XENT Intersect ENT

Jeri Hilleman Chief Financial Officer
Lisa Earnhardt President and Chief Executive Officer
Richard Newitter Leerink Partners
Bob Hopkins Bank of America Merrill Lynch
Kevin Farshchi Piper Jaffray
Na Sun Wedbush
Kaila Krum William Blair
Call transcript
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Good afternoon, and welcome to the Intersect ENT Third Quarter 2017 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Jeri Hilleman, Chief Financial Officer. ahead. go Please

Jeri Hilleman

and call. Chad, all participating for Thank thank today’s on you, you

Joining and Earnhardt, Lisa me is today President CEO.

SEC. coverage, sales securities for the Before and herein. without we will to and are and undertaking of timing or procurement within we products I’ll over other such could to anticipated risks differ statements you Lisa file contained remind and approval studies, financial of results materially or our We force federal indications of limitation, update meaning well Lisa? from to events call the begin, I’d the as upon these reimbursement risks growth, any make now as include, estimates like forward-looking disclaim codes a current any uncertainties, in to forward-looking of and laws. from the performance, which Earnhardt. statements and time Actual we time which clinical obligation our detailed turn outlook in those revise new that as forward-looking statements result based reports assumptions with of

Lisa Earnhardt

Thanks, Jeri.

date, majority the use to with to better been year. revenue of account to Contour primary give pleased To just adoption on average patient, franchise. year. of strong to for report regularly. and and Contour guidance reflecting recently outlook, continue frontal of almost from sinus. two strong experience use XX this a thereby, XX% to being our with about for quarter, PROPEL with Based you the the understand continuing implants success their the that of on the exited last with per of use by QX. in grew date our has we are XX% rest accounts quarter our our represents flavor are we account over in the raising and over with stocking XXX of Overall, Contour that over usage physicians third over usage we up success PROPEL introduction surveyed active We our a The accounts. driving Contour Contour, X/X PROPEL We of stocking QX This

starting now with turn use as no or PROPEL. of accounts planned lower even to are We attention to our

look Contour driver growth given that will strong forward, we and we unique evidence. As design expect a of remain its clinical

just the In JAMA, ENT in that the Medical fact, study of American published we the announced PROGRESS edition was of today Journal Association. the

regarding next study interventions yet need to XX% as prescriptions As a role the life postoperative driver over the significant need Taking our will evidencing family for study This to or step reminder, surgical not to used as PROPEL surgery randomized our is into for reduction their the year. a such commitment significant alone. for for relative our to meaningful blinded additional PROPEL a in oral need we milestone products our the is This demonstrated improve this in particularly accomplishment us, statistically XX-patient and treat to patients. steroid for XXX,XXX a back, interventions compared randomized our quality been meaningful has community chronic important demonstrate of benefits a second controlled of sinusitis Overall, found of Contour that fourth quarter benefits date have trial ENT reinforce continue a growth through conviction in frontal move opportunity of the and be practices. disease. observations to This those patients. for great PROPEL steroid-releasing educate treatment clinical the publication the especially products, will the of another provide to implants of who sinus the

XX territory sales managers sales field consultants. continues up to Our be XXX XX effective strong, reps made and force stable with and of

by the force with to our XXXX. our consistent overall stated sales sales We by force grown X% grow of plan XX% year, our start since have the in about

per manager productivity year revenue by year-to-date to also Our over has grown $X.X annualized XX% million. last territory

our million above million. outlook to results million we third guidance to reflecting expectations, and from to raising are $XX again up these factors, Our million our $XX.X – came $XX XXXX $XX.X revenue XXth quarter in revenue outlook

In preparing for product, our commercial are the to investigational success, our potential propelling we of addition launch SINUVA.

