UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 5, 2014
Intersect ENT, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 001-36545 | 20-0280837 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
Intersect ENT, Inc.
1555 Adams Drive
Menlo Park, California 94025
(Address of principal executive offices, including zip code)
(650) 641-2100
(Registrants telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 | Results of Operations and Financial Condition |
On November 5, 2014, Intersect ENT, Inc. (the Company) issued a press release announcing its financial results for the quarter ended September 30, 2014. The full text of the press release issued in connection with the announcement is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference. The Companys management conducted a conference call on November 5, 2014 at approximately 4:30 p.m. Eastern Standard Time, to review the Companys financial results for the quarter ended September 30, 2014. A copy of the transcript of the conference call is furnished as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated herein by reference.
The information in this Form 8-K and the Exhibits attached hereto shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 9.01 | Financial Statements and Exhibits. |
(d) | Exhibits |
Exhibit No. |
Description | |
99.1 | Press release entitled Intersect ENT Reports Third Quarter 2014 Results dated November 5, 2014. | |
99.2 | Transcript of conference call held by management of Intersect ENT, Inc. on November 5, 2014. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Intersect ENT, Inc. | ||||||
Dated: November 10, 2014 |
||||||
By: | /s/ Jeryl L. Hilleman | |||||
Jeryl L. Hilleman | ||||||
Chief Financial Officer |
INDEX TO EXHIBITS
Exhibit No. |
Description | |
99.1 | Press release entitled Intersect ENT Reports Third Quarter 2014 Results dated November 5, 2014. | |
99.2 | Transcript of conference call held by management of Intersect ENT, Inc. on November 5, 2014. |
Exhibit 99.1
Intersect ENT Reports Third Quarter 2014 Results
Third Quarter Revenue Increased 113% Year-Over-Year to $9.1 Million
Menlo Park, Calif. Nov. 5, 2014 (GLOBE NEWSWIRE) Intersect ENT, Inc. (Nasdaq:XENT), a company dedicated to improving the quality of life for patients with ear, nose and throat conditions, today reported financial results for the third quarter of 2014.
Recent Accomplishments
| Achieved Q3 revenue of $9.1 million, an increase of 113% over the third quarter of 2013. |
| Realized Q3 gross margin of 72% versus 66% in the third quarter of 2013. |
| Commenced enrollment in September of the PROGRESS study, a prospective, randomized, blinded, multi-center trial to assess the safety and efficacy of the PROPEL® mini steroid eluting sinus implant when placed in the frontal sinus opening following frontal sinus surgery in patients with chronic sinusitis. The trial is intended to support an expanded indication for placement of PROPEL mini in the frontal sinuses, which are located behind the eyebrows. PROPEL mini is currently indicated for placement in the ethmoid sinuses, located just behind the bridge of the nose. |
| Published results from a prospective, randomized, blinded, multi-center clinical trial for Intersect ENTs investigational RESOLVE steroid eluting implant, as well as the results of a pharmacokinetic study of this implant. Based on these findings, Intersect ENT is working with the FDA to finalize the Phase 3 study design. |
| Completed enrollment in a feasibility study to assess the Companys investigational NOVA steroid eluting sinus implant. This implant is designed primarily as a treatment in the physicians office for patients suffering from chronic sinusitis who have not yet had sinus surgery. |
Our accomplishments this quarter demonstrate ongoing progress in both commercial execution and product pipeline advancement, said Lisa Earnhardt, president and chief executive officer. We were pleased to deliver continuing quarter-on-quarter revenue growth despite the historic seasonal slowdown associated with the summer, and to achieve clinical milestones for our key product pipeline initiatives.
Third Quarter Financial Results
Revenue for the three months ending September 30, 2014 increased by 113% to $9.1 million from $4.3 million in the same period in 2013. This increase is attributable to higher unit sales via the acquisition of new accounts and driving adoption with existing customers. Gross margin for the third quarter of 2014 was 72%, up from 66% in the three months ended September 30, 2013. This increase in gross margin was due primarily to spreading the companys manufacturing costs over higher production volumes.
Operating expenses for the third quarter of 2014 were $12.4 million, an increase of 83% compared to $6.8 million in the third quarter of 2013. The increase in operating expenses was driven primarily by an increase in expenses associated with being a public company as well as growth in sales and marketing headcount.
