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Item 1. Business

2023-02-10 compared with 2022-02-15 · 268 added, 244 removed, 521 unchanged (50% of the section changed)

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We have developed a novel, closed-loop solution that continuously monitors a patient’s breathing and delivers mild hypoglossal nerve stimulation to maintain an open airway.

A significant body of clinical data, which includes a publication in the New England Journal of Medicine and more than 190 peer-reviewed publications, supports the safety and efficacy of Inspire therapy.

Inspire therapy received premarket approval ("PMA") from the FDA in April 2014 and has been commercially available in certain European markets since November 2011.

Japan's Ministry of Health, Labour and Welfare ("MLHW") approved Inspire therapy to treat moderate to severe OSA in June 2018 and was formally added to the Japan National Health Insurance Payment Listing in June 2021.

A significant body of clinical data, which includes a publication in the New England Journal of Medicine , multiple publications in leading respiratory, ear, nose and throat ("ENT") and sleep medicine journals, and more than 240 peer-reviewed publications, supports the safety and efficacy of Inspire therapy.

Inspire therapy received premarket approval ("PMA") from the FDA in 2014 and has been commercially available in certain European markets since 2011.

Japan's Ministry of Health, Labour and Welfare ("MLHW") approved Inspire therapy to treat moderate to severe OSA in 2018.

Inspire therapy is indicated for patients with moderate to severe OSA who do not have significant central sleep apnea and do not have a complete concentric collapse of the airway at the soft palate level.

In addition, patients in the United States ("U.S.") and Japan must have been confirmed to fail or be unable to tolerate positive airway pressure ("PAP") treatments, such as continuous positive airway pressure ("CPAP"), and be 18 years of age or older, though there are no similar requirements for patients in Europe.

Physicians have treated more than 20,000 patients with Inspire therapy at over 765 medical centers across the U.S., Europe, and Japan.

In addition, patients in the United States ("U.S."), Japan, and Singapore must have been confirmed to fail or be unable to tolerate positive airway pressure ("PAP") treatments, such as continuous positive airway pressure ("CPAP"), and be 18 years of age or older, though there are no similar requirements for patients in Europe.

Physicians have treated more than 36,000 patients with Inspire therapy at over 1,000 medical centers across the U.S., Europe, and Asia.

Sleep apnea is a serious and chronic disease that negatively impacts a patient’s sleep, health, and quality of life.

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We believe that there is both an urgent clinical need and a strong market opportunity for an alternative to CPAP that is effective and minimally invasive.

Patients with CPAP intolerance are at risk of higher mortality and healthcare utilization.

Two recent findings published in 2022 from large healthcare outcome databases, including Medicare and the French national healthcare insurance database, have demonstrated, in a large national cohort, the risks and costs of CPAP intolerance.

Specifically, Medicare patients with untreated OSA had $20,000 in higher healthcare costs prior to their OSA diagnosis compared to those without OSA, and those with CPAP intolerance had higher risks of new cardiovascular events than those who were adherent.

Similarly, the French national reimbursement database showed that in over 176,000 patients, CPAP non-adherent patients had a higher risk for mortality and new onset of heart failure than those who were adherent.

These findings show the urgency of treating CPAP-intolerant OSA to improve outcomes and reduce healthcare utilization.

Inspire therapy is an innovative, closed-loop, minimally invasive solution that provides comfort and convenience, resulting in high compliance for patients with moderate to severe OSA.

Once implanted, the Inspire system delivers electrical stimulation that causes a slight forward movement of the back of the tongue, which helps to maintain an open airway, enabling the patient to inhale freely without interruption.

Once implanted, the Inspire system delivers electrical stimulation that causes a slight forward movement of the back of the tongue, which helps to

maintain an open airway, enabling the patient to inhale freely without interruption.

We believe our Inspire therapy provides the following benefits:

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• Closed-loop system that uses a proprietary algorithm to continuously monitor patients’ breathing and provide electrical stimulation during the inspiratory phase.

• Comfortable and convenient therapy resulting in high patient satisfaction that was reported to be 91% at an average of 12 months from initial treatment in the first 1,849 patients in our ongoing global patient registry.

• Comfortable and convenient therapy resulting in high patient satisfaction that was reported to be 90% in patients who were followed an average of 12 months from initial treatment, according to the most recent publication of our ongoing global patient registry.

• Strong patient compliance , with 80% of patients reporting continued nightly use through five years from initial treatment in our Stimulation Therapy for Apnea Reduction ("STAR") trial.

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• Long-lasting solution with a battery designed to last approximately 11 years without charging or maintenance.

The results from multiple clinical trials, which include seven sponsored and more than 70 independent clinical studies that evaluated several thousand patients, have shown that our Inspire therapy provides statistically significant and sustained reduction in the severity of patients’ OSA, improvement in sleep-related quality of life and reduction in snoring, as well as high patient compliance rates and a strong safety profile.

The results from multiple clinical studies, which include seven sponsored and more than 90 independent clinical studies that evaluated several thousand patients, have shown that our Inspire therapy provides statistically significant and sustained reduction in the severity of patients’ OSA, improvement in sleep-related quality of life and reduction in snoring, as well as high patient compliance rates and a strong safety profile.

Our pivotal STAR trial was designed to demonstrate longitudinal therapy efficacy and included a randomized controlled therapy withdrawal study.

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We sell our Inspire system to hospitals and ambulatory surgery centers ("ASCs") in the U.S.

and in select countries in Europe through a direct sales organization, and we sell our Inspire system in Japan through a distributor.

and in select countries in Europe through a direct sales organization, and we sell our Inspire system in Japan and Singapore through distributors.

As of December 31, 2022, we had 225 sales territories in the U.S.

and 12 in Europe.

Our direct sales force engages in sales efforts and promotional activities focused on ear, nose and throat ("ENT") physicians, and sleep centers.

Our direct sales force engages in sales efforts and promotional activities focused on ENT physicians, and sleep centers.

In addition, we highlight our compelling clinical data and value proposition to increase awareness and adoption amongst referring physicians.

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This outreach helps to educate thousands of patients on our Inspire therapy.

Our customers are generally reimbursed for the cost of patient treatment by various third-party payors, such as commercial insurance providers and Medicare.

As of February 15, 2022, we have secured positive coverage policies with most U.S.

customers are generally reimbursed for the cost of patient treatment by various third-party payors, such as commercial insurance providers and Medicare.

We have secured positive coverage policies with many U.S.

commercial payors, including virtually all large national commercial insurers, encompassing approximately 260 million covered lives in the U.S.

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In parallel, a subset of our 25-person reimbursement team, which we refer to as our market access team, is focused on assisting patients and physicians in obtaining prior authorization approvals from commercial payors on a case-by-case basis in advance of treatment with our Inspire therapy.

In addition, all seven Medicare Administrative Contractors ("MACs") published final policies in 2020 that provide coverage of Inspire therapy when certain coverage criteria are met.

In addition, all seven Medicare Administrative Contractors ("MACs") provide coverage of Inspire therapy when certain coverage criteria are met.

We also have a U.S.

government contract for patients who are treated by the Veterans Health Administration.

The procedure performed to implant our device was previously described for billing purposes using a Category I Current Procedural Terminology (“CPT”) code (64568), which was used in conjunction with a temporary Category III CPT code (+0466T).

At the October 2020 American Medical Association (“AMA”) CPT Editorial Panel meeting, the AMA approved the creation of new Category I CPT codes (64582, 64583, and 64584) to separately identify hypoglossal nerve stimulator services.

A new Category I code (42975) was also approved for Drug-Induced Sleep Endoscopy, which is the final procedure to determine which patients are appropriate for Inspire therapy.

These new codes went into effect on January 1, 2022.

With these approvals, a formal survey was conducted to determine the Medicare reimbursement levels assigned to each code and in November 2021 the final 2022

reimbursement rates were announced by the Centers for Medicare and Medicaid Services (“CMS”).

The 2022 national average physician payments are approximately $888 for implantation of a hypoglossal nerve stimulator and approximately $115 for the DISE procedure.

The 2022 rates of Medicare reimbursement to our hospital customers is approximately $30,063, an increase of 2% over the 2021 rate.

The ASC reimbursement rate for 2022 is approximately $24,828, an increase of 2% over the 2021 rate.

Reimbursement in other countries can often be established through a combination of private (commercial insurance) and public funding sources, or at the hospital level through innovation budgets.

We generated revenue of $407.9 million, with a gross margin of 83.8% and a net loss of $44.9 million, for the fiscal year ended December 31, 2022, compared to revenue of $233.4 million, with a gross margin of 85.7% and a net loss of $42.0 million, for the fiscal year ended December 31, 2021, and revenue of $115.4 million, with a gross margin of 84.7% and a net loss of $57.2 million, for the fiscal year ended December 31, 2020.

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We have developed the first and only FDA-approved neurostimulation technology that provides a safe and effective treatment for patients with moderate to severe OSA who have been confirmed to fail or cannot tolerate PAP treatments, such as CPAP.

We received a PMA from the FDA in April 2014 for our Inspire therapy.

We received a PMA from the FDA in 2014 for our Inspire therapy.

Unlike CPAP, which is limited by low patient compliance primarily due to patient discomfort with the mask or device, our innovative, closed-loop, minimally invasive solution is designed to provide comfort and convenience, resulting in high compliance for patients with moderate to severe OSA.

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This outreach helps to educate thousands of patients on our Inspire therapy.

Our patient call center, the Advisor Care Program, assists patients with making a connection with a qualified healthcare provider based on their specific needs.

We are confident that this holistic approach to engagement across multiple constituents will continue to drive increased awareness of and demand for our Inspire therapy.

• Dedicated team focused on providing market access for patients and providers.

We have a highly efficient approach to advance patients, once identified, to placement of the Inspire system.

Our dedicated market access team helps patients and providers work with payors to secure prior authorization approvals in advance of initial treatment.

We have a refined, efficient approach to advance patients, once identified, to placement of the Inspire system.

When required, our dedicated market access team helps patients and providers work with payors to secure prior authorization approvals in advance of initial treatment.

