What changed in this filing

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Item 1A. Risk Factors

2023-02-10 compared with 2022-02-15 · 215 added, 318 removed, 742 unchanged (42% of the section changed)

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You should carefully consider the risks described below, together with the other information included or incorporated by reference in this Annual Report on Form 10-K.

The realization of any of the following risks could have a significant adverse effect on our reputation, business, financial condition, results of operations, growth, and our ability to accomplish our strategic objectives.

In that event, the trading price of our common stock could decline.

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We have incurred significant operating losses since inception, we expect to incur operating losses in the future and we may not be able to achieve or sustain profitability.

We have limited history operating as a commercial company.

We have incurred net losses since our inception in 2007.

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As of December 31, 2022, we had an accumulated deficit of $324.3 million.

To date, we have financed our operations primarily through sales of our Inspire system, private placements of our convertible preferred securities, amounts borrowed under our credit facility, the initial public offering of our common stock that closed in May 2018 ("IPO"), and the two follow-on offerings of our common stock that closed in December 2018 and April 2020 (our "follow-on offerings").

To date, we have financed our operations primarily through sales of our Inspire system, private placements of our convertible preferred securities, amounts borrowed under our credit facility, the initial public offering of our common stock that closed in May 2018 ("IPO"), and the three follow-on offerings of our common stock that closed in December 2018, April 2020, and August 2022.

We have devoted significant resources to research and development activities related to our Inspire system, including clinical and regulatory initiatives to obtain marketing approval, and sales and marketing activities.

We first commercialized our Inspire system in certain European markets in 2011, in the U.S.

in 2014, and Japan in 2021 and therefore do not have a long history operating as a commercial company.

Since 2011, our revenue has been derived, and we expect it to continue to be derived, primarily from sales of our Inspire system.

Because of its recent commercial introduction, our Inspire system has limited product and brand recognition, particularly in new markets.

Because of its recent commercial introduction, in particular in Singapore, our Inspire system has limited product and brand recognition, particularly in new markets.

In addition, demand for our Inspire system may decline or may not increase as quickly as we expect.

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Our revenue is primarily generated from sales of our Inspire system and we are, therefore, highly dependent on it for our success.

We began selling our Inspire system in 2011 in certain European countries, in 2014 in the U.S., and in 2021 in Japan.

We began selling our Inspire system in 2011 in certain European countries, in 2014 in the U.S., in 2021 in Japan, and in 2022 in Singapore.

Sales of our Inspire system accounted for primarily all of our revenue for the years ended December 31, 2022, 2021, and 2020.

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Our ability to execute our growth strategy and become profitable will therefore depend upon the adoption by patients, physicians, and sleep centers, among others, of our Inspire therapy to treat moderate to severe OSA in patients who are unable to use or get consistent benefit from CPAP.

Some physicians may have prior history with or a preference for other treatment options, such as positive airway pressure devices, surgical treatments or oral appliances, or may be reluctant to alter their practice patterns and undergo the training required to enable them to treat patients with our Inspire therapy.

Patients may not adopt our Inspire therapy if, among other potential reasons, their airway anatomy would not allow for effective treatment with Inspire therapy, they are reluctant to receive an implantable device as opposed to an alternative, non-implantable treatment, they are worried about potential adverse effects of our Inspire system, such as infection, discomfort from the stimulation or tongue soreness or weakness, or they are unable to obtain adequate third-party coverage or reimbursement for our Inspire therapy.

We cannot ensure that our Inspire therapy will achieve broad market acceptance among physicians and patients.

We cannot ensure that our Inspire therapy will achieve or maintain broad market acceptance among physicians and patients.

Any failure of the Inspire system to satisfy physician or patient demand or to achieve meaningful market acceptance will harm our business and future prospects.

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Our primary strategy to grow our revenue is to drive an increase in the adoption of our Inspire therapy to treat patients with moderate to severe OSA who are unable to use or get consistent benefit from CPAP.

While the number of physicians prescribing our Inspire therapy has increased in recent years, there is a significant group of physicians who have not yet adopted our Inspire therapy, and additional physicians may choose not to adopt our Inspire therapy for a number of reasons, including:

While the number of physicians prescribing our Inspire therapy has increased, there is a significant group of physicians who have not yet adopted our Inspire therapy, and additional physicians may choose not to adopt our Inspire therapy for a number of reasons, including, for example:

• lack of availability of adequate third-party payor coverage or reimbursement;

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• the training required to use new products.

We focus our sales, marketing, and training efforts primarily on ENT physicians and sleep physicians.

However, physicians from other disciplines, including cardiologists, pulmonologists, electrophysiologists, and primary care physicians, as well as other medical professionals, such as dentists, nurse practitioners, and physician assistants, are often the initial point of contact for patients with OSA.

These physicians and other medical professionals commonly screen and treat patients with moderate to severe OSA, and are likely to prescribe more conventional second-line treatment methods for patients who are unable to use or obtain consistent benefit from CPAP.

We believe that educating physicians in these disciplines and other medical professionals about the clinical merits and patient benefits of our Inspire therapy as a treatment for moderate to severe OSA is a key element of increasing the adoption of our Inspire therapy.

Physicians and other medical professionals commonly screen and treat patients with moderate to severe OSA and are likely to prescribe more conventional second-line treatment methods for patients who are unable to use or obtain consistent benefit from CPAP.

We believe that educating physicians in appropriate disciplines and other medical professionals about the clinical merits and patient benefits of our Inspire therapy as a treatment for moderate to severe OSA is a key element of increasing the adoption of our Inspire therapy.

If additional physicians or other medical professionals do not adopt, or existing physician customers cease prescribing our Inspire therapy for any reason, including those listed above, our ability to execute our growth strategy will be impaired, and our business may be adversely affected.

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If we are unable to achieve and maintain adequate levels of coverage or reimbursement for our Inspire system, or any future products we may seek to commercialize, our commercial success may be severely hindered.

We currently derive primarily all of our revenue from sales of our Inspire system and expect this to continue for the foreseeable future.

We currently derive all of our revenue from sales of our Inspire system and expect this to continue for the foreseeable future.

The primary customers for our products are hospitals and ASCs.

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Further, any decline in the amount payors are willing to reimburse our customers could make it difficult for existing customers to continue using or to adopt our products and could create additional pricing pressure for us.

If we are forced to lower the price we charge for our products, our gross margins will decrease, which could have a material adverse effect on our business, financial condition, and results of operations, and impair our ability to grow our business.

If we are forced to

lower the price we charge for our products, our gross margins will decrease, which could have a material adverse effect on our business, financial condition, and results of operations, and impair our ability to grow our business.

Several third-party payors do not currently cover our products and the related procedures because they have determined that our products and the related procedures are experimental or investigational.

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Therefore, coverage and reimbursement for procedures using our products can differ significantly from payor to payor.

Payors continually review new and existing technologies for possible coverage and can, without notice, deny or reverse coverage for

new or existing products and procedures.

Payors continually review new and existing technologies for possible coverage and can, without notice, deny or reverse coverage for new or existing products and procedures.

There can be no assurance that third-party payor policies will provide coverage for procedures in which our products are used.

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and in international markets.

In Europe, reimbursement is entirely regulated at the Member State level, varies significantly between countries, and member states are facing increased pressure to limit public healthcare spending.

Third-party coverage and reimbursement for procedures using our products or any of our products in development for which we may receive regulatory approval may not be available or adequate in either the U.S.

In Europe, reimbursement is entirely regulated at the member state level, varies significantly between member states, and member states are facing increased pressure to limit public healthcare spending.

Third-party coverage and reimbursement for procedures using our products or any of our products in development for which we may receive regulatory approval or certification may not be available or adequate in either the U.S.

or international markets, which could have an adverse effect on our business, financial condition and results of operations, and impair our ability to grow our business.

Third-party payors who do not cover, or physicians who do not use, our Inspire system may require additional clinical data prior to adopting or maintaining coverage of our Inspire system.

Our success depends on physician and third-party payor acceptance of our Inspire therapy as an effective treatment option for patients with moderate to severe OSA.

If physicians or payors do not find our body of published clinical evidence and data compelling or wish to wait for additional studies, they may choose not to use or provide coverage and reimbursement for our products.

Currently, there are several third-party payors that have determined upper airway neurostimulation to be experimental or investigational and therefore do not cover it at this time.

In addition, the long-term effects of upper airway neurostimulation with our Inspire system beyond 10 years are not yet known.

Certain physicians, hospitals, ASCs, and payors may prefer to see longer-term safety and efficacy data than we have produced.

We cannot provide assurance that any data that we or others may generate in the future will be consistent with that observed in our existing clinical studies.

The training required for physicians to use our Inspire system could reduce the market acceptance of our products.

As with any new method or technique, physicians must undergo a thorough training program before they are qualified to perform the surgery to implant our Inspire system.

Physicians could experience difficulty with the technique necessary to successfully insert the device and may not achieve the technical competency necessary to complete the training program.

Even after successfully completing the training program, physicians could still experience difficulty implanting our Inspire system and, as a result, limit its use significantly in their practice or cease utilizing it altogether.

In addition, we may experience difficulty growing the number of physicians who complete our training program if patient demand is low, if the length of time necessary to train each physician is longer than expected, if the capacity of our sales representatives to train physicians is less than expected or if we are unable to sufficiently grow our sales organization.

All of these events would lead to fewer trained physicians qualified to implant our Inspire system, which could negatively affect our business, financial condition and results of operations, and impair our ability to grow our business.

We currently compete and will in the future continue to compete against other companies, some of which have longer operating histories, more established products or greater resources than we do, which may prevent us from achieving increased market penetration and improved operating results.

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We consider our primary competition to be other neurostimulation technologies designed to treat OSA.

Though we are currently the only such technology approved for commercialization in the

Though we are currently the only such technology approved for commercialization in the U.S.

by the FDA, we currently compete outside the U.S.

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In addition, our Inspire therapy is approved for use as a second-line therapy in the treatment of moderate to severe OSA in patients who cannot use or obtain consistent benefit from CPAP.

If one or more CPAP device manufacturers successfully develop a CPAP device that is more effective, better tolerated or otherwise results in better compliance by patients, or if improvements in other second-line therapies make them more effective, cost effective, easier to use or otherwise more attractive than our Inspire therapy, sales of our Inspire system could be significantly and adversely affected, which could have a material adverse effect on our business and financial condition and results of operations.

significantly and adversely affected, which could have a material adverse effect on our business and financial condition and results of operations.

In addition, if other companies are successful in developing neurostimulation devices that are approved for a broader range of indications than our Inspire system, we will be at a further competitive disadvantage, which could also affect our business, financial condition and results of operations.

Many of the companies against which we compete may have competitive advantages with respect to primary competitive factors in the OSA treatment market, including:

Many of the companies against which we compete may have competitive advantages with respect to primary competitive factors in the OSA treatment market, including, for example:

• greater company, product, and brand recognition;

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In addition, though there are currently no pharmacologic therapies approved to treat OSA, we may in the future face competition from pharmaceutical companies that develop such therapies.

We also expect to experience

increased competition in the future as other companies develop and commercialize competing neurostimulation devices.

