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What changed in Inspire Medical Systems, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Inspire Medical Systems, Inc.'s 2023 and 2024 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 2024 report.

+529 added−539 removedSource: 10-K (2025-02-10) vs 10-K (2024-02-09)

Top changes in Inspire Medical Systems, Inc.'s 2024 10-K

529 paragraphs added · 539 removed · 409 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

157 edited+46 added−79 removed135 unchanged
Biggest changeIn addition, we have a contract with the U.S. government that covers implantations of our Inspire system performed in Veterans Affairs and military hospitals, which account for approximately 5% of all Inspire system implantations historically in the U.S. 20 Table of Contents Prior Authorization Approval Process A second pillar of our reimbursement strategy includes leveraging our market access team to assist patients and physicians in obtaining appropriate prior authorization approvals in advance of treatment.
Biggest changeFee-for-service Medicare beneficiaries have historically accounted for approximately 25% to 30% of all Inspire system implantations in the U.S. In addition, we have a contract with the U.S. government that covers implantations of our Inspire system performed in Veterans Affairs and military hospitals, which account for approximately 5% of all Inspire system implantations historically in the U.S.
Our U.S. customers are generally reimbursed for the cost of patient treatment by various third-party payors, such as commercial insurance providers and Medicare. We have secured positive coverage policies with many U.S. commercial payors, including virtually all large national commercial insurers, encompassing approximately 260 million covered lives in the U.S.
Our U.S. customers are generally reimbursed for the cost of patient treatment by various third-party payors, such as commercial insurance providers and Medicare. We have secured positive coverage policies with many U.S. commercial payors, including all large national commercial insurers, encompassing approximately 260 million covered lives in the U.S.
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.
These include: • establishment registration and device listing with the FDA; • QSR requirements, which currently 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 22 Table of Contents • 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.
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.
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; 25 Table of Contents • 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.
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.
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, France, Belgium, the United Kingdom, and Japan.
Our manufacturing processes are required to comply with the applicable portions of the QSR, which cover the methods and the facilities, controls for the design, manufacture, testing, production, processes, controls, quality assurance, labeling, packaging, distribution, installation, and servicing of finished devices intended for human use.
Our manufacturing processes are required to comply with the applicable portions of the QSR, which currently cover the methods and the facilities, controls for the design, manufacture, testing, production, processes, controls, quality assurance, labeling, packaging, distribution, installation, and servicing of finished devices intended for human use.
We believe our Inspire therapy provides the following benefits: • Safe, effective, and durable treatment supported by compelling clinical data, including long-term efficacy results out to five years from initial treatment. • Closed-loop system that uses a proprietary algorithm to continuously monitor patients’ breathing and provide electrical stimulation during the inspiratory phase. • Comfortable and convenient therapy resulting in high patient satisfaction that was reported to be 90% in patients who were followed an average of 12 months from initial treatment, according to the most recent publication of our ongoing global patient registry. • Strong patient compliance , with 80% of patients reporting continued nightly use through five years from initial treatment in our Stimulation Therapy for Apnea Reduction ("STAR") trial. • Minimally invasive outpatient procedure with short recovery time. • Long-lasting solution with a battery designed to last approximately 11 years without charging or maintenance.
We believe our Inspire therapy provides the following benefits: 6 Table of Contents • Safe, effective, and durable treatment supported by compelling clinical data, including long-term efficacy results out to five years from initial treatment. • Closed-loop system that uses a proprietary algorithm to continuously monitor patients’ breathing and provide electrical stimulation during the inspiratory phase. • Comfortable and convenient therapy resulting in high patient satisfaction that was reported to be 90% in patients who were followed an average of 12 months from initial treatment, according to the most recent publication of our ongoing global patient registry. • Strong patient compliance , with 80% of patients reporting continued nightly use through five years from initial treatment in our Stimulation Therapy for Apnea Reduction ("STAR") trial. • Minimally invasive outpatient procedure with short recovery time. • Long-lasting solution with a battery designed to last approximately 11 years without charging or maintenance.
For example, the advertising and promotion of medical devices is subject to some general principles set forth in EU legislation. According to the EU Medical Devices Regulation, only devices that are CE marked may be marketed and advertised in the EU in accordance with their intended purpose.
For example, the advertising and promotion of medical devices are subject to some general principles set forth in EU legislation. According to the EU Medical Devices Regulation, only devices that are CE marked may be marketed and advertised in the EU in accordance with their intended purpose.
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.
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, France, and the Netherlands, and in the Asia Pacific region, including Japan, Singapore, and Hong Kong.
An IDE supplement must be submitted to, and approved by, the FDA before a sponsor or investigator may make a change to the investigational plan that may affect its scientific soundness, study plan or the rights, safety or welfare of human subjects.
An IDE supplement must also be submitted to, and approved by, the FDA before a sponsor or investigator may make a change to the investigational plan that may affect its scientific soundness, study plan or the rights, safety or welfare of human subjects.
The FDA will approve the new device for commercial distribution if it determines that the data and information in the PMA constitute valid scientific evidence and that there is reasonable assurance that the device is safe and effective for its intended use(s).
The FDA will approve the device for commercial distribution if it determines that the data and information in the PMA constitute valid scientific evidence and that there is reasonable assurance that the device is safe and effective for its intended use(s).
Similarly, the French national reimbursement database showed that in over 176,000 patients, CPAP non-adherent patients had a higher risk for mortality and new onset of heart failure than those who were adherent. These findings show the urgency of treating CPAP-intolerant OSA to improve outcomes and reduce healthcare utilization.
Similarly, the French national reimbursement database showed that in over 176,000 patients, CPAP non-adherent patients had a higher risk for mortality and new onset of heart failure than those who were adherent. These findings show the urgency of treating CPAP-intolerant OSA to improve patient outcomes and potentially reduce healthcare utilization.
Patients undergo a drug-induced sleep endoscopy performed by an ENT surgeon in order to confirm that they satisfy this anatomical requirement.
Patients undergo a drug-induced sleep endoscopy ("DISE") performed by an ENT surgeon in order to confirm that they satisfy this anatomical requirement.
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.
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 350 peer-reviewed publications. Data reported in these clinical studies also demonstrated a high level of overall patient satisfaction.
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.
We believe we have a significant first mover advantage and momentum over future competitors, as physicians have treated more than 90,000 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 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.
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 have 19 sales territories in Europe and Japan, and we sell our products through distributors in Singapore and Hong Kong. We provide consistent training in geographies outside of the U.S. as is conducted in the U.S. and have established a support team in Europe and Japan for patient outreach and education, implant support, and device programming.
We have 25 sales territories in Europe and Japan, and we sell our products through distributors in Singapore and Hong Kong. We provide consistent training in geographies outside of the U.S. as is conducted in the U.S. and have established a support team in Europe and Japan for patient outreach and education, implant support, and device programming.
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.
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 350 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 280 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 350 peer-reviewed publications, supports the safety and efficacy of Inspire therapy.
The Inspire system uses a proprietary algorithm to continuously monitor a patient’s breathing and provide electrical stimulation during the inspiratory phase, working with the body’s natural actions to keep the airway open during the breathing cycle. • Comfortable and convenient therapy resulting in high patient satisfaction.
The Inspire system uses proprietary algorithms to continuously monitor a patient’s breathing and provide electrical stimulation during the inspiratory phase, working with the body’s natural actions to keep the airway open during the breathing cycle. • Comfortable and convenient therapy resulting in high patient satisfaction.
Our contributions seeks to provide crucial assistance to charitable organizations striving to treat critical illnesses, combat poverty and homelessness, ease hardship for people affected by disasters, eliminate barriers to equal opportunity, and support underserved communities to address inequities in health outcomes.
Our contributions seek to provide crucial assistance to charitable organizations striving to treat critical illnesses, combat poverty and homelessness, ease hardship for people affected by disasters, eliminate barriers to equal opportunity, and support underserved communities to address inequities in health outcomes.
STAR trial follow-up has shown results similar to the initial data at 18 months, three years, and five years. At five years, median AHI in patients with moderate to severe OSA remained low at 6.2 events per hour.
STAR trial follow-up has shown results similar to the initial data at 18 months, three years, and five years following initial treatment. At five years, median AHI in patients with moderate to severe OSA remained low at 6.2 events per hour.
Our Solution for OSA Overview of Inspire Therapy Our proprietary Inspire system is the first and only FDA-approved closed-loop neurostimulation technology that provides a safe and effective treatment for moderate to severe OSA.
Our Solution for OSA Overview of Inspire Therapy Our proprietary Inspire system is the first and only FDA-approved closed-loop neurostimulation technology that provides a safe and effective treatment for patients with moderate to severe OSA.
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.
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.
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.
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.
Regulation of Medical Devices in the European Union The European Union (“EU”) has adopted specific directives and regulations regulating the design, manufacture, clinical investigation, conformity assessment, labeling and adverse event reporting for medical devices.
Regulation of Medical Devices in the European Union The EU has adopted specific directives and regulations regulating the design, manufacture, clinical investigation, conformity assessment, labeling and adverse event reporting for medical devices.
Third-Party Reimbursement Our market access team is responsible for all of our reimbursement processes and initiatives. Our team includes 28 professionals who are focused on all key aspects of reimbursement, which include coding, payment, coverage, and prior authorization. Coding and Payment In the U.S., we sell our products to hospitals and ASCs.
Third-Party Reimbursement Our market access team is responsible for all of our reimbursement processes and initiatives. Our team of professionals are focused on all key aspects of reimbursement, which include coding, payment, coverage, and prior authorization. Coding and Payment In the U.S., we sell our products to hospitals and ASCs.
This highly effective team has been successful in helping to secure reimbursement from hundreds of commercial payors to date, and positive coverage policies from most U.S. commercial payors, including virtually all large national payors. • Strong research and development capabilities and comprehensive intellectual property portfolio.
This highly effective team has been successful in helping providers and patients to secure reimbursement from hundreds of commercial payors to date, and positive coverage policies from most U.S. commercial payors, including all large national payors. • Strong research and development capabilities and comprehensive intellectual property portfolio.
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.
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.
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.
In parallel, a subset of our market access team, which we refer to as our prior authorization 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.
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.
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.
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.
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.
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.
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.
