Intersect ENT, Inc.
Q1 2021 Earnings Call Transcript

Published: 10 May 2021

[Operator:]

Good morning, and welcome to Intercept First -- I mean Intersect ENT, First Quarter 2021 Earnings Conference Call. All participants will be in listen-only mode. Please note that this event is being recorded. I would now like to turn the conference over to Randy Meier, Executive Vice President and Chief Financial Officer. Please go ahead.

[Randy Meier:]

Thank you, Kate. And welcome everyone, and thank you for participating in today's call. Joining me today is, Tom West, President and CEO of Intersect ENT. Before we begin, I would like to remind you, that we will be making forward-looking statements within the meaning of the federal securities law. Actual results and timing of the events could differ materially from those anticipated in such forward-looking statements, as a result of those risks and uncertainties, which include, without limitation our guidance for financial performance, sales force growth, clinical studies, approval of new products, and indications and procurement of reimbursements codes and coverage, which are based upon our current estimates and assumptions, as well as other risks detailed from time to time in the reports, which we file with the SEC. We disclaim any obligation or undertaking update or revise any forward-looking statements contained herein.

[Tom West:]

Thanks Randy, and thank you all for joining the Intersect ENT First Quarter 2021 Earnings Call today. As a company, Intersect ENT seeks to more fully satisfy, the significant unmet needs that exist across the continuum of care in chronic rhinosinusitis, a large and growing market that is now more than $20 billion globally. In fact, chronic rhinosinusitis is among the top 10 most costly conditions for US employers and is a condition from which one in eight US adults suffers. Our focus and motivation as a company, centers on the opportunity to meaningfully and cost effectively, address the significant clinical needs of chronic rhinosinusitis sufferers and their physicians, regardless of the setting of care, hospital OR, ambulatory surgical center, or office clinic. Our first quarter results reflect our continued penetration into this market, and the progress we are making in executing on our strategy. This despite, the need in the most recent quarter to continue to navigate through lingering COVID-related challenges. First quarter Intersect ENT revenue was $24.3 million, highlighted by the continued strength and resilience of our core PROPEL franchise and the growing revenue momentum in our SINUVA business. In addition, we were pleased with the early market acceptance and sales performance of our VenSure Balloon and Cube navigation products, as we progress as planned, towards the exciting formal national launch of our Fiagon-acquired balloon and navigation businesses in July of this year. There were several further important Q1 developments to highlight as well. These would include, first, implementation of final CMS coding for both PROPEL and SINUVA; second, positive initial feedback from our OM1 longitudinal 18-month PROPEL health economic real-world evidence analysis; and third, the initiation of a prospective clinical trial, the EXPAND trial to establish the benefits of combined use of our PROPEL Contour localized drug delivery sinus implant, following balloon dilation. Let's break down the components of our business. As we stated on our fourth quarter call, our core PROPEL hospital business was adversely impacted by the slowdown of elected sinus procedures due to the increase of COVID cases at the end of last year and into this year. Relative to the first quarter of 2021, this impact was felt especially in January and early February, but it showed clear signs of improvement as the quarter closed. We expect sinus surgical procedures will continue to rebound, especially in the hardest hit hospital setting with procedure rates normalizing in the near term and with some additional benefits of pent-up procedure demand likely to occur in the second and third quarters of 2021. Moreover, we are positioning PROPEL for future sustainable growth by also taking advantage of the continued shift in chronic sinusitis care from hospitals and ASCs to the office, a decentralization of care, representing a clear opportunity, giving the increasing orientation towards the office found in our broadening portfolio.

[Randy Meier:]

