Intersect ENT, Inc.
Q2 2016 Earnings Call Transcript

Published: 3 Aug 2016

[Operator:]

Good afternoon and welcome to the Intersect ENT Second Quarter Earnings Conference Call. [Operator Instructions] Please also note, today's event is being recorded. At this time, I'd like to turn the conference call over to Jery Hilleman, Chief Financial Officer. Please go ahead

[Jery Hilleman:]

Thank you, Jamie. With me today is Lisa Earnhardt, our President and CEO. We appreciate you joining us today to review our second-quarter results and business update. Before we begin, I'd like to remind you that will make statements during this call include forward-looking statements within the meaning of the federal securities laws. Actual results and timing in events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include without limitation, our outlook for financial performance, sales force growth, clinical studies, approval of new product and indications, and procurement of reimbursement codes, which are based upon our current estimates and assumptions, as well as other risks detailed from time to time in Intersect ENT's reports filed with the SEC. Intersect ENT disclaims any obligation or undertaking to update or revise any forward-looking statements contained herein. I'll now turn the call over to Lisa Earnhardt. Lisa?

[Lisa Earnhardt:]

Thank you, Jery. Good afternoon, everyone, and thanks for joining us. We were pleased to deliver our strongest quarter to date with revenues of $19.3 million in Q2, an increase of 27% over the second quarter of last year. We also have continued to make significant progress on our pipeline, completing enrollment of our phase III RESOLVE trial, reporting positive top-line results from our pivotal NOVA study and, as we reported yesterday, submitting our PMA supplement for NOVA. We're excited that we are moving closer to our goal of providing solutions across the continuum of care for sinus sufferers. Our second-quarter revenue growth reflects positive traction on a number of fronts, including the newly approved frontal indication for PROPEL Mini, continuing expansion of use of PROPEL and PROPEL Mini in the ethmoid sinus and the ongoing growth in seasoning of our sales force. To expand on these topics, PROPEL and Mini have long been approved for the use in the ethmoid sinus, the main drainage passageway on either side of the nose. At the end of the first-quarter, the FDA approved the use of Mini in the frontal sinus as well. As we've discussed, the frontal sinus, located behind your eyebrows, is the most challenging sinus to manage and the Mini has proven to reduce the need for postoperative intervention. We launched the frontal indication in Q2 and are pleased with the early reception from physicians and the corresponding sales results. The frontal launch is off to a great start. In order to gain insight into the reception of this indication, we chose a sample of about 350 ENT physicians and track their usage over the quarter. This group was comprised of physicians who had not yet used Mini in the frontal and represented a range of PROPEL adoption, including physicians who are selective users as well as non-users. The majority of these physicians have now tried placement in the frontal sinus and most have indicated they will increase their usage moving forward. The small sampling reinforces our belief that the frontal indication will drive incremental business, both among our current PROPEL users as well as with those who have not yet found a role for PROPEL in their practice. The progress Mini frontal study was just published in July and will be a focus of our team, for our team at next month's annual AAO meeting in San Diego. We expect physicians will appreciate the chance to review the data, which provides critical support as we extend from early launch into building awareness and driving adoption in the frontal. Regarding our salesforce, we were pleased with the stability and seasoning of our team. On average, our territory managers have been with us about 18 months compared to 12 months a year ago. At the end of the second quarter, we had 98 sales representatives in the field, made up of 73 territory managers plus 25 sales consultants. This represents a growth of about 26% over our field sales force at this time last year. Additionally, we realized almost a 20% increase in per territory productivity in the first half of the year compared with the first half of last year, with annualized TM productivity continuing above the $1 million mark. We're also continuing to see strong contributions from our sales consultants, reinforcing our commitment to the sales model. We do expect to continue expansion of the sales team, growing from 98 to about 110 field reps by year end, including the addition of a few territory managers and about 5 to 10 sales consultants. Moving to reimbursement, in our last call, we advised that a few key players had recently posted investigational experimental policies on PROPEL. We express recognition that the existence of such policies could impact market access, particularly with providers that operate with thin margins. What we have observed thus far is that these policies have, in some cases, become indeed part of the conversation, but we're not seeing a notable impact from these recent changes. Fortunately, our sales and reimbursement teams are well-equipped and proficient at answering questions about both the clinical and economic value of PROPEL. As evidenced, our business in the AFCs, the surgery centers, which are typically the most cost conscious sector of the market, continues to be strong, representing over 20% of year-to-date revenue. As part of our reimbursement strategy, we are actively seeking to increase the number of payers with positive coverage policies as we prepare to commercialize products designed for use in the office. We are engaged in outreach with both regional and national payers to ensure patients and physicians have access to our technology. At this point, we have gained positive coverage policies and access among private payers representing about 10% of covered lives. Expanding the space to include Medicare, one in four patients enjoy favorable access today. To gain additional positive coverage policies, we are expanding upon our clinical evidence, aligning with ENT physician societies for their support, and driving demand and usage across the country. We have invested heavily in evidence-based medicine and are now poised to have these efforts feed into reimbursement as we anticipate publication of several studies in the next 12 months, including the NOVA and RESOLVE II randomized trials, along with a few other post market studies. We believe that these publications will play a key role in garnering additional positive coverage. We continue to recognize that establishing reimbursement takes time, based on anticipated publication timelines and other factors, we are working to apply for a category one code in 2017 for a January 1, 2019 effective date. We are also building on product coding by applying for a J code. Overall, we believe that we will continue to drive adoption of PROPEL in the current environment through our strong value proposition and existing sinus surgery reimbursement. In addition, we have numerous efforts underway in that securing favorable coding and coverage for our products as we move towards the in-office setting of care. Putting this all together, as we look to the second half of the year, we're targeting revenue for the year of approximately $78 million, which is at the low end of our previous guidance range. In support of this outlook, we expect territory level productivity to continue to increase in the second half of the year, driven by factors I referenced earlier. Namely, increasing average tenure of the sales force, growth of our sales team, and the launch trajectory of the frontal indication. Let me now turn the call over to Jery to further discuss our Q2 results and outlook and then I'll address progress on our pipeline.