We also continue to invest in our SleepSync™ platform, a cloud-based patient management system which allows patients and physicians alike to remotely monitor key compliance and outcomes measures for connected and coordinated care management, thereby optimizing therapy. • Promote awareness among patients, ENT physicians, sleep centers, and referring physicians.
We also continue to invest in our SleepSync™ platform, a cloud-based patient management system which allows patients and physicians alike to remotely monitor key compliance and outcomes measures for connected and coordinated care management, thereby optimizing therapy. • Promote awareness of and reliance on Inspire therapy among patients, ENT physicians, sleep centers, and referring physicians.
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.
As of December 31, 2024, we had 165 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.
Once implanted, the Inspire system delivers electrical stimulation that causes a slight forward movement of the back of the tongue, which helps to 6 Table of Contents maintain an open airway, enabling the patient to inhale freely without interruption.
Once implanted, the Inspire system delivers electrical stimulation that causes a slight forward movement of the back of the tongue, which helps to maintain an open airway, enabling the patient to inhale freely without interruption.
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.
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.
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.
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 335 sales territories in the U.S. and 25 outside of the U.S.
If an IDE application is approved by the FDA and one or more IRBs, human clinical studies may begin at a specific number of investigational sites with a specific number of patients, as approved by the FDA.
If an IDE application is approved by the FDA and one or more institutional review boards ("IRBs"), human clinical studies may begin at a specific number of investigational sites with a specific number of patients, as approved by the FDA.
A recent example of our efforts to expand our label indications for the Inspire system include obtaining FDA approval to offer Inspire therapy to certain pediatric patients with Down syndrome in 2023, which was approved in 2023.
A recent example of our efforts to expand our label indications for the Inspire system include obtaining FDA approval in 2023 to offer Inspire therapy to certain pediatric patients with Down syndrome.
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.
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.
The federal civil False Claims Act prohibits, among other things, any person or entity from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment or approval to the federal government or knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government.
The federal civil False Claims Act prohibits, among other things, any person or entity from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment or approval to the federal government or 26 Table of Contents knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government.
The procedures performed to implant, revise, or explant our device are described for billing purposes using Category I CPT codes (64582, 64583, and 64584, respectively) to identify hypoglossal nerve stimulator services. A Category I code (42975) is used for DISE, which is a required procedure to determine which patients are appropriate for Inspire therapy.
The procedures performed to implant, revise, or explant our Inspire IV device are described for billing purposes using Category I CPT codes (64582, 64583, and 64584, respectively) to identify hypoglossal nerve stimulator services. A Category I code (42975) is used for DISE, which may be a necessary procedure to determine which patients are appropriate for Inspire therapy.
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.
We select our suppliers so 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 satisfied that the relevant product conforms to the relevant essential requirements, the notified body issues a certificate of conformity, which the manufacturer uses as a basis for its own declaration of conformity. The manufacturer may then apply the CE mark to the device, which allows the device to be placed on the market throughout the EU.
If satisfied that the relevant product conforms to the relevant general safety and performance requirements, the notified body issues a certificate of conformity, which the manufacturer uses as a basis for its own declaration of conformity. The manufacturer may then apply the CE mark to the device, which allows the device to be placed on the market throughout the EU.
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.
We also plan to expand our reach to markets in new regions, such as Thailand and South Korea. 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 estimate that the majority of patients who meet the FDA indication for Inspire therapy are covered by commercial insurance companies and we have secured coverage policies with virtually all major national commercial payors. All seven MACs provide coverage of Inspire therapy when certain coverage criteria are met.
We estimate that the majority of patients who meet the FDA-approved indication for Inspire therapy are covered by commercial insurance companies and we have secured coverage policies with all major national commercial payors. 15 Table of Contents All seven MACs provide coverage of Inspire therapy when certain coverage criteria are met.
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.
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 to help facilitate further adoption and broaden awareness of our Inspire therapy.
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).
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 Thailand and Australia (where our products are approved for sale but where we have not yet commercialized 19 Table of Contents them).
To demonstrate compliance with the essential requirements, medical device manufacturers must undergo a conformity assessment procedure, which varies according to the type of medical device and its (risk) classification.
To demonstrate compliance with the general safety and performance requirements medical device manufacturers must undergo a conformity assessment procedure, which varies according to the type of medical device and its (risk) classification.
Open Airway The effectiveness of Inspire therapy to relieve OSA is objectively measured during a sleep study or polysomnogram. A sleep study records a patient’s breathing, airflow, and blood oxygen levels before and after activating the device.
The effectiveness of Inspire therapy to relieve OSA is objectively measured during a sleep study or polysomnogram. A sleep study records a patient’s breathing, airflow, and blood oxygen levels before and after 10 Table of Contents activating the device.
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.
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 and individual contractors are expected to certify annually that they understand and will comply with the expectations contained in the Code of Conduct.
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.
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.
Additionally, there has been a recent trend of increased regulation of payments and transfers of value provided to healthcare professionals or entities and many EU member states have adopted national “Sunshine Acts” which impose reporting and transparency requirements (often on an annual basis), similar to the requirements in the United States, on medical device manufacturers.
In the EU, there has also been a recent trend of increased regulation of payments and transfers of value provided to healthcare professionals or entities and many EU 27 Table of Contents member states have adopted national "Sunshine Acts" which impose reporting and transparency requirements (often on an annual basis), similar to the requirements in the United States, on medical device manufacturers.
Additionally, after a study begins, we, the FDA or the IRB could suspend or terminate a clinical study at any time for various reasons, including a belief that the risks to study subjects outweigh the anticipated benefits.
Additionally, after a study begins, the sponsor, the FDA or the IRB 21 Table of Contents could suspend or terminate a clinical study at any time for various reasons, including a belief that the risks to study subjects outweigh the anticipated benefits.
Data reported in the most recent publication of our ongoing ADHERE patient registry, which we established to follow patients who have been implanted with an Inspire system, demonstrated that patients used Inspire therapy an average of 5.7 hours per night an average of 12 months after initial treatment, with overall patient satisfaction reported to be at 90%. • Strong patient compliance.
Data reported in the most recent publication of our ongoing ADHERE patient registry demonstrated that patients used Inspire therapy an average of 5.7 hours per night an average of 12 months after initial treatment, with overall patient satisfaction reported to be at 90%. • Strong patient compliance.
Data gathered on the first 1,963 patients published in the Journal of Clinical Sleep Medicine in 2022 showed that patients used Inspire therapy an average of 5.7 hours per night when measured an average of 12 months after implantation.
The most recent analysis, published in the Journal of Clinical Sleep Medicine in 2022 on 1,963 patients enrolled, showed that patients used Inspire therapy an average of 5.7 hours per night when measured an average of 12 months after implantation.
Risk Factors — Risks Related to Intellectual Property Matters” for additional information regarding these and other risks related to our intellectual property portfolio and their potential effect on us.
See Part I, "Item 1A. Risk Factors — Risks Related to Intellectual Property Matters” for additional information regarding these and other risks related to our intellectual property portfolio and their potential effect on us.
Our employees are passionate about improving the lives of others so we provide channels for our team members to identify opportunities to engage with new charitable organizations and events in our communities. In 2023, we contributed nearly $85,000 to 15 local and national charitable organizations including healthcare charities and charitable organizations addressing other related causes.
Our employees are passionate about improving the lives of others, so we provide channels for our team members to identify opportunities to engage with charitable organizations and events in our communities. In 2024, we contributed nearly $140,000 to local and national charitable organizations including health care charities and charitable organizations addressing other related causes.
Anti-Bribery and Corruption Laws Our U.S. operations are subject to the FCPA. We are required to comply with the FCPA, which generally prohibits covered entities and their intermediaries from engaging in bribery or making other prohibited payments to foreign officials for the purpose of obtaining or retaining business or other benefits.
We are required to comply with the FCPA, which generally prohibits covered entities and their intermediaries from engaging in bribery or making other prohibited payments to foreign officials for the purpose of obtaining or retaining business or other benefits.
Manufacturers are also notably responsible for entering the necessary data on Eudamed, which includes the UDI database, and for keeping it up to date. The obligations for registration in Eudamed will become applicable at a later date (as Eudamed is not yet fully functional).
Manufacturers are also notably responsible for entering the necessary data on Eudamed, which includes the UDI database, and for keeping it up to date. Certain obligations for registration in Eudamed are expected to become applicable in Q1 2026 (as Eudamed is not yet fully functional).
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.
(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.
Following the end of the Brexit transitional period on January 1, 2021, new regulations require medical devices to be registered with the MHRA before being placed on the Great Britain market.
Following the end of the United Kingdom's ("UK" withdrawal from the EU ("Brexit") transitional period on January 1, 2021, new regulations require all medical devices to be registered with the MHRA before being placed on the Great Britain market.
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.
As of December 31, 2024, we had rights to 98 issued U.S. patents, which will expire between 2029 and 2041 assuming all required fees are paid, 67 pending U.S. patent applications, 72 issued foreign patents, and 69 pending foreign patent applications. Our patents cover aspects of our current Inspire system and future product concepts.
Manufacturers are required to take FSCAs defined as any corrective action for technical or medical reasons to prevent or reduce a risk of a serious incident associated with the use of a medical device that is made available on the market. An FSCA may include the recall, modification, exchange, destruction or retrofitting of the device.
Manufacturers are required to take FSCAs defined as any corrective action for technical or medical reasons to prevent or reduce a risk of a serious incident associated with the use of a medical device that is made available on the market.
Except for low-risk medical devices ( Class I non-sterile, non-measuring devices ), where the manufacturer can self-assess the conformity of its products with the essential requirements (except for any parts which relate to sterility or metrology) , a conformity assessment procedure requires the intervention of a notified body.
Except for low-risk medical devices (Class I), where the manufacturer can self-assess the conformity of its products with the general safety and performance requirements (except for any parts which relate to sterility, metrology or reuse aspects), a conformity assessment procedure requires the intervention of a notified body.
Privacy and security laws, regulations, and other obligations are constantly evolving, may conflict with each other to complicate compliance efforts, and can result in investigations, proceedings, or actions that lead to significant civil and/or criminal penalties and restrictions on data processing.
Privacy and security laws, regulations, and other obligations are constantly evolving, may conflict with each other to complicate compliance efforts, and can result in investigations, proceedings, or actions that lead to significant civil and/or criminal penalties and restrictions on data processing. Anti-Bribery and Corruption Laws Our U.S. operations are subject to the FCPA.