In addition, this team proactively works with payors to establish positive coverage policies when needed by highlighting the compelling clinical data and the value of our Inspire therapy.

This highly leverageable team has been successful in helping to secure reimbursement from hundreds of commercial payors to date, and positive coverage policies from most U.S.

This highly effective team has been successful in helping to secure reimbursement from hundreds of commercial payors to date, and positive coverage policies from most U.S.

commercial payors, including virtually all large national payors.

• Strong research and development capabilities and comprehensive intellectual property portfolio.

Our commitment to driving innovation has allowed us to achieve continuous, significant improvements of our Inspire therapy.

For example, in February 2021, the FDA approved a new Inspire physician programmer system and in March 2021, the FDA approved an update to the system manual for the Inspire system to include an improved surgical implant procedure that eliminates one incision with a revised placement of the pressure sensing lead.

In May 2021, we received certificates of conformity in Europe for the two-incision implant procedure which allowed us to affix the CE mark on our system.

In December 2021, the FDA approved our new Bluetooth-enabled patient remote.

Our commitment to driving innovation has allowed us to achieve continuous, significant improvements of

our Inspire therapy.

For example, in 2022, we received FDA approval for additional magnetic resonance imaging ("MRI") scan conditions for use with Inspire therapy.

This full-body MRI approval expanded the Inspire use labeling that previously allowed only head, neck, and extremity MRI scans.

Also in 2022, the FDA approved new silicone-based stimulation and sensing leads, which provides improved manufacturability, easier system implantation, increased long-term performance, and enhanced reliability.

In 2021, we received FDA approvals for our Bluetooth-enabled patient remote control, a new Inspire physician programmer platform, and an improved two-incision surgical implant procedure that eliminates one incision with a revised placement of the pressure sensing lead.

We received European Conformity Marking ("CE mark") in Europe for the two-incision implant procedure in 2021.

We have a comprehensive patent portfolio to protect our intellectual property and technology, with rights as of December 31, 2022 to 66 issued U.S.

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We believe the following strategies will play a critical role in achieving this goal and our future growth:

• Foster strong and consistent patient outcomes.

Patient outcomes remain the single most important focus for Inspire as we scale our business, and we have a dedicated patient outcomes team furthering this mission.

Our Surgical Implant Trainers are tasked with conducting physician trainings and proctoring implants.

Care Pathway Specialists develop and promote consistent post-implant care protocols.

Our team of Sleep Support Specialists educate and oversee local sleep lab titrations.

These teams are critical to ensuring that outcomes continue to improve even as implant volumes increase around the world.

• Promote awareness among patients, ENT physicians, sleep centers, and referring physicians.

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We believe investing in a scalable, efficient direct sales force and continuing the development of our marketing efforts will help us broaden adoption of our Inspire therapy and drive revenue growth.

• Leverage our prior authorization model while we work with payors to broaden coverage.

Our dedicated in-house market access team will continue to assist patients and physicians in obtaining prior authorization approvals from commercial payors for treatment with our Inspire therapy.

In parallel, we are in active discussions with the commercial payors that have yet to establish positive coverage policies and modify existing policies when needed.

We believe increased positive payor coverage policies and modifying existing positive coverage policies could expand patient access by reducing hurdles to treatment.

• Invest in research and development to drive innovation and expand indications.

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Recent examples of our product innovation include the next generation of the Inspire neurostimulator, which is in development, and an active project to improve the physician programmer.

We have launched a cloud-based patient management system called Inspire Cloud, which allows physicians to monitor patient compliance and more efficiently coordinate patient care, and in 2020, we launched the Inspire Sleep app for patients' smart phones.

2021, the FDA approved our new patient remote control which is Bluetooth® enabled.

An example of our efforts to expand our label indications includes our clinical study that is evaluating the use of Inspire therapy in pediatric patients with Down syndrome.

In April 2020, we received FDA approval for an expanded age-range for Inspire therapy to include 18 to 21 year old patients.

In August 2020, the Australian Therapeutic Goods Administration approved Inspire therapy to treat moderate to severe OSA, and Japan's MLHW approved Inspire therapy to treat moderate to severe OSA in June 2018.

We have launched a cloud-based patient management system called SleepSync™ (formerly referred to as Inspire Cloud), which allows physicians to monitor patient compliance and more efficiently coordinate patient care, and in 2020, we launched the Inspire Sleep app

for patients' smartphones.

In 2021, the FDA approved our new patient remote control which is Bluetooth® enabled.

An example of our efforts to expand our label indications for the Inspire system include an application to seek FDA authorization to provide therapy to the pediatric population with Down’s Syndrome, which we submitted in August 2022.

Additionally, in July 2022, the Inspire system received Breakthrough Device Designation from the FDA for application to increase the upper limit of AHI to up to 100 events per hour from the original 65 events per hour, and to raise the Body Mass Index ("BMI") warning for patients with a BMI of up to 40 from the previous limit of 32.

• Further penetrate and expand into existing and new international markets.

We plan to establish and strengthen our presence internationally.

Our goal is to further increase sales of our Inspire therapy in existing international markets in Europe, including Germany and the Netherlands, and in Japan.

We plan to expand our reach to markets in new regions, such as Australia, Singapore, Hong Kong, South Korea and China.

Our goal is to further increase sales of our Inspire therapy in existing international markets in Europe, including Germany and the Netherlands, and in the Asia Pacific region, including Japan and Singapore.

We plan to expand our reach to markets in new regions, such as Australia, Hong Kong, South Korea, and China.

We plan to strategically invest in new markets based on our assessment of market size and opportunity and prospects for compelling reimbursement coding and coverage.

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• Safe, effective, and durable treatment.

Results from our clinical trials provide compelling safety and efficacy data regarding the clinical benefits of Inspire therapy as many as five years after initial treatment.

Results from our clinical studies provide compelling safety and efficacy data regarding the clinical benefits of Inspire therapy as many as five years after initial treatment.

The results from our STAR trial, a five-year follow-up phase III pivotal trial, demonstrated an approximately 70% reduction in the median AHI from a baseline of 29.3 events per hour to 9.0 events per hour at 12 months following initial treatment.

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• Comfortable and convenient therapy resulting in high patient satisfaction.

Data reported on the first 1,849 patients in our ongoing ADHERE patient registry, which we established to follow patients who have been implanted with an Inspire system, demonstrated that these patients used Inspire therapy an average of 5.6 hours per night an average of 12 months after initial treatment, with overall patient satisfaction reported to be at 91%.

Data reported in the most recent publication of our ongoing ADHERE patient registry, which we established to follow patients who have been implanted with an Inspire system, demonstrated that patients used Inspire therapy an average of 5.7 hours per night an average of 12 months after initial treatment, with overall patient satisfaction reported to be at 90%.

• Strong patient compliance.

Results from our STAR trial demonstrated that 80% of patients continue to use Inspire therapy on a nightly basis five years after initial treatment.

• Similar outcomes and usage as CPAP.

Several independent clinical studies demonstrating Inspire therapy has similar improvements in symptoms, and similar nightly usage as CPAP.

• Minimally invasive outpatient procedure.

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Additionally, we received a certificate of conformity for commercialization of our Inspire system in Europe in 2010 which allowed us to affix the CE mark on our device.

Japan's MLHW approved Inspire therapy to treat moderate to severe OSA in June 2018 and was formally added to the Japan National Health Insurance Payment Listing in June 2021.

In August 2020, the Australian Therapeutic Goods Administration approved Inspire therapy to treat moderate to severe OSA, and we are currently seeking reimbursement coverage in Australia.

Japan's MLHW approved Inspire therapy to treat moderate to severe OSA in 2018 and was formally added to the Japan National Health Insurance Payment Listing in 2021.

Reimbursement in Singapore is handled through hospital innovation budgets or private health insurance sources .

In 2020, the Australian Therapeutic Goods Administration approved Inspire therapy to treat moderate to severe OSA, and we are currently seeking reimbursement coverage in Australia.

To commercialize our Inspire system, both in the U.S.

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sales representatives and continuing our direct-to-consumer marketing efforts in existing and new markets throughout the U.S.

In Japan, our commercialization approach is through our exclusive distribution partner, Japan Lifeline ("JLL").

JLL is responsible for local sales and promotional activities focused on ENT physicians, sleep centers, and community

We work closely with JLL to ensure a globally consistent approach and effective employee and customer training are in place.

In Japan and Singapore, our commercialization approach is through exclusive distribution partners, who are responsible for local sales and promotional activities focused on ENT physicians, sleep centers, and community awareness.

We work closely with the distributors to ensure a globally consistent approach and effective employee and customer training are in place.

In addition, a significant part of our commercialization effort consists of supporting our customers through the reimbursement process.

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Patients are allowed to heal for a month before the Inspire system is activated through a wireless connection to the device in the clinician’s office.

The initial activation is performed by the clinician using a programming tablet that is able to turn the system on as well as change various parameters such as the strength of the stimulating pulse, the sensitivity of the detection, the timing and length of the pulse, and which part of the stimulating electrode should be used.

The initial activation is performed by the clinician using a programming tablet that is able to turn the system on as well as change various parameters such as the strength, timing, and duration of the stimulation pulse, the stimulating electrode configuration, and the sensitivity of respiration detection.

With the exception of pulse strength, the factory default settings are used in the majority of patients.

The pulse strength is initially adjusted to the lowest level required to move the tongue out of the way without causing discomfort.

The pulse strength is initially adjusted to the lowest level required to move the tongue forward without causing discomfort.

Patients receive a remote control that they use to turn their Inspire system on when they plan to go to sleep and to turn it off when they awaken.

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It then delivers mild stimulation to the hypoglossal nerve, causing the tongue to move as the patient is inhaling.

The remote enables patients to adjust the strength of the stimulation to optimize their therapy and comfort.

The range of control given to patients is limited to avoid setting the strength of

the stimulation to an ineffective or excessively high level.

The remote enables patients to adjust the strength of the stimulation to

optimize their therapy and comfort.