Thanks Tom and good morning, everyone. I would like to start the financial overview with a summary of our top-line results and then provide a little more detail on our financial statements. In the first quarter of 2021, Intersect ENT reported net sales of $24.3 million compared to $19.8 million in the same period of 2020, an increase of 23% from the prior year. Our sales improvement reflected the continued recovery in PROPEL implants, a significant increase in SINUVA implants, and a solid global contribution from our acquired Fiagon products, that include VenSure Balloon Cube Navigation and surgical accessories. For the first quarter of 2021, PROPEL product family revenues were $20.4 million, a 7% increase compared to the first quarter of 2020. SINUVA revenues were $2.4 million more than doubled from the first quarter of 2020, reflecting clinical benefit, further improvement in reimbursement, increasing comfort with our office-based procedures and the expansion of our market access model and distributor relationships. Our global Fiagon product portfolio contributed nicely with VenSure, Cube and accessories generating revenues of $1.5 million in the quarter, with approximately $0.4 million in domestic revenue. Product mix for PROPEL was consistent with recent quarters with PROPEL at 30%, PROPEL Mini at 35%, PROPEL Contour at 35%. Overall, PROPEL family ASP in the first quarter was -- of 2021 was $868 per unit, up 2% from a year ago. The SINUVA ASP in the first quarter was $1,370 per unit up 4% from a year ago. Gross margin for the first quarter of 2021 was 65%, compared to 68% in the same period a year ago. Gross margin was unfavorably impacted by amortization of intangible assets, production-related period and project costs, that collectively represented approximately $1 million. Partially offsetting the decline in Q1, gross margin was lower per unit manufacturing costs, as production volumes returned to normal capacity. Excluding the impact of amortization and the production-related costs, gross margin for the quarter would have been higher by approximately 4%. Looking ahead we expect to see meaningful increases in production volumes for the balance of 2021, and beyond, in anticipation of increasing demand for our expanded product portfolio, which we believe will result in improved margins in the second half of the year and 2022. Total operating expenses for the first quarter of 2021 were $34.4 million versus $31.3 million in the same period a year ago, an increase of 10%. The increase in operating expenses was due to expanded marketing initiatives, clinical activities and the addition of the Fiagon expenses inclusive of integration costs, which are now largely complete. For the first quarter of 2021, we recorded operating loss of $18.6 million, a net loss of $20 million or a, per diluted share loss of $0.61, compared to the operating loss of $17.9 million, a net loss of $17.5 million or a per diluted share loss of $0.54 in the first quarter of 2020. The adjusted net loss, excluding the impact of the fair value of embedded derivatives, amortization of intangible assets and the costs associated with the integration of the Fiagon product is $16.9 million, or $0.51 per share. The details of the adjustments are included in the reconciliation table of our press release. Now turning to our balance sheet. Total cash, cash equivalents and restricted cash and short-term investments balances as of March 31, 2020, was $89 million, compared to $105.5 million as of December 31, 2020. As a result of the Fiagon acquisition, our current and non-current deferred acquisition related considerations as of March 31, 2021, totaled $52.4 million. We believe our cash position, combined with our ongoing cost management initiatives and continued revenue growth provides the company with adequate capital to operate well into 2022. Looking ahead and based on the improvement in the overall COVID-19 situation, the initial and ongoing recovery of elective procedure volumes, improved procedure market penetration and our broader product portfolio, we are now more comfortable shifting from our informal outlook, providing guidance for 2021. As Tom indicated, we are raising our guidance for the full year 2021 revenue by $1 million to a range of $117 million to $121 million and targeting full year gross margin to be in the low to mid-70% range. Now I’ll turn the call back to Tom.

[Tom West:]

Thank you, Randy. We are pleased with our first quarter results as the performance of PROPEL and SINUVA underscore the differentiated value proposition of our proprietary localized drug delivery sinus implant offerings. We believe that our EU regulatory filing for PROPEL will be well received in the very near term and that we will be in a position to continue to execute our growth strategies unimpeded and with no material impact. We are pleased with the early feedback on the performance of our recent portfolio additions VenSure sinus balloon and Cube navigation. Looking ahead, we believe the future for Intersect ENT is bright. Based on positive trends for elective and office-based sinus procedures, we anticipate sequential improvement throughout our business in the second quarter and beyond. Encouraging macro indicators combined with our first quarter performance, a clear plan for commercial execution and expanding product portfolio and clinical evidence, as Intersect ENT well positioned to return to meaningful growth through the 2020 full year relative to 2019 and longer term establish the company as a predictable double-digit grower year after year. Before closing I would like to thank our employees, patients customers and shareholders. Now, I'd like to turn the call back over to the operator and open the call for your questions. Kate, would you please open the lines?

[Operator:]

We will now begin the question-and-answer session. Our first question is from Robbie Marcus from JPMorgan. Go ahead.

[Robbie Marcus:]

Great. Thanks and congrats on a nice quarter.

[Tom West:]

Thanks, Robbie.

[Robbie Marcus:]

Maybe to start going back to formal guidance, I just wanted to see how you feel about second quarter at about $28 million here, which is where The Street currently sits. Does that track well with your strong recovery or recovery in second quarter and third quarter comments?