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 have a comprehensive patent portfolio to protect our intellectual property and technology, with rights as of December 31, 2024 to 98 issued U.S. patents, 72 issued foreign patents, 67 pending U.S. patent applications, and 69 pending foreign patent applications that cover aspects of our Inspire system and future product concepts.
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.
Our Bluetooth®-enabled patient remote control was approved by the FDA in 2021 and the initial commercial launch occurred in 2022. We have launched a cloud-based patient management system called the SleepSync™ platform, which allows physicians to monitor patient compliance and more efficiently coordinate patient care. In 2020, we launched the Inspire Sleep app for patients' smartphones.
Inspire therapy is an innovative, closed-loop, minimally invasive solution that provides comfort and convenience, resulting in high compliance for patients with moderate to severe OSA.
Inspire therapy is an innovative, closed-loop, minimally invasive solution designed to provide comfort and convenience, and which results in high compliance for patients with moderate to severe OSA.
For example, the General Data Protection Regulation (the "GDPR"), imposes strict requirements for processing the personal data of individuals within the European Economic Area, or the EEA.
For example, the General Data Protection Regulation imposes strict requirements for processing the personal data of individuals within the EEA.
Initial activation of the system occurs 30 days after the implantation. After the initial activation, the patient is instructed to use the therapy each night by turning on their Inspire system before going to sleep using their remote control.
Initial activation of the system occurs 30 days after the implantation. After the initial activation, the patient is instructed to use the therapy each night by turning on their Inspire system before going to sleep using their remote control. Patients turn their Inspire system on when they plan to go to sleep and turn it off when they awaken.
In 2017, we released the Inspire IV neurostimulator, which is 40% smaller than the previous version while maintaining approximately 11 years of battery life. The Inspire IV device was launched in the U.S. in 2017, and in Europe in 2018.
In 2017, we released the Inspire IV neurostimulator, which is 40% smaller than the previous version while maintaining approximately 11 years of battery life.
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.
We have been successful in helping our customers and patients pursue prior authorization approvals from most commercial payors for the Inspire device and procedure. Historically, commercial payors, including Medicare Advantage plans, cover approximately 65% to 70% of Inspire implants in the U.S.
On an annual basis, our leadership team participates in a talent review and succession planning exercise to identify organizational needs, development opportunities, and potential future leaders. This enables us to identify the resources and skill sets needed to meet our growth objectives.
On an annual basis, our leadership team participates in a talent review and succession planning exercise to identify organizational needs, development opportunities, and potential future leaders. This enables us to identify the resources and skill sets needed to meet our growth objectives. Inclusion and Belonging We strive to create a culture in which all employees feel heard, respected, and valued.
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.
Our foundational commitment to driving innovation and improving patient lives fuels our desire for continuous product 9 Table of Contents development. 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.
Our Inspire system consists of a remote control and three implantable components: • a pressure sensing lead, which detects when the patient is attempting to breathe; • a neurostimulator, which houses the electronics and battery power for the device; and • a stimulation lead, which delivers electrical stimulation to the hypoglossal nerve.
Both our Inspire IV and Inspire V systems consists of a remote control and the following implantable components (except as otherwise noted): • in the Inspire IV system, a pressure sensing lead, which detects when the patient is attempting to breathe; • a neurostimulator, which houses the electronics, battery power for the device, and, as to the Inspire V system, a respiratory sensor; and • a stimulation lead, which delivers electrical stimulation to the hypoglossal nerve.
Patients also have the ability to temporarily pause therapy if they awaken during the night. Clinical Results and Studies A significant body of published clinical evidence, which includes seven sponsored and more than 100 independent clinical studies that evaluated several thousand patients, supports the safety and effectiveness of Inspire therapy.
Clinical Results and Studies A significant body of published clinical evidence, which includes seven sponsored and more than 100 independent clinical studies that evaluated several thousand patients, supports the safety and effectiveness of Inspire therapy.
If the FDA accepts the application for review, it has 180 days under the FDCA to complete its review of a PMA, although in practice, the FDA’s review often takes significantly longer, and can take up to several years.
If the FDA accepts a submitted PMA application for substantive review, it has 180 days under the FDCA to complete its review, although in practice, the FDA’s review 20 Table of Contents often takes significantly longer.
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.
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.

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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: 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.
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; 60 Table of Contents • 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; • 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.
If our third-party suppliers fail to deliver the required commercial quantities of materials on a timely basis and at commercially reasonable prices, and we are unable to find one or more replacement suppliers capable of production at a substantially equivalent cost in substantially equivalent volumes and quality on a timely basis, the continued commercialization of our Inspire system, the supply of our products to customers, and the development of any future products will be delayed, limited or prevented, which could have material adverse effect on our business, financial condition, and results of operations.
If our third-party suppliers fail to deliver the required commercial quantities of materials on a timely basis and at commercially reasonable prices, and we are unable to find one or more replacement suppliers capable of production at a substantially equivalent cost in substantially equivalent volumes and quality on a timely basis, the continued commercialization of our Inspire system, the supply of our products to customers, and the development of any future products will be delayed, limited or prevented, which could have a material adverse effect on our business, financial condition, and results of operations.
There has been increasing and evolving public focus by investors, customers, environmental and social activists, the media, politicians, and governmental and nongovernmental organizations and other stakeholders on a variety of environmental, social, and governance (“ESG”) matters.
There has been increasing and evolving public focus by investors, customers, environmental and social activists, the media, politicians, governmental and nongovernmental organizations and other stakeholders on a variety of environmental, social, and governance (“ESG”) matters.
Subject to the transitional provisions, in order to sell our products in EU member states, our products must comply with the general safety and performance requirements of the EU Medical Devices Regulation, which repeals and replaces EU Medical Devices Directive and the AIMDD.
Subject to the transitional provisions, in order to sell our products in EU member states, our products must comply with the general safety and performance requirements of the EU Medical Devices Regulation, which repeals and replaces the EU Medical Devices Directive and the AIMDD.
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.
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 68 Table of Contents 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 it is not clear what, if any, long-term impact the PTAB proceedings will have on the operation of our business, the initial results of patent challenge proceedings before the PTAB since its inception in 2013 have resulted in the invalidation of many U.S. patent claims.
Although it is not clear what, if any, long-term impact the PTAB proceedings will have on the operation of our business, the initial results of patent challenge proceedings before the PTAB since its inception have resulted in the invalidation of many U.S. patent claims.
We began selling our Inspire system in 2011 in certain European countries, in 2014 in the U.S., and in 2021 in certain Asia Pacific regions. Sales of our Inspire system accounted for primarily all of our revenue for the years ended December 31, 2023, 2022, and 2021.
We began selling our Inspire system in 2011 in certain European countries, in 2014 in the U.S., and in 2021 in certain Asia Pacific regions. Sales of our Inspire system accounted for primarily all of our revenue for the years ended December 31, 2024, 2023, and 2022.
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.
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; 32 Table of Contents • 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.
Any future funding requirements will depend on many factors, including: • patient, physician and market acceptance of our Inspire therapy; • the scope, rate of progress and cost of our current or future clinical studies; • the cost of our research and development activities; • the cost of filing and prosecuting patent applications and defending and enforcing our patent or other intellectual property rights; • the cost of defending, in litigation or otherwise, any claims that we infringe third-party patents or other intellectual property rights; • the cost and timing of additional regulatory clearances, approvals or certifications; • the cost and timing of establishing additional sales and marketing capabilities; • costs associated with any product recall that may occur; • the effect of competing technological and market developments; and • the extent to which we acquire or invest in products, technologies and businesses, although we currently have no commitments or agreements relating to any of these types of transactions.
Any future funding requirements will depend on many factors, including: • patient, physician and market acceptance of our Inspire therapy; • the scope, rate of progress and cost of our current or future clinical studies; • the cost of our research and development activities; • the cost of filing and prosecuting patent applications and defending and enforcing our patent or other intellectual property rights; • the cost of defending, in litigation or otherwise, any claims that we infringe third-party patents or other intellectual property rights; 45 Table of Contents • the cost and timing of additional regulatory clearances, approvals or certifications; • the cost and timing of establishing additional sales and marketing capabilities; • costs associated with any product recall that may occur; • the effect of competing technological and market developments; and • the extent to which we acquire or invest in products, technologies and businesses, although we currently have no commitments or agreements relating to any of these types of transactions.
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.
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 or modified 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; 36 Table of Contents • be fully FDA-compliant with marketing of new or modified devices and be fully compliant with foreign requirements to market our new or modified devices; • 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.
Our failure to comply with applicable regulatory requirements could result in enforcement action by the FDA, state or foreign regulatory authorities, which may include any of the following sanctions: • untitled letters or warning letters; • fines, injunctions, consent decrees and civil penalties; • recalls, termination of distribution, administrative detention, or seizure of our products; • customer notifications or repair, replacement or refunds; • operating restrictions or partial suspension or total shutdown of production; • delays in or refusal to grant our requests for future PMAs or foreign regulatory approvals or certifications of new products, new intended uses, or modifications to existing products; • withdrawals or suspensions of our current PMA or foreign regulatory approvals or certifications, resulting in prohibitions on sales of our products; • FDA refusal to issue certificates to foreign governments needed to export products for sale in other countries; and • criminal prosecution.
Our failure to comply with applicable regulatory requirements could result in enforcement action by the FDA, state or foreign regulatory authorities, which may include any of the following sanctions: • untitled letters or warning letters; • fines, injunctions, consent decrees and civil penalties; • recalls, termination of distribution, administrative detention, or seizure of our products; • customer notifications or repair, replacement or refunds; 51 Table of Contents • operating restrictions or partial suspension or total shutdown of production; • delays in or refusal to grant our requests for future PMAs or foreign regulatory approvals or certifications of new products, new intended uses, or modifications to existing products; • withdrawals or suspensions of our current PMA or foreign regulatory approvals or certifications, resulting in prohibitions on sales of our products; • FDA refusal to issue certificates to foreign governments needed to export products for sale in other countries; and • criminal prosecution.
Any actual or perceived failure by us, our employees or contractors, our partners, our service providers, or the third parties with whom we work, to comply with privacy or security laws, policies, legal obligations or industry standards, or any security incident that results in the unauthorized release or transfer of personal information, may result in governmental enforcement actions and investigations including by EU regulators and U.S. federal and state regulatory authorities as well as fines and penalties, litigation, including by consumer advocacy groups, and/or adverse publicity and could cause our customers, their patients and other healthcare professionals to lose trust in us, which could harm our reputation and have a material adverse effect on our business, financial condition and results of operations.