NDA Our PDUFA January for pre-approval communications commercial remains launch a launching XXXX, second with readiness. FDA SINUVA and ongoing the we of review date anticipate the including Recently, advancing interaction been number results, quarter there to expanding trial of efforts of XXXX. related clinical X, activities in have and the SINUVA,

transparency medical study As of randomized we of presented more results. the were clinical II Kern. RESOLVE presented and the investigator by providing meta-analysis leading and trials scientific Dr. II by further study to community Stolovitzky have previously study at results two conferences a RESOLVE in-depth Robert Pablo ENT conferences recent outcomes disclosed, A were co-principal at two review the study Dr. our

single for continuing the evidence The today based a six clinical are We build the to through of use surgery. indicated assess reduction significant demonstrating SINUVA, have months for efficacy of SINUVA. on a on patients trials safety and in proportion we completed revision

SINUVA We of the use the long-term is that polyps. of regarding product also assist has management as data in the important repeated believe potential to

trial end, initiate plan repeat placement SINUVA study focused the to implant sinusitis on patient quarter. we ENCORE the that chronic is a polyp. prospective ENCORE nasal this XX-patient Towards multicenter of evaluation with study clinical The in open-label of

of XXX-patient SINUVA the with results of our that over first usage. study the study FDA study to not approval additive to characterize the This be will and be with reviewed will date have study are the for the confirmed repeat SINUVA. and have to We required

may few their believe conditions. call information regarding Given provide that further outlook. turn recent results will moments. and launch SINUVA and patients in the I chronic from SINUVA our to to over approval outlook financial discuss for placements benefit a I Jeri periodic first, manage adequately chronic will this nature to our of we But disease, the some

Jeri Hilleman

year. for Lisa outlook Lisa. you, quarter what are pleased said, we our the Thank third echo To raising were and revenue our with

$XX.X for the year to million $XX.X full million the targeting of Our and XX%. approximately quarter year, fourth million of $XX.X for $XX.X growth outlook to achieve million, revenue is to

expenses and year, if of quarter by gross margin, units gross second to margins X% Contour quarter fourth margin we produced, sale in of first introduction of and third the quarter led some first XX%. the as the Regarding XXXX. of a and anticipated, look the benefited each ramp half the back initial In from Contour R&D gross our about to quarter, we pre-approval, with resulting the inefficiencies

cost outlook with XX% QX. expect of quarters, consistent for for margin of to Overall, the coming to improve we Contour XX% PROPEL Over more prior are the QX, PROPEL align the mini guidance with production and our gross for to with closely upholding continue we an the year, cost.

QX and of of $X.X SG&A. $XX.X Our million $XX.X operating included expenses million of R&D million

support R&D quarters SINUVA develop Our spending we continue and as prior consistent to our pipeline. was with

the spending onetime expenses as of in the prior to with range. our units consistent outlook expenses related fourth to SG&A therefore, related year our for and the do we was quarter, costs in demo at high the market to of Our We, quarter. SINUVA, guidance expect fourth previous operating rise of access We the quarter increased production infrastructure. incur expect also to with see the launch spending end

plan progress to far in expense process, approximately an million. thus with review In $X.X of addition, the our QX products based we commercial of produce for SINUVA on initial quantities FDA

setup as expense are to including $XXX prior total we initial expect As R&D to our in to year QX with produce since million Contour, production for be outlook $XX operating our these date. million. will recognized costs, production for expense revising Therefore, and PDUFA costs we to the

flow the increased investment from cash operating during cash remained quarter and our million. did and to million $X.X position strong Finally, quarter We this of $XXX.X million. achieve positive $XXX

continue the the quarter. call However, we not launch back cash now turn generate do we to SINUVA flows to expect you, positive ramp starting I’ll expenses to in fourth Lisa. as

Lisa Earnhardt

Jeri. you, Thank

topic SINUVA. our towards final you today to is Our update all address of to commercialization progress on

the with review resolution audit review. of past information of is and is Other First FDA to inspection final Monday, they commenced would we of finalization it any audit the and we anticipated This manufacturing NDA activities as and continue standard findings, include quality request on progress foremost, the PDUFA process, discussions. date in practices. pre-approval a timing. additional believe their labeling This step with the FDA consistent our and the work any

the itself, including launch regarding are sales there plans activities key several market of well Regarding focus, as areas readiness SINUVA as force anticipated our access. for launch and

