Q3 2019 Earnings Call

Good day, and welcome to the intersect and T third quarter 2019 earnings Conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist pressing the star key followed by zero. After today's presentation, there will be an opportunity to watch question.

Please note. This event is being recorded I would now like to turn the conference over to intersect and cheese CFO jury Hilleman. Please go ahead.

Thank you Andrew joining me today, it's called <unk>, President and CEO that DMT before we begin I'd like to remind you that will make forward looking statements within the meaning of federal Securities law.

Actual results and 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 Salesforce growth clinical studies approval of new product an indication that procurement reimbursement codes at coverage, which are based upon our current estimate.

And assumptions as well as other risks detailed from time to time in the reports we file with the FCC.

We disclaim any obligation or undertaking update or revise any forward looking statements contained herein I'll now turn the call over to Tom.

Looking back on the third quarter and our further progress in October I can confidently reflect the guesses or time of new beginnings.

I'd now completed my first 100 days that intersect PMT and I'm happy to report or what I view it for meaningful progress in that time.

Our financial performance in the quarter with sound and I believe consistent with the expectations we communicated in August .

We noted at that time that strengthening and refining execution would be a precursor to return to revenue growth.

Remained focused on driving sustainable growth as we enter 2020 and are taking the necessary actions now to ensure our success.

Importantly, as we focus on execution, our priorities remain aligned with delivering the commitments we communicated to you during our August earnings call.

One reemphasizing had redirecting our propel sales rep work well to adding try new boat market access partnership.

Together these efforts will open the door to growth on both businesses.

In addition, we would seem to be a sense drug coated balloon clinical study results in the quarter and all apply the findings to further development of this meaningful pipeline product.

I'll now walk you through each of these three areas, where the focus on how we see our current efforts because it shouldn't enough for 2020 I'd be arc.

First addressing propel.

This product family remains the backbone of our business, but recent growth has been impacted by bandwidth and distraction issues caused quite a disproportionate focus on so I knew that.

During our third quarter call. We committed to you that we were going to deliver on Threed specific actions to put ourselves in a position to restore growth overtime to propel.

The first wish to Reprioritize market development activities to drive growth by leveraging our clinical evidence to support broader and deeper adoption.

Second wants to strengthen the balance of our sales teams efforts to bring a meaningful greater meaningfully greater focus on propel while still supporting the thing to the launch.

And finally, we communicated our intention to pull back on larger often discounted bulk orders that could build up inventory and drive down a ASP, while simultaneously striving to work down any accumulated propel inventory in the channel.

I'm pleased to tell you that we addressed all three of these points successfully in the third quarter.

To share some specifics.

We have put considerable effort into refocusing our interactions with physicians to emphasize market development and clinical selling activities.

For propel market development means leveraging our substantial clinical evidence to one expand the number of physicians using propel to encourage usage across a wider audience of chronic sinusitis patients and three expanded use of propel in all indicated areas of the sinus cavity.

Propels proven clinical benefits extend beyond just the toughest side to side its cases.

In August we held regional meetings across the country with our field teams designed to refresh our sales approach with a back to basics message.

During these meetings marketing and sales leadership, let interactive skill building and best practice workshops that help clarify or objectives segment and prioritize our targeted physician universe and ensure mastery of our messaging.

The clear direction, what's to prioritize growing our propelled franchise by a more targeted deployment and expert tailored clinical selling in order to drive broader and deeper product adoption.

Regarding salesforce ballots Q3 was our first full quarter a partnership among our core 125 person you PMT sales team our news seven specialist so I do the account managers and our fully resourced to 12% <unk> regional reimbursement team.

This coordinated approach has helped our team to greatly improve their balance of effort.

Previously our primary sales team was drawn away from clinical selling of propel to attend to the inherent demand of introducing so I knew that in a new sites pair with a distinct reimbursement requirements of the drug versus a device.

Propel you will recall is classified as a device that is primarily used in the hospital and ambulatory surgical center, let's see.

Whereas I knew that is classified as a drug that is primarily used to be office.

We now have smaller specialty groups, the CAD with greater knowledge skill and focus address the specific clinical and reimbursement needs the called which I knew this introduction.

