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Hi, I’m Jennie Tsai, the medical device analyst at Gabelli Funds.
• Today, I want to talk about Intersect ENT, a manufacturer and distributor of products for ENT conditions such as chronic sinusitis
• The company has 32.4m shares outstanding @$17.98 = $583 million equity market cap – $88 million net cash for an TEV of $495 million
• Yesterday, there was speculation that Medtronic had made an offer to acquire the company. And the board of directors is now evaluating the offer ….
• With its unique and differentiated products to treat various ENT conditions, Intersect ENT is an attractive acquisition candidate for any medical company with an existing ENT franchise.
• Its Propel family of products are PMA approved drug releasing implants used to treat chronic sinusitis, inflammation of the nasal cavities caused by infections, allergies, environmental factors and other factors.
• Its SINUVA product is a steroid releasing implant used to treat nasal polyps in conjunction with surgery.
• The company generated $109 million of revenue in 2019. Management expects 2020 revenue to be down due to the pause in elective surgeries due to COVID-19, which negatively impacted most medical companies from mid-March and to the present, although to a lesser extent recently as states have re-opened.
• So far in 2020, new management that came on board in 2019, is executing well.
• Recent actions by management include getting increased reimbursement for SINUVA, re-training its sales reps to better train, target and assist surgeons and their specific procedures and reducing discretionary spend and numerous other manufacturing and operating actions.
• During the COVID crisis, these actions will help reduce annual operating expenses by $40 million beginning in Q2 and preserve cash and maintain liquidity.
• With improved sales execution over time, we believe Intersect ENT’s value will increase over time. Management noted that it expects 2021 revenue to be at or above 2019 levels.