Net loss for the third quarter of 2014 was $5.9 million, compared to $4.1 million for the third quarter of 2013.
Cash, cash equivalents and short-term investments totaled $53.6 million as of September 30, 2014.
Conference Call
Intersect ENT will host a conference call today at 4:30 p.m. ET to discuss its third quarter 2014 financial results. To access the conference call via the Internet, go to the Investor Relations page of the Companys web site at www.intersectENT.com. To access the live conference call via phone, dial 1-866-652-5200 and ask to join the Intersect ENT call. International callers may access the live call by dialing 1-412-317-6060.
A replay of the conference call may be accessed that same day after 8:00 p.m. ET at www.intersectENT.com or via phone at 1-877-344-7529 or 1-412-317-0088 for international callers. The reference number to enter the replay of the call is 10054909. The dial-in replay will be available for a week after the call and via the Internet for approximately one month.
About Intersect ENT
Intersect ENT, Inc. is dedicated to improving the quality of life for patients with ear, nose and throat conditions. The company markets the first and only drug-eluting sinus implants, PROPEL and PROPEL mini, clinically proven to improve surgical outcomes for patients with chronic sinusitis. The products release an advanced steroid with anti-inflammatory properties directly into the sinus lining, then dissolve, maintaining the open passages created in ethmoid sinus surgery. In addition, Intersect ENT is pursuing clinical trials designed to support expanded indications and to assess two new investigational drug-eluting implants to provide ENT physicians with additional options to treat patients with chronic sinusitis less invasively and more cost effectively. Chronic sinusitis is an inflammatory condition leading to debilitating symptoms and chronic infections, and is one of the most costly conditions to U.S. employers. To learn more about Intersect ENT, please visit www.intersectENT.com.
Intersect ENT, Inc.
Condensed Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Revenue |
$ | 9,100 | $ | 4,279 | $ | 25,162 | $ | 10,959 | ||||||||
Cost of sales |
2,576 | 1,438 | 7,256 | 5,589 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit |
6,524 | 2,841 | 17,906 | 5,370 | ||||||||||||
Gross margin |
72 | % | 66 | % | 71 | % | 49 | % | ||||||||
Operating expenses: |
||||||||||||||||
Selling, general and administrative |
9,667 | 4,700 | 24,616 | 12,137 | ||||||||||||
Research and development |
2,758 | 2,077 | 7,712 | 6,754 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating expenses |
12,425 | 6,777 | 32,328 | 18,891 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Loss from operations |
(5,901 | ) | (3,936 | ) | (14,422 | ) | (13,521 | ) | ||||||||
Interest and other income (expense), net |
16 | (163 | ) | (254 | ) | (216 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss |
$ | (5,885 | ) | $ | (4,099 | ) | $ | (14,676 | ) | $ | (13,737 | ) | ||||
|
|
|
|
|
|
|
|
|||||||||
Net loss per share, basic and diluted |
$ | (0.32 | ) | $ | (2.39 | ) | $ | (2.00 | ) | $ | (10.08 | ) | ||||
|
|
|
|
|
|
|
|
|||||||||
Weighted average common shares used tocompute net loss per share, basic and diluted |
18,217 | 1,718 | 7,343 | 1,363 | ||||||||||||
|
|
|
|
|
|
|
|
Intersect ENT, Inc.