[Jery Hilleman:]

Thank you, Lisa. As Lisa mentioned, our second-quarter revenues were $19.3 million, an increase of 27% over the second quarter last year. We were also very pleased with the improvement in gross margin to 84%, a meaningful increase from 81% a year ago. This increase resulted in roughly equal parts from our 2016 price increase, increased production as we engage a second distribution center, and continuing labor cost efficiencies as we move toward larger lot sizes. Our second-quarter operating expenses totaled $22.4 million compared with $18.2 million in the second quarter of 2015. SG&A was $17.8 million, an increase of $3.7 million over Q2 last year, attributable to expansion in our commercial team, including sales, reimbursement and marketing. R&D was relatively flat versus the second quarter of last year at $4.6 million. Finally, our balance of cash, cash equivalents, and short-term investments at quarter-end was $111.8 million, representing a net use of cash during the quarter of approximately $5.2 million. Lisa has updated our outlook for full-year revenue. Regarding our view of quarterly revenue, we do expect to see normal procedural seasonality for sinus surgery, with summer being slow, and Q4 having the highest volume of the year. In line with this seasonality, our outlook for Q3 revenue is a drop from Q2 to approximately $17.8 million. This level represents a growth of approximately 25% over the third quarter 2015 and is consistent with growing at a rate above the seasonal quarter-over-quarter procedural decline of approximately 15%. We're also revising our gross margin outlook from 80% to 81% up to 82% to 83%. We expect the margin drivers I mentioned previously of price, inventory and efficiency to continue to benefit the year, enabling us to increase our outlook for gross margin by an absolute 2%. We're continuing our outlook for operating expense for the year of approximately $92 million and continue to anticipate a net use of cash of approximately $25 million for the year. I'd now like to turn the call back over to you, Lisa.

[Lisa Earnhardt:]

Thanks, Jery. Switching gears to our pipeline, we were thrilled with the positive results from the NOVA pilot pivotal study shared in May. As a reminder, NOVA is designed to follow opening of the peripheral sinuses in either the operating room or office setting. Its hourglass shape and lower profile is designed to allow for placement in smaller sinus openings. The NOVA study was a prospective randomized blinded multi-centric trial of 80 patients examining the use of NOVA in the frontal versus standard postoperative treatment. The study met its primary efficacy endpoint, demonstrating a statistically significant 65% relative reduction in the need for postoperative interventions compared to surgery alone. As we shared yesterday, we just submitted the PMA supplement to the FDA. The team has done a fantastic job moving this product through the various stages of development the last two years. We've also made solid progress on the RESOLVE program. This product is designed specifically for patients who have had sinus surgery who return with recurrent symptoms due to polyps. We completed enrollment of our 300-patient RESOLVE II study at the end of May. This is the final planned critical trial to support NDA approval of the RESOLVE steroid releasing implant. We anticipate that we will report preliminary top-line results in the fourth quarter, including assessment of both patient reported symptoms and objective endoscopic outcomes. To wrap up the call, we appreciate your ongoing support. We're pleased with our progress so far this year as we continue to redefine the standard of care for sinus sufferers. Importantly, we are well-positioned for the world of value-based healthcare with strong and growing clinical evidence that supports our aim to both improve clinical outcomes and reduce the cost of care. With that, Jery and I will remain on the line to answer questions. Jamie, why don't we go ahead and open up the lines?

