Intersect ENT, Inc.
Q4 2020 Earnings Call Transcript

Published: 9 Mar 2021

[Operator:]

Good morning, and welcome to the Intersect ENT Fourth Quarter and Full Year 2020 Earnings Conference Call. All participants will be in listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I'd now like to turn the conference call over to Intersect ENT's CFO, Randy Meier. Please go ahead.

[Randy Meier:]

Thank you, and good morning, everyone and welcome. Thank you for participating in today's call. Joining me today is Tom West, President and CEO of Intersect ENT.

[Tom West:]

Thanks, Randy and thank you all for joining the Intersect ENT Q4 2020 earnings call today. As we discussed with many of you at various investor conferences over the past eight weeks, what a difference a year makes. A year ago we were a single-technology innovator with the PROPEL family of sinus implants accounting for the vast majority of our revenues. At the beginning of 2020, PROPEL could also be seen as a relatively mature business that had shown limited growth in recent quarters. A year ago SINUVA's business model was still largely unproven a full two years after launch. So despite the inherent difficulties surrounding the pandemic, 2020 was a year in which Intersect ENT had something to prove and work to be done. Through the course of the year, we were able to demonstrate the resiliency of our core business in the face of the pandemic, while also making significant progress on multiple fronts towards reestablishing the basis for sustainable growth for the years ahead. We enter 2021 with positive momentum. Fourth quarter revenue was solid at $28.2 million, slightly ahead of what we reported on a preliminary basis in January and sound given the evident impact of COVID in the latter part of December. However, rather than take you through the details of the fourth quarter, I'd like to take you through the key elements of our 2020 transformation that led me to the comment what a difference a year makes. In turn, Randy will take you through the detail of the numbers with a focus on the fourth quarter. Importantly, this year we can see more clearly than last year, the sustainable growth potential in both of our core product platforms PROPEL and SINUVA and the additional opportunities for growth in adjacent ENT segments with our acquisition and integration of Fiagon.

[Randy Meier:]

Thanks, Tom and good morning everyone. I would like to start the financial overview with a summary of our topline results and then provide a little more detail on our financial statements. In the fourth quarter of 2020, Intersect ENT reported net sales of $28.2 million, compared to $31.8 million in the same period of 2019, a decrease of 11% from the prior year. On a sequential basis, our sales increased approximately 24% from third quarter levels, as we saw continued recovery in PROPEL, record strength in SINUVA and initial sales of our newly acquired Fiagon products. For the full year 2020, net sales were $80.6 million, a decrease of 26% compared to the $109.1 million in the same period of 2019. The decrease resulted from the impact of hospitals suspending elective procedures and reduced ENT office visits related to the COVID-19 pandemic. For the fourth quarter of 2020, PROPEL product family revenues were $24.7 million, a 19% decrease compared to the fourth quarter of 2019. SINUVA generated record revenues of $2.6 million, representing a 93% increase from the fourth quarter of 2019, resulting from continued improvements in reimbursement and our market access model, expansion of our distributor relationships and ongoing shift to office-based procedures. Fiagon products generated revenues of $0.9 million in the quarter. Product mix for PROPEL was consistent with recent quarters with PROPEL at 29%, PROPEL Mini at 34%, PROPEL Contour at 37%. Overall, PROPEL family ASP for the fourth quarter of 2020 was $836 per unit, up 2% from a year ago and stable from the third quarter 2020. SINUVA ASP in the fourth quarter was $1,332 per unit, up 10% from a year ago. Gross margin for the fourth quarter of 2020 was 69% compared to 77% in the same period a year ago, but continue to trend to higher sequentially up four percentage points from the third quarter. For the 2020 full year, gross margin was 62% compared to 80% last year. The year-over-year decrease in both periods was driven by higher per unit manufacturing costs associated with lower volumes. During the year, we incurred idle facility charges and an inventory provision related to the impact of COVID, representing a negative effect on our gross profit margin of approximately 9% for 2020. That said, our gross margin recovered in the second half of the year as we resumed our production in anticipation of continued revenue growth. Total operating expenses for the fourth quarter of 2020 were $36.8 million versus $33.1 million in the same period a year ago, an increase of 11%. The increase in operating expenses was due to the Fiagon acquisition and integration costs, which consisted largely of professional fees. Operating expenses for the full year 2020 were $117.9 million, a decrease of 11% over the $132.8 million in the same period of 2019. The reduction in full year operating expenses was a direct result of our cost reduction measures put in place in response to the COVID-19 pandemic. The actions taken in early 2020 in response to the pandemic, the better-than-expected recovery in the second half of 2020, enabled us to meet our cash burn rate objectives for the year and enabled us – enabled our ability to acquire Fiagon. Going forward, we expect to improve our operating cash burn rate as a result of our cost management efforts anticipated revenue growth as well as strengthen our financial position. For the fourth quarter of 2020, we recorded an operating loss of $17.3 million, a net loss of $20.2 million, or a per diluted share loss of $0.62 compared to an operating loss of $8.5 million, a net loss of $8 million, or a per diluted share loss of $0.25 in the fourth quarter of 2019. The adjusted net loss, excluding the impact of fair value of embedded derivatives also associated with the acquisition of Fiagon is $17.6 million, or $0.54 per share. The detail of the adjustments are included in a reconciliation table in our press release. For the full 2020 year, we recorded an operating loss of $67.7 million, a net loss of $72.3 million, or a per diluted share loss of $2.22, compared to an operating loss of $45.4 million, a net loss of $43 million, or a per diluted share loss of $1.37 for the 2019 full year. Adjusted net loss for the 2020 full year also excludes the impact of embedded derivatives as well as transaction and restructuring costs was $66.8 million, or $2.05 per share. Now turning to our balance sheet. The balance of cash, cash equivalents short-term investments and restricted cash as of December 31, 2020 was $105.5 million. As of December 31, 2019, cash, cash equivalents and short-term investments was $90.6 million. As of December 31, 2020 the restricted cash balance was $17.5 million compared to no restricted cash as of the prior year. As a result of the Fiagon acquisition, our current and non-current deferred acquisition-related considerations as of December 31, 2020 totals $54.2 million. We believe our cash position combined with our ongoing cost management initiatives continued revenue growth provides the company with adequate capital to operate well into 2022. Looking ahead to 2021, we are reiterating our outlook from our January 12 preliminary announcement as we expect to grow revenues in 2021 relative to the 2019 period, despite continuing uncertainties related to the impact of COVID-19. For the full year 2021, revenues are expected to be in the range of $116 million to $120 million. Gross margins are expected to return to the low to mid-70s range. As we previously stated, we believe, we have adequate capital to operate well into 2022. Now, I will turn the call back to Tom.

