Q1 2021 Intersect Ent Inc Earnings Call
Good morning, and welcome to intersect first I mean, Intelsat E N T first quarter 2021 earnings conference call all participants will be in listen only mode should you need assistance, placing teleconference.
By pressing the star key followed by zero.
After today's presentation there'll be an opportunity to ask questions. Please note that this event is being recorded I would now like to turn the conference over to Randy Meier Executive Vice President and Chief Financial Officer. Please go ahead.
Thank you Kate and welcome everyone and thank you for participating in today's call.
Joining me today is Tom West President and CEO intersect Ent's.
Before we begin I would like to remind you that we will be making forward looking statements within the meaning of the federal Securities law.
Actual results and timing of events could differ material materially from those anticipated in such forward looking statements as a result of those risks and uncertainties, which include without limitation our guidance for financial performance.
Those force growth clinical studies approval of new products, and indications and procurement of reimbursement codes and coverage, which are based upon our current estimates and assumptions as well as other risks detailed from time to time in the reports, which we file with the SEC we.
We disclaim any obligation or undertaking update or revise any forward looking statements contained herein.
I will turn the call over to Tom.
Thanks, Randy and thank you all for joining the intersect Ent's first quarter 2021 earnings call today.
As a company intersect ent's seeks to more fully satisfy the significant unmet needs that exist across the continuum of care and chronic rhinosinusitis, a large and growing market that is now more than $20 billion globally.
Fact, chronic rhinosinusitis is among the top 10, most costly conditions for U S employers and as a condition from which one in eight U S. Adults suffers.
Our focus and motivation as a company centered on the opportunity to meaningfully and cost effectively address the significant clinical needs of chronic rhinosinusitis sufferers and their physicians, regardless of the setting of care hospital or ambulatory surgical center or office.
Nick.
Our first quarter results reflect our continued penetration into this market and the progress we are making in executing on our strategy. This despite.
The need in the most recent quarter to continue to navigate through lingering COVID-19 related challenges.
First quarter intersect Ent's revenue was $24 3 million highlighted by the continued strength and resilience of our core propel franchise and the growing revenue momentum and our sign new book business.
In addition, we were pleased with the early market acceptance and sales performance of our bench or balloon and cube navigation products as we progress as planned towards the exciting formal national launch of our fee has gone on acquired balloon and navigation businesses in July of this year.
There were several further important Q1 developments to highlight as well.
This would include first implementation of final CMS coding for both propel and so on DUBA second positive initial feedback from our OEM, one longitudinal 18 month propel health economic real World evidence analysis and third the initiation of a prospective.
Clinical trial, the expand trial to establish the benefits of combined use of our propel contour localized drug delivery sinus implant following balloon dilation.
Let's break down the components of our business.
As we stated on our fourth quarter call. Our core propel hospital business was adversely impacted by the slowdown of elective sinus procedures due to the increase in COVID-19 cases at the end of last year and into this year.
Relative to the first quarter of 2021. This impact was felt especially in January and early February.
But it showed clear signs of improvement as the quarter closed we.
We expect to sign at surgical procedures will continue to rebound, especially in the hardest hit hospital setting with procedure rates normalizing in the near term and with some additional benefits of pent up procedure demand likely to occur in the second and third quarters of 2021.
Moreover, we are positioning propel for future sustainable growth, but also taking advantage of the continued shift in chronic sinusitis care from hospitals and a S sees to the office a decentralization of care, representing a clear opportunity given the increasing orientation towards the on.
<unk> found in our broadening portfolio.
Much of the growth in in office space propel will be incremental to our business as certain office procedures, such as sinus balloon dilation did not previously benefit from localized drug delivery.
We are seeing increasing use of propel in the office setting in conjunction with balloon sinus Plasty and we believe this will accelerate behind increasing clinical evidence.
And the introduction and promotion of our venture <unk> sinus balloon.
Clinical use of propel implant following the trauma of balloon sinus dilation can effectively and efficiently provide localized drug delivery to reduce inflammation, while maintaining patency the opening of the nasal cavity.
Through the unique benefits of our family assignments stent implant.
In the first quarter. We also continued to take steps to expand propel into Europe by building and investing in our commercial infrastructure capabilities and by leveraging our kids on business critical mass and healthcare contacts.
As we previously said the O U S contribution from propel will have a modest positive impact on growth in 2021, but with our 2021 business investments and current expectations of near to midterm returned to pre COVID-19 macro conditions in the EU, we expect to see more significant revenue.
Contributions from propel and our other businesses in Europe over the coming years.
To support propel long term growth globally, we are investing in health economic evidence behind our existing propel offerings to ensure a steady cadence of new evidence and new news to support cost effected standard expanded use of our propel products.
Specifically, our recent work with a data analytics company <unk>. One has produced longitudinal real world evidence supporting the benefit to patients providers and payers and using propel in fess surgery functional endoscopic sinus surgery, the standard of care in our segment.
The analysis, just completed found that propel statistically significantly reduces the need for subsequent and potentially costly health care interventions in the full 18 months one year on one half period. Following a first procedure versus comparable fess procedures that did not include.
Use of propel.
This is longitudinal data that the business has been lacking and for which payers have been asking.
Going forward, we expect to use the demonstrated health economic value of propel and reducing the need for health care services in order to unlock greater provider access use and penetration of our product in fess surgery broadly.
In addition, we are working with the American Academy of Otolaryngology and O M. One to further analyze the OS registry database of sinus procedures to gather additional insight and evidence.