Condensed Balance Sheets
(in thousands)
(unaudited)
September 30, 2014 |
December 31, 2013 |
|||||||
Assets | ||||||||
Current assets: |
||||||||
Cash, cash equivalents and short-term investments |
$ | 53,617 | $ | 12,294 | ||||
Accounts receivable, net |
4,934 | 4,200 | ||||||
Inventory |
2,680 | 2,197 | ||||||
Prepaid expenses and other current assets |
1,188 | 511 | ||||||
|
|
|
|
|||||
Total current assets |
62,419 | 19,202 | ||||||
Property and equipment, net |
1,611 | 1,707 | ||||||
Other non-current assets |
111 | 126 | ||||||
|
|
|
|
|||||
Total assets |
$ | 64,141 | $ | 21,035 | ||||
|
|
|
|
|||||
Liabilities and Stockholders Equity | ||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 2,088 | $ | 1,451 | ||||
Accrued compensation |
4,219 | 2,955 | ||||||
Equipment loans current portion |
35 | 696 | ||||||
Convertible preferred stock warrant liability |
| 237 | ||||||
Other current liabilities |
832 | 745 | ||||||
|
|
|
|
|||||
Total current liabilities |
7,174 | 6,084 | ||||||
Equipment loans non-current portion |
30 | 756 | ||||||
Deferred rent |
| 52 | ||||||
|
|
|
|
|||||
Total liabilities |
7,204 | 6,892 | ||||||
Total stockholders equity |
56,937 | 14,143 | ||||||
|
|
|
|
|||||
Total liabilities and stockholders equity |
$ | 64,141 | $ | 21,035 | ||||
|
|
|
|
Inquiries: | Jeri Hilleman | |
650.641.2105 | ||
ir@intersectENT.com |
Exhibit 99.2
Intersect ENT |
Third Quarter Earnings |
November 05, 2014 at 4:30 PM Eastern |
CORPORATE PARTICIPANTS
Lisa Earnhardt President and Chief Executive Officer
Jeri Hilleman Chief Financial Officer
James Stambaugh Vice President, Clinical Affairs and Reimbursement |
Intersect ENT
September 03, 2014 at 4:30 PM Eastern
PRESENTATION
Operator
Good afternoon and welcome to the Intersect ENT Third Quarter Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero.
After todays presentation, there will be an opportunity to ask questions. Please note, this event is being recorded.
I would now like to turn the conference over to Jeri Hilleman, Chief Financial Officer. Please go ahead.
Jeri Hilleman
Thank you, Denise, and good afternoon. With me today is Lisa Earnhardt, President and CEO of Intersect ENT and James Stambaugh, VP of Clinical Affairs and Reimbursement. We appreciate you joining us today to review our third quarter results and business update.
Before we begin, Id like to remind you that we will make statements during this call that include forward-looking statements within the meaning of Federal Securities Laws. Actual results or the timing of 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 products and indications, and the receipt of reimbursement, which are based upon current estimates and assumptions, as well as other risks detailed from time-to-time in Intersect ENTs reports filed with the SEC.
Intersect ENT disclaims any obligation or undertaking to update or revise any forward-looking statements contained herein.
I will now turn the call over to Lisa Earnhardt. Lisa?
Lisa Earnhardt
Thanks, Jeri and good afternoon everyone. Our first quarter as a Public Company was indeed an exciting one, pricing our offering and ringing the NASDAQ bell affirm the progress weve made delivering solutions to improve the lives of chronic sinusitis patients. Today, well highlight three additional accomplishments from the third quarter, specifically, our progress in driving adoption of our PROPEL products, tangible advances in our pipeline and clinical programs, and expansion of our commercial footprint to position us for growth in 2015 and beyond. We are pleased with the progress we have made in driving adoption of our PROPEL and PROPEL mini steroid-releasing implants.
As we just reported, revenue grew to 9.1 million in the third quarter as we continue to grow sequentially quarter-over-quarter. Our growth continues to be driven by both the acquisition of new accounts, as well as a strong recurring business. In fact, over 75% of our business comes from reordering customers. Overall, we have expanded into almost 1,200 accounts and have treated over 40,000 patients since approval. Net-net, were pleased with our momentum on the commercial front.
Intersect ENT
September 03, 2014 at 4:30 PM Eastern
We had a strong presence at the annual conferences of the American Rhinologic Society and the American Academy of Otolaryngology in September, and Id like to ask James Stambaugh to share some highlights, as well as provide an update on our RESOLVE clinical program.
James Stambaugh
Thanks Lisa. We were pleased to see an elevated awareness of Intersect ENT at the conferences, as evidenced by the level of interest and outreach from physicians, as well as the many references to PROPEL and to our pipeline products in physician presentations.
We had two major events at the conferences. First, our sponsored Synchronicity Physician Educational Event and second, the presentation on the outcomes of our RESOLVE Phase 2 clinical trial.
The Synchronicity event was opened by Dr. David Kennedy, the Surgeon who introduced endoscopic sinus surgery in the United States. Dr. Kennedy commenced his remarks by describing the approval process for new ENT devices, sharing that while over 300 ENT products have received 510(k) clearance in the last 10 years, thereve been only three PMA approved devices in the ENT field, one of which is PROPEL.