We also expect to experience increased competition in the future as other companies develop and commercialize competing neurostimulation devices.

Any of these companies may also have the competitive advantages described above.

Our business, financial condition, results of operations and growth could be significantly harmed by the effects of the COVID-19 pandemic.

We are subject to risks related to public health crises such as the global pandemic associated with COVID-19.

In 2020, a novel strain of coronavirus, SARS-CoV-2, and the resulting disease COVID-19, spread around the world and within the U.S.

New variants of the virus have subsequently emerged, some of which have shown to be more contagious.

The COVID-19 pandemic has negatively impacted our business, results of operations and financial condition by significantly decreasing and delaying the number of Inspire therapy procedures performed and patients screened for eligibility for Inspire therapy, and we expect the COVID-19 pandemic to continue to negatively impact our business, results of operations and financial condition.

The number of Inspire therapy procedures performed, similar to other elective surgical procedures, decreased compared to pre-pandemic levels as health care organizations in the U.S.

Our business, financial condition, results of operations and growth has been and could in the future be significantly harmed by the effects of the COVID-19 pandemic or other pandemics.

The COVID-19 pandemic has negatively impacted our business, results of operations and financial condition by significantly decreasing and delaying the number of Inspire therapy procedures performed and patients screened for eligibility for Inspire therapy, and the COVID-19 pandemic may continue to negatively impact our business, results of operations and financial condition.

The number of Inspire therapy procedures performed, similar to other elective surgical procedures, decreased in 2020 and early 2021 compared to pre-pandemic levels as health care organizations in the U.S.

and globally have prioritized the treatment of patients with COVID-19.

For example, substantially all of our Inspire therapy procedures were postponed beginning in the second week of March 2020 and numerous other cases, which received prior authorization approval, were not able to be scheduled and therefore were also postponed.

Beginning in May 2020, surgical volumes began to increase steadily through the remainder of 2020, with most implanting centers performing procedures by October 2020.

Resurgences of COVID-19 in various U.S.

and European regions and Japan have, and may in the future, negatively impact our procedure volumes.

Additionally, while procedural volume rates for elective surgeries generally returned to pre-pandemic levels in the U.S.

and Europe by March 31, 2021, the COVID-19 pandemic continues to rapidly evolve and its impact on our business will depend on several factors that are highly uncertain and unpredictable.

The COVID-19 pandemic will likely continue to adversely impact our procedure volumes.

These measures and challenges will likely continue for the duration of the pandemic, which is uncertain, and will continue to significantly reduce our revenue and negatively impact our business, results of operations and financial condition while the pandemic continues.

Further, if there are additional or reinstated government mandated or recommended cancellations of elective surgical procedures, this could create in the future a substantial backlog of patients seeking appointments with physicians and surgeries to be performed at hospitals and ambulatory surgery centers relating to a variety of medical conditions, and as a result, patients seeking Inspire therapy procedures to be performed will have to navigate limited provider capacity.

We believe this limited provider, hospital and ambulatory surgery center capacity could have a significant adverse effect on our business, results of operations and financial condition.

Numerous foreign, state and local jurisdictions have imposed, and others in the future may impose, ‘‘shelter-in-place’’ orders, quarantines, social distancing requirements, executive orders and similar government orders and restrictions for their residents to control the spread of COVID-19.

Although such orders have been lifted, various disruptions remain ongoing.

and European regions, Japan, and Singapore have, and may in the future, negatively

impact our procedure volumes.

The COVID-19 pandemic continues to rapidly evolve and its impact on our business will depend on several factors that are highly uncertain and unpredictable.

The COVID-19 pandemic may adversely impact our procedure volumes.

These measures and challenges may continue for the duration of the pandemic, which is uncertain, and may reduce our revenue and negatively impact our business, results of operations and financial condition while the pandemic continues.

Further, if there are additional or reinstated government mandated or recommended cancellations of elective surgical procedures, this could create in the future a substantial backlog of patients seeking appointments with physicians and surgeries to be performed at hospitals and ambulatory surgery centers, and as a result, patients seeking Inspire therapy procedures to be performed may have to navigate limited provider capacity which could have a significant adverse effect on our business, results of operations and financial condition.

Other future pandemics may lead to similar impacts.

Numerous foreign, state, and local jurisdictions have imposed, and others in the future may impose orders and restrictions to control the spread of COVID-19.

These disruptions have included, and future disruptions may also include, restrictions on our personnel and personnel of partners to travel and access customers for training and case support;

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delays in approvals or certifications by regulatory authorities or notified bodies;

delays in ongoing preclinical trials;

delays in ongoing preclinical studies;

delays in operations at insurance agencies, which may impact timelines for the issuance of insurance coverage policies;

diversion of or limitations on employee resources that would otherwise be focused on the operations of our business, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people;

delays in growing or reductions in our sales team, including through delays in hiring, lay-offs, furloughs or other losses of sales representatives;

and additional government requirements or other incremental mitigation efforts that may further impact our or our suppliers’ capacity to manufacture our Inspire system.

The extent to which the COVID-19 pandemic impacts our business will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity and spread of COVID-19, future waves of infection, and the actions to contain COVID-19 or treat its impact, among others.

While the potential economic impact brought by and the duration of COVID-19 may be difficult to assess or predict, the widespread pandemic has resulted in, and may continue to result in, significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity.

In addition, a recession or market correction resulting from the COVID-19 pandemic could materially affect our

The occurrence of any such events may lead to reduced disposable income and access to health insurance which could adversely affect the number of Inspire systems sold after the pandemic has ended.

diversion of or limitations on employee resources that would otherwise be focused on the operations of our business, delays in growing or reductions in our sales team, and additional government requirements or other incremental mitigation efforts that may further impact our or our suppliers’ capacity to manufacture our Inspire system.

The extent to which the COVID-19 pandemic or other future pandemics cause disruptions to our business will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity and spread of COVID-19, future waves of infection, and the actions to contain COVID-19 or treat its impact, among others.

The disruption to global financial markets or a recession or market correction resulting from the COVID-19 pandemic or other future pandemics could materially affect our business.

The occurrence of any such events may lead to reduced disposable income and access to health insurance which could adversely affect the number of Inspire systems sold.

Our long-term growth depends on our ability to enhance our Inspire system, expand our indications, and develop and commercialize additional products.

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• avoid infringing upon the intellectual property rights of third-parties;

• demonstrate, if required, the safety and efficacy of new products with data from preclinical studies and clinical trials;

• demonstrate, if required, the safety and efficacy of new products with data from preclinical studies and clinical studies;

• obtain the necessary regulatory clearances, approvals or certifications for expanded indications, new products or product modifications;

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Our financial results may fluctuate significantly and may not fully reflect the underlying performance of our business.

Our quarterly and annual results of operations may vary significantly in the future, and period-to-period comparisons of our operating results may not be meaningful.

Our quarterly and annual results of operations have in the past and may in the future vary significantly and future period-to-period comparisons of our operating results may not be meaningful.

Accordingly, the results of any one quarter or period should not be relied upon as an indication of future performance.

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during the fourth quarter as a result of patients having paid their annual insurance deductibles in full, thereby reducing their out-of-pocket costs.

Additionally, in the first quarter of each year in Europe, we have historically experienced reduced demand for our Inspire therapy as NUB coverage status is being determined in Germany and as hospitals are establishing their budgets pertaining to allocation of funds to purchase our Inspire therapy.

Beginning January 1, 2021, Inspire therapy was fully integrated into the German hospital reimbursement system (“G-DRG”), however this may not eliminate our seasonal fluctuations in Germany.

Other factors that may cause fluctuations in our quarterly and annual results include:

• patient and physician adoption of our Inspire therapy;

Alternatively, 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.

Other factors that may cause fluctuations in our quarterly and annual results include, but are not limited to:

• changes in coverage policies by third-party payors that affect the reimbursement of procedures using our products;

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• our ability to obtain regulatory clearance, approval, or certification for any products in development or for our current products for additional indications or in additional countries outside the U.S.;

• results of clinical research and trials on our existing products and products in development;

• results of clinical research and studies on our existing products and products in development;

• delays in receipt of anticipated purchase orders;

• delays in, or failure of, component and raw material deliveries by our suppliers;

• positive or negative coverage in the media or clinical publications of our products or products of our competitors or our industry.

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To ensure adequate inventory supply, we must forecast inventory needs and place orders with our suppliers based on our estimates of future demand for our Inspire system.

Our ability to accurately forecast demand for our Inspire system could be negatively affected by many factors, including our failure to accurately manage our expansion strategy, product introductions by competitors, an increase or decrease in customer demand for our Inspire system or for products of our competitors, our failure to accurately forecast customer acceptance of new products, unanticipated changes in general market conditions or regulatory matters, and weakening of economic conditions or consumer confidence in future economic conditions.

Our ability to accurately forecast demand for our

Inspire system could be negatively affected by many factors, including our failure to accurately manage our expansion strategy, product introductions by competitors, an increase or decrease in customer demand for our Inspire system or for products of our competitors, our failure to accurately forecast customer acceptance of new products, unanticipated changes in general market conditions or regulatory matters, and weakening of economic conditions or consumer confidence in future economic conditions.

Inventory levels in excess of customer demand may result in inventory write-downs or write-offs, which would cause our gross margin to be adversely affected and could impair the strength of our brand.

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As a result, we are subject to the risk that a portion of our inventory will become obsolete or expire, which could have a material adverse effect on our earnings and cash flows due to the resulting costs associated with the inventory impairment charges and costs required to replace such inventory.

We have experienced and continue to experience supply disruptions which began during the COVID pandemic, and our efforts to maintain higher levels of inventory to protect ourselves from supply interruptions may not be successful in avoiding significant supply and inventory issues or delay in implant procedures.

As a result, we are subject to the risk of inventory obsolescence and expiration, which could lead to inventory impairment charges.

For example, during the three months ended September 30, 2022, we recorded a charge of $2.8 million for obsolete inventory and component parts related to product introductions which were completed in October 2022, including the new silicone leads and the Bluetooth®-enabled patient remote.

We rely on a limited number of third-party suppliers and contract manufacturers for the manufacture and assembly of our products, and a loss or degradation in performance of these suppliers and contract manufacturers could have a material adverse effect on our business, financial condition, and results of operations.

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Our ability to supply our products commercially and to develop any future products depends, in part, on our ability to obtain these materials, components, and products in accordance with regulatory requirements and in sufficient quantities for commercialization and clinical testing.

While our suppliers and contract manufacturers have generally met our demand for their products and services on a timely basis in the past, we cannot guarantee that they will in the future be able to meet our demand for their products, which could be adversely affected due to, for example, natural and man-made disasters, public health emergencies, pandemics such as COVID-19, other catastrophic events, the nature of our agreements with our contract manufacturers, our relative importance to such manufacturers as a customer or a contract manufacturer's decision to discontinue or reduce the level of business they conduct with us.

