Inspire Medical Systems (NYSE: INSP) builds and sells implantable devices that help treat moderate to severe obstructive sleep apnea (OSA) by stimulating the hypoglossal nerve—the nerve that helps keep your airway open as you sleep. Their flagship therapy includes a tiny implanted device, a couple of leads, and an external remote so patients can turn the device on and off themselves. Inspire brings in revenue mainly from selling these devices to hospitals and surgery centers, charging for both implant procedures and follow-up support. The company is heavily US-focused, with over 96% of 2024 sales coming from the States. That said, international sales surged 163% last year (though from a tiny base) as more insurers in Europe and Asia agreed to pay for the device. OSA treatment is usually dominated by old-school CPAP machines—a market led by heavyweights like ResMed and Philips—but plenty of people struggle to stick with those masks. Newer therapies, including other nerve stimulation devices from Nyxoah, LivaNova, and Medtronic, are emerging, but Inspire currently holds about 85% of revenue in this corner of the market. That's down to being first to market, strong clinical evidence, and established insurance reimbursement.\n\nInspire's shares have returned -7.63% over the past year to August 2025—a far cry from the S&P 500's roughly +13.6% total return in the same stretch. A big chunk of that drop came after the Q2 2025 earnings update in early August, where management blamed rising competition from weight-loss drugs like Zepbound and Wegovy, plus delays in getting its next-generation Inspire V system rolled out. Executives also cut full-year revenue and earnings targets, spooking investors. Broader market jitters after April's tariff-related sell-off haven't helped the share price either.\n\nIn 2024, Inspire delivered 28% revenue growth, bringing in $802.8 million, and kept the momentum going with 33% growth in Q3 2024 and $203.2 million booked. The company opened 1,435 new US implant centers, set up 335 sales territories by year-end, and officially launched the Inspire V device in mid-2025. For 2025, management is projecting 17 to 19% top-line growth, with new clinic launches, expanded international reimbursement, and continued rollout of Inspire V and SleepSync remote tech driving demand. The wild card? Widespread use of GLP-1 weight-loss drugs could eventually shrink the number of people with OSA who need device-based solutions, potentially slowing growth over time.\n\nInspire turned things around in 2024, reaching profitability with $53.5 million in net income and a 6.7% profit margin, a full U-turn from a $21.2 million loss and negative margins the year before. Gross margins sit comfortably at 85%, thanks to their patent-protected tech and strong pricing. The balance sheet is debt-free with net debt/EBITDA at 0.0x, and the company has strong liquidity. Returns look healthy too: return on equity is roughly 10%, and return on assets is 8.7%. Management’s been disciplined—evident in a $75 million accelerated share buyback announced late last year.\n\nAfter a sharp sell-off, Inspire is trading at a forward P/E of 72.1x, way above the market's average of 25.5x—that's investors pricing in plenty of future growth. On an EV/sales basis, the shares are valued at 3.97x 2025 revenue, a steep drop from their five-year average of 14.23x and actually a bit below the market's median of 4.40x post-drop. But free cash flow yield is still in the red at -1.51%, echoing the last five years' trend and lagging the market’s +2.00%. This gap between earnings and cash flow suggests investors are worried about Inspire pulling off its next phase, especially if GLP-1 drugs start to eat into demand.\n\nInvestor mood has shifted—Inspire's shares have slumped 36.8% over the past 50 days, and volatility is off the charts at 123.7% (compared to the market's 27.6%), signaling huge price swings. Strength ratings have slipped, while analysts are lowering their targets. Leerink Partners cut their rating to 'Market Perform’ in August, spotlighting the risks from weight-loss drugs. Short interest is low at 0.43%—so not a hot target for negative bets—but with institutional ownership near 95%, most big money already owns it, and few are swimming against the tide.\n\nGLP-1 drug competition: Weight-loss drugs like Zepbound (tirzepatide) and Wegovy (semaglutide) have FDA approval for treating sleep apnea in obese adults. That could mean fewer patients needing surgical implants like Inspire’s. Regulatory and reimbursement changes: If Medicare, Medicaid, or private insurers tighten their rules for covering implantable devices, that could put the brakes on Inspire’s growth. Valuation and cash-flow risk: Inspire’s high valuation (72x forward P/E) plus negative free cash flow (-1.51%) leaves little room for error. If results disappoint, the stock could drop further. Supply chain and execution: Any delays shipping Inspire V or getting new clinics onboard could slow growth and eat into margins.