There's still they weren't allocation effort freeze time and resources in our primary field force to reestablish propel clinical selling to drive renewed growth in our core.

As the regional reimbursement directors and news I knew the account managers manage much of the sudden ever worked demands our sales team can prioritize driving propel and assist proportionately in trying to do that Sally.

We expect that this balance will continue to improve as we also strengthen our measurement and tracking a field efforts and just kind of just incentive compensation accordingly in the fourth quarter and into the new year.

Finally, we consciously more tightly aligned propel shipments to procedure driven customer order flow encouraging utilization of existing product on customer shelves for the limited customers, where inventory had grown beyond quarterly usage.

And our assessment at the ended the third quarter, we achieved our goal in reducing shelf inventory and we continue to believe this issue will be largely behind us by yearend.

At this point, we hope that we were conveying both a sense of purpose and the progress no I know you Alaska, it's premature to indicate what level of growth. We expect to achieve next year with propel but we'd went out with our renewed focus on market development and clinical Sally.

That are more proportionate focusing our efforts on propel at a more naturally flowing procedure driven order pipeline, we're confident that we will reestablish propel growth.

Turning to so I do though we have a number of coordinated initiatives all designed to significantly advance product adoption.

We continue to receive very strong clinical feedback from patients and physicians.

But the key determinant of physician adoption remains ease of product access and assurance of reimbursement coverage in the office setting.

As we discussed last call, we're committed to bringing in stronger partners, particularly in specialty pharmacy to support our efforts.

And I'm happy to tell you that in our execution of these key deliverables, we achieved and even exceeded the goals. We set on our last call in August specifically in the last month, we added a new physician support hub as well as a new specialty pharmacy, we ties to national payers, so focused on streamlining physician.

Access to so I knew about.

We're also supporting CMS and commercial pay or use of the newly issued J code and we are finalizing contracting on an additional specialty wholesaler.

Let me provide provide some further background on these new partners and capabilities.

Since launch we have engaged third party service provider referred to as a hub to work with physicians to facilitate patient benefits investigation.

Our first per partner address the basics of this process.

But we have put it but we have been able to strengthen our hub services with a more technology enabled hub connective Rx.

In this case, we expect technology enabled to translate to better faster more transparent benefits processing, making it easier for physicians to understand a patient coverage and authorization status.

Newpark partner was up and running October 4th we are working through the startup phase with an eye to expand these operations and services as well as the data analytics, the new hub enables as we move into 2020 .

We also added an important new specialty pharmacy partner in mid October or see any health care Orsini is a nationwide specialty pharmacy focused on providing exceptional care to patient throughout their journey.

We see their services as a very strong fit which I knew that in chronic rhinosinusitis.

We are excited about the partnership addition, as Orsini offers to critical ingredients, we have been missing today.

First well see any has established arrangements with a broad array of payers, including major national payers second Orsini processes medical benefit claims. In addition to pharmacy benefit claims at a number of payer policies require medical benefits review for say Nuva me they look at the patient medical needs.

Versus just checking that the product is on formulary.

Up to now medical benefit claims have required fulfillment via buy and bill at the specialty distributor.

Or see any capabilities open the door for physicians to recede signed new book for medical benefit patients through specialty pharmacy.

As a reminder, the advantage of specialty pharmacy fulfillment is that physicians do not need to purchase or seek reimbursement for the product as they do when buying builds required.

With only three weeks under our belt, it's clearly too early to give you a full assessment of Orsini Genpact, but early reports from the field are very encouraging.

Another element and Thats why Nuva mix, if the specific J code, Jay seven 401, which became effective October onest.

Implementation of this code remains a work in progress on the Medicare side as CMS has yet to assign a specific reference price, we're working with CMS and anticipate that this price will be posted effective January one.

On the commercial payer side, where we estimate that 90% of patients are covered commercial payers determine their own pricing and many of these payers are already starting to utilize the specific J code in their systems to ease billing foresight nuva.

The J code is a true positive for signing but adoption.

In addition to providing specific coating for so I knew the J code. Seven 401 is also with signed for reimbursement for propel in the office setting of care I'll underscore in the office setting rather than the hospital or a and C.