We continue to evaluate our next steps in this important endeavor, which include potential peer reviewed publication and the presentation and announcement of the detailed findings at sinus related medical conferences later this year.
Our ultimate goal is to use the health economic evidence of benefit with Payors to support greater and unencumbered assets put propel in all settings of care.
This evidence and messaging will become integral to our communication in the latter part of this year and we believe it will begin to bear a positive impact on payer coverage policies and provider assets beginning in 2022.
Looking further out we plan to develop additional evidence to support reimbursement changes our products work, but the onus is on us to provide the data to support it.
Altogether, we believe real World health economic evidence will be central to our propel strategy and to increasing our long term revenue growth outlook for propel.
Now turning to <unk>, we continue to sustain momentum with solid revenue performance in the first quarter.
We remain confident in our assertion on more than doubling <unk> revenue in 2021 versus 2019.
While down slightly on a sequential basis versus Q4, our performance in Q1 is consistent with the seasonality of the business as Copays and deductibles reset at the beginning of the new year.
Moreover, the first quarter lacks the procedure catalysts of the onset of cold and flu season bound in Q4 or the beginning of the allergy season as in Q2.
We clearly see that as a strong growth vehicles in the quarters and years to come supported by strong clinical benefit.
Increased provider trial clearer and better coding expanded payer coverage and an enhanced go to market model supported by our patient hub and network of best in class specialty pharmacies and distributors.
We also signed new book as an important patient appealing alternative to revision sinus surgery and regular self injections of a systemic autoimmune agents.
Correspondingly the economics on site number as an alternative to surgery or monoclonal antibodies is a clear win for payers and accounts for our strong overall coverage.
So I knew the implant can be conveniently and easily delivered in the office or ASC environment with clear clinical benefit to the patient.
A sound economic return to the provider and overall cost savings to the payer.
As we previously stated there is still work to be done as we were establishing buy and bill and specialty pharmacy assignment of benefit as viable and attractive avenues for product assets in the E&P space.
However, physician comfort and confidence in these new to E&P procurement and billing modalities are manifesting and increased trial and repeat use.
We believe and are confident that signed new book is well positioned to meaningfully contribute to our ongoing corporate revenue growth.
The CMS coding changes announced in March for both propel and signed new book that provided each product with a single and distinct code to support clear reimbursement and adjudication will contribute further to our positive revenue growth momentum.
And dedicated codes enable patient and physician access support expanded use at all sites of service, especially on the opposite AFC and provide greater clarity of coverage evidence of benefit for payers and providers and improve accuracy and speed resolution and any claims adjudication.
Coating is finally optimized and coverage, especially per se nuba is strong.
At time, we will now demonstrate that payment follows more seamlessly than ever before.
Try umbrella of coding coverage and payment are falling into place.
Now switching to balloons and navigation the newly added in diversifying portfolio of fees on products, which include <unk> sinus balloon cube navigation with Virtualized total registration and navigable surgical tools and consumables have together added multiple and relevant shots on goal to support.
Further revenue growth.
Can you go on integration activities are effectively complete we now see positive sequential progress and prelaunch trial and evaluations on our venture balloon in the U S and Chile navigation products globally we.
We remain on track to formerly launch these products across our full U S sales force in July and are developing further extensions enhancements through the near term portfolio.
Most notably in 2020, one we will release virtual <unk> Gen. Two our next generation Revolutionary no contact high precision photo registration tool for navigated surgical procedures in all settings of care.
This expanding portfolio of cube navigation venture balloon and surgical accessories provide us with a range of growth drivers in the second half of 2021 and into 2022.
Of note to support our commercial sales growth in these new product launches. We're excited to have appointed Mark Alley, as vice president of sales effective today.
Mark is a proven leader with more than 20 years of commercial and sales success. Most recently, serving as chief commercial officer at medical device specialist Levine Magnetics Importantly, Mark has extensive sales force and commercial leadership experience in the E&P space based on his time at Stryker.
T as VP of sales as well as at Entellus medical spiral and Mclaren all stalwarts of the ear nose and throat space.
Mark has deep knowledge across our broadening technology segments and direct connections to many of the physicians medical societies and customers we serve.
We are excited to have someone that Mark's caliber experience and character join our leadership team.
To support and integrate our broadening portfolio, we recently initiated our expand U S clinical study.
Study seeks to measure the enhanced benefit of balloon dilation, when followed by our propel contour implant and sinus procedures as compared to balloon sinus dilation alone.
This prospective randomized single blind intra patient controlled trial will enroll approximately 80 patients from up to 15 U S sites.
With Roland starting this week and to be completed by year end.
Patients treated with our bench or sinus balloon will be assessed at various intervals.
Throughout this study with final follow up at six months to assess the incremental benefit.
And using propel contour.
We are confident in the studies and points of improved patency and reduced inflammation. In addition to patient reported that assets based upon data from our original propel contour trial, where there was a small cohort of patients that only receive balloon dilation and propel contour as opposed to force that surgery and this balloon.
Only cohort we saw strong positive clinical results from propel contour.
Positive expand trial results could also provide a pathway for the company to consider additional clinical studies, demonstrating the durability of outcomes to support label expansion and the collection of valuable health economic evidence for the use of propel contour in conjunction with balloon sinus dilation procedures.
We expect to present preliminary results reading out in second half of 2022 and full results with longer term data in 2023.
Importantly, I would now like to provide an update and clarity on our announcement in todays press release regarding the suspension of the CE Mark for propel and propel mini.
