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Intersect ENT Down on Low Propel Sales, Pricing Pressure

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On Mar 3, we issued an updated research report on Intersect ENT, Inc. XENT. While the company’s bright long-term prospects, driven by the favorable Chronic Sinusitis market encourage us, its choppy pricing scenario raises concerns.

The stock carries a Zacks Rank #5 (Strong Buy), at present.

Over the past year, shares of Intersect ENT have underperformed its industry. The stock has lost 32.9% compared with the 5.2% fall of the industry.

Intersect ENT ended the fourth quarter of 2019 on a mixed note. While the quarterly numbers surpassed the Zacks Consensus Estimates, the same reported year-over-year declines. The tepid top line resulted from lower sales of the PROPEL product portfolio, and other headwinds like seasonality in business and a stiff competitive landscape. A contraction in gross margin also played spoilpsort. The pending J code reimbursement rate from CMS is disappointing.

Further, 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. Apart from this, the pricing scenario has been persistently choppy for Intersect ENT. Strong competitors in the large medical device market also pose challenges.

On a positive note, the company's revenue growth on the increased adoption of the SINUVA Sinus Implant buoys optimism. Management’s optimism that a renewed focus on PROPEL market development will enhance SINUVA product access also boosts market sentiment. The increase in customer adoption of SINUVA buoys optimism as well.

In order to maintain its position in the ENT specialty market and widen the sales base, Intersect ENT is focusing on product development and innovation.The latest offering in the SINUVA portfolio is specific J code — J7401 (which became operational from October 2019). Intersect ENT expanded the adoption and utilization of the new J code, especially with commercial payers.

Regarding the company’s Propel line,though the year-over-year downside in the fourth quarter resulted from lower unit sales of the PROPEL product portfolio, Intersect ENT is hopeful of the product’s growth on market expansion, clinical selling and improved analytical insight.

Stocks Worth a Look

Some better-ranked stocks from the broader medical space are ResMed Inc. RMD, Medtronic plc MDT and Hill-Rom Holdings, Inc. HRC.

ResMed has a projected long-term earnings growth rate of 12%. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Medtronic’s long-term earnings growth rate is estimated at 7.4%. The company presently carries a Zacks Rank of 2.

Hill-Rom’s long-term earnings growth rate is estimated at 11.1%. It carries a Zacks Rank #2, currently.

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