September 8, 2021 | 12:14 PM by Jay Kunstman | jkunstman@jaguaranalytics.com

MedTech Monitor – Inspire Medical (INSP)

In the middle of July, a number of medtech companies were in focus after the Centers for Medicare and Medicaid (CMS) came out with updated reimbursement guidelines. Stocks like Cardiovascular Systems (CSII), Glaukos (GKOS), Shockwave Medical (SWAV), and Teleflex (TFX) were affected. These were all covered in the July 18th Weekend Research. In addition to these stocks, Inspire Medical (INSP) was also caught in the crossfire. On July 14th, this led Stifel analyst Jonathan Block to come out with a survey note saying his checks should override this professional fee noise. As a result, they would be buyers on the weakness. The closing price for INSP on July 14th was $175.58. At the close yesterday, the stock was back to $234.99. Needless to say, this was a timely note by Mr. Block.

That same analyst came out with another note last night where he provided Sleep Specialist and ENT checks surrounding the recent Phillips recall.

“It now appears another source of upside has recently emerged and despite the solid move in the stock, Inspire remains one of our favorite stories. Our current checks among both Sleep Specialists and ENTs reveal that the mid-June Philips/Respironics recall is in the early stages of heightening demand for Inspire therapy. The recall numbers are so massive that only a small percentage of impacted patients opting for HGNS should move the needle for Inspire. Specifically quantifying the amount of Philips-to-Inspire patients is challenging, but most importantly, our diligence suggests it is on the cusp of occurring. We move estimates higher and above consensus.”

The analyst would go into more specifics and highlight that checks suggest INSP is being proactively mentioned as an alternative for Philips CPAP patients. Stifel asked the Sleep Specialists to describe their conversations with the impacted CPAP patients and what alternative treatment options they are recommending. Half of the Sleep Doctors specifically call out Inspire therapy by name. They then asked how many patients they referred for Inspire HGNS in 1H21 and what that will look like in 2H21. In 1H21, each physician referred 17 patients for Inspire. In 2H21, this is expected to increase to 25, with 9 specifically attributable to the recall. “We point you to the sensitivity analysis on page 5, which shows only a very modest conversion (less than 20 bps) from recalled Philips/ Respironics CPAP patients to Inspire is needed to have a profound impact on Inspire’s P&L.”

Encouragingly, 7 of 15 ENTs they surveyed said that their HGNS procedural volume in July and August was higher than their expectations (only one below expectations). This appears to be mostly attributable to Inspire advertising and overall HGNS momentum (increasing referral patterns) and not a function of the Philips/Respironics recall. However, the write-in explanations from these ENTs on their strong volume shows that the recall tailwinds may be starting to percolate, and while only one of the overall 15 ENTs has already performed an Inspire implant on a Philips/Respironics CPAP patient that was impacted by the recall, 10 of the remaining 14 surgeons expect to perform Inspire implants on impacted patients in 2H21.

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