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Intersect ENT (XENT) Q2 Loss Wider Than Expected, Revenues Top

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Intersect ENT Inc. reported second-quarter 2021 adjusted loss per share of 49 cents, wider than the Zacks Consensus Estimate of a loss of 42 cents. However, the bottom line was narrower than the year-ago adjusted loss of 65 cents. The quarter’s adjustments exclude the impact of certain integration costs and others.

Meanwhile, without adjustments, GAAP net loss for the second quarter was 50 cents compared with the year-ago loss of 71 cents.

Revenues in Detail

Reported revenues in the second quarter surged 179.6% year over year to $27.3 million beating the Zacks Consensus Estimate by 0.5%. This year-on-year increase was attributable to higher PROPEL revenues, resulting from a significant recovery in demand for elective surgical procedures. In addition, the company generated record SINUVA revenues from improved access and coverage and a shift in sinus procedures toward ambulatory surgery centers and the office setting of care.

Margins

Cost of sales was $8.3 million in the reported quarter, up 13.3% year over year. Gross profit rose 684.9% to $19 million. Gross margin surged 69.5%, reflecting an expansion of 4478 basis points (bps) year over year.

Selling, general and administrative expenses rose 47.4% to $28.7 million in the quarter under review. Research and development expenses were $6.4 million, up 58.3% year over year. Total operating expenses were $35.1 million in the second quarter, up 49.2% year over year.

Intersect ENT, Inc. Price, Consensus and EPS Surprise

 

The company reported adjusted operating loss of $16.1 million, narrower than the year-ago adjusted operating loss of $21.1 million.

2021 Guidance Update

The company has not mentioned anything related to its guidance in its earnings release. Earlier in July, during the preliminary second-quarter results announcement, the company reiterated its full-year revenue guidance at the range of $117-$121 million. Full-year gross margin was expected to be in the low-to-mid 70% range.

Acquisition News

Intersect ENT recently entered into a definitive agreement with Medtronic (MDT - Free Report) , wherein the latter has agreed to acquire Intersect ENT for $1.10 billion. The deal is expected to close toward the end of Medtronic's 2021-22 fiscal year (ending April 2022), subject to the satisfaction of customary closing conditions, including receipt of regulatory clearances and approval by Intersect ENT's stockholders.

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 Medtronic 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).

Our Take

Intersect ENT reported mixed results for the second quarter of 2021. The company reported adjusted net loss wider than expected in the second quarter. The increase in operating costs is putting pressure on the bottom line. However, revenues improved year over year on increased PROPEL revenues from a significant recovery in demand of elective surgical procedures. The company also generated increased SINUVA revenues from improved access and coverage and a shift in sinus procedures toward ambulatory surgery centers and the office setting of care.

Significant investor optimism currently surrounds the company’s recently-announced agreement to be acquired by MedTech stalwart Medtronic for $1.10 billion. Following the announcement of the deal on Aug 6, shares of the company rallied 11.6% to close the session at $27.37.

Zacks Rank and Key Picks

The company currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader medical space that have announced their quarterly results are West Pharmaceutical Services, Inc. (WST - Free Report) , Encompass Health Corporation (EHC - Free Report) , both carrying a Zacks Rank #2 (Buy).

West Pharmaceutical reported second-quarter 2021 adjusted earnings per share (EPS) of $2.46, which surpassed the Zacks Consensus Estimate by 41.4%. Revenues of $723.6 million outpaced the Zacks Consensus Estimate by 8.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Encompass Health reported second-quarter 2021 adjusted EPS of $1.17, which beat the Zacks Consensus Estimate by 15.8%. Revenues of $1.3 billion outpaced the consensus mark by 1.5%.


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