Intersect ENT: Bringing Drug/Device Convergence to ENT

As we’ve often noted, the introduction of drug-eluting coronary stents (DES) nearly two decades ago was believed by many medtech executives to be just the beginning of a revolutionary movement in medical devices.

DES themselves created arguably the first blockbuster medical device category, and that, many believed, was only the beginning. The ability to incorporate active therapeutic agents into what are otherwise passive tools in the hands of physicians and surgeons would, it was hoped, usher in a new era in medtech, defined by devices both clinically and commercially of much greater value than historic devices.

That revolution never really took place for a number of reasons. Incorporating drugs into medical devices proved so difficult that wide-scale drug/device convergence was impossible. Ask any medtech executive who worked on DES during the early years whether the time and dollars invested in drug/device convergence was worth the effort. Odds are, most will say no. Plus, critical cultural/operational issues differ so dramatically between drug and device development that merging the cultures proved extremely difficult.

Still, if drug/device convergence is unlikely to play a major role in defining medical device technology going forward, it would be wrong to dismiss the value of convergence out of hand. In many surgical procedures, the ability to deliver a drug locally to promote healing represents an important advance over systemic drug delivery. In the ear, nose, and throat (ENT) space, Menlo Park, CA-based Intersect ENT is helping to bring the benefits of drug/device convergence to one of the most difficult of procedures: surgery to treat chronic sinusitis.

Delivering Drugs Locally

Founded in 2003 as Sinexus, Intersect ENT was the brainchild of Don Eaton, a serial entrepreneur who had previously launched an ophthalmology company that had developed a system to inject steroids into the back of the eye to treat macular edema. Discussions Eaton had with some ENT physicians revealed that one of the primary frustrations that these physicians face is the inability to get steroids into the sinuses to treat sinusitis. At the time, the only way to do so was either through drops or irrigation, which often forced patients to hang their heads awkwardly several times a day as the drug found its way into the sinuses.

The early 2000s was a time of innovation in the treatment of sinusitis, as companies like Acclarent (now part of Johnson & Johnson) and Minneapolis-based Entellus were pioneering new ways to open the sinuses by replacing conventional surgery with balloon technology and stents. Intersect’s technology represents an adjunct and complementary therapy for both balloon-based and conventional surgery by solving the problem of steroid delivery. “The physician opens the sinus in whatever way he or she wants and our implant is placed afterwards, providing local, focal delivery of the drug,” explains Intersect CEO Lisa Earnhardt.

There are around 30 million people in the US who suffer from sinusitis, but only about three million actually consult an ENT. Of that group, approximately 1.9 million are indicated for surgery to deal with their symptoms, but only 540,000 actually undergo the procedure each year. Those who don’t opt for surgery turn either to some kind of medical therapy—intranasal steroid sprays, oral steroids, antibiotics, antifungals, antihistamines—or some alternative therapy, such as rinses or head-hanging positions, to relieve their symptoms. “Sinusitis is an incredibly debilitating condition,” says Earnhardt, “and one of the top 10 most costly conditions to US employers.” Patients who decline surgery do so for a variety of reasons, including fear of the risks inherent in any surgery, the discomfort associated with conventional sinus surgery, and a reluctance to take time off from work for the surgery and recovery.

Approved in 2011, Intersect’s first-generation device, PROPEL, is a bioabsorbable implant that delivers drugs to prevent the inflammation and scarring that occurs following sinus surgery. The drug used in PROPEL is mometasone furoate, a corticosteroid, incorporating the same active ingredient that’s in Nasonex. Earnhardt notes that early on, Intersect evaluated 30 compounds to find the right drug, “and [mometasone furoate] is absolutely the most efficacious for this application.” In addition, because the delivery of the drug is local, Intersect’s device can use significantly less steroid than a patient on systemic oral steroids would receive. “We’re putting the steroid exactly where it’s needed so you don’t have a side-effect profile,” says Earnhardt. “It makes perfect sense.”