[Operator:]

[Operator Instructions] Our first question today comes from Bob Hopkins from Bank of America. Please go ahead with your question.

[Bob Hopkins:]

Hi. Thanks. Can you hear me okay?

[Lisa Earnhardt:]

Hello, Bob.

[Bob Hopkins:]

Hello. Great. Good afternoon. So thanks for taking the question. First thing I wanted to ask about was just a quick question on the third-quarter guidance. You just reported, obviously, your best quarter ever. As you said, the comps are getting a little bit easier, you're launching a new product that there's a lot of enthusiasm about, at least in our view. But your Q3 guidance calls for kind of lower growth rate in Q3 than Q2 and a little bit of a larger sequential decline than you saw last year sequentially from Q2 to Q3. So just want to make sure that I am not missing anything here. I didn't hear anything but positives in the prepared remarks and other results, but the guidance just seems a bit overly conservative for Q3. So I just want to make sure that I'm not missing anything like maybe anticipated losing more sales reps or other volatility that is probably worth discussing.

[Lisa Earnhardt:]

Bob, I think you're reading the positives very accurately. We did have a very strong Q2. We look forward to continuing with strength. We have seen increasing seasonal variation of procedures over time, so I think we are anticipating that a little bit. We do continue to expect to outperform seasonality, but we are mindful that the months of July, August and September are a bit slower for the FESS procedure and our quarter guidance is intended to reflect that.

[Bob Hopkins:]

So there's no incremental negatives, is there, that are out there. I mean, from a sales force perspective, you gave us the numbers, they kind of match up nicely with what you said previously. What's your view on the stability of the sales organization right now and the progress you are making there? And again, the reason for the original question is I just want to make sure that I'm not missing anything. Is there a reason why seasonality would be worse this year than a year ago?

[Lisa Earnhardt:]

Yes, we would anticipate seasonality being about similar as to what it was last year and we look at market data. It was about a 15% drop from Q2 into Q3 as Jery had referenced. In terms of the stability of the sales team, we feel like we're on a great place there with the number of folks we have on the team and we've continued to build the sales consultants ranks and think that they are playing a critical role for us as we look to drive adoption of our products.

[Bob Hopkins:]

And then I guess just lastly, would it be fair, and these are my words not yours, but would it be fair to characterize the guidance that you're giving for Q3 as conservative in your minds relative to some of the volatility that you've seen previously? And that's maybe the rationale for the Q3 guidance as it stands.

[Lisa Earnhardt:]

Yes, I don't want to characterize it with any qualitative terms, but we are really focused on making sure that the guidance we put out is something that really fits with our high confidence view of the time periods.

[Bob Hopkins:]

Okay. Thank you very much.

[Operator:]

Our next question comes from Matt O'Brien from Piper Jaffray. Please go ahead with your question.

[JP McKim:]

Hi. Good afternoon. This is JP in for Matt. Thanks for taking the questions. I guess my first one is on, you mentioned the 300 physicians you were tracking after introducing PROPEL Mini and I just want to see, from their baseline, maybe last year or whatever, have you seen the number of implants per patient increase. Like, if it was two before, are you seeing people getting up to two-and-a-half, three or four? I'm just trying to see where that metric can go.

[Lisa Earnhardt:]

Yes. PJ, good question. I'm sorry. JP. Did I say PJ? JP.

[JP McKim:]

Yes. No worries.

[Lisa Earnhardt:]

I, around the number of implants, so we are tracking that closely. And just to put that in context, the reason we are is - as you know, PROPEL Mini was already an approved product. So to be able to really sort of track the incremental impact of the frontal indication, we wanted to make sure we had a real deep understanding of at least a sub-segment of our physicians and we are seeing some use where they are using more than just two implants per case. But the majority of time, what we are seeing is them use either devices in the ethmoid or devices in the frontal and that's really where we're seeing the majority of incremental use with the expanded indication into the frontal.