On April 26, following an audit on April 9th and 14th by and that's a I the National standards Authority of Ireland, our European notified body, we received a letter, citing deficiencies and certain policies and processes at one of our facilities.
Importantly, these deficiencies did not pertain to the quality of our manufactured products, which had huge applicable production and safety standards and remain available for distribution in the EU without recall.
However, N S AI suspended our CE marks for propel and propel mini pending the successful response to the identified deficiencies.
Since the inspection, we had been conducting remediation activities, which culminated with the submission of a complete filing to the notified body today outlining the actions completed in our commitments going forward.
As part of that process. We have received positive feedback on our response and actions from the original audit Inspector and we hired a well regarded and acknowledged consulting specialist so that we can regain and remain in compliance and according with evolving EU standards as expeditiously as possible.
At this time on to the best of our knowledge, we expect to meet all regulatory filing requirements in a timely manner.
Importantly, and worth reiterating although the CE, marking for propel and propel mini are suspended we maintain the ability with NSA is full understanding to continue to sell both products in the EU markets with our available inventory.
As such we do not anticipate a near term impact on our revenues. Moreover, this decision does not impact our fees on products, our business, our U S business or related to U S regulations.
Lastly on to be clear, we will be filing our formal response with the N S. AI today and it reflects the positive and constructive feedback that we received last week and over the weekend from the original NSA Ey Auditor NSA I recognize the urgency of this matter and we expect that they will respond expeditiously as they have expressed.
We committed we are grateful for NSA is evident collaboration with us as we solidify our internal standards and overall standing with them.
In summary, despite COVID-19 headwinds in the first quarter. We are pleased with the continued progress we are making by capitalizing on our expanding product portfolio and increasing market presence to achieve long term sustainable growth we.
We are confident that we can drive meaningful revenue growth as evidenced by our decision to increase our full year revenue outlook to formal guidance in the range of $117 million to $121 million, which is reflective of current and anticipated electric procedure volumes and the potential impact of <unk>.
<unk>.
Our guidance also reflects our belief that growth will accelerate as the year progresses moving forward. Our focus remains on building continued momentum behind propel in all settings of care achieving record new record results and integrating and expanding our cube navigation and then show a balloon product lines with <unk>.
Numerous value drivers in place for 2021, we are well positioned to capitalize on our expanding product portfolio and increasing market presence to achieve long term sustainable growth.
At this time I will now turn the call over to Randy to take you through our financial results.
Thanks, Tom and good morning, everyone I would like to start the financial overview with a summary of our top line results and then provide a little more detail on our financial statements.
In the first quarter of 2021 intersect Ent's reported net sales of $24 3 million compared to $19 8 million in the same period of 2020, an increase of 23% from the prior year.
Our sales improvement reflected the continued recovery in propel implants, a significant increase in <unk> implants.
A solid global contribution from our acquired via gone on products that include venture balloon you've navigation surgical accessories.
For the first quarter of 2021 propel product family revenues were $20 4 million, a 7% increase compared to the first quarter of 2020.
<unk> revenues were $2 4 million more than doubled from the first quarter of 2020, reflecting clinical benefit further improvement in reimbursement increasing comfort with our office based procedures and the expansion of our market access model and distributor relationships.
Our global field on product portfolio contributed nicely with venture cube.
Sure Cube and accessories generating revenues of $1 5 million in the quarter with approximately <unk> 4 million and domestic revenue.
Product mix for propel was consistent with recent quarters with propel at 30%.
How many at 35% propel contour at 35 per cent.
Overall propel family ASP in the first quarter was 22021 was 868 per unit.
Up 2% from a year ago. So I knew the ASP in the first quarter was $1370 per unit up 4% from a year ago.
Gross margin for the first quarter of 2021 was 65% compared to 68% in the same period a year ago.
Gross margin was unfavorably impacted by amortization of intangible assets production related period and project cost at.
That collectively represented approximately $1 million, partially offsetting the decline in Q1 gross margin was lower per unit manufacturing cost as production volumes returned to normal capacity.
Excluding the impact of amortization and the production related costs gross margin for the quarter would have been higher by approximately 4%.
Looking ahead, we expect to see meaningful increases in production volumes for the balance of 2021 and beyond in anticipation of increasing demand for our expanded product portfolio, which we believe will result in improved margins in the second half of the year in 2022.
Total operating expenses for the first quarter of 2021 were $34 4 million versus $31 3 million in the same period, a year ago, an increase of 10%.
The increase in operating expenses was due to expanded marketing initiatives.
Our activities and the addition of the fields on expenses inclusive of integration costs, which are now largely complete.
For the first quarter of 2021, we recorded operating loss of $18 6 million, a net loss of $20 million.
Or a per diluted share loss of 61.
Compared to the operating loss of $17 9 million.
Net loss of $17 5 million or a per diluted share loss of 54 cents in the first quarter of 2020.
The adjusted net loss, excluding the impact of the fair value of embedded derivatives amortization of intangible assets and the costs associated with the integration of the figure on product is $16 9 million or <unk> 51 per share.
The details of the adjustments are included in the reconciliation table of our press release.
Now turning to our balance sheet.
Total cash cash equivalents and restricted cash and short term investments balances as of March 31, 2020 was $89 million.
Compared to $105 5 million as of December 31, 2020.
As a result of the <unk> acquisition, our current and non current deferred acquisition related considerations as of March 31, 2021 total.
$52 4 million.
We believe our cash position combined with our ongoing cost management initiatives.
<unk> revenue growth provides the company with adequate capital to operate well into 2022.