More than just a drug delivery device, PROPEL (and its sister devices) also delivers an important structural effect; Earnhardt compares it to a drug-eluting coronary stent. Moreover, within 30 to 45 days after implant, the device dissolves while the drug remains in the tissue and continues to treat the sinusitis. Anatomy differs from patient to patient as does the extent of the surgery, which means the device has to be somewhat conformable to the anatomy of each patient and each surgery. A second-generation device, the PROPEL Mini, approved in late 2012, is a smaller version of PROPEL, designed to treat the Ethmoid sinus, the small, honey-combed sinus that represents the main drainage passageway.

Around 85% of all sinus surgeries focus on the Ethmoid sinus, and Earnhardt notes that as less-invasive approaches to sinusitis catch on, many surgeons are trying to perform smaller surgeries with less trauma to the sinus tissue and with the removal of smaller amounts of bone. The PROPEL Mini offers drug delivery with what might be called a smaller footprint inside the sinus. In addition, the Mini received an expanded indication for treatment of the frontal sinus in 2016. The focus of about 30% of sinus surgeries, the frontal sinus has, Earnhardt explains, “a very narrow passageway and is really challenging given the proximity to the eye and the brain. That’s where the Mini comes into play.”

Finally, Intersect’s third device, the PROPEL Contour, approved in February of this year and on the market since March, is designed to treat even smaller passageways in the frontal and maxillary sinuses. Earnhardt notes that the clinical data for the Mini is strong, “and for some patients the Contour will work even better, especially in the case of the physician who’s using a balloon to open the sinuses.” Indeed, Intersect’s clinical studies show Contour delivers a 73% improvement over surgical intervention alone.

With its recently filed NDA, Intersect is now looking forward to the approval and release of its fourth product, Sinuva (formerly called Resolve). Sinuva has four times the drug of PROPEL and is designed specifically for patients with recurring sinusitis, specifically polyps. Designed to treat patients in an in-office setting, Earnhardt notes that the device targets patients who have previously had surgery and are headed for revision surgery. “Instead of taking them back into surgery, the ENT can treat them in an office under local anesthesia, less invasively and more cost-effectively,” she says.

In addition, patients can be treated with the Sinuva implant more than once and might come to see it as a recurring treatment option. Most importantly, Earnhardt goes on, for the target patient group there are no other options: “In our clinical trials we targeted patients who had failed oral steroids and were indicated for revision surgery. For those patients, current treatment options are limited.”

A New CEO

Following a couple of years of concept development and some seed capital, Intersect ENT raised its first round of capital in 2006—from Kleiner Perkins, Caufield & Byers and US Venture Partners—a Series A that brought in $10 million in two tranches. In addition, renowned device developer Fred Moll, MD, the person behind Intuitive Surgical, Hansen Medical, and most recently, Auris Surgical Robotics, was a seed-stage investor. At the time Earnhardt joined the company in 2008, Intersect had done some early work in humans but, she notes, “We faced some significant questions. Did it work? Could we prove it? Could we build it?”

Earnhardt came to Intersect after a long career in the cardiovascular device industry. Just out of business school, she joined Guidant in 1996 as part of the cardiac rhythm management team in marketing, operating out of Minneapolis. After several positions in CRM sales and marketing, she moved to California six years later to join Guidant’s cardiac surgery business, focused on promoting minimally invasive surgery, as a sales and marketing executive before eventually running the cardiac surgery group as President.

Boston Scientific acquired Guidant in 2006, and by 2008, as part of a broader restructuring resulting from the integration, had spun out the cardiac and vascular surgery business, which by that time included not only Guidant’s MIS-focused business, but BSC’s Meadox product lines as well, to the Maquet division of Getinge. Maquet asked Earnhardt to stay and run what was then a new cardiovascular franchise, but she had other plans. “I was living in Silicon Valley where there was a lot of start-up activity,” she recalls. “And it occurred to me that if I was ever going to make the move [i.e., to running a start-up], that was the time.”