We are engaged with payers and physician practices to assess it the use of the J code for propel in the office will serve to broaden coverage or on the flip side potentially adversely impact the dollar value of reimbursement per propel in the office. It either scenario. This was a small element of our propel business representing roughly one.

The 2% a product revenue.

On a metrics basis, approximately 2800 patients have now been treated with so I knew that says that started commercial commercialization with an increase of approximately 600 patients in Q3.

Since launch about 850 physicians have treated patients, we'd say, new both of which about one third or 280 had successfully engaged in buy and bill ordering.

Another very positive supporting factor is that our payer coverage for signed new that continues to grow with approximately 80% of covered lives currently having access to signing up.

Looking ahead, we believe that the partner channel changes and J code efficiency will stimulate growth through the breadth and depth segment of adoption.

More physicians being able to use side to the against a broader patient population.

The hub should streamlined the workload at the physician's office, the new specialty pharmacy should increase the flows through for pharmacy, reducing the buy and bill reimbursement burden in LNG offices, and we believe that the J code once fully established should further streamline insurance processing, while increasing physician competence in.

Consistently obtaining reimbursement when our product is use.

So a lot of change and a lot of progress over the past quarter as we look to unlock side it was full potential.

With all that said our work is by no means done and at a minimum we anticipate adding an additional national specialty pharmacy by net spring as a further enhancement to our reach in addition, we intend to add additional specialty wholesaler in the near term with a particular focus on improving support for our hospital critic.

Customers with a partner channel infrastructure, we have put in place and further expansion in the coming months, we're now better placed to effectively ramp up our clinical and patient demand generation efforts.

And now we come to our third subject area ascend our investigational drug coated sinus balloon.

As disclosed a few weeks ago, we completed the assent trial and did not hit our primary endpoint, which was the superiority claim against the conventional balloon based upon an independent assessors view of sinus patency for lack of obstruction.

This endpoint proved to be challenging as the measurement and rating of patency was novel for our product and relatively unchartered territory for conventional balloons.

As five 10-K devices conventional balloons have not had as much clinical study as our pmeight and Mds govern drug delivering stats.

Importantly, when looking at the assent trial data the observed and measured performance of our drug coated balloon was at least comparable relative to the control across nearly all parameters of the study, including the primary endpoint of paid receipt.

In addition, and importantly, our drug coated balloon showed statistically significant positive differences in several important secondary endpoints of meeting to physicians that are directly attributable to the drug the met as I'm sure a.

These endpoints include statistically significant reduction in inflammation and statistically significant reduction in Powerpoint edema pellets at all measured time points, including at day 30.

We also demonstrated a statistically significant reduction and the need for oral steroids interventions through day 30.

Further there were no adverse events related to the drug component of our drug coated balloon in the assent trial and no device related serious adverse events were observed.

As a first of its kind study we communicated earlier this study might not serve as a clear pivotal study.

Our team is now accessing next steps and we'll work with FDA to determine to further studies are needed prior to submitting a PMAG.

But based upon closer examination of the trial results. We're very encouraged by the role we believe our drug coated balloon can play in our portfolio of localized drug delivery devices, we remain committed to leading innovation with the clinical evidence for the benefit of clinicians and their patients with chronic sinusitis.

To summarize all of this renewed commercial focus and prioritization on propel.

New capabilities to support physician access to say Nuva.

Clear evidence at a pathway towards adding a drug coated balloon platform to the portfolio in the future.

Now, let me turn the call over to Jerry to touch on our financials and outlook.

Thank you Tom to touch on revenue from the quarter. Our total revenue of $24.1 million included $23 million revenue from propel down 4% from the third quarter up last year, and so I never revenue of $1.1 million up 38% over Q3 of 2018 well.

Also estimate that we cleared in the range of 1.5 to 2 million of the customer inventory accumulation sold in prior quarter, it which lowered our Q3 results commensurately, we maintain our outlook for approximately flat growth over 2018.

Gross margin in the third quarter with 80% as anticipated and consistent with past quarters. Accordingly, we may we remain on track with our previous guidance of 80% to 81% for the year looking forward to next year as we noted in the last earnings call. We do expect to see some modest lowering of gross margin, resulting from the rate of.

Overhead utilization and an anticipated ramp up of spending for certain process improvement designed to develop more efficient and effective manufacturing operations.