This review showcased the competitive advantages of our products and highlighted that the level of clinical and scientific rigor supporting PROPEL is truly noteworthy in this space. Dr. Kennedys remarks were followed by a physician panel discussion, designed to share real-world experience with PROPEL, followed by questions from the standing room only audience. We believe these peer-to-peer educational programs to be a powerful tool to drive adoption as physicians share their experiences with one another.
In addition to this physician program, Dr. Joseph Hahn presented a summary of the RESOLVE trial results. As a reminder, the RESOLVE study was a 100-patient, prospective, multi-center, randomized, controlled, blinded clinical trial evaluating our RESOLVE steroid eluting implant, for the in-office treatment of patients with recurrent disease due to polyps.
Dr. Hahns presentation was recognized by the Society with the Cottle Award for Best Clinical Research, the third such award recognizing Intersect ENTs clinical studies. Dr. Hahn commented, that the overall study results reflected his own observations in his study patients, in whom he observed that nasal polyps responded quickly to the steroid implant, within seven days. At 90 days, more than half of the patients treated with this implant were no longer indicated for surgery. The RESOLVE study results were published last month in the International Forum of Allergy & Rhinology, along with two other publications on our products.
We are pleased with the results from these studies which continue to build upon the solid foundation of clinical evidence supporting the benefits of our technology for patients with chronic sinusitis.
Intersect ENT
September 03, 2014 at 4:30 PM Eastern
We have applied the learnings from the RESOLVE trial into refining the final design of RESOLVE II, our Phase 3 study. We met with the FDA in early October and were pleased to have had a collaborative discussion and to receive clarity on key points of the trial design.
We plan to commence the RESOLVE II study in early 2015, as previously communicated. Three hundred patients will be enrolled in the trial and we expect to complete enrollment in the latter part of 2016.
Lisa Earnhardt
Thanks, James. We also made solid progress on two other pipeline initiatives, the PROGRESS study to evaluate the use of PROPEL mini when placed in the frontal sinus opening following sinus surgery, as well as the first-in-man evaluation of our NOVA product.
PROPEL mini, like PROPEL is approved for use in the ethmoid sinus, the common drainage pathway for the sinuses. The PROGRESS study will enroll 80 patients and is designed to support an expanded indication for placement in the frontal sinus, the sinuses right behind your eyebrows. We believe at least 25% of patients who undergo sinus surgery have their frontal sinuses opened. We started patient enrollment in late Q3, in this prospective randomized, blinded, multi-center trial, and expect to complete enrollment by mid-2015.
Our other pipeline initiative is NOVA, which is a miniaturized steroid eluting implant designed primarily as a treatment in the physician office, targeting patients suffering from chronic sinusitis who have not yet had sinus surgery. We now have a small study underway to evaluate placement feasibility in both the frontal and maxillary sinuses, as well as outcomes through three months.
This past quarter, we completed enrollment and are now in the process of following patients and assessing outcomes. We were pleased with the placement success rate and expect to be able to update you about our takeaways and next steps in early 2015.
On a final note, before I turn the call over to Jeri, I just wanted to highlight our progress in building organizational readiness to drive top line growth and achieve our clinical milestones in 2015.
We are actively expanding our team, especially on the sales force along with our reimbursement, and clinical research teams. Our sales force now stands at 50 Territory Managers, up almost 70% from the 31 Territory Managers in-place at the start of the year. Much of this growth has occurred since our IPO, as we expand to reach a larger number of the 7,500 sinus surgeons in the US. We are also expanding our Sales Leadership to support this growth.
We continue to hire seasoned medical device professionals and believe that our track record, unique value proposition, and growth prospects create a compelling basis for recruitment and retention of very strong talent.
Intersect ENT
September 03, 2014 at 4:30 PM Eastern
Overall, when we reflect on the quarter, we are encouraged by our continued success in capturing the hearts and minds of a growing number of ENTs. We are also pleased to be moving forward towards starting our RESOLVE II trial, to be enrolling patients in the PROGRESS frontal study, and to be completing the first-in-man study with NOVA.
We continue to onboard talented and motivated team members and together were working to deliver shareholder value and of course, improve the lives of chronic sinusitis patients.
Id now like to turn the call over to Jeri, to review our financial results and outlook for the rest of the year. Jeri?