\n\nLarge addressable market: More than 22 million people worldwide struggle with moderate to severe OSA—a huge pool of potential patients for Inspire’s devices. First-mover moat: Patent protection and established insurance reimbursement give Inspire a defensible edge over up-and-coming competition in hypoglossal nerve stimulation. Proven growth track record: A historical revenue CAGR of more than 25% and over 90,000 patients treated speak to robust device demand and adoption. Strong balance sheet: With zero net debt and $516 million in cash, Inspire has the flexibility to keep investing in new tech and buy back shares if it sees fit. Valuation reset: After the share price drop, EV/sales sits at 3.97x—well below historical averages—meaning there’s potential upside if growth regains momentum.\n\nGLP-1 displacement risk: If patients and doctors embrace weight-loss drugs, the pool of people needing surgical sleep apnea devices could shrink fast. High earnings multiple: A forward P/E of 72x means expectations are sky-high. Any stumbles—on sales, profits, or execution—could trigger a hard drop. Margin pressures: Inspire’s operating margin is just 4.4%, way below the 18.4% average for medical device firms. That shows it’s tough to scale profits in this niche. Competitive pipeline: Rivals like Nyxoah’s Genio and LivaNova’s aura6000 are pushing alternatives. If they go less invasive or cheaper, Inspire’s share could slip. Trend and sentiment: The recent -36.8% 50-day trend and wild volatility reflect negative momentum that could linger in the short term.\n\nInspire Medical Systems is still the clear market leader when it comes to implantable treatment for sleep apnea, bolstered by strong growth prospects, a new device launch, and that all-important debt-free balance sheet. Still, short-term challenges—including tough competition from GLP-1 drugs, trouble expanding margins, and a demanding valuation—have dragged on the share price. If you’re a believer in long-term adoption of alternative sleep apnea treatments, the current price and lower EV/sales may look tempting, especially if Inspire’s upcoming clinical results and reimbursement wins pan out. On the other hand, if you’re worried about rivals eating Inspire’s lunch or further execution hiccups, there’s an argument for waiting to see how the next batch of clinical data and management guidance play out before doubling down.\n\nQ3 2025 Earnings: Expect the next results update in early November 2025 (probably around November 3rd or 4th). Investors will be watching for any signs of progress on revenues, margins, and Inspire V rollout. Clinical data readouts: Doctors and investors will be paying attention to long-term results for the Inspire V device at the American Academy of Otolaryngology meeting in October 2025—a positive update could spur more interest. FDA and reimbursement updates: Potential new approvals or changes in government coverage in the second half of 2025 may widen market access and boost the number of potential patients.

Inspire Medical’s Sleep Device Growth Hits A Bumpy Patch

Inspire Medical Systems, a U.S.-based company that develops implantable devices for treating moderate to severe obstructive sleep apnea (OSA) by stimulating the hypoglossal nerve, reported strong revenue growth in 2024 with $802.8 million in revenue and 28% year-over-year growth, reaching profitability with $53.5 million in net income and a 6.7% profit margin. The company expanded its U.S. footprint by opening 1,435 new implant centers and launching its next-generation Inspire V device in mid-2025. Despite strong fundamentals, including a debt-free balance sheet, high gross margins of 85%, and a strong patient adoption track record, the stock declined significantly after Q2 2025 earnings, driven by concerns over competition from GLP-1 weight-loss drugs like Zepbound and Wegovy, which have FDA approval for sleep apnea treatment, as well as delays in the Inspire V rollout and lower-than-expected margins. Investors are pricing in high future growth with a forward P/E of 72.1x, though free cash flow remains negative at -1.51%, raising concerns about execution and long-term sustainability. The company remains the market leader in implantable OSA therapy with about 85% of market revenue, but faces growing competition from rivals such as Nyxoah, LivaNova, and Medtronic. Key risks include potential displacement of patients by weight-loss drugs, regulatory changes in insurance reimbursement, and margin pressures. The next earnings update is expected in early November 2025, with clinical data for Inspire V to be presented at the American Academy of Otolaryngology meeting in October 2025.