Looking ahead and based on the improvement in the overall COVID-19 situation. The initial and ongoing recovery of elective procedure volumes improved procedure market penetration and our broader product portfolio. We are now more comfortable shifting from our informal outlook providing guidance for 2021.
Yeah.
As Tom indicated we are raising our guidance for the full year 2021 revenue by $1 million to a range of $117 million.
$121 million.
And targeting full year gross margin to be in the low to mid 70% range.
Now I will turn the call back to Tom.
Thank you Randy.
We are pleased with our first quarter results as the performance of propel and signed new book underscore the differentiated value proposition of our proprietary localized drug delivery sinus implant offerings.
We believe that our EU regulatory filing for propel will be well received in the very near term and that we will be in a position to continue to execute our growth strategies unimpeded and with no material impact.
Pleased with the early feedback on the performance of our recent portfolio additions than <unk> sinus balloon and <unk> navigation.
Looking ahead, we believe the future for intersect Ent's is bright based on positive trends for elective and office based sinus procedures, we anticipate sequential improvement throughout our business in the second quarter and beyond Inc.
Encouraging macro indicators combined with our first quarter per bit performance, a clear plan for commercial execution and expanding product portfolio and clinical evidence has intersect ent's well positioned to return to meaningful growth for the 2020 full year relative to 2019 and longer term establish the.
A company as a predictable double digit grower year after year.
Before closing I would like to thank our employees patients customers and shareholders.
Now I would like to turn the call back over to the operator and open the call for your questions.
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 you touched on phone if youre using a speakerphone. Please pick up your handset before pressing the keys. So withdraw your question. Please press Star then two we will pause monetize lead to assemble our roster.
Our first question is from Robbie Marcus from Jpmorgan go ahead.
Great Thanks, and congrats on a nice quarter.
Thanks Ravi.
Maybe to start.
Don back to formal guidance I just wanted to see how you feel about second quarter at about 28 million here, which is where the street currently sets.
Does that track well with your strong recovery or recovery in the second quarter, Inc. Third quarter comments.
Yeah, I'm not sure I feel good about being specific on the second quarter other than to say, we feel we feel we have good momentum and feel comfortable where we are or we would not have made the change to the formal guidance in the slide slight uptick that we put there but.
But we feel that we are experiencing the recovery and feel like we're in good position.
To be able to meet expectation.
Okay, and then maybe just incorporating the comments on the CE Mark I want to make sure you know on the.
Fourth quarter call you gave a little more color as to the different sub components.
The business and how you thought those would trend.
It sounded like Europe was going to be around $2 million to $3 million is that still on the table on any other color you can provide.
With respect to how snook on propel trend within your guidance range would be really helpful. Thanks a lot.
Yes, Thanks Ravi realm.
Relative to the size of the European business, we did in the first quarter.
Just over 400000 in Europe, So it's not a big piece of business today relative to some of the.
Regulatory challenges that we're experiencing right now we expect to be able to clear that quickly.
And given our ability to continue to ship product, we don't expect a material impact on the revenue line as a result of that.
So we would still see Europe coming in in that $2 million to $3 million range for the full year.
And feel comfortable debt.
We cleared this hurdle and we have work to do to do that.
But once we cleared this hurdle we should be in that range.
Relative to the second part of your question on kind of the guidance and where we are for <unk> and the propel business as a whole.
We indicated previously at the fourth quarter recall that we would more than double our site new the business in.
In 2021 relative to 2019, we're tracking very nicely against that objective and feel comfortable with it.
And looking for a return to growth on propel as we come out of the impact of COVID-19. So again I think across the board. We feel that we are on solid footing for the change in guidance that we've made.
And are of course, working hard to execute and to exceed that.
Great and if I could squeeze one more in you had some really nice expense control in first quarter on.
How much of that was pulled back on expense rather than a new normal going forward. Thanks.
Ravi This is Randy.
I think we just continue to see.
Good management of as we roll out the broader portfolio.
Two this year and the expectation is on.
Launch in July.
And then continued growth across the platform.
As we mentioned I think we started to see a wind down of a few of the integration cost that we incurred in the fourth quarter.
So I think it was more of just a reduction in some of those integration and transaction costs rather than anything abnormal.
But as we've suggested where we are on track to a.
Slight increase into in terms of the overall operating expenses.
Relative to 2020, and a little bit of an increase over the 2019, our full year operating expenses.
Great. Thanks, a lot.
Our next question is from Richard New Winter from S. V. B Leerink go ahead.
Hi, Thanks for taking the question.
Hum.
Hoping you could maybe talk a little bit more about the longitudinal data that you guys are have put together I think you said.
It is statistically significant and you plan to publish.
Later in the year or at least reveal the data sets in a more formal fashion at conferences later in the year, maybe you can just.
Give us a sense as debt.
Where exactly this data is going to have the biggest impact first and what Carrie said, Hey, my understanding was it's probably going to be more.
Aimed towards the hospital outpatient setting your surgery business and that's going to be more of a kind of insure insurer discretion and going to them to secure carve outs.
On a one day one basis is that correct and maybe you can just give a little more color around that strategy and the timing.
Does that could that could take.
Yes, Great question Rich and first let me say, we're excited by the data, we're still kind of unpacking it a little bit but the preliminary read that we've had with our partners at O N. One.
It's just very encouraged in terms of the caliber of the data and the findings that are there.
This is a longitudinal real world evidence trials, so it's drawing from registry data sets.
Oh on one access is it allows us to look at the full 18 month period post procedure.
With a cohort of those that received propel versus a cohort of individuals who did not receive propel following fats.