Beyond this we do anticipate returning to our current strong gross margin levels overtime as we ramp revenue regain efficiency, an overhead utilization and work through our process improvement plan.

Regarding operating expenses, we are maintaining our outlook in the $135 million to $137 million range with increasing spending in Q4, as we incurred expenses such as onetime set up cost supporting the market access changes.

Finally, our cash position at the ended the third quarter with $89 million with a net cash usage in the quarter of approximately $4 million similar to our burn in the second quarter. We believe that we continue to have a strong cash position as we work to ramp revenue in 2020.

Let me now turn the call back to Tom.

Before we conclude our prepared remarks, let me emphasize how proud I am a b intersect empty team for their focus and commitment to execution embracing the direction, we set to strengthen both our sales effectiveness and market access further the R&D and clinical teams are responding quickly and deliberately to chart differ.

Forward course, following the assent study results.

We remain a company with a history of innovation and success and I believe we are making true progress our goals remain to restore growth to propel established broad usage upside nuva and create exciting future opportunities through our pipeline.

Delighted to have the opportunity to lead this team at such an important moment in the company's history.

Thank you for your time in your attention and we remain on the line to address your questions. Andrew would you. Please open the lines.

We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

If you were speak using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then too.

This time, we will pause momentarily to assemble our roster.

The first question comes from Robbie Marcus of JP Morgan. Please go ahead.

Thanks, and good morning, and congrats on a good quarter here.

Tom was I was hoping we could start out just get your thoughts on since you've come in what have you changed at the company both from a functional level and practice at the company and was there anything you needed to do in terms of company morale.

To turn around and what.

Impact if you had so far and plan to have.

Yes, Thanks, Ravi good questions and certainly nuanced too.

I think the most important.

To change and cultural change is really.

Focus on execution rigor, how do we get more deliberate more measured in how we go about tackling the problems at hand, and the opportunities that we have.

It's really about being very intentional and what we're doing.

Manifests itself in.

Chartering key programs internally, adding new metrics and how we measure salesforce performance in the field, but beyond that that more deliberate more intentional about how we execute.

I think thats a shift that in many ways is being very positively received as people have a greater sense of clarity on the direction of the company.

And maybe shifting over to some new for you now have the J code in place.

What are some of the steps that investors should be focused on as you re launch the product here now with reimbursement in out how much. If this is theres awareness out there should be and easy launch how much of that is you need to reeducate, everyone on the benefits of J code and just helps set expectations.

For how we should think about the revenue acceleration here going forward. Thanks.

Thanks, Robbie I think to set expectation I think it's going to be a slower built we have to be cognizant of the fact that were really changing behavior in the and T. office.

Initiating drug therapy in the office setting.

Is new to the anti community, while in oncology and ophthalmology, that's been a practice that's been in place for some time, it's a new practice too.

Discern between pharmacy benefit medical benefit buy and Bill J code assignment and we've got a train the capability not only of the physicians desire to use a clinically but at the office space staff or how to bill for most appropriately we think we put the tools in place but with.

Anything it takes time for people to adopt them and use them.

I think thats true of the J code, which will simplify but also really taking advantage of the benefits of the hub and of the pharmacies.

Specialty pharmacy capability that we've built.

Thanks, a lot.

The next question comes from Richard Newitter of SVB Leerink. Please go ahead.

Hi, Thanks for taking my questions.

I have a couple of here just I know I know that the.

Propel business it was impacted by some inventory work down.

In the quarter I would just hoping you could update us on how we should think about that working its way through into the fourth quarter, if anything and beyond and on that same topic I know that.

Part of the Reacceleration thesis on propel our why you have confidence there is you know better execution. It does that mean that until you start to just see some of the reimbursement.

Benefits, which should naturally help this I Nuva lodge does that mean that you're just going to put more focused every store as much focus as you cannot propel for the time being rather than trying to.

Have been kind of do two things I want with a lower productivity angle on the if I knew that until the reimbursements in place I guess I'm trying to I'm trying to get a sense basically for that.

How we should think how quickly that propelled business can truly reaccelerate.

Into the end of 19 into 2020. Thanks.

Sure. So two parts to your question first relative to inventory.

