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Intersect ENT (XENT) Q3 Loss Widens, Sell-Off Process On Track

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Intersect ENT Inc. reported third-quarter 2021 adjusted loss per share of 48 cents, wider than the Zacks Consensus Estimate of a loss of 42 cents. The figure was also wider than the year-ago adjusted loss of 34 cents per share. The reported quarter’s adjustments exclude a $13 million loss on embedded derivatives in convertible debt, $2.0 million of transaction costs, primarily associated with the Medtronic transaction, and $0.7 million of intangible asset amortization expense.

Meanwhile, without adjustments, GAAP net loss for the third quarter was 95 cents compared with the year-ago net loss of 35 cents.

Quarter in Detail

Reported third-quarter revenues increased 7% year over year to $24.4 million but missed the Zacks Consensus Estimate by 17.7%.

The cost of sales was $5.1 million in the reported quarter, down 35.1% year over year. Gross profit rose 29.8% to $19.3 million. Gross margin surged 79.2%, reflecting an expansion of 1368 basis points (bps) year over year.

Selling, general and administrative expenses rose 35.8% to $29.5 million in the quarter under review. Research and development expenses were $6.7 million, up 47.6% year over year.

Intersect ENT, Inc. Price, Consensus and EPS Surprise

Intersect ENT, Inc. Price, Consensus and EPS Surprise

Intersect ENT, Inc. price-consensus-eps-surprise-chart | Intersect ENT, Inc. Quote

The company reported an adjusted operating loss of $16.9 million, wider than the year-ago adjusted operating loss of $11.4 million.

The company ended the third quarter with cash, cash equivalents and short-term investments of $80.9 million compared with $88 million at 2020 end.

Sell-Off Update

In August 2021, Intersect ENT entered into a definitive agreement with Medtronic (MDT - Free Report) , wherein the latter 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.

On Sep 22, Intersect EMT received a second request from the Federal Trade Commission (FTC) for additional materials regarding the transaction. On Oct 8, the company’s shareholders voted to approve the transaction. Based on this information, Intersect ENT believes the acquisition is on track to close toward the end of Medtronic’s current fiscal year.

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, thus advancing its efforts to aid chronic rhinosinusitis patients.

Our Take

Intersect ENT reported dismal results for the third quarter of 2021 missing on both the earnings and revenue front. The increase in operating costs is putting pressure on the bottom line. However, revenues improved year over year.

Significant investor optimism currently surrounds the company’s recently-announced agreement to be acquired by MedTech stalwart Medtronic for $1.10 billion.

Zacks Rank and Key Picks

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

Two better-ranked stocks in the broader medical space that have announced quarterly results are Thermo Fisher Scientific Inc. (TMO - Free Report) , and West Pharmaceutical Services, Inc. (WST - Free Report) .

Thermo Fisher, carrying a Zacks Rank #1 (Strong Buy), reported third-quarter 2021 adjusted EPS of $5.76, which beat the Zacks Consensus Estimate by 23.3%. Third-quarter revenues of $9.33 billion outpaced the consensus mark by 12%. You can see the complete list of today’s Zacks #1 Rank stocks here.

West Pharmaceutical reported third-quarter 2021 adjusted EPS of $2.06, which surpassed the Zacks Consensus Estimate by 13.2%. Revenues of $706.5 million outpaced the Zacks Consensus Estimate by 3.2%. It currently carries a Zacks Rank #2 (Buy).

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