A very sizable database over 2000 patients.
Each arm, giving us a real chance to establish the statistical significance and what we do see is in the in the cohort that had propel the utilization of health care services. Following the first procedure is statistically significantly down and therefore our basis by.
Which to be able to.
Derived cost savings from the use of propel to exactly your point, where we think this is going to be most important.
Is in the <unk> setting, whether that's a hospital operating room or an ASC.
We're a full functional endoscopic sinus surgery would take place.
And that the opportunity is really to go directly to Payors and make the case that in providing coverage for propel as a separate implant code you're leveraging our S code that we have as a supply code is cost effective for them because of the reduced additional.
On health care utilization that is implied by the data.
That's not an overnight build that will require us going and speaking with payers and getting on the payer cycle for reevaluation, but in the end. We think that this represents a long term basis by which we can support propel growth and broader propel utilization.
I think where it's going to be most impactful is actually in the ASC setting, which is where the economics are tightest, but where a payer has an incentive to drive traffic because it's generally less expensive to conduct a procedure in the ASC setting now we would add to the health economic benefit.
By reducing health care utilization, if you were to use propel and we would be motivated to partner with payers in order to drive traffic into the ASC environment.
So we're excited about it more work to be done there as well in terms of.
Finding our publication and presentation strategy, but this is something that we think we will be able to kind of spool out through the remainder of this year and work on in the years to come.
Okay. That's helpful and just to clarify the escrowed can be used in the ASC as well as the hospital outpatient setting correct.
Yes, we can.
Okay, Great and then.
Yeah, I'm just I'm just curious in light of the reimbursement changes that really.
Kicked in during this quarter between <unk> and.
Propel the bifurcation there.
The J code.
On.
Any any even anecdotal areas you can share with us on how that has if at all impacted utilization trends.
Hence instructors who are using signings on.
Just given the payment may have come down in some cases on what the average.
Reimbursement level Clinton.
Yeah. So.
As you as you noted effective April one.
We went into effect with the new J code that was dedicated to <unk> and an S code that is dedicated to propel.
This is I promise the final coding change for the business, we've got it exactly where we want it which is a single dedicated code for each product.
I give a tremendous amount of credit to our market access team at intersect DMT in terms of preparing the market.
Both payers as well as office space for this change.
And I think it went fairly seamlessly in and that we see immediate utilization of the codes, we see that they are being recognized and honored by payers as well as being understood.
Reloaded and office based systems.
And at this point.
Seeing kind of a continuity of business without a hiccup.
And what we are also clearly seeing is the more rapid adjudication.
In the background in terms of just clarity of getting coverage clarity of the adjudication and reconciliation of any dispute because of the clarity that comes with having a single.
Number that is dedicated to the to each individual product so yes it.
It's been a pretty arduous arduous path to get to where we are now, but we feel that we've got the right coding and that utilization is in place.
And that.
We're in a position to provide a much clearer experience and a greater basis per confidence among providers in the marketplace, which had been something of an impediment up to this point.
Thanks, Tom and just one last one if I could squeeze it in any shift in the percentage of sales with submissions between buy and bill and a specialty pharmacy submissions.
Yeah.
Not a material shift we did have a little bit of a pickup in terms of utilization.
Of the pass through.
No on site Uva and a pickup in the ASC setting we see this as a nice incremental source of business as people are realizing that they can access the Medicare Medicaid population using the pass through.
Code, which is now again in that single J code also encompasses the pass through it used to be somewhat awkwardly a separate C code.
And so a bit of a shift towards ASC as that pick up of incremental business, but buy and bill remains attractive.
We also continue to expand our authorization of benefit and pharmacy benefit. So all in all on a pretty clean bill of health in terms of improved clarity and understanding and expanded use debt I think will serve us well, particularly in the remainder of the year and as we go forward.
Thank you Sir.
Our next question is from Ryan from moment from BT I Cant go ahead.
Good morning, Thanks for taking the questions.
Tom from a call on the last quarter, we saw propel and really propel in the office come back I think a bit stronger.
Here, we're seeing some move on for yoga and really drive the business. This quarter can you just talk a little bit about maybe some of the going back to propel the office based adoption of propel this quarter, especially after the reimbursement changes that took place April one and how to think about that channel on that business.
As we proceed forward and then I have a follow up thank you.
Sure.
Thanks Ryan.
We remain very bullish on propel on the office so in terms of Q1.
Propel office relative to 2019, again, probably a better comparator year.
More than doubled.
It did a lot better than that versus 2020, where.
There was a lot of noise because of COVID-19.
So it is continues to be a real grower.
And again for the reason that I said in my prepared comments.
The opportunity to use propel following.
Balloon dilation, which increasingly takes place in an office setting.
<unk> provides a real incremental benefit and opportunity to deliver.
<unk> anti inflammatory.
And radial expansion of a stent.
To improve sinus dilation and it is that insight that has prompted us to go forward with the prospective expand trial to be able to demonstrate that with.
A much greater and then the small cohort we had in the original propel contour trial.
So it is a growing piece of business. It's one that we think will continue to grow it's one that we will get behind as we.
Expand our own balloon dilation business.
And we're very excited about how.
It can deliver incremental growth to the propel business.
As propel and its core in the hospital and ASC setting recovers post pandemic, we think that the combined elements of propel in the office and propel in the surgical setting with increased evidence of health economic benefit.
Enable us to get that core business back to growth and then we will be able to build upon that growth with <unk> and what we have and then sure balloon in cube navigation.