As we just stated we took about a million in a half to 2 million of in inventory out of the channel that had been built up I.

I believe on our last call. We said we were in the range of two to 3 million. Overall, so we still have a bit of work to do in the fourth quarter, but as I noted I think that will be largely behind us as we close out the year, so that should not be a headwind as we ended and head into 2020.

Relative to balance between propel focus and so I knew the.

Clearly our emphasis is to free resource to spend more time back on propel to provide expertise that can address questions of reimbursement.

In the site Nuva office environment, not look to our clinical selling team to be burdened by that and Thats why weve built out.

Our regional reimbursement directors and have signed new but experts as well, but clearly both products in the end are the key to driving success. So we don't want to be.

Too much to the extent that the pendulum swings the other way and that's really where better metric in better measurement and better segmentation of our physician universe and called on audience will enable us to get that balance and that's what we're striving for is a better balance I think you'll see us steady rides.

In both businesses. Neither one is going to tear it up overnight, but what are our goal is to build predictable steady growth on both.

Got it and then maybe just one last one Tom you were all thinking about 2020, I appreciate you're probably going to be reluctant to give too much color.

On the specifics there but.

As we as we think of some of these positive reimbursement developments unfolding.

Realistically, what when do you think.

We can start to see them actually impact and move the needle first I knew and it's just something we should be thinking of or maybe you could just give us a sense as to when you think we should start thinking about sequential improvement insights I knew the sales is that three quarters away two quarters away.

I think any color there just to help us think of the ramp. So we don't get ahead of ourselves. Thanks.

Yep.

I think the way to think about it is look for steady progress, it's not going to turn overnight on either business. In one case, we have propel which is a somewhat more mature business that we think we can get back to steady predictable growth by better execution, better targeting better focus and that really was the theme of our back to basics message.

With so I knew that we're still training the market.

To use new tools in order to provide patients access to the product new tools of the hub the specialty pharmacy, the J code.

And that anytime you're teaching somebody new behaviors. It takes time to ramp we feel good about it I think you should see steady progress, but don't expect it to suddenly flip.

In the next quarter or hit an immediate timeframe.

Steady progress steady growth predictable is what you should look for from us.

Thank you.

The next question comes from Brian Weinstein of William Blair. Please go ahead.

Hey, good morning, guys. Thanks for taking my question.

Maybe we can start on your team.

There are any additions that you need to make to your executive team.

And then as it relates to other team members have you had any regrettable departures on the Salesforce is you're kind of coming in and in shaking. The trees are little bit can you just give us an update on where all that stands.

Sure. Thanks, Brian .

Most obvious one is.

To bring in a new CFO .

And that it's a process that we've been conducting through the fall and we would expect to have an announcement to you in relatively short order Jerry has been gracious and bringing up the learning curve and supporting me through these early months and we're committed to honoring our.

Our commitment to her to allow her to move on and the early part of the new year.

So CFO is clearly the first order business and we feel that we've got the the right groundwork there to be able to make an announcement relatively soon.

In terms of other capabilities, absolutely continuing to build on.

Analytics as well as program management, it's back to the fundamentals of execution internally and how it is that we measure the performance of the business in order to be more deliberate and more intentional and while that's a little bit under the radar relative to kind of the bigger titles. One might think it is deeply in the culture that I wish to create.

Around a culture of execution and delivery on our commitments and to your question about the Salesforce, we have not had any abnormal sale sales turnover, even though we have been kind of dialing up the demands a bit and I'm grateful for the sales leadership team that has embraced the.

Executional performance that I'm looking for and their commitment.

No changes there are no unusual turnover, but again, we're going to keep striving for strong performance and look for the team to respond.

Great. Thank you for that and then is the follow up you continue to reference this idea of better metrics.

Putting in analytics, but can you maybe a little bit more specific about what youre looking at specifically when you're evaluating field reps. Other then of course revenue to ensure that the focus is being appropriately put on on what a visit you guys want them to do.

Yes, so really it comes back to a much more granular level at segmentation and understanding our position physician universe, what is their prescribing behavior, how do they how would we segment them and understanding their use in different types of procedures, and where there was opportunity to appropriately expand.

And ill utilization up one of the things we hear a lot is.