While our suppliers and contract manufacturers have generally met our demand for their products and services on a timely basis in the past, we cannot guarantee that they will in the future be able to meet our demand for their products or prevent delays in the delivery of their products, which could be adversely affected due to, for example, natural and man-made disasters, public health emergencies such as the COVID-19 pandemic, product quality issues, other catastrophic events, the macroeconomic environment including supply chain constraints, higher inflation and interest rates, the nature of our agreements with our contract manufacturers, our relative importance to such manufacturers as a customer or a contract manufacturer's decision to discontinue or reduce the level of business they conduct with us.

If we are required to change contract manufacturers due to any change in or termination of our relationships with these third parties, or if our manufacturers are unable to obtain the materials they need to produce our products at consistent prices or at all, we may lose sales, experience manufacturing or other delays, incur increased costs or otherwise experience impairment to our customer relationships.

We cannot guarantee that we will be able to establish alternative relationships on similar terms, without delay or at all.

While we believe replacement suppliers and manufacturers exist for all materials, components, and services necessary to manufacture our Inspire system, establishing additional or replacement suppliers for any of these materials, components or services, if required, could be time-consuming and expensive, may result in interruptions in our operations and product delivery, may affect the performance specifications of our Inspire system or could require that we modify its design.

Even if we are able to find replacement suppliers or third-party contract manufacturers, we will be required to verify that the new supplier or third-party manufacturer maintains facilities, procedures, and operations that comply with our quality expectations and applicable regulatory requirements.

Establishing additional or replacement suppliers for any of these materials, components or services, if required, could be time-consuming and expensive, may result in interruptions in our operations and product delivery, may affect the performance specifications of our Inspire system or could require that we modify its design.

are able to find replacement suppliers or third-party contract manufacturers, we will be required to verify that the new supplier or third-party manufacturer maintains facilities, procedures, and operations that comply with our quality expectations and applicable regulatory requirements.

Furthermore, our contract manufacturers could require us to move to another one of their production facilities or use alternative materials or components.

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We rely heavily on providers of transport services for reliable and secure point-to-point transport of our Inspire system to our customers and for tracking of these shipments.

Should a carrier encounter delivery performance issues such as loss, damage or destruction of any systems, such occurrences may damage our reputation and lead to decreased demand for our Inspire system and increased cost and expense to our business.

Should a carrier encounter delivery performance issues such as delivery delays or loss, damage or destruction of any systems, such occurrences may damage our reputation and lead to decreased demand for our Inspire system and increased cost and expense to our business.

Similarly, strikes, severe weather, natural disasters, public health crises or other service interruptions affecting delivery services we use would adversely affect our ability to process orders for our Inspire system on a timely basis.

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We expect that market demand, government regulation, third-party coverage, and reimbursement policies and societal pressures will continue to change the healthcare industry worldwide, resulting in further business consolidations and alliances among our customers, which may exert further downward pressure on the prices of our products.

We have limited experience marketing and selling our Inspire system, and if we are unable to expand, manage and maintain our direct sales and marketing organization we may not be able to generate revenue growth.

We began selling our Inspire system in certain European markets in 2011, in the U.S.

in 2014, and in Japan in 2021.

As a result, we have limited experience marketing and selling our Inspire system.

If we are unable to expand, manage and maintain our direct sales and marketing organization we may not be able to generate revenue growth.

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

and Europe, and also utilize various direct-to-consumer marketing initiatives, including paid online search, radio, television, social media, and online videos.

In Japan, we sell our products through a distributor.

In Japan and Singapore, we sell our products through a distributor.

As of December 31, 2022, our direct sales and marketing organization, including reimbursement personnel, consisted of 523 employees, having increased from 72 employees as of December 31, 2017 .

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If our direct sales force fails to adequately promote, market and sell our Inspire system, our revenue may be adversely affected.

In order to generate future revenue growth, we plan to expand the size and geographic scope of our direct sales organization.

In order to generate future revenue growth, we plan to continue to expand the size and geographic scope of our direct sales organization.

This growth may require us to split or adjust existing sales territories, which may adversely affect our ability to retain customers in those territories.

Additionally, our future success will depend largely on our ability to continue to hire, train, retain, and motivate skilled sales and reimbursement personnel with significant industry experience and technical knowledge of implantable devices and related products.

Because the competition for their services is high, we cannot ensure that we will be able to hire and retain additional personnel on favorable or commercially reasonable terms, if at all.

competition for their services is high, we cannot ensure that we will be able to hire and retain additional personnel on favorable or commercially reasonable terms, if at all.

Failure to hire or retain qualified sales and reimbursement personnel would prevent us from expanding our business and generating revenue.

If we are unable to expand our sales and marketing capabilities, we may not be able to effectively commercialize our Inspire system, which could have an adverse effect on our business, financial condition, and results of operations.

To successfully market and sell our Inspire system in markets outside of the U.S., we must address many international business risks with which we have limited experience.

To successfully market and sell our Inspire system in markets outside of the U.S., we must address many international business risks.

Sales in markets outside of the U.S.

accounted for approximately 3.2%, 5.3%, and 8.0% of our revenue for the years ended December 31, 2022, 2021, and 2020, respectively.

Our strategy is to increase our international presence in Europe, including Germany and the Netherlands, as well as other international markets, such as Japan and Australia, which may increase our revenue from markets outside the U.S.

International sales are subject to a number of risks, including:

Our strategy is to increase our international presence in Europe, including Germany and the Netherlands, as well as other international markets, such as Japan, Singapore, Hong Kong, and Australia.

This strategy is subject to a number of risks, including:

• difficulties in staffing and managing our international operations;

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• reduced or varied protection for intellectual property rights in some countries;

• export restrictions, trade regulations, and foreign tax laws;

• trade export restrictions, trade regulations, and foreign tax laws;

• fluctuations in currency exchange rates;

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Some of our competitors rely predominantly on independent sales agents and third-party distributors.

A direct sales force may subject us to higher fixed costs than those of companies that market competing products through independent third parties, due to the costs that we will bear associated with employee benefits, training, and managing sales personnel.

A direct sales force has in the past and may in the future subject us to higher fixed costs than those of companies that market competing products through independent third parties, due to the costs that we bear associated with employee benefits, training, and managing sales

As a result, we could be at a competitive disadvantage.

Additionally, these fixed costs may slow our ability to reduce costs in the face of a sudden decline in demand for our Inspire system, which could have a material adverse effect on our business, financial condition, and results of operations.

We may be unable to manage our growth effectively.

Our past growth has provided, and our future growth may create, challenges for our organization.

From December 31, 2016 to December 31, 2021, the number of our employees increased from 79 to 485.

In the future, we expect to hire and train new personnel as we continue to grow and expand our operations.

This growth may place significant strain on us.

Successful growth is also dependent upon our ability to implement appropriate financial and management controls and systems and procedures.

If we fail to manage these challenges effectively, there may be an adverse effect on our business, financial condition, and results of operations.

Our ability to maintain our competitive position depends on our ability to attract and retain senior management and other highly qualified personnel.

Our success depends in part on our continued ability to attract, retain, and motivate highly qualified management, clinical, and other personnel.

We are highly dependent upon our management team, particularly our Chief Executive Officer and President and the rest of our senior management, and other key personnel.

Although we have entered into employment letter agreements with all of our executive officers, each of them may terminate their employment with us at any time.

The replacement of any of our key personnel likely would involve significant time and costs and may significantly delay or prevent the achievement of our business objectives and could therefore have an adverse effect on our business.

Our future success also depends on our ability to continue to

attract and retain additional executive officers and other key employees who have the requisite background and skills relevant to our business and industry, a product like Inspire therapy and a company at our stage of growth.

We face the risk of product liability claims that could be expensive, divert management’s attention and harm our reputation and business.

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• product recalls or withdrawals from the market;

• withdrawal of clinical trial participants;

• withdrawal of clinical study participants;

• substantial monetary awards to patients or other claimants;

• loss of sales.

While we may attempt to manage our product liability exposure by proactively recalling or withdrawing from the market any defective products, any recall or market withdrawal of our products may delay the supply of those products to our customers and may impact our reputation.

We can provide no assurance that we will be successful in initiating appropriate market recall or market withdrawal efforts that may be required in the future or that these efforts will have the intended effect of preventing product malfunctions and the accompanying product liability that may result.

Such recalls and withdrawals may also be used by our competitors to harm our reputation for safety or be perceived by patients as a safety risk when considering the use of our products, either of which could have a material adverse effect on our business, financial condition and results of operations.

Although we have product liability and clinical study liability insurance that we believe is appropriate, this insurance is subject to deductibles and coverage limitations.

Although we have product liability and clinical study liability insurance, this insurance is subject to deductibles and coverage limitations.

Our current product liability insurance may not continue to be available to us on acceptable terms, if at all, and, if available, coverage may not be adequate to protect us against any future product liability claims.

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In the course of conducting our business, we must adequately address quality issues that may arise with our Inspire system, including defects in third-party components included in our Inspire system.

Although we have established internal procedures designed to minimize risks that may arise from quality issues, there can be no assurance that we will be able to eliminate or mitigate occurrences of these issues and associated liabilities.

There can be no assurance that we will be able to eliminate or mitigate occurrences of quality issues and associated liabilities.

In addition, even in the absence of quality issues, we may be subject to claims and liability if the performance of our Inspire system does not live up to the expectations of physicians or patients as a result of the patient’s use of the product.

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The global financial crisis caused extreme volatility and disruptions in the capital and credit markets.

Factors such as Brexit, the COVID-19 pandemic and the U.S.

Factors such as geopolitical events (including the ongoing war in Ukraine), inflationary pressures, impacts from the COVID-19 pandemic, and the U.S.

election cycles have contributed to this volatility.

These global economic conditions could result in a variety of risks to our business, including weakened demand for our Inspire system, and adversely impact our ability to raise additional capital when needed on acceptable terms, if at all.

A weak or declining economy could also strain our manufacturers or suppliers, possibly resulting in supply disruption, or cause our customers to delay making payments for our services.

A weak or declining economy has strained in the past and may in the future strain our manufacturers or suppliers, possibly resulting in supply disruption, or cause our customers to delay making payments for our services.

Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the economic climate and financial market conditions could adversely affect our business.

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These systems affect, among other things, ordering and managing materials from suppliers, shipping products to customers, processing transactions, summarizing and reporting results of operations, complying with regulatory, legal or tax requirements, data security and other processes necessary to manage our business.

Our internal information technology systems and those of our third-party service providers, vendors, strategic partners and other contractors or consultants are vulnerable to damage or interruption from computer viruses, natural disasters, terrorism, war, telecommunication and electrical failures, hacking, cyberattacks, phishing attacks and other social engineering schemes, malicious code, employee theft or misuse, human error, fraud, denial or degradation of

service attacks, sophisticated nation-state and nation-state-supported actors or unauthorized access or use by persons inside our organization, or persons with access to systems inside our organization.

Our information technology systems and those of our third-party service providers, vendors, strategic partners and other contractors or consultants are vulnerable to damage or interruption from computer viruses and malware (e.g.

ransomware), natural disasters, terrorism, war, telecommunication and electrical failures, hacking, cyberattacks, phishing attacks and other social engineering schemes, malicious code, employee theft or misuse, human error, fraud, denial or

degradation of service attacks, sophisticated nation-state and nation-state-supported actors or unauthorized access or use by persons inside our organization, or persons with access to systems inside our organization.

