Inspire Medical's Recovery from Temporary Q3 Revenue Shortfall - Analysts Find Optimism

Tuesday, Inspire Medical Systems Inc INSP released Q3 earnings, with sales of $153.3 million, up 40% Y/Y, beating the consensus of $154.45 million.

During the quarter, it activated 62 new centers in the U.S. in the third quarter of 2023, bringing the total to 1,107 U.S. medical centers providing Inspire therapy.

Guidance: Inspire increased and narrowed its FY23 revenue guidance to $608 million-$612 million compared to the prior revenue guidance of $600 million-$610 million and the consensus of $609.81 million.

The company also maintained its guidance relating to the opening of new U.S. medical centers of 52-56 per quarter for the remaining quarter of the year and its guidance of 12 to 14 new U.S. territories for the fourth quarter of 2023.

Mizuho Securities says Inspire Medical experienced an atypical shortfall in revenue, attributed to a temporary decline in prior authorizations due to a pilot program initiated in Q3 2023. 

This program was later discontinued, leading to a normalization of trends by the quarter's end. 

The stock has seen a downturn as investors express concern over potential near-term impacts on its growth trajectory and the long-term effects from competing GLP-1 therapies. 

However, the analyst suggests that these concerns may be exaggerated and views the current dip in share price as an opportune moment to invest in INSP. 

The anticipated rise from the AHI/BMI label enhancement and forthcoming coverage expansions are expected to drive volume growth in the upcoming year.

Stifel also writes that Inspire's Q3 revenue missed consensus for the first time as a public company, and this occurred amid GLP-1 concerns, saying Inspire's execution had been flawless.

The main takeaway from Inspire's 3Q23 results was a decline in prior authorization patient submissions. 

Stifel analyst writes that while this dynamic was surprising, these patients are not lost, and the company is actively re-engaged with prior-authorization candidates, with these procedures to be recaptured in coming quarters.

Price Action: INSP shares are down 18.90% at $131.20 on the last check Wednesday.