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Intersect ENT's (XENT) Sell-Off on Track Amid COVID Woes

Zacks Equity Research
·4-min read

Intersect ENT, Inc.’s XENT long-term prospects, driven by the favorable chronic sinusitis market, encourage us. However, the business has been severely hit by low ENT office visits amid COVID-19.

The stock carries a Zacks Rank #3 (Hold) at present.

Over the past six months, shares of Intersect ENT have outperformed the industry it belongs to. The stock has risen 44.9% compared with the 12.1% rally of the industry.

Amid the company’s ongoing business slump, significant investor optimism currently surrounds Intersect ENT’s agreement to be acquired by MedTech stalwart Medtronic MDT for $1.10 billion.

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The deal is expected to close toward the end of Medtronic's 2021-22 fiscal year (ending April 2022). Medtronic's offer price represents more than a 15% premium to Intersect ENT’s closing price on Aug 5, 2021 (the previous day of the announcement).

Through the pandemic months of 2020, Intersect ENT’s business suffered a huge revenue decline as a result of hospitals suspending elective surgical procedures and significantly reducing ENT office visits. Further, the company was worried about the significant resurgence in COVID-19 cases that began in mid-December and continued into the first quarter of 2021 and adversely impacted ENT procedures through this period. In such a situation, consolidation with an industry behemoth like Medtronic seems a strategically aligned survival plan.

Intersect ENT, Inc. Price

Intersect ENT, Inc. Price
Intersect ENT, Inc. Price

Intersect ENT, Inc. price | Intersect ENT, Inc. Quote

The acquisition of Intersect ENT, which provides clinically-proven PROPEL and SINUVA sinus implants that deliver an anti-inflammatory steroid to help in healing, will enable Medtronic to expand its portfolio of products used in ear, nose, and throat procedures. The acquisition will further allow the consolidated company to leverage complementary product lines and customer base that will advance Medtronic's efforts to have a positive impact on patients who suffer from chronic rhinosinusitis (CRS).

On Sep 22, Intersect EMT received a second request from the Federal Trade Commission for additional materials regarding the Medtronic transaction. On Oct 8, the company’s shareholders voted to approve the transaction. Based on this information, Intersect ENT believes the acquisition is on track to close toward the end of Medtronic’s current fiscal year.

Meanwhile, Intersect ENT’s third-quarter 2021 revenues improved year over year on increased PROPEL revenues from a significant recovery in demand for elective surgical procedures. In October, the company also announced the first implants of PROPEL Contour in patients with CRS following frontal sinus surgery in Europe. Earlier, the company also noted growing SINUVA revenues from improved access and coverage and a shift in sinus procedures toward ambulatory surgery centers and the office setting of care.

On the flip side, Intersect ENT incurred a wider-than-expected adjusted net loss in the third quarter of 2021. The figure was also wider than the year-ago adjusted loss per share. Reported third-quarter revenues too missed the Zacks Consensus Estimate by a wide margin. Top-line growth from the PROPEL family of products and SINUVA continues to be challenged by seasonal variations in the volume of sinus surgery procedures. The increased expenses are putting pressure on the bottom line. Selling, general and administrative expenses rose 35.8% in the quarter under review. Research and development expenses were up 47.6% year over year.

Further, regulatory complications surrounding the impending sale of the company to Medtronic are concerning too.

Stocks Worth a Look

Two better-ranked stocks from the broader medical space are Chemed Corporation CHE and Medpace Holdings, Inc. MEDP.

Chemed has a long-term earnings growth rate of 7.7%. The company surpassed earnings estimates in three of the trailing four quarters and missed in one, delivering a surprise of 5.6%, on average. Chemed currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Chemed has outperformed its industry over the past year. CHE has gained 3.7% against a 35.6% industry decline.

Medpace reported third-quarter 2021 adjusted EPS of $1.29, surpassing the Zacks Consensus Estimate by 20.6%. Revenues of $295.57 million beat the Zacks Consensus Estimate by 1.2%. Medpace currently carries a Zacks Rank #1.

Medpace has an estimated long-term growth rate of 16.4%. MEDP surpassed estimates in the trailing four quarters, the average surprise being 11.9%.


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Medtronic PLC (MDT) : Free Stock Analysis Report

Chemed Corporation (CHE) : Free Stock Analysis Report

Intersect ENT, Inc. (XENT) : Free Stock Analysis Report

Medpace Holdings, Inc. (MEDP) : Free Stock Analysis Report

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Zacks Investment Research