The risk of a security breach or disruption, particularly through cyberattacks or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased and evolved.

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We may experience security breaches that may remain undetected for an extended period.

Even if identified, we may be unable to adequately investigate or remediate incidents or breaches due to attackers increasingly using tools and techniques that are designed to circumvent controls, to avoid detection, and to remove or obfuscate forensic evidence.

Our third-party service providers and partners are also subject to these heightened risks.

If our systems are damaged or cease to function properly due to any number of causes, ranging from catastrophic events to power outages to security breaches, and our business continuity plans do not effectively compensate on a timely basis, we may experience interruptions in our operations, which could have an adverse effect on our business.

Furthermore, any breach in our IT systems could lead to the unauthorized access, disclosure and use of non-public information, including information from our ADHERE patient registry or other patient information we create, receive, maintain or transmit, including with respect to our Inspire Cloud or the Inspire Sleep app, which is governed by HIPAA and other laws.

We and certain of our service providers are from time to time subject to cyberattacks and security incidents.

While we do not believe that we have experienced any significant system failure, accident or security breach to date, if such an event were to occur, it could lead to unauthorized access, disclosure and use of non-public information, including information from our ADHERE patient registry or other patient information we create, receive, maintain or transmit, including with respect to our Inspire Cloud, SleepSync™, or the Inspire Sleep app, which are governed by HIPAA and other laws.

Any such access, disclosure, or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, and damage to our reputation.

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The inability to perform those activities, combined with the time it may take to rebuild our inventory of finished product, may result in the loss of customers or harm to our reputation.

Although we possess insurance for damage to our property and the disruption of our business, this insurance may not be sufficient to cover all of our potential losses and this insurance may not continue to be available to us on acceptable terms, or at all.

Although we possess insurance for damage to our property and the disruption of our business, this

insurance may not be sufficient to cover all of our potential losses and this insurance may not continue to be available to us on acceptable terms, or at all.

We rely on third-party distributors to effectively distribute our products in certain markets.

We depend or expect to depend in the future on qualified distributors for the marketing and selling of our products in certain markets, namely in Japan, Singapore, and Hong Kong.

We depend or expect to depend in the future on qualified distributors for the marketing and selling of our products in certain markets.

Currently, the markets in which we market and sell our products through distributors include Japan, Singapore, and Hong Kong.

If our distributors fail to effectively market and sell our Inspire system in full compliance with applicable laws, our operating results and business may suffer.

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To develop and expand our distribution, we may be required to scale and improve our processes and procedures that support our distributors.

Further, if our relationship with a successful distributor terminates, we may be unable to replace that distributor without disruption to our business.

If we fail to develop or maintain positive relationships with our distributors, including in new markets, fail to manage, train or incentivize these distributors effectively, or fail to provide distributors with competitive products on attractive terms, or if these distributors are not successful in their sales efforts, we may not achieve expected revenues or may have a reduction in revenue and our operating results, reputation and business would be harmed.

Further, if our relationship with a distributor in a given market terminates, we may be unable to replace that distributor without disruption to our business, or we may decide to transition to a direct sales force in that market.

If we fail to develop or maintain positive relationships with our distributors, including in new markets, fail to manage, train or incentivize these distributors effectively, or fail to provide distributors with competitive products on attractive terms, or if these distributors are not successful in their sales efforts, or if we are unable to successfully transition to a direct sales force in markets previously served by distributors, we may not achieve expected revenues or may have a reduction in revenue and our operating results, reputation and business would be harmed.

We are subject to anti-bribery, anti-corruption, and anti-money laundering laws, including the U.S.

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If we fail to comply with these laws, we could be subject to civil or criminal penalties, other remedial measures and legal expenses, which could adversely affect our business, results of operations and financial condition.

As we grow our international presence and global operations, we will have increasing obligations to comply with trade and economic sanctions and other restrictions imposed by the U.S., the European Union ("EU") and other governments and organizations.

During the year ended December 31, 2021, approximately 5.3% of our total sales were made in EU member states and Japan.

During the year ended December 31, 2022, approximately 3.2% of our total sales were made in EU member states, Japan, and Singapore.

Departments of Justice, Commerce, State and Treasury and other federal agencies and authorities have a broad range of civil and criminal penalties they may seek to impose against corporations and individuals for violations of economic sanctions laws, export control laws, the U.S.

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Violations of the FCPA, OFAC restrictions, the Bribery Act or other export control, anti-corruption, anti-money laundering and anti-terrorism laws or regulations may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could have a material adverse effect on our business, financial condition and results of operations.

Our indebtedness may limit our flexibility in operating our business and adversely affect our financial health and competitive position.

As of December 31, 2021, we had $24.5 million of indebtedness outstanding under our credit facility with Oxford Finance LLC ("Oxford Finance").

In order to service this indebtedness and any additional indebtedness we may

incur in the future, we need to generate cash from our operating activities.

Our ability to generate cash is subject, in part, to our ability to successfully execute our business strategy, as well as general economic, financial, competitive, regulatory and other factors beyond our control.

We cannot ensure that our business will be able to generate sufficient cash flow from operations or that future borrowings or other financings will be available to us in an amount sufficient to enable us to service our indebtedness and fund our other liquidity needs.

To the extent we are required to use cash from operations or the proceeds of any future financing to service our indebtedness instead of funding working capital, capital expenditures or other general corporate purposes, we will be less able to plan for, or react to, changes in our business, industry and in the economy generally.

This will place us at a competitive disadvantage compared to our competitors that have less indebtedness.

In addition, the agreement governing the credit facility contains, and any agreements evidencing or governing other future indebtedness may contain, certain covenants that limit our ability to engage in certain transactions that may be in our long-term best interests.

Subject to certain limited exceptions, these covenants limit our ability to, among other things:

• convey, sell, lease, transfer, assign, dispose of or otherwise make cash payments consisting of all or any part of our business or property;

• effect certain changes in our business, management, ownership or business locations;

• merge or consolidate with, or acquire all or substantially all of the capital stock or assets of, any other company;

• create, incur, assume or be liable for any additional indebtedness, or create, incur, allow or permit to exist any additional liens;

• pay cash dividends on, make any other distributions in respect of, or redeem, retire or repurchase, any shares of our capital stock;

• make certain investments;

• enter into transactions with our affiliates.

While we have not previously breached and are not currently in breach of these or any of the other covenants contained in our credit agreement, there can be no guarantee that we will not breach these covenants in the future.

Our ability to comply with these covenants may be affected by events and factors beyond our control.

In the event that we breach one or more covenants, our lender may choose to declare an event of default and require that we immediately repay all amounts outstanding, terminate any commitment to extend further credit and foreclose on the collateral granted to it to collateralize such indebtedness.

The occurrence of any of these events could have a material adverse effect on our business, financial condition and results of operations.

A portion of our indebtedness bears interest at variable interest rates, primarily based on the London Inter-bank Offered Rate (“LIBOR”), which may be subject to regulatory guidance and/or reform that could cause interest rates under our current or future debt agreements to perform differently than in the past or cause other unanticipated consequences.

Some tenors of LIBOR were discontinued on December 31, 2021.

Although we expect that the capital and debt markets will cease to use LIBOR as a benchmark in the near future and the administrator of LIBOR has announced its intention to extend the publication of most tenors of LIBOR for U.S.

dollars through June 30, 2023, we cannot predict whether or when LIBOR will actually cease to be available, whether the Secured Overnight Funding Rate, or SOFR, will become the market benchmark in its place or what impact such a transition may have on our business, financial condition and results of operations.

We bear the risk of warranty claims on our Inspire system.

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We may not be successful in claiming recovery under any warranty or indemnity provided to us by our suppliers or vendors in the event of a successful warranty claim against us by a customer or that any recovery from such vendor or supplier would be adequate.

warranty claims brought by our customers related to third-party components may arise after our ability to bring corresponding warranty claims against such suppliers expires, which could result in costs to us.

In addition, warranty claims brought by our customers related to third-party components may arise after our ability to bring corresponding warranty claims against such suppliers expires, which could result in costs to us.

We may need substantial additional funding beyond our existing cash resources and may be unable to raise capital when needed, which could force us to delay or reduce our commercialization efforts or product development programs.

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If we do not have, or are not able to obtain, sufficient funds, we may have to delay development or commercialization of our products or license to third-parties the rights to commercialize products or technologies that we would otherwise seek to commercialize.

We also may have to reduce marketing, customer support or other resources

devoted to our products or cease operations.

We also may have to reduce marketing, customer support or other resources devoted to our products or cease operations.

Any of these factors could harm our business, financial condition and results of operations.

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In general, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the "Code"), a corporation that undergoes an “ownership change,” generally defined as a greater than 50% change by value in its equity ownership over a three-year period, is subject to limitations on its ability to utilize its pre-change net operating losses ("NOLs") and its research and development credit carryforwards to offset future taxable income.

We have not performed a detailed analysis to determine whether an ownership change has occurred.

We are currently performing a detailed analysis to determine whether an ownership change has occurred and if a limitation exists.

Based on the preliminary results of the analysis, we believe there is no evidence that this limitation would hinder the utilization of our net operating loss carryforwards or R&D credit carryforwards in the future.

As of December 31, 2022, our gross federal NOL carryforward was $257.4 million.

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However, if we were to be deemed an investment company, restrictions imposed by the 1940 Act, including limitations on our capital structure and our ability to transact with affiliates, could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business, financial condition and results of operations.

The increasing focus on environmental sustainability and social initiatives could increase our costs, harm our reputation and adversely impact our financial results.

There has been increasing public focus by investors, customers, environmental activists, the media, and governmental and nongovernmental organizations on a variety of environmental, social and other sustainability matters.

We experience pressure to make commitments relating to sustainability matters that affect us, including the design and implementation of specific risk mitigation strategic initiatives relating to sustainability.

If we are not effective in addressing environmental, social and other sustainability matters affecting our business, or setting and meeting relevant sustainability goals, our reputation and financial results may suffer.

We may experience increased costs in order to execute upon our sustainability goals and measure achievement of those goals, which could have an adverse impact on our business and financial condition.

In addition, this emphasis on environmental, social and other sustainability matters has resulted and may result in the adoption of new laws and regulations, including new reporting requirements.

If we fail to comply with new laws, regulations or reporting requirements, our reputation and business could be adversely impacted.

The increasing and evolving focus on sustainability and environmental, social, and governance initiatives from regulators and stakeholders could increase our costs, harm our reputation and adversely impact our financial results.

There has been increasing and evolving public focus by investors, customers, environmental and social activists, the media, politicians, and governmental and nongovernmental organizations and other stakeholders on a variety of environmental, social, and governance (“ESG”) matters.

We experience pressure to make commitments relating to ESG matters that affect us, including the design and implementation of specific risk mitigation strategic initiatives relating to ESG.

If we are not effective in addressing ESG matters relevant to business, including

meeting stakeholder expectations regarding relevant ESG goals, practices, initiatives, commitments, performance and/or public disclosures, our reputation and financial results may suffer.

We may experience increased costs in order to execute upon our ESG goals, initiatives, and commitments and measure achievement of those goals, initiatives, and commitments which could have an adverse impact on our business and financial condition.