Use propelled for my most difficult patients. The reality is the use of propel is clinically proven and a much broader audience of chronic sinusitis suffers so by metric in measuring it's really understanding at a granular level. How is an individual physician using our product and how are we changing that behavior approach.

Really within our indications in order to grow the business, it's about being detailed and it's about the follow through that comes with it.

And we need to add I T infrastructure still at this point to be able to do that.

This is something that additional spending is anticipated for.

No not at the material level I don't think we'll need to expand infrastructure I think we will need to take better advantage of the.

CRM systems that we haven't place already and better populate them with data in third party data and then use that and train our teams to be able to be more analytically rigorous and data driven but a new additions I don't see.

Thank you guys.

Thanks for.

The next question comes from Matthew O'brien of Piper Jaffray. Please go ahead.

Good morning, Thanks for taking the questions.

To follow up on Rich's question on the propel side of things I think you said you took a million and a half to 2 million out of inventory in Q3.

Is that all propel revenue first of all are all propel product first of all of that secondly, if you backed that out did your procedure growth in the quarter was it something in that 3% to 4% Randy you actually would have grown.

A little bit here in Q3 has not been for that inventory reduction.

Yes, so first relative to the 1.5 to two is it all propel yes. It is Tom and yes, I mean, if you think about the.

The fact that we took down inventory demand would have been paid.

Procedure demand would have been higher and revenue would have been higher had we not pull down that amount of inventory, but we were clear in our direction to the to the field sales organization and candidly our commitment to you.

That we were going to bring that back down and get to a much more procedure driven order flow a much more predictable way of managing the business and understanding where we where we stand. So we feel good about what we've done yes took a little bit of a bite out of the revenue line, but that was the right move to do and I would do it again.

Okay. That's the that's great and so that was all done at the same time, where you are changing up the way that you are selling into the field in terms of no more bulk discounting and then also.

Retraining or Reeducating your salesforce on how to go after this market. So is it fair to say there was probably some additional disruption in Q3.

To the propel business based on some of those activities as well.

Maybe a little bit I mean, we had folks out of the field in order to have our our regional meetings in the month of August .

Yes, we are we're pressing some demands on folks, but I don't think anything on do.

Nothing that would really fall significantly out of the norm of how you.

Bring the team up to speed throughout the course of the year in terms of direction and training. So I don't think it was unusually disruptive I wouldn't I wouldn't take credit for that in terms of another headwind. We may have had been encountering.

Okay I'm, just I think you could see what I'm trying to triangulate and not here is that the base business. The propel business actually would have grown probably something more like mid single digits.

Without all these these activities to do in during the quarter. So.

Again, not wanting to get into the 2020 too much but just a general sense of what the base business is doing despite.

Some of the early efforts that you have I'd read refocusing the organization.

Yes.

And I appreciate what you're doing and I'll confess that I do the same back of the envelope calculation as myself, but I think the important thing is let's get the let's get the engine running well again in terms of a real clarity of intention right messaging in the field and we should be able to bring back.

A predictable level of growth again propel is not.

Okay, not likely to go back to the 20, 20% grower, but can we make it as a predictable steady piece of the business. While so I know that then begins to take off that's what I'm playing for.

Got it and then just one more real quick one you've got the spec pharma.

Providers in place now how critical are the new the is the new spec pharma distributor at wholesaler to really accelerated growth.

First the new but next year or do you kind of habits, you need right now to do.

Equally better in 2020 with what I think everybody on this call it would say as a good product.

Yes.

I think we I think we're in good shape with the addition of our new specialty pharmacy.

But we want to make it better so we're looking to potentially bring on another in addition, but I think we have materially better capability in our new specialty pharmacy, particularly because they can process, both the medical benefit and the pharmacy benefit that's a key AD and NR equation.

Very helpful. Thanks, so much.

The next question comes from Chris Pasquale of Guggenheim. Please go ahead.

Yeah. Thanks.

Just wanted to push a little bit on this nuva trajectory from here I mean, it sounds like you've checked all the boxes that were previously mentioned in terms of the things that needed to happen to resolve the market access challenges in holding that product that you've got the J code you've upgrade the hub you have the new specialty pharma partner on boards. So what's left and why shouldn't think start to.