Okay, and then follow up on venture itself.
I guess, you know youre going to do the broader launch this quarter and as we think about it longer term what would you guys be disappointed if you werent generating more revenue off the venture balloon versus legacy figure on by next year.
Yes.
Absolutely I think the opportunity in the long term.
<unk> been sure balloon and the cube navigation in the U S.
And they really come together so it's it's hard to distinguish the two is oftentimes there is a placement of the cube navigation and then the.
Lisa lease to lease to own model, a bundling of appropriate and compliant consumable products.
But clearly as we enter into the total available market of balloon dilation in the U S, which is in excess of $250 million that represents a very sizable opportunity for us and if you combine that with the potential for.
Our own propel contour business, you could see that that.
New aspect of the venture balloon business represents a significant growth element for us.
And kind of what legacy via gone had done so I, absolutely I would agree with your assertion.
Okay I'll leave it there. Thank you for taking the question.
Brian just a quick clarification venture was.
Basically just launched in the fourth quarter. So you won't see on a year over year growth relative to the cube and the navigation tool.
Last year was probably just given the transition in a variety of other things that you're gone.
Probably not a good comparison, so it's probably more of a 2019 comparison.
But we feel very confident that we will see a sustainable growth throughout that platform going forward.
Thank you Randy.
Our next question is from add on media from Piper Sandler go ahead.
Hey, Tom Hey, Randy Thanks for taking the questions here I guess I wanted to start with just kind of a bigger picture question on procedure.
Environments I.
I think you talked about some challenges in January on an early sad, but was wondering if you could put a finer point on just how the business progressed over the course of Q1 and through April.
Just any additional color there would be super helpful. And then I had a follow up on two thanks.
Yep.
You hit the you hit the nail on the head.
Yes.
Everyone is aware at the end of last year in December we started to see a new spike in COVID-19 in the United States and we.
We were not spared that either and so that showed up in the last several weeks of December and carried through into January and early February the very good news is as we started to see that kind of recovery and a return to more normal.
As we moved through March and as we head into April we're seeing that for sure.
So we expect the business the core business to rebound nicely and for US where that shows up most acutely is in the hospital setting and the more formalized procedure of the functional endoscopic sinus surgery in the hospital and the ASC. So our office space business has remained.
More steady through that period, even though office visits are down net.
In terms of third party measures.
But where we saw the softness was in January and February and the surgical based side of the business in the hospital and ASC and I'm happy to report that we've seen that begin to recover within the quarter through March and then April that trending is continuing and as I said in my prepared notes.
Would expect its recovery in.
Full in Q2.
With the potential to even up some pent up demand to be able to contribute further to the latter part of Q2 on into Q3.
Got it that's really helpful. Tom and maybe just a quick follow up there are you able to quantify the backlog or pent up demand and how we should think about that playing out over the next two quarters and then on one more follow up thanks.
Yes.
Difficult to get an exact number around but the pent up demand what we're looking at from our perspective as we go back to kind of wave one and 2020, we saw a bounce back in July in fact in July of 2020, we actually had growth versus 2019, we.
We saw a similar pattern in October of 2020, where that second wave that hit kind of Florida, Texas, Arizona and Southern California.
Through August and September of 2020, we got a bit of a bounce back in October.
So again, not a not a huge kind of hockey stick rebound.
But a nice contributor to growth that we would expect again to see and in the latter part of this quarter.
Or potentially the beginning of next quarter.
So were optimistic there, but hard to put it put a concrete number against it.
Okay fair enough debt.
That makes sense and then just for the the last question guys. Just wanted to ask about the Aegon.
It seems like that's off to a better than expected start with.
It's a nice early sales adoption in Q4 and Q1. So my question is how many folks are selling venture in queue. At this point in time and then with the formal launch I think you said.
Late July or July time frame.
How many hands to the products go into I'm, just trying to understand kind of how the revenue trajectory could could potentially shift there.
Thanks, so much for taking my questions.
Sure.
First is in terms of what we've done thus far we've been very.
Regimented ourselves in terms of the number of accounts that we want to take on.
In order to be able to make sure we have appropriate understanding of the business the right kind of support behind it.
The right kind of training and capability to make sure that we are successful in the marketplace. All the while as we ramp up production and get ready for a more fulsome launch and the opportunity frankly to bring our teams together and train them properly.
In a post COVID-19 environment.
So in terms of hands touching it today, it's limited because we're really limited by the number of accounts that we wish to go out too and that's kind of prescribed our behavior to this point.
As of July and it will be middle of July in advance of the allergic Rhinitis Society meeting in Austin, we will be bringing our full sales force together in order to train and expose them.
To the product line.
That's not to say that every one of them is gonna be guns, a blazing going out selling it hard we will continue to place compensation and focus on both propel and <unk> for the majority of our reps at a higher premium than we will on the venture balloon, but we will have a specialist who are able to carry that message.
And generate the evaluations in trial that we want.
To set expectations, though while we see a stronger back half and growing momentum behind the fee Aegon balloon and navigation business, it's a longer selling cycle as youre selling in capital Youre using evaluation periods to allow individuals' providers and physicians to understand and navigate.
<unk> and to determine where it fits in their practice and where it fits in their own capital cycle with navigation.
But it is a very complementary piece of business to what we have overall, we see particular strength in the office setting and in the messaging that we have with in conjunction with propel and we believe it will be a steady and consistent grower for us again, not an overnight hockey stick as most capital businesses.
Arent that way.
But rather a complementary element as we continue to be.