Earnhardt landed not at one of the myriad cardiovascular start-ups in Northern California, but at Intersect, as CEO in March of 2008, replacing Don Eaton, at the suggestion of Dana Mead, former head of cardiovascular at Guidant, at the time a partner with Kleiner, Perkins. (Mead is now CEO of ophthalmology company Beaver-Visitec.) Mead knew Earnhardt from their days together at Guidant where she had been instrumental in the launch of the company’s PRIZM implantable defibrillator.

By March of 2008, Intersect was running out of money and as luck would have it, Earnhardt’s first task as a new CEO was to raise the company’s Series B round in what would soon emerge as the most difficult financing climate medical device start-ups have ever faced. In retrospect, Earnhardt argues that her lack of experience—her “naïveté,” as she puts it—worked in her favor since she had no real expectations that it would be difficult. “Our drywall date was June,” she recalls. “And my attitude was ‘Great, let’s get this done,’” not recognizing that in a couple of months the world would be turned upside down. “I guess I didn’t know what I didn’t know.” It was fortunate, too, that Intersect was starting early in 2008 and already had a strong group of existing investors. Had Intersect begun its fundraising in September instead of March, “we would have been dead in the water,” she says because of the global financial crisis that fall.

The compressed time frame—Intersect had about three months of capital left—forced Earnhardt to learn the Intersect story quickly and find the story points that would convince VCs to invest. “It was fun, but it was like drinking from a fire hose,” she says.

Earnhardt did raise the capital—Intersect actually had several term sheets before the June deadline hit—with Austin, TX-based PTV Healthcare Capital leading the $20 million Series B round. Evan Melrose, PTV’s founder, and Rick Anderson, a former head of cardiovascular at J&J, made the investment on PTV’s behalf. Earnhardt had gotten to know Anderson several years earlier when, during the months when it looked as if J&J would be the eventual winner in the battle for Guidant, she and Anderson sat together on some early planning meetings between the two organizations. “That didn’t work out, but we both felt that in the future, if there was an opportunity to work together, we would,” she recalls. “When I needed to raise money, Rick was one of the first folks I reached out to.”

In a lot of ways, Intersect represented a new experience for Earnhardt. “I had managed businesses before,” she notes, but Intersect was “much earlier stage than I had done previously.” ENT also took Earnhardt away from the cardiovascular device space in which she had grown up. In some measure that was by design: by 2008, as she contemplated what to do next, Earnhardt decided she wanted “anything non-cardiovascular, if only because I had spent my entire career there and I was at a point where I really wanted to do something that was much more white space and offered the opportunity to really develop a market.”

Intersect provided the perfect opportunity—obviously outside of cardiovascular, there was still something of a familiar feel. “Instead of less-invasive approaches to cardiac surgery, this was a less-invasive approach to sinus surgery,” she notes. Though she’s cautious about comparisons to drug-eluting stents, Earnhardt points out “there are similarities in the use of catheters, the delivery system, the structural nature of the implants.” As Earnhardt saw it, Intersect was “a great opportunity to fulfill a true unmet need where there hadn’t been anything before,” yet at the same time doing so with a technology that was “relatively familiar” from her days in cardiovascular.

A Regulatory Roadblock

Intersect officials believed that the $20 million Series B would take the company through regulatory approval, assuming, based on some preliminary interaction with the FDA, that the device would be eligible for a de novo 510(k). But the FDA ultimately decided that the company would have to do a PMA, with all of the delays and extra costs that would entail. Intersect had dodged a bullet when it closed its second round of financing before the full impact of the global recession hit in 2008, but it ran head on into the other major challenge that medtech start-ups faced at the time: a crackdown on 510(k)s at the FDA.

Earnhardt recalls a 2009 meeting at FDA headquarters that coincidentally fell on her birthday. “We went there with all of our clinical data thinking this was the pre-submission meeting for our 510(k),” she says. “And all of a sudden, they say, ‘Well wait a minute.’ And we found out it was going to be a PMA. My first reaction was, ‘You’ve got to be kidding.’”