[Tom West:]

Thank you, Randy. We had a productive 2020. And we believe that we are in a much stronger position today, compared to this time last year, notwithstanding the challenges of the pandemic. Supported by the rebound in elective procedures and increased office-based opportunities, continued record results from SINUVA and meaningful contributions from our navigation and balloon products, we expect to return to growth in 2021. Longer term, we believe, that we will achieve sustainable growth by expanding our markets, our strategy centers and further penetration among existing ENT physicians across all sites of care, capitalizing on our broader and complementary CRS portfolio, and generating clinical evidence to support unencumbered access and expanded use. The integration of Fiagon has progressed smoothly. And with the planned Q2 national launch and deployment of VenSure balloon and Cube navigation, we expect meaningful contributions from our navigation and balloon products in the second half of 2021. Furthermore, we plan to invest and expand internationally, while extending core technology to new platforms and line extensions. In sum, we've laid the foundation to establish Intercept ENT, as a predictable, double-digit grower year after year. Before closing, I would like to thank our employees, patients, customers, and shareholders. Now I would like to turn the call back over to the operator, and open the call for your questions. Operator, would you please open the lines?

[Question-and:]

[Operator:]

Thank you. We will now begin the question-and-answer session. The first question is from Robbie Marcus from JPMorgan. Please go ahead.

[Robbie Marcus:]

Oh, great. Thanks for taking my question and congrats on a nice quarter. Maybe starting off with the SINUVA announcement yesterday, you gave a lot of great detail on the call. I was just wondering if you could help us breakout, what percentage of plans are going to have to lower reimbursement. And how that compares now to what the ASP is of the product and versus commercial plans?

