Intersect ENT (XENT) Q1 2019 Earnings Call Transcript

Intersect ENT (XENT)
Q1 2019 Earnings Call
May. 06, 2019, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon, everyone, and welcome to the Intersect ENT first-quarter 2019 earnings conference call. [Operator instructions] Please also note today's event is being recorded. At this time, I'd like to turn the conference call over to Intersect ENT's CFO, Jeri Hilleman. Please go ahead.

Jeri Hilleman -- Chief Financial Officer

Thank you, Jamie. Joining me today is Lisa Earnhardt, president and CEO; and Kieran Gallahue, a member of our board of directors. Before we begin, I'd like to remind you that we will make forward-looking statements within the meaning of federal securities laws. Actual results and timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitations, our outlook for financial performance, salesforce 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 we filed with the SEC.

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

Lisa Earnhardt -- President and Chief Executive Officer

Good afternoon. Thank you for joining us. Before we discuss our first-quarter results, I want to take a moment to discuss the leadership transition that we announced today. After more than 11 years at Intersect, I will be stepping down from my role in early June as I have accept another opportunity as head of medical devices at Abbott.

Kieran Gallahue, who has serviced our lead director since April 2015 will immediately assumed the new role of executive chair and will also serve as interim CEO starting June 5. In addition, the board has commenced a formal process to assist with identifying our next leader. I will remain on the Intersect board and look forward to continuing to work closely with Kieran and the team. Over the last four years, Kieran has made significant contributions to our business and gave his deep understanding of our company.

He brings more than 20 years of leadership experience in the healthcare industry. Moreover, he embodied a core value of integrity, collaboration and innovation. Importantly, I know that in effect all of our talented employees will be a great hands with his leadership as we work to identify a permanent CEO. With that, I'll turn it over to Kieran for a few remarks.

Kieran Gallahue -- Board of Directors

Thank you, Lisa. Under Lisa's leadership, Intersect has become the leader in evidence-based innovation in the ENT specialty, and for that, we are grateful. On behalf of the board and the entire team, I want to thank you for your many contributions to our company and wish you the best and look forward to continuing to work with you as a member of the Intersect forward. I'm honored to take on the role of interim CEO during this important time for the company.

During my tenure on the board over the past several years, I've gotten to know the team very well. And I'm proud of the progress that we've made. That being said, there's always a big difference between being a board member and getting involved in more operational. I'm looking forward to digging in deeper, building relationships with the team and focusing on our opportunities to improve and expand.

As Lisa noted, we are undertaking the search process to identify a strong leader with the right skills and experience to position Intersect ENT for continued success. Importantly, all of us remained focused on executing on our priorities to improve the quality of life of sinusitis patients and drive value for our shareholders. As we work to identify to lead Intersect into the next stage of growth, we are committed to advancing our products in the marketplace and leveraging our expertise and localized drug delivery to drive growth across the portfolio. On that note, let me turn the call back over to Lisa.

Lisa Earnhardt -- President and Chief Executive Officer

Thank you, Kieran. Now onto our Q1 results and outlook for the rest of the year. Total revenue for the first quarter was $26.7 million, an increase of 8% over the first quarter of last year. While we are pleased with this performance, we recognize that we have yet to hit our stride with Sinuva.

We continue to spend a significant amount of time working with physicians on Sinuva market access, a consequence of Sinuva being the first of its kind physician-administered drug for the ENT specialties. The high degree of effort required by both our sales and market access team has continue to impact our ability to balance growth for both Propel and for Sinuva. Let me assure you that we do see our path to success based on Sinuva's seller clerical performance and the preliminary decision around that J code, both of which I will discuss further today. However, reflecting on our experience in March and April, historically strong months for us, we now expect that we'll take further time to work through the access and bandwidth issues to truly establish the foundation for Sinuva's long-term success.

That said, several important elements for the Sinuva role are progressing well. We continue to deliver turnaround times of less than two weeks per prior authorization and payer coverage remains broad and stable. We've engaged over 600 physician who have treated approximately 1,650 patients through the first quarter. And as I mentioned, both addition and patient clinical feedback remains favorable.