And dialogue with our positions across the continuum of care and lineup chronic rhinosinusitis I hope that answers your question.
Very clear thanks, Tom.
Yes, I think the other thing that we've found from the early evaluation sales that we've been doing as a physician.
<unk> on the technicians are giving us a tremendous feedback on the technology. So we feel.
A growing sense of confidence that we've got some nice products here that will be.
To allow us to have sustainable growth for a number of years.
Positive from that perspective as well.
Our next question is from Chris Pasquale from Guggenheim Go ahead.
Thanks.
Tom you had another good snow on the number this quarter I'm curious after all the changes and improvements you've made to the process there where do you see as the biggest remaining friction points for adoption I'm sure. This past quarter COVID-19 was still a headwind, but as the macro environment normalizes. What are you most focused on to help that product continue to ramp.
It's just you know Chris Great question, its really just a.
A matter of getting.
Physicians comfortable.
With the very different nature of a buy and bill of authorization of benefit of the go to market model, that's inherent and initiating drug therapy in the Doctor's office.
It is not something that is familiar to the E&P community as we've said before it's not new to the world of.
Of health care, you see it a lot in other segments oncology rheumatology ophthalmology, but it is new for this particular group of physicians.
And early on candidly they were a bit burned by the fact that.
Payer reimbursement wasn't guaranteed.
The mechanism for getting repayment was slow.
And what I think we have done very effectively with our improved coding and an expanded coverage is really begun to fill those gaps and now it's a question of generating trial, enabling them to have the experience that it goes through quickly.
And that they can with certainty.
Be able to buy and bill and.
Not only come out economically whole, but actually.
With some fair return for having done the procedure.
And their office environment I think clinically.
Docs are convinced it's now really just getting the go to market model mechanism.
To a place where they are very comfortable with it and I think this last round of coding changes and the simplicity inherent in that and the fact that there's now a CMS.
ASP, that's listed which essentially provides the assurance of a minimum payment.
Are all further steps in providing that comfort.
And it's now on us and our reps to go out there and drive trial.
Thanks, that's helpful and then I'm sorry, if I missed this but what is the updated guidance assume for the figure on contribution this.
This year I think originally you had said $5 million to $7 million you're on track at the midpoint of that if sales were just to stay flat at <unk> levels and it does seems unlikely given the normal seasonality of the business and the fact that COVID-19 was probably still a pretty significant headwind in Europe this quarter.
Yes.
Haven't broken out the specifics Randy do you want to pick that one up.
Yeah, I was just going to say I don't think there was no single item that gave us confidence to increase guidance I think.
We're just seeing a continued Ah <unk>.
Execution across the platform.
Obviously, the recovery in the COVID-19 environment here in the United States.
And the potential for recovery on other parts of the World, where we operate you know in the future just gave us incremental confidence in moving forward and again.
As Tom has indicated that the breadth of the portfolio continues to look very strong and we anticipate it.
First the launch in the second half of the year.
Fiona on products.
Thanks.
Yeah.
Our next question is from Ravi Misra from there go ahead.
Hi, Good morning, Tom Good morning, Randy So just another.
Another point on <unk>, you mentioned, you know kind of building the value proposition against monoclonal antibodies, there and it would seem kind of with reimbursement set and kind of your clinical force.
Being said as well from the management to kind of feet on the street perspective, you're there just wondering what else kind of you think you'd need to be doing to kind of drive the awareness either amongst the patient or the doctor around the advantages of your product versus that other therapy and then maybe just the second one really quickly.
Sure.
Just curious on the margin commentary Randy it sounds like second half is going to be higher than the first if I heard you right. What was that kind of overall gross margin and op margin. Just if you could provide a little bit details a little bit more around the pacing of those expenses to Eric.
Gross margin came a little bit below where the street was and I just want to make sure. We've calibrated on models correctly. There. Thanks, a lot guys.
So maybe I'll take the first part of that question and Randy ill, let you comment on gross margin.
But I think the point is well made relative to incremental opportunity to drive awareness and demand around trying to do the.
We're excited about the prospects over time too.
To begin to initiate a greater degree of direct to patient awareness that doesn't mean necessarily a mass media advertising, but the opportunity to use.
Social media and other vehicles, where.
Folks who suffer from chronic rhinosinusitis are very self aware and seeking information and I think they are very efficient ways over the web and otherwise to make people aware that there is a very effective therapy that is available to them. We've held off on that we didn't want to drive a lot of traffic into the Doctor's office.
Without being able to ensure.
Debt that doctors were comfortable with the reimbursement and payment mechanisms as that becomes more solidified.
Ample opportunity for us to begin to dial up some of that direct to patient and we've done so on a selected basis, sometimes in conjunction with large <unk> practices within our local area as an element of market development, but I think that's another avenue by which we can begin to drive primary demand among patients.
In order to make them aware that there is a.
Effective immediately.
<unk> alternative to what they might otherwise be considering.
That will help to grow our business over time.
Maybe I'll, let you comment on gross margin yeah.
Yeah on the gross margin side I think the that's the easy part of that is.
We continue to see a ramping up of our production at the tail end of the first quarter, we got back to what we characterize as normal production levels, we'll probably see that sustain throughout the year. So youll.
We begin to see the benefit of that absorption.
And through again, so I wouldn't expect to see.
Any sort of spikes along the way I think you'll see a gradual improvement for the balance of the year.
One other item or potentially too.
Going forward, we will be providing a little bit of an adjustment to the calculation. We're gonna exclude purchase price amortization from that and just give you visibility into that and as we mentioned in the prior quarter call.