Pickup this quarter.

I think the key that's left is teaching offices in practice groups how to use all the tools that we've now put in place.

Yeah, we're changing behavior in the office environment. The good news is we know that physicians and patients alike.

Like the product to see the benefit of the product, but weve change behavior in terms of how the office staff has to manage reimbursement the burden that comes with initiating drug therapy in the empty office. These are all things that can be overcome and we've seen it overcome and other categories I mentioned oncology and.

The molecules that are much more used to.

That's kind of.

You are initiation of therapy in the office, it's really about building a the the practice in the experience now that the tools are lined up and we'll get that it's just again I don't want to set an expectation that it's going to happen overnight.

Okay.

And then you mentioned on the balloon Sinuplasty side. The competitors. There are five 10-K products. So my impression has been that the randomized superiority trial that you guys were going for was really something you're pursuing to enhance the commercial potential the product rather than a specific regulatory requirement.

Is that the right way to characterize and how do you think about now that you have maybe more of a mixed trial.

The tradeoff between just getting that products approved and going back to the clinic to try and generate a stronger claim relative to the competitors that are out there.

It's a really good question Chris.

You have that you hit the nail and ahead.

Hi, good.

Credit for the courage and the team that that was here that preceded me and going after the superiority claim.

In the area and attribute for which conventional balloons are quite good they went for the home run.

Interestingly, we got directional superiority, but not statistically significant superiority in that category in that claim, but you're 100% correct. There is a very viable product that performs well in terms of reducing inflammation, reducing polyps and reducing oral steroids use while still deliver.

During all the benefits of a balloon that.

That is a very very viable commercial product and one that we believe can capture share in an established market.

Unlike my commentary on site Nuva, where were building a market in the case of the of the drug coated balloon we have the potential to perform in in a market. That's already there with incremental beneficial claims and that's that's worth playing for.

Thanks.

The next question comes from Rafi Misra of Berenberg capital markets. Please go ahead.

Hi, Thank you for taking the question I appreciate the structured comments on the call.

My question was on some new the summer checks and kind of the competitive environment around it we were at Apio and.

There is it seems to be a very large gathering of doctors around devices or drugs that can treat nasal polyps and I'm just wondering.

With reimbursement kind of being established in distribution being established in those accounts that are actually using this device regularly how how is it being used again say some of the pharmaceutics pharmaceutical options that are out there either from a steroid basis or an injectable basis, just curious in terms of how.

Fitting into that doctors armamentarium.

Yeah, it's still early days in terms of the level of usage to be able to say what kind of definitive no pattern of years within the armamentarium I think that thing that I would highlight relative to the other alternatives that we bring in our unique combination of drug and device is that.

We bring the physical benefit of the radial expansion of the stent itself of the of this I knew that stat. We also bring the localized drug delivery the drug that you need in the location it should be and we also bring a level of kind of enforced compliance of that corticosteroid because it.

And implantable, you're going to get the fold, yes, 30 days of coverage against that that puts us in a unique position to provide real benefit where other offerings don't have that same combination of physical radial expansion localized drug delivery delivery and imposed comply.

Yes.

Great and then just on propel you know.

I appreciate that you're not going to get ahead of your skis for 2020, but can you help us calibrate maybe in terms of what you see the market growth. There is and and is this longer term do you still view propel as an above market growth device. Thanks.

Yes so.

Markets market growth is it's tough to come by because in terms of are we talking about the total number of fast surgeries are we talking about site of care for those surgeries.

I guess the simple back of the envelope that I would offer that that certainly is very encouraging to me is of the roughly 400000 fast surgeries for which propel is eligible and if you assume to to propel for each of them you come up with a total available market in excess of six.

Hundred million dollars and we're at 100.

So to me that suggest there's ample room to grow into it. It will take time. It will take continued effort on our part I'm not here to say that the endgame is that that we are a 600 million dollar propel brand, but I certainly see a lot of upside where more disciplined rigorous efforts in our execution against.

Targeted audiences should be able to deliver us a fairly predictable and steady level of growth.

Great. Thanks, and if I can just ask one more on the pipeline just from R&D perspective, the that appreciate the comments on the balloon just anything you can kind of talk to us about what else should we expect out of this company. Historically you guys had been until the balloon it at least very good at hitting your clinical targets just curious.

