Intersect ENT (XENT) Grows On Innovation Despite Cost Woes

Recently, we issued an updated research report on Intersect ENT, Inc. (NASDAQ:XENT) . While we are encouraged by the company’s growth prospects, driven by the favorable Chronic Sinusitis market, its difficult pricing scenario raises concerns. The stock has a Zacks Rank #3 (Hold).

In order to maintain its position in the ENT specialty market and widen its sales base, Intersect ENT is focusing on product development and innovation.

The SINUVA Sinus Implant (to treat nasal polyp in adult patients with no previous sinus surgery recorded) in the United States has been on the forefront since April 2018, following its FDA approval. In this regard, the company also completed its ENCORE study, a small 50-patient open label program, designed to evaluate the safety of the repetitive use of SINUVA.

The latest offering from the SINUVA portfolio is specific J code — J7401 (which became operational in October 2019). However, the implementation of this code is still in process on the Medicare side as the Centers for Medicare & Medicaid Services (CMS) are yet to assign a specific reference price. Nonetheless, the company expects this to be resolved by January 2020.

Regarding the company’s Propel line, the PROPEL suite has become the standard of care for polyp patients undergoing sinus surgery and it has grown over time through addition of users, expansion of usage frequency and adoption of products. In July 2019, the company received FDA approval for a new Straight Delivery System (SDS), which will replace the PROPEL Ministeroid.

On the flip side, shares of Intersect ENT have underperformed its industry over the past six months. The stock has lost 12.9% against 6.8% growth of the industry.

In the last reported quarter, the company put up a dismal performance with lower-than-expected numbers. Escalating selling, general and administrative as well as R&D expenses induced an operating loss in the period. Costs mainly flared up due to the expansion of SINUVA commercial and market access activities including headcount, marketing and consulting expenses and the incremental stock-based compensation associated with leadership change.

Inadequacies in the overall product access process combined with physicians’ hesitancy to engage in buy-and-bill process are the main causes behind this company’s failure to provide proper treatment to patients. This apart, the pricing scenario has been persistently tough for Intersect ENT. Strong competitors in the large medical device market also pose a challenge.

Stocks Worth a Look

A few better-ranked stocks from the broader medical space are Haemonetics Corporation (NYSE:HAE) , NuVasive, Inc (NASDAQ:NUVA) and ResMed (NYSE:RMD) . While ResMed sports a Zacks Rank #1 (Strong Buy), the other two carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Haemonetics has a projected long-term earnings growth rate of 13.5%.

NuVasive has an expected long-term earnings growth rate of 10.9%.

ResMed has a long-term earnings growth rate of 12.9%.

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