Any actual or perceived failure by us, our employees or contractors, our partners, our service providers, or the third parties with whom we work, to comply with privacy or security laws, policies, legal obligations or industry standards, or any security incident that results in the unauthorized release or transfer of personal information, may 58 Table of Contents result in governmental enforcement actions and investigations including by EU regulators and U.S. federal and state regulatory authorities as well as fines and penalties, litigation, including by consumer advocacy groups, and/or adverse publicity and could cause our customers, their patients and other healthcare professionals to lose trust in us, which could harm our reputation and have a material adverse effect on our business, financial condition and results of operations.
The FDA and other regulatory authorities or notified bodies outside the U.S. can delay, limit or deny approval or certification of a device for many reasons, including: • our inability to demonstrate to the satisfaction of the FDA or the applicable foreign regulatory entity or notified body that our products are safe or effective for their intended uses; • the disagreement of the FDA or the applicable foreign regulatory authority or notified body with the design or implementation of our clinical studies or the interpretation of data from pre-clinical studies or clinical studies; • serious and unexpected adverse device effects experienced by participants in our clinical studies; • the data from our pre-clinical studies and clinical studies may be insufficient to support approval or certification, where required; • our inability to demonstrate that the clinical and other benefits of the device outweigh the risks; • the manufacturing process or facilities we use may not meet applicable requirements; and • the potential for approval policies or regulations of the FDA or applicable foreign regulatory authorities to change significantly in a manner rendering our clinical data or regulatory filings insufficient for clearance, approval or certification.
The FDA and other regulatory authorities or notified bodies outside the U.S. can delay, limit or deny approval or certification of a device for many reasons, including: • our inability to demonstrate to the satisfaction of the FDA or the applicable foreign regulatory entity or notified body that our products are safe or effective for their intended uses; • the disagreement of the FDA or the applicable foreign regulatory authority or notified body with the design or implementation of our clinical studies or the interpretation of data from pre-clinical studies or clinical studies; • serious and unexpected adverse device effects experienced by participants in our clinical studies; • the data from our pre-clinical studies and clinical studies may be insufficient to support approval or certification, where required; • our inability to demonstrate that the clinical and other benefits of the device outweigh the risks; 49 Table of Contents • the manufacturing process or facilities we use may not meet applicable requirements; and • the potential for policies or regulations of the FDA or applicable foreign regulatory authorities to change significantly in a manner rendering our clinical data or regulatory filings insufficient for clearance, approval or certification.
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.
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.
In addition, our Inspire therapy is approved for use as a second-line therapy in the treatment of moderate to severe OSA in patients who cannot use or obtain consistent benefit from CPAP.
Our Inspire therapy is approved for use as a second-line therapy in the treatment of moderate to severe OSA in patients who cannot use or obtain consistent benefit from CPAP.
If we do not achieve or sustain profitability, it will be more difficult for us to finance our business and accomplish our strategic objectives, either of which would have a material adverse effect on our business, financial condition, results of operations, and cause the market price of our common stock to decline.
If we do not sustain profitability, it will be more difficult for us to finance our business and accomplish our strategic objectives, either of which would have a material adverse effect on our business, financial condition, results of operations, and cause the market price of our common stock to decline.
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.
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, 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.
These systems affect, among other things, ordering and managing materials from suppliers, shipping products to customers, processing transactions, summarizing and reporting results of operations, complying with regulatory, legal or tax requirements, data security and other processes necessary to manage our business.
These systems affect, among other things, ordering and managing materials from suppliers, shipping products to customers, processing transactions, summarizing and reporting results of operations, patient marketing, complying with regulatory, legal or tax requirements, data security and other processes necessary to manage our business.
Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. Recent changes in U.S. patent laws may limit our ability to obtain, defend and/or enforce our patents.
Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. Changes in U.S. and foreign patent laws may limit our ability to obtain, defend and/or enforce our patents.
For example, HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and regulations implemented thereunder (collectively "HIPAA"), imposes privacy, security and breach notification obligations on certain healthcare providers, health plans, and healthcare clearinghouses, known as covered entities, as well as their business associates that perform certain services that involve creating, receiving, maintaining or transmitting individually identifiable health information for or on behalf of such covered entities, and their covered subcontractors.
For example, HIPAA, 56 Table of Contents as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and regulations implemented thereunder (collectively "HIPAA"), imposes privacy, security and breach notification obligations on certain healthcare providers, health plans, and healthcare clearinghouses, known as covered entities, as well as their business associates that perform certain services that involve creating, receiving, maintaining or transmitting individually identifiable health information for or on behalf of such covered entities, and their covered subcontractors.
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.
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.
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.
Our ability to accurately forecast demand for our Inspire system could be negatively affected by many factors, including, for example, 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, customer preferences for new products or new generation products, unanticipated changes in general market conditions or regulatory matters, and weakening of economic conditions or consumer confidence in future economic conditions.
Any adverse determination against us in these proceedings, or even the allegations contained in the claims, regardless of whether they are ultimately found to be without merit, may also result in settlements, injunctions or damages that could have a material adverse effect on our business, financial condition and results of operations.
Any adverse determination against us in these proceedings, or even the allegations contained in the claims, regardless of whether they are ultimately found to be 35 Table of Contents without merit, may also result in settlements, injunctions or damages that could have a material adverse effect on our business, financial condition and results of operations.
If we are required to change contract manufacturers due to any change in or termination of our relationships with these third parties, or if our manufacturers are unable to obtain the materials they need to produce our products at consistent prices or at all, we may lose sales, experience manufacturing or other delays, incur increased costs or otherwise experience impairment to our customer relationships.
If we are required to change contract manufacturers due to any change in or termination of our relationships with these third parties, or if our manufacturers are unable to obtain the materials they need to produce our products at consistent prices or at all, 38 Table of Contents we may lose sales, experience manufacturing or other delays, incur increased costs or otherwise experience impairment to our customer relationships.
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).
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).
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.
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.
Our ability to generate revenue from sales of our Inspire system, or from any products we may develop in the future, may not be sufficient to enable us to transition to profitability and generate positive cash flows.
Our ability to generate revenue from sales of our Inspire system, or from any products we may develop in the future, may not be sufficient to enable us to sustain profitability and generate positive cash flows.
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 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.
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.
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.
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.
For example, in Europe, we are subject to the requirements of the General Data Protection Regulation ("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.
Such recalls and withdrawals may also be used by our competitors to harm our reputation for safety or be perceived by patients as a safety risk when considering the use of our products, either of which could have a material adverse effect on our business, financial condition and results of operations.
Such recalls and withdrawals may also be used by our competitors to harm our reputation for safety or be perceived by patients as a safety risk 41 Table of Contents when considering the use of our products, either of which could have a material adverse effect on our business, financial condition and results of operations.
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 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.
Such policy or regulatory changes could 54 Table of Contents impose additional requirements or time delays upon us that could delay our ability to obtain new approvals or certifications, increase the costs of compliance and our operating expenses, adversely impact our revenues or inventory forecasting or restrict our ability to maintain our current approval or certification.
Such policy or regulatory changes could impose additional requirements or time delays upon us that could delay our ability to obtain new approvals or certifications, increase the costs of compliance and our operating expenses, adversely impact our revenues or inventory forecasting or restrict our ability to maintain our current approval or certification.
Furthermore, the use of our Inspire system for indications other than those approved by the FDA, approved by any foreign regulatory authority or certified by a notified body, may not effectively treat such conditions, which could harm our reputation in the marketplace among physicians and patients.
Furthermore, the use of our Inspire system for indications other than those approved by the FDA, approved by any foreign regulatory 52 Table of Contents authority or certified by a notified body, may not effectively treat such conditions, which could harm our reputation in the marketplace among physicians and patients.
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.
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.
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.
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.
Failure to conduct the required studies in accordance with institutional review board ("IRB") and informed consent requirements, or adverse findings in these studies, could also be grounds for withdrawal of approval of the PMA. The regulations to which we are subject are complex and have become more stringent over time.
Failure to conduct the required studies in accordance with IRB and informed consent requirements, or adverse findings in these studies, could also be grounds for withdrawal of approval of the PMA. The regulations to which we are subject are complex and have become more stringent over time.
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.
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law ("DGCL"), 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.
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.
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.
Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions.
Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation 69 Table of Contents to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions.
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.
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, 2024, approximately 4.0% of our total sales were made in EU member states and certain Asia Pacific regions.
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.
The U.S. Departments of Justice, Commerce, State and Treasury 44 Table of Contents 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.
Seeking such approvals may delay our ability to replace the recalled devices in a timely manner. Moreover, if we do not adequately address problems associated with our devices, we may face additional regulatory enforcement action, including FDA or foreign regulatory authority warning letters, product seizure, injunctions, administrative penalties or civil or criminal fines.
Seeking such approvals may delay our ability to replace the recalled devices in a timely manner. Moreover, if we do not adequately address problems associated with our 53 Table of Contents devices, we may face additional regulatory enforcement action, including FDA or foreign regulatory authority warning letters, product seizure, injunctions, administrative penalties or civil or criminal fines.
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.
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 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.
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.
This lawsuit and any future lawsuits to which we may become a party are subject to inherent uncertainties and could result in very substantial costs, divert our management’s attention and resources and materially harm our business, operating results and financial condition.
These lawsuits and any future lawsuits to which we may become a party are subject to inherent uncertainties and could result in very substantial costs, divert our management’s attention and resources and materially harm our business, operating results and financial condition.
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.
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.
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.
Sales in markets outside of the U.S. accounted for approximately 4.0%, 3.0%, and 3.2% of our revenue for the years ended December 31, 2024, 2023, and 2022, 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.
Such proceedings could include supplemental examination or contested post-grant proceedings such as review, reexamination, inter partes review, interference or derivation proceedings before the USPTO and challenges in U.S. District Court. Patents may be subjected to opposition, post-grant review or comparable proceedings lodged in various foreign, both national and regional, patent offices.