In terms of where you see opportunities for growth from an organic perspective, thanks a lot.

Yes, well first order of businesses to complete the work we have wonderful.

No doubt about that and that obviously, it's going to be informed.

By our upcoming conversations with FDA Lithia send data in hand.

Beyond that I'm not going to comment in terms of pipeline other than to say we are working on other things and we look forward to continuing to bring a steady cadence of innovation and I would just say for me. The definition of innovation is both product and clinical claims are we bring new news to the marketplace that enhance.

It is our physician communities ability to understand how and when and where to use our products.

But I am committed to bring that steady cadence of innovation first order business is the balloon.

It was or a follow up.

Mr Me through I know thank you. Thank you. The next question comes from Kyle Rose of Canaccord Genuity. Please go ahead.

Great. Thank you very much for taking the call. So.

Tom I, just wanted to kind of thing from a from a.

You bet in a deeper 100 days.

Obviously made a lot of structural changes I guess when you take a step back and think about turning around the organization in putting it on the on the path towards growth moving forward. How do you how do you view.

In broad strokes your timeline here I mean is this something that we should think about.

2020, it's probably more of a transition year setting up or growth year in 2021 or kinda turnaround actually happened.

In 2020, and then I'll ask my second question just quickly years, you made a lot of investments in the team and how you're talking about the analytical rigor and things of that or help us understand have we seen those investments already or will you need to continue to invest in 2020 and beyond.

Got it.

So your first question really is when can we expect to see kind of quote unquote. The turnaround I don't think theres going to be a momentous occasion. When this is that the moment of the turnaround what I'd endeavoring to do is show steady progress against a a growth and I and accelerating growth.

Over time, and it will show signs clearly in 2020.

More towards the latter part in the front part of the year because it will build with time as we get better and build new rig or a new muscle and how we go about it I don't think theres going to be a pivot moment.

That you would point to in say on July 30, Onest that was the beginning of the turnaround I think it's going to be slow and steady and that's what we're playing for in terms of investment I don't I don't expect any precipitated precipitous change in our investment approach.

We have the dollars necessary to do the things that we need.

And we will make the changes necessary as we go so I again, I'm really seeking to convey a story of steady progress rather than.

Big jokes and big changes.

Great and then just that.

Two more questions from me one you have you made any changes the salesforce compensation and just kind of incentives and how we should think about that structure in 2020.

And then you've also talked about changing some of the selling dynamics focusing more on focusing away from large orders are there would have been price compression how should we think about the pricing dynamic in 2020, 'cause it feels like if you're starting to drive more utilization in just the more focused selling effort, we should be positive unit mix, but then if you're also showing lets discuss.

Finally, we should be positive pricing mix as well my thinking about that appropriately.

Yeah, I think you are so let me take the pricing first yeah, we've been pretty steady in holding price. We had some some bulking that that adversely impacted ASP, but we've been able to sustain our ASP.

Very minimal effect and I think.

You should continue to see modest increases in a SP overtime.

Nothing dramatic, but not not the pressure downwards that you might see in other segments.

So I feel good that we're in a in a strong position in that regard.

Your other question was.

Salesforce compensation and kind, how you're thinking about what else out there right. Thank you saw that yeah. We've made some minor tweaks within this year not major we don't want to change the whole comp plan army year, but sales leadership team and I are engaged right now in determining.

Whether or not and a more substantial change is appropriate for 2020, and it's it's premature to say that because we also haven't announced that to our field sales organization, but it would be consistent with.

Our priorities that we're placing on the products that we have upping our game on propel us continuing to make sure. The appropriate incentives are there for us I knew the recognizing that we've got specialty teams that are particularly focused on so I knew the and therefore their comp structure should reflect their priorities.

That's the direction we're headed.

Great. Thank you for taking the question.

Again, if you have a question. Please press Star then one.

This concludes our question and answer session I would like to turn the conference back over to Tom West for any closing remarks.

[noise] Yep, thanks, everyone for joining us today really we greatly appreciate your interest and support and look forward to staying in touch and I know will be speaking with a number of view in the coming moments coming days again grateful for your.

Your interest in your attention. Thank you.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.