[JP McKim:]

Okay, so it's easy, just one or the other. They're not just doing all four. Just depending on what they're trying to…

[Lisa Earnhardt:]

Yes. And I'd say sometimes they will do that and once again, it depends on the patient need first and foremost, what the physician thinks is most appropriate, and then also the economics of the facility in which they are operating in.

[JP McKim:]

Sure. And then can you kind of help us think about, I mean, we looked to the NOVA data you put out, and I guess time around that probably sometime next year, you would hope for approval, but how should - if and when that does get approval, how should we think about that with PROPEL Mini in terms of cannibalization? Because it looks like the data was better for NOVA and NOVA will have an office as well. How are you going to position, I guess, the two products, PROPEL Mini and NOVA in the frontal?

[Lisa Earnhardt:]

As we get closer to launch, we'll articulate this even more, and we do anticipate a launch next year for the product. NOVA is a miniaturized version of the Mini and so it will fit into smaller sinus openings, so we do think it could expand the patient population that is treated. It also has an optimized delivery system, which some physicians might prefer, especially in the office setting. So we do think there will be use of NOVA, both incremental use and potentially cannibalization in the operating room, and in particular, 2017. And then over time, as reimbursement falls into place, additional use and growth in the office setting, which we think NOVA will be the sort of device of choice should give it the size of the implant and the delivery system.

[JP McKim:]

Sure. And then one last one from me, if I could. And I know you guys are not giving any guidance on 2017, but if I look at consensus estimates, you get a kind of a growth acceleration north of 30%, 31% next year. Is that something you guys are comfortable with or is it something the streets mis-modelled that we need to kind of take a closer look at?

[Lisa Earnhardt:]

I think there will be a lot of variables that will go into our thinking about this year and you're right that it's a little premature for us to be addressing that.

[JP McKim:]

Great. Thank you for taking the questions.

[Operator:]

Our next question comes from Kyle Rose from Canaccord Genuity. Please go ahead with your question.

[Kyle Rose:]

Great. Thank you very much. Can you hear me all right?

[Lisa Earnhardt:]

We can. Thank you.

[Kyle Rose:]

Great. So I just wanted to talk about the NOVA a little bit more. We saw that data looked very strong. I just wonder if you had any hypothesis as far as would the 65% improvement in that data set versus some of the similar data sets we've seen the past that are more on the mid- to high-30%s and just what might be driving that. And then, I know you talked about from a longer-term perspective, once it launches, how will it positioned relative to PROPEL. But just from a pricing and that type of expectation, should we continue to expect similar pricing for the NOVA relative to the PROPEL?

[Lisa Earnhardt:]

Yes, Kyle, and we haven't determined the pricing strategy, but I think your assumptions of having in the same ballpark is appropriate for planning purposes at this point. I did want to talk about the performance of the two. We'll be very careful, because obviously, we did not do a head-to-head study, which is the only way in which we'd be able to make claims of superiority in terms of the NOVA versus our other products. We were, as you know, excited about the results, had found them very compelling. There are some specific designs features to the NOVA which we think could be a better solution in some patients, in particular, its hourglass design and the fact that it's a miniaturized device with the same amount of drug, could potentially help improve apposition to the sinuses to maximize drug delivery. And so we are excited about that potential, but we think it's, it will be another tool in our bag and much like with PROPEL or PROPEL Mini, we have been agnostic in terms of which product they use. It really just gives physicians another choice of products to help fight the disease.

[Kyle Rose:]

Great. And then switching over to the rep productivity, I just wanted you had some turn over into Q1, and then in Q2 that you talk about. And you sensory hired there. Just wondered how should we think about the sales ramp and the productivity of the reps who are replacing prior reps in an existing territory versus I guess a Greenfield rep who is starting from day one. How do you internally think about the productivity of a new rep getting up that curve to that $1 million, new $1 million mark there? And then a follow-up to that is when you think about the territories that have the sales consultants there, is there any way you can quantify the impact of the sales consultants and how we should think about the added productivity that those participants add?