are current further deployment, plan the is The with on set that call we their for introduction our the sales today of our leverage SINUVA business PROPEL to force practices. physicians we SINUVA can into same well organization. potential As up provides the ENTs sales incorporate and

spent physicians with sales time of Our setting considerable already care. office the in force these

to we SINUVA our driving upon one business office therefore, Our plan, force in into integrated introduce products we are growth the force, OR deploy committed that sales while our to PROPEL of Through SINUVA sales the approval. and PROPEL to sell continuing both setting. remains

our in proven be XX% sales by We which to territory consultants, additional effective expect has to force continue to driving business. XX% structure XXXX, at and in to managers a sales our depth including grow

way the January, in partners, sales product training the and physician our pharmacies. with and initial to for adoption. boarding program remainder quarter, and we a being first the hub a use second outreach and in successful would outcome including introduction to on kick using Starting the early off training, provide our Assuming paves the we access FDA product plan with reimbursement going specialty market for education approval of and launch, priority quarter targeted live a patient that

to sales localized with among will end, and guide our that training force delivery. on those drug physicians, Towards experience concentrate we especially with adoption building

the reimbursement and also new hub product elements ENT related that benefits will practices. a to verification, to process many We will claims assist customer SINUVA access have physicians and purchasing may as access. as questions reimbursement serve recognize Patients for service related to for to and resource the we questions be with these

open directly drugs. on programs, launches in standard reimbursement physicians they backbone SINUVA of our through it as the approved, and a a the After choice that have steroid pharmacy training that to financial track unique practices. acquisition. complete may that expect sustained we field position or SINUVA, accelerate if delivery, product their We handle proven These opening provide believe and please all hundreds local and of experience Jeri has address to I fantastic ordering market the been want your and the elements much patients will will in to Therefore, with buying product, into call the team questions. Thank growth. adopt that we interest, on which We Chad, would of be envision to information any targeted the they of many through benefit a year. access product rollout, the mechanical with you line will the and of for to and these this will office have in support participating product each specialty we thousands have remain the be and are successful their you of the up to physicians it for offer combining so of potential the the lines. aspects will record avenues of we and hand physician-administered


begin [Operator now the will with first from ahead. JPMorgan. come We’ll session. Please Certainly. question-and-answer Weinstein Michael The Instructions] question go

Unidentified Analyst

Hi, Allen the Mike. on on quarter. this Congratulations for is good actually

Just had a quick question.

products, roughly of I of So out of to? what new percentage Contour granted going and have kind begun you’re in in growth basically mix different kind and really believe the base seeing, actual that X/X you that base now you of the just compete you’re accounts that what Contour, PROPEL shaking stocking business see business terms of that is mentioned of your forward that you launching do kind spaces? And

Jeri Hilleman

Jeri. Allen, for your is Thanks this question.

committees forth. accounts traction stocking PROPEL. are Contour, Part you largest and gotten just we that out largely simply initial have the process new would existing If it’s so current go value of with assessment the of Potential adoption. also is accounts that with through sales where look the and

those come bit on a can later. little So

traction current and also Contour. both accounts of making the We’re gaining through with accounts launch new

Unidentified Analyst

PROPEL what and do accounts be have where think mix And there’s the you have already would idea, any – you Contour? could like, of in you you do ultimate – the base PROPEL, like,

Jeri Hilleman

that degree, to we preference we We think have how physician and because to good a as and how that on of We’ve assessment the is were fact project the launch. transparency PROPEL on procedure some products depending that used needs. given launched we forward some you in doing the patient going same all really our of wanted the the to during are and based interchangeable – are because

start at We’re looking – as going rather family. continuing revenue on this really apart that the aggregate be at than going we’re individual our to little point, the the bit integrated approved, at breaking just but to components. accounts SINUVA and is business focus PROPEL to different may if a family one for look

Unidentified Analyst

and be still bit step year-over-year to XQ, of, growth do do one. With early. should implying the of to out know And to guidance, looking to of in the you���ve growth of that will in of over But a that it’s XXXX? we you’re XX% Okay. expect just rate just like, up yourself kind close XXXX, doing. the go-forward I kind final Or the again, kind SINUVA growth in but kind then see a down up, maybe what you expecting kind expecting your not another year-to-date? be to little had step you

