investment premium, and other, net.
The non-cash charges consisted primarily of stock-based compensation, which increased mainly as a result of granting more stock options, restricted stock units, and performance stock units to a greater number of employees at a higher fair market value.
Also in 2022, the FDA approved new silicone-based stimulation and sensing leads, which provides improved manufacturability, easier system implantation, increased long-term performance, and enhanced reliability.
Also in 2022, the FDA approved silicone-based stimulation and sensing leads, which provides improved manufacturability, easier system implantation, increased long-term performance, and enhanced reliability. Our direct-to-consumer marketing includes the use of social media platforms such as Facebook, Google ad placements, and radio and television commercials.
Income Taxes We recorded a provision for income taxes of $0.6 million and $0.1 million for the years ended December 31, 2022 and 2021, respectively. This change was primarily due to an increase of $0.3 million in state and local taxes, as well as $0.2 million in foreign taxes.
This change was primarily due to an increase of $0.3 million in state and local taxes, as well as $0.3 million in foreign taxes.
Our sources of capital include sales of our Inspire system and registered offerings of our common stock. During the quarter ended September 30, 2022, we repaid all amounts outstanding under our former credit facility. See Note 5 to our audited financial statements for additional information on our previous credit facility.
We received net proceeds of approximately $243.8 million after deducting underwriting discounts, commissions, and offering expenses. During the quarter ended September 30, 2022, we repaid all amounts outstanding under our former credit facility. See Note 4 to our audited financial statements for additional information on our previous credit facility.
Management expectations related to the achievement of the performance goal associated with PSU grants is assessed each reporting period, which determines the amount of stock-based compensation recorded during the period. The number of shares earned at the end of the three-year period will vary based on actual performance, from 0% to 200% of the number of PSUs granted.
The number of PSUs that will ultimately be earned is based on our performance relative to pre-established goals for the three-year periods ending December 31, 2024 and 2025, respectively. Management expectations related to the achievement of the performance goals associated with PSU grants is assessed each reporting period, which determines the amount of stock-based compensation expense recorded during the period.
Investing Activities Net cash provided by investing activities for 2022 was $19.6 million and consisted of the purchase of strategic investments of $10.5 million and the purchases of property and equipment, net of $9.1 million, mainly for testing systems, production equipment, and leasehold improvements on our corporate office.
Net cash used in investing activities for 2022 was $19.6 million and consisted of the purchase of strategic investments of $10.5 million and the purchases of property and equipment, net of $9.1 million, mainly for testing systems, production equipment, and leasehold improvements on our corporate office. 88 Table of Contents Financing Activities Net cash provided by financing activities was $14.0 million for 2023 and consisted primarily of proceeds from the exercise of stock options of $25.8 million and proceeds from the issuance of common stock from our employee stock purchase plan of $5.3 million, partially offset by $17.2 million of taxes paid on net share settlement of equity awards.
Our SG&A expenditures, primarily for increasing headcount and advertising, may exceed any associated increases in revenues, and therefore would reduce our cash flow from operations. We also anticipate R&D expenses will continue to be significant in 2023, primarily related to the ongoing development of the next generation Inspire neurostimulator and the SleepSync™ platform.
In 2023, our R&D and SG&A expenditures increased significantly over the prior year levels, and we anticipate further increases during 2024. Our SG&A expenditures, primarily for increasing headcount and advertising, may 86 Table of Contents exceed any associated increases in revenues, and therefore would reduce our cash flow from operations.
If the performance condition is not met or not expected to be met, any compensation expense previously recognized associated with the grant will be reversed which will impact our operating results. 83 Table of Contents Recent Accounting Pronouncements A discussion of recent accounting pronouncements is included in Note 2 to our financial statements contained in this Annual Report on Form 10-K.
If the performance conditions are not met or not expected to be 89 Table of Contents met, any compensation expense previously recognized associated with the grant will be reversed which will impact our operating results.
In August 2022, we completed a follow-on offering that included our offer and sale of 1,150,000 shares of common stock at a public offering price of $215.00 per share. We received net proceeds of approximately $243.8 million after deducting underwriting discounts, commissions, and offering expenses.
We proactively manage our access to capital to support liquidity and continued growth. Our sources of capital have included sales of our Inspire system and registered offerings of our common stock. In August 2022, we completed a follow-on offering that included our offer and sale of 1,150,000 shares of common stock at a public offering price of $215.00 per share.
The reserve for excess and obsolete inventory was $2.7 million and $0.3 million as of December 31, 2022 and 2021, respectively. Stock-Based Compensation We maintain an equity incentive plan to provide lon g-term incentives for eligible employees, consultants, and members of the board of directors.