The range of control given to patients is limited to avoid setting the strength of the stimulation to an ineffective or excessively high level.

Patients also have the ability to temporarily pause therapy if they awaken during the night.

Clinical Results and Studies

A significant body of published clinical evidence, which includes seven sponsored and more than 70 independent clinical studies that evaluated several thousand patients, supports the safety and effectiveness of our Inspire therapy.

A significant body of published clinical evidence, which includes seven sponsored and more than 90 independent clinical studies that evaluated several thousand patients, supports the safety and effectiveness of Inspire therapy.

The results of the STAR trial, our phase III pivotal clinical trial that served as the basis for the FDA approval of our PMA application, were published in the New England Journal of Medicine , and the results of additional clinical studies have been published in more than 240 peer-reviewed publications.

We have established a global patient registry, which we refer to as our ADHERE patient registry, to collect data on safety, effectiveness, weekly usage, overall compliance, and satisfaction from patients who have been implanted with an Inspire system.

The table below highlights key findings from certain of these studies and data from the first 1,849 patients in our ADHERE patient registry, including significant improvements in objective sleep measures and patient-reported quality of life measures, strong therapy compliance, and a favorable safety profile.

The table below highlights key findings from certain of these studies and data from our ADHERE patient registry, including significant improvements in objective sleep measures and patient-reported quality of life measures, strong therapy compliance, and a favorable safety profile.

STAR Trial (1)

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(1) Median results

(2) Mean results

(3) Thomas Jefferson University Hospital ("TJUH") and University of Pittsburgh Medical Center ("UPMC").

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We established our ADHERE patient registry to follow patients who have been implanted with an Inspire system, with a goal of collecting data on a group of at least 5,000 patients.

Data gathered on the first 1,849 patients published in Laryngoscope in 2021 showed that patients used Inspire therapy an average of 5.6 hours per night when measured an average of 12 months after implantation.

Median AHI was reduced from 33.0 events per hour to 9.9 events per hour and median ESS score improved from 11 to 6 over the same period.

Data gathered on the first 1,963 patients published in the Journal of Clinical Sleep Medicine in 2022 showed that patients used Inspire therapy an average of 5.7 hours per night when measured an average of 12 months after implantation.

Mean AHI was reduced from 33.0 events per hour to 10.2 events per hour and mean ESS score improved from 11 to 6 over the same period.

Overall satisfaction with Inspire therapy was reported by patients to be 90%, with 92% of patients reporting that they would choose the procedure again.

In addition, 91% of patients reported a better experience than CPAP.

This same study demonstrated comparable outcomes across five disease severity groups.

Inspire Therapy Improves Patient Symptoms Similarly as CPAP

In 2021, the Cleveland Clinic published on the first comparison of patient-reported outcomes between Inspire therapy and CPAP.

These results showed that Inspire therapy and CPAP had a similar improvement in patient symptoms of sleepiness, daytime energy, depression, and insomnia.

The results also showed that Inspire therapy patients were more likely to have a more clinically meaningful improvement in symptoms than CPAP patients.

This high degree of improvement was maintained through at least one-year in the Inspire therapy patients.

A second study, published by Dr.

Clemens Heiser and team at the Technical University of Munich in the Journal of Sleep and Breathing in 2022, compared two similar parallel cohorts of patients who were initiating use of Inspire therapy (n=63) or CPAP (n=63).

They found that Inspire therapy patients had larger improvements in sleepiness (an eight point reduction in Epworth Sleepiness Scale (“ESS”) with Inspire therapy versus a four point reduction in ESS with CPAP), and numerically higher usage in Inspire therapy patients versus CPAP patients (five hours per night with Inspire therapy versus four hours per night with CPAP).

Additionally, the objective AHI outcomes were similar in both arms.

Taken together, we believe these results suggest that Inspire therapy may be superior to CPAP at improving disease.

There are now multiple studies in which Inspire showed equivalent improvements in OSA outcomes as CPAP, and similar, if not potentially higher usage than CPAP.

We believe these observed improvements could translate to better disease alleviation in patients unable to tolerate CPAP.

Large-scale Insights of Over Three Million Patient Nights from Inspire SleepSync™ Patient Database Showing Real-World Results

Inspire SleepSync™ patient management system helps physicians track therapy usage and outcomes, and the results of the first three million patient nights of data were presented by Dr.

Jordan Weiner at the 2022 American Academy of Otolaryngology conference and Dr.

Deborah Goss at the 2022 American Association of Sleep Medicine meeting.

These data, the largest to date evaluating outcomes from Inspire therapy, show the results of

3.7 million patient-nights in 12,017 patients across 491 practices.

These data showed that, in real-world use, Inspire therapy continued to show highly effective outcomes similar to the early clinical trials.

Objective outcomes such as AHI and ESS were in the normalized ranges, and very high therapy usage of seven hours per night in the first 90 days, demonstrate high usage despite a previous history of CPAP intolerance.

Inspire Therapy Outcomes are Consistent in Both Majority and Minority Populations

Two 2022 publications increased our focus on evaluating Inspire efficacy across a broader range of patient race and ethnicity by leveraging the ADHERE registry, which is a database of real-world Inspire therapy outcomes.

The first publication from Dr.

Meena Khan and team, published in the Journal of Clinical Sleep Medicine , demonstrated that both White and Non-White patients had similar improvements in sleep apnea severity, with no notable differences in usage, AHI, or sleepiness.

Similarly, a second analysis by Dr.

Linda Magaña, presented at the 2022 meeting of the American Academy of Otolaryngology, examined the differences between Hispanic / Latino and non-Hispanic / non-Latino patients, and found that it demonstrated comparable outcomes.

While there is an opportunity to continue to improve the adoption of Inspire therapy in minority populations, given the higher incident rates and under diagnosis in these groups, we believe these two analyses provide additional evidence that Inspire therapy is equally effective across race and ethnicity.

Comparison of Sleep Surgery Complication Rates versus Inspire Therapy

A 2021 paper published in Otolaryngology – Open Journal found that Inspire therapy had a lower complication rate and shorter hospital length of stay compared with sleep surgery, despite the fact that the Inspire population was older and had more co-morbidities.

Combined with previous studies on sleep surgery outcomes, this demonstrates that Inspire therapy may be safer and more effective than sleep surgery in selected patients.

Upper Airway Surgery Improves Patient Symptoms Similarly as CPAP

In 2021, Cleveland Clinic published on the first comparison of patient-reported outcomes between Upper Airway Surgery ("UAS") and CPAP.

These results showed that UAS and CPAP had similar degree of improvement of patient symptoms of sleepiness, daytime energy, depression, and insomnia.

The results also showed that UAS patients were more likely to have a clinically meaningful improvement of symptoms than CPAP patients.

This high degree of improvement was maintained through at least one-year in the UAS patients.

In this first study comparing UAS versus CPAP patient symptoms, they conclude that this improvement is likely due to UAS’s high ease of use, effectiveness, and high rates of adherence, recommending it as an alternative to CPAP.

Two-incision Procedure has Similar Outcomes as Three-incision Procedure

The new two-incision implant technique was compared to the legacy three-incision technique.

This study of several hundred patients in a multi-center registry showed that the new two-incision technique is 39 minutes faster than the legacy technique (129 minutes vs.

86 minutes, p<0.001), while maintaining similarly low complication rates of 1%, and equivalent outcomes of reductions in AHI and Epworth Sleepiness Scale.

Thus, the new two-

incision technique is faster, without compromising safety and efficacy, saving operative time for physicians and enabling shorter recovery time for patients.

Combined with previous studies on sleep surgery outcomes, we believe these data demonstrate that Inspire therapy may improve outcomes compared to traditional sleep surgery in selected patients.

In 2022, a larger analysis was repeated on a national outcomes database, comparing post-operative operative safety and complication rates between Inspire therapy implants (n=1,201) versus palate surgery (n=3,364), which was the predominant OSA surgery prior to the introduction of Inspire therapy (Dr.

Ryan Nord, Otolaryngology – Open Journal , 2022).

This analysis found that Inspire therapy was safer than palate surgeries.

Inspire therapy implantation had a much lower risk of emergency room readmission and complication rates in the first 90 days after surgery.

We believe a reduction in post-operative complication rates may help reduce clinical utilization costs versus traditional sleep surgery.

Taken together, we believe these data suggest that Inspire therapy should be considered first prior to any traditional airway surgery.

Sales and Marketing

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We sell our Inspire system through a direct sales force that primarily targets ENT physicians and sleep centers in the U.S.

and Europe, and through a distributor in Japan.

The implant procedure for our Inspire therapy is typically performed by an ENT physician or in some cases by neurosurgeons.

and Europe, and through distributors in Japan and Singapore.

The implant procedure for our Inspire therapy is typically performed by an ENT physician or in some cases by a neurosurgeon.

We also focus on sleep centers because they diagnose and manage large volumes of patients with sleep apnea and are often an important referral base for ENT physicians.

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We seek to recruit sales representatives with strong sales backgrounds, direct experience developing markets with new technologies, and core knowledge of medical device coding, reimbursement, and the prior authorization process.

In Japan, we rely on our distribution partner for local sales and promotional activities.

In our Asian markets, we rely on our distribution partner for local sales and promotional activities.

We also utilize direct communication channels to inform and educate patients about Inspire therapy and to enable them to connect with active clinical sites that offer our Inspire systems.

Our primary methods of patient outreach are Facebook, Google ad placements, radio advertisements (either local or satellite), and television advertisements.

Our primary methods of patient outreach are Facebook, Google ad placements, radio advertisements (either local or satellite), and television advertisements (either local or national).

The objective of this outreach is to bring patients to our website, where they can find educational materials and videos on sleep apnea and the use and benefits of our Inspire therapy, contact information for physicians and clinical sites, and information regarding community awareness events.

We believe our patient outreach efforts have been effective in bringing potential patients to our website and facilitating contact with our clinical sites.

During 2021, we had over 7.3 million visits to our website, of which 410,000 used our "Find a Doctor" function to find a physician in their area.