[Tom West:]

Yes. I'm not sure I feel good about being specific on the second quarter, other than to say, we feel we have good momentum and feel comfortable where we are or we would not have made the change to the formal guidance and the slight uptick that we put there. But we feel that we are experiencing the recovery and feel like we're in good position to be able to meet expectation.

[Robbie Marcus:]

Okay. And then maybe just incorporating the comments on the CE mark, I want to make sure on the fourth quarter call you gave a little more color as to the different subcomponents of the business and how you thought those would trend. Sounded like Europe was going to be around $2 million to $3 million. Is that still on the table? And any other color you could provide with respect to how SINUVA and PROPEL trend within your guidance range would be really helpful. Thanks a lot.

[Tom West:]

Yes. Thanks, Robbie. Relative to the size of the European business, we did in the first quarter just over 400,000 in Europe. So it's not a big piece of business today relative to some of the regulatory challenges that we're experiencing right now. We expect to be able to clear that quickly. And given our ability to continue to ship product, we don't expect a material impact on the revenue line as a result of that. So we would still see Europe coming in in that $2 million to $3 million range for the full year and feel comfortable that once we clear this hurdle and we have work to do that but once we clear this hurdle we should be in that range. Relative to the second part of your question on kind of the guidance and where we are for SINUVA and the PROPEL business as a whole, we indicated previously in the fourth quarter call that we would more than double our SINUVA business in 2021 relative to 2019. We're tracking very nicely against that objective and feel comfortable with it, and looking for a return to growth on PROPEL as we come out of the impact of COVID. So again I think across the board we feel that we are on solid footing for the change in guidance that we've made and are of course working hard to execute and to exceed that.

[Robbie Marcus:]

Great. And if I could squeeze one more in. You had some really nice expense control in first quarter. How much of that was a pullback on expense rather than a new normal going forward? Thanks.

[Randy Meier:]

Robbie, this is Randy. I think we just had to continue to see good management of -- as we roll out the broader portfolio into this year and the expectation of a launch in July and the continued growth across the platform. As we mentioned, I think, we started to see a wind-down of a few of the integration costs that we incurred in the fourth quarter. So I think it was more of just a reduction in some of those integration and transaction costs rather than anything abnormal. But as we've suggested we're on track to a slight increase in terms of the overall operating expenses relative to 2020 and a little bit of an increase over the 2019 full year operating expenses.

[Robbie Marcus:]

Great. Thanks a lot.

[Operator:]

Our next question is from Richard Newitter from SVB Leerink. Go ahead.

[Richard Newitter:]

Hi. Thanks for taking my questions. Tom, I was hoping you could maybe talk a little bit more about the longitudinal data that you guys are -- have put together. I think you said it's statistically significant and you plan to publish later in the year or at least reveal the data sets in a more formal fashion at conferences later in the year. Maybe you can just give us a sense as to where exactly this data is going to have the biggest impact first and what care setting? My understanding was it probably going to be more aimed towards the hospital outpatient setting your surgery business and that's going to be more of a kind of insurer discussion and going to them to secure carve-outs on a one-by-one basis. Is that correct? And maybe you can just give a little more color around that strategy and the timing that that could take?

[Tom West:]

Yes. Great question, Rich. And first, let me say, we're excited by the data. We're still kind of unpacking it a little bit, but the preliminary read that we've had with our partners at OM1 has us very encouraged in terms of the caliber of the data and the findings that are there. This is a longitudinal real-world evidence trial. So it's drawing from registry data sets that OM1 accesses. It allows us to look at the full 18-month period post FESS procedure with a cohort of those that received PROPEL versus a cohort of individuals who did not receive PROPEL following FESS, a very sizable database over 2,000 patients in each arm giving us a real chance to establish the statistical significance. And what we do see is in the cohort that had PROPEL the utilization of health care services following the FESS procedure is statistically significantly down and therefore a basis by which to be able to derive cost savings from the use of PROPEL. To exactly your point where we think this is going to be most important is in the OR setting whether that's a hospital operating room or an ASC where a full functional endoscopic sinus surgery would take place. And the opportunity is really to go directly to payers and make the case that in providing coverage for PROPEL as a separate implant code leveraging our S code that we have as a supply code is cost effective for them, because of the reduced additional health care utilization that is implied by the data. That's not an overnight build that will require us going and speaking with payers and getting on the payer cycle for reevaluation. But in the end we think that this represents a long-term basis by which we can support PROPEL growth and broader PROPEL utilization. I think where it's going to be most impactful is actually in the ASC setting, which is where the economics are tightest, but where a payer has an incentive to drive traffic because it's generally less expensive to conduct a procedure in the ASC setting. Now we would add to the health economic benefit by reducing health care utilization if you were to use PROPEL, and we would be motivated to partner with payers in order to drive traffic into the ASC environment. So we're excited about it. More work to be done there as well in terms of refining our publication and presentation strategy, but this is something that we think we will be able to kind of spool out through the remainder of this year and work on in the years to come.