Indeed, by the time Intersect was preparing for regulatory submission, “the pendulum had swung to be more conservative,” Earnhardt notes. “At the time, there were a lot of questions around the 510(k) process, and our technology was truly novel.” Intersect’s early clinical work had shown the device’s safety profile to be “very clean,” Earnhardt says. But there was a lot of uncertainty at the agency at the time and the de novo process, in particular, was not well-defined. Acclarent and Entellus had gone down a 510(k) route, using balloons as a predicate; Intersect’s device was, says Earnhardt, “a whole different ballgame, but isn’t that the definition of innovation?”

Ever the optimist, Earnhardt says that, while de novo 510(k)s can be challenging because each one is a kind of universe of one, “what’s nice about the PMA is that there are specific dates and deliverables that the FDA has to come back with.” Still, Earnhardt had joined Intersect assuming that once the company raised its Series B round, it would be on a fast track to commercialization. The new regulatory path slowed Intersect’s time to market by two years, she says, both because the PMA process is itself more rigorous and time-consuming and also because the company would have to do another clinical trial to meet the new regulatory requirements.

To handle the PMA submission, Intersect beefed up its team to replace the consultants it had been using, and Earnhardt says the team “did a phenomenal job” in preparing for the PMA. “Our pivotal trial had great outcomes.” But, in the meantime, the company would have to do another round of fundraising since the Series B wouldn’t be enough to take it to the early commercialization the company had envisioned. And this time, 2009 to 2010, Intersect couldn’t avoid the financing crunch that hit medtech start-ups so hard.

The company had a blue-chip roster of investors—Kleiner Perkins, USVP, PTV—which in any other climate would have made the Series C easy. But by 2010, raising capital for medical device start-ups was difficult for everyone, and the additional challenge of the shift from 510(k) to PMA would only make potential new investors even more timid.

A Financing in Tough Times

Complicating Intersect ’s PMA bid: there had been only one other PMA in ENT before Intersect’s, and that was for cochlear implants. Intersect would be submitting a PMA to an agency that didn’t have much experience in the company’s clinical space. “We did a fair amount of education and were very collaborative with the FDA,” Earnhardt says. “It was great, but we definitely invested more than we would have had we worked with the cardiovascular group,” all at a time when Intersect was running low on cash and facing what Earnhardt calls “a resourcing constraint.”

In addition, Intersect’s technology was a combination product, a drug/device convergence play, even if the drug was generic, meaning that both CDER and the Office of Combination Products would weigh in. Fortunately for Intersect, Earnhardt had recruited a team of executives, many of whom had worked at Guidant, Medtronic, Abbott, and Boston Scientific and had had experience with other combination products, most notably drug-eluting stents. “The majority of my team came from the cardiovascular world and they really understood the drug component of the device,” she says. In fact, the core technical team had developed the Absorb bioresorbable stent 15 or so years earlier when it had been a project at Guidant. “There was a lot of expertise around the table, but it was a whole new anatomy and a whole new customer base,” she recalls.

In the end, the FDA’s decision not to send Intersect’s device to a panel had Earnhardt “breathing deeply again.” Still, even with the favorable ruling, raising capital in 2010 wasn’t easy. “We definitely hunkered down in 2009 and 2010,” she says. The company didn’t have to lay off a lot of people, she recalls, “but ran incredibly lean. Everyone treated each dollar as if it was their own. Capital efficiency was the name of the game.”

In addition to the broadly felt fund raising difficulties that plagued all medtech start-ups in 2010, the fact that Intersect was in the midst of its pivotal trial also gave investors pause, since most of them wanted to see the clinical results before putting their money in. In the end, Intersect was able to attract several interested parties and raised $30 million, but, says Earnhardt, “It was a really challenging time; it was definitely a buyer’s market.”

Intersect’s existing investors came in for the Series C round, “but most VCs weren’t putting money into new investments,” she recalls. In part, Intersect eased financing by turning to an investment from a strategic, in this case Medtronic, in an investment championed by Mark Fletcher who was running Medtronic’s surgical technologies business at the time. Medtronic not only brought capital but also what Earnhardt calls the ‘Good Housekeeping seal of approval.’ “The view was, if Medtronic is in, this must be the real deal,” she says.

