Inspire Medical Systems, Inc. Annual Report: A Year in Review

This summary provides a clear overview of Inspire Medical Systems' performance and strategic direction, drawing from their annual report for the fiscal year ending December 31, 2025. We aim to present key insights in an accessible format for investors.

Here's what we'll cover:

1. Business Overview Inspire Medical Systems leads the medical technology sector, developing innovative solutions for Obstructive Sleep Apnea (OSA). Its flagship product, Inspire therapy, is an implantable device that treats OSA by stimulating the hypoglossal nerve, keeping the airway open during sleep. This past year, Inspire demonstrated strong performance, driven by increased patient awareness, broader physician adoption, and expanded insurance coverage. The company solidified its pioneering position in the hypoglossal nerve stimulation market.

2. Financial Performance Inspire reported robust financial results for the fiscal year ended December 31, 2025. Total revenue reached approximately $820 million, marking a significant 28% increase over the previous fiscal year. This growth primarily stemmed from a substantial rise in Inspire therapy procedures and the expansion of the company's sales and support infrastructure. Inspire achieved a net income of $65 million, a notable improvement from the prior year, reflecting enhanced operational efficiencies and scaling benefits. Gross margin remained healthy at around 85%, underscoring the therapy's value and cost-effectiveness.

3. Management Discussion (MD&A highlights) A significant achievement for Inspire this year was the continued expansion of its global footprint, securing new market approvals in select European and Asian countries and broadening patient access. The company also reached a milestone, treating over 100,000 patients worldwide, which highlights the therapy's growing acceptance and clinical success. Clinically, new long-term data reinforced the therapy's safety and efficacy, further strengthening physician confidence. However, Inspire faced challenges, including navigating persistent global supply chain constraints that occasionally impacted device availability, and managing increased competition from emerging alternative sleep apnea therapies.

4. Financial Health Inspire maintains a strong financial position, providing ample flexibility for future growth and operations. As of December 31, 2025, the company reported cash and cash equivalents of approximately $450 million, reflecting solid cash generation from operations. Inspire continues to operate with no significant long-term debt, emphasizing a conservative financial strategy. This robust liquidity ensures the company can comfortably fund ongoing research and development, market expansion initiatives, and working capital needs. As of February 5, 2026, the total value of its publicly traded common stock was approximately $4.5 billion, with around 28.6 million shares outstanding, providing investors a clear sense of the company's market valuation.

5. Risk Factors The annual report details several potential risks. These include:

   • Regulatory changes or delays in obtaining necessary approvals for new products or expanded indications, which could impact market access.
   • Intense competition from existing and new sleep apnea treatments, including CPAP alternatives and other implantable devices, posing a threat to market share.
   • Product liability claims or safety concerns related to Inspire therapy, which, though rare, could lead to significant financial and reputational damage.
   • Reliance on physician adoption and training, meaning any slowdown in new physician onboarding or patient referrals could affect revenue.
   • Reimbursement policies from government and private payers, which are critical; any adverse changes could limit patient access and impact profitability.

6. Competitive Position Inspire Medical Systems holds a leading position in the hypoglossal nerve stimulation market for OSA. This leadership stems from its pioneering technology, extensive clinical evidence, and established market presence. While CPAP remains the most common treatment, Inspire effectively targets patients who cannot tolerate or benefit from CPAP, carving out a significant niche. Its competitive advantages include a strong intellectual property portfolio, a well-trained and expanding network of treating physicians, and a growing body of positive patient outcomes. Although new competitors are emerging in the broader sleep apnea device space, Inspire's first-mover advantage and robust clinical data provide a significant barrier to entry.

7. Future Outlook The past year saw consistent executive leadership, maintaining stability in the company's strategic direction. Inspire's core strategy focuses on three pillars:

   • Expanding patient access to Inspire therapy through increased physician training and awareness campaigns.
   • Driving innovation through ongoing research and development to enhance existing technology and explore new applications.
   • Optimizing operational efficiency to support scalable growth. No major shifts occurred in the executive team, ensuring continuity in executing these strategic priorities. Looking ahead to fiscal year 2026, Inspire projects continued strong revenue growth, with an anticipated increase of 20-25%. This outlook relies on further market penetration in existing geographies, the launch of new physician training programs, and the potential for expanded insurance coverage. The company plans to continue significant investment in R&D to develop next-generation devices and explore new indications, aiming to maintain its technological leadership. While economic uncertainties and the evolving healthcare landscape present potential headwinds, Inspire remains optimistic about capturing a larger share of the underserved sleep apnea market.

8. Market Trends and Regulatory Changes Several market trends favor Inspire, including increasing awareness of the health risks associated with untreated sleep apnea and a growing patient preference for less invasive, more convenient treatment options over traditional CPAP. The integration of telehealth and remote monitoring solutions in healthcare also presents opportunities for improved patient management. On the regulatory front, while the FDA approval process remains rigorous, Inspire benefits from a well-established pathway for its device. However, ongoing changes in healthcare reimbursement policies, particularly from Medicare and private insurers, will continue to critically influence patient access and the company's growth trajectory.

Additional Context: Inspire Medical Systems trades on the New York Stock Exchange (NYSE) under the ticker symbol INSP. The SEC classifies Inspire as a "well-known seasoned issuer" and a "large accelerated filer." This designation indicates a larger, more established public company with a history of timely financial reporting and a significant public float, generally implying greater liquidity and market scrutiny.