[Richard Newitter:]

Okay. That's helpful. And just to clarify the S code can be used in the ASC as well as the hospital outpatient setting correct?

[Tom West:]

Yes, it can.

[Richard Newitter:]

Okay, great. And then I'm just curious in light of the reimbursement changes that really kicked in during this quarter between SINUVA and PROPEL the bifurcation there of the J code, any anecdotal areas you can share with us on how that has if at all impacted utilization trends, incentive structures for using SINUVA just given that payment may have come down in some cases and what the average reimbursement levels have been?

[Tom West:]

Yes. So as you noted effective April 1, we went into effect with the new J code that was dedicated to SINUVA and an S code that is dedicated to PROPEL. This is I promise the final coding change for the business. We've got it exactly where we want it which is a single dedicated code for each product. I give a tremendous amount of credit to our market access team at Intersect ENT in terms of preparing the market both payers as well as office-based staff for this change, and I think it went fairly seamlessly in that we see immediate utilization of the codes. We see that they're being recognized and honored by payers as well as being understood and reloaded in office-based systems. And at this point, we're seeing kind of a continuity of business without a hiccup. And what we are also clearly seeing is the more rapid adjudication in the background in terms of just clarity of getting coverage clarity of the adjudication and reconciliation of any dispute because of the clarity that comes with having a single number that is dedicated to each individual product. So it's been a pretty arduous path to get to where we are now, but we feel that we've got the right coding and that utilization is in place and that we're in a position to provide a much clearer experience and a greater basis for confidence among providers in the marketplace, which had been something of an impediment up to this point.

[Richard Newitter:]

Thanks, Tom. And then just one last one if I could squeeze it in. Any shift in the percentage of SINUVA submissions between buy-and-bill and specialty pharmacy submissions? Thanks.

[Tom West:]

Yes. Not a material shift. We did have a little bit of a pickup in terms of utilization of the pass-through on SINUVA and a pickup in the ASC setting. We see this as a nice incremental source of business as people are realizing that they can access the Medicare Medicaid population using the pass-through code, which is now again in that single J code also encompasses the pass-through. It used to be somewhat awkwardly a separate C-code. And so, a bit of a shift towards ASC as a pickup of incremental business, but buy-and-bill remains attractive as we also continue to expand our authorization of benefit and pharmacy benefit. So, all in all, a pretty clean bill of health in terms of improved clarity and understanding and expanded use that I think will serve us well, particularly in the remainder of the year and as we go forward.

[Richard Newitter:]

Thank you.

[Operator:]

Our next question is from Ryan Zimmerman from BTIG. Go ahead.

[Ryan Zimmerman:]

Good morning. Thanks for taking my questions. Tom, if I recall on the last quarter, we saw PROPEL and really PROPEL in the office come back, I think a bit stronger. Here, we're seeing SINUVA and Fiagon really drive the business this quarter. Can you just talk a little bit about maybe some of the -- going back to PROPEL, the office-based adoption of PROPEL this quarter, especially after the reimbursement changes that took place April 1. And how to think about that channel in that business as we proceed forward? And then I have a follow-up. Thank you.

[Tom West:]

Sure. Thanks Ryan. We remain very bullish on PROPEL in the office. So, in terms of Q1, PROPEL office relative to 2019 again probably a better comparator year, more than doubled. It did a lot better than that versus 2020 where there was a lot of noise because of COVID. So, it is -- continues to be a real grower. And again, for the reason that I said in my prepared comments, the opportunity to use PROPEL following balloon dilation, which increasingly takes place in an office setting, provides a real incremental benefit and opportunity to deliver the anti-inflammatory and radial expansion of a stent to improve sinus dilation. And it is that insight that has prompted us to go forward with the prospective EXPAND trial to be able to demonstrate that with a much greater end than the small cohort we had in the original PROPEL Contour trial. So, it is a growing piece of business. It's one that we think will continue to grow. It's one that we will get behind as we expand our own balloon dilation business. And we're very excited about how it can deliver incremental growth to the PROPEL business. And as PROPEL in its core in the hospital and ASC setting, recovers post pandemic we think that the combined elements of PROPEL in the office and PROPEL in the surgical setting with increased evidence of health economic benefit should enable us to get that core business back to growth, and then we'll be able to build upon that growth with SINUVA and what we have in VenSure Balloon and Cube navigation.

