Inspire Medical Systems, Inc.

Inspire Medical Systems, Inc. is a US-listed company materially exposed to Sleep & Breathing Health Platforms.

Inspire Medical Systems, Inc. operates as a single reportable segment: the design, manufacturing, and commercialization of implantable neurostimulation systems for obstructive sleep apnea. The product is sold as a system to hospitals and ambulatory surgery centers; revenue is recognized upon transfer of control, not as a recurring subscription. This is a device-plus-procedure model rather than a razor/razor-blade model in the strict software sense, though replacement/implant-related follow-on sales are a longer-term possibility after battery depletion. [S1]

The company does not disclose an average selling price in its annual report. ASP estimates used in this note are therefore modeled, not observed. [S1]

INSP reports one reportable segment. Geographic split is disclosed as U.S. versus international. The U.S. dominates revenue; international sales remain small relative to the U.S. commercial and Medicare-covered U.S. OSA market. I am not quoting a specific U.S./international percentage from memory here because the segment note should be pulled directly from the Form 10-K for the fiscal year ended December 31, 2024; the company does not separately report a software, services, or recurring-revenue segment. [S1]

• The hospital/ASC buys the implantable system.
• The treating physician performs the implant procedure.
• Medicare and commercial payers reimburse the procedure/device, subject to medical necessity and prior authorization.
• The patient bears copays/deductibles under the applicable payer policy.

The company also provides sales/clinical support, physician training, and product support as part of building implanting-center capacity. Those support functions are not a separately priced software subscription; they support system sales. [S1]

INSP has historically operated with gross margin in the mid-80s percent range, reflecting an implantable-device cost profile. Using the arithmetic:

`text

Revenue - Cost of revenue = Gross profit

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If fiscal 2024 revenue was $802.8 million and gross margin was approximately 85%, gross profit was approximately $682 million. The exact cost of revenue and gross margin should be read from the FY2024 income statement. The company has historically spent heavily on SG&A and R&D relative to revenue; therefore high gross profit has not always translated into strong GAAP operating profit. [S1]

The direct customers are hospitals and ambulatory surgery centers that purchase the implantable system. The economic decision-makers are:

• Hospital supply chain/OR purchasing
• Implanting surgeons, usually ENT/otolaryngology or sleep surgeons
• Sleep medicine physicians who refer patients
• Payers who approve coverage/prior authorization

The patient archetype is an adult with moderate-to-severe obstructive sleep apnea who has failed or cannot tolerate CPAP, has the anatomical/clinical features required by the indication, and is willing to undergo an implant procedure. The hospital archetype is a U.S. hospital or ASC with an implanting physician trained on Inspire therapy. [S1]

The primary annual report does not name individual hospital or physician customers in the depth required to list them here. The company sells through a direct U.S. sales organization, but the 10-K does not make a practice of naming top commercial customers in the sections reviewed here. This section should remain no named-customer disclosure rather than inventing customer names. [S1]

• INSP — Inspire Medical Systems, Inc. — FDA PMA P130008 records approval of its upper-airway stimulation therapy for OSA. [FDA PMA P130008](https://www.acc

• - INSP — Inspire Medical Systems, Inc. — FDA PMA P130008 records approval of its upper-airway stimulation therapy for OSA. [FDA PMA P130008](https://www.acc source

`text

Eligible patient pool =

425,000,000 × 20% × 35% × 30%

= 8,925,000 patients

Annual implants =

8,925,000 × 1.0%

= 89,250 systems per year

Annual revenue opportunity =

89,250 × $35,000

= $3,123,750,000

≈ $3.12 billion

`

`text

Low case:

425,000,000 × 15% × 20% × 20% × 0.5% × $25,000

= 12,750 systems

= $318,750,000

High case:

425,000,000 × 30% × 50% × 40% × 2.0% × $45,000

= 510,000 systems

= $22,950,000,000

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The wide range shows how sensitive the TAM is to assumptions about diagnosis rates, CPAP failure, anatomical eligibility, penetration, and ASP. It is not a near-term revenue forecast.

Using the same modeled ASP:

`text

Implied systems sold =

FY2024 revenue / modeled ASP

= $802,800,000 / $35,000

≈ 22,937 systems

`

If ASP were $25,000, implied volume would be about 32,112 systems. If ASP were $45,000, implied volume would be about 17,840 systems. The company does not disclose unit volume or ASP. [S1]