CEO: Tim Herbert
Based: Maple Grove, MN
The scoop: This Medtronic ($MDT) spinoff makes the first and only implantable neurostimulation device to treat sleep apnea, offering patients an alternative to continuous positive airway pressure (CPAP) therapy. The Inspire Upper Airway Stimulation implant is installed just under the pectoral muscle in a two-hour surgery. The energy-efficient device has an impressive battery life of 10 years, after which a replacement is required.
What makes Inspire Medical Systems Fierce: "There's over a million people a year diagnosed with moderate to severe obstructive sleep apnea in the United States that are looking for alterative treatment options beyond CPAP," Inspire CEO Tim Herbert said. The implant fills an unmet need because standard CPAP therapy is plagued by noncompliance.
|Inspire device--Courtesy of Inspire Medical Systems|
"About half the patients just can't handle CPAP about 6 months or a year after prescription," Herbert said in an interview, explaining that many find the CPAP mask uncomfortable or cannot tolerate high pressure being blown into their airway.
The remote-controlled Inspire neurostimulator also keeps the airway open during sleep but does so in a novel way. "Instead of us putting pressure down the airway, what we do is we provide stimulation to the hypoglossal nerve that can track the muscles and moves the muscles and holds the muscles open," Herbert said. Neurostimulation has been applied by former parent company Medtronic for deep brain stimulation. "We're applying that same technology to sleep apnea," the CEO said.
A well-cited study in The New England Journal of Medicine found that the Inspire implant reduced apnea-related complications by 68%, meaning patients were able to breathe properly during sleep. Further confirmation came in April when the FDA approved the device via its stringent PMA pathway.
Inspire also boasts a $40 million Series E financing round, led by OrbiMed Private Equity. Other participants in the May financing include Johnson & Johnson Development Corp. and Aperture Venture Partners.
A host of dental devices treat sleep apnea while dispensing with the traditional mask, but Herbert said those mandibular devices are for "mild to slightly moderate" cases, as opposed to moderate to severe ones.
What to look for: Inspire is expanding from 22 employees in February to more than 100 by this time next year, Herbert said. The implant will be available at 36 sites this year; Herbert is aiming to offer it in 70 hospitals next year and more than 100 in 2016. About 300 patients worldwide have received the device commercially so far, but Herbert touts the market size of 1 million patients a year in the U.S. alone.
As always, the backing of insurance companies is critical. The CEO said payers are reimbursing for the device on a case-by-case basis: "We're working with the medical directors locally in a state and getting approved for just that one case." He is optimistic that the big insurance companies will support Inspire nationally but said it takes two years for that to occur.
"It's also important to note the risks associated with untreated moderate to severe sleep apnea [are] significant, from cardiovascular disease to stroke to diabetes, even quality of life and the risk of car accidents," Herbert said. If so, the threat of downstream payments should provide public and private payers impetus to reimburse the cost of the surgery and/or device.
International expansion is another facet to watch. "Europe's always a challenging market because of reimbursement. We are focusing our efforts primarily in Germany," the CEO said. Inspire has had a CE mark to sell the product in Europe since 2011. Meanwhile, he said the company is "just starting" to formulate an Asia strategy.
Finally, Herbert hopes to continuously improve the neurostimulator, saying, "We will continue to develop advanced techniques and advanced technologies that could reduce the size of the device, could make the device more efficacious, there's going to be an evolution of new products that we would like to release."
Herbert would not commit to a deadline for profitability, but said he expects the milestone to be achieved in the "next couple of years." An IPO is "to be determined." -- Varun Saxena (email | Twitter)
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