Lisa Earnhardt leads Intersect ENT (NASDAQ: XENT), a medical technology company dedicated to improving the quality of life for patients with ear, nose and throat conditions having led the company from the early clinical stage.
President and CEO
Intersect ENT, Inc.
Lisa Earnhardt, CEO of Intersect ENT, led the start-up company through regulatory approval, commercial launch and ultimately and IPO. The company sports a $500 million market cap as it works to improve how sinus surgery is performed. The company’s Propel stent delivers anti-inflammatory steroids directly to nasal passages, speeding relief and recover for sinusitis sufferers.
Prior to joining Intersect, Earnhardt was the President of Boston Scientific’s Cardiac Surgery division with $200M in revenue and over 450 employees. She played an instrumental role in the sale of that business in January 2008 (now known as Maquet Cardiovascular). Previously, Lisa held a variety of sales and marketing roles of increasing responsibility at Guidant, a leader in cardiovascular medical devices, leading global product launches and driving adoption of new technologies.
In this interview she hits upon the company’s successes and challenges in a growing ENT market.
1:10 – Update on Intersect ENT’s “healthy growth” released at JP Morgan.
1:35 – What is the source of the 60% revenue growth?
2:42 – What impact do new technologies have on the sinusitis market?
3:58 – How receptive are physicians and surgeons to new technologies?
5:01 – How much does Direct-to-Consumer factor into Intersect’s commercial success?
5:52 – Intersect working to changing the perception of sinus surgery.
7:00 – A look at Intersect’s clinical data showing reduction of post-surgicla complications.
8:00 – Thirty million patient suffer from sinusitis, only half a million undergo sinus surgery. How can Intersect expand that with new devices?
8:36 – Update on Intersect’s reimbursement strategy.
9:25 – Reimbursement for Sinus Surgery went up. Could open doors for Intersect’s Propel.
10:29 – What is the ultimate vision of Intersect? Can it be an acquirer?
11:35 – Does Intersect have or need a Digital strategy?
12:25 – What’s the one thing you would change to make Medtech easier?
Tom Salemi: Hi, this is Tom Salemi from Healthegy TV. We are at the JP Morgan Conference in San Francisco. Happy to have Lisa Earhnardt, CEO of Intersect ENT with us. Thanks for joining us.
Lisa Earnhardt: Thank you so much for having me.
TS: I’m sure you’ve had a very, very busy week.
LE: It has indeed been a busy week for us, but a good one.
TS: Now you live south of here. Do you go home during this week? Or do you get a room?
LE: I actually get a room up here –
TS: You should, yeah.
LE: – just because the days are long, and they go well into the evening. And I treasure my sleep.
TS: Good call by you. So you did present. How did that go? You had some great numbers you released yesterday.
LE: Yeah, you know, I had the joy of just sharing the team’s successes from 2015. So we did announce a very healthy growth at 2014 to 2015 of 60%.
TS: That’s fantastic.
LE: Which feels really good. It was a busy year, and not only just on the commercial side, but also on the clinical perspective. We made some great progress on our future products.
TS: So is that growth primarily coming from your main product, or is it the introduction of new products?
LE: Yeah, you know what, it’s actually from our two products that have been approved now for a couple of years, Propel and Propel Mini. Really the growth was driven by the expansion of our sales force. That was one of the primary reasons for the IPO and really putting those funds to use. So we expanded significantly last year. And as a result, 60% revenue growth.
TS: That’s great numbers. And that was in line with what you were expecting? What was Wall Street projecting for you guys?
LE: Yeah. So when we started the year, we provided a pretty big range of expectations and was sort of right in line with expectations. We feel good. I mean that was a lot of growth, but we feel really good about the year, and really most importantly, if you can believe it, we’ve treated over 100,000 patients.
TS: Holy moly.
LE: Yeah. So it’s come a long way.
TS: So basic question. Sinusitis, it’s obviously a big problem. But you never really think of it as a large market. And I saw in an announcement that you put out recently that you had said it was one of the top ten most costly conditions for employers, that’s it’s really a lot of people losing work or productivity because of that. Is the market that’s growing from that, is that because of just the demand? Or is it the fact that medtech companies like yourselves and Acclarent and Entellus are coming up with less invasive ways to treat those diseases?