[Tom West:]

Sure. Thanks Robbie. Good to hear from you as well. Let's start with a simple one, which is, for Medicare/Medicaid patients, who previously were under the C code which represents between about, 10% to 15% of volume. There's no change whatsoever. Essentially the same price is now applied under the J code. And that's how all kind of government customers will be reimbursed. Relative to the commercial payers, there's a mix, from some plans that we're paying very generously. And again, we don't yet know how they will manage the plan, but likely it will go down. So the highest payers, we will see an adverse impact. But maybe it's easiest, just to look at it as the average payer. Today they pay about $4,100 bilaterally, on average for commercial payers. Our expectation is that, on average commercial payers will drop to about $3,000 bilaterally for the implant alone. So that's about $1,000 reduction. And the total value of a procedure net gain for the physician will remain at about $2,000. That's inclusive of the implant plus the procedure code. So it is a significant hit. There's no doubt about it. But what we think is important is recognizing the level of uncertainty that we had around adjudication, the timing that it took. This now pretty much enables any plan or any account to be able to look up and have with certainty an understanding of the level of reimbursement that they will have, as we have much clearer coding going forward.

[Robbie Marcus:]

Great. And maybe just a follow-up you talked about how you feel comfortable with where The Street is sitting. That's at $120.1 million according to Bloomberg now versus guidance of $116 million to $120 million. So I was hoping you could just reconcile the difference. How much is conservatism? How much is maybe something else? Just wanted to get a better clarity of the reconciliation between the comments and where the street sits? Thanks.

[Tom West:]

Go ahead, yeah.

[Randy Meier:]

I was just going to say I'd jump in. Last week when we were looking at all this -- the consensus we look we weren't looking at Bloomberg. But we were at $119.6 million. So we were comfortable with consensus sort of at the higher end of our range. But again, we feel pretty comfortable with where the range is right now.

[Operator:]

The next question is from Richard Newitter from SVB Leerink. Please go ahead.

[Richard Newitter:]

Hi. Thanks for taking the questions. Congratulations on making progress, especially in a challenging year Tom and Randy. And one of the things that struck me in your opening comments and what you've done you've created more vectors of growth for the organization. I guess, I'm also detecting though, it feels like you might be a little less reliant as a result of that on SINUVA for the growth acceleration story, and you're reemphasizing some things that I think investors had left for dead a little bit like PROPEL. And that might not be a bad thing given some of the reimbursement changes we've seen around those two. On a relative basis, it looks like you can make more money on PROPEL in-office than you can on SINUVA now from a doctor perspective. So I guess, my question -- my first question here Tom is, am I hearing the messaging correct? Is this a little bit more -- you've got more ways to win. You're still going to get to the same place double-digit growth, but maybe a little less reliance on SINUVA and we should be thinking of the PROPEL kind of acceleration happening sooner and SINUVA will be a little more gradual?

[Tom West:]

Yeah. Thanks, Rich. Great question. I'm going to agree and disagree with you. So here's what I mean. I'll talk a little bit out of both sides of my mouth. You're absolutely correct that we deliberately created my language more shots on goal by emphasizing and focusing on the opportunities for PROPEL in the office, which you're right are enhanced with the new coding, the opportunities we have OUS, adding the Fiagon assets so that we have an opportunity to participate in the balloon dilation market as well as navigation with consumable tools. So more shots on goal, more basis for growth, you're absolutely correct. But I wouldn't minimize the SINUVA opportunity. The feedback that we get from physicians clinically and from patients as well patient testimonials is that there is absolutely a role place and opportunity for that product. And as we look at what has hindered us, a lot of that has been the confusion in the marketplace around reimbursement, the level of reimbursement, the availability of reimbursement. We now have a very attractive procedure in which a physician on average can make about $2,000 between the implant code and the procedure code for what will be a 40-minute procedure that offers real benefit to the physician and to the patient in an environment that's with the grain, which is in the office setting of care. So I still think that SINUVA is a substantial source of growth for us. But we've diversified as you noted by adding other shots on goal.

[Richard Newitter:]

Okay. That's really helpful. And maybe just a follow-up Tom on SINUVA, I know a lot of these changes are somewhat out of your control. CMS makes up states on their own timetables. But just to prepare investors to -- I'm sure we're going to continue to get updates on the SINUVA reference price each quarter, because it's a J code. Are there -- is there any potential downward bias to the $10.25 per microgram unit basis? The reason I ask that is just to prepare investors just in case that fluctuates around a little bit what the magnitude could be. And I know CMS uses a rolling kind of two quarter basis of data points to make their pricing decisions. So I'm assuming that this round of pricing captures, the old invoice pricing that was using higher rates with the insurance -- private insurers paying more generously. Will there be downward bias as we move into the rolling two quarter period that captures this reduced rate?