This generated more than 95,000 contacts with physicians throughout the year and approximately 33,000 visitors to our website signed up to attend a local or online Inspire informational event.

During 2022, we had over 13.8 million visits to our website, which generated more than 78,000 contacts with physicians throughout the year.

In 2020, we launched the Inspire Sleep app for patients' smart phones.

This app is an educational tool for patients and also interfaces with the Inspire Cloud to allow physicians to collect clinical data from patients directly.

This app is an educational tool for patients and also interfaces with SleepSync TM to allow physicians to collect clinical data from patients directly.

We continue to enhance the functionality of this app as part of our overall digital platform development.

During 2020 and 2021, over 26,000 copies of the app were downloaded to smartphones.

Since launch, over 60,000 copies of the app have been downloaded to smartphones.

Commercial Activities Outside of the U.S.

Our general practice is to limit commercial investments in countries until such time as there is a determined reimbursement pathway.

We have 12 sales territories in Europe, 8 of which are located in Germany, and we sell our products through a distributor in Japan.

We provide consistent training in Europe and Japan as is conducted in the U.S.

We have 12 sales territories in Europe and we sell our products through a distributor in Japan and Singapore.

We provide consistent training in Europe, Japan, and Singapore as is conducted in the U.S.

and have established a support team in Europe for patient outreach and education, implant support, and device programming.

In Japan we assist our distribution partner with patient outreach and education initiatives.

In our Asian markets we assist our distribution partner with patient outreach and education initiatives.

We expect to continue to scale our commercial activities in Europe as we continue to develop country-wide reimbursement in additional markets.

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Third-party payors require physicians and hospitals to identify the service for which they are seeking reimbursement by using CPT codes, which are created and maintained by the AMA.

The procedure performed to implant our device was previously described for billing purposes using a Category I CPT code (64568), which was used in conjunction with a temporary Category III CPT code (+0466T).

At the October 2020 AMA CPT Editorial Panel meeting, the AMA approved the creation of new Category I CPT codes (64582, 64583, and 64584) to separately identify hypoglossal nerve stimulator services.

A new Category I code (42975) was also approved for DISE, which is the final procedure to determine which patients are appropriate for Inspire therapy.

These new codes went into effect on January 1, 2022.

Physician reimbursement under Medicare is based on a defined fee schedule, the Physician Fee Schedule, through which payment amounts are determined by the relative values of the professional service rendered.

Medicare provides reimbursement to our hospital customers under the hospital outpatient prospective payment system ("HOPPS") which provides bundled amounts generally intended to reimburse the hospital for all facility costs related to procedures performed in the hospital outpatient setting.

Under the HOPPS, the 2022 national average Medicare payment to the hospital for this procedure is $30,063, which is intended to cover the hospitals’ costs for the device and the implantation procedure.

The 2022 ASC reimbursement rate is $24,828.

The procedures performed to implant, revise, or explant our device are described for billing purposes using Category I CPT codes (64582, 64583, and 64584, respectively) to identify hypoglossal nerve stimulator services.

A Category I code (42975) is used for DISE, which is a required procedure to determine which patients are appropriate for Inspire therapy.

Physician reimbursement under Medicare is based on a defined fee schedule, the Medicare Physician Fee Schedule, through which payment amounts are determined by the relative values of the professional service rendered.

Medicare provides reimbursement to our hospital customers under the hospital outpatient prospective payment system ("OPPS") which provides bundled amounts generally intended to reimburse the hospital for all facility costs related to procedures performed in the hospital outpatient setting.

Under OPPS, the 2023 national average Medicare payment to the hospital for this procedure is $29,358, which is intended to cover the hospitals’ costs for the device and facilities and resources required for the implantation procedure.

The 2023 Medicare national average ASC reimbursement rate is $25,180.

The physician’s professional services are reimbursed separately under the Medicare Physician Fee Schedule.

The 2022 national average physician fee for the implant (CPT code 64582) is $888.

The 2022 average reimbursement rate for the DISE procedures is $115.

The 2023 Medicare national average physician fee for the implant is $873.

The 2023 Medicare national average reimbursement rate for the DISE procedures is $97.

Reimbursement rates from commercial payors vary depending on the procedure performed, the commercial payor, contract terms, and other factors.

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We have been successful in obtaining prior authorization approvals from most commercial payors for the Inspire device and procedure.

Historically, commercial payors approve prior authorization requests for approximately 70% of Inspire implants in the U.S.

Historically, commercial payors cover approximately 70% of Inspire implants in the U.S.

We estimate that the majority of patients who meet the FDA indication for Inspire therapy are covered by commercial insurance companies and we have secured coverage policies with virtually all major national commercial payors.

A number of small regional commercial payors currently consider hypoglossal nerve stimulation to be investigational, including procedures involving the Inspire system, and therefore do not have formal coverage policies, which presents an opportunity for incremental positive coverage development.

All seven MACs published final policies in 2020 that provide coverage of Inspire therapy when certain coverage criteria are met.

All seven MACs provide coverage of Inspire therapy when certain coverage criteria are met.

Medicare beneficiaries have historically accounted for approximately 25% of all Inspire system implantations in the U.S.

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Prior Authorization Approval Process

A second pillar of our reimbursement strategy includes leveraging our market access team to assist patients and physicians in obtaining appropriate prior authorization approvals in advance of treatment on a case-by-case basis where positive coverage policies currently do not exist.

We believe our market access team is highly effective in working with patients and physicians to obtain prior authorizations for our Inspire system including assisting with

the appeals process.

We have received multiple prior authorization approvals from all of the largest commercial payors, for example Anthem, Cigna, Blue Cross Blue Shield, United Healthcare, and Humana.

We believe we will continue to benefit from this efficient prior authorization process in the near-term and in the longer-term by expanding positive coverage policies.

We intend to expand our market access team and increase the number of annual patient submissions as we grow our operations.

We believe our market access team is highly effective in working with patients and physicians to obtain prior authorizations for our Inspire system including assisting with the appeals process.

We have received hundreds of prior authorization approvals from all of the largest commercial payors, for example Anthem, Cigna, Blue Cross Blue Shield, United Healthcare, and Humana.

We believe we will continue to benefit from this efficient prior authorization process.

Reimbursement Outside of the U.S.

In Germany, the Institut für das Entgeltsystem im Krankenhaus ("InEK"), the German federal reimbursement agency, fully integrated Inspire therapy into the German hospital reimbursement system (“G-DRG”), effective January 1, 2021.

The integration was done under conditions of a Zusatzentgelt (a supplemental fee or add-on payment scheme).

The reimbursement for the procedure has two parts, a G-DRG fee plus an add-on payment called a ZE fee, in this case, ZE2021-187 Neurostimulatoren zur Hypoglossusnerv-Stimulation (Neurostimulators for hypoglossal nerve stimulation).

The amount for the G-DRG is calculated annually by the InEK based on empirical cost data supplied by reference hospitals.

The ZE fee is negotiated locally with each hospital, paid additionally and usually covers device fees for the Inspire system, additional procedural equipment, and service costs that are not included within the G-DRG.

Before January 1, 2021, Germany’s reimbursement for the Inspire procedure was provided through Neue Untersuchungs-und Behandlungsmethoden ("NUB") Status 1 coverage.

The NUB process allows for the introduction of new and innovative medical devices prior to reaching reimbursement eligibility and provides for a supplemental payment for new technologies in the German reimbursement system.

NUB Status 1 is the highest of four levels and allowed for full reimbursement for our Inspire system.

NUM reimbursement requires the negotiation of a respective agreement with the treating hospital and applies for a limited term.

Under NUB Status 1, payors at these hospitals were obligated to cover the gaps in treatment costs for the Inspire system.

In the Netherlands, the Zorginstituut, or the Dutch Health Institute, has approved Inspire therapy for conditional reimbursement within the basic package of all payors.

This allows patients to receive the Inspire system in certain hospitals and within approved indications set by the Zorginstituut.

In Switzerland, Inspire therapy is covered by the public health insurance and hospitals receive reimbursement from the Swiss Diagnosis Related Groups ("DRG") system.

This allows patients to receive the Inspire system in certain hospitals and within the indication covered by the Swiss DRG.

In Japan, Inspire therapy is paid for by Japan's National Health Insurance system, following coverage requirements established by the Ministry of Health, Labour and Welfare.

Reimbursement in other countries can often be established through a combination of private (commercial insurance) and public funding sources, or at the hospital level through innovation budgets.

We continue to pursue permanent reimbursement in target markets across the Asia Pacific, including Australia, and Europe, including Belgium, France, Spain, the United Kingdom, and the Nordic region.

Outside the U.S., reimbursement levels vary significantly by country and by region within some countries.

Reimbursement is obtained from a variety of sources, including government-sponsored and private health insurance plans, and combinations of both.

Some countries require additional clinical data before granting or expanding coverage and reimbursement for our products.

In general, obtaining broad-based reimbursement and adequate payment for new technologies is more difficult in these markets than in the U.S.

Some countries require new medical technologies to not only be safe and effective, but also to be able to demonstrate clinical benefits that outweigh the costs when compared to the standard of care.

As in the U.S., reimbursement decisions can change, resulting in the elimination or reduction of reimbursement payments, which could adversely affect our financial results and our ability to invest in and grow our business.

We currently have country wide reimbursement in Germany, the Netherlands, Switzerland, and Japan.

We are in the final process to have the Inspire IV system included in the French Haute Autorité De Santé listing of products and services qualifying for reimbursement (LPPR) of approved technologies for reimbursement across the French health system.

We are similarly awaiting publication of a nationwide positive national health reimbursement

decision in Belgium.

We continue to pursue permanent reimbursement in target markets across the Asia Pacific, including Australia, and Europe, including Spain, the United Kingdom, and the Nordic region.

Research and Development

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Based on the initial clinical trial results, which were published in 2001, Medtronic began developing what became known as our Inspire II system, introducing a new, more durable stimulation lead and lower-power neurostimulator, and relocating the respiratory sensing lead to between the intercostal muscle layers.