We attribute the slight decline in Sinuva revenue in Q1 through a few factors. As we hypothesized earlier in the year, we did see an impact from seasonality due to the resetting of insurance fee deductibles. Although, we were encouraged to see a 20% increase enrollments during Q1 over Q4, we fell short on getting these patients treated due to inefficiencies in the overall product access process combined with physician hesitancy to engage in buying bills. While our two-week turnaround time for prior authorization is acceptable, there remains a higher level of back and forth resulting in an excessive amount of time and effort for our team, as well as for physician offices.

Additionally, the number of physicians to have incorporated buying bill into their practices rose from 140 to 185. What we recognize that this still reflects a smaller function of our customer base than we'd like to see. We believe that a more streamline product access combined with the J code for Sinuva wanted in this space will provide greater assurance to our physician and allow them to prescribe Sinuva without hesitation. And on that front, I'm pleased to share a little more information on CMS's recent preliminary decision to assign a new J code that would allow for reporting on Sinuva.

We expect this code to be effective January 1, 2020, and that it will both streamline submissions to payers and increase physician confidence around reimbursement. CMS communicated that they intent to establish a new J code described as mometasone furoate implant 10 micrograms. This coding structure of unit dose is applied commonly in the case of drug delivery such as infusions and injection. Sinuva carries 1,350 micrograms of drug, so physicians will submit for of 135 units of the code per implant, which we would expect to be a straightforward in typical process.

CMS has also indicated a preliminary decision to eliminate the code as 10-90, which is currently assigned to Propel. While we will see clarity from CMS, we believe that there intent for Propel to reported under the new J code. As a reminder, despite the F 10-90 code, Propel is typically not reimbursed separately as it is bundled into the payment to facilities for the surgical procedure. We do plan to attend the upcoming CMS meeting to reinforce our concurrence set of J code for Sinuva should be established.

Net-net, we believe that the J code will help streamline access once it is in place next year, and may even bolster physician confidence in Sinuva overall. Needless to say, the positive position on the J code is welcome news. So taking a step back to reflect on a performing year to date, we are continuing to evolve our commercial strategy to address the challenges we have identified. At this point, it is clear to us that the product access process continues to be inefficient.

Our sales team is spending a disproportionate amount on Sinuva, diverting attention away from selling Propel. We continue to strive to improve this balance and believe that we will resolve this with time. Specifically, we are implementing changes to the sales force structure and have doubled the size of the field reimbursement team to support Sinuva access. Our approach at sales force structure is to place a greater focus on Sinuva in key markets through a team of Sinuva specialists who will work in tandem with our field sales team.

We believe that this additional sales support will immediately benefit both Sinuva and Propel. Regarding the second point, we have nearly doubled our reimbursement team, which now comprises 20 individuals, up from 11 since the beginning of the year. Our field reimbursement team is focused primarily on two objectives: One, helping patients through the funnels to ensuring that they get treated; and two, on reimbursement education for both physicians and their office staff. To that end, in April, we rolled out our Sinuva master class, an educational program for physicians and their staff that educate them on both the clinical aspects and product access.

We are hopeful these focused resources, clear roles and responsibilities and increased customer education will help us move the needle forward on Sinuva. We believe these actions will also allow our sales team to have the necessary time and attention required to drive growth in our core Propel franchise. With these changes, it is important to note that we are not expanding our sales force but rather strategically deploying team members so that we can fast meet the needs of the Sinuva rollout, as well as the continued growth of Propel. We have discontinued use of contract wraps, which were brought on as a transitional measure and are presently fully staffed at about 125 fields rep.

We believe that this team is the right size to engage with 7,500 ENTs that treat our target patient population across our product portfolio. Now let me turn to outlook. Based on our continued learnings and modifications to our commercial strategy, we are revising our 2019 outlook to $113 million to $117 million on growth of 4% to 8%. We expect to deliver modest growth in the second quarter as we work through this transitionary period.