Jeri Hilleman

to Contour But contribution launch indicated we continue strong would to look also certainly and in second that help timing growth. of really of we So as quarter, that the assuming to make give when the continuing to SINUVA, look at the start that its year. and we’ll guidance then the will quantify growth, we’ve

Our to there very SINUVA described, make high strategy for is launch, smoothly on as process really Lisa the physicians. goes adoption, is the sure quality

the we build can first more quarters aggressively of it. think And on focused I go we that. or over couple then more as So

the question So but I over of it to quantitatively, long growth answering overall directly you really a a I’m growth time. gives ourselves think strong continue your drivers and not of period positioning of sense


go Leerink question come next Our Richard will Partners. Newitter from with Please ahead.

Richard Newitter

hurricane But at for all? Hi, have at strong I’m do the impacted just there if was might a an from start a if to off, it. kind I mentioned what attracted questions. jumping sure just taking I’m between so, impact was you – And all. I’m calls, thanks you estimate as what that the not curious if of but still might have result, have that want

Lisa Earnhardt

we our did We in levers we’re obviously because multiple specifically address not to business drivers the that Rich. and develop and of call able revenue. and Yes, have on strong growth in in volume. an well estimate South would procedural on points volume, a Houston. it of of both terms as was impact couple there We Clearly, deliver in was probably Florida percentage as

Richard Newitter

thanks. just we this and for any timelines see Okay, ENCORE great, curious, readout? you potentially then I’m on enrollment have could estimated study, when would a And

Lisa Earnhardt


know So this heard if yes, and study subjects, don’t you it’s commence have we’ll – year. I enrollment, it, this XX

within or months some year So of we or the would expect to results the initial the results, probably XX readout – of XX a so.

Richard Newitter

preliminary you conversations would think to had I’m that is respect help is heard from just that this you your could something something that with curious, in insurers, the like the with that feedback you’ve that this cause coding? insurers to see or

Lisa Earnhardt

the No. I has evidence, clinical or work of is repeat so safety of mean, foundation implant. on the of just the natural really, the the word this usage is – done hopefully, of just characterizing already company strong and the Obviously, extension this been we’ve far. focused great

Richard Newitter

about XXXX majority of of in with be XXXX? how that on do cadence? SINUVA. the the about like but as of feel a last we bit, single-digit Okay. and million-or-so I’m SINUVA. more you then right we way very, that feels Is kind XQ, And XQ contribution wondering, That’s a cadence in a of should are of couple just sure move to just thinking think XQ, thinking the a to Is or rate helpful. be very like estimates And for $X comfortable less it of about maybe the generally million high be estimates, run good could kind maybe make this of more maybe one SINUVA. range just into or kind Jeri, like to little right a for consensus might kind correctly. that time vary building of it we’re they and dollar And kind think the what million to early all looking

Lisa Earnhardt

with that’s then I That’s the spirit a certainly terms and, in talk our launch, the something good a quantitatively of and consistent Rich, little in will But pretty so more in the of a we of consensus building remarks and way. made the that timing tight towards certainly about the correct. people January. question, think, more also interpreting we’ve back Street, of the business those similar The in there’s end are noticed year a nature comments I certainly, think I is of in

think quantitatively The looking I we’ll we’re So gives more how numbers, insight into to when into we certainly beginning at some the and you that this Street speak get year. next of

Richard Newitter

thanks. Okay,


Our Merrill will question with next Please from Hopkins be America Bob go ahead. Bank of Lynch.

Bob Hopkins

today? me Thanks. Can you hear

Lisa Earnhardt

We can.

