UPDATE: JPMorgan Downgrades Intersect ENT (XENT) to Neutral
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(Updated - November 2, 2016 10:38 AM EDT)
JPMorgan downgraded Intersect ENT (NASDAQ: XENT) from Overweight to Neutral with a price target of $16.00 (from $25.00). The change follows the release of the final HOPPS rule.
"After the close on Tuesday Medicare released the highly anticipated Hospital Outpatient Prospective Payment System (HOPPS) final rule. In what is seemingly a worst case for manufacturers, CMS finalized the bundled payment rates for FESS (sinus surgery) procedures that were first proposed in July without any material adjustments," said analsyt Michael Weinstein. "... the simple explanation is that reimbursement for endoscopic sinus surgery is moving away from a fee-for-service model to a bundled payment, resulting in up to a 68% reduction in reimbursement for a bilateral total sinus surgery ($4,361 vs. $13,799 in FY16). The biggest headwind to Propel adoption has always been cost, even though historically there was ample headroom for both Propel usage and hospital profits. At just 10% of Intersect’s volumes CMS’s bundled rate won’t have a material impact on sales; however, the risk is that commercial payors follow suit, and even at the usual 135%-140% commercial premium to CMS rates, it makes it difficult to justify Propel usage at these levels."
The analyst added, "In short, the world in which XENT operates is about to change, and while it’s impossible at this point to quantify the impact, the headwinds to Propel adoption just got that much more real. We are, as a result, lowering our 2016-20sales estimates, lowering our 2017 YE PT to $16 (3.0x 2018 EV/Sales), and downgrading XENT shares to N from OW."
Shares of Intersect ENT closed at $14.70 yesterday.
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