Despite the challenges with Sinuva, I want to reiterate our conviction in the potential of make Sinuva the standard of care for chronic sinusitis. The why behind our convention is simple? It's the continuing flow of patient testimonials of about how Sinuva is making it different in transforming lives. We continue to hear about patients who can breathe freely for the first time in years. And how in a short period of time they go from being utterly miserable to having a newly come life.

For these patients, Sinuva works, it is making a life-changing difference. One of my favorite anecdote is from a highly regarded chef at New York, who is recently treated with Sinuva with a new permanent physician. This patient feels that he is creating the best meals of his life now that he can smell again. This positive feedback is encouraging not only to our team but also to our physician customers.

This is why we are focused intently on ensuring physicians and patients have access to Sinuva. With respect to Propel, we continue to believe that we have the opportunity to grow Propel through the addition of new accounts, continued rollout of Contour and expanding usage among physicians, who use the product selectively. Historically, with sufficient focus from our sales team, we've been able to grow uses through both current accounting expansion and new accounts. As a result of these recent actions to realign in commercial resources, we believe we will achieve higher growth rates to Propel after the initial transition that comes with salesforce realignment.

On that note, let me now turn the call over to Jeryl to take you through the further aspects of our financial results and outlooks.

Jeri Hilleman -- Chief Financial Officer

Thank you, Lisa. Lisa has already discussed revenues. So let me walk you through the remaining financial points. Our Q1 growth margin of 83% reflects a residual benefits from last year's Sinuva write-off, as well as improved efficiency.

We were pleased with this result and continue to expect gross margin to land in between 80% to 81% for the year. Our Q1 opex is $33.5 million, represents an increase of $1.4 million of the last quarter driven by ramping of the Ascend study and by incremental headcount spending and marketing and market access in support of Sinuva. Looking forward, triggered by our change in revenue outlook, we are reducing our base line spending for the full year by approximately $6 million or 4% through reprioritization of spending and by scaling back our hiring plan. However, we are offsetting this reduction with incremental stock-based expenses associated with the leadership change and that the results are maintaining our previous outlook for operating expenses of $135 million to $137 million.

Our cash position at the end of the first quarter was $97.6 million, compared to $100.8 million at the start of the year. Entering a strong balance sheet to support operations. I'll now turn the call back to you Lisa.

Lisa Earnhardt -- President and Chief Executive Officer

Thanks, Jeri. Looking ahead, we continue to make solid progress on our product pipelines, supporing our mission of making localized drug delivery the standard of care for sinusitis sufferers. Importantly, Ascend of our drug-coated balloon remains on track. We continue to expect a complete enrollment in Q3 of this year with top line results by year end.

As a reminder, Ascend is a critical study designed to assess safety and efficacy of our drug-coated balloon technology compared with the plain sinus balloon. We are excited about our drug-coated balloon as a new platform product and believe it reinforces our standing as the leader in evidence-based innovation in the ENT specialty. In addition, we are excited to share that we recently submitted a supplemental PMA for a new Propel Mini delivery system. As we discussed on the last call, we have been working on ways to further enhance our Propel product.

Many customers have indicated that they would prefer a modified delivery system when placing Propel Mini in the frontal sinus. We now expect to have the system available to customers later this year. Our strategy is to make this delivery system available separately for a nominal fee with the main commercial objective to provide additional clinical options for the physicians, which in turn should reinforce and expand Propel usage. In closing, we believe that Sinuva provides an important new treatment option for chronic polyp patients, and we are confident that we're making the right investments for its long-term success.

With our Propel Sinuva family of products in our pipeline, we remain fully dedicated to bring innovative solutions to the ENT community. On a personal note, I wanted to thank you all for your support of me in Intersect ENT during our nearly five years as a public company. This has been an amazing experience, and I'm proud of the work we've done as a team. And this is my last earnings call as CEO with Intersect ENT.

I thank you for your interest and support as we unleashed the full potential of our technology for the millions of sinus sufferers that desperately needs better options to manage their debilitating conditions. We will now remain on the line to answer some questions. So Jaimy, would you please open the line

Questions & Answers:

Operator

[Operator instructions] Our first question comes from Na Sun with Wedbush Securities.