A Less Painful Procedure

Intersect’s financing closed in October of 2010, about a month after the un-blinding of its clinical data, just as the company had run out of operating capital. Intersect had stopped all spending except payroll. Says Earnhardt, “If the data hadn’t been positive, that probably would have been it. We’d have had to sell the IP and other assets. It wasn’t as if there was any other clear pathway forward.”

Intersect’s clinical study was a randomized trial that sought to prove the benefit of adding the drug to the implant. The study used an intra-patient control in which each patient had one sinus that received the PROPEL implant with the other sinus receiving a non-drug implant. The primary endpoint was reduction in the need for postoperative interventions, and secondary endpoints included reduction in inflammation, in the need for medication, and in scarring, which can lead to adhesions. In the end, PROPEL was approved.

As noted, of the 30 million people who suffer from sinusitis, only a very small number actually undergo surgery. Whether that’s because of the ugly nature of conventional surgery or for some other reason, the difference between the treatable population and the treated suggests that there’s tremendous potential market expansion for Intersect looking ahead. Moreover, unlike novel sinusitis approaches like Acclarent’s and Entellus’, which introduce a whole new way to a perform sinus surgery, Intersect’s technology can be an adjunct to conventional sinus surgery as well as those new approaches, thus appealing to a more conservative physician base.

Still, new, less-painful approaches to surgery are part of Intersect’s story and opportunity. Noting the “educational component” in Intersect’s strategy, Earnhardt argues that sinus surgery today “isn’t like the sinus surgery of yesteryear.” Patients who’ve undergone sinus surgery are usually “packed with gauze to keep the passage open,” she goes on. And for a lot of patients “actually the most painful part of the procedure comes when that packing is removed in the office-setting. Some women have told us that the pain is worse than childbirth.” Intersect’s procedure obviates the need for that kind of packing.

For an elective procedure like sinus surgery, that level of pain is a huge deterrent for many patients, one reason for the low penetration rates. But there’s an additional benefit to the Intersect device: because the steroid is delivered as part of the procedure, there are no issues with patient non-compliance with the drug regimen post-op. “We have 100% patient compliance because you don’t have to rely on patients taking their drugs postoperatively,” says Earnhardt.

Earnhardt points out that other approaches to delivering drugs to the sinuses have failed in the past—Acclarent, for example, toyed at one point with the idea of filling their balloons with drugs but never got the device through approval. It is important to note that small hairs or cilia in the sinuses serve to clear the sinuses of all foreign matter. As a result, “gels and other foreign factors are typically washed away from the sinuses in a couple of days so you really don’t get a therapeutic effect," she says.

Another Tool for ENTs

Reflecting on the regulatory issues she encountered soon after arriving at Intersect, Earnhardt says, “When I started in March of 2008, I thought I’d be launching in a year and a half to two years. It ended up being almost three and a half years later.”

With three products now approved and on the market, Intersect’s focus now is on the kinds of commercial issues on which Earnhardt cut her teeth during her Guidant days.

At Guidant, Earnhardt encountered both aggressive early adopters (in interventional cardiology) and more conservative physicians when she ran the cardiac surgery business. ENTs, or otolaryngologists, “tend to be conservative in their approach to new procedures and technologies," she says. The balloon approach pioneered by Acclarent ran into resistance early on, she goes on, because it was perceived as a replacement for the kinds of surgeries ENTs were performing, “rather than a tool they can use, another option,” she says. “And I think they did that because they were trying to create a whole new space. But when you have a conservative specialty, it’s sometimes hard to get [physicians’] buy-in. It was attention-getting for them when they launched.”

