Intersect ENT's (XENT) Sell Off Plan Strategic Amid Pandemic

Intersect ENT (NASDAQ:XENT), Inc.’s XENT long-term prospects, driven by the favorable chronic sinusitis market, encourage us. However, the business has been severely hit by low ENT office visits amid COVID-19.

The stock carries a Zacks Rank #3 (Hold), at present.

Over the past six months, shares of Intersect ENT have outperformed the industry it belongs to. The stock has risen 13.3% compared with the 8.5% rise of the industry.

Amid the company’s ongoing business slump, significant investor optimism currently surrounds Intersect ENT’s recently-announced agreement to be acquired by MedTech stalwart Medtronic (NYSE:MDT) MDT for $1.10 billion.

The deal is expected to close toward the end of Medtronic's 2021-22 fiscal year (ending April 2022). This offer price represents more than 15% premium to Intersect ENT’s closing price on Aug 5 2021 (the previous day of the announcement). Following the announcement, on Aug 6, shares of the company rallied 11.6% to close the session at $27.37.

Intersect ENT, Inc. Price

Intersect ENT, Inc. price | Intersect ENT, Inc. Quote

Through the pandemic months of 2020, Intersect ENT’s business suffered huge revenue decline as a result of hospitals suspending elective surgical procedures and significantly reducingENT office visits. Further, the company was worried about the significant resurgence in COVID-19 cases that began in mid-December and continued into the first quarter of 2021 and adversely impacted ENT procedures through this period. Amid such situation, consolidation with a industry behemoth like Medtronic seems a strategically aligned survival plan.

The acquisition of Intersect ENT, which provides clinically-proven PROPEL and SINUVA sinus implants that deliver an anti-inflammatory steroid to help in healing, will enable Medtronic to expand its portfolio of products used in ear, nose, and throat procedures. The acquisition will further allow the consolidated company to leverage complementary product lines and customer base that will advance Medtronic's efforts to have a positive impact for patients who suffer from chronic rhinosinusitis (CRS).

Intersect ENT reported wider-than-expected adjusted net loss in the second quarter of 2021. Top-line growth from the PROPEL family of products and SINUVA continues to be challenged by seasonal variations in the volume of sinus surgery procedures. The increase in costs and expenses are putting pressure on the bottom line. Cost of sales was $8.3 million in the reported quarter, up 13.3% year over year. Selling, general and administrative expenses rose 47.4% in the quarter under review. Research and development expenses were up 58.3%. Total operating expenses in the second quarter were up 49.2% year over year.

Stocks Worth a Look

Two better-ranked stocks from the broader medical space are Envista Holdings (NYSE:NVST) Corporation NVST and Henry Schein (NASDAQ:HSIC), Inc. HSIC, each carrying a Zacks Rank #2 (Buy). You can see the complete list of Zacks #1 Rank (Strong Buy) stocks here.

Envista Holdings has an estimated long-term earnings growth rate of 26%.

Henry Schein has a projected long-term earnings growth rate of 14%.

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