After our November 2007 inception and contemporaneous spin-off of the Inspire business from Medtronic, our primary focus was to requalify the Inspire II system and resume clinical trial activity.

We completed a phase I

feasibility trial along with a phase II dosing or patient selection trial in 2009.

After our 2007 inception and contemporaneous spin-off of the Inspire business from Medtronic, our primary focus was to requalify the Inspire II system and resume clinical trial activity.

We completed a phase I feasibility trial along with a phase II dosing or patient selection trial in 2009.

In 2011, we began our phase III pivotal STAR trial.

The STAR trial was completed and published in the New England Journal of Medicine in January 2014 and we received PMA in April 2014.

Additionally, we received a CE mark for commercialization in Europe in 2011.

The STAR trial was completed and published in the New England Journal of Medicine in 2014 and we received PMA in 2014.

Additionally, the device was CE marked for commercialization in Europe in 2010.

We continue to invest in advancing our Inspire system with the goal of providing patients more effective and less invasive therapy for OSA.

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The Inspire IV device was launched in the U.S.

in July 2017, and in Europe in the second quarter of 2018.

Our newly designed respiratory sensing lead was developed in 2017 and was approved by the FDA in January 2019.

This lead was introduced in Europe in October 2018 and in the U.S.

in March 2019.

in 2017, and in Europe in 2018.

Our newly designed respiratory sensing lead was developed in 2017 and was approved by the FDA in 2019.

This lead was introduced in Europe in 2018 and in the U.S.

The lead has a significantly smaller profile, including a reduction in diameter of 49 percent as compared to the prior design.

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Our next generation of the Inspire neurostimulator is in development, and we also have an active project to improve the physician programmer.

Our Bluetooth® enabled patient remote control was approved by the FDA in December 2021.

We have launched a cloud-based patient management system called Inspire Cloud, which allows physicians to monitor patient compliance and more efficiently coordinate patient care.

Our Bluetooth®-enabled patient remote control was approved by the FDA in December 2021 and the initial commercial launch occurred in 2022.

We have launched a cloud-based patient management system called SleepSync™, which allows physicians to monitor patient compliance and more efficiently coordinate patient care.

In 2020, we launched the Inspire Sleep app for patients' smart phones.

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We continue to enhance the functionality of this app as part of our overall digital platform development.

The Inspire Cloud and our app are initial steps in establishing interconnectivity between the patient and their healthcare provider with a long-term plan to improve outcomes by tracking patient activity and adherence, and monitoring for any issues with device use.

SleepSync™ and our app are initial steps in establishing interconnectivity between the patient and their healthcare provider with a long-term plan to improve outcomes by tracking patient activity and adherence, and monitoring for any issues with device use.

Additional Indications

We have sought and continue to seek to expand the approved indications for our Inspire therapy.

For instance, in January 2017, the FDA approved a PMA supplement expanding the indicated AHI range for our Inspire therapy from 20 to 65 events per hour to 15 to 65 events per hour.

In April 2020, we received FDA approval for an expanded age-range of patients who can be treated with Inspire therapy, which now includes 18 to 21-year old patients.

Our research and development team focuses on the products currently under development, including our clinical trials, as well as feasibility studies in which we are evaluating different design configurations to enhance product functionality for future generations of the Inspire system.

For instance, in 2020, we received FDA approval for an expanded age-range of patients who can be treated with Inspire therapy, which now includes 18 to 21-year old patients.

In August 2022, we submitted an application to seek FDA authorization to provide therapy to the pediatric population with Down’s Syndrome.

Additionally, in July 2022, the Inspire system received Breakthrough Device Designation from the FDA for application to increase the upper limit of AHI to up to 100 events per hour from the original 65 events per hour, and to raise the BMI warning for patients with a BMI of up to 40 from the previous limit of 32.

Our research and development team focuses on the products currently under development, including our clinical studies that include efforts to improve patient selection, expand indications, and simplify patient management, as well as feasibility studies in which we are evaluating new ways to deliver neuromodulation for OSA therapy and different design configurations to enhance product functionality for future generations of the Inspire system.

One example is our PREDICTOR study, which completed enrollment of 300 patients in 2022, which aims to remove the DISE requirement for patients less likely to have concentric collapse.

Our industry is subject to rapid change from the introduction of new products and technologies and other activities of industry participants.

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and is conducting its first pivotal trial as it seeks FDA approval in the U.S.

A dug candidate produced by Apnimed is entering a Phase 3 clinical trial to assess the viability of its pharmaceutical to treat OSA.

We believe other emerging businesses are in the early stages of developing neurostimulation devices or early-stage pharmaceutical approaches.

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Some other OSA treatments against which we compete, such as oral appliances, MMA, and UPPP, have a greater penetration into the OSA treatment market.

Oral appliances and some other surgical treatments are better known to ENT physicians, sleep centers and the other physicians on whom we rely for referrals, but we believe physician awareness of our Inspire therapy is increasing.

We also compete with other medical technology companies to recruit and retain qualified sales, training and other personnel, including members of our in-house prior authorization team.

Oral appliances and some other surgical treatments are better

known to ENT physicians, sleep centers and the other physicians on whom we rely for referrals, but we believe physician awareness of our Inspire therapy is increasing.

We also compete with other medical technology companies to recruit and retain qualified personnel.

Intellectual Property

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License Agreement with Medtronic

In November 2007, we entered into an assignment and license agreement with Medtronic ("the Assignment and License Agreement") pursuant to which Medtronic assigned certain patents and trademarks to us and granted to us a worldwide, royalty-free license to certain other patents and technical information to make, use, import and sell products, and to practice methods in the field of electrical stimulation of the upper airway for the treatment of OSA ("the Field").

In 2007, we entered into an assignment and license agreement with Medtronic ("the Assignment and License Agreement") pursuant to which Medtronic assigned certain patents and trademarks to us and granted to us a worldwide, royalty-free license to certain other patents and technical information to make, use, import and sell products, and to practice methods in the field of electrical stimulation of the upper airway for the treatment of OSA ("the Field").

We share co-exclusive rights with Medtronic under this license;

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We select our suppliers to ensure that our Inspire system and its components are safe and effective, adhere to all applicable regulations, are of the highest quality, and meet our supply needs.

We employ a rigorous supplier assessment, qualification, and selection process targeted to suppliers that meet the requirements of the FDA and the International Organization for Standardization and quality standards supported by internal policies and procedures.

and procedures.

Our quality assurance process monitors and maintains supplier performance through qualification and periodic supplier reviews and audits.

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We intend to maintain sufficient levels of inventory to enable us to continue our operations while we obtain another supplier in the event that one or more of our single-source suppliers were to encounter a delay in supply or end supply.

We have experienced and continue to experience some minor supply disruptions during the COVID pandemic, but have managed to avoid any significant supply and inventory issues.

We have experienced and continue to experience supply disruptions which began during the COVID pandemic, but have managed to avoid any significant supply and inventory issues or delay in implant procedures due to those issues, although there can be no assurance that we will avoid significant supply disruptions in the future.

Government Regulation

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In the U.S., our products are subject to regulation as medical devices under the Federal Food, Drug, and Cosmetic Act ("FDCA") as implemented and enforced by the FDA.

The FDA regulates the development, design, non-clinical and clinical research, manufacturing, safety, efficacy, labeling, packaging, storage, installation, servicing,

recordkeeping, premarket clearance or approval, import, export, adverse event reporting, advertising, promotion, marketing and distribution, and import and export of medical devices to ensure that medical devices distributed domestically are safe and effective for their intended uses and otherwise meet the requirements of the FDCA.

The FDA regulates the development, design, non-clinical and clinical research, manufacturing, safety, efficacy, labeling, packaging, storage, installation, servicing, recordkeeping, premarket clearance or approval, import, export, adverse event reporting, advertising, promotion, marketing and distribution, and import and export of medical devices to ensure that medical devices distributed domestically are safe and effective for their intended uses and otherwise meet the requirements of the FDCA.

In addition to U.S.

regulations, we are subject to a variety of regulations in the EEA governing clinical trials and the commercial sales and distribution of our products.

Whether or not we have or are required to obtain FDA clearance or approval for a product, we will be required to obtain authorization before commencing clinical trials and to obtain marketing authorization or approval of our products under the comparable regulatory authorities of countries outside of the U.S.

before we can commence clinical trials or commercialize our products in those countries.

Whether or not we have or are required to obtain FDA clearance or approval for a product, we will be required to obtain authorization before commencing clinical studies and to obtain marketing authorization or approval of our products under the comparable regulatory authorities of countries outside of the U.S.

before we can commence clinical studies or commercialize our products in those countries.

The approval process varies from country to country and the time may be longer or shorter than that required for FDA clearance or approval.

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Our currently marketed Inspire products are Class III devices which have received PMA.

In a PMA, the manufacturer must demonstrate that the device is safe and effective, and the PMA must be supported by extensive data, including data from preclinical studies and human clinical trials.

In a PMA, the manufacturer must demonstrate that the device is safe and effective, and the PMA must be supported by extensive data, including data from preclinical studies and human clinical studies.

The PMA must also contain a full description of the device and its components, a full description of the methods, facilities and controls used for manufacturing, and proposed labeling.

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In addition, the FDA will generally conduct a preapproval inspection of the applicant or its third-party manufacturers’ or suppliers’ manufacturing facility or facilities to ensure compliance with the QSR.

The FDA will approve the new device for commercial distribution if it determines that the data and information in the PMA constitute valid scientific evidence and that there is reasonable assurance that the device is safe and

effective for its intended use(s).

The FDA may approve a PMA with post-approval conditions intended to ensure the safety and effectiveness of the device, including, among other things, restrictions on labeling, promotion, sale and distribution, and collection of long-term follow-up data from patients in the clinical study that supported PMA or requirements to conduct additional clinical studies post-approval.

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Certain other changes to an approved device require the submission of a new PMA, such as when the design change causes a different intended use, mode of operation, and technical basis of operation, or when the design change is so significant that a new generation of the device will be developed, and the data that were submitted with the original PMA are not applicable for the change in demonstrating a reasonable assurance of safety and effectiveness.