Though Intersect’s technology is more adjunctive than competitive and is relevant to, rather than a replacement for, conventional surgery, the early experience of the ENT balloon companies certainly resonated. That’s why Earnhardt notes that part of Intersect’s challenge lies in how the company positions itself. As noted, for all the affinities with balloon-based sinusitis treatments, Intersect’s applicability extends beyond those approaches. “We definitely appeal to a broader base of surgeons,” she says, “balloon users, non-balloon users, the academic community. Most physicians believe localized drug delivery in the sinuses makes a lot of sense. And, of course, the data supports that hypothesis.”

A Targeted Roll Out

For now, Intersect is focusing its commercial efforts on the US. Early on, Intersect officials debated whether to launch outside the US alongside its US efforts and in the end decided on a US-only launch. “We firmly believed that unless we could build a business in the US, we ultimately wouldn’t be successful,” Earnhardt says, if only because “elective procedures outside the US are oftentimes treated very differently in terms of the value placed on them.” In countries with nationalized health systems, conditions like sinusitis are often given a lower priority, even though there are significant co-morbidities associated with the condition.

Indeed, sinusitis procedure volumes in Europe are about half those in the US with a similarly sized population. The fact that Intersect is a combination device was also a consideration because of the regulatory pathway. “Companies with a purely mechanical device might find an easier pathway in Europe because of the challenges with FDA requirements,” she goes on. “But we didn’t think that would be the case with a combination device.”

Intersect began its US commercialization with a targeted roll out, focusing on six markets “geographically dispersed, but with large populations and high surgical volumes,” says Earnhardt, including Chicago, Atlanta, New York, and Texas. And the results have been impressive. In New York, for example, 60% of the patients undergoing sinus surgery each year are treated with the Intersect technology. Today, of the 7,500 physicians who perform sinus surgery, around 2,500 use the device.

And with its successful US launch underway, Intersect has now started to explore its opportunity in Europe, beginning in Germany. As noted, in the US, Intersect began by targeting a handful of markets where the company “went deep, drove traction, and then expanded,” Earnhardt says. “We’re doing the same thing in Europe. We want to walk before we run; we want to make sure we’re establishing the groundwork from a reimbursement perspective before we invest a lot of resources.” Germany came first because of the size of the market and the presence of some important KOLs, she goes on, and Intersect this year received Status 1 approval with Germany’s NUB. But expansion to other major European markets is also on the table in what Earnhardt calls “a long-term growth play for us.

 Intersect also has plans in the Pacific. The company has initiated work to gain regulatory approval in Japan, and China is an intriguing, if somewhat daunting, market for the company, largely because of what Earnhardt calls “the compelling market needs there,” most notably, the heavy pollution that has made the Chinese population prone to pulmonary and sinus problems and eager to address them. Still, the difficulty of effectively serving such a large country raises both questions—should a company work with a local partner or go it alone—and concerns, particularly around copycats and competition from local players. China is, says Earnhardt, “a lot more complicated for a company our size. Our philosophy is that we want to focus on a few things, do them well, and earn the right to go beyond that.”

Cost Pressures and a Move to In-Office Procedures

In addition to geographic considerations, Intersect is also targeting new settings and procedures to fuel expansion. One critical target: physician-office procedures. The company’s first designs and its first sales and marketing efforts positioned the devices as adjuncts to surgical procedures. “ Contour was the first device where we started taking into account that more procedures are being done in the in-office setting,” Earnhardt says, largely to move treatment into lower-cost settings at a time when health systems in the US and around the world face cost pressures. Importantly, too, Sinuva, awaiting approval, is targeted for in-office procedures.

The decision to do a procedure in-office is made based on a combination of physician preference—how skilled he or she is—and the patient’s etiology. Sinusitis is a progressive disease; patients for whom the disease has progressed significantly almost always have to be treated in a hospital operating room. If caught early enough, however, the patient is a candidate for lower-acuity settings such as the physician’s office. “That’s where we think Contour can play a role, treating patients earlier in the disease’s progression,” she notes.