Such proceedings could include supplemental examination or contested post-grant proceedings such as review, reexamination, inter partes review, interference or derivation proceedings before the USPTO and 64 Table of Contents challenges in U.S. District Court. Patents may be subjected to opposition, post-grant review or comparable proceedings lodged in various foreign, both national and regional, patent offices.
Under Sections 3(a)(1)(A) and (C) of the 1940 Act, a company generally will be deemed to be an “investment company” for purposes of the 1940 Act if (1) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities or (2) it engages, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis.
Under Sections 3(a)(1)(A) and (C) of the 1940 Act, a company generally will be deemed to be an “investment company” for purposes of the 1940 Act if (1) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities or (2) it engages, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S.
To the extent ESG matters negatively impact our reputation, we may also not be able to compete as effectively to recruit or retain employees. 52 Table of Contents This emphasis on ESG matters has resulted and may result in the adoption of new laws and regulations, including new reporting requirements.
To the extent ESG matters negatively impact our reputation, we may also not be able to compete as effectively to recruit or retain employees. This emphasis on ESG matters has resulted and may result in the adoption of new and varied laws and regulations, including reporting requirements.
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.
“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.
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.
The market price of our common stock is likely to be highly volatile and may fluctuate substantially due to many factors, including, for example: 67 Table of Contents • 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.
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.
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.
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.
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.
The medical technology industry is highly competitive, subject to change and significantly affected by new product introductions and other activities of industry participants. Our competitors have historically dedicated and will continue to dedicate significant resources to promoting their products or developing new products or methods to treat moderate to severe OSA.
The medical technology and pharmaceutical industries are highly competitive, subject to change and significantly affected by new product introductions and other activities of industry participants. Our competitors have historically dedicated and will continue to dedicate significant resources to promoting their products or drugs or developing new products, drugs or methods to treat moderate to severe OSA.
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.
Our ability to execute our growth strategy and remain 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.
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.
We cannot guarantee that our suppliers and contract manufacturers will continue to meet our demand for their products and services on a timely basis 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, 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.
In addition, as we continue to update and improve our SleepSync™ platform, we are also continuing to integrate certain software functions we utilize for compliance, 59 Table of Contents quality oversight and product surveillance into the SleepSync™ platform.
In addition, as we continue to update and improve our SleepSync™ platform, we are also continuing to integrate certain software functions we utilize for compliance, quality oversight and product surveillance into the SleepSync™ platform.
Our clinical studies may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical and non-clinical testing in addition to those we have planned.
Our clinical studies may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical and non-clinical testing in 61 Table of Contents addition to those we have planned.
We primarily rely on our own direct sales force, which as of December 31, 2023, covered 287 territories in the U.S. and 19 outside of the U.S., to market and sell our Inspire system. Some of our competitors rely predominantly on independent sales agents and third-party distributors.
We primarily rely on our own direct sales force, which as of December 31, 2024, covered 335 territories in the U.S. and 25 outside of the U.S., to market and sell our Inspire system. Some of our competitors rely predominantly on independent sales agents and third-party distributors.
If we are unable to comply with QMSR, once effective, or with any other changes in the laws or regulations enforced by FDA or comparable regulatory authorities, we may be subject to enforcement action, which could have an adverse effect on our business, financial condition and results of operations. Similarly, the EU landscape concerning medical devices recently evolved.
If we are unable to comply with QMSR, once effective, or with any other changes in the laws or regulations enforced by FDA or comparable regulatory authorities, we may be subject to enforcement action, which could have an adverse effect on our business, financial condition and results of operations.
To ensure adequate inventory supply, we must forecast inventory needs and place orders with our suppliers based on our estimates of future demand for our Inspire system.
So that we have adequate inventory supply, we must forecast inventory needs and place orders with our suppliers based on our estimates of future demand for our Inspire system.
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.
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; 63 Table of Contents • 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.
As of December 31, 2023, our direct sales and marketing organization, including reimbursement personnel, consisted of 728 employees, having increased from 129 employees as of December 31, 2018 . Our operating results are directly dependent upon the efforts of these employees.
As of December 31, 2024, our direct sales and marketing organization, including reimbursement personnel, consisted of 896 employees, having increased from 129 employees as of 39 Table of Contents December 31, 2018 . Our operating results are directly dependent upon the efforts of these employees.
Litigation may be necessary to resolve an ownership dispute, and if we are not successful, we may be precluded from using certain intellectual property or may lose our exclusive rights in that intellectual property. Either outcome could harm our business and competitive position.
Litigation may be necessary to resolve an ownership dispute, and if we are not successful, we may be precluded from using certain intellectual property or may lose our exclusive rights in that intellectual property.
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.
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; • changing tariffs and trade barriers, including potential changes in tariffs that may be proposed by the Trump administration and any retaliatory tariffs by other countries; • 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. 40 Table of Contents If one or more of these risks are realized, our business, financial condition, and results of operations could be adversely affected.
The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the U.S. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions.
We may be unable to enforce our intellectual property rights throughout the world. The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the U.S. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions.
We do not believe that we are an “investment company,” as such term is defined in either of those sections of the 1940 Act. We intend to conduct our operations so that we will not be deemed an investment company.
Treasury debt securities and cash items) on an unconsolidated basis. We do not believe that we are an “investment company,” as such term is defined in either of those sections of the 1940 Act. We intend to conduct our operations so that we will not be deemed an investment company.
If any of these claims succeed or settle, we may be forced to pay damages or settlement payments on behalf of our customers or may be required to obtain licenses for the products they use. If we cannot obtain all necessary licenses on commercially reasonable terms, our customers may be forced to stop using our products.
If any of these claims succeed or settle, we may be forced to pay damages or settlement payments on behalf of our customers or may be required to obtain licenses for the products they use.
In addition, patients may not be able to adopt or may choose not to adopt our Inspire therapy if, among other potential reasons, their airway anatomy would not allow for effective treatment with Inspire therapy, they are reluctant to receive an implantable device as opposed to an alternative, non-implantable treatment, they are worried about potential adverse effects of our Inspire system, such as infection, discomfort from the stimulation or tongue soreness or weakness, or they are unable to obtain adequate third-party coverage or reimbursement. 38 Table of Contents If we are unable to achieve and maintain adequate levels of coverage or reimbursement for our Inspire system, or any future products we may seek to commercialize, our commercial success may be severely hindered.
In addition, patients may not be able to adopt or may choose not to adopt our Inspire therapy if, among other potential reasons, their airway anatomy would not allow for effective treatment with Inspire therapy, they are reluctant to receive an implantable device as opposed to an alternative, non-implantable treatment, they are worried about potential adverse effects of our Inspire system, such as infection, discomfort from the stimulation or tongue soreness or weakness, or they are unable to obtain adequate third-party coverage or reimbursement.
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.
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; • patients opting to delay implants of our devices in advance of the commercial launch of new products or product generations; • 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. 37 Table of Contents Because our quarterly and annual results may fluctuate, period-to-period comparisons may not be the best indication of the underlying results of our business and should only be relied upon as one factor in determining how our business is performing.
Case law from the Court of Justice of the European Union (“CJEU”) states that reliance on the standard contractual clauses (SCCs) (a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism) alone may not necessarily be sufficient in all circumstances and that transfers must be assessed on a case-by-case basis. 62 Table of Contents We expect the existing legal complexity and uncertainty regarding international personal data transfers to continue.
Case law from the Court of Justice of the European Union (“CJEU”) states that reliance on the standard contractual clauses (SCCs) (a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism) alone may not necessarily be sufficient in all circumstances and that transfers must be assessed on a case-by-case basis.
The USPTO recently developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, which became effective on March 16, 2013.
These include provisions that affect the way patent applications are prosecuted and also affect patent litigation. The USPTO recently developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, which became effective on March 16, 2013.
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.
For example, in recent 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.
These global economic conditions could result in a variety of risks to our business, including weakened demand for our Inspire system, and adversely impact our ability to raise additional capital when needed on acceptable terms, if at all.
Uncertainty or unfavorable global economic conditions could result in a variety of impacts to our business, including weakening demand for our Inspire system, and adversely impacting our ability to raise additional capital when needed on acceptable terms, if at all.
As of December 31, 2023, we had rights to 80 issued U.S. patents, 55 issued foreign patents, 81 pending U.S. patent applications, and 79 pending foreign patent applications. Assuming all required fees are paid, issued U.S. patents owned by us will expire between 2029 and 2041.
As of December 31, 2024, we had rights to 98 issued U.S. patents, 72 issued foreign patents, 67 pending U.S. patent applications, and 69 pending foreign patent applications. Assuming all required fees are paid, issued U.S. patents owned by us will expire between 2029 and 2041.
For example, as a result of the transition towards the new regime, notified body review times have lengthened, and product introductions or modifications could be delayed or canceled, which could adversely affect our ability to grow our business.
These modifications are likely to have an effect on the way we conduct our business in the EEA. For example, as a result of the transition towards the new regime, notified body review times have lengthened, and product introductions or modifications could be delayed or canceled, which could adversely affect our ability to grow our business.
Factors such as geopolitical events (including the ongoing wars in Ukraine and Israel), inflationary pressures, impacts from COVID-19, and U.S. election cycles have caused extreme volatility and disruptions in the capital and credit markets.
Factors such as geopolitical events (including the ongoing wars in Ukraine and Israel), inflationary pressures, public health crises, and U.S. election cycles have caused extreme volatility and disruptions in the capital and credit markets in recent years.
As a result, we are subject to a number of risks related to credit and debit card payments. As a result of these transactions, we pay interchange and other fees, which may increase over time and could require us to either increase the prices we charge for our Inspire system or experience an increase in our costs and expenses.
As a result of these transactions, we pay interchange and other fees, which may increase over time and could require us to either increase the prices we charge for our Inspire system or experience an 43 Table of Contents increase in our costs and expenses.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur information security program includes: (i) risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, software, and services; (ii) an information security team principally responsible for managing our (1) information security risk assessment processes, (2) security controls, and (3) response to cybersecurity incidents; (iii) risk assessments and security tests, conducted internally and by external security and risk audit providers, as appropriate; (iv) new-hire and annual cybersecurity awareness training of our employees; (v) a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and (vi) third-party risk assessment procedures to review material third-party vendors and applications for information security. 75 Table of Contents We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition.