[Ryan Zimmerman:]

Okay. And then, a follow-up on VenSure itself, I guess you're going to do the broader launch this quarter. And as we think about it longer term, would you guys be disappointed if you weren't generating more revenue off the VenSure Balloon versus legacy Fiagon by next year?

[Tom West:]

Yes. I mean absolutely. I think the opportunity in the long-term for VenSure Balloon and the Cube navigation in the US and they really come together. So it's hard to distinguish the two. And oftentimes there is a placement of the Cube navigation, and then the lease-to-own model of bundling of appropriate and compliantly consumable products. But clearly, as we enter into the total available market of balloon dilation in the US, which is in excess of $250 million that represents a very sizable opportunity for us. And if you combine that with the potential for our own PROPEL Contour business you could see that that new aspect of the VenSure Balloon business represents a significant growth element for us beyond kind of what legacy Fiagon had done. So, absolutely, I would agree with your assertion.

[Ryan Zimmerman:]

Okay. I’ll leave it there. Thanks for taking the question.

[Randy Meier:]

Ryan, just a quick clarification. VenSure was basically just launched in the fourth quarter. So, you won't see any year-over-year growth relative to the Cube and the navigation tool. Last year is probably just given the transition and a variety of other things at Fiagon, probably not a good comparison. So it's probably more of a 2019 comparison that you're really looking, but we feel very confident that we'll see sustainable growth throughout that platform going forward.

[Ryan Zimmerman:]

Thank you Randy.

[Operator:]

Our next question is from Adam Maeder from Piper Sandler. Go ahead.

[Adam Maeder:]

Hey Tom. Hey Randy. Thanks for taking the questions here. I guess, I wanted to start with just a bigger picture question on procedure environment. I think you talked about some challenges in January and early Feb. But I was wondering if you could put a finer point on just how the business progressed over the course of Q1 and through April? Just any additional color there would be super helpful. And then I had a follow-up or two. Thanks.

[Tom West:]

Yeah. You hit the nail in the head. As everyone is aware at the end of last year in December, we started to see a new spike in COVID in the United States and we were not spared that either. And so that showed up in the last several weeks of December and carried through into January and early February. The very good news is we started to see that recovery and a return to more normal. As we moved through March and as we head into April, we're seeing that for sure. So we expect the business, the core business to rebound nicely. And for us where that shows up most acutely is in the hospital setting and the more formalized procedure of a functional endoscopic sinus surgery in the hospital and the ASC. So our office-based business has remained more steady through that period even though office visits are down in terms of third-party measures. But where we saw the softness was in January and February in the surgical-based side of the business in the hospital and ASC and I'm happy to report that we've seen that begin to recover within the quarter through March and then April. That trending is continuing. And as I said in my prepared notes, we would expect its recovery in full in Q2 with the potential even of some pent-up demand to be able to contribute further to the latter part of Q2 and into Q3.

[Adam Maeder:]

Got it. That's really helpful Tom. And maybe just a quick follow-up there. Are you able to quantify the backlog or pent-up demand? And how we should think about that playing out over the next two quarters? And then I have one more follow-up. Thanks.

[Tom West:]

Yeah. Difficult to get an exact number around the pent-up demand. What we are looking at from our perspective is we go back to wave one in 2020. We saw a bounce back in July. In fact, in July of 2020, we actually had growth versus 2019. We saw a similar pattern in October of 2020 where that second wave that hit Florida, Texas, Arizona and Southern California through August and September of 2020. We got a bit of a bounce back in October. So again not a huge hockey-stick rebound but a nice contributor to growth that we would expect again to see in the latter part of this quarter or potentially beginning of next quarter. So we're optimistic there, but hard to put a concrete number against it.