Na Sun -- Wedbush Securities -- Analyst

So Lisa, congratulations on your new opportunity at Abbott. That sounds like a big job. And can I was curious just first question just would you considered taking this on full time depending on how the search goes?

Kieran Gallahue -- Board of Directors

I'm really happy on the seat that I have and I'm very supportive of working with the board, did he said to me or to Kieran?

Lisa Earnhardt -- President and Chief Executive Officer

Everyone was looking at me. Hold it very clear. I'm not in the running for the leadership, and now I'll let Kieran answer.

Kieran Gallahue -- Board of Directors

Yes. Well, thank you very much for the question. Yes. I think the answer is at this point the boards engaged in external search.

And I think you can expect that we'll be beating the bushes across the industry for finding the best way to support this time but thanks for the question.

Na Sun -- Wedbush Securities -- Analyst

OK. So I guess I'll move on. So two other quick things. One, I just wondered if you can go through what exactly is -- you mentioned some sort of change with Propel.

I was wondering if you can go through that a little bit more? And then two final, I had a question on guidance. But on Propel, I just want to make sure I heard correctly, what you're seeing in terms of the potential changes there.

Lisa Earnhardt -- President and Chief Executive Officer

Yes. For the Propel, there is a new product that we will be releasing him out of this year, which is modified delivery system for the Propel Mini. But I'm assuming you're ordering more to some of the commercial structure changes that we're making.

Na Sun -- Wedbush Securities -- Analyst

No. I thought I heard something on reimbursement maybe I misread.

Lisa Earnhardt -- President and Chief Executive Officer

OK. Yes. That's a good point as well. So I think there were many things as it relates that Propel and Sinuva somewhat in decline there obviously, both incredibly important to our business today, as well as in the future.

And with the J code this preliminary decision by CMS. They did bring forward, sort of, almost like a generic J code for a mometasone furoate implant. And as part of that they CMS is recommending eliminating the existing code that is used for Propel, which is F1090. So we would assume based on that there intent is for reporting to happen with this new J code, so we still need to clarify CMS's position there.

It is important to note for the most part Propel is not paid separately from the typical sinus surgery procedure that typically covered as a, sort of, a part of a bundle payment, so we wouldn't expect incremental reimbursement associated with that. But it is still part of the detail we need to work through with CMS and then ultimately with various pairs.

Na Sun -- Wedbush Securities -- Analyst

OK. And then lastly, on the Sinuva side, I understand there's a little bit of seasonality but with the product launch that's only in the millions of dollars, I would think seasonality wouldn't play a huge role at this point. So I guess maybe just take a step back and what's going on with Sinuva? Such a good doctor feedback. But I'm sure it doesn't seem to be getting any momentum at all.

And so I'm curious, what gives you confidence that it really is this J code issue? What can you tell us that to give us confidence that you have your kind of arms around the issue, and no one is going to take make this a real product?

Lisa Earnhardt -- President and Chief Executive Officer

Yes. I'll start with that maybe I'll ask Jeri to supplement. As for first and foremost with the market access product side, so one, strong indicator going from Q4 to Q1 is that we did take it up -- we do see an uptick in enrollments which are basically prescriptions for Sinuva, so we've encouraged by that. Where we failed as an organization was getting those patients through the funnel and getting those patients ultimately treated.

So we believe we understand that process, the things that we're going to medicate that. First and foremost is adding substantially to our reimbursement team. And I can allude to the fact that we are we went from 11 to 20 folks that are really focused and they are experts at working with physicians practices. And will both educate our physician practices but also help troubleshoot to get those patients from being prescribed Sinuva to ultimately getting Sinuva, and that is really the metric that really matters.

So that's for us is our -- it was our primary focus right now. The J code is something longer term. Certainly, for next year, which we believe as well will help streamline that process, as well as confidence physician around payment associated with Sinuva. But at this point, it's really counting patients through that funnel.

Our service is only down demand is really getting patients to the funnel and treated, that's our primary focus today.

Na Sun -- Wedbush Securities -- Analyst

OK. I'll get back in the queue.

Operator

Our next question comes from Robbie Marcus with J.P. Morgan.