[Tom West:]

Yeah. Another great question. Actually, just the opposite is true. We would expect the rate to actually go up in the coming quarters, because we recently took a price increase. And that is not reflected in their two quarter look-back the way they do it. So we would expect when the price issues in July that it will be up slightly. And then again, when it issues in October, it will be up slightly again, because of the two quarter look-back, which does not reflect our January price increase. So, again, I think there's a slight positive there. But I don't think that's meaningful enough to change physician appetite. But it should be a slightly positive move in our direction. And that's what I think investors should expect.

[Richard Newitter:]

Thanks. And Tom, if I could squeeze one more follow-up. And just, whenever you have a code shift, the J code is changing. Doctors have been accustomed to submitting under the old J code. They now have to learn a new J code. Can you just help us gain confidence that that transition is going to go smoothly? What are you doing just to ensure that there's no hiccups in the transition period here with yet another code coming from the government? Thanks.

[Tom West:]

Yes, another good question. We are all hands on deck to ensure that smooth transition as we move to the new J code and have the new S code. Essentially our corporate account directors are working directly with each of the payers. And we have a daily -- a weekly dashboard that we go through with our market access team to ensure that we're progressing that and that everybody is anticipating the April one change. Then we have our regional reimbursement directors out in the field. You may recall we added those with SINUVA to help with the payer adjudication and the office staff. And we have again a dashboard and punch list of every doc that's writing SINUVA, to make sure that that's implemented and changed at a local level with our providers. So, it is front and center for us. I feel confident that our team is doing everything that is necessary. But as I said, we, as a leadership team, have a weekly meeting in which we go through those dashboards and look at every single payer, every single account, to make sure that we have covered that off and that there is no hiccup.

[Richard Newitter:]

Thank you, Tom.

[Operator:]

The next question is from Chris Pasquale from Guggenheim. Please go ahead.

[Chris Pasquale:]

Thanks. Maybe switch over -- keep it on the reimbursement theme, but switching over to PROPEL. Could you just walk through that $1,431 number that you quoted? How consistent is that going to be? How much variability across different types of payers do you expect in-office PROPEL? And that's obviously a pretty generous rate compared to the ASP for that product. So, how should we think about that evolving over time?

[Tom West:]

Yes. So, an S code, unlike a J code, we don't report ASP. So, you basically -- the methodology by which that's derived is looking at Compendium or Red Book where we have list price at $1,350. And then, generally, it's that $1,350 plus 6% pretty consistently applied. That's what brings you to the $1,431. And relative to where we are today, with the former blended rate, again with some high variability under the dual J code and the kind of weighted average per microgram, we were coming in on average at about $900. So, it's a substantial increase in the level of reimbursement where there is individual implant reimbursement. And that's particularly in the office environment, and gives an opportunity for us to get further behind PROPEL in the office setting of care and also gives us a usable code to be able to begin to start to do implant carve-out reimbursement in the -- and particularly in the ASC, something that we gave up when the old S code back in October of 2019 went away. So, we think there's upside around that. It will take time to build and rebuild, but again attractive pricing based on WACC plus 6%.

[Chris Pasquale:]

That's helpful. Thanks. Can you talk a little bit about how you plan to position VenSure? The balloon sinuplasty category has a number of competitors already established there. You guys had initially taken an approach of trying to enter that market with a really clinically differentiated offering by incorporating drugs on to the balloon. Now, you're making your entrée with a more traditional offering. So, how do you intend to sort of carve out a space in that field? And are there ways for you to leverage the rest of the portfolio to try and gain share on the balloon side?

[Tom West:]

Yes, great question. Our differentiated value proposition in the balloon space comes on the front end from the VirtuEye photo registration, which allows for a faster registration of the -- kind of the patient's anatomy on the – with the CT scan and on to the screen for navigation. It makes it easier, faster. And we ultimately hope to have a greater accuracy claim as a function of that navigation capability. But more importantly, on the back end, we think there's a real opportunity for us to demonstrate differential clinical value with the use of PROPEL Contour following balloon sinuplasty. Again, in our earlier PROPEL Contour trial, there was a cohort of folks, who only had balloon sinuplasty, and then had a PROPEL placed afterwards. And that delivered an improvement of 40% in patency, the size of the opening, which is exactly what you're aiming to do with balloon dilation. And we feel that's a very meaningful differentiation that allows us to go in and talk about our portfolio in a more comprehensive way. I think the other thing to remind ourselves is these are the same docs that we've been calling on that we know very well that look at us with a high degree of credibility as an ENT-focused company. And now, we're coming in with a broader offering and broader set of products across the continuum. We're not making new introductions. We're not establishing a new market. We're in there to provide a broader and more comprehensive approach to how they treat patients, an extension of the conversations that we've already been in. So we feel, we're well positioned to be able to capture share and present ourselves with a differentiated value proposition on the front end and on the back end.