[Adam Maeder:]

Okay. Fair enough. That makes sense. And then just for the last question guys, I just wanted to ask about Fiagon. It seems like that's off to a better than expected start with some nice early sales adoption in Q4 and Q1. So my question is how many folks are selling VenSure and Cube at this point in time? And then with the formal launch I think you said that's late July or the July time frame, how many hands do the products go into? Just trying to understand how the revenue trajectory could potentially shift there? Thanks so much for taking the questions.

[Tom West:]

Sure. First is in terms of what we've done thus far, we've been very regimented ourselves in terms of the number of accounts that we want to take on in order to be able to make sure we have appropriate understanding of the business, the right kind of support behind it, the right kind of training and capability to make sure that we are successful in the marketplace, all the while as we ramp up production and get ready for a more fulsome launch and the opportunity frankly to bring our teams together and train them properly in a post-COVID environment. So in terms of hands touching it today, it's limited because we're really limiting by the number of accounts that we wish to go out to. And that's proscribed our behavior to this point. As of July and it will be middle of July in advance of the Allergic Rhinitis Society Meeting in Austin, we will be bringing our full sales force together in order to train and expose them to the product line. That's not to say that every one of them is going to be guns blazing going out selling it hard. We will continue to place compensation and focus on both PROPEL and SINUVA for the majority of our reps at a higher premium than we will on the VenSure Balloon. But we will have specialists who are able to carry that message and generate the evaluations and trial that we want. I think to set expectations though while we see a stronger back half and growing momentum behind the Fiagon balloon and navigation business, it's a longer selling cycle. As you're selling in capital, you're using evaluation periods to allow individuals, providers and physicians to understand the navigation and to determine where it fits in their practice and where it fits in their own capital cycle with navigation. But it is a very complementary piece of business to what we have overall. We see particular strength in the office setting and in the messaging that we have within conjunction with PROPEL. And we believe that it will be a steady and consistent grower for us. Again, not an overnight hockey stick as most capital businesses aren't that way, but rather a complementary element as we continue to be in dialogue with our physicians across the continuum of care in chronic rhinosinusitis. I hope that answers your question.

[Adam Maeder:]

Very clear. Thanks, Tom.

[Randy Meier:]

I think the other thing that we've found from the early evaluation sales that we've been doing is physicians and the technicians are giving us a tremendous feedback on the technology. So we feel a growing sense of confidence that we've got some nice products here that will be able to allow us to have sustainable growth for a number of years. Very positive from that perspective as well.

[Operator:]

Our next question is from Chris Pasquale from Guggenheim. Go ahead.

[Chris Pasquale:]

Thanks. Tom, you had another good SINUVA number this quarter. I'm curious after all the changes and improvements you've made to the process there, what you see is the biggest remaining friction points for adoption? I'm sure this past quarter COVID was still a headwind. But as the macro environment normalizes, what are you most focused on to help that product continue to ramp?

[Tom West:]

It's just – Chris, great question. It's really just a matter of getting physicians comfortable with the very different nature of buy-and-bill of authorization of benefit of the go-to-market model that's inherent in initiating drug therapy in the doctor's office. It is not something that is familiar to the ENT community. As we've said before, it's not new to the world of healthcare. You see it a lot in other segments oncology, rheumatology, ophthalmology, but it is new for this particular group of physicians. And early on candidly, they were a bit burned by the fact that payer reimbursement wasn't guaranteed. The mechanism for getting repayment was slow. And what I think we have done very effectively with our improved coding and expanded coverage has really begun to fill those gaps. And now it's a question of generating trial, enabling them to have the experience that it goes through quickly and that they can with certainty be able to buy-and-bill and not only come out economically whole, but actually with some fair return for having done the procedure in their office environment. I think clinically docs are convinced. It's now really just getting the go-to-market model mechanism to a place where they're very comfortable with it. And I think this last round of coding changes and the simplicity inherent in that and the fact that there's now a CMS, ASP that's listed, which essentially provides the assurance of a minimum payment are all further steps in providing that comfort and it's now on us and our reps to go out there and drive trial.

[Chris Pasquale:]

Thanks. That's helpful. And then, I'm sorry if I missed this, but what is the updated guidance assumed for the Fiagon contribution this year? I think originally, you said $5 million to $7 million. You're on track at the midpoint of that if sales were just to stay flat at 1Q levels. And that seems unlikely given the normal seasonality of the business and the fact that COVID was probably still a pretty significant headwind in Europe this quarter.

