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Summary

  • Commercial stage drug-device company committed to improving the quality of life for patients with ear, nose and throat conditions.
  • Has developed a drug-eluting bioabsorbable implant technology that enables targeted and sustained release of therapeutic agents.
  • 2013 revenue was $18 million with an $18 million loss. Q1 '14 revenue compared to Q1 '13 was up 173% to $7.5 million with a $4.4 million loss.

Based in Menlo Park, CA, Intersect ENT (Pending:XENT) scheduled a $60 million IPO on the Nasdaq with a market capitalization of $270 million at a price range midpoint of $12 for Thursday, July 24, 2014.

The full IPO calendar is available at IPOpremium.

SEC Documents

Manager, Co-Managers: J.P. Morgan, Piper Jaffray

Joint Managers: Leerink Partners, Wedbush PacGrow Life Sciences

End of lockup (180 days): Tuesday, January 20, 2015

End of 25-day quiet period: Monday, August 18, 2014

Summary

XENT is a commercial stage drug-device company committed to improving the quality of life for patients with ear, nose and throat conditions.

XENT has developed a drug-eluting bioabsorbable implant technology that enables targeted and sustained release of therapeutic agents.

2013 revenue was $18 million with an $18 million loss.

Q1 '14 revenue compared to Q1 '13 was up 173% to $7.5 million with a $4.4 million loss.

Valuation

Glossary

Valuation Ratios

Mrkt Cap ($mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

Annnualizing Q1 '14

Intersect ENT

$270

9.0

-15.3

4.3

4.3

22%

Conclusion

The rating on XENT is neutral.

To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above.

Business

XENT is a commercial stage drug-device company committed to improving the quality of life for patients with ear, nose and throat conditions.

XENT has developed a drug-eluting bioabsorbable implant technology that enables targeted and sustained release of therapeutic agents.

This targeted drug delivery technology is designed to allow ear, nose and throat, or ENT, physicians to improve patient care.

Commercial products

The two commercial products, PROPEL and PROPEL mini, are designed to improve the outcomes of sinus surgery by reducing postoperative inflammation and scarring, both from the underlying condition as well as the surgery.

PROPEL and PROPEL mini, are the first and only drug-eluting implants approved by the U.S. Food and Drug Administration, or FDA, for use in patients with chronic sinusitis.

Inserted by a physician during ethmoid sinus surgery, the self-expanding implants are designed to conform to and hold open the surgically enlarged sinus, while gradually releasing an anti-inflammatory steroid over a period of 30 days, before being fully absorbed into the body.

Use of XENT's PROPEL implants is clinically proven to improve surgical outcomes by maintaining the open pathways created in surgery and reducing the need for oral steroids and additional surgical procedures.

In addition, XENT is using its drug-eluting bioabsorbable implant technology to develop new, less-invasive and more cost-effective treatment options for the management of chronic sinusitis in the physician office setting to provide benefits for patients, physicians and payors. Any new products XENT develops, or changes that it makes in the therapeutic agent used in PROPEL or PROPEL mini, will require FDA approval prior to commercialization in the United States.

Marketing and sales
XENT's direct sales force engages in sales efforts and promotional activities focused on ENT physicians.

XENT increased the number of employees in our sales, marketing and reimbursement organizations from 21 as of December 31, 2012, to 62 as of March 31, 2014, and expects to continue to expand this infrastructure to further penetrate the chronic sinusitis market.

As of March 31, 2014, over 1,000 ENT physicians in the United States have been trained and have incorporated XENT's steroid-eluting implants into their practice.

Although sales and marketing efforts are directed at ENT physicians because they are the primary users of the technology, XENT considers the hospitals and ambulatory surgery centers where the procedure is performed to be the customers, as they typically are responsible for making the decisions to purchase products.

No single customer accounted for more than 6% of revenue during 2012, 2013, and 2014

Market size
Chronic sinusitis is one of the most prevalent chronic diseases in the United States and significantly impacts the quality of life of patients.

According to the Centers for Disease Control and Prevention, or CDC, approximately 12% of the U.S. adult population, or 29 million people, are affected by chronic sinusitis, making it more prevalent than heart disease and asthma.