Jeri Hilleman
Thanks, Lisa. As Lisa referenced, revenue grew to $9.1 million in the third quarter, an increase of 113% over the third quarter last year. In addition, we continued to grow revenue quarter-over-quarter, even during the historically slow summer months. Our reported gross margin was 72%, consistent with last quarter, and higher than the 66% reported in the third quarter of last year. This improvement is driven primarily by our increased volume and our consequent ability to spread overhead more broadly.
Our third quarter R&D expenses were $2.8 million, an increase of 33% compared with $2.1 million in the third quarter last year. This increase was primarily due to an increase in development costs for our pipeline products and increase in personnel.
Our third quarter SG&A expenses were $9.7 million, an increase of 106% compared with $4.7 million in the third quarter last year. This increase is primarily due to hiring additional sales and marketing personnel, as we increased our sales force, and support function growth.
Our balance of cash, cash equivalents, and short-term investments at the end of the third quarter was $53.6 million, benefiting from the $55.8 million we received in net IPO proceeds during the quarter. We also retired approximately $1 million of debt to eliminate the associated costs.
Looking forward, we remain on track to deliver on our previously stated revenue guidance for 2014 of 35 to $37 million and now believe we will come in at the upper-end of that range. Supporting this outlook, we expect to continue to expand usage in new and current accounts, while benefiting from the higher rate of surgical procedures that we have seen in previous end of the year periods.
We have also guided to a gross margin of 70 to 72% for 2014 and expect to deliver at the top-end of this range, as well. We continue to expect 2014 operating expenses to fall between 46 to $48 million.
Finally, we expect to have approximately 23.4 million shares outstanding in the fourth quarter. However, for calculation of 2014 GAAP EPS, we would recommend you use 11.3 million shares for the year, reflecting the lower number of common shares in the period before our IPO.
Intersect ENT
September 03, 2014 at 4:30 PM Eastern
Lisa, Ill now turn the call back to you.
Lisa Earnhardt
Thanks, Jeri. On our last call I closed by saying that in the near-term, it is all about commercial execution. We are holding to that mandate and remain focused on building our team to continue to drive growth and deliver on our plan. We are excited about the opportunity ahead to deliver meaningful growth via expanding patient and physician access to PROPEL, while delivering on the promise of our pipeline of less invasive, more cost effective products for use in the physician office. We are uniquely positioned to make this happen and look forward to keeping you posted on our progress.
Denise, lets go ahead and open the lines for questions.
QUESTIONS AND ANSWERS
Operator
Thank you. We will now begin the question and answer session. To ask a question you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick-up your handset before pressing the keys. To withdraw your question, please press star, then two.
At this time, we will pause momentarily to assemble our roster.
Our first question will come from Mike Weinstein of JP Morgan. Please go ahead.
Mr. Weinstein, your line is open.
Mike Weinstein
Can you hear me okay?
Lisa Earnhardt
We can hear you.
Mike Weinstein
Oh, good. Okay, perfect. Sorry. So, let me start with the commentary you guys made aboutso, number one, youre coming off of which is a very good third quarter so congratulations. Then your commentary about the full-year guidance coming in at the upper-end of the range. So, can we flush it out a little bit and talk about, kind of what youre seeing within the business thats giving you that confidence? What you saw over the course of the quarter because naturally we would expect to see them slow down over the course of the summer months in the third quarter and it didnt look like we saw that.
Then lastly, can you give us a little bit more on the sales force build out. You talked on the 2Q call about the acceleration in the sales force adds. Can you just give us an update on where that stands today? Thanks.
Intersect ENT
September 03, 2014 at 4:30 PM Eastern
Jeri Hilleman
Hey Mike, this is Jeri. Ill take a first pass at that. If you look back at the dynamics that weve seen, we did address that the summer months tend to be very slow. We have built on a number of new reps during the third quarter, and starting to see them begin to get comfortable in their territories.
So, were seeing very consistent productivity as people ramp up and I think that the tenure that we have in our experienced reps and some of the new reps is what gives this quarter in our continued outlook for 2014.
When you think about the size of the reps, weve grown to aboutto having 50 Territory Managers now, and expect to continue to add a few more as we go through and complete the year.