[Tom West:]

Yes, I don't -- we haven't broken out the specifics. Randy, you want to pick that one up?

[Randy Meier:]

Yes. I was just going to say, I don't think there was no single item that gave us confidence to increase guidance. I think, we're just seeing continued execution across the platform. Obviously, the recovery in the COVID environment here in the United States and the potential for recovery at other parts of the world where we operate in the future just gave us incremental confidence in moving forward. And again, as Tom has indicated, the breadth of the portfolio continues to look very strong and we anticipate a successful launch in the second half of the year for the Fiagon products.

[Chris Pasquale:]

Thanks.

[Operator:]

Our next question is from Ravi Misra from Berenberg. Go ahead.

[Ravi Misra:]

Hi, good morning, Tom. Good morning, Randy. So just another one on SINUVA. You mentioned kind of building the value proposition against monoclonal antibodies there. And it would seem kind of with reimbursement set and kind of your clinical force being set as well from a management to kind of feet on The Street perspective you're there. Just wondering, what else kind of you think you need to be doing to kind of drive the awareness either amongst the patient or the doctor around the advantages of your product versus that other therapy? And then maybe just the second one really quickly, just curious on the margin commentary Randy. It sounds like second half is going to be higher than the first if I heard you right. Was that kind of overall gross margin and OP margin? Just if you need to provide a little bit details, a little bit more around the pacing of those expenses there. And gross margins came a little bit below where I guess The Street was and I just want to make sure, we've calibrated our models correctly there. Thanks a lot guys.

[Tom West:]

So maybe, I'll take the first part of that question. And Randy, I'll let you comment on gross margin. But I think, the points well made relative to incremental opportunity to drive awareness and demand around SINUVA. We're excited about the prospects over time to begin to initiate a greater degree of direct-to-patient awareness. That doesn't mean necessarily a mass media advertising, but the opportunity to use social media and other vehicles where folks who suffer from chronic rhinosinusitis are very self aware and seeking information. And I think there are very efficient ways over the web and otherwise to make people aware that there is a very effective therapy that is available to them. We've held off on that. We didn't want to drive a lot of traffic into the doctor's office, without being able to ensure that doctors were comfortable with reimbursement and payment mechanisms. As that becomes more solidified, ample opportunity for us to begin to dial up some of that direct to patient. And we've done so on a selected basis, sometimes in conjunction with large ENT practices within a local area, as an element of market development. But I think that's another avenue by which we can begin to drive primary demand among patients in order to make them aware that there's an effective -- immediately effective alternative to what they might otherwise be considering. And I think that will help to grow our business over time. Randy, I'll let you comment on gross margin.

[Randy Meier:]

Yes. On the gross margin side, I think the easy part of that is, we continue to see a ramping up of our production at the tail end in the first quarter. We got back to what we characterize as normal production levels. We'll probably see that sustain throughout the year. So, you'll begin to see the benefit of that absorption and through -- again. So I wouldn't expect to see any sort of spikes along the way. I think you'll see a gradual improvement for the balance of the year. One other item or potentially two. Going forward, we will be providing a little bit of an adjustment to the calculation. We're going to exclude purchase price amortization from that and just give you visibility into that. And as we mentioned in the prior quarter call, we are making some incremental investments in this area so to achieve some of the sustainability that we've talked about. And some of the costs that are more onetime in nature will back up. But we'll be fairly prescriptive as we were this quarter. But again, as we move forward we're very confident in seeing a return to 70% gross margins and longer term on our legacy products getting back to the high 70s.

[Operator:]

Our next question is from Suraj Kalia from Oppenheimer. Go ahead.

[Suraj Kalia:]

Good morning, Tom, Randy. Can you hear me all right?

[Tom West:]

Yes. Got you.

[Suraj Kalia:]

Perfect. Tom, Randy maybe I missed this number, but what was the SINUVA commercial contribution in the quarter?

[Randy Meier:]

In terms of revenue?

[Suraj Kalia:]

Revenue, percent either way?

[Randy Meier:]

Revenue was $2.4 million in the quarter.

[Suraj Kalia:]

No, no the commercial component of the $2.4 million?

[Randy Meier:]

Guess, maybe I'm misunderstanding the question.

[Suraj Kalia:]

So I just want to make sure what is the commercial versus Medicare proportion?

