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Intersect ENT (XENT) Q2 Loss Widens, Revenues Beat Estimates

Intersect ENT Inc. XENT reported second-quarter 2020 adjusted loss per share of 65 cents, wider than the Zacks Consensus Estimate of a loss of 50 cents as well as the year-ago reported loss of 36 cents. The quarter’s adjustments exclude the impact of losses on embedded derivatives and certain restructuring costs.

Revenues in Detail

Reported revenues in the second quarter plunged 63.3% year over year to $9.8 million but exceeded the Zacks Consensus Estimate by 24.8%. The year-over-year downside resulted from suspension of elective surgical procedures by hospitals and reduced ENT office visits due to the coronavirus pandemic.

Revenues from the PROPEL product line were $9.5 million in the quarter.

Margins

Cost of sales was $7.4 million in the reported quarter, up 45.8% year over year. Gross profit declined 88.7% to $2.4 million. Gross margin was 24.8%, reflecting a signifcant contraction of 5630 basis points (bps) 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

Selling, general and administrative expenses were down 29.4% to $19.5 million in the quarter under review. Research and development expenses were $4 million, down 33.5% year over year. Adjusted operating expenses were $23.5 million in the second quarter, down 30.1% year over year.

The company reported adjusted operating loss of $21.1 million, wider than the year-ago adjusted operating loss of $12 million.

Cash Position

Intersect ENT exited the second quarter of 2020 with cash, cash equivalents and short-term investments of $135.8 million compared with $87.7 million at the end of the first quarter.

2020 Guidance

Intersect ENT withdrew its 2020 guidance on Apr 23 due to uncertainties associated with the pandemic. This time too, due to the rapidly evolving environment and continued uncertainties, the company refrained from providing any new guidance for the ongoing year.

However, based on second-quarter elective procedure volumes and referral trends improvements and a strong third quarter start, the company expects a sequential increase in revenues in each of the quarters of second-half 2020. Also, it expects revenues to grow in 2021 relative to 2019. Intersect ENT also expects gross margin levels to return to the mid-70% range by the end of 2020.

Our Take

Intersect ENT ended the second quarter on a disappointing note as a result of hospitals suspending elective surgical procedures, and significantly reduced ENT office visits. Significant contraction in gross margin and a higher adjusted operating loss are discouraging as well. This time too, the company could not come out with its guidance for the rest of the year.

On a positive note, the company noted that despite the year-over-year decline, sales were stronger than expected. This was driven by the return of sinus surgery procedures using PROPEL as the U.S. market began to overcome the challenges of the COVID-19 pandemic. According to the company, sales improved in the quarter as evident from a strong show in May compared with a very soft performance in April. Sales in June were stronger than May. This momentum stemmed primarily from the commercial execution on top of pent-up demand among untreated patients awaiting care for chronic rhinosinusitis. SINUVA patient referrals too experienced a progressive rise through the second quarter.

Intersect ENT projects continued increases in elective sinus procedures that will drive sequential revenue growth during the second half of 2020.

Zacks Rank and Stocks to Consider

Intersect ENT currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space are West Pharmaceutical Services, Inc. WST, Thermo Fisher Scientific Inc. TMO and Hologic, Inc. HOLX.

West Pharmaceutical reported second-quarter 2020 adjusted EPS of $1.25, beating the Zacks Consensus Estimate by 37.4%. Net revenues of $527.2 million outpaced the consensus estimate by 6.9%. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Thermo Fisher, a Zacks Rank #2 (Buy) company, reported second-quarter 2020 adjusted EPS of $3.89, beating the Zacks Consensus Estimate by 45.7%. Revenues of $6.92 billion outpaced the consensus mark by 0.1%.

Hologic reported third-quarter fiscal 2020 adjusted EPS of 75 cents, surpassing the Zacks Consensus Estimate by a stupendous 108.3%. Net revenues of $822.9 million exceeded the Zacks Consensus Estimate by 37.1%. It currently sports a Zacks Rank #1.

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