[Lisa Earnhardt:]

Sure. I'll address that question. As we think about the ramp of sales reps, that was really a very important metric that we looked on in building our forecast when we were putting in place a lot of new territories. Starting from scratch, brand-new territory, it would typically take six months to get to breakeven, nine months to get to full target productivity, but what we have learned now that we have more established territories and reps moving into territories that have some track record, have account approvals in process, is that it's just much more the territory specific. So we've had new territory managers moving into existing territories that hit very high levels of productivity almost immediately. So that kind of ramp-up curve isn't as applicable to where we are now that we have a pretty stable territory profile. With regard to the sales consultant productivity, that absolutely is part of the drivers of growth. We talked about in the last quarter that we were seeing a materially higher growth rate in territories with the sales consultants, but we've not broken that out as a specific metric at this point. We may as we get more and more traction, but it certainly is very important both to driving that in the accounts, maintaining accounts, helping the territory manager deploy their territories more strategically and how they spend their time with key opinion leaders or others. So there's a lot of ways of evaluating it. Overall, we do continue to look to see higher growth rate in those territories and that is what we continue to see.

[Kyle Rose:]

Great. And then just one more for me and then I'll hop back in the queue. Very strong progress from a gross margin perspective. I understand the moving pieces this year, but how should we think about the durability of that as we move into next year and beyond? I mean should we still, is this guidance that should we consider that the floor moving forward or how should we think about that?

[Lisa Earnhardt:]

I think it's really going to depend on where we decide to price NOVA on the ramp. We had previously said that long-term, we probably would look at a business of 80% gross margin. It could be a little bit higher, just over time, depending what happens with pricing. And then the introduction of NOVA will be slightly lower to begin with, RESOLVE will be slightly lower to begin with. So this certainly isn't a floor, but I think it's certainly a neighborhood we'll be operating in with some variability over the next couple of years.

[Kyle Rose:]

Great. Thank you for taking the questions.

[Operator:]

Our next question comes from Ben Andrew from William Blair. Please go ahead with your question.

[Alexa Desai:]

Hi, guys. This is actually Alexa in for a Ben. Thanks for taking the question. First, I know I may have missed this, but how many accounts did you add in the quarter?

[Lisa Earnhardt:]

We added about 100 accounts in the quarter, which is consistent with what we did in the first quarter of the year.

[Alexa Desai:]

Okay. And you've talked about how account adds is likely going to slow as it has over the past couple of years. But where do you see overall account penetration by the end of the year or maybe the end of next year, given you're about 30% penetrated today? Are you in most of the high-volume centers or are there larger signs you still haven't hit?

[Lisa Earnhardt:]

Yes, we anticipate for this year, we will continue to add about 100 accounts per quarter. And we had shared that earlier in the year. Alexa, I would say there's equal opportunity there. While we have had great progress in a number of the larger centers, there still are some out there that are not yet using our product. So it varies by market, but we think there's still sort of equal opportunity of the accounts that are out there sort of average size.

[Alexa Desai:]

Okay. And then maybe on international. I'll switch it up. Can you give an update on your progress to expand internationally? I know you guys talked about Germany, Japan and China the last time you spoke about this kind of a few quarters ago, but has there been any other further progress made on reimbursement or regulatory side that you can talk about?

[Lisa Earnhardt:]

I think things stay, are very much in track with what we have been discussing. We are doing some very initial, very minor commercialization in Germany under having received the NUB level 1 reimbursement in a handful of accounts. And then that may build over time, but it's going to take a few years to get to any level of materiality with a focus on Germany. We are also then looking at Japan and looking at the regulatory process there, but we don't have any near-term expectations for significant business outside of the US. And that's consistent with what we've said previously.

[Alexa Desai:]

Okay. And then you said CPT 1 coding would be implemented January 1 of 2019. But you're expecting NDA approval of RESOLVE in 2018, so there's a bit of disconnect there, right? Or am I reading that wrong?

[Lisa Earnhardt:]

Alexa, I think that's a good assessment of the situation. There are a couple of different ways to help facilitate payment, in particular, in the office setting. One will be with the CPT code, the second of which could be via a product code. In terms of the CPT code, we do anticipate having that category to recode in place, which as you know, some payers will cover on a case-by-case basis. So between now and then, there's an avenue for the physician to be reimbursed. We also will pursue, as we alluded to on the call, a new product code under the J code family, which is for physician administered drugs and that is something that could be applicable to resolve in particular. And so that could be forthcoming as well. So we think it's sort of all kind of coming together around the same time frame, with the approval of RESOLVE being likely sooner in terms of 2018.

