Inspire Medical Systems (INSP 38.38, +1.58, +4.29%) is a recent IPO that has been
pretty impressive since making its debut in early May. The company priced its
6.75 mln share IPO at $16, at the high-end of the expected $14-16 range. It
popped on the first day, opening at $24.49. It continued to make a move after
that, trading as high as $41 in mid-June. It has pulled back a little bit since
The medical technology company focuses on minimally invasive devices aimed at being more comfortable solutions than a CPAP machine for obstructive sleep It has developed the first and only FDA-approved neurostimulation technology that treats moderate to severe obstructive sleep apnea. It functions by continuously monitoring a patient's breathing patterns and delivers mild hypoglossal nerve stimulation to maintain an open airway.
What Is Sleep Apnea?
Sleep apnea is a serious and chronic disease that negatively impacts a patient's sleep, health and quality of life. According to the WHO, sleep apnea affects more than 100 mln people worldwide. Obstructive sleep apnea (OSA) is the most common form of sleep apnea. OSA occurs when a person's breathing is interrupted during sleep by a partially or completely blocked airway and affects patients of all ages, sexes, and body types. Left untreated, OSA increases the risk of high blood pressure, hypertension, heart failure, stroke, coronary artery disease, and other life-threatening diseases.
CPAP is delivered through a face or nasal mask that is connected by a hose to a bedside air pump. However, the effectiveness of CPAP has been limited by low patient compliance with only 35% to 65% of patients prescribed a CPAP device being compliant with the therapy as many patients find the mask or treatment cumbersome, uncomfortable, and loud. When CPAP fails or cannot be tolerated, patients' remaining treatment options are limited and consist primarily of invasive surgical procedures.
The 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, which is the nerve that controls forward movement of the tongue.
To receive the Inspire system, patients undergo a short, minimally invasive outpatient surgical procedure, typically lasting two hours, during which the neurostimulator, sensing lead and stimulation lead are implanted in a series of three small incisions. Patients typically recover quickly and are able to resume normal activities in just a few days.
Once the Inspire system has been activated, patients are able to turn it on when they plan to go to sleep and turn it off when they awaken. The device has a programmed delay, typically 30 minutes, to allow patients to fall asleep naturally before the device activates. INSP believes its system overcomes many of the limitations of CPAP. Inspire therapy received premarket approval, or PMA, from the FDA in April 2014 and has been commercially available in certain European markets since November 2011.
Inspire reported strong Q1 results on June 7. While profits are not expected any time soon and the company is still very small, Q1 revenue jumped 90% year/year to $10.0 mln. INSP also recently received CE Mark approval in Europe for Inspire IV, its fourth-generation neurostimulator. Then, on June 27, Inspire announced that Japan's Ministry of Health approved its Inspire therapy to treat moderate to severe OSA. Inspire intends to launch in Japan in 2H19.
In sum, INSP believes that there is both an urgent clinical need and a strong market opportunity for an alternative to CPAP that is safe, effective and minimally invasive. Inspire therapy provides comfort and convenience, resulting in high compliance for patients with moderate to severe OSA. INSP believes the annual total addressable market for Inspire therapy in the US to be approximately 500,000 patients, which, based on its average selling price per implantation, represents an estimated annual market opportunity of approximately $10 bln. INSP also believes there is a substantial market opportunity outside the US.
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