Biggest changeKey elements of our information security program include but are not limited to the following: (i) risk assessments designed to help identify material risks from cybersecurity threats to our critical systems and information; (ii) an information security team principally responsible for managing our (1) information security risk assessment processes, (2) security controls, and (3) response to cybersecurity incidents; (iii) risk assessments and security tests, conducted internally and by external security and risk audit providers, as appropriate; (iv) cybersecurity awareness training of our employees; (v) a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and (vi) third-party risk assessment procedures to review material third-party vendors and applications for information security.
For more information, see the section titled “Risk Factor—Risks Related to Our Business—Failure of a key information technology system, process or site, cyberattacks, or other deficiencies in our cybersecurity could have an adverse effect on our business and operations.” Cybersecurity Governance Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to the Audit Committee oversight over our information security and technology risks, including our information security, cybersecurity and related risk management programs.
For more information, see the section titled “Risk Factor—Risks Related to Our Business—Failure of a key information technology system, process or site, cyberattacks, or other deficiencies in our cybersecurity could have an adverse effect on our business and operations.” Cybersecurity Governance Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to the Audit Committee oversight over our information security and technology risks, including oversight of management’s implementation of our information security program.
Our information security team supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through a variety of means, including briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the IT environment.
Our information security team takes steps to stay informed about and monitor efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through a variety of means, including briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the IT environment.
Our information security program is principally managed by our information security team, which is led by our Information Security Officer. Our Information Security Officer reports to our Vice President of Information Services, who has extensive experience with information technology governance, data management, and systems management, including managing information security and data privacy law compliance at large multinational companies.
Our Senior Director of Information Services and Security reports to our Vice President of Information Services, who has extensive experience with information technology governance, data management, and systems management, including managing information security and data privacy law compliance at large multinational companies.
Our information security team includes professionals with deep professional experience and cybersecurity expertise, including our Information Security Officer. Such expertise includes applicable security and technology degrees and certifications held by information security team members, including degrees in computer science, cybersecurity, and systems engineering and management and security certifications such as COMP TIA Security+, COMP TIA Data+, and GIAC Security Essentials.
Such expertise includes applicable security and technology degrees and certifications held by information security team members, including degrees in computer science, cybersecurity, and systems engineering and management and security certifications such as COMP TIA Security+, COMP TIA Data+, and GIAC Security Essentials. We also augment our internal cybersecurity expertise by engaging security service organizations.
The Audit Committee oversees management’s implementation of our information security program and receives periodic reports from management on our material cybersecurity risks. Additionally, management updates the Audit Committee, as necessary, regarding material cybersecurity incidents. The full Board receives quarterly updates from management on our information security program.
The Audit Committee receives quarterly reports from our Chief Technology Officer on our information security program, including any material cybersecurity risks.
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We also augment our internal cybersecurity expertise by engaging security service organizations which provide 24x7 security operations centers.
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We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected us, including our operations, business strategy, results of operations, or financial condition.
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We also augment our internal cybersecurity expertise by engaging security service organizations which provide 24x7 security operations centers.
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We face risks from cybersecurity threats that, if realized, are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition.
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Additionally, management updates the Audit Committee, where it deems appropriate, regarding any cybersecurity incidents it considers to be significant or potentially significant. 71 Table of Contents Our information security program is principally managed by our information security team, which is led by our Senior Director, Information Services and Security.
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Our information security team includes professionals with deep professional experience and cybersecurity expertise, including our Senior Director of Information Services and Security.

Item 2. Properties

Properties — owned and leased real estate

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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.
Biggest changeItem 2. Properties. Our principal offices are located in Golden Valley, Minnesota, where we lease approximately 116,000 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.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe 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
Biggest changeThe information contained in “Note 12 — Commitments and Contingencies” in the Notes to the Consolidated Financial Statements is incorporated by reference into this Item 3. 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 changeThis graph shall not be deemed “soliciting material” or be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act of 1933, as amended (the "Securities Act"), whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
Biggest changeThis graph shall not be deemed “soliciting material” or be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act of 1933, as amended (the "Securities Act"), whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. 73 Table of Contents December 31, Stock or Index Ticker 2019 2020 2021 2022 2023 2024 Inspire INSP $ 100.00 $ 253.46 $ 310.01 $ 339.42 $ 274.13 $ 249.80 NYSE Composite NYA 100.00 104.40 123.37 109.14 121.13 137.26 S&P Healthcare Equipment Select SPSIHE 100.00 132.83 137.24 104.93 98.68 103.67 Item 6. [Reserved] 74 Table of Contents
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.
The graph assumes an investment of $100 in our common stock at market close on December 31, 2019 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.
This number does not include stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.
This number does not include stockholders who are beneficial owners, but whose shares are held in street name by brokers and 72 Table of Contents other nominees. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.
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.
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, 2025, there were approximately 12 holders of record of our common stock.
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.
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, 2019 through December 31, 2024.
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December 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
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Issuer Purchases of Equity Securities Below is a summary of stock repurchases for the three months ended December 31, 2024. See Note 6 of our Notes to Consolidated Financial Statements for information regarding our stock repurchase program.
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Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Approximate dollar value of shares that may yet be repurchased under the plans or programs (1) October 1, 2024 - October 31, 2024 — $ — — $ 150,000,000 November 1, 2024 - November 30, 2024 (2) (2) (2) $ 75,000,000 December 1, 2024 - December 31, 2024 — $ — — $ 75,000,000 (1) On August 6, 2024, our Board of Directors authorized the repurchase of up to $150.0 million in our common stock through August 5, 2026 in open market transactions, privately negotiated transactions, tender offers, or other means (the "Repurchase Program").
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We are not obligated to repurchase any specific number of shares and the Repurchase Program may be modified, suspended, or discontinued at any time.
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(2) In November 2024, we entered into an accelerated share repurchase agreement (the “ASR”) with a large financial institution as part of the Repurchase Program, whereupon we paid the counterparties to the ASR $75.0 million for the repurchase of shares of our common stock.
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In November 2024, we received an initial delivery of 305,157 shares of common stock representing a portion of the prepayment, which shares had an average price paid per share of $196.62. Upon final settlement of this ASR in January 2025, we received an incremental delivery of 103,886 shares of our common stock.
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Under this ASR, we repurchased a total of 409,043 shares at an average price paid per share of $190.29.

Item 7. Management's Discussion & Analysis

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

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Biggest changeAs 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.
Biggest changeSee section titled “Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” in Part II, Item 5 of this report for stock repurchases during the quarter ended December 31, 2024 and Note 6 of our Notes to our Consolidated Financial Statements for further details regarding our Repurchase Program. 83 Table of Contents Cash Flows The following table presents a summary of our cash flow for the periods indicated: Year Ended December 31, 2024 2023 (in thousands) Net cash provided by (used in): Operating activities $ 130,246 $ 24,653 Investing activities (113,122) (294,822) Financing activities (52,393) 13,950 Effect of exchange rate on cash (118) 164 Decrease in cash and cash equivalents $ (35,387) $ (256,055) Operating Activities Net cash provided by operating activities was $130.2 million for 2024 and consisted of net income of $53.5 million, non-cash charges of $114.4 million, and a decrease in net operating assets of $37.7 million.
In addition, we highlight our compelling clinical data and value proposition to increase awareness and adoption amongst referring physicians. We build upon this top-down approach with strong direct-to-consumer marketing initiatives to create awareness of the benefits of our Inspire system and drive interest through patient empowerment. This outreach helps to educate thousands of patients on our Inspire therapy.
In addition, we highlight our compelling clinical data and value proposition to increase awareness and adoption amongst referring physicians. We build upon this top-down approach with strong direct-to-consumer marketing initiatives to create awareness of the benefits of our Inspire system and drive interest through patient empowerment. We believe this outreach helps to educate thousands of patients on our Inspire therapy.
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.
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 primarily focused on ENT physicians and sleep centers.
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 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.
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.
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, 2024.
During the fourth quarter of 2023 and extending into early 2024, the delay in certification and the shortage of polyurethane-based stimulation leads caused delays to implant procedures which adversely affected our business in the EU, including a reduction in our European revenue, and thereby our consolidated revenue.
During the fourth quarter of 2023 and extending into early 2024, the delay in certification and the shortage of polyurethane-based stimulation leads caused delays to implant procedures which adversely affected our business in Europe, including a reduction in our European revenue, and thereby our consolidated revenue.
Investing activities also included purchases of property and equipment of $23.6 million, mainly for testing systems and production equipment for our next generation Inspire system, our SleepSync™ platform, computer hardware and software, and leasehold improvements, as well as the purchase of strategic investments of $0.3 million.
Investing activities also included purchases of property and equipment of $23.6 million, mainly for testing systems and manufacturing equipment for our next generation Inspire system, our SleepSync™ platform, computer hardware and software, and leasehold improvements, as well as the purchase of strategic investments of $0.3 million.
Higher interest rates and capital costs, higher shipping costs, increased costs of labor, international conflicts and terrorism, and weakening foreign currency exchange rates are creating additional economic challenges. These conditions may cause our customers to decrease or delay orders for our products.
Higher interest rates and capital costs, higher shipping costs and new or increased tariffs, increased costs of labor, international conflicts and terrorism, and weakening foreign currency exchange rates are creating additional economic challenges. These conditions may cause our customers to decrease or delay orders for our products.
As noted above, during the fourth quarter of 2023, not having received EU MDR certification of our silicone-based stimulation lead and the resulting shortage of polyurethane-based stimulation leads had an estimated adverse impact on European revenue of approximately $4 million.
As noted above, during the fourth quarter of 2023, not having received EU MDR certification of our silicone-based stimulation lead and the resulting shortage of polyurethane-based stimulation leads had an estimated adverse impact on European revenue during that period of approximately $4.0 million.
We continue to make investments in research and development efforts to develop our next generation Inspire systems and support our future regulatory submissions for expanded indications and for new markets such as additional European countries and the Asia Pacific region.
We continue to make investments in research and development efforts to develop our next generations of the Inspire systems and support our future regulatory submissions for expanded indications and for new markets such as 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.
We expect R&D 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.
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.
We believe that our existing cash and cash equivalents and available for sale investments, which totaled $516.5 million as of December 31, 2024, 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.
The number of shares earned at the end of the three-year periods will vary based on actual performance, from 0% to 200% of the number of PSUs granted. If the performance goals are not met, no shares will be earned.