Clinical Trials

Clinical trials are almost always required to support a PMA and are sometimes required to support a 510(k) submission.

Clinical Studies

Clinical studies are almost always required to support a PMA and are sometimes required to support a 510(k) submission.

All clinical investigations of investigational devices to determine safety and effectiveness must be conducted in accordance with the FDA’s investigational device exemption ("IDE") regulations which govern investigational device labeling, prohibit promotion of the investigational device, and specify an array of recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators.

If the device presents a “significant risk” to human health, as defined by the FDA, the FDA requires the device sponsor to submit an IDE application to the FDA, which must become effective prior to commencing human clinical trials.

A significant risk device is one that presents a potential for serious risk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing, mitigating or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject.

An IDE application must be supported by appropriate data, such as animal and laboratory test results, showing that it is safe to test the device in humans and that the testing protocol is scientifically sound.

An IDE application must be supported by appropriate data, such as animal and laboratory test results, showing that it is safe to test the device in humans and that the testing protocol is

scientifically sound.

The IDE will automatically become effective 30 days after receipt by the FDA unless the FDA notifies the company that the investigation may not begin.

If the FDA determines that there are deficiencies or other concerns with an IDE for which it requires modification, the FDA may permit a clinical trial to proceed under a conditional approval.

If the FDA determines that there are deficiencies or other concerns with an IDE for which it requires modification, the FDA may permit a clinical study to proceed under a conditional approval.

An IDE supplement must be submitted to, and approved by, the FDA before a sponsor or investigator may make a change to the investigational plan that may affect its scientific soundness, study plan or the rights, safety or welfare of human subjects.

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The IRB is responsible for the initial and continuing review of the IDE, and may pose additional requirements for the conduct of the study.

If an IDE application is approved by the FDA and one or more IRBs, human clinical trials may begin at a specific number of investigational sites with a specific number of patients, as approved by the FDA.

If the device presents a non-significant risk to the patient, a sponsor may begin the clinical trial after obtaining approval for the trial by one or more IRBs without separate approval from the FDA, but must still follow abbreviated IDE requirements, such as monitoring the investigation, ensuring that the investigators obtain informed consent, and labeling and record-keeping requirements.

During a study, the sponsor is required to comply with the applicable FDA requirements, including, for example, trial monitoring, selecting clinical investigators and providing them with the investigational plan, ensuring IRB review, adverse event reporting, record keeping, and prohibitions on the promotion of investigational devices or on making safety or effectiveness claims for them.

The clinical investigators in the clinical study are also subject to FDA regulations and must obtain patient informed consent, rigorously follow the investigational plan and study

protocol, control the disposition of the investigational device, and comply with all reporting and recordkeeping requirements.

Additionally, after a trial begins, we, the FDA or the IRB could suspend or terminate a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh the anticipated benefits.

If an IDE application is approved by the FDA and one or more IRBs, human clinical studies may begin at a specific number of investigational sites with a specific number of patients, as approved by the FDA.

If the device presents a non-significant risk to the patient, a sponsor may begin the clinical study after obtaining approval for the study by one or more IRBs without separate approval from the FDA, but must still follow abbreviated IDE requirements, such as monitoring the investigation, ensuring that the investigators obtain informed consent, and labeling and record-keeping requirements.

During a study, the sponsor is required to comply with the applicable FDA requirements, including, for example, study monitoring, selecting clinical investigators and providing them with the investigational plan, ensuring IRB review, adverse event reporting, record keeping, and prohibitions on the promotion of investigational devices or on making safety or effectiveness claims for them.

The clinical investigators in the clinical study are also subject to FDA regulations and must obtain patient informed consent, rigorously follow the investigational plan and study protocol, control the disposition of the investigational device, and comply with all reporting and recordkeeping requirements.

Additionally, after a study begins, we, the FDA or the IRB could suspend or terminate a clinical study at any time for various reasons, including a belief that the risks to study subjects outweigh the anticipated benefits.

Expedited Development and Review Programs

Following passage of the 21st Century Cures Act, the FDA implemented the Breakthrough Devices Program, which is a voluntary program offered to manufacturers of certain medical devices and device-led combination products, including ours, that may provide for more effective treatment or diagnosis of life-threatening or irreversibly debilitating diseases or conditions.

The goal of the program is to provide patients and health care providers with more timely access to qualifying devices by expediting their development, assessment and review, while preserving the statutory standards for FDA marketing authorization.

The program is available to medical devices that meet certain eligibility criteria, including that the device provides more effective treatment or diagnosis of life-threatening or irreversibly debilitating diseases or conditions, and that the device meets one of the following criteria:

(i) the device represents a breakthrough technology, (ii) no approved or cleared alternatives exist, (iii) the device offers significant advantages over existing approved or cleared alternatives, or (iv) the availability of the device is in the best interest of patients.

Breakthrough Device designation provides certain benefits to device developers, including more interactive and timely communications with FDA staff, use of post-market data collection, when scientifically appropriate, to facilitate expedited and efficient development and review of the device, opportunities for efficient and flexible clinical study design, and prioritized review of premarket submissions.

Post-market Regulation

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In addition, the device must achieve the performance intended by the manufacturer and be designed, manufactured, and packaged in a suitable manner.

Compliance with the essential requirements is a prerequisite for European Conformity Marking (“CE mark”) without which medical devices cannot be marketed or sold in the EU.

To demonstrate compliance with the essential requirements, medical device manufacturers must undergo a conformity assessment procedure, which

varies according to the type of medical device and its (risk) classification.

Compliance with the essential requirements is a prerequisite for CE mark without which medical devices cannot be marketed or sold in the EU.

To demonstrate compliance with the essential requirements, medical device manufacturers must undergo a conformity assessment procedure, which varies according to the type of medical device and its (risk) classification.

Except for low-risk medical devices ( Class I non-sterile, non-measuring devices ), where the manufacturer can self-assess the conformity of its products with the essential requirements (except for any parts which relate to sterility or metrology) , a conformity assessment procedure requires the intervention of a notified body.

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This aims at increasing harmonization across the EU.

The EU Medical Devices Regulation became effective on May 26, 2021.

The new Regulation among other things:

• strengthens the rules on placing devices on the market (e.g.

reclassification of certain devices and wider scope than the EU Medical Devices Directive and the AIMDD) and reinforces surveillance once they are available;

• establishes explicit provisions on manufacturers’ responsibilities for the follow-up of the quality, performance and safety of devices placed on the market;

• establishes explicit provisions on importers’ and distributors’ obligations and responsibilities;

• imposes an obligation to identify a responsible person who is ultimately responsible for all aspects of compliance with the requirements of the new regulation;

• improves the traceability of medical devices throughout the supply chain to the end-user or patient through the introduction of a unique identification number, to increase the ability of manufacturers and regulatory authorities to trace specific devices through the supply chain and to facilitate the prompt and efficient recall of medical devices that have been found to present a safety risk;

• sets up a central database (Eudamed) to provide patients, healthcare professionals and the public with comprehensive information on products available in the EU;

• strengthens rules for the assessment of certain high-risk devices, such as implants, which may have to undergo a clinical evaluation consultation procedure by experts before they are placed on the market.

Devices lawfully placed on the market pursuant to the EU Medical Devices Directive or the AIMDD prior to May 26, 2021 may generally continue to be made available on the market or put into service until May 26, 2025, provided that the requirements of the transitional provisions are fulfilled.

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Until Eudamed is fully functional, the corresponding provisions of the EU Medical Devices Directive and the AIMDD continue to apply for the purpose of meeting the obligations laid down in the provisions regarding exchange of information, including, and in particular, information regarding registration of devices and economic operators.

All manufacturers placing medical devices on the market in the EU must comply with the EU medical device vigilance system which has been reinforced by the EU Medical Devices Regulation.

All manufacturers placing medical devices into the market in the EU must comply with the EU medical device vigilance system.

Under this system, serious incidents and Field Safety Corrective Actions (“FSCAs”) must be reported to the relevant authorities of the EU member states.

These reports will have to be submitted through Eudamed – once functional – and aim to ensure that, in addition to reporting to the relevant authorities of the EU member states, other actors such as the economic operators in the supply chain will also be informed.

Until Eudamed is fully functional, the corresponding provisions of the EU Medical Devices Directive and the AIMDD continue to apply.

A serious incident is defined as any malfunction or deterioration in the characteristics or performance of a device made available on the market, including use-error due to ergonomic features, as well as any inadequacy in the information supplied by the manufacturer and any undesirable side-effect, which, directly or indirectly, might have led or might lead to the death of a patient or user or of other persons or to a temporary or permanent serious deterioration of a patient's, user's or other person's state of health or a serious public health threat.

Manufacturers are required to take FSCAs defined as any corrective action for technical or medical reasons to prevent or reduce a risk of a serious incident associated with the use of a medical device that is made available on the market.

An FSCA may include the recall, modification, exchange, destruction or retrofitting of the device.

FSCAs must be communicated by the manufacturer or its legal representative to its customers and/or to the end users of the device through Field Safety Notices.

For similar serious incidents that occur with the same device or device type and for which the root cause has been identified or a FSCA implemented or where the incidents are common and well documented, manufacturers may provide periodic summary reports instead of individual serious incident reports.

The aforementioned EU rules are generally applicable in the European Economic Area (“EEA”) which consists of the 27 EU member states plus Norway, Liechtenstein, and Iceland.

Since January 1, 2021, the Medicines and Healthcare Products Regulatory Agency (“MHRA”) has become the sovereign regulatory authority responsible for Great Britain (i.e.

England, Wales and Scotland) medical device market according to the requirements provided in the Medical Devices Regulations 2002 (SI 2002 No 618, as amended) that sought to give effect to the three pre-existing EU directives governing active implantable medical devices, general medical devices and in vitro diagnostic medical devices whereas Northern Ireland continues to be governed by EU rules according to the Northern Ireland Protocol.