Moreover, the increasing attention to corporate ESG initiatives could also result in reduced demand for products, reduced profits, and increased investigations and litigation.

In addition, organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on ESG matters.

Such ratings are used by some investors to inform their investment or voting decisions.

Unfavorable ESG ratings could lead to negative investor sentiment toward us and/or our industry, which could have a negative impact on our access to and costs of capital.

To the extent ESG matters negatively impact our reputation, we may also not be able to compete as effectively to recruit or retain employees.

This emphasis on ESG matters has resulted and may result in the adoption of new laws and regulations, including new reporting requirements.

As we continue to focus on our ESG goals, initiatives, commitments, performance, and disclosures, and as ESG-related laws, regulations, and voluntary and required disclosure standards and frameworks continue to evolve, we have expanded our public disclosures in these areas.

Such disclosures may reflect goals, aspirations, commitments, and other expectations and assumptions, which are necessarily uncertain and may not be realized.

If we fail to comply with new laws or regulations or accurately disclose against voluntary or required reporting standards or frameworks, our reputation and business could be adversely impacted.

Climate-related events and other events could harm our business.

Natural disasters, disease outbreaks and pandemics, power shortages, terrorism, political unrest, telecommunications failure, vandalism, geopolitical instability, war, climate-related events, and other events beyond our control could negatively impact our operations or otherwise harm our business.

Such events may result in damage or loss of service to assets that our operations rely on, cause delays in product development or availability, or result in losses of critical data, any of which may adversely impact our operations.

In addition, the impacts of climate-related events on the global economy and our industry are rapidly evolving.

Physical impacts of climate-related events (including but not limited to floods, droughts, more frequent and/or intense storms and wildfires), may disrupt our operations, as well as the operations of our suppliers and customers.

Longer term physical impacts may also result in changing consumer preferences, which may adversely impact demand for certain of our products.

Transition impacts of climate-related events may subject us to increased regulations, reporting requirements, standards or expectations regarding the environmental impacts of our business.

Failure to disclose accurate climate-related events information in a timely manner may also adversely affect our reputation, business, or financial performance.

Risks Related to Government Regulation

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testing, labeling, content and language of instructions for use and storage;

clinical trials;

clinical studies;

product safety;

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The regulations to which we are subject are complex and have tended to become more stringent over time.

Regulatory changes could result in restrictions on our ability to carry on or expand our operations, higher than anticipated costs or lower than anticipated sales.

The FDA and foreign regulatory authorities enforce these regulatory requirements through periodic unannounced inspections.

Regulatory changes could result in restrictions on our ability to carry on or expand our operations, higher than

anticipated costs or lower than anticipated sales.

The FDA, foreign regulatory authorities, and notified bodies enforce these regulatory requirements through periodic unannounced inspections.

Failure to comply with applicable regulations could jeopardize our ability to sell our products and result in enforcement actions such as:

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In the U.S., before we can market a new medical device, or a new use of, or claim for, or significant modification to, an existing product, we must first receive PMA from the FDA.

In the process of obtaining PMA, which was required for our Inspire system, the FDA must determine that a proposed device is safe and effective for its intended use based, in part, on extensive data, including, but not limited to, technical, pre-clinical, clinical trial, manufacturing and labeling data.

The PMA process is typically required for devices that are deemed to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices.

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The process of obtaining a PMA is costly and more uncertain than the 510(k) clearance process used for lower risk devices.

PMAs generally take from one to three years, or even longer, from the time the application is filed with the FDA.

In addition, a PMA often requires the performance of one or more clinical trials.

Despite the time, effort and cost, a device may not be approved by the FDA.

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Furthermore, even if we are granted regulatory approval, it may include significant limitations on the indicated uses for the device, which may limit the market for the device.

In the U.S., we have obtained approval of our Inspire system through the PMA pathway.

Any modification to the Inspire system that has not been previously approved may require us to submit a new PMA or PMA supplement and obtain FDA approval prior to implementing the change.

If the FDA requires us to go through a lengthier, more rigorous examination for future products or modifications to existing products than we had expected, product introductions or modifications could be delayed or canceled, which could adversely affect our ability to grow our business.

The FDA and other regulatory authorities or notified bodies outside the U.S.

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• our inability to demonstrate to the satisfaction of the FDA or the applicable foreign regulatory entity or notified body that our products are safe or effective for their intended uses;

• the disagreement of the FDA or the applicable foreign regulatory authority or notified body with the design or implementation of our clinical trials or the interpretation of data from pre-clinical studies or clinical trials;

• serious and unexpected adverse device effects experienced by participants in our clinical trials;

• the data from our pre-clinical studies and clinical trials may be insufficient to support approval or certification, where required;

• the disagreement of the FDA or the applicable foreign regulatory authority or notified body with the design or implementation of our clinical studies or the interpretation of data from pre-clinical studies or clinical studies;

• serious and unexpected adverse device effects experienced by participants in our clinical studies;

• the data from our pre-clinical studies and clinical studies may be insufficient to support approval or certification, where required;

• our inability to demonstrate that the clinical and other benefits of the device outweigh the risks;

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Such policy or regulatory changes could impose additional requirements upon us that could delay our ability to obtain new approvals, increase the costs of compliance or restrict our ability to maintain our current approval.

The EU landscape concerning medical devices recently evolved.

On May 25, 2017, the EU Medical Devices Regulation entered into force, which repeals and replaces the Council Directive 93/42/EEC (the “EU Medical Devices Directive”) and Directive 90/385/EEC (“AIMDD”).

Unlike directives, which must be implemented into the national laws of the EU member states, regulations are directly applicable (i.e., without the need for adoption of EU member state laws implementing them) in all EU member states and are intended to eliminate current differences in the regulation of medical devices among EU member states.

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.

In particular, the certificate in question must still be valid.

However, even in this case, manufacturers must comply with a number of new or reinforced requirements set forth in the EU Medical Devices Regulation with regard to registration of economic operators and of devices, post-market surveillance, market surveillance and vigilance requirements.

Subject to the transitional provisions, in order to sell our products in EU member states, our products must comply with the general safety and performance requirements of the EU Medical Devices Regulation, which repeals and replaces EU Medical Devices Directive and the AIMDD.

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If we fail to comply with applicable laws and regulations, we would be unable to affix the CE mark to our products, which would prevent us from selling them within the EU.

The aforementioned EU rules are generally applicable in the EEA, and non-compliance with the above requirements would also prevent us from selling our products in these three countries.

We must inform the notified body that carried out the conformity assessment of the medical devices that we market or sell in the EU and the EEA of any planned substantial changes to our quality system or substantial changes to our medical devices that could affect compliance with the general safety and performance requirements laid down in Annex I to the EU Medical Devices Regulation or cause a substantial change to the intended use for which the device has been CE marked.

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If the assessment is favorable, the notified body will issue a new certificate of conformity or an addendum to the existing certificate attesting compliance with the general safety and performance requirements and quality system requirements laid down in the Annexes to the EU Medical Devices Regulation.

Modifications to our products may require us to obtain new PMAs or approvals of a PMA supplement, and if we market modified products without obtaining necessary approvals, we may be required to cease marketing or recall the modified products until required approvals are obtained.

Modifications to our products may require us to obtain new PMAs or approvals of a PMA supplement or certification, and if we market modified products without obtaining necessary approvals or certifications, we may be required to cease marketing or recall the modified products until required approvals are obtained.

Certain modifications to a PMA-approved device may require approval of a new PMA or a PMA supplement, or alternatively a notification or other submission to the FDA.

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If the FDA disagrees with our determination and requires us to submit a new PMA or PMA supplement for modifications to our previously approved products, we may be required to cease marketing or to recall the modified product until we obtain approval, and we may be subject to significant regulatory fines or penalties.

In addition, the FDA may not approve our products for the indications that are necessary or desirable for successful commercialization or could require clinical trials to support any modifications.

In addition, the FDA may not approve our products for the indications that are necessary or desirable for successful commercialization or could require clinical studies to support any modifications.

Similar requirements may apply in foreign jurisdictions where we market our products.

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Failure to submit such reports, or failure to submit the reports in a timely manner, could result in enforcement action by the FDA.

Following its review of the periodic reports, the FDA might ask for additional information or initiate further investigation.

Following its review of the periodic reports, the FDA might ask for additional

information or initiate further investigation.

Similar requirements may apply in foreign jurisdictions where we market our products.

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Our third-party manufacturers may not take the necessary steps to comply with applicable regulations, which could cause delays in the delivery of our products.

In addition, failure to comply with applicable FDA foreign requirements or later discovery of previously unknown problems with our products or manufacturing processes could result in, among other things:

In addition, failure to comply with applicable FDA and foreign requirements or later discovery of previously unknown problems with our products or manufacturing processes could result in, among other things:

warning letters or untitled letters;

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If any of these events occurs, our reputation could be harmed, we could be exposed to product liability claims and we could lose customers and experience reduced sales and increased costs.

If treatment guidelines for OSA change or the standard of care evolves, we may need to redesign and seek new marketing authorization from the FDA for one or more of our products.

If treatment guidelines for OSA changes or the standard of care for this condition evolves, we may need to redesign the applicable product and seek new approvals from the FDA.

Our PMAs from the FDA are based on current treatment guidelines.

If treatment guidelines change so that different treatments become desirable, the clinical utility of one or more of our products could be diminished and our business could be adversely affected.

The misuse or off-label use of our Inspire system may harm our reputation in the marketplace, result in injuries that lead to product liability suits or result in costly investigations, fines or sanctions by regulatory bodies if we are deemed to have engaged in the promotion of these uses, any of which could be costly to our business.

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The discovery of serious safety issues with our products, or a recall of our products either voluntarily or at the direction of the FDA or another governmental authority, could have a negative impact on us.

We are subject to the FDA’s medical device reporting regulations and similar foreign regulations, which require us to report to the FDA and foreign regulatory authorities when we receive or become aware of information that reasonably suggests that one or more of our products may have caused or contributed to a death or serious injury or malfunctioned in a way that, if the malfunction were to recur, it could cause or contribute to a death or serious injury.

reasonably suggests that one or more of our products may have caused or contributed to a death or serious injury or malfunctioned in a way that, if the malfunction were to recur, it could cause or contribute to a death or serious injury.

The timing of our obligation to report is triggered by the date we become aware of the adverse event as well as the nature of the event.

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The FDA and foreign regulatory bodies have the authority to require the recall of commercialized products in the event of material deficiencies or defects in design or manufacture of a product or in the event that a product poses an unacceptable risk to health.

The FDA’s and foreign regulatory bodies' authority to require a recall must be

based on a finding that there is reasonable probability that the device could cause serious injury or death.

The FDA’s and foreign regulatory bodies' authority to require a recall must be based on a finding that there is reasonable probability that the device could cause serious injury or death.

We may also choose to voluntarily recall a product if any material deficiency is found.

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In addition, FDA regulations and guidance are often revised or reinterpreted by the FDA in ways that may significantly affect our business and our products.

Any new statutes, regulations or revisions or reinterpretations of existing regulations may impose additional costs or

lengthen review times of any future products or make it more difficult to obtain approval for, manufacture, market or distribute our products.