Bob Hopkins

you. thank Great,

it just you’ve that the study, was my kind that right. to So that on first I make I to just curious outside? the mandated it sure ENCORE Just kind of about. Is together? that is how is Or got question background by a something of the came as want put on study

Lisa Earnhardt

Yes. to come is work we’ve in just a This the be up conversations at knowing this study we wanted that one the did need and FDA make much clinical done. as repeat look usage, characterized that sure in would characterize the that our with condition very to chronic

Bob Hopkins

on I’m then which payment training it approach going I of reimbursement? a But – bigger curious, gating very sort to it’s is understand and SINUVA, and the undertaking is here is And here. Okay. or the measured item, bigger which just

Lisa Earnhardt

both of element then look ENT as our be it about but new on organization It’s some also the for drawn when hand SINUVA, because for really rolling A the folks. and our launches, there’s I will for drug the path product, will out the all be that as customers. And well market think well and new hand. access at many new I go Because those internal for things. procedure kind team obviously training,

how that. they or and get product, So the procedure access access market the the to

customers. to foundational that work, quarter for our ramp both like we’ll in we year. do heavily in as feel our first into want training sure we in we invest we pass well team phase as as the And So later the do make

Bob Hopkins

from pretty The the to training the to training? Because product you – seems incrementally? perspective, products sell happen? similar so Like has to need do it so doctors learn what’s what a what today,

Lisa Earnhardt

physician around protocol. for it’s anesthesia perspective, Probably the

way, the their that Given that well patient office we in make as patient in don’t place this a great setting want typically so has as a that patient in the both is, implants sure to today they our experience. physician setting,

Bob Hopkins


Okay. question can what – And last us for just then sense. give That me. makes you –

the on us reimbursement give a side. sense Just

Just curious.

Maybe just detail access mentioned be bit how with access partners. You a market are and you’d partners working who market those going on more little them.

Jeri Hilleman

Jeri. This begin question. the reimbursement to that But to questions choices reauthorization, to they how a individual referring really the can access source customer three is source with I’m to fall where into Lisa’s take basically that forth. so hub happy partners the what is groups. that about One service center and are product, market product, will is patient help the their

of just largely the in without them product how don’t deal to involved product. getting want and allows going office. – implementation the reimbursement distributors seeking are if partners, with addition with the in And In physician They simply we a specialty that, to from of similar specialty then with a distributors they and getting difference and with product also the are access contracting the it And stock specialty source vein their and working would aspect point aspects financial we working and are they to we we pharmacy it being ship need the in phase reimbursement. are are distributors. specialty those to view pharmacy

So some it’s tried-and-true set variedly methodology. of

to a this good product. for the just on learn with would the to to physicians that there’s element is along well of this that’s accessing new. think consistent novelty It’s how But them we access of process in certain We’re but just require to it process implementation timelines, going solutions bring our straightforward ENTs, product. very again, and of

Bob Hopkins

Perfect. from me. That’s all Thank you.

Jeri Hilleman



from will with Piper Our next go be Matt question Jaffray. Please O’Brien ahead.

Kevin Farshchi

today. Hi, margin a headwind Contour I to taking this with was on the gross for know you questions. Thank mix first impact. I this is said Matt the the for on start Kevin time. wanted you

over quarters? long the think Do be really Any of that’ll you comments think on product a time? would the persist it’s improves curious couple that helpful. of how Just you profile as

Lisa Earnhardt


progress I think rapid make we’ll that. with

or go produce. our seeing already shows up in We’re traction terms into we – the good in we a as QX our products production, that sell when of we so quarter which

going with So already that think toward I to we’re for a traction good and Contour. us be long-term to very do seeing I challenge respect it’s think

Kevin Farshchi

with you a year, Okay. the how that’s And specific in I this Got on are year? SINUVA number on SG&A cadence into you. curious, leverage thinking great just for in the then model about next side. or expense the was side Whether operating the guys general? coming just in QX

Lisa Earnhardt

again, as And of we give be Yes. guidance. part that will

go in drivers about think a next so we’ve expense up about of range. XX% to talked we for that year, sales bit as XX% So the force little expect to

of going going some We’re expense and and have and be infrastructure internal increase to marketing headcount, to our of we’re large-scale sort to incurring forth. so

in So expenses year, the have do see of after not We believe company moving next ramp direction nearly raise SINUVA. launch the continuing we go profitability initial the completed to we and the leverage do up. but of continue to in may we

Kevin Farshchi

so much. Thanks Perfect.