Following the end of the Brexit transitional period on January 1, 2021, new regulations require medical devices to be registered with the MHRA (but manufacturers were given a grace period of four to 12 months, depending on the classification of the device, to comply with the new registration process) before being placed on Great Britain market.

England, Wales and Scotland) medical device market according to the requirements provided in the Medical Devices Regulations 2002 (SI 2002 No 618, as amended) that sought to give effect to EU Medical Devices Directive and AIMDD whereas Northern Ireland continues to be governed by EU rules according to the Northern Ireland Protocol.

Following the end of the Brexit transitional period on January 1, 2021, new regulations require medical devices to be registered with the MHRA before being placed on Great Britain market.

The MHRA only registers devices where the manufacturer or their United Kingdom (“UK”) Responsible Person has a registered place of business in the UK.

Manufacturers based outside the UK need to appoint a UK Responsible Person that has a registered place of business in the UK to register devices with the MHRA in line with the grace periods.

By July 1, 2023, in Great Britain, all medical devices will require a UKCA (“UK Conformity Assessed”) mark but CE marks issued by EU notified bodies will remain valid until this time.

Manufacturers may choose to use the UKCA mark on

a voluntary basis until June 30, 2023.

Manufacturers based outside the UK need to appoint a UK Responsible Person that has a registered place of business in the UK to register devices with the MHRA.

On June 26, 2022, the MHRA published its response to a 10-week consultation on the post-Brexit regulatory framework for medical devices and diagnostics.

MHRA seeks to amend the UK Medical Devices Regulations 2002 (which are based on EU legislation, primarily the EU Medical Devices Directive and the EU In Vitro Diagnostic Medical Devices Directive 98/79/EC), in particular to create new access pathways to support innovation, create an innovative framework for regulating software and artificial intelligence as medical devices, reform IVD regulation, and foster sustainability through the reuse and remanufacture of medical devices.

Regulations implementing the new regime were originally scheduled to come into force in July 2023, but have recently been postponed to July 2024.

Devices bearing CE marks issued by EU notified bodies under the EU Medical Devices Regulation, the EU Medical Devices Directive or AIMDD are now subject to transitional arrangements.

In its consultation response, the MHRA indicated that the future UK regulations will allow devices certified under the EU Medical Devices Regulation to be placed on the market in Great Britain under the CE mark until either the certificate expires or for five years after the new regulations take effect, whichever is sooner.

Devices certified under the EU Medical Devices Directive or AIMDD could continue to be placed on the market until either the certificate expires or for three years after the new regulations take effect, whichever is sooner.

Following these transitional periods, it is expected that all medical devices will require a UK Conformity Assessed ("UKCA") mark.

Manufacturers may choose to use the UKCA mark on a voluntary basis until June 30, 2023.

However, UKCA marking will not be recognized in the EU.

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Compliance with this legislation is a prerequisite to be able to affix the UKCA mark to our products, without which they cannot be sold or marketed in Great Britain.

An MHRA public consultation was opened until end of November 2021 on the post-Brexit regulatory framework for medical devices and diagnostics.

The regime is expected to come into force in July 2023, coinciding with the end of the acceptance period for EU CE marks in Great Britain, subject to appropriate transitional arrangements.

The consultation indicated that the MHRA will publish guidance in relation to the changes to the regulatory framework and may rely more heavily on guidance to add flexibility to the regime.

In addition, the Trade Deal between the UK and the EU generally provides for cooperation and exchange of information between the parties in the areas of product safety and compliance, including market surveillance, enforcement activities and measures, standardization-related activities, exchanges of officials, and coordinated product recalls.

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• content and language of instructions for use;

• clinical trials;

• clinical studies;

• record keeping procedures;

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The criminal False Claims Act prohibits the making or presenting of a claim to the government knowing such claim to be false, fictitious or fraudulent and, unlike the federal civil False Claims Act, requires proof of intent to submit a false claim.

knows or should know is for an item or service that was not provided as claimed or is false or fraudulent, or offering or transferring remuneration to a federal healthcare beneficiary that a person knows or should know is likely to influence the beneficiary’s decision to order or receive items or services reimbursable by the government from a particular provider or supplier.

The Civil Monetary Penalty Law imposes penalties against any person or entity that, among other things, is determined to have presented or caused to be presented a claim to a federal healthcare program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent, or offering or transferring remuneration to a federal healthcare beneficiary that a person knows or should know is likely to influence the beneficiary’s decision to order or receive items or services reimbursable by the government from a particular provider or supplier.

The Health Insurance Portability and Accountability Act of 1996 ("HIPAA") also created additional federal criminal statutes that prohibit among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.

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states also mandate implementation of commercial compliance programs, impose restrictions on device manufacturer marketing practices and require tracking and reporting of gifts, compensation, and other remuneration to healthcare professionals and entities.

Violation of any of the federal and state healthcare laws described above or any other governmental regulations that apply to device manufacturers may result in significant penalties, including the imposition of significant civil, criminal and administrative penalties, damages, disgorgement, monetary fines, imprisonment, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, additional reporting requirements and/or oversight if the

entity becomes subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and curtailment of operations.

reputational harm, diminished profits and future earnings, additional reporting requirements and/or oversight if the entity becomes subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and curtailment of operations.

Data Privacy and Security Laws

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For example, the General Data Protection Regulation (the "GDPR"), imposes strict requirements for processing the personal data of individuals within the European Economic Area, or the EEA.

Companies that must comply with the GDPR face increased compliance obligations and risk, including more robust regulatory enforcement of data protection requirements and potential fines for noncompliance of up to €20 million or 4% of the annual global revenues of the noncompliant company, whichever is greater.

Further, from January 1, 2021, companies have had to comply with the GDPR and also the UK GDPR, which, together with the amended UK Data Protection Act 2018, retains the GDPR in UK national law.

The UK GDPR mirrors the fines under the GDPR, i.e., fines up to the greater of €20 million (£17.5 million) or 4% of global turnover.

Privacy and security laws, regulations, and other obligations are constantly evolving, may conflict with each other to complicate compliance efforts, and can result in investigations, proceedings, or actions that lead to significant civil and/or criminal penalties and restrictions on data processing.

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The cost containment measures that payors and providers are instituting and the effect of any healthcare reform initiative implemented in the future could impact our revenue from the sale of our products.

The implementation of the Affordable Care Act in the U.S., for example, has changed healthcare financing and delivery by both governmental and private insurers substantially, and affected medical device manufacturers significantly.

The Affordable Care Act, among other things, provided incentives to programs that increase the federal government’s comparative effectiveness research, and implemented payment system reforms including a national pilot program on payment bundling to encourage hospitals, physicians, and other providers to improve the coordination, quality, and efficiency of certain healthcare services through bundled payment models.

Additionally, the Affordable Care Act expanded eligibility criteria for Medicaid programs and created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.

Since its enactment, there have been judicial, executive and Congressional challenges to certain aspects of the Affordable Care Act.

The implementation of the Affordable Care Act (the "ACA") in the U.S., for example, has changed healthcare financing and delivery by both governmental and private insurers substantially, and affected medical device manufacturers significantly.

The ACA, among other things, provided incentives to programs that increase the federal government’s comparative effectiveness research, and implemented payment system reforms including a national pilot program on payment bundling to encourage hospitals, physicians, and other providers to improve the coordination, quality, and efficiency of certain healthcare services through bundled payment models.

Additionally, the ACA expanded eligibility criteria for Medicaid programs and created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.

Since its enactment, there have been judicial, executive and Congressional challenges to certain aspects of the ACA.

On June 17, 2021, the U.S.

Supreme Court dismissed the most recent judicial challenge to the Affordable Care Act without specifically ruling on the constitutionality of the Affordable Care Act.

Prior to the Supreme Court’s decision, President Biden issued an executive order to initiate a special enrollment period from February 15, 2021 through August 15, 2021 for purposes of obtaining health insurance coverage through the Affordable Care Act marketplace.

The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the Affordable Care Act.

Supreme Court dismissed the most recent judicial challenge to the ACA without specifically ruling on the constitutionality of the ACA.

In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted.

For example, the Budget Control Act of 2011, among other things, included reductions to Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2030, with the exception of a temporary suspension from May 1, 2020 through March 31, 2022, unless additional Congressional action is taken.

Additionally, the American Taxpayer Relief Act of 2012, among other things, reduced Medicare payments to several providers, including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

We expect additional state and federal healthcare reform measures to be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our products or additional pricing pressure.

For example, the Budget Control Act of 2011, among other things, included reductions to Medicare payments to providers, which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect into 2032, with the exception of a temporary suspension from May 1, 2020 through March 31, 2022, unless additional Congressional action is taken.

In addition, the Medicare Access and CHIP Reauthorization Act of 2015 enacted on April 16, 2015, repealed the formula by which Medicare made annual payment adjustments to physicians and replaced the former formula with fixed annual updates and a new system of incentive payments began in 2019 that are based on various performance measures and physicians’ participation in alternative payment models such as accountable care organizations.

We expect additional state, federal, and foreign healthcare reform measures to be adopted in the future, any of which could limit the amounts that federal, state, and foreign governments will pay for healthcare products and services, which could result in reduced demand for our products or additional pricing pressure.

Anti-Bribery and Corruption Laws

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Segment information is consistent with how management reviews our business, makes investing and resource allocation decisions, and assesses our operating performance.

Historically, we have experienced seasonality in our first and fourth quarters, and we expect this trend to continue.

Historically, we have experienced seasonality in our first and fourth fiscal quarters, and we expect this trend to continue.

In the U.S., we have experienced, and may in the future experience, higher sales in the fourth quarter as a result of patients having paid their annual insurance deductibles in full, thereby reducing their out-of-pocket costs.

In the first quarter of each year in Germany, we have experienced reduced demand for our Inspire therapy as Neue Untersuchungs-und-Behandlungsmethoden ("NUB") coverage status is being determined and as hospitals are establishing their budgets pertaining to allocation of funds to purchase our Inspire therapy.