Any new statutes, regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of any future products or make it more difficult to obtain approval for, manufacture, market or distribute our products.

We cannot determine what effect changes in regulations, statutes, legal interpretation or policies, when and if promulgated, enacted or adopted may have on our business in the future.

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or additional record keeping.

In addition, legislation in the U.S.

and the EU may impose additional or different regulatory requirements on us that could increase the costs of compliance or otherwise create competition that may negatively affect our business.

Similarly, the EU landscape concerning medical devices recently evolved.

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For example, as a result of the transition towards the new regime, notified body review times have lengthened, and product introductions or modifications could be delayed or canceled, which could adversely affect our ability to grow our business.

We are subject to certain federal, state and foreign fraud and abuse laws, health information privacy and security laws and transparency laws, which, if violated, could subject us to substantial penalties.

We are subject to federal, state and foreign fraud and abuse laws, and transparency laws, which, if violated, could subject us to substantial penalties.

Additionally, any challenge to or investigation into our practices under these laws could cause adverse publicity and be costly to respond to, and thus could harm our business.

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The healthcare laws and regulations that may affect our ability to operate include, but are not limited to:

• the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce either the referral of an individual or furnishing or arranging for a good or service, for which payment may be made, in whole or in part, under federal healthcare programs, such as Medicare and Medicaid.

government has interpreted this law broadly to apply to the marketing and sales activities of manufacturers.

In addition, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation;

• the federal civil and criminal false claims laws and civil monetary penalties laws, including the federal civil False Claims Act, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid or other federal healthcare programs that are false or fraudulent.

Moreover, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act.

Private individuals can bring False Claims Act “qui tam” actions, on behalf of the government and such individuals, commonly known as “whistleblowers,” may share in amounts paid by the entity to the government in fines or settlement;

• the federal Civil Monetary Penalties Law, which prohibits, among other things, 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;

• HIPAA, which created additional federal criminal statutes that prohibit, among other things, executing a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters.

Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation;

• the federal Physician Payments Sunshine Act, which requires certain applicable manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program ("CHIP") to report annually to the DHHS Centers for Medicare and Medicaid Services ("CMS") information related to payments and other transfers of value to physicians (as defined by statute), certain non-physician practitioners such as physician assistants and nurse

practitioners, and teaching hospitals, and applicable manufacturers and group purchasing organizations, to report annually ownership and investment interests held by physicians and their immediate family members;

• analogous state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers or patients;

state laws that require device companies to comply with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources;

state laws that require device manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures;

consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm customers;

and state laws related to insurance fraud in the case of claims involving private insurers.

the federal Anti-Kickback Statute, the federal civil and criminal false claims laws and civil monetary penalties laws, including the federal civil False Claims Act, the federal Civil Monetary Penalties Law, federal criminal fraud and abuse laws under HIPAA, analogous state and foreign law equivalents of each of the foregoing.

See Part I, Item 1.

"Business — Government Regulation."

These laws and regulations, among other things, constrain our business, marketing and other promotional activities by limiting the kinds of financial arrangements, including sales programs, we may have with hospitals, physicians or other potential purchasers of our products.

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To enforce compliance with the healthcare regulatory laws, certain enforcement bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry.

Responding to investigations can be time-and resource-consuming and can divert management’s attention from the business.

Responding to

investigations can be time-and resource-consuming and can divert management’s attention from the business.

Additionally, as a result of these investigations, healthcare providers and entities may have to agree to additional compliance and reporting requirements as part of a consent decree or corporate integrity agreement.

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We are subject to U.S.

federal, state, and foreign laws and regulations imposing obligations on how we collect, store and process personal information.

federal, state, and foreign laws and regulations imposing obligations on how we collect, store and process health-related and other personal information.

Our actual or perceived failure to comply with such obligations could harm our business.

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HIPAA requires covered entities and business associates to develop and maintain policies with respect to the protection of, use and disclosure of PHI, including the adoption of administrative, physical and technical safeguards to protect such information, and certain notification requirements in the event of a breach of unsecured PHI.

Under HIPAA, covered entities must report breaches of unsecured PHI to affected individuals without unreasonable delay, not to exceed 60 days following discovery of the breach by a covered entity or its agents.

Notification also must be made to the U.S.

Department of Health and Human Services Office for Civil Rights, or OCR, and, in certain circumstances involving large breaches, to the media.

Business associates must report breaches of unsecured PHI to covered entities within 60 days of discovery of the breach by the business associate or its agents.

A non-permitted use or disclosure of PHI is presumed to be a breach under HIPAA unless the covered entity or business associate establishes that there is a low probability the information has been compromised consistent with requirements enumerated in HIPAA.

Entities that are found to be in violation of HIPAA as the result of a breach of unsecured PHI, a complaint about privacy practices or an audit by the U.S.

Department of Health and Human Services, or HHS, may be subject to significant civil, criminal and administrative fines and penalties and/or additional reporting and oversight obligations if required to enter into a resolution agreement and corrective action plan with HHS to settle allegations of HIPAA non-compliance.

Department of Health and Human Services, or HHS, may be subject to significant civil, criminal and administrative fines and penalties and/or additional reporting and oversight obligations.

HIPAA also authorizes state Attorneys General to file suit on behalf of their residents.

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The CCPA creates individual privacy rights for California consumers and increases the privacy and security obligations of entities handling certain personal information.

The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation.

Further, the California Privacy Rights Act (the "CPRA") recently passed in California.

The CPRA will impose additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data.

Further, the California Privacy Rights Act (the "CPRA") went into effect on January 1, 2023 and imposes additional data protection obligations on covered

businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data.

It will also create a new California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement.

The majority of the provisions will go into effect on January 1, 2023, and additional compliance investment and potential business process changes may be required.

Similar laws have passed in Virginia and Colorado, and have been proposed in other states and at the federal level, reflecting a trend toward more stringent privacy legislation in the United States.

The enactment of such laws could have potentially conflicting requirements that would make compliance challenging.

Similar laws have passed in Virginia and Colorado, and have been proposed in other states and at the federal level, reflecting a trend toward more stringent privacy legislation in the U.S.

The enactment of such laws could have potentially conflicting requirements that would make compliance challenging and additional compliance investment and potential business process changes may be required.

In Europe, we are subject to the requirements of the GDPR (and national laws implementing the GDPR) because we are “established” in certain EU countries and we are processing personal data of individuals located in the EU and EEA in the context of these establishments, as well as offering of goods to, and/or monitoring the behavior of, individuals in the EU and EEA in connection with our clinical investigations.

The GDPR, which went into effect in May 2018, imposes strict requirements for processing the personal data of individuals within the EEA.

The GDPR, which went into effect in May 2018, imposes strict requirements for processing the personal data subject to the GDPR.

If we do not comply with our obligations under the GDPR, we could be exposed to significant fines the greater of EUR 20 million or 4% of total global annual turnover for certain breaches.

In addition to the foregoing, a breach of the GDPR could result in regulatory investigations, reputational damage, orders to cease/ change our use of data, enforcement notices, as well potential civil claims including class action type litigation where individuals suffer harm.

Among other requirements, the GDPR regulates transfers of personal data subject to the GDPR to third countries that have not been found to provide adequate protection to such personal data, including the United States, and the efficacy and longevity of current transfer mechanisms between the EU and the United States remains uncertain.

For example, in July 2020, the Court of Justice of the EU ("CJEU") limited how organizations could lawfully transfer personal data from the EU/EEA to the United States by invalidating the Privacy Shield for purposes of international transfers and imposing further restrictions on the use of standard contractual clauses, or SCCs.

The European Commission issued revised SCCs on June 4, 2021 to account for the decision of the CJEU and recommendations made by the European Data Protection Board.

The revised SCCs must be used for relevant new data transfers from September 27, 2021;

existing standard contractual clauses arrangements must be migrated to the revised clauses by December 27, 2022.

The new SCCs apply only to the transfer of personal data outside of the EEA and not the UK;

the UK’s Information Commissioner’s Office launched a public consultation on its draft revised data transfers mechanisms in August 2021.

There is some uncertainty around whether the revised clauses can be used for all types of data transfers, particularly whether they can be relied on for data transfers to non-EEA entities subject to the GDPR.

As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the SCCs cannot be used, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results

Recent legal developments in Europe have created complexity and uncertainty regarding such transfers, in particular in relation to transfers to the United States.

On July 16, 2020, the Court of Justice of the European Union (“CJEU”) invalidated the EU-US Privacy Shield Framework, or Privacy Shield, under which personal information could be transferred from the EEA (and the UK) to relevant self-certified U.S.

The CJEU further noted that reliance on the standard contractual clauses (a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism and potential alternative to the Privacy Shield) alone may not necessarily be sufficient in all circumstances and that transfers must be assessed on a case-by-case basis.

European court and regulatory decisions subsequent to the CJEU decision of July 16, 2020 have taken a restrictive approach to international data transfers.

As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the standard contract clauses cannot be used, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results.

Further, from January 1, 2021, we have to comply with both the GDPR and the GDPR as incorporated into United Kingdom national law, the latter regime having the ability to separately fine up to the greater of £17.5 million or 4% of global turnover.

The relationship between the United Kingdom and the EU in relation to certain aspects of data protection law remains unclear, for example around how data can lawfully be transferred between each jurisdiction, which may expose us to further compliance risk.

The European Commission has adopted an adequacy decision in favor of the UK, enabling data transfers from EU member states to the UK without additional safeguards.

However, the UK adequacy decision will automatically expire in June 2025 unless the European Commission re-assesses and renews/ extends that decision.

We are also subject to evolving EU and EEA privacy laws on cookies and e-marketing.

The EU is in the process of replacing the e-Privacy Directive (2002/58/EC) with a new set of rules taking the form of a regulation, which will be directly applicable in each European Member State.

The draft e-Privacy Regulation imposes strict opt-in marketing rules with limited exceptions for business-to-business communications, alters rules on third-party cookies, web beacons and similar technology and significantly increases fining powers to the same levels as the GDPR (i.e.

the greater of EUR 20 million or 4% of total global annual turnover for certain breaches).

We have enlisted the help of external advisors to provide assistance in implementing a robust program that we believe will ensure compliance with these obligations which is likely to require us to expend capital and other resources.

In the EU and the UK, informed consent is required for the placement of a cookie or similar technologies on an individual’s device and for direct electronic marketing.

The GDPR also imposes conditions on obtaining valid consent for cookies, such as a prohibition on pre-checked consents and a requirement to ensure separate consents are sought for each type of cookie or similar technology.

Recent European court and regulator decisions are driving increased attention to cookies and tracking technologies.

If the trend of increasing enforcement by regulators of the strict approach to opt-in consent for all but essential use cases, as seen in recent guidance and decisions continues, this could lead to substantial costs, require significant systems changes, limit the effectiveness of our marketing activities, divert the attention of our technology personnel, adversely affect our margins, and subject us to additional liabilities.