LE: Yeah, I think you’re right, Tom. First of all, it is a big market. So it’s 30 million adults in the US who suffer. A fraction of those end up going to an ENT or otolaryngologist, the specialist in the world of sinus to provide relief from their symptoms. And I do think new technologies, starting first with Medtronic and a company they acquired, gosh, in 1999, so it’s been some time, called Zomed. And that was really the first really new technology in terms of really help facilitating surgical intervention for chronic sinusitis. And really since then, with Acclarent and Entellus and other players, really bringing forth innovation that helps drive improvements, both improved outcomes for the patients as well helps facilitate the ease of use for those patients, and ultimately as well helping save the healthcare system money. So I think it’s those 3 things that really have helped drive the increase in the overall chronic sinusitis market.
TS: What has the reception been from the physicians?
LE: You know, I think quite strong. So we have a steroid releasing implant that’s used in conjunction with sinus surgery. So it’s really quite intuitive for the surgeon because here we are, we’re putting something in to open up the sinus, and then to bathe that sinus in a steroid or an anti-inflammatory. Chronic sinusitis is an inflammatory disease, and the fact that we’re wanting to keep it open and put steroid where it’s really needed most is quite intuitive for the surgeon.
TS: How would have those steroids been delivered previously?
LE: You know, the most common ways of delivering steroids are either intranasal steroid sprays or oral steroids. And they both have their limitations. So intranasal steroid sprays are just that, nasal. So the majority of it actually you end up swallowing it. Doesn’t get up to the sinuses. And then oral steroids can be incredibly potent, right?
LE: Unfortunately, systemic exposure. So they come with a number of deleterious side effects. So we really are providing the only option in terms of delivering that steroid exactly where it’s needed in the sinus.
TS: How much of your success is coming from your direct to consumer campaign? Assuming you have one. I’m on your website; I see you’ve got news piece after news piece of people who are benefitting from your products. Is that –
LE: Yeah, you know, there is a role. I think about the patient really does play a critical role in managing this disease. I mean the patient who’s administering the medications every day. So it’d be antihistamines, antibiotics, the sprays I talked about, irrigation. So they play a big role and do have a say. Right now, though, because our technology is an adjunct to surgery, it’s really the physician who is the primary decision maker. That said, one of the things we’re really trying to help people understand that this is not your mother’s sinus surgery.
LE: Right. And so the world is different.
TS: That sounds pretty horrible.
LE: And I would say you’re right. That is the impression oftentimes people get is because historically, you know, you go back in time and people talk about sinus surgery as you’ve got you’re doing all this surgical intervention and then you’re out of work, and then you have packing or gauze that needs to be removed. That actually can be quite painful for patients. And so one of the things we’ve done where we’ve used PR has been really effective in local markets. Physicians have been so compelled about the benefits Propel brings to the patients that they’ve then gone on different media outlets to try to share their stories, and oftentimes patients as well. The most powerful thing is when a patient who’s had sinus surgery before and needs a revision, when they have Propel as part of the revision, they’re like, what did you do this time? It is so different. And that is –
TS: That’s gratifying.
LE: – so gratifying for our team.
TS: Is there a reduction in the number of total sinus surgeries going on? Are you taking market share away from – I don’t want to put it in that way, but are you saving people from having to undergo that with your product?
LE: Yeah. So our data from the trials that we did, which was extensive – so very robust clinical trials, prospective, randomized, double blinded trials, so high level of rigor – demonstrated that we have a reduction in the need for a post-operative intervention. So things like prescribing oral steroids, the need to lyse adhesions in the postoperative period to keep that cavity open, that said, if you look at the overall market, total surgery volumes have been pretty consistent. So we do think with increased awareness of new, less invasive ways to manage these patients, it’s keeping the market relatively stable.
TS: But how do you pull away from – that would seem that that would be a no-brainer for someone who’s aware of all the options to these procedures to have your procedure done as opposed to something more invasive. Is there a reason why that number isn’t going down?
LE: In terms of the – well, right now, we are used in conjunction with surgery.
TS: Yeah, that’s true.
LE: And so that’s the difference.
LE: So over time –
TS: But –
LE: – we have some products that will be used in the office surgery –
TS: Good point.
LE: – in lieu – I mean in the office setting in lieu of surgery. But we still think like – Tom, so get this. Thirty million patients suffer from sinus surgery. Only a half a million patients actually – I mean suffer from sinusitis. Only a half a million undergo sinus surgery.
LE: So even if we start moving some more into the office, really what we’re looking at doing is expanding the patient population who can benefit from some sort of procedure.
LE: So we think over time it’s not so much that it’s going to be a pure shift from the surgical setting, but really more patients will benefit.