Allen Gong -- J.P. Morgan -- Analyst

It's Allen on for Robbie. I just wanted to say congratulations on your new job, and you'll be missed here I guess. But just like first question is going to be on guidance. So obviously you've taken a pretty healthy step down, you kind of walked through why is that's the case in your prepared remarks.

But I guess just in terms of care is right for kind of looking at 2Q is only being a modest year-over-year growth rate. How should we think at that like kind of the mix of that between Propel I guess majority of that is coming from some of Propel but then how should we think about Propel improving maybe in the back half of the year seeing our it doesn't sound like you made some pretty substantial enhancements to kind of the reimbursement restructure so far this year.

Lisa Earnhardt -- President and Chief Executive Officer

Allen, this is Jeri. Let me address your question. I think it's a very good question and as we are thinking about the nature of the work we need to do with the sales force, Lisa and I talked about making this is field easier for physicians to access Sinuva. We certainly think that that is going to be the focus in that.

Our aim is absolute to get both Sinuva and Propel to higher levels of growth over time. And how that will play out every day year we can see better visibility as we make progress.

Allen Gong -- J.P. Morgan -- Analyst

Got it. OK. And then I suppose like when you do get the J code in 1Q, not the start of 2020 right how should we think about that impacting your growth in 2020 moving to 2021, are you... I mean, I'm guessing it's not so much on an off so I just kind of like accelerator for your growth is that the right way to think about it? And I know, we're starting off 2019 now but figure that might be an interesting question to ask.

Jeri Hilleman -- Chief Financial Officer

If you think about the benefit that the J code will provide to Sinuva, it has a lot to do with streamlining the reimbursement process just a little bit more efficient for the officers administration and for the payers. And it also conserve just to give physicians a bit more confidence about the sense of reimbursement so there is an important positive factor and then how that we think that will play out, I think we'll learn more about the dynamics in the year and potential for that should be really be a positive for the product.

Operator

And our next question comes from Richard Newitter from SVB Leerink.

Richard Newitter -- SVB Leerink -- Analyst

Lisa, just to echo some of the comments, good luck in your future endeavor at Abbot. Wanted to just start off with the kind of the balancing between Propel and Sinuva. And kind of the allocation of resources that are seemingly kind of limiting the growth acceleration of both businesses. This was the problem, I think, that you guys had called out last quarter and heading into the 2019 timeframe but just felt like you had taken the appropriate steps to staff up especially on that Propel business.

And you will kind of put your guidance range at a level that you saw had captured under the plan that would be associated with that. So question here is what was the kind of focus on what gives you confidence this time around that you identified exactly the right level of resources to get to the numbers that you've set out? And how that you arrived at that? And what's changed because it feels like over the same kind of issue before you have visibility into these instructions, what's changed between now and a couple of months ago?

Lisa Earnhardt -- President and Chief Executive Officer

Yes. It was all set with that until he can supplement in and you're right, these are a lot of the same issues and I think we had hoped and believe that some of the friction was going to be streamline with some of the earlier changes we've made and we were wrong. And so we clearly have made some changes to our commercial strategy as it relates to increasing the number of field reimbursement team members that's obviously those are pretty expert in the field who will be focused day and night on getting patients treated with Sinuva and educating our accounts. This is obviously something that the sales team has had to spend a disproportionate amount of time on.

It's not with they do best, and so were refocusing them on to sort of creating demand and driving in clinical value and great clinical outcomes and really supplementing them sort of experts in the field at the access problem. So I think that's where we were slow out of the case to be getting those resources getting the right resources on board. And I think that and combined with creating a sort of a new role on the sales team around Sinuva specialists, which we just started doing in April just kind of, once again, free up the sales team up with some of the detailed that's required around Sinuva and putting ourselves our fast resource so we can effectively walk and at the same time like certainly not how we had intended this year to play out.

Richard Newitter -- SVB Leerink -- Analyst

OK. That's helpful. And then just with respect to the Sinuva kind of the Sinuva hurdles. If I can break it into two areas.

It sounds like part of it is getting doctors to be OK and comfortable doing