Sinusitis is also a chronic disease, with most patients diagnosed by the age of 40. Indeed, compared to patient populations in other diseases and conditions, Medicare plays a relatively small role in sinus surgery. Earnhardt describes a “continuum of care” in sinusitis, with the earliest treatments focused on medications such as intranasal or oral steroids. Patients who have more severe sinusitis—perhaps with polyps—are going to need surgery because the surgeon has to remove bone and tissue just to create the passageway for aeration and drainage. (Chronic sufferers also can’t take lifelong oral steroids, usually the first course of drug therapy, because of the associated side effects.) And while surgery is part of the treatment protocol, and an important one because it allows for drainage and the delivery of drugs into the sinus, it’s not, for the most part, curative. “Some patients will continue to be treated by the ENT for life,” says Earnhardt. “They’re married to their doctor.”

But the decision to treat in-office isn’t driven just by the severity of the condition; there are important cost considerations as well. The shift to in-office procedures and lower-cost settings is still in its early stages: today, of the 540,000 sinus surgeries performed each year, just under 10% are done in-office. There will, of course, always be patients whose conditions are so severe or complicated that they need to be treated in a hospital, but the move to in-office settings “is where the market is headed,” says Earnhardt, because that ability to lower costs “is so important.” (Follow-up treatment for long-suffering chronic patients is sometimes done in the physician’s office after the first couple of surgeries.) Because the patient population skews younger, there are also cost considerations beyond those related to the procedure itself. Most sinusitis sufferers are in the work force; one recent study suggested that workers with sinusitis miss over 20 days of work a year due to the side effects associated with the condition, such as fatigue and depression. As a result, it’s one of ten costliest conditions for employers in terms of lost productivity, as employees are absent for about a month of work.

That said, the cost argument can be tricky for Intersect. Earnhardt notes that one path of resistance Intersect runs into is simply that using its device adds another cost to the procedure. (A second path of resistance—the basic conservatism of surgeons—plays into that because surgeons, by training and temperament, are more inclined to believe they don’t really need a new technology than are early adopters like, say, interventionalists.) “There’s always the question, ‘Is this worth it? What’s the value I’m getting?’” Earnhardt notes. Indeed, Intersect can make a longer-term case for the cost benefit of its technology; the challenge is to make a short-term one as well. “That’s one of the issues we’ve had in trying to establish this as a standard of care. It’s unfortunate that the way the healthcare system works today, the incentives aren’t always aligned. It costs more up front for the procedure. But the benefits are reaped over time. That’s like most implants. That’s just how it works. At the end of the day, we are improving outcomes and lowering costs. It’s a winning combination.”

Here, too, education is a large part of Intersect’s strategy. Earnhardt says that the large integrated delivery systems with which Intersect has worked—IDNs like Kaiser and Geisinger—“those truly integrated delivery systems really have seen the benefit and embraced it. Now it’s just a matter of creating believers in the physician community.”

An IPO

Intersect’s several private rounds of financing would take the company into its early commercialization efforts, but wouldn’t be sufficient for a full-scale ramp up. To do that, it would have to raise more money, and rather than do another private round, the company chose to tap the public markets. Indeed, having started in six markets, Earnhardt says, “once we developed a formula for success, we started scaling.” In turn, she goes on, “our IPO was all about growth and scaling.” Of course, it also provided liquidity for investors, particularly early VCs like KP and USVP, who had been investors for almost a decade.

Intersect was one of a handful of companies—Nevro, LDR, Tandem, and Glaukos to name others—that snuck into the public markets a few years ago after several years that saw few if any initial public offerings of medical device companies and before the market closed recently. (In 2009, there were no medtech IPOs.) “At the time [Intersect went public], I think two medtech companies had gone public in the second half of 2015. For us, two points made a line,” says Earnhardt.

The year before its IPO, Intersect had done a final private round of financing, its Series D, to prepare for commercialization, with Norwest Ventures joining existing investors. Earnhardt says that when she joined Intersect nearly a decade ago, the notion that she would one day run a public company was the furthest thing from her mind. “Oh my goodness, are you kidding me?” she laughs. “We thought that the quickest way to scale our technology to the market would be to be acquired by a larger company.” And in fact there has been interest on the part of strategics, she says. “But we had such strong conviction around our potential,” no deal was ever struck. The goal of the public offering was to raise the capital “that would help us fulfill our vision,” she says.