Chronic sinusitis is an inflammatory condition in which the sinus lining becomes swollen and inflamed, leading to significant patient morbidity, including difficulty breathing, chronic headaches, recurrent infections, bodily pain, and loss of sense of smell and taste.

These persistent symptoms can severely impact a patient's day-to-day well-being, resulting in frequent doctor visits and lost work productivity and can lead to chronic fatigue and depression.

Chronic sinusitis is managed by a combination of medical management and surgical intervention. The first line of therapy is medical management involving antibiotics, anti-inflammatory steroids and decongestants.

Patients whose symptoms persist, despite medical management, are recommended to undergo functional endoscopic sinus surgery, or FESS. FESS is performed in the operating room to open the blocked sinus pathways by removing inflamed tissue and bone using surgical tools.

Approximately 540,000 patients underwent sinus surgery for chronic sinusitis in 2013 in the United States. Although sinus surgery can be effective, a majority of patients experience recurrent symptoms which commonly necessitate additional treatment with medications and surgery.

XENT's two commercial products, PROPEL and PROPEL mini, are designed to improve the outcomes of sinus surgery by reducing postoperative inflammation and scarring from the underlying condition as well as the surgery.

PROPEL and PROPEL mini were clinically proven in a meta-analysis of prospective, multicenter, randomized, controlled, double-blind clinical studies to improve surgical outcomes, including a 35% reduction in the need for postoperative oral steroid and surgical intervention.

Growth Plan

Dividend Policy

No dividends are planned.

Intellectual Property

As of March 31, 2014, XENT owned 41 issued patents globally, of which 24 were issued U.S. patents.

As of March 31, 2014, XENT owned 41 patent applications pending globally, of which 13 were patent applications pending in the United States.

Subject to payment of required maintenance fees, annuities and other charges, XENT's issued U.S. patents have expiration dates between 2017 and 2030, with one of its issued U.S. patents expiring before 2020, 13 expiring between 2021 and 2025, and the remaining 10 expiring after 2025.

As of March 31, 2014, XENT's trademark portfolio contained 20 trademark registrations, four of which were U.S. trademark registrations, as well as three pending foreign trademark applications.

Competition

Because of the size of the market opportunity for the treatment of chronic sinusitis, potential competitors have historically dedicated and will continue to dedicate significant resources to aggressively promote their products or develop new products.

New product developments that could compete with XENT more effectively are possible because of the prevalence of chronic sinusitis and the extensive research efforts and technological progress that exist within the market.

Large medical device companies with ENT divisions, such as Medtronic, also have capability in drug-eluting stents.

Though XENT is not aware of any such products to date, these or other companies may develop drug-eluting products that could compete with its products.

5% stockholders

U.S. Venture Partners IX, L.P. 22.7%

KPCB Holdings, Inc., as nominee 20.3%

PTV Sciences II, L.P. 14.7%

Entities affiliated with Norwest Venture Partners 12.9%

Medtronic, Inc. 6.8%

Rick D. Anderson 14.7%

Casper L. de Clercq 12.8%

Mark Fletcher 6.8%

Dana G. Mead, Jr. 20.3%

Casey M. Tansey 22.7%

Lisa D. Earnhardt 5.6%

Use of proceeds

XENT intends to use the $53 million in proceeds from its IPO as follows:

XENT expects to use approximately $7.0 million of the net proceeds from this offering to fund the Phase 3 clinical trial of its Steroid-Eluting Implant for Refactory Disease in Office and pre-clinical development its Steroid-Eluting Implant for Primary Disease Management in Office products in development

and approximately $3.3 million for research and development expenses related to these products. XENT expects to use the remainder of the net proceeds from this offering for sales, marketing, working capital and general corporate purposes.

XENT may also use a portion of its net proceeds to acquire and invest in complementary products, technologies or businesses; however, XENT currently has no agreements or commitments to complete any such transaction.

Disclaimer: This XENT IPO report is based on a reading and analysis of XENT's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Source: IPO Preview: Intersect ENT