The number of shares earned at the end of the three-year periods will vary based on actual performance, from 0% to 200% of the number of PSUs 85 Table of Contents granted. If the performance goals are not met, no shares will be earned.
We expense prelaunch inventory as research and development expense in the period incurred unless objective and persuasive evidence exists that regulatory approval and subsequent commercialization of a product candidate is probable and we also expect future economic benefit from the sales of the product candidate to be realized.
We expense prelaunch inventory as R&D expense in the period incurred unless objective and persuasive evidence exists that regulatory approval and subsequent commercialization of a product candidate is probable, and we also expect future economic benefit from the sales of the product candidate to be realized.
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.
We have experienced 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.
We expect research and development expenses as a percentage of revenue to vary over time depending on the level and timing of initiating new product development efforts and new clinical development activities.
We expect R&D expenses as a percentage of revenue to vary over time depending on the level and timing of initiating new product development efforts and new clinical development activities.
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.
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.
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.
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 program to facilitate and streamline patient access to care. We intend to continue to enhance this scheduling capability during 2025.
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.
The primary driver of this change was an increase of $66.6 million in compensation, including salaries, commissions, stock-based compensation, and other employee-related expenses, mainly as a result of increased headcount.
The overhead costs include the cost of material procurement, depreciation expense for production equipment, and operations supervision and management personnel, including employee compensation, stock-based compensation, supplies, and travel. We expect cost of goods sold to increase or decrease in absolute dollars primarily as, and to the extent, our revenue grows or declines, respectively.
The overhead costs include the cost of material procurement, depreciation expense for manufacturing equipment, amortization of internal-use software, and operations and quality supervision and management personnel, including employee compensation, stock-based compensation, supplies, and travel. We expect cost of goods sold to increase or decrease in absolute dollars primarily as, and to the extent, our revenue grows or declines, respectively.
We anticipate further capital expenditures in 2024, primarily for additional production equipment and our SleepSync™ platform, computer hardware and software, and leasehold improvements on our corporate office buildings.
We anticipate further capital expenditures in 2025, primarily for additional manufacturing equipment and our SleepSync™ platform, computer hardware and software, and leasehold improvements on our corporate office buildings.
Our Inspire system is currently reimbursed primarily on a per-patient prior authorization basis for patients covered by commercial payors, under Local Coverage Determinations for patients covered by Medicare, and under U.S. government contract for patients who are treated by the Veterans Health Administration.
Our Inspire system is currently covered on a per-patient basis for patients insured by commercial payors, under Local Coverage Determinations for patients insured by Medicare and Medicare Advantage, and under U.S. government contract for patients who are treated by the Veterans Health Administration.
Also in June 2023, we received approval from the FDA on an expanded indication which includes an increase on the upper limit of the Apnea Hypopnea Index to 100 events per hour from 65, and raises the Body Mass Index ("BMI") warning in the labeling to 40 from 32, and we also received FDA approval of our new physician programmer, called the SleepSync™ programmer, which we expect to formally launch in the U.S. in early 2024.
In June 76 Table of Contents 2023, we received approval from the FDA on an expanded indication which includes an increase on the upper limit of the Apnea Hypopnea Index to 100 events per hour from 65 and raises the Body Mass Index ("BMI") warning in the labeling to 40 from 32, and we also received FDA approval of our new physician programmer, called the SleepSync™ programmer, which we launched in the U.S. in late 2024.
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.
In 2024, our SG&A expenditures increased significantly over the prior year levels, and we anticipate further increases during 2025. 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.
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.
As of February 10, 2025, we have secured positive coverage policies with many U.S. commercial payors, including 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.
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.
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. and in select countries in Europe and the Asia Pacific region.
We also anticipate R&D expenses will continue to be significant in 2024, primarily related to the ongoing development of the SleepSync™ platform and next generation products.
We also anticipate R&D expenses will increase in 2025, primarily related to the ongoing development of the SleepSync™ platform and next generation products.
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.
Our long-term cash requirements also will be significantly impacted by the level of our investment in commercialization, entry and expansion into new markets, whether we make strategic acquisitions, whether we repurchase more shares of our common stock, and competition. We cannot accurately predict our long-term cash requirements at this time.
At December 31, 2023, we had $146.2 million in money market funds, $243.6 million in U.S. government securities, and $40.4 million in corporate debt securities, certificates of deposit, commercial paper, and asset-asset-backed securities. See Note 2 to our audited financial statements for additional information on our investments.
At December 31, 2024, we had $59.6 million in money market funds, $267.4 million in U.S. Treasury debt securities, and $99.0 million in corporate debt securities, commercial paper, certificates of deposit, and asset-asset-backed securities. See Note 2 to our audited financial statements for additional information on our investments.
During the third quarter of 2023, we also began experiencing an inventory supply issue related to our polyurethane-based stimulation leads, one component of the Inspire system currently used only in the European market.
During the third quarter of 2023, we experienced an inventory supply issue related to our polyurethane-based stimulation leads, one component of the Inspire system used only in the European market at that time.
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.
We also purchased strategic investments of $0.3 million. 84 Table of Contents 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.
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.
For the year ended December 31, 2024, we generated revenue of $802.8 million with a gross margin of 84.7% and net income of $53.5 million, compared to revenue of $624.8 million with a gross margin of 84.5% and a net loss of $21.2 million for the year ended December 31, 2023, and 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.
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.
If 200% of the PSUs outstanding as of December 31, 2024 are ultimately earned, the total stock-based compensation expense recognized over the five-year period ending December 31, 2026 will be $142.8 million.
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.
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.
Our business has grown rapidly in recent years, resulting in substantially increased revenues, and we expect that our business will continue to grow. However, our revenue growth rate has generally declined in recent periods, and it may continue to do so as a result of the difficulty of maintaining growth rates as our revenues increase to higher levels.
However, our revenue growth rate has generally declined in recent periods, and it may continue to do so as a result of the difficulty of maintaining growth rates as our revenues increase to higher levels.
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.
We spent $39.1 million on purchases of property and equipment in 2024, mainly on testing systems and manufacturing equipment for our next generation Inspire system, our SleepSync™ platform, computer hardware 82 Table of Contents and software, and leasehold improvements.
Revenue growth was primarily due to increased market penetration in existing territories, the expansion of our European sales representatives into new territories, 84 Table of Contents increased sales in the Asia Pacific region, and, we believe, increased physician and patient awareness of our Inspire system.
Revenue growth in the U.S. was primarily due to increased market penetration in existing centers, the expansion into new territories and centers, and, we believe, increased physician and patient awareness of our 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.
However, our gross margin may also fluctuate from quarter to quarter due to seasonality and foreign currency exchange rates. 78 Table of Contents Research and Development Expenses Research and development ("R&D") 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.
In 2022, the FDA approved our silicone-based stimulation and sensing leads in the U.S., which replaced the polyurethane versions of the leads, and we stopped manufacturing polyurethane leads. We applied for European Union ("EU") Medical Devices Regulation ("MDR") approval in December 2021, which we expect to obtain in the second quarter of 2024, following delays in the process.
In 2022, the FDA approved our silicone-based stimulation and sensing leads in the U.S., which replaced the polyurethane versions of the leads, and we stopped manufacturing polyurethane leads. We applied for EU MDR certification in December 2021, which we received in July 2024, following industry-wide delays in the process.
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.
Revenue generated outside of the U.S. was $31.8 million in the year ended December 31, 2024, an increase of $13.1 million, or 70.6%, over the year ended December 31, 2023.
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.
For the year ended December 31, 2024, 96.0% of our revenue was derived in the U.S. and 4.0% was derived outside of the U.S. 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.
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.
The 2025 Medicare national average physician reimbursement is $816 for implantation of a hypoglossal nerve stimulator, a 1% decrease over the 2024 payment. The reimbursement for the DISE procedure in the hospital setting is $1,724, a 7% increase over the prior year amount.
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.
Revenue information by region is summarized as follows: Year Ended December 31, 2024 2023 Change Amount % of Revenue Amount % of Revenue $ % (in thousands, except percentages) United States $ 771,040 96.0 % $ 606,178 97.0 % $ 164,862 27.2 % All other countries 31,764 4.0 % 18,621 3.0 % 13,143 70.6 % Total revenue $ 802,804 100.0 % $ 624,799 100.0 % $ 178,005 28.5 % Revenue generated in the U.S. was $771.0 million for the year ended December 31, 2024, an increase of $164.9 million, or 27.2%, over the year ended December 31, 2023.
As of December 31, 2023 ($ 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.
As of December 31, 2024 ($ in thousands) Total Fiscal 2025 After Fiscal 2025 Recorded contractual obligations: Operating leases (1) $ 41,330 $ 3,204 $ 38,126 Unrecorded contractual obligations: Purchase obligations (2) 85,968 85,968 — Total $ 127,298 $ 89,172 $ 38,126 (1) See Note 3 to our audited consolidated financial statements. (2) Primarily purchase obligations to suppliers for inventory.
In the interim, we received derogation approval from the Dutch, German, Swiss, and Belgian national competent authorities allowing us to place the silicone-based leads on the market in those countries until various dates in 2024 or until we receive certification under the EU MDR, whichever occurs first.
In the interim, we had received a derogation pursuant to Article 59 of the EU MDR from the Dutch, German, Swiss, Belgian, and Austrian competent authorities, and the British equivalent, i.e. exceptional use authorization, from the United Kingdom national competent authority, allowing us to continue to place the silicone-based leads on the market in those countries until various dates in 2024 or until we received certification under the EU MDR, whichever occurred first.
"Item 1A. Risk Factors’’ and elsewhere in this Annual Report on Form 10-K. Overview We are a medical technology company focused on the development and commercialization of innovative, minimally invasive solutions for patients with OSA. Our proprietary Inspire system is the first and only FDA-approved neurostimulation technology that provides a safe and effective treatment for moderate to severe OSA.
"Item 1A. Risk Factors’’ and elsewhere in this Annual Report on Form 10-K. Overview We are a medical technology company focused on the development and commercialization of innovative, minimally invasive solutions for patients with obstructive sleep apnea ("OSA").
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.
Selling, General and Administrative Expenses SG&A expenses increased $77.6 million, or 17.2%, to $529.6 million for the year ended December 31, 2024 compared to $452.0 million for the year ended December 31, 2023.
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.
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.
