Imagine you cannot sleep at night as suddenly your airways are blocked. In the best case, you “just can’t sleep”, because you wake up repeatedly due to breathing pauses. In the worst case, you suffer serious side effects from sleep fragmentation, causing high blood pressure, heart diseases, and possibly worse outcomes. Sleep apnea is a chronic disease doing exactly this. Affected patients sleep with a machine and mask combo on their face as a first-line treatment, but this brings its own side effects and burden. Inspire Medical Systems developed an implanted solution, solving many issues. Could the stock be a SWAN (sleep-well-at-night) pick?
Summary and key takeaways from today’s Weekly
– At first glance, Inspire Medical Systems looks like a disruptor in a market with high unmet medical need.
– The company is growing, margins are improving, and the implanted device is proven.
– However, there are a few reasons for the stock’s decline — with potentially more to come.
Everyone knows how important sleep is.
It is not optional, but essential for us to “recharge”. More important than the absolute duration is the quality of the sleep. Lying around for ten hours with the eyes wide open certainly is less desirable than waking up after six or better seven hours of high-quality, uninterrupted sleep.
But what if you can’t sleep, because suddenly your airways are blocked at night?
People suffering from this phenomenon experience very fragmented nighttime sleep. This is most commonly caused by the relaxation and collapse of throat muscles during sleep, blocking the upper airway.
Breathing temporarily stops. You wake up.
The standard-of-care solution is a so-called CPAP machine. The problem is, it is not really comfortable for long-term use, and discontinuation rates are relatively high.
Inspire Medical Systems (ISIN: US4577301090, ticker: INSP) developed a seemingly better solution — an implant that helps affected patients sleep better again, as this device stimulates the responsible nerve to keep the airway open.
Let’s check the stock for its sleep-well-at-night quality.
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per 04 March 2026 market close – since August 2022
SWAN or nightmare stock?
Inspire Medical Systems, or just Inspire in short from here on, is a medical-device company, publicly listed on the NYSE. The company received the premarket approval (PMA) — the equivalent of an NDA, or new drug approval, just for medical devices — in 2014 for the U.S. market. In Europe, Inspire has been selling its implant since 2011, and since 2019 in Japan.
The “Inspire Therapy” is an implanted solution to treat severe “OSA”, obstructive sleep apnea — the condition I described above in the intro. More than 125k patients worldwide have been treated with it, so it is not some strange and unproven novelty.
Due to impaired sleep quality and in consequence health, affected people need some kind of ease. OSA by the way does not affect just obese people, as might be the first thought.
It can affect anyone, regardless of age or body composition.
Ignoring it and leaving patients untreated is not a good idea, as this disease in the extreme case can be life-threatening. The current standard of care (leading, first-line therapy) are CPAP machines — continuous positive airway pressure. The undisputed market leader is Resmed (ISIN: US7611521078, ticker: RMD) with a share of some 60%. Another competitor is Philips (ISIN: NL0000009538, ticker: PHIA).
These machines pump air through a hose into a mask that is worn while sleeping.
However, as might be of little surprise, this setup is not really comfortable, limiting sleep positions and movement at night. In addition, for some patients the device might be too loud or wearing the mask cumbersome.
Relatively high long-term discontinuation rates in excess of 30% are screaming for a different solution. According to Inspire’s presentation, the market is very lowly penetrated with just 5—10% of affected patients being under some form of treatment.
If CPAP is not well tolerated, alternatives are surgical procedures, removing excess tissue in the mouth-throat region to increase the air flow space. Coming with own risks and not being reversible, unlike a mask that can be taken off, this does not sound like a convincing solution either.
This is where Inspire comes into play.
Inspired by the urgent need suffering patients have, an effective alternative was developed. The Inspire Therapy is a minimally-invasive, two-incision procedure.
One under the chin for the main stimulation device, and one near the upper chest for the implantable pulse generator and battery, similar to a pacemaker.
The device sends small electrical impulses, stimulating and pushing the tongue away from the throat, preventing it from closing the airway. Patients are able to inhale and exhale without the pesky interruptions.
The device can be switched on and off, as it obviously is not needed during daytime.
Providing more comfort and reducing many of the obstacles CPAP machines come with, qualified patients show better long-term usage, with significantly lower dropout rates. Inspire reports 80% of patients continue usage for five years or more.
New and total implanted devices are rising.
The next slide shows that the Inspire Therapy is helping patients, reducing the severity of their symptoms, while overall experiences are reported to be extremely good, with 90% and higher satisfaction rates on various questions.
Turning now to the first financials of the company, we can see that sales more than 10x-ed in just six years, and more than doubled since 2022.
Gross margins are high in the mid-80s.
To the right, we can also see that the company is guiding positive earnings per share, so at first glance there’s nothing to complain about. The story sounds good, there is a serious problem with high unmet medical need, and the company is offering a seemingly better solution, while being profitable.
You might be surprised when I tell you now that the stock of INSP is down 70% over the last five years, and even 64% just over the last twelve months.
How can that be?
The answer is, there have been multiple factors at play, creating this nightmare share-price performance, despite a solid business development.
Euphoria and hype: Inspire stock showed strong sales growth, but the stock went into euphoria, pricing in a major success and sustained hyper-growth in the OSA market, based on the truly solid story.
Inspire was valued excessively for a long time.
It started with an EV / sales (sales, not earnings or free cash flow) between 20–30x, reaching up to more than 60x.