Stock-Based Compensation We maintain an equity incentive plan to provide lon g-term incentives for eligible employees, consultants, and members of the board of directors. The plan allows for the issuance of performance stock units ("PSUs"), and d uring 2022 and 2023, we granted PSUs to officers and key employees.
As of December 31, 2022 ($ in thousands) Total Fiscal 2023 After Fiscal 2023 Recorded contractual obligations: Operating leases (1) $ 10,274 $ 1,777 $ 8,497 Unrecorded contractual obligations: Purchase obligations (2) 157,412 130,340 27,072 Total $ 167,686 $ 132,117 $ 35,569 (1) See Note 4 to our audited consolidated financial statements. 81 Table of Contents (2) Primarily purchase obligations to suppliers for inventory.
As of December 31, 2023 ($ in thousands) Total Fiscal 2024 After Fiscal 2024 Recorded contractual obligations: Operating leases (1) $ 35,089 $ (3,582) $ 38,671 Unrecorded contractual obligations: Purchase obligations (2) 91,375 91,375 — Total $ 126,464 $ 87,793 $ 38,671 (1) See Note 3 to our audited consolidated financial statements. (2) Primarily purchase obligations to suppliers for inventory.
Cash Flows The following table presents a summary of our cash flow for the periods indicated: Year Ended December 31, 2022 2021 (in thousands) Net cash provided by (used in): Operating activities $ 11,569 $ (20,119) Investing activities (19,596) 29,139 Financing activities 235,077 14,948 Effect of exchange rate on cash 75 (19) Increase in cash and cash equivalents $ 227,125 $ 23,949 Operating Activities Net cash provided by operating activities was $11.6 million for 2022 and consisted of a net loss of $44.9 million, non-cash charges of $54.6 million, and a decrease in net operating assets of $1.8 million.
As of December 31, 2023, we did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources. 87 Table of Contents Cash Flows The following table presents a summary of our cash flow for the periods indicated: Year Ended December 31, 2023 2022 (in thousands) Net cash provided by (used in): Operating activities $ 24,653 $ 11,569 Investing activities (294,822) (19,596) Financing activities 13,950 235,077 Effect of exchange rate on cash 164 75 (Decrease) increase in cash and cash equivalents $ (256,055) $ 227,125 Operating Activities Net cash provided by operating activities was $24.7 million for 2023 and consisted of a net loss of $21.2 million, non-cash charges of $86.6 million, and a decrease in net operating assets of $40.8 million.
The 2023 Medicare national average physician reimbursement is $873 for implantation of a hypoglossal nerve stimulator, a 2% decrease over the 2022 payment, and $97 for the DISE procedure, a 16% decrease from the 2022 amount.
The 2024 Medicare national average ASC reimbursement is $24,847, a decrease of 1% from the 2023 rate. The 2024 Medicare national average physician reimbursement is $823 for implantation of a hypoglossal nerve stimulator, a 6% decrease over the 2023 payment. The reimbursement for the DISE procedure in the hospital setting is $1,617, an 803% increase over the prior year amount.
Below is a summary of short-term and long-term anticipated cash requirements under contractual obligations existing as of December 31, 2022.
There can be no assurance that such transactions will be available to us on favorable terms, if at all. Below is a summary of short-term and long-term anticipated cash requirements under contractual obligations existing as of December 31, 2023.
Gross margin for the year ended December 31, 2022 was lower primarily due to inventory obsolescence charges and costs associated with the transition of manufacturing lines described above, as well as higher costs of certain component parts caused by inflation and supply chain issues, somewhat offset by increased sales volume and a price increase which began taking effect for some U.S. customers in May 2022.
Gross margin for the year ended December 31, 2023 was negatively impacted by additional manufacturing costs of sensors and lower yields prior to process enhancements, additional costs associated with an isolated production issue at a supplier, and higher costs of certain component parts, partially offset by the price increase that began taking effect for some U.S. customers in May 2022.
A Category I code (42975) is also used for Drug-Induced Sleep Endoscopy ("DISE") to evaluate sleep disordered breathing, which is a necessary procedure to determine which patients are appropriate for Inspire therapy. In January 2023, the final 2023 reimbursement rates were announced by the Centers for Medicare and Medicaid Services (“CMS”).
A Category I code (42975) is also used for Drug-Induced Sleep Endoscopy ("DISE") to evaluate sleep disordered breathing, which may be a necessary procedure to determine which patients are appropriate for Inspire therapy. The Medicare national average 2024 payment to implant our device in a hospital outpatient site of service is $29,586, an increase of 1% from the 2023 rate.
The list price increase was substantially complete as of December 31, 2022. As noted above, U.S. revenue during both periods was negatively impacted by the COVID-19 pandemic. Revenue generated outside of the U.S. was $13.0 million in the year ended December 31, 2022, an increase of $0.6 million, or 4.9%, over the year ended December 31, 2021.