We also continue to make significant investments to build our sales and marketing organization by increasing the number of U.S. and European sales representatives and continuing our direct-to-consumer marketing efforts in existing and new markets throughout the U.S. and in Europe.
We also continue to make significant investments to build our sales and marketing organization by increasing the number of U.S., European, and Japanese sales representatives and continuing our direct-to-consumer marketing efforts in existing and new markets. During 2024, we activated 285 U.S. centers bringing the total to 1,435 U.S. medical centers implanting Inspire therapy as of December 31, 2024.
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.
This change was primarily due to a decrease of $23.6 million in ongoing research and development costs, primarily with respect to our next generation versions of the Inspire neurostimulator and our SleepSync™ platform, partially offset by an increase of $20.1 million in compensation and employee-related expenses, mainly as a result of increased headcount and stock-based compensation expense, and an increase of $1.1 million in regulatory and clinical studies expenses and quality compliance fees.
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.
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 ESPP of $5.3 million, partially offset by $17.2 million of taxes paid on net share settlement of equity awards.
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.
Our accumulated deficit as of December 31, 2024 was $291.9 million. We have invested heavily in product development. Our research and development activities have been centered on driving continuous improvements to our Inspire therapy. We have also made significant investments in clinical studies to demonstrate the safety and efficacy of our Inspire therapy and to support regulatory submissions.
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.
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. In November 2024, the final 2025 Medicare reimbursement payments were announced.
Additionally, patients with a higher BMI are subject to a larger neck circumference and present predominantly with lateral-wall collapse. A combination of tongue-based collapse and lateral-wall collapse is identified as a complete concentric collapse of the upper airway. Inspire is contraindicated for complete concentric collapse.
A combination of tongue base collapse and lateral wall collapse is identified as a complete concentric collapse of the upper airway. Inspire is contraindicated for complete concentric collapse.
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.
Research and Development Expenses Research and development expenses decreased $2.4 million, or 2.1%, to $114.1 million for the year ended December 31, 2024 compared to $116.5 million for the year ended December 31, 2023.
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).
The procedures performed to implant, revise, or explant our Inspire IV device are described for billing purposes in the U.S. with Category I Current Procedural Terminology codes (64582, 64583, and 64584, respectively).
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.
Other Income, Net Other income, net increased by $2.0 million, or 9.8%, to $22.4 million of income for the year ended December 31, 2024 compared to $20.4 million of income for the year ended December 31, 2023.
We expect GLP-1s may help patients address their lateral wall collapse, making them a potential candidate for Inspire therapy to the extent they also have tongue-based collapse.
While weight loss may help reduce a patient’s AHI and other OSA symptoms, numerous other studies have shown that weight loss alone will not resolve OSA for the vast majority of patients. We expect GLP-1s may help patients address their lateral wall collapse, making them a potential candidate for Inspire therapy to the extent they also have tongue base collapse.
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.
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.
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.
If the performance conditions are 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. 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.
We plan to continue to refine our approach to direct-to-consumer outreach, including increasing attention to digital advertising directed towards qualified patients. We expect to maintain our level of direct-to-consumer activities. We have a call center which we refer to as the Inspire Advisor Care Program ("ACP").
Moving forward, we plan to refine and optimize our outreach strategies, with an emphasis on expanding digital advertising efforts to reach more qualified patients. We generally expect to maintain our level of direct-to-consumer expenditures. We have a call center which we refer to as the Inspire Advisor Care Program.
We estimate the impact on our revenue during the fourth quarter of 2023 was approximately $4 million.
We estimate the impact during the fourth quarter of 2023 was approximately $4.0 million in lost revenue opportunity, most of which we believe was recovered during the first half of 2024.
Our customers are reimbursed the cost required to treat each patient through various third-party payors, such as commercial payors and government agencies.
Our customers are reimbursed according to the coding and correlated payment by various third-party payors, such as commercial payors and government healthcare programs.
Our inventory on-hand has been constrained by the continuing supply chain challenges and component shortages, although the supply chain constraints eased somewhat throughout 2023.
Our inventory on-hand has been constrained by the supply chain challenges and component shortages, although to a lesser degree in 2024 than in prior periods.
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.
Overall revenue growth was primarily due to increased market penetration in existing centers, expansion into new territories and centers, and, we believe, increased physician and patient awareness of our Inspire system, partially offset by ENT surgeon capacity constraints.
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.
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 For a discussion of our results of operations for the year ended December 31, 2023, including a year-to-year comparison between 2023 and 2022, 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, 2023. 81 Table of Contents Liquidity and Capital Resources We believe our balance sheet and liquidity as of February 10, 2025 provides us with flexibility, and that our cash, cash equivalents, and investments will satisfy our operating needs and capital expenditures for at least the next 12 months.
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.
On our website, patients can explore educational materials and videos about sleep apnea, learn about the benefits of Inspire therapy, find physician and clinical site contact information, and stay informed about community awareness events. We also use the Inspire Sleep app as a valuable tool for patient education.
Other (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.
Other Income, Net Other income, net 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. 79 Table of Contents Results of Operations Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 Year Ended December 31, Change 2024 2023 $ % (in thousands, except percentages) Revenue $ 802,804 $ 624,799 $ 178,005 28.5 % Cost of goods sold 122,986 96,576 26,410 27.3 % Gross profit 679,818 528,223 151,595 28.7 % Gross margin 84.7 % 84.5 % Operating expenses: Research and development 114,128 116,536 (2,408) (2.1) % Selling, general and administrative 529,607 451,958 77,649 17.2 % Total operating expenses 643,735 568,494 75,241 13.2 % Operating income (loss) 36,083 (40,271) 76,354 (189.6) % Other income, net (22,370) (20,365) (2,005) 9.8 % Income (loss) before income taxes 58,453 (19,906) 78,359 (393.6) % Income taxes 4,944 1,247 3,697 296.5 % Net income (loss) $ 53,509 $ (21,153) $ 74,662 (353.0) % Revenue Revenue increased $178.0 million, or 28.5%, to $802.8 million for the year ended December 31, 2024 compared to the year ended December 31, 2023.
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.
This change was primarily due to an increase of $2.7 million in interest and dividend income due to higher cash, cash equivalents, and investment balances, partially offset by an increase in net losses of $0.7 million in foreign currency translation and remeasurement gains due to exchange rates.
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.
The reserve for excess and obsolete inventory was $1.0 million and $2.4 million as of December 31, 2024 and 2023, 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.
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.
Financing Activities Net cash used in financing activities was $52.4 million for 2024 and consisted primarily of a $75.0 million payment for our ASR agreement and $5.2 million of taxes paid on net share settlement of equity awards, partially offset by proceeds from the exercise of stock options of $22.2 million and proceeds from the issuance of common stock from our Employee Stock Purchase Plan ("ESPP") of $5.6 million.
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.
The increase was attributable to a $164.9 million increase in sales of our Inspire system in the U.S and an increase of $13.1 million outside of the U.S.
Gross margin was 84.5% for the year ended December 31, 2023 compared to 83.8% for the year ended December 31, 2022.
Gross margin was 84.7% for the year ended December 31, 2024 compared to 84.5% for the year ended December 31, 2023. This increase was primarily due to increased sales volume and manufacturing efficiencies.
The increase in working capital was primarily due to the following factors: • an increase of $9.0 million in cash and cash equivalents and short-term available for sale investments due primarily to sales of the Inspire system, proceeds from the exercise of stock options, and interest and dividend income; • an increase of $28.7 million in accounts receivable due to higher sales which occurred during the fourth quarter of 2023; • an increase of $22.0 million in inventory balances which increased as supply chain issues ease; and • an increase of $4.1 million in prepaid expense and other current assets which increased primarily due to miscellaneous prepaid expenses and interest income receivable.
The increase in working capital was primarily due to the following factors: • an increase of $46.2 million in inventory balances which increased as supply chain issues eased and we increased inventory levels to support higher sales and the anticipated 2025 launch of our next generation Inspire system in the U.S.; • an increase of $3.2 million in accounts receivable due to higher sales which occurred during the fourth quarter of 2024; • an increase of $2.5 million in prepaid expense and other current assets which increased primarily due to increases in miscellaneous receivables and interest income receivable; and • a decrease of $0.2 million in accounts payable.
Therefore, we do not believe there is not a significant overlap between the Inspire patient population and the patient population being treated with GLP-1s today. While we cannot quantify the impact, we believe that there could be a benefit to our business as a result of GLP-1s, although there can be no assurance of such benefit.
Therefore, we believe there is not a notable overlap between the Inspire patient population and the patient population being treated with GLP-1s today.
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.
Likewise, the timing of FDA approval of a next generation product, if granted, and the associated commercial launch, could have a significant impact on the carrying value of the inventory of our previous generation product, and therefore our reported operating results. The net inventory balance was $80.1 million and $33.9 million as of December 31, 2024 and 2023, 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. 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.
The 2025 Medicare national average physician reimbursement for the DISE procedure is $94, a 2% decrease over the prior year amount. 75 Table of Contents 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 example, we have historically experienced seasonality in our first and fourth quarters and have experienced adverse impacts on our revenue due to the COVID-19 pandemic and foreign currency exchange rates.
For example, we have historically experienced seasonality in our first and fourth quarters. We have also previously experienced adverse impacts on our revenue due to the prior delay in obtaining EU MDR approval of our silicone-based leads and foreign currency exchange rates. In addition, we believe our revenue growth has been adversely impacted by lack of ENT surgeon capacity.
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.
In the ASC setting, the reimbursement for the DISE procedure is $792, a 714% increase from the 2024 amount.
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.
The non-cash charges consisted primarily of stock-based compensation, which increased mainly as a result of granting more equity awards to a greater number of employees as compared to the same prior year period.

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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 changeAlthough 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
Biggest changeAlthough 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 86 Table of Contents 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. 87 Table of Contents
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.
Our accounts receivable primarily relate to revenue from the sale of our Inspire system to hospitals and ASCs in the U.S. and Europe. 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.
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.
Credit Risk As of December 31, 2024 and 2023, 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, 2023 or 2022. 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, 2024 or 2023. Foreign Currency Risk The majority of our business is currently conducted in U.S. dollars.
A 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.
A hypothetical 1% change in interest rates would have impacted interest and dividend income on our consolidated financial statements by approximately $3.6 million and $3.1 million for the years ended December 31, 2024 and 2023, respectively.

Other INSP 10-K year-over-year comparisons