At the time of its IPO, Intersect had two products on the market, PROPEL and PROPEL Mini, with Contour having just done its first human case and Sinuva on the horizon. “We had this incredible pipeline that we wanted to invest in and we had invested very heavily in clinical evidence,” Earnhardt says. “We knew we had some pretty significant work to do to get both Contour and Sinuva to market.” Intersect could have done yet another round of private financing “, she goes on. “And we would have gotten to profitability, but it would have been a very different story for us because we wouldn’t have been able to invest in the pipeline the way we did [as a public company].”

But going public has also changed Intersect’s story in some ways. Earnhardt acknowledges that running a public company, answerable to a different sort of investor, is different from running a private company backed by experienced, supportive investors. “There’s so much more to running a public company as a CEO,” she notes. “You don’t make different business decisions, but there’s scrutiny around every quarter and our results.” After going public at a price of $11 in 2014, Intersect hit a speed bump in the first quarter of 2016 when it missed its consensus revenue goal by $200,000, less than one percent of its sales. The day of the announcement, Intersect’s stock price dropped dramatically, and at one point in December of 2016 was trading under $10. “Was there any real difference in the value of our business?” she asks. “No, and that’s the hard part, managing expectations and keeping the faith.”

The Partner of Choice

About the IPO, Earnhardt says, “It was great for us to be able to access new capital and be able to invest so heavily in the business. But I don’t think we’re making different decisions. Intersect’s stock price has since recovered and as of early August was trading at over $30 a share, nearly triple its IPO price. Earnhardt disagrees that being a public company has limited her options, narrowing her time frame and forcing decisions she wouldn’t have made had Intersect been privately-held. “As a company, we’ve always been very disciplined,” she says. “Everyone [in the company] knows exactly what we’re focused on and we’ve always held ourselves accountable to our own quarterly objectives. We’ve always been the kind of company to focus on a few things and do them well in order to earn the right to do more.”

What more will that be? Earnhardt insists that Intersect has “so much work to do just with our existing product line.” Most immediately, the company’s goal is to become, in Earnhardt’s words “the standard of care” in treating sinusitis, and she notes that in some markets, like New York, where it has been on the market for half a decade, Intersect has already established itself as that.

Longer-term, the company hopes to position itself as “the partner of choice for ENTs.” ENTs do much more than just treat sinusitis, she says. “We have so much more work to do. Do we follow [our existing] technology or are there other things that could be adjacencies to what we’re doing?” Framing Intersect’s next moves: the company has built what Earnhardt calls “the largest and arguably the strongest sales force” in the US in ENT today. And, she notes, “There are other products that we could, potentially, add to the bag,” not necessarily drug delivery, but devices that are used during sinusitis and other ENT procedures.

Before that, however, Intersect faces tremendous opportunity in its target market. Today, the company’s devices are used in about one in ten sinus surgeries in the US. “We have incredible room to scale,” Earnhardt says, especially in those markets beyond the original six where Intersect’s penetration rate is considerably higher. All of which should put the company on the path to profitability in the short term. The competition between J&J/Acclarent, Medtronic, and Entellus, which went public a year or so after Intersect, could help Intersect as well by expanding the market for sinus procedures. All of which is kind of amazing given the challenges Intersect faced when Earnhardt joined the company in 2008, including two financial crunches and an unexpected switch in its regulatory path. “We essentially threaded a very small needle from 2008 all the way to our IPO,” she says. “It wasn’t always pretty along the way, but I’m proud of what we were able to accomplish as a team.”

But Intersect’s ambitions and opportunities reach further than its original vision. “We want to stay true to being an innovation leader, with strong clinical evidence,” Earnhardt goes on. “That’s really what we’re known for. We’re focused on creating lasting value and delivering strong long-term growth.”

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