Revenue generated outside of the U.S. was $18.6 million in the year ended December 31, 2023, an increase of $5.6 million, or 43.0%, over the year ended December 31, 2022.
Long term, we believe that there could be a sustained benefit to our business as a result of the recall although there can be no assurance of such benefit. We rely on third-party suppliers to manufacture our Inspire system and its components. Many of these suppliers are currently single source suppliers.
No single customer accounted for more than 10% of our revenue. We rely on third-party suppliers to manufacture our Inspire system and its components. Many of these suppliers are currently single source suppliers.
In 2022, we initiated a digital scheduling pilot program to facilitate and streamline patient access to care. We plan to expand this scheduling capability in 2023. One of the many benefits of the ACP is the anecdotal feedback we are able to collect from patients during conversations with the ACP representatives.
The primary purpose of this program is to assist patients with making a connection with a qualified healthcare provider based on their specific needs. In 2022, we initiated a digital scheduling pilot program to facilitate and streamline patient access to care. We plan to continue to enhance this scheduling capability during 2024.
We spent $10.6 million on purchases of property and equipment in 2022, mainly on testing systems, production equipment, and leasehold improvements on our corporate office. We anticipate further capital expenditures in 2023, primarily for additional production equipment and to a lesser extent, leasehold improvements.
We spent $23.6 million on purchases of property and equipment in 2023, mainly on testing systems and production equipment for our next generation Inspire system, our SleepSync™ platform, computer hardware and software, and leasehold improvements.
At the end of 2022, ASCs made up 23% of our total U.S. implanting centers, up from 22% at the end of 2021. Additionally, we created 68 new U.S. sales territories during 2022, bringing the total to 225 U.S. territories as of December 31, 2022.
During 2023, we activated 280 U.S. centers bringing the total to 1,180 U.S. medical centers implanting Inspire therapy as of December 31, 2023. Additionally, we created 62 new U.S. sales territories during 2023, bringing the total to 287 U.S. territories as of December 31, 2023.
Net cash provided by investing activities for 2021 was $29.1 million and consisted primarily of proceeds from sales or maturities of investments of $43.8 million, partially offset by purchases of investments of $10.0 million. 82 Table of Contents Purchases of property and equipment of $4.7 million, mainly for manufacturing test systems, production equipment, and tooling, comprised the remainder of the investing activities.
Investing Activities Net cash used in investing activities for 2023 was $294.8 million and consisted primarily of the purchase of investments of $281.2 million, partially offset by $10.2 million of proceeds from sales or maturities of investments.
During both 2022 and 2021, resurgences of COVID-19 in various U.S. and international regions disrupted our ability to access our clinician customers and their patients, although surgical volumes generally returned to pre-pandemic levels by the end of the first quarter of each year. 78 Table of Contents Revenue information by region is summarized as follows: Year Ended December 31, 2022 2021 Change Amount % of Revenue Amount % of Revenue $ % (in thousands, except percentages) United States $ 394,833 96.8 % $ 220,976 94.7 % $ 173,857 78.7 % All other countries 13,023 3.2 % 12,418 5.3 % 605 4.9 % Total revenue $ 407,856 100.0 % $ 233,394 100.0 % $ 174,462 74.7 % Revenue generated in the U.S. was $394.8 million for the year ended December 31, 2022, an increase of $173.9 million, or 78.7%, over the year ended December 31, 2021.
Revenue information by region is summarized as follows: Year Ended December 31, 2023 2022 Change Amount % of Revenue Amount % of Revenue $ % (in thousands, except percentages) United States $ 606,178 97.0 % $ 394,833 96.8 % $ 211,345 53.5 % All other countries 18,621 3.0 % 13,023 3.2 % 5,598 43.0 % Total revenue $ 624,799 100.0 % $ 407,856 100.0 % $ 216,943 53.2 % Revenue generated in the U.S. was $606.2 million for the year ended December 31, 2023, an increase of $211.3 million, or 53.5%, over the year ended December 31, 2022.
During 2022, we recorded a $1.8 million inventory reserve related to product introductions which were completed in October 2022, including the new silicone leads and the Bluetooth®-enabled patient remote. The net inventory balance was $11.9 million and $17.2 million as of December 31, 2022 and 2021, respectively.
Likewise, the timing of FDA approval of a next generation product, if granted, could have a significant impact on the carrying value of the inventory of our previous generation product, and therefore our reported operating results. During 2022, we recorded a $1.8 million inventory reserve related to product introductions, including the new silicone leads and the Bluetooth®-enabled patient remote.