[Chris Pasquale:]

Thanks. That's helpful. And then just last one for me, I was hoping Randy, you could talk about what guidance includes for Fiagon, because you are guiding to growth over 2019 but that's obviously not all organic. So, just some ballpark of the acquired revenue contribution would be helpful. Thank you guys.

[Randy Meier:]

Yeah. Sure. We characterized Fiagon as kind of being in that $5 million to $7 million range for 2021. We think it's mostly back half of the year as we indicated in his remarks as we begin our more formal launch towards the second half of the second quarter. So again, we're fairly confident. We're really pleased with the early adoption, and how the docs are taking in the newer technology, and certainly with the Cube technology and continue to see some nice progress in the first quarter. But again, we expect most of that revenue to be placed in the second half of the year.

[Operator:]

The next question is from Adam Maeder from Piper Sandler. Please go ahead.

[Adam Maeder:]

Hey, Tom. Hey, Randy. Thanks for taking the questions and congrats on the progress. I wanted to start with the PROPEL outlook for 2021. So in January, you gave a growth objective of 4% to 6% growth versus 2019. That was comfortably above Street expectations at the time. So, I guess first does that still hold? And can you maybe just speak to your confidence net outlook? What are the key drivers there? And how did you arrive at that mid-single-digit assumption versus the 2019 baseline? Thanks.

[Tom West:]

Yeah. Good question. I think we feel, we will certainly return to growth with PROPEL this year. 4% to 6% is the right range broadly. I think the challenge for us is really understanding what the impact of COVID will be as it relates to the hospital-based business. We think we can manage it. We think that we've shown resiliency in the core business. But there remains uncertainty there. While things have certainly improved in the last several weeks, and we're encouraged by the increased vaccination rates and expect we will also have some bit of a bounce-back that's probably the biggest variable. We feel good about our ability to drive growth in the office setting. It's really back to that surgical suite both the hospital and ASC that we had some caution in our minds. And that's what's really breathing that low to mid-single-digit number on PROPEL. But broadly, we expect a return to growth for PROPEL. We're going to see some headwinds here in the first quarter. And we would expect it to progressively improve over the course of the year.

[Adam Maeder:]

That's really helpful, Tom. Thanks for the color there. And then just for the follow-up, I was hoping you could talk a little bit more about the road map for the R&D pipeline. You talked about several initiatives in the prepared remarks. So what are you prioritizing? Is it the surgically naive product? Is it higher drug? Just help level-set us on those projects. And just any rough timelines you can share as we think about the years ahead? I mean, is this kind of a steady cadence of new launches, or are these more kind of longer-term initiatives? Thanks so much.

[Tom West:]

Yeah. Relative to pipeline in terms of prioritization in 2021, the two clinical trials that we -- that I spoke of are the number one priorities. And those are the VenSure plus Contour prospective trial establishing that combination use of balloon dilation and PROPEL Contour to improve patency in the balloon dilation market. And we've prioritized that as a clinical trial and a significant source of investment in 2021. The other is our real-world evidence effort with the American Academy of Otolaryngology to establish health economic benefit for PROPEL in order to continue to ensure that we get appropriate reimbursement behind PROPEL and even the potential for a separate coverage of the implant itself. Relative to product prioritization right now, we're focusing in on optimization around the Fiagon assets that we brought in order to have incremental rather than platform innovation, but optimizing our balloon and our navigation capabilities to ensure that those products are a full suite and competitive with a steady cadence of modest news over the course of the next several years. Lastly, we're doing a step-back and reevaluation of what is the next major platform effort that we would wish to have. Whereas previously we were focused on the drug-coated balloon, we now have a very clear balloon option in front of us that we did not have six months ago with our VenSure balloon and then with the potential of the claims that we expect out of the combination of VenSure plus PROPEL. So that has us reexamining the prioritization of drug-coated balloon relative to a subcutaneous delivery of mometasone fuorate or even a play for the surgically naive. So we're doing work now to reset the prioritization and then we will reinitiate the primary platform play that we will go after. That also gives us more time before we go back into the hospital clinical environment, which is somewhat impeded by COVID whereas our VenSure/Contour trial enables us to execute that primarily in an office-based setting, which is clearly a lot easier to navigate with the pandemic still in play.