TS: And you’re getting good news on the reimbursement front as well?
LE: You know, we’re making progress there. That’s one thing that I’d love for things to move more quickly. But we are. Payers are really starting to see the benefit of the technology. We have had a couple of papers that have been written by third parties around the cost effectiveness of our technology and use in this patient population. And then we’ve made some headway in terms of coding, but as you know, it’s a multi-year, multi-step process.
TS: Sure. So at this point, if this is used in conjunction with the surgery, the product is being paid for out of the reimbursement for that surgery, whether – the same amount they’d be getting, whether or not they use Propel?
LE: Yeah. So right now we’re an adjunct to surgery. And we come out of the existing hospital or surgery center margins. The good news is, though, as of January first of this year, reimbursement rates on average for a sinus surgery procedure went up $1000.
LE: So the cost of our implant is 750 per implant, $1500 per procedure. And so while it doesn’t cover the full cost, the fact that there are more available funds for the procedure is certainly a positive for us. And we think will be a tailwind for this year. Obviously we want to make sure those dollars are used for improved patient care. So those are exactly the kind of conversations we’re having today, both with hospital administrators as well as physicians.
TS: Is reimbursement your primary challenge? Or is there something else that you find vexing?
LE: Yeah, I would say reimbursement is probably the biggest challenge for everyone walking the streets of San Francisco this week. So I think we all struggle with the fact that there just isn’t as much clarity and certainty around what the process is in terms of coding, coverage and payment. And that’s something we started working on years ago and likely will be working on years from now.
TS: Interesting. What’s your ultimate vision for Intersect? What will you be when you’ll be what you want to be?
LE: Yeah. We really see ourselves as the leader in improving the quality of life for patients with ear, nose and throat conditions. So it isn’t just specifically to the products that we have today, but really being viewed as the partner of choice for the otolaryngologist.
TS: Have you looked downstream at smaller companies with products that you can license or acquire? Are you in that sort of position yet?
LE: Yeah. You know, it’s a good question. We’re in a great position in terms of the product portfolio we have, the fact that we have two products commercial, we have a couple other products in the pipeline. We still haven’t – we’re just scratching the surface in terms of what the potential is globally. That said, we do think we are developing a very strong channel to the ENT, and there really aren’t that many companies that have the kind of capability we do in terms of customer facing. And we really do believe we have not just one of the largest, but actually one of the strongest commercial facing organizations. So you might see over time the potential to add more things to the bag, if you will.
TS: This is my boneheaded question of the day. But do you have – we talk about the importance of digital technology as it moves into medtech. I can’t for the life of me imagine where you might fit a digital component into what you do, but is that a conversation you have and something you think about?
LE: Yeah, and I think many specialties, digital is going to be incredibly important. You know, you think things like diabetes and some of the other areas. You know, for us, since it isn’t – we’re not getting that data today, it would be thinking about potentially new products that might – we’d be able to incorporate a digital component. So not something that’s, at least in the near term, a focus of ours.
TS: It’s not at the top of your to-do list right now.
LE: No. I’ve got plenty of things, especially on a week at the JP Morgan. Got a long to-do list.
TS: That’s fantastic. And final question. Beyond reimbursement, what else about medtech, if you could change it, could you change to make things easier?
LE: You know, I would change reimbursement.
LE: And part of which is not just the clarity.
LE: It’s also the uncertainty and the timing. And so the way that innovation happens now, you have all the risk associated with research and development and clinical. And it used to always be regulatory was that big black box. And now, unfortunately, you have regulatory and then you have reimbursement. So in order for a product to get from point A to actually being to the point, you know, where you actually have it paid for and patients are getting benefit from that, you know, that is a long process. So I think the only way we’re going to really change sort of the ecosystem in which we live is by figuring out is the way to parallel path those or really streamline that process. Otherwise, it’s going to be really challenging to attract venture capitalists and other – having people put capital at risk, given that the timeframes are so long relative to what they had been historically.
TS: Do you see a path to getting something done there?
LE: You know, it seems like there are people who are interested and you’re starting to hear rumblings from the FDA, and are there things that we can do to make things happen in a more streamlined fashion. I think it’s challenging from reimbursement because there are so many stakeholders. And unless you sort went all the way to a single payer system, which is hard to imagine here, at least stateside, it’s hard to think about that getting a lot simpler, at least any time soon.
TS: Excellent. Well, thanks for taking a few minutes to join us today.
LE: All right. Thank you so much. Appreciate the time.