Beginning January 1, 2021, Inspire therapy is fully integrated into the German hospital reimbursement system (“G-DRG”), and we therefore may experience less seasonal fluctuations in Germany although it may not eliminate them.

Conversely, in the first quarter, many U.S.

patients' insurance deductibles reset, requiring more out-of-pocket costs, which negatively impacts our sales during this period.

Human Capital

We pride ourselves on our innovative and collaborative work environment, which we believe has driven our success and which we seek to uphold through a diverse workforce, generous compensation and benefits, open communication, a focus on employee health, wellbeing and engagement, and robust training and development programs.

As of December 31, 2022, we had 755 employees, of which 722 are in the U.S., 32 are in Europe and one is in Japan.

We increased the number of employees by 56% during 2022 to support the rapid growth of our business.

Our internal promotion and progression rate was 15%, of which 60% were women and diverse employees.

We continue to experience a minimal voluntary attrition rate of 6%, despite the market's strong competition for talent.

None of our employees is subject to a collective bargaining agreement or represented by a trade or labor union.

We consider our relationship with our employees to be good.

Code of Business Conduct and Business Ethics

All employees are expected to conduct business with the highest standards business ethics.

Each employee receives and agrees to follow the Inspire Medical Systems Code of Business Conduct and Ethics.

Employees are encouraged to discuss any related concerns with management or report concerns anonymously through an Ethics Hotline.

All reports received on the Ethics Hotline are investigated by an independent third party.

Culture of Respect and Inclusion

Code of Business Conduct and Ethics

Inspire is committed to conducting business in accordance with the highest ethical standards and applicable laws.

We maintain, and all of our employees are expected to adhere to our Code of Business Conduct and Ethics (the “Code of Conduct”), which serves as the foundation of Inspire’s core values that drive our company’s culture.

employees must certify they understand and comply with the expectations contained in the Code of Conduct.

We also maintain an anonymous hotline for employees to report concerns regarding violations of the Code of Conduct.

In addition, our employees complete training and education at least annually on a range of important topics related to our Code of Conduct.

Compensation and Benefits

Our human capital strategies, initiatives, and outcomes are reviewed on a regular basis with our Board’s Organization and Compensation Committee to help align with the company’s overall business strategies.

In 2022, the Committee engaged an independent consulting firm to assess the market competitiveness of our compensation programs and offerings.

We believe strongly in providing employees with the opportunity to participate as owners of the company.

All of our full-time employees are eligible to receive annual grants of stock awards, which may include stock options, restricted stock units, or performance stock units, and can elect to participate in our employee stock purchase program.

Additionally, beginning in 2022, we incorporated a 401(k)-employer match for all U.S.-based employees.

We typically complete a pay equity analysis every other year at the request of the Organization and Compensation Committee.

The Committee reviews the detailed analysis with an outside consulting firm and reports the results to the full Board.

Based on the results of the 2021 analysis, we believe our compensation programs are fair and equitable.

The next analysis is expected to be completed in 2023.

Talent Management

With our aggressive growth objectives, it is imperative that we continue to hire exceptional talent and invest in the growth and development of our existing employees.

Inspire’s growth has required several strategies to attract talent and meet our headcount plans.

We have a strong internal referral network in which between 50% to 60% of all hires have been from internal referrals.

This is supplemented with search partners, who meet with our talent acquisition team on a quarterly basis to review and provide the most up-to-date public information so that potential candidates can fully understand the potential that employment with Inspire can offer.

Our search firms’ partners include U.S.

veteran, women-owned, and minority-owned organizations.

Even with aggressive headcount growth, our global attrition rate has been less than 11%.

We seek to foster a culture where learning is continuous.

We believe in our people and their ability to accept new responsibilities and challenges, and to grow with us to contribute to our success.

We look to foster growth through professional development and learning programs, as well as practical experience leading projects or teams.

To support newly promoted leaders, we have implemented a leadership program entitled, “Boss to Coach,” which is specially designed to help them succeed in their expanded roles.

Additionally, we provide leadership coaching opportunities through external partners.

Our leadership team participates in a talent review and succession planning exercise typically annually in order to identify organizational needs, development opportunities, and potential future leaders.

This has enabled us to identify the resources and skill sets needed to meet our growth objectives.

Over 50% of our leadership promotions have been from within.

In 2022, we launched tools that support individual managers as they seek to enhance their leadership skills and deepen their team’s engagement.

To encourage further professional development of our employees, in 2022 we introduced a tuition reimbursement program for those pursuing an advanced degree.

Diversity, Equity, and Inclusion

We strive to create a culture in which all employees feel heard, respected, and valued.

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In 2020, we created an engaging training initiative for all employees which encourages awareness of unconscious bias and microaggressions.

Building on our 2020 program, we implemented sessions specifically for Inspire leaders in their roles to create respectful culture within their teams.

The goals of these programs are to encourage broad and diverse viewpoints to achieve the best outcomes for our patients, healthcare providers, and employees, and to build awareness of how our own behaviors impact our colleagues.

Talent Management & Development

With our aggressive growth objectives, it is imperative that we have a strong pipeline of external candidates as well as opportunities for current employees to grow within our organization.

To support these critical success factors, we have continued to invest in our talent acquisition group.

In addition, we have created an internal Learning and Development organization to lead our development initiatives.

To encourage further professional development of our employees, in 2022 we introduced a tuition reimbursement program for those pursuing a degree.

Through internal promotions, we proactively reorganized our U.S.

sales team structure to execute continued rapid growth.

To help support the expanded role of our leadership, we created a new leadership program specially designed to help our new leaders be successful in their expanded roles, as well as provide coaching opportunities for our leaders through external partners.

On an annual basis, our leadership team participates in a talent review and succession planning exercise to identify organizational needs, development opportunities, and potential future leaders.

This enables us to identify the resources and skill sets needed to meet our growth objectives.

Compensation Philosophy to Drive High Performing Teams

Our human capital strategies, initiatives, and outcomes are reviewed on a regular basis with our board of directors ensuring alignment with the Company’s overall business strategies.

We continue to evaluate all reward-related strategies to remain competitive externally and internally and ensure our rewards are aligned with our compensation philosophy.

At the direction of the compensation committee of our board of directors, we continue to partner with a consulting firm to benchmark our peer group companies and other key companies from which we recruit talent.

As a result of this analysis, we have implemented a number of changes to our rewards practices which allows us to maintain our competitiveness in the market.

We continue to believe strongly in providing employees the opportunity to participate as owners in the Company.

This is done through equity programs such as the employee stock purchase program and the grant of stock options and restricted stock units.

Additionally, we have incorporated a 401(k) employer match for all U.S.-based employees starting in 2022.

COVID-19 Health and Safety

COVID-19 continues to impact our employees, healthcare providers, and patients, which requires us to find creative and flexible strategies to address the effects.

Our top priority is the health of our employees and their families while ensuring business continuity.

Our safety practices align closely to the guidance set by the Centers for Disease Control and locally mandated regulations.

We have continued with contact tracing of all potential or

confirmed COVID-19 cases throughout our organization to minimize exposure to our employees as well as our external partners, and we have implemented a flexible work schedule to accommodate quarantine situations and the care of family members impacted by COVID-19.

Community Engagement

Throughout the year, Inspire engages in community programs which align with our Company values.

Traditional means of community involvement, however, continue to be a challenge through the pandemic.

Where feasible, we encourage employees to participate in local level in community service programs, including the American Heart Association's Twin Cities Heart Walk, and also companywide participation in the annual Toys for Tots campaign.

Building on our 2020 program, during 2021, we implemented sessions specifically for Inspire leaders to create respectful culture within their teams.

The goals of these programs are to encourage broad and

diverse viewpoints to achieve the best outcomes for our patients, customers, and employees, and to build awareness of how our own behaviors impact our colleagues.

In addition to new employee training focused on creating a harassment-free work environment, managers participate in facilitator-led training focused on the importance of inclusivity and diversity of thought.

Leaders are provided information and tools that help them, with the assistance of our Human Resources team, to investigate and address issues.

The program, entitled “Humanity is our Superpower,” was launched in 2022.

Following the program, leaders meet as a team and review ideas for creating an environment where inclusion prospers.

During talent acquisition, our recruiting team reinforces with hiring managers the importance of seeking and engaging with diverse candidates.

In order to develop a more diverse talent pool, we actively seek diverse candidates to participate in our Internship Program and routinely host activation events at college campus career fairs.

We also partner with four external agencies, including veteran and women-owned organizations, to supplement field hiring with a focus on diverse candidate slates.

As of December 31, 2022, 46% of our workforce was female, and 14% identified as a member of minority racial group.

Charitable Giving

Our employees are passionate about improving the lives of others.

This passion is at the core of our various philanthropic initiatives that our company and employees support, through which, we have had significant positive impact on our community over the years.

As our business continues to grow and expand geographically, we intend to build upon that impact by expanding these initiatives in ways that are aligned with our community giving goals.

Environmental, Social, and Governance

As our business continues to grow and develop, we recognize the importance of making responsible business decisions for the benefit of all of our stakeholders, including our stockholders, customers, employees, partners, the communities in which we work and live, as well as the planet.

To that end, we are in the process of designing, evaluating, and implementing a corporate Environmental, Social and Governance ("ESG") program and engaged an outside consultant to help us conduct a materiality assessment and develop a strategy, including short, intermediate and long-term objectives.

We published our inaugural ESG Report in December 2022, which is available on our website, and expect to continue reporting on our progress to our various stakeholders annually.

Available Information

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We also make these filings available, free of charge, under the Investor Relations section of our website at www.inspiresleep.com as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the SEC.

Our website and the information contained on or connected to that site are not incorporated into this Annual Report on Form 10-K or any other public filing made by us with the SEC.

Our Corporate Governance Guidelines, Code of Business Conduct and Ethics, ESG Report, and the charters for the committees of our Board of Directors are also available free of charge at https://investors.inspiresleep.com.

Information on our website, including our Corporate Governance Guidelines, Code of Business Conduct and Ethics, ESG Report, and committee charters, is not part of this or any other report we file with, or furnish to, the SEC.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business