In light of the complex and evolving nature of EU, EU Member State, and UK privacy laws on cookies and tracking technologies, there can be no assurances that we will be successful in our efforts to comply with such laws;

violations of such laws could result in regulatory investigations, fines, orders to cease/ change our use of such technologies, as well as civil claims including class actions, and reputational damage.

Any actual or perceived failure by us, our employees or contractors, our partners, our service providers, or the third parties with whom we work, to comply with privacy or security laws, policies, legal obligations or industry standards, or any security incident that results in the unauthorized release or transfer of personal information, may result in governmental enforcement actions and investigations including by EU regulators and U.S.

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In the U.S., there have been and continue to be a number of legislative initiatives to contain healthcare costs.

In March 2010, the Affordable Care Act was enacted in the U.S., which made a number of substantial changes in the way healthcare is financed by both governmental and private insurers.

Among other ways in which it may affect our business, the Affordable Care Act:

In March 2010, the Affordable Care Act (the "ACA") was enacted in the U.S., which made a number of substantial changes in the way healthcare is financed by both governmental and private insurers.

Among other ways in which it may affect our business, the ACA:

• established a new Patient-Centered Outcomes Research Institute to oversee and identify priorities in comparative clinical effectiveness research in an effort to coordinate and develop such research;

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• expanded the eligibility criteria for Medicaid programs.

The expansion in the government’s role in the U.S.

In addition, other legislative changes have been proposed and adopted since the ACA was enacted, such as the Budget Control Act of 2011, the American Taxpayer Relief Act of 2012, and the Medicare Access and CHIP Reauthorization Act of 2015, among others.

See Part I, Item 1.

“Business — Government Regulation.” The expansion in the government’s role in the U.S.

healthcare industry may result in decreased profits to us, lower reimbursement by payors for our Inspire system, and/or reduced medical procedure volumes, all of which may have a material adverse effect on our business, financial condition and results of operations.

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

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.

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

On August 2, 2011, the Budget Control Act of 2011 was signed into law, which, among other things, reduced Medicare payments to providers by 2% per fiscal year, effective 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.

On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, 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.

In addition, the Medicare Access and CHIP Reauthorization Act of 2015 ("MACRA") 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.

It is unclear what effect new quality and payment programs, such as MACRA, may have on our business, financial condition, results of operations or cash flows.

We expect additional state, federal, and foreign healthcare policies and reform measures to be adopted in the future, any of which could limit reimbursement for healthcare products and services or otherwise result in reduced demand for our Inspire system or additional pricing pressure and have a material adverse effect on our industry generally and on our customers.

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Although we believe the safety procedures of our manufacturers for handling and disposing of these materials and waste products comply with the standards prescribed by these laws and regulations, we cannot eliminate the risk of accidental injury or contamination from the use, storage, handling or disposal of hazardous materials.

of an accident, state or federal or other applicable authorities may curtail our manufacturers’ use of these materials and interrupt their business operations which could adversely affect our business.

The clinical trial process required to obtain regulatory approvals is lengthy and expensive with uncertain outcomes.

If clinical studies of our future products do not produce results necessary to support regulatory clearance or approval in the U.S.

In the event of an accident, state or federal or other applicable authorities may curtail our manufacturers’ use of these materials and interrupt their business operations which could adversely affect our business.

The clinical study process required to obtain regulatory approvals or certifications is lengthy and expensive with uncertain outcomes.

If clinical studies of our future products do not produce results

necessary to support regulatory clearance or approval in the U.S.

or foreign approval or certification, with respect to our current or future products, elsewhere, we will be unable to expand the indications for or commercialize these products and may incur additional costs or experience delays in completing, or ultimately be unable to complete, the commercialization of those products.

We have obtained PMA for our Inspire system.

In order to obtain PMA for a device, the sponsor must conduct well-controlled clinical trials designed to assess the safety and efficacy of the product candidate.

Conducting clinical trials is a complex and expensive process, can take many years, and outcomes are inherently uncertain.

We incur substantial expense for, and devote significant time to, clinical trials but cannot be certain that the trials will ever result in commercial revenue.

We may experience significant setbacks in clinical trials, even after earlier clinical trials showed promising results, and failure can occur at any time during the clinical trial process.

Any of our products may malfunction or may produce undesirable adverse effects that could cause us or regulatory authorities to interrupt, delay or halt clinical trials.

We, the FDA, or another regulatory authority may suspend or terminate clinical trials at any time to avoid exposing trial participants to unacceptable health risks.

Successful results of pre-clinical studies are not necessarily indicative of future clinical trial results, and predecessor clinical trial results may not be replicated in subsequent clinical trials.

Additionally, the FDA or foreign regulatory authorities or notified bodies may disagree with our interpretation of the data from our pre-clinical studies and clinical trials, or may find the clinical trial design, conduct or results inadequate to prove safety or efficacy, and may require us to pursue additional pre-clinical studies or clinical trials, which could further delay the clearance, approval or certification of our products.

The data we collect from our pre-clinical studies and clinical trials may not be sufficient to support FDA clearance or approval or foreign approval or certification, and if we are unable to demonstrate the safety and efficacy of our future products in our clinical trials, we will be unable to obtain regulatory clearance, approval or certification to market our products.

In addition, we may estimate and publicly announce the anticipated timing of the accomplishment of various clinical, regulatory and other product development goals, which are often referred to as milestones.

These milestones could include the obtainment of the right to affix the CE mark in the EU;

the submission to the FDA of an IDE application to commence a pivotal clinical trial for a new product candidate;

the enrollment of patients in clinical trials;

the release of data from clinical trials;

and other clinical and regulatory events.

The actual timing of these milestones could vary dramatically compared to our estimates, in some cases for reasons beyond our control.

We cannot ensure that we will meet our projected milestones and if we do not meet these milestones as publicly announced, the commercialization of our products may be delayed and, as a result, our stock price may decline.

Clinical trials are necessary to support PMA applications and may be necessary to support PMA supplements for modified versions of our marketed device products.

This would require the enrollment of large numbers of suitable subjects, which may be difficult to identify, recruit and maintain as participants in the clinical trial.

The clinical trials supporting the PMA application for our Inspire system involved 126 randomized patients.

Adverse outcomes in the post-approval studies could also result in restrictions or withdrawal of approval of the PMA.

In order to obtain PMA for a device, the sponsor must conduct well-controlled clinical studies designed to assess the safety and efficacy of the product candidate.

Conducting clinical studies is a complex and expensive process, can take many years, and outcomes are inherently uncertain.

We incur substantial expense for, and devote significant time to, clinical studies but cannot be certain that the studies will ever result in commercial revenue.

We may experience significant setbacks in clinical studies, even after earlier clinical studies showed promising results, and failure can occur at any time during the clinical study process.

Any of our products may malfunction or may produce undesirable adverse effects that could cause us or regulatory authorities to interrupt, delay or halt clinical studies.

We will likely need to conduct additional clinical studies in the future to support new indications for our products or for approvals, clearances or certifications of new product lines, or for the approval of the use of our products in some foreign countries.

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The initiation and completion of any of these studies may be prevented, delayed, or halted for numerous reasons.

We may experience a number of events during that could adversely affect the costs, timing or successful completion of our clinical trials, including:

• we may be required to submit an IDE application or similar application to the FDA or a foreign regulatory authority, which must become effective prior to commencing human clinical trials, and the FDA or foreign regulatory authority may reject our IDE or similar application and notify us that we may not begin investigational trials;

• regulators and other comparable foreign regulatory authorities may disagree as to the design or implementation of our clinical trials;

• regulators and/or IRBs, or other reviewing bodies may not authorize us or our investigators to commence a clinical trial, or to conduct or continue a clinical trial at a prospective or specific trial site;

• we may not reach agreement on acceptable terms with prospective contract research organizations ("CROs") and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

• clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon product development programs;

• the number of subjects or patients required for clinical trials may be larger than we anticipate, enrollment in these clinical trials may be insufficient or slower than we anticipate, and the number of clinical trials being conducted at any given time may be high and result in fewer available patients for any given clinical trial, or patients may drop out of these clinical trials at a higher rate than we anticipate;

• our third-party contractors, including those manufacturing products or conducting clinical trials on our behalf, may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;

• we might have to suspend or terminate clinical trials for various reasons, including a finding that the subjects are being exposed to unacceptable health risks;

• we may have to amend clinical trial protocols or conduct additional studies to reflect changes in regulatory requirements or guidance, which we may be required to submit to an IRB or other review bodies and/or regulatory authorities for re-examination;

We may experience a number of events during that could adversely affect the costs, timing or successful completion of our clinical studies, including:

• we may be required to submit an IDE application or similar application to the FDA or a foreign regulatory authority, which must become effective prior to commencing human clinical studies, and the FDA or foreign regulatory authority may reject our IDE or similar application and notify us that we may not begin investigational studies;

• regulators and other comparable foreign regulatory authorities may disagree as to the design or implementation of our clinical studies;

• regulators and/or IRBs, or other reviewing bodies may not authorize us or our investigators to commence a clinical study, or to conduct or continue a clinical study at a prospective or specific study site;

• we may not reach agreement on acceptable terms with prospective contract research organizations ("CROs") and clinical study sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and study sites;

• clinical studies may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical studies or abandon product development programs;

• the number of subjects or patients required for clinical studies may be larger than we anticipate, enrollment in these clinical studies may be insufficient or slower than we anticipate, and the number of clinical studies being conducted at any given time may be high and result in fewer available patients for any given clinical study, or patients may drop out of these clinical studies at a higher rate than we anticipate;

• our third-party contractors, including those manufacturing products or conducting clinical studies on our behalf, may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;

• we might have to suspend or terminate clinical studies for various reasons, including a finding that the subjects are being exposed to unacceptable health risks;

• we may have to amend clinical study protocols or conduct additional studies to reflect changes in regulatory requirements or guidance, which we may be required to submit to an IRB or other review bodies and/or regulatory authorities for re-examination;

• regulators, IRBs, or other parties may require or recommend that we or our investigators suspend or terminate clinical research for various reasons, including safety signals or noncompliance with regulatory requirements;

• the cost of clinical trials may be greater than we anticipate;

• clinical sites may not adhere to the clinical protocol or may drop out of a clinical trial;

• we may be unable to recruit a sufficient number of clinical trial sites;

• regulators, IRBs, or other reviewing bodies may fail to approve or subsequently find fault with our manufacturing processes or facilities of third-party manufacturers with which we enter into agreement for clinical and commercial supplies, the supply of devices or other materials necessary to conduct clinical trials may be insufficient, inadequate or not available at an acceptable cost, or we may experience interruptions in supply;

• the cost of clinical studies may be greater than we anticipate;

• clinical sites may not adhere to the clinical protocol or may drop out of a clinical study;

• we may be unable to recruit a sufficient number of clinical study sites;

• regulators, IRBs, or other reviewing bodies may fail to approve or subsequently find fault with our manufacturing processes or facilities of third-party manufacturers with which we enter into agreement for clinical and commercial supplies, the supply of devices or other materials necessary to conduct clinical studies may be insufficient, inadequate or not available at an acceptable cost, or we may experience interruptions in supply;

• approval policies or regulations of FDA or applicable foreign regulatory agencies may change in a manner rendering our clinical data insufficient for approval or certification;

• our current or future products may have undesirable side effects or other unexpected characteristics.

