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Product Launches Aid Intersect ENT (XENT) Despite Cost Woes

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

In order to maintain its leading 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 issue to be resolved by January 2020.

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

On the flip side, the company put up a dismal performance with lower-than-expected numbers in the last reported quarter. 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.

Overall, 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.

Stocks Worth a Look

Some better-ranked stocks from the broader medical space are Haemonetics Corporation HAE, National Vision Holdings, Inc (EYE - Free Report) and ResMed Inc RMD.

Haemonetics currently has a Zacks Rank #2 (Buy) and a projected long-term earnings growth rate of 13.5%.

National Vision’s long-term earnings growth rate is estimated at 17.8%. The company currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

ResMed’s long-term earnings growth rate is estimated at 14%. It currently flaunts a Zacks Rank #1.

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