[Alexa Desai:]

Okay. Thank you.

[Operator:]

Our next question comes from Rich Newitter from Leerink Partners. Please go ahead with your question.

[Robbie DeVita:]

Hello. Good afternoon. It's Robbie in for Rich. Can you hear me okay?

[Lisa Earnhardt:]

Hello, Robbie.

[Robbie DeVita:]

I have a couple of questions. Maybe if I can start from just a quick mix question in terms of how is sort of the Mini launch tracking in terms of your unit mix shift in frontal and versus ethmoid, if you could maybe help out with that. And then I want to probe a little bit on the account usage. It's at about 20% year-to-date revenue for ASCs. How does that track compared to maybe this time about a year ago? And what kind of customers are in the ASCs? Is it high-volume customer that you're seeing that's really growing sales or is it sort of like the new customer that's coming in is from the AFC and that's represents maybe the new base of growth from there?

[Lisa Earnhardt:]

So your first question, Robbie, was around the mix of our business, ethmoid versus frontal. Right now, because the PROPEL Mini can be used for either, we don't have that specific statistic to share with you. What we do know is heading into the launch, the mix was relatively lower for Mini, so it was 40%...

[Jery Hilleman:]

In the neighborhood of 50/50, but it was a little bit lower for Mini and Mini is now a more significant product, over 50%.

[Lisa Earnhardt:]

Yes so it's sort of shifted positions and so that sort of gives us an indication that the frontal indication has indeed made an impact. Your second question was with regards to ASCs and it was two-part question, I believe, one of which was last year and how that compared and Jery, do you want to cover that one?

[Jery Hilleman:]

Yes, it's actually been very consistent. I would say if anything we've probably gained a little bit of ground with the ASCs. Last year, it was around 20%. We are seeing it a little bit higher in the first quarter of this year. Same order of magnitude, but if anything, it's probably shifting up a little bit higher in that sector, which we view as a very good sign for expanding our business.

[Lisa Earnhardt:]

Yes, and then in terms of volumes, they're relatively similar in volumes relative to the hospital outpatient setting. And when we are talking ASC, it typically is a freestanding ambulatory surgery center is how we define that specifically.

[Robbie DeVita:]

And just want one follow-up on that one. Is it the same ASP that you are being able to capture in the ASC versus the other location?

[Lisa Earnhardt:]

It's fairly similar. We don't have lots of variation on the ASP among our customer base, and we certainly have a range in the ASC as we do in our hospitals, but within a reasonable band.

[Robbie DeVita:]

Great and then maybe one more on just the cadence of gross margins. So I guess historically from a percentage of sales, the third quarter has dipped. Should we expect a similar type of gross margin dip with the lower revenue or is it even more weighted towards fourth quarter?

[Jery Hilleman:]

Our gross margin in the third quarter, we haven't really guided to it and I don't want to just off the top of my head give guidance for it, but we are seeing a lot of variability in gross margin for the rest of the year consistent with our guidance.

[Operator:]

Our next question comes from Sean Laven from BTIG. Please go ahead with your question.

[Unidentified Analyst:]

This is actually Ryan in for Sean. Can you guys hear me okay?

[Lisa Earnhardt:]

Yes. Hello, Ryan.

[Unidentified Analyst:]

Great. So I'll keep my question to one since we've had quite a few already tonight. But just with regards to insurance policies that you've talked about previously, at least. Any color on them in terms of making headway with the policies that are currently or previously were investigational that are potentially now allowing and reimbursing for the product? Any color there would be really helpful.

[Lisa Earnhardt:]

Yes, Ryan. It's a good question. When we're at a position where progress is made public, we certainly will share that with you. I can tell you at this point, our discussions with various payers are all in confidence. But we do feel like we've made some progress along those lines in terms of helping educate payers around the benefits or technology and when we do have sort of material news there, we most certainly will probably air on the side of sharing even more than we may have before, because we appreciate the importance of this as you think about the broader intersect opportunity.

[Unidentified Analyst:]

Okay, great. That's it for me. Thank you, guys.

[Lisa Earnhardt:]

Thanks, Ryan.

[Operator:]

[Operator Instructions] Our next question comes from Suraj Kalia from Northland Securities. Please go ahead with your question.

[Suraj Kalia:]

Good afternoon, ladies.

[Lisa Earnhardt:]

Hi, Suraj.