[Randy Meier:]

Okay. We don't -- we haven't provided that level of granularity going forward. I think what we've provided in the past is just the broader level of average both by private and public payers. And again I think we're very comfortable. I believe that we've said the high 70s low 80s from a private payer market and upwards to about 90% of the public payer market. And so we're very comfortable with the reimbursement environment. But we haven't typically broken down the percentage of revenue from who's paying.

[Suraj Kalia:]

Got it. Randy in terms of FY 2021 guidance, would you care to update the OpEx guidance? I believe on the Q4 call you said it would be higher than FY 2020. Just given where it's passed out in Q1 I was wondering if you could update your OpEx guidance.

[Randy Meier:]

We've characterized, sort of, our spending level in 2021 probably a little bit north in the aggregate of about $140 million. As we've mentioned on a more operating basis it will be up slightly from the levels in 2019 which were relatively speaking about the mid-130s. And then as we've indicated we're making some investments in the sustainability both in our production areas in some of our IT areas and certainly in our ability to manage future growth in our European platform. Again there will be some incremental spend associated with that. But in total probably a little north of about $140 million which is pretty consistent with where we've been guiding folks.

[Operator:]

Our next question is from Kyle Rose from Canaccord. Go ahead.

[Kyle Rose:]

Good morning, everybody. Thank you for taking the questions today. Just a lot has been asked but I just wanted to ask two towards the end here. So one, could you just give us an update on where the account base is in the US now? And kind of maybe how that grew quarter-over-quarter in the Q1 and then maybe expectations for the full year? And then I'll just ask my second one right upfront is just the overall commercial team both in the US and OUS maybe just give us an update as far as where the headcount stands now? And then any plans for additions on a go-forward basis just given all the cross-selling opportunities? Thank you.

[Tom West:]

Yes, Kyle, we haven't broken out the actual number of accounts and same-store sales and the like. What I can tell you is that there's positive momentum in the number of accounts as we expand the business. We certainly see that too in terms of accounts that are taking on PROPEL in the office environment that haven't previously done that. So we see a healthy expansion in terms of the recovery of the business post-COVID as well as the general growth of the business. And so I feel good about where we are that we have not broken out the specifics of that set of numbers. In terms of our commercial force, we're still down relative to where we were pre-COVID. We took a reduction in our direct sales force at the time of COVID. We've built some of that back both in terms of traditional territories and expanding back to areas where we felt that we may have been too lean. So we've built some of that back. We've also added capability very specifically around the Cube and navigation capability in order to be able to ensure that we have folks in the field who are navigation experts and are prepared to train and support our evaluations. So that has been an expansion of capability in a very specialist domain in order to ensure our overall performance, but we feel that we've got an appropriate selling organization right now. We are actively looking at the size of the sales force really with a lens towards what will the new normal be post-COVID in terms of access to the hospital environment. If you think about where we were pre-COVID, our territory managers spent as much as 30% of their time gowned up and in the OR. We don't expect that to return, and therefore, that may present an efficiency in terms of how we deploy, but obviously, we're looking for what that recovery pattern looks like and the value and the utility of that time in the OR. What I will say is that we don't feel that we are constrained in terms of being able to invest behind commercial expansion as necessary and appropriate. But we will look to do so, as we have a clearer lens of what is the post-COVID environment look like. And then we will add as the business grows and as our the complexity of our portfolio requires.

[Operator:]

This concludes our question-and-answer session. I would like to turn the conference back over to Tom West for closing remarks.

[Tom West:]

So, first and foremost, thank you all for your interest and attention to Intersect ENT. We're extremely encouraged by our performance in Q1 and our prospects for the full year. That confidence is reflected in our modest raise on our guidance to take it to $117 million to $121 million for the full year, and we see that and our confidence stems from the potential we see across our multiple lines of business as we've diversified our portfolio. We see potential in PROPEL in the office environment in particular and over the longer-term as we build out our health economic evidence on the utility of using PROPEL post FESS surgery to reduce overall health care expenditure. We're excited about SINUVA and the continued momentum that we have and the increased clarity that comes with our improved codings and our expanded reimbursement. We're also delighted with how our VenSure Balloon and Cube navigation system have been received in the marketplace in the limited number of evaluation sites that we've already taken under. Putting that all together we feel confident in our ability to deliver on 2021 and even more excited about our growth prospects in the years to come. Again, thanks very much for your interest and attention. And I want to thank again my colleagues, our shareholders and our Board for their constant and continued support. Thanks very much everybody. Take care.

[Operator:]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.