We are making some incremental investments.
This area so to achieve some of the sustainability that we've talked about.
Some of the cost debt are up more onetime in nature, we will back out, but it will be fairly prescriptive as we were on.
This quarter, but again as we move forward, we're very confident in seeing a return to a 70% gross margins at longer term on.
On our legacy products are getting back to the high Seventy's.
Our next question is from Sylvia called Yeah from Oppenheimer go ahead.
Good morning, Tom and Randy.
Can you hear me alright, yes.
Got you.
Perfect.
Randy maybe I missed this number but what does the signed nouveau commercial contribution in the quarter.
In terms of revenue.
Revenue per cent either way.
Revenue was $2 4 million in the quarter.
No no the commercial component of the two four.
I guess, maybe I'm misunderstanding the question.
So yes.
I just wanted to make sure what does the retina commercial versus Medicare.
On a proportion.
Okay. We don't we haven't provided that level of granularity going forward.
I think what we've provided in the past is just.
The broader level of average both by private and public payers.
And again I think we're very comfortable that I believe that we've said the high seventy's low eighty's from a.
Private payer market and upwards to about 90% of the public payer market.
And so we're very comfortable with the reimbursement environment, but we haven't typically broken down.
The percentage of revenue from who's paying.
Got it.
Randy in terms of.
White 'twenty one guidance.
Would you care to update the Opex guidance I believe on the Q4 call you on it said it would be higher.
And then if why 'twenty.
Just given where it's.
Hashed out in Q1 was wondering if you could update your opex guidance.
We've characterized sort of our spending level.
In 2021, probably a little bit north in the aggregate of about $140 million as we've mentioned on on and add more operating basis it'll be up slightly from.
The levels in 2019, which were relatively speaking about the mid one <unk> net as we've indicated.
Catered, we're making some investments in the sustainability both in our production areas.
And some of our I T areas and.
Certainly in our ability to manage growth future growth in our European platform.
There'll be some incremental spend associated with that but in total probably a little north of about 140 million, which is pretty consistent with where we've been guiding folks.
Our next question is from Kyle Rose from Canaccord go ahead.
Good morning, everybody. Thank you for taking the questions today, just a lot's been asked but I just wanted to ask two towards the end here. So.
One.
Could you just give us an update on where the account base is in the U S. Now and kind of maybe how that grew quarter over quarter or in the Q1, and then maybe expectations for the full year on then I'll just ask my second one right upfront.
Just the overall commercial team.
You're in the U S and O U S. Maybe just give us an update as far as you know where the head count stands now and then any plans.
For additional.
<unk> on a go forward basis, just given up on the cross selling opportunities. Thank you.
Yeah, Kyle we haven't broken out the the actual number of accounts.
And same store sales and the like.
I can tell you is that there's positive momentum in the number of accounts as we expand the business.
We certainly see that too in terms of accounts that are taking on propel in the office environment that hadn't previously done that.
So we see a healthy expansion in terms of.
The recovery of the business post COVID-19 as well as the general growth of the business.
And so feel good about where we are that we have not broken out the <unk>.
Specifics of that set of numbers in terms of our commercial force.
We're still down relative to where we were pre COVID-19, we took a reduction in our direct sales force at the time of COVID-19. We've built some of that back both in terms of traditional territories and expanding back to areas, where we felt that we may have been too lean so.
So we built some of that back we've also added a capability very specifically around.
On the cube and navigation capability in order to be able to ensure that we have folks in the field, who are navigation experts and are prepared to train.
Train and support our evaluations so that has been an expansion of capability in.
In a very specialist domain in order to ensure our overall performance but.
But we feel that we've got an appropriate selling organization right. Now we are actively looking at the size of the sales force it really with the lens towards.
What will the new normal B post COVID-19.
In terms of access to the hospital environment. If you think about where we were pre COVID-19 our territory managers.
Spent as much as 30% of their time gowned up and in the or we don't expect that to return and therefore that may present, an efficiency.
In terms of how we deploy but obviously, we're looking for what that recovery pattern looks like and the value and the utility.
Of that time in the or.
What I will say is that we don't feel that we are constrained in terms of being able to invest behind commercial expansion as necessary and appropriate.
But we will look to do so as we have a clearer lens of what is the post COVID-19 environment look like and then we will add as the business grows.
And as our debt.
<unk> of our portfolio requires.
This concludes our question and answer session I would like to turn the conference back over to Tom West for closing remarks.
So first and foremost thank you all for your interest and attention to intersect DNT.
We're extremely encouraged by our performance in Q1, and our prospects for the full year that confidence is reflected in our modest raise on our guidance to take it to $1 17 to $1 21 for the full year.
And we see that and our confidence stems from the potential we see across our multiple lines of business as we've diversified our portfolio.
We see potential in propel in the office environment in particular and over the longer term as we build out our health economic evidence on the utility of using propel post surgery to reduce overall health care expenditure.
We're excited about <unk> and the continued momentum that we have and the increased clarity that comes with our improved coding and our expanded reimbursement.
We're also delighted with how our then sure balloon and tube navigation system had been received in the marketplace and the limited number of evaluation sites that we've already taken under.
Putting that all together, we feel confident in our ability to deliver on 2021 and even more excited about our growth prospects in the years to come.
Again, thanks very much for your attention.
Interest and attention and I want to thank again my colleagues our shareholders.
Our board for their constant and continued support thanks.
Thanks, very much everybody take care.
The conference has now concluded.
Thank you for attending today's presentation you may now disconnect.
Okay.