[Suraj Kalia:]

So Lisa, a few questions, and forgive me if I heard this wrong. I heard the number 50% mix with PROPEL Mini. Did I get that wrong?

[Jery Hilleman:]

Suraj, this is Jery. What I was saying is that prior to the launch of the frontal indication, less than 50% of our sales were with PROPEL Mini and that that's now shifted so that PROPEL Mini is now sold more frequently than PROPEL, but I'm just giving that as directional, not quantitative.

[Suraj Kalia:]

Fair enough. So, Lisa, let me start out just you'll have, this was the first full quarter of the frontal indication. Your commentary implied that the initial adoption has been pretty good. I guess where I'm trying to go with this is a lot of these chronic rhinosinusitis is overlapping, that if it's ethmoids, frontals, maxillary, you name it. When you guys go in, when the sales guys go in, what are the conditions under which a clinician says, well I'm going to use it in ethmoid but I'm going to pass on the frontals, or vice versa? What situation drives that? Is that economics? Is that experience? Love to get some color there.

[Lisa Earnhardt:]

Suraj, I think it can be a number of different things. First and foremost, it's what the clinical need is in terms of the individual patient and they do different considerably based on the anatomy and the disease. Economics, though, do come into play and so they may think at times that they're just going to use it where they think the patient quote unquote needs it most. And so that is what we are seeing play out. As you know, though, we have a lot of opportunity to expand usage with our existing customers. And so we do have a number of physicians who use this more selectively with certain patient populations and that's really where we are targeting our efforts or thinking about those who have used us selectively to expand their indication of use and the number of patients who would benefit. And it also has provided an nice door opener with physicians who had not yet found a role for PROPEL in their practice and physicians, no one argues that the physician is the most, the frontal is the most challenging sinus to manage. And so we're excited about the opportunity this gives us to reopen some doors that maybe we had not been as successful with previously.

[Suraj Kalia:]

Okay. And we said, the math roughly indicates, again, roughly. I know you guys don't give out the number of procedures per se. It indicates it's roughly north of 12,000. When I look at the recent payer policy language change, can you at least give us some directional idea or color? These many accounts, there was some discussion about the payer policy change, the language revision. Out of that, this is the percent that we resolved favorably. I guess just trying to understand or quantify some of the impact that could have had happened?

[Lisa Earnhardt:]

Yes, and what we shared on the call was just that it wasn't a meaningful impact, at least to this point. And we are just not in a position to be able to quantify that just given the situation.

[Suraj Kalia:]

Fair enough. And finally, Lisa, I know this is a forward-looking question on NOVA a number of people have asked. Let me ask just a little differently. In an office setting, Lisa, when I look at NOVA, you guys have a pretty good idea about this balloon sinuplasty market. For when I look at primary CRS treatment, how do you see NOVA stacking up vis a vis balloons? I know there is, in the past, you have said there could be complementary of possession thereof. Where I'm trying to head at is economics do matter. And when you will look at the data that NOVA has, is generating, which is pretty strong, how do you think this will stack up with balloons when you'll finally get the approvals? Are clinicians going to be more moved by the delay in phase? Are they going to be, is it looking at sinus fadency? Any color specifically NOVA in a physician setting for primary CRS would be great appreciated. Thank you for taking my questions

[Lisa Earnhardt:]

We do see, as you had mentioned, NOVA in particular, being complementary with the balloon technology that is out there and think in particular in the office, we might see physicians ballooning a couple of the dependent sinuses and then placing NOVA as they deem appropriate. There will be some potential and I think some physicians have expressed interest maybe in some patients to be just using the NOVA device. We obviously will need to continue to invest in clinical studies to really understand the true benefit there. We feel like we are in a good position given our unique offering that we bring to the table and there are a choice of other technologies that are out there for the opening and so we feel like in terms of relative value, we're in a good position given the uniqueness of our product portfolio.

[Suraj Kalia:]

Thank you

[Lisa Earnhardt:]

Thanks, Suraj.

[Operator:]

And, ladies and gentlemen, at this time, we'll conclude today's question-and-answer session. I'd like to turn the conference call back over to Lisa Earnhardt for any closing remarks.

[Lisa Earnhardt:]

Great. Thank you so much, everyone, for joining us today. We certainly appreciate your interest and support and look forward to talking with you all soon. Thanks.

[Operator:]

Ladies and gentlemen, that does conclude today's conference call. We do thank you for attending. You may now disconnect your lines. Thank you.