Self explanatory, such a massive multiple cannot last, so a re-valuation absolutely made sense. The question is only for how long and where to spot a potential bottom.
Taking a look at the enterprise-value chart, we can see that Inspire started below a billion USD, shot up above 8 billion USD, and is now below 2 billion USD again.
Quite a ride!
While gross margins north of 80% sound impressive, the truth is that Inspire just two years ago turned profitable. Operating margins have been on the rise since then.
However, just back the envelope, 50 million USD in operating earnings vs. a market cap / EV of rounded up roughly 2 billion USD is still quite a lot. At this point, we cannot give a final answer, yet, because we need to look at a few other factors to get the full big picture.
The good news is, Inspire is generating positive free cash flow. This has been the case over the last two financial years.
The issue is, stock based compensation is much higher.
This is eating into shareholder value.
Although share count looks stable and has fallen even modestly last year, the problem is that Inspire is “buying back stock”, which sounds like a major positive, just to roughly keep share count stable.
In other words, shareholder have no benefit from their “free cash flow”.
Inspire even repurchased stock for more than twice the reported FCF to, as said, minimally lower share count.
This creates on the surface the impression of a shareholder friendly management.
But I’d be cautious with this view.
I think it is not a bold call to say that the euphoria is gone.
But there is a reason for that: a massive growth slow down — which is our second reason. Sales growth did not come to a standstill, but compared to the previous pace this comes close to a step on the brakes.
On a quarterly trailing-twelve-month view it becomes even clearer.
Where do we go from here?
Unfortunately, likely further south, potentially even deep inside single-digit territory.
As shown a few charts above (the one with the long-term sales evolution), management guided revenues for 2026 in a range of just 950-1,000 million USD — representing an increase of just 4–10% compared to 2025.
This reflects a noticeable deceleration after years of rapid expansion.
Although adjusted operating margins are expected to rise in parallel to 6–8%, pulling up operating earnings stronger than the top line, decelerating top-line growth is a concern.
If you know the reasons.
First of all, there are serious concerns that reimbursement rates could be lowered, passing costs to patients at a higher proportion. The newer fifth-generation device Inspire V faces uncertainty in the U.S., delaying adoption of the device.
Then, the Inspire V rollout appeared below expectations. Inventory issues might be solvable, but procedural economics pressure (too expensive) negatively impacted procedure volumes.
While the above is more short-term and manageable, a higher risk factor is competition.
Even though I said that obesity is not the main factor for sleep apnea, some patients try weight-loss drugs, hoping to improve their sleep quality. This is lower-effort approach compared to surgery.
The bigger factor, though, and for me the main point of concern, is that direct competition is heating up.
Inspire has been the dominant / near-monopoly player in the U.S. since its 2014 FDA approval, the competitive landscape has intensified particularly more recently. This likely hasn’t yet caused massive market share erosion, but this is a massive ark cloud over the company.
The Belgian company Nyxoah (ISIN: BE0974358906, ticker: NYXH) with its Genio system received FDA-approval in August 2025 for moderate to severe OSA — the space where Inspire is operating.
First U.S. commercial implants started in late 2025.
Key differentiators are a battery-free and leadless design, powered externally via a wearable patch, bilateral stimulation (both sides of the tongue for potentially more even airway opening), a single-incision procedure versus two, full-body MRI compatibility, and no need for battery replacement surgery.
For me, this sounds like serious competition, offering a few interesting advantages.
There’s a catch, though, creating an highly uncertain situation: Inspire sued Nyxoah in May 2025 for alleged infringement on three patents. The case is ongoing and the outcome not clear.
We only have for sure uncertainty for both sides.
But there’s likely more to come.
British LivaNova (ISIN: GB00BYMT0J19, ticker: LIVN) is another strong contender with its aura6000, targeting a similar patient group. It is already CE-marked in Europe, but not approved in the U.S. An ongoing final clinical trial showed positive predictive outcome (high probability of meeting primary endpoint), with earlier-than-expected enrollment completion.
FDA approval is expected in 2026 on a limited basis, with full approval targeted for H2 2027.
The in my view biggest potential challenger, however, for all of them, is the following.
Privately-held Apnimed is working on a pill to treat OSA. If this gets approved, then good night to those implants.
So, we are dealing with a very mixed setup.
High unmet medical need and a currently working solution meet a fragile stock, dragged down by the lack of real profitability (FCF adjusted for stock based compensation), reimbursement uncertainty, and looming competition.
Should the pill work and come to the market, this could even be the kiss of death.
We have seen above that this is likely not priced in.
Inspire is debt free and has 300 million USD in cash, implying an EV of 1.5 billion USD — for an EV / sales ratio of some 1.5–1.6x. On a profitability and free cash flow basis, it is hard to make a guess.
That’s why I am putting this case only on my watchlist, awaiting new developments. The potential downside is still quite considerable, especially if the competition should start taking market share.
If you’ve found the overall idea of life-improving medical solutions interesting from an investment perspective, I have good news for you.
Last week, I sent this report to my Premium PLUS members. The company could potentially disrupt a market with very little innovation for decades.
As a first-mover, it has developed a promising device, ready to break through a wall. The current standard of care, like with OSA, is rather cumbersome.
If you compare this weekly to my latest report, you will see the parallels.
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Conclusion
At first glance, Inspire Medical Systems looks like a disruptor in a market with high unmet medical need.
The company is growing, margins are improving, and the implanted device is proven.
However, there are a few reasons for the stock’s decline — with potentially more to come.
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