Inspire Medical's stock price drops 8% due to coding changes casting a shadow over its prospects

Minneapolis - Inspire Medical Systems, Inc. (NYSE:INSP) reported fourth-quarter earnings that exceeded analyst expectations, but the stock fell 8.7% after the company disclosed a coding clarification that will impact physicians’ reimbursements for its latest sleep apnea device.

The medical technology company’s adjusted fourth-quarter earnings per share were $1.65, significantly above the analyst consensus of $0.68. Revenue reached $269.1 million, surpassing the $263.81 million consensus and representing a 12% year-over-year increase. Despite strong performance, investors remain concerned about future reimbursement challenges.

Following management’s announcement that its new Inspire V system procedure will be billed using CPT code 64582 with a -52 modifier, Inspire’s stock dropped sharply, potentially reducing physicians’ reimbursement amounts. The company also revised its 2026 revenue outlook to between $950 million and $1 billion, representing a 4% to 10% annual growth rate. This more cautious forecast reflects coding uncertainty.

Tim Herbert, Chairman and CEO of Inspire Medical Systems, stated, “While we are disappointed with this outcome, this clarification provides direction for our future. We will work with payers including MACs, government agencies, commercial payers, and physician associations to try to minimize the impact of this change on physician fees.”

For the full year 2025, Inspire reported revenue of $912 million, up 14% year-over-year, with an adjusted EPS of $2.42. The company’s gross margin in the fourth quarter increased to 86.6%, up 160 basis points, primarily due to increased sales volume and a higher proportion of Inspire V system sales.

Inspire generated $52.5 million in operating cash flow in the fourth quarter and $117 million for the full year. As of the end of 2025, the company held $404.6 million in cash, cash equivalents, and investments, down $111.9 million from the previous year, primarily due to the company’s $175 million share repurchase in 2025.

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