Mike Weinstein
Okay, thats great. A couple of things you said, one; I want to follow-up on the RESOLVE II commentary. So, with RESOLVE II, are you locked down on design now, so itspost the discussion with the FDA, is it definitively 300 patients? Is thatcan you just describe anything else you know about trial design and what else is needed to wrap up before you would start the study?
James Stambaugh
Sure. This is James; Ill take that. The RESOLVE II study design is actually fairly similar to RESOLVE. I mentioned that it will include 300 patients. Itll be randomized 2-to-1, so theres twice the odds of a patient being enrolled into the treatment arm versus control group.
As a reminder, the treatment group receive the implants in both ethmoid sinuses, whereas the control group undergoes a sham procedure. So the study will continue to include both patient reported and endoscopic outcome measures. We were able to simplify the study in several ways. One is that we reached agreement with the FDA not to include ocular exams which was a significant cost and visit burden for patients. So that was a positive outcome.
We also narrowed the patient population somewhat based on our experience from the RESOLVE study. So we think those two thingswe certainly gained alignment with the FDA on those and the remaining steps are we do have the protocol submitted back to the FDA, and we expect to have their concurrence early next month.
Mike Weinstein
Thats great. So the elimination of ocular exams, Id read that as a (inaudible) on the FDA getting incrementally comfortable with the idea of the steroid eluting implant. Is that a fair assumption, the FDAs just getting more comfortable with PROPEL and mini PROPEL, and now with this otherwith the idea of the implant?
James Stambaugh
Absolutely. Weve provided clinical evidence from 155 patients in the PROPEL studies and the hundred patients from the RESOLVE trial, as well as literature support for that decision.
Intersect ENT
September 03, 2014 at 4:30 PM Eastern
Mike Weinstein
James, thatll bewill that be three month follow-up? Is that decided at this point?
James Stambaugh
Yes, itll be three months follow-up.
Mike Weinstein
Great and then, maybe one last question. Ill let some others jump in guys. But is there anything you want to update us on, on reimbursement, and some of what youre working on there, such as the goal of trying to establish a new CPT code? Any progress over the course of the last couple of months?
Lisa Earnhardt
Yes, as you knowMike, this is Lisa. You know reimbursement is certainly a multi-year process and we have a number of initiatives underway, in terms of both coding and coverage. I think where we made the most progress the last couple of months since we last spoke, was around clinical evidence which is clearly a key part of gaining reimbursement.
So as James mentioned, we had three new clinical papers that were published just last month demonstrating the value of our products, specifically in the office setting. So thats, you know, definitely a great feather in our cap, and at this point, were not able to share anything further in terms of where we are with the coding initiatives, but weve got a couple of different things in the works.
Mike Weinstein
Okay, great. Ill let some others jump in. Thank you guys.
Operator
The next question will come from Tom Gunderson of Piper Jaffray. Please go ahead.
Tom Gunderson
Hi, good afternoon. So, let me follow-up on the questions that Mike was asking about RESOLVE II and just sort of go over the timing again. That would be start enrolling in early 2015, I think I heard, and late 2015 to stop enrolling? Finish enrolling and then three months follow-up meansjust looking to see if theres anything Im missing heresubmitting this to the FDA sometime in early 16. Is that right?
Lisa Earnhardt
Hey, MikeTom, this is Lisa. Youre about a year off with that timing and so given that we are enrolling 300 patients versus what we did in RESOLVE, we believe well need until the latter part of 2016 to do enrollment. Then well have the subsequent timing in terms of the follow-up and then the submission to the FDA with the NDA.
So we remain, as we have in the past, consistently saying we think its going to be about a 2018 approval. But no change there. Obviously, well look to identify ways to accelerate
Intersect ENT
September 03, 2014 at 4:30 PM Eastern
enrollment. Were pleased with the FDA relaxing their requirements from an ocular standpoint between that and the 2-to-1 randomization that works in our favor. On the flip side, as you know, we are narrowing the patient population somewhat to those patients that have more extensive disease. So were still anticipating enrollments going to take, you know, just short of a couple of years.
Tom Gunderson
Got it. Thanks. Sorry for the error, note taking 101. The territories; youre at 50 now. I had you at 50 for the end of the year. Excuse me, I think I heard Jeri say youre going to continue to add this year and I would assume, continue with your measured expansion of the sales force until you see that its less productive?