Patient enrollment in clinical trials and completion of patient follow-up depend on many factors, including the size of the patient population, the nature of the trial protocol, the proximity of patients to clinical sites, the eligibility criteria for the clinical trial, patient compliance, competing clinical trials and clinicians’ and patients’ perceptions as to the potential advantages of the product being studied in relation to other available therapies, including any new treatments that may be approved for the indications we are investigating.

For example, patients may be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive post-

treatment procedures or follow-up to assess the safety and efficacy of a product candidate, or they may be persuaded to participate in contemporaneous clinical trials of a competitor’s product candidate.

In addition, patients participating in our clinical trials may drop out before completion of the trial or experience adverse medical events unrelated to our products.

Delays in patient enrollment or failure of patients to continue to participate in a clinical trial may delay commencement or completion of the clinical trial, cause an increase in the costs of the clinical trial and delays, or result in the failure of the clinical trial.

Clinical trials must be conducted in accordance with the laws and regulations of the FDA and other applicable regulatory authorities’ legal requirements, regulations or guidelines, and are subject to oversight by these governmental agencies and IRBs and other reviewing bodies at the medical institutions where the clinical trials are conducted.

In addition, clinical trials must be conducted with supplies of our devices produced under current good manufacturing practice requirements and other regulations.

Furthermore, we rely on CROs, and clinical trial sites to ensure the proper and timely conduct of our clinical trials and while we have agreements governing their committed activities, we have limited influence over their actual performance.

We depend on our collaborators and on medical institutions and CROs to conduct our clinical trials in compliance with good clinical practice ("GCP") requirements.

To the extent our collaborators or the CROs fail to enroll participants for our clinical trials, fail to conduct the study in accordance with GCP requirements or are delayed for a significant time in the execution of trials, including achieving full enrollment, we may be affected by increased costs, program delays or both.

In addition, clinical trials that are conducted in countries outside the U.S.

Patient enrollment in clinical studies and completion of patient follow-up depend on many factors, including the size of the patient population, the nature of the study protocol, the proximity of patients to clinical sites, the eligibility criteria for the clinical study, patient compliance, competing clinical studies and clinicians’ and patients’ perceptions as to the potential advantages of the product being studied in relation to other available therapies, including any new treatments that may be approved for the indications we are investigating.

For example, patients may be discouraged from enrolling in our clinical studies if the study protocol requires them to undergo extensive post-treatment procedures or follow-up to assess the safety and efficacy of a product candidate, or they may be persuaded to participate in contemporaneous clinical studies of a competitor’s product candidate.

In addition, patients participating in our clinical studies may drop out before completion of the study or experience adverse medical events unrelated to our products.

Delays in patient enrollment or failure of patients to continue to participate in a clinical study may delay commencement or completion of the clinical study, cause an increase in the costs of the clinical study and delays, or result in the failure of the clinical study.

Clinical studies must be conducted in accordance with the laws and regulations of the FDA and other applicable regulatory authorities’ legal requirements, regulations or guidelines, and are subject to oversight by these governmental agencies and IRBs and other reviewing bodies at the medical institutions where the clinical studies are conducted.

In addition, clinical studies must be conducted with supplies of our devices produced under current good manufacturing practice requirements and other regulations.

Furthermore, we rely on CROs, and clinical study sites to ensure the proper and timely conduct of our clinical studies and while we have agreements governing their committed activities, we have limited influence over their actual performance.

We depend on our collaborators and on medical institutions and CROs to conduct our clinical studies in compliance with good clinical practice ("GCP") requirements.

To the extent our collaborators or the CROs fail to enroll participants for our clinical studies, fail to conduct the study in accordance with GCP requirements or are delayed for a significant time in the execution of studies, including achieving full enrollment, we may be affected by increased costs, program delays or both.

In addition, clinical studies that are conducted in countries outside the U.S.

may subject us to further delays and expenses as a result of increased shipment costs, additional regulatory requirements and the engagement of non-U.S.

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Our failure to adequately demonstrate the safety and efficacy of our system or any product we may develop in the future would prevent receipt of regulatory clearance, approval or certification and, ultimately, the commercialization of that product or indication for use.

Even if our future products are cleared or approved in the U.S., commercialization of our products in foreign countries would require approval by regulatory authorities or certification by notified bodies in those countries.

Approval and certification procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and greater than, those in the U.S., including additional preclinical studies or clinical trials.

Even if our future products are cleared or approved in the U.S., commercialization of our products in foreign countries would require approval by

regulatory authorities or certification by notified bodies in those countries.

Any of these occurrences could have an adverse effect on our business, financial condition and results of operations.

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Similarly, a prolonged government shutdown could prevent the timely review of our patent applications by the United States Patent and Trademark Office ("USPTO"), which could delay the issuance of any U.S.

patents to which we might otherwise be

patents to which we might otherwise be entitled.

Further, in our operations as a public company, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly fund our business.

Separately, in response to the COVID-19 pandemic, in March 2020, the FDA announced its intention to postpone most inspections of foreign manufacturing facilities, and on March 18, 2020, the FDA temporarily postponed routine surveillance inspections of domestic manufacturing facilities.

Subsequently, in July 2020, the FDA resumed certain on-site inspections of domestic manufacturing facilities subject to a risk-based prioritization system.

The FDA utilized this risk-based assessment system to assist in determining when and where it was safest to conduct prioritized domestic inspections.

In May 2021, the FDA outlined a detailed plan to move toward a more consistent state of inspectional operations, and in July 2021, the FDA resumed standard inspectional operations of domestic facilities and was continuing to maintain this level of operation as of September 2021.

More recently, the FDA has continued to monitor and implement changes to its inspectional activities to ensure the safety of its employees and those of the firms it regulates as it adapts to the evolving COVID-19 pandemic.

In the European Union (“EU”), notified bodies must be officially designated to certify products and services in accordance with the EU Medical Devices Regulation.

In the EU, notified bodies must be officially designated to certify products and services in accordance with the EU Medical Devices Regulation.

While several notified bodies have been designated, the COVID-19 pandemic has significantly slowed down the designation process.

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This situation could significantly impact our ability to grow our business in the EU and EEA.

Separately, in response to the global COVID-19 pandemic, the FDA postponed most inspections of domestic and foreign manufacturing facilities at various points.

Any resurgence of the virus or emergence of new variants may lead to further inspectional delays.

Regulatory authorities outside the U.S.

may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic.

have adopted similar restrictions or other policy measures in response to the COVID-19 pandemic.

If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA, other regulatory authorities and notified bodies from conducting their regular inspections or audits, reviews, or other regulatory activities, it could significantly impact the ability of the FDA, other regulatory authorities or notified bodies to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

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If we are unable to adequately protect our intellectual property rights, or if we are accused of infringing on the intellectual property rights of others, our competitive position could be harmed or we could be required to incur significant expenses to enforce or defend our rights.

Our commercial success will depend in part on our success in obtaining and maintaining issued patents, trademarks and other intellectual property rights in the U.S.

Our commercial success depends in part on our success in obtaining and maintaining issued patents, trademarks and other intellectual property rights in the U.S.

and elsewhere and protecting our proprietary technology.

If we do not adequately protect our intellectual property and proprietary technology, competitors may be able to use our technologies or the goodwill we have acquired in the marketplace and erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability.

If we do not adequately protect our intellectual property and proprietary technology, competitors may be able to use our

technologies or the goodwill we have acquired in the marketplace and erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability.

Some of our intellectual property rights depend on a licensing agreement with a third party, and our patent coverage includes protection provided by licensed patents.

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We cannot provide any assurances that any of our patents have, or that any of our pending patent applications that mature into issued patents will include, claims with a scope sufficient to protect our Inspire system, any additional features we develop for our Inspire system or any new products.

Other parties may have developed technologies that may be related or competitive to our system, may have filed or may file patent applications and

may have received or may receive patents that overlap or conflict with our patent applications, either by claiming the same methods or devices or by claiming subject matter that could dominate our patent position.

Other parties may have developed technologies that may be related or competitive to our system, may have filed or may file patent applications and may have received or may receive patents that overlap or conflict with our patent applications, either by claiming the same methods or devices or by claiming subject matter that could dominate our patent position.

The patent positions of medical device companies, including our patent position, may involve complex legal and factual questions, and, therefore, the scope, validity and enforceability of any patent claims that we may obtain cannot be predicted with certainty.

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In addition, trade secrets may be independently developed by others in a manner that could prevent legal recourse by us.

If any of our confidential or proprietary

information, such as our trade secrets, were to be disclosed or misappropriated, or if any such information was independently developed by a competitor, our business and competitive position could be harmed.

If any of our confidential or proprietary information, such as our trade secrets, were to be disclosed or misappropriated, or if any such information was independently developed by a competitor, our business and competitive position could be harmed.

We may be unable to enforce our intellectual property rights throughout the world.

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The USPTO recently developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, which became effective on March 16, 2013.

The first to file provisions limit the rights of an inventor to

patent an invention if not the first to file an application for patenting that invention, even if such invention was the first invention.

The first to file provisions limit the rights of an inventor to patent an invention if not the first to file an application for patenting that invention, even if such invention was the first invention.

Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business.

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The market price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for purchasers of our common stock

The market price of our common stock is likely to be highly volatile and may fluctuate substantially due to many factors, including:

The market price of our common stock is likely to be highly volatile and may fluctuate substantially due to many factors, including, for example:

• the volume and timing of sales of our products;

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• our board of directors is authorized to issue shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror.

voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.

Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

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We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business.

In addition, the agreement governing our credit facility precludes, and any future debt agreements may preclude, us from paying cash dividends.

In addition, the agreement governing our former credit facility precluded, and any future debt agreements may preclude, us from paying cash dividends.

As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

General Risk Factors

Changes in U.S.

and foreign tax laws could have a material adverse effect on our business, cash flow, results of operations and financial condition.

We are subject to taxation in several countries, and changes in tax laws or challenges to our tax positions could adversely affect our business, results of operations and financial condition.

As such, we are subject to tax laws, regulations, and policies of the U.S.

federal, state, and local governments and of comparable taxing authorities in foreign jurisdictions.

Changes in tax laws in one or more jurisdictions, as well as other factors, could cause us to experience fluctuations in our tax obligations and effective tax rates in the future and otherwise adversely affect our tax positions and/or our tax liabilities.

We are currently unable to predict what changes will occur and, if so, the ultimate impact on our business.

To the extent that such changes have a negative impact on us or our consumers, including as a result of related uncertainty, these changes may materially and adversely impact our business, financial condition, results of operations and cash flow.

There can be no assurance that our effective tax rates, tax payments or tax credits will not be adversely affected by changes in tax laws in various jurisdictions.

Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

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If any of the analysts who cover us provide inaccurate or unfavorable research or issue an adverse opinion regarding our stock price, our stock price could decline.

If one or more of the analysts covering our business downgrade our stock or change their opinion

of our stock, our stock price would likely decline.

If one or more of the analysts covering our business downgrade our stock or change their opinion of our stock, our stock price would likely decline.

In addition, if one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.

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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 1A. Risk Factors