Operating assets includes inventories, which increased due to manufacturing of systems inventory to meet increased sales and to establish safety stock to avoid inventory shortages in the event of COVID-related production or supply issues. Operating assets also includes accounts receivable which increased due to higher sales, and prepaid expenses and other current assets which increased primarily due to prepaid insurance.
Operating assets include inventories, which increased as supply chain constraints eased, and accounts receivable, which increased due to higher sales volume. Operating assets also include prepaid expenses and other current assets, which increased primarily due to various prepaid expenses and interest income receivable.
The increase was primarily due to product costs associated with higher sales volume of our Inspire system, higher costs of certain component parts which were impacted by inflation and supply chain issues, $2.8 million of inventory obsolescence charges associated with recent product introductions, and additional costs associated with the transition of manufacturing lines to produce our new silicone-based leads.
The increase was primarily due to product costs associated with higher sales volume of our Inspire system, additional manufacturing costs of sensors and lower yields prior to process enhancements, additional costs associated with an isolated production issue at a supplier, and higher costs of certain component parts.
Additionally, the COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets. An extended period of global supply chain and economic disruption could materially affect our business, results of operations, access to sources of liquidity, and financial condition.
An extended period of global supply chain and economic disruption could materially affect our business, results of operations, access to sources of liquidity, and financial condition. We may seek additional sources of liquidity and capital resources through equity or debt financings, such as additional securities offerings or through borrowings under a new credit facility.
The Medicare national average 2023 payment in a hospital outpatient site of service is $29,358, a decrease of 2% from the 2022 rate. The 2023 Medicare national average ASC reimbursement is $25,180, an increase of 1% over the 2022 rate.
In the ASC setting, the reimbursement for the DISE procedure is $757, a 714% increase from the 2023 79 Table of Contents amount. The 2024 Medicare national average physician reimbursement for the DISE procedure is $95, a 2% decrease over the prior year amount.
No single customer accounted for more than 10% of our revenue. Our direct-to-consumer marketing includes the use of social media platforms such as Facebook, Google ad placements, and radio and television commercials. In January 2021, we began airing television commercials and in January 2022, we purchased our first national television advertising spots and began airing new TV commercials.
In January 2022, we purchased our first national television advertising spots and began airing new TV commercials, and in March 2023, we began airing additional new television commercials.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeA hypothetical 1% change in interest rates during 2022 would have impacted interest and dividend income on our consolidated financial statements by approximately $2.4 million.
Biggest changeA hypothetical 1% change in interest rates would have impacted interest and dividend income on our consolidated financial statements by approximately $3.1 million and $2.4 million for the years ended December 31, 2023 and 2022, respectively.
Our accounts receivable primarily relate to revenue from the sale of our Inspire system to hospitals in the U.S. and Europe, primarily in Germany. We believe that the credit risk in our accounts receivable is mitigated by our credit evaluation process, relatively short collection terms, and dispersion of our customer base.
Our accounts receivable primarily relate to revenue from the sale of our Inspire system to hospitals and ASCs in the U.S. and Europe, primarily in Germany. We believe that the credit risk in our accounts receivable is mitigated by our credit evaluation process, relatively short collection terms, and dispersion of our customer base.
Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain and increase our gross margin and selling and marketing and operating expenses as a percentage of our revenue if the selling prices of our products do not increase as much as or more than these increased costs. 84 Table of Contents
Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain and increase our gross margin and selling and marketing and operating expenses as a percentage of our revenue if the selling prices of our products do not increase as much as or more than these increased costs. 90 Table of Contents
Credit Risk As of December 31, 2022 and 2021, our cash, cash equivalents, and investments were maintained with financial institutions which we believe have sufficient assets and liquidity to conduct their operations in the ordinary course of business with little or no credit risk to us, however our cash balances were in excess of insured limits.
Credit Risk As of December 31, 2023 and 2022, our cash, cash equivalents, and investments were maintained with financial institutions which we believe have sufficient assets and liquidity to conduct their operations in the ordinary course of business with little or no credit risk to us, however our cash balances were in excess of insured limits.
We generally do not require collateral, and losses on accounts receivable have historically not been significant. No single customer represented more than 10% of our accounts receivable as of December 31, 2022 or 2021. Foreign Currency Risk The majority of our business is currently conducted in U.S. dollars.
We generally do not require collateral, and losses on accounts receivable have historically not been significant. No single customer represented more than 10% of our accounts receivable as of December 31, 2023 or 2022. Foreign Currency Risk The majority of our business is currently conducted in U.S. dollars.
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Market conditions can impact the viability of institutions where our cash is held. In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we will be able to access uninsured funds in a timely manner or at all.

Other INSP 10-K year-over-year comparisons