Jeri Hilleman
Thats correct Tom. What weve said previously and really its still kind of our thinking, is that well end the year somewhere between 50 and 55, and for next year well probably add, order of magnitude, 20 more Territory Managers probably fairly evenly through the course of the year.
Tom Gunderson
Okay and then you said 75%over 75% from reorders which is obviously good, but can you give us a sensedo you have a sense of same-store sales increases? Are you seeing growth there? Any change in penetration of individual practices on the number of best procedures that theyre using PROPEL with?
Lisa Earnhardt
Yes, Ill take that one Tom. Its Lisa. We dont have any specific stats to share with you today. As you know, going from Q2 to Q3 there is a surgical volume drop and so, you know, typically we say the seasonality effect to be about 15% off in terms of volumes, when you go from a very busy spring to a very slow summer, and we saw that similar trend this year.
So we dont have anywe do know from our previous analysis that weve done, that we continue to grow, and drive depth with our existing users while adding new accounts. It is something well, you know, look at reporting, you know, on a periodic basis moving forward.
Jeri Hilleman
Yes and weve seen a lot of consistency and, you know, the 75% level of our business is coming from recurring accounts. So we have a recurring base and that recurring component of overall revenues remain very constant.
Tom Gunderson
Got it and then last question. Just checking the numbers, the number of implants per procedure and ASPs. How did they change, if at all, in the quarter?
Lisa Earnhardt
They have not changed. So, 1.8 implants per procedure and ASP is right around 700. So, very consistent.
Intersect ENT
September 03, 2014 at 4:30 PM Eastern
Tom Gunderson
Great. Thats it for me. Thank you.
Jeri Hilleman
Thank you Tom.
Lisa Earnhardt
Thanks Tom.
Operator
The next question will come from Richard Newitter of Leerink Partners. Please go ahead.
Robbie (ph)
Hi, good afternoon. Thanks for taking the questions. This is actually Robbie in for Rich. Two questions; one, maybe on the gross margins. You know, better than I thought, looks like fixed costs are getting utilized nicely. Wondering whats sort of the long-term, if you could remind us of the long-term prospects of where you can see those going?
Then second, with the 75% recurring sort of same-store sales. Can you also maybe give us an outlook on how you see this mix shifting as you add new Territory Managers? Thanks.
Jeri Hilleman
Hi Robbie. This is Jeri. Good questions. As we think about gross margin over time, as we add volume, we really think that that number will improve. We have said that an overall targets probably around 80%. We havent given any timeframe with that.
But, I think as we get to where a steady-state production of spreading overhead, thats a reasonable longer-term target for us.
Lisa Earnhardt
Then on the second question with regards to our recurring base of business. I mean, as you might imagine, as we grow and that book-of-business, that sticky business if you will, continues towill continue to become a bigger portion of our overall revenue.
We do anticipate, as you know, we have a lot of headroom in terms of growth both in terms of the number of accounts that are still out there who dont yet stock PROPEL or PROPEL mini, as well as the number of physicians who are not yet using. So we do see our growth coming really from both aspects in the coming year.
Robbie
Great, thanks. Then maybe one last one, just regarding the commentary on adding 20 Territory Managers in next year. Thats a little bit below I guess what we were modeling. Is thatsort of take it as maybe the 3Q was a little bit higher, pulled forward some hires and then, sort of your resources going to be allocated into R&D as you build the clinical studies?
Intersect ENT
September 03, 2014 at 4:30 PM Eastern
Jeri Hilleman
I think this represents a sales force expansion that weve talked about consistently, you know, certainly on the last call, and then some of our other overall commentary. But, you know, targetingthe growth we have this year plus about 20 reps next year, we think is very strong growth. Is consistent with the pace of which we think we can recruit quality people, establish new territories. So we see it as actually consistent with how weve planned for the story to unfold.
Robbie
Okay, great. Thanks. Ill get back in the queue.
Operator
Our next question will come from Tao Levy of Wedbush Securities. Please go ahead.
Matt Won (ph)
Hi, good afternoon. This is actually Matt Won filling in for Tao. I just have two quick questions. First, with regards to the AAO meeting in September. Have you heard any feedback that is different from the first half of the year from physicians after the AAO meeting?