The would Please Levy from go next question ahead. with Tao Wedbush. be

Na Sun

is Hi, Na great This Congratulations. on for Tao. quarter.

about, And impact manufacturing can of help how Can can Regarding describe start the on SINUVA? study ENCORE. when next what SINUVA have you year? we adoption how margin maybe question – – I one the regarding the expect one gross regarding you SINUVA, just study talk sort more

Lisa Earnhardt

We for do a questions product. this patients think condition. the believe, some to the think suffer we could product, have as it’s physicians study and use gating Yes, might that Jeri and have. additional and don’t provide their to disease, address factor year for a any I’ll patients let for always implant but same beneficial do within adoption this this from the they repeat to that remainder. the will address it’s I consider even additional of be information question, their information ENCORE both And of they great address

to as I the mantra. heavily said, been that. to investing to clinical evidence of hold make continue that want so Intersect and we’re And foundation that’s we up And sure going in really is characterize we

to So you Jeri, want the... to do speak

Jeri Hilleman

little your to more introduce Supplementing to we little expect you than do We bit a don’t major product our the efficiencies it cost a and margins. hopefully, products, initially see then, a as shift SINUVA higher and will Sure. expect be we cost gain it in but our or gross current drops. bit

We consistently XXs continues expect the we and have said that be to in view. long-term margins our low

Na Sun

Great, thank you.


The from will with next be ahead. Krum Please question Kaila go Blair. William

Kaila Krum

for Lisa. taking Jeri. Hi Hi our questions. Thanks

So give talk amount that, one I I mean, can But, you it you on forward? product continued will clarity strength from guess And and Contour. how to a it dollar publication think quarter support about to specific increased first little going Understanding you there. is today bit then to level? fair up that then guys don’t want the say the second sequentially

Lisa Earnhardt


we’re And there’s growth We the to that’s I as growth and a publication, next about. things well. number see with excited into do year think, into for strong Contour this quarter believe significant PROPEL that a and continue really of us driver of

and First foremost, the was in that it JAMA. fact

As you most most that’s one of the know, well-respected world. as in well widely journals as distributed the

endpoints stronger As compare outcomes because you significant. although do secondary which Several we a there’s were we of meaningful also But statistically you many some prespecified clinically don’t comparison. and really do know, direct than the results there. believe that those can’t were somewhat cohort, the

published clinicians that adoption. think we important the incrementally clinical period. healing icing in be on evidence it’s think do I it products. we is the cake question also from the note That publication to of almost finally, the this And think data in And could family some supporting gotten in do as this I past have outcomes, the our helpful just looked which a is of of controlled blinded they the We randomized and fourth XX-day consider terms that PROPEL PROPEL study strength is postoperative at is family.

Kaila Krum

being into some That’s guys will And now into the of guys mean, growth XX% market the planning I that is stable. reason new next grow you year? assume remain you introduced Okay. next I year, sustain rest any year guess you’re this to will year. then helpful. full plus the for I the mean, in have rate couldn’t And the that business I there why relatively –

Lisa Earnhardt

all growth. reserve I give We level. the until neighborhood to talked agree grow with it we of give continue specifics. we’ll as is think to you any drivers about aim And guidance of to this being factors our have the But the really in

Kaila Krum

Thank you, guys.

Lisa Earnhardt

Kaila. Thanks,


The Instructions] our for be Suraj floor Northland is to Suraj, conference line will no Securities. right. session. Hi, go from turn The still Kalia [Operator questions, concludes Lisa remarks. question you. further [Operator is would muted. back to next to closing perhaps All Please the this with we’re Showing Instructions] ahead, hear your any unable yours. Earnhardt question-and-answer I like

Lisa Earnhardt

all. forward Have today, help Bye-bye. Thanks, evening. wonderful all your you thank in us. for with your Chad, and joining you support touch look a and to appreciate staying for We certainly interest and


has now Thank conference today’s for presentation. attending concluded. The you

now disconnect. may You