[Operator:]

The next question is from Ryan Zimmerman from BTIG. Please go ahead.

[Ryan Zimmerman:]

Yes. Thanks for taking the questions, guys. So just wanted to talk about the changes to reimbursement a little bit. And you have a variety of partners that help physicians utilize SINUVA such as the distributors and the specialty pharmacy channels. We saw last year some uptick in buy-and-bill with SINUVA. And so with the changes that you're talking about in terms of reimbursement, I'd love to understand your expectations for how physicians utilize SINUVA in their office from an either buy-and-bill perspective or using maybe one of the specialty distributors where they may not be able to recoup as much in terms of reimbursement. Just your expectation for how those dynamics may change given what you see from a coding perspective?

[Tom West:]

Yes. I think you will see a bit of a shift more towards the greater ease and predictability of using a specialty pharmacy. I think this is where our additional Walgreens specialty pharmacy will come to play as there's an easier pathway faster turnaround that is enabled by having better coding and where to your point there's a bit less of the economic incentive to go to the buy-and-bill pathway. But I think the ease of execution there should enable continued high adoption and where the return is still on the procedure side of the procedure the procedure coding and still a very attractive return, the predictability, the ease, the convenience, the certainty and I should also say the much faster turnaround that we would expect whereas before and buy-and-bill in cases folks were waiting six even nine months before they were getting reimbursed. I think all of that is going to still induce people to want to use our products and to use them at a high rate.

[Ryan Zimmerman:]

Okay. Got it. And then just a follow-up for me. You talked about you're doing some really longer-term longitudinal study work for PROPEL just around health economics. And just help us understand is the intent behind that to maybe combat competitive offerings? Is it to drive incremental commercial payer adoption? What's the strategic rationale for that investment, particularly given PROPEL's business profile today and where that can go over time?

[Tom West:]

Yes. So it really is around improving our coverage. So the greatest impediment to utilization for PROPEL today is that it's captured largely in the procedure code. And therefore, any time a physician uses it, it eats into the profitability of the institution. That impact is probably greatest in the ASC where utilization on a fast procedure is lower than what we see in the hospital setting. If we can demonstrate that we improve the payer economics by reducing the number and frequency of postoperative visits of improving care and reducing health utilization, we will have an opportunity to be able to argue for a separate implant code in addition to the procedure code and providing an overall reduction to the payer when they provide access to PROPEL. What we hear most often from our physicians is I would use it more often, if I were not asked to use it less by the institution or for purposes of profitability. So what this will enable us to do is go in and say, with the use of PROPEL overall health care utilization goes down and there is an economic savings overall to the plan to the payer by enabling access to PROPEL.

[Ryan Zimmerman:]

Thanks for taking the questions, Tom, and congrats on all the progress.

[Tom West:]

Thanks, Ryan.

[Operator:]

The next question is from Suraj Kalia from Oppenheimer. Please go ahead.

[Suraj Kalia:]

Good morning everyone. Hey, Tom, I know a lot of comments were made about the FY 2021 guide. And maybe I can just piggyback on the same. So if Fiagon contribution is $5 million to $7 million, the organic guide is roughly $109 million to $115 million in that bracket. So your comments about PROPEL for the last analysts were interesting Tom. PROPEL growth even if I look at FY 2019, it is roughly flattish over FY 2018. If reimbursement is a critical issue, and you're relying on health economics to sort of jumpstart growth, let's say, in FY 2022 and beyond, maybe I can ask a different way Tom. What is the price elasticity of demand as you all see it? If you all were to reduce pricing for PROPEL would that more than offset the unit uptake?

[Tom West:]

It's a great question. There -- the manner in which we're attacking price elasticity is by endeavoring to improve the level of reimbursement in order to take away the impact of price on the physician. You're right, there is a theoretical argument that could be made that you could take our price down and demand would rise with it. I think that's a pretty precarious path to go on. And it undermines the strength that we think that we have in the data that we have already in terms of the real benefit that the product offers that is not being rewarded. So for instance, if you look at our Contour studies, in particular, we saw a 65% reduction in postoperative intervention. There's an economic value attached to that for which we are not being rewarded, and that -- so I'd much rather go and establish the long-term health economic benefit. It may take us a bit longer than trying to play a price game that would have an immediate negative impact on the business and certainly on our installed base business. Your theory is plausible, but I'd much rather demonstrate the value to the payer and sustain my pricing and my margins rather than take that risky path. And I believe that the underlying data that we have in our more short-term studies that we've done will bear fruit in the longer-term work that we're doing with the American Academy.

[Suraj Kalia:]

No question there Tom. It just seems like you have a heavy lift. PROPEL, if you just look at the numbers it seems a drag on the overall business, and it is understandable. You guys are trying to tack on growth. So I don't disagree. It's just interesting to see what are the fundamental drivers that will move PROPEL to the next level. And I'm not sure I got a handle on that. Hey, Randy one quick question for you and I'll hop back in queue. Forgive me if you already mentioned this. What were new store sales, same-store sales in the quarter? And also, could you just -- from a bird's side view, tell us how do you see OpEx leverage? What are the metrics for rep productivity currently? Just so that we can sort of tie fiscal year 2021 numbers, in terms of operationally, how the business is performing. Gentlemen, thank you for taking my questions.

[Randy Meier:]

Yes Suraj. And just to maybe, give a little bit more color on your first question, one of the things you have to remember about PROPEL in terms of revenue growth and pricing, certainly the new coding certainly bodes well for office-based procedures and a variety of things in the future. But right now, just remember from a pricing perspective, we are a cost as part of the overall procedure in the CPT code. And so, it's really -- that's part of the reason that you've seen some sluggishness in the growth rates of PROPEL. I think that's, where Tom has been guiding us. And certainly with some of the clinical trials, it's an effort to sort of try to open that up over the next couple of years and maybe look at the potential for some carve-outs at the ASC or other ways of differentiating the pricing strategy. So right now, as Tom indicated, I'm not sure, cutting the price is going to do much to leverage the use of it in terms of the CPT code. Your other question, we are looking at our OpEx this year of growing a little bit off of the 2019 base. We had generated -- I think spent about $133 million of OpEx overall in 2019. We'd expect that to rise reasonably well, as we begin to position the company for a number of years of sustainable growth. And we're investing in a few areas of -- so there will be some incremental OpEx flowing through the income statement in 2021. And then, your other question relative to same-store sales, not really a metric we look at. Although, I think the team and our presence in the market has probably one of the best coverage's of docs out there right now. I think early on, I think the prior management team talked about the number of new docs' trialing some of this stuff. We're in a pretty good shape with our coverage right now. The real area that we're seeing an increase is over on the SINUVA side as the commercial team continues to reengage docs. And certainly, the new coding will make it significantly easier to get reimbursed. So, we remain very optimistic about the prospects for revenue growth going forward. So hopefully, I gave you enough color there on the OpEx side.

[Suraj Kalia:]

Thank you.

[Operator:]

The next question is from Kyle Rose from Canaccord Genuity. Please go ahead.

[Kyle Rose:]

Great. Thank you, very much. Just wanted to ask one question about international and then also about PROPEL and VenSure. So maybe, just help us frame out the international opportunity a little bit more. I mean, I realize, you're talking about modest growth in 2021 and larger growth in 2022 and beyond. But I guess just, with respect to where the guidance is now, how are you thinking about the contribution internationally this year and then maybe, what investments need to take place to really help support that larger growth that you're pointing to in 2022?

[Tom West:]

Yes. So let me take that first. Yes, we start with a very modest platform in Europe. We have a small business, $2 million to $3 million in 2019 in -- primarily in Germany. We see 2021 as a year in which, we may be able to double that value, so adding $2 million to $3 million of growth. Again on a base of $109 million that represents one to two points of incremental growth to the overall corporation, so very small. But again, each movement moves the ball forward. But really the way to think about 2021 is a year, where we are preparing for a broader play. And specifically, we're investing in our EU MDR to make sure that we're appropriately filed and registered across the board. So that's a level of investment necessary there. We expect to get approval for PROPEL Contour. Right now, we have the PROPEL Mini approved and CE marked. We should get PROPEL Contour added to the portfolio in Q2. In addition, we expect to get -- hear back on guidance from the NHS in the UK, which would give us clearly a much greater opportunity in the UK. And that should come also in Q2. So it's really setting ourselves up with a modest level of growth now building from the greater degree of infrastructure that we have as a result of the Fiagon acquisition, which is based in Berlin and then to be able to expand from there in years to come. And again, not trying to suddenly take the market by storm, but really build from our beachhead in Germany to include Switzerland, Austria and Germany and then expand out of the UK as we really move into 2022 and beyond. I think the key again in all of these and maybe to Suraj's point -- PROPEL growth in 2021 comes from office-based environment comes from a modest level of European activity on PROPEL. We start adding those together and we've just got those more shots on goal as we go forward. With SINUVA probably being the biggest dollar contributor getting incremental value out of the Fiagon assets, getting modest contributions coming from the elements that I just spoke of with PROPEL, I think, all sets us up for continuing momentum throughout the year.

