The company said that the Centers for Medicare & Medicaid Services released its 2017 Hospital Outpatient Final Rule, which included reimbursement rates for sinus surgery at a fixed amount 40-50% below the current average amount. The rule is set to go into effect January 1.
“We continue to assess the impact of the Medicare ruling, which we believe has the potential to impact a limited segment of our business, approximately 8%. Based on our experience with private payors and their reaction to Medicare changes, we also believe that this ruling will have little to no near-term impact on our non-Medicare business. We remain focused on leveraging our compelling pipeline of products and the strength and tenure of our sales force to continue to deliver high value options for chronic sinusitis patients,” prez & CEO Lisa Earnhardt said in a press release.
The Menlo Park, Calif.-based company posted losses of $6.2 million, or 22¢ per share, on sales of $18.5 million for the 3 months ended September 30. That equates to a 36.1% reduction in losses while sales grew 29.8% compared with the same period last year.
Losses per share were lower than the consensus on Wall Street, which expected to see -27¢ from the company. Intersect ENT also topped expectations for revenue, which was expected to be at $17.8 million.
“We are pleased to see the Propel products continuing to gain adoption, including expanded usage of Propel Mini following the recently approved frontal indication. In addition to our commercial products, we advanced our pipeline considerably this quarter with the submission of the PMA-s for Propel Contour and the successful conclusion of the Resolve II trial,” CEO Earnhardt said in a prepared statement.
After posting results yesterday, shares dropped from $12.20 to close at $8.35, down 31.5%. Today, XENT shares are trading up approximately 15%, at $9.60 as of 3:02 p.m. EDT.
The company reiterated earlier guidance for the full year, expecting to see revenue of $78 million.
Leerink Partner analyst Richard Newitter said the next year would be a “wildcard” for Intersect ENT due to the CMS changes.
“As a reminder, the majority of procedures in which Propel is used are covered through private insurance. There is a risk that private payors eventually adopt the CMS payment scheme, but mgmt does not think this will be the case,” Newitter wrote, adding that commercial payors often have multi-year contracts with providers that are unlikely to change.
In addition, 20-25% of the company’s business with its Propel device is performed in ambulatory surgery centers, Newitter said, for which the CMS rule will not apply.