Lisa Earnhardt
Yes, I think, you know, its continued in terms of the positive feedback we have on both the product, the idea around localized drug delivery, and then the (inaudible) I would say, as James had commented on, if anything. So its just increased awareness of who we are and we certainly have transitioned over the last couple of years from being, you know, a small start-up organization, and now that we have I would say widespread awareness around our technology.
So we feel great about those interactions and you can see it is marked from where we were last fall, in 2013, to this year. There clearly was more awareness around what were doing and obviously greater utilization and adoption of our products.
Matt Won
Thanks and what have you seen as far as surgical volumes? You know in 3Q, I know you alluded towards the end of your commentary, but according to some of the larger med-tech companies that have already reported, these trends seem to have continued into the fourth quarter. Have you seen this as well?
Lisa Earnhardt
Yes. I mean the sinus surgery volumes sell off the summer just as theyve done historically. That said, we did anecdotally see a slight pick-up earlier, in particular September, and thats earlier than what it typically does. So its obviously something we continue to monitor. There have been changes in seasonality patterns with the intro of high-deductible plans at the beginning of the year.
So it is something that were monitoring and I think our experience is pretty consistent with what weve seen with some of the larger players where we did see a pick-up. We still saw a slowdown, no question about it, but we did see a little bit more pick-up more quickly than we typically do.
Intersect ENT
September 03, 2014 at 4:30 PM Eastern
Matt Won
Okay. Thank you so much.
Lisa Earnhardt
Thanks.
Jeri Hilleman
Thank you.
Operator
As a reminder, if you would like to ask a question, please press star, then one. Again, it is star one to ask a question.
Im showing no additional questions in the queue. This will conclude our question and answer session. I would like to turn the conference back over to Lisa Earnhardt for any closing remarks.
CONCLUSION
Lisa Earnhardt
Thanks, Denise and thanks everyone for joining us today. We certainly appreciate your interest and support and look forward to staying in touch with you all. Thanks so much. Have a great afternoon.
Operator
The conference has now concluded. Thank you for attending todays presentation. You may now disconnect.
Intersect ENT
September 03, 2014 at 4:30 PM Eastern
D!
M\@'Z`@,"#`(4`AT")@(O`C@"00)+`E0"70)G`G$">@*$`HX"F`*B`JP"M@+!
M`LL"U0+@`NL"]0,``PL#%@,A`RT#.`-#`T\#6@-F`W(#?@.*`Y8#H@.N`[H#
MQP/3`^`#[`/Y!`8$$P0@!"T$.P1(!%4$8P1Q!'X$C`2:!*@$M@3$!-,$X03P
M!/X%#044%]@8&!A8&)P8W!D@&
M609J!GL&C`:=!J\&P`;1!N,&]0<'!QD'*P<]!T\'80=T!X8'F0>L![\'T@?E
M!_@("P@?"#((1@A:"&X(@@B6"*H(O@C2".<(^PD0"24).@E/"60)>0F/":0)
MN@G/">4)^PH1"B<*/0I4"FH*@0J8"JX*Q0K<"O,+"PLB"SD+40MI"X`+F`NP
M"\@+X0OY#!(,*@Q##%P,=0R.#*<,P`S9#/,-#0TF#4`-6@UT#8X-J0W##=X-
M^`X3#BX.20YD#G\.FPZV#M(.[@\)#R4/00]>#WH/E@^S#\\/[!`)$"800Q!A
M$'X0FQ"Y$-<0]1$3$3$13Q%M$8P1JA')$>@2!Q(F$D429!*$$J,2PQ+C$P,3
M(Q-#$V,3@Q.D$\43Y10&%"<4211J%(L4K13.%/`5$A4T%585>!6;%;T5X!8#
M%B86219L%H\6LA;6%OH7'1=!%V47B1>N%](7]Q@;&$`891B*&*\8U1CZ&2`9
M11EK&9$9MQG=&@0:*AI1&G<:GAK%&NP;%!L[&V,;BANR&]H<`APJ'%(<>QRC
M',P<]1T>'4<=:AZ4'KX>Z1\3'SX?:1^4'[\?ZB`5($$@
M;""8(,0@\"$<(4@A=2&A( &YXS'DJ>8EYYWI&
M>J5[!'MC>\)\(7R!?.%]07VA?@%^8G["?R-_A'_E@$>`J($*@6N!S8(P@I*"
M](-7@[J$'82`A..%1X6KA@Z&