[Randy Meier:]

Yes. Just maybe to add a little color to that and again to Suraj's question again, as Tom indicated with the number of things that we're doing in Europe to position ourselves for -- really to see meaningful growth over in Europe in 2022, we're making some investments this year as Tom indicated EU MDR, the further improvement and expansion of Contour and certainly some of the health economic studies. We're also investing in, sort of, our Fiagon platform so that we are in a good position to grow, particularly, in Germany and hopefully in the UK in 2022.

[Kyle Rose:]

Okay. That's very helpful. I appreciate the color there. And then just maybe level-set us with respect to where the business is really occurring now. When we think about all the moving pieces from the hospital environment, the outpatient ASC and then also the physician office, can you just, kind of, help us understand when I look at your US business what percentage is occurring in those specific sites? And how we should think about that evolving in 2021? Because clearly the office feels like it's going to be a larger part of the growth on a go-forward basis.

[Tom West:]

Yes. The vast majority of our business is still in the hospital setting behind PROPEL. There's no doubt about that. And I would say that's probably about 60%, 65% of our total revenue is the hospital-based PROPEL. ASC comes in at about 15% or so 15% to 20% with the office being an opportunity for growth as we have both SINUVA and PROPEL in the office environment expanding from there. And right now, I would say, we're seeing nice year-on-year growth in the office setting behind both Propel and SINUVA. We're seeing a little bit more of the headwinds on -- of COVID in the hospital setting. But we feel that we will get all of those on a growth trajectory through the course of the year and be able to deliver on expectation in terms of meaningful growth relative to 2019.

[Kyle Rose:]

Great. Thank you very much for taking the questions.

[Operator:]

The next question is from Ravi Misra from Berenberg. Please go ahead.

[Ravi Misra:]

Hi. Good morning. Thanks for taking the questions. So I just wanted to circle back to reimbursement and how it affects the kind of commercialization strategy for SINUVA. Just curious number one, how you kind of see this impacting the, kind of, depth versus breadth argument? I mean is it going to be easy given the more standardization to get new doctors on to this and kind of if you could help us know where you think your penetration stands most of your installed base using the device and how that could affect any changes on the existing users?

[Tom West:]

Yes. Sure. I mean in terms of penetration we have a long, long way to go. Our total available market for SINUVA by our estimation is in the $300 million range. And we did $4 million in 2019. We indicated that we would expect to at least double that this year so call it $10 million on a high side. Relative to a $300 million market, we've got a long, long way to go. We think that with the ease and simplicity that is implied by having a code, the certainty of getting covered, the faster turnaround times, we're going to see substantially more penetration across docs. Many docs who had tried us before and were candidly a little bit burned by the reimbursement environment, we think that represents a very clear and targetable group. They obviously had clinical interest in the product. And now we can come back and speak with them with certainty, that we've got a much faster, simpler, easier, predictable means, by which, they can get coverage and reimbursement. Because, you have to remember that, for many of those physicians not only did they not get reimbursed, they may have put out of pocket on a buy-and-bill basis for the product so they actually lost money. Now they can come back. And they know that they're going to get reimbursement on the implant. They're going to make a modest amount of money on the implant. They're going to get paid for the procedure code. It's now a net lucrative opportunity for them with certainty, for a relatively low-intensity procedure to be done in their office. And we think that's going to be the key to really opening substantially greater penetration and a greater realization of that total available market. Won't happen all overnight, but we think that it is a source of sustainable growth that will drive overall corporate growth not just the product growth, in the years to come.

[Ravi Misra:]

Okay. Thanks. That was it for me. Have a nice day.

[Tom West:]

Thank you.

[Operator:]

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

[Tom West:]

I just want to thank everybody again for your interest in Intersect ENT. We're excited about where we are. We feel we've made tremendous progress that will support us not only in returning to growth in 2021, but really to providing sustainable double-digit growth into the future. We have set up our portfolio, in a way, that diversifies us it gives us greater relevance and meaning to the physicians that we cover. We have set ourselves up with the ability to deliver meaningful product news in 2021 and a cadence of new news and innovation in the years to come. Thank you for your interest in Intersect ENT. I look forward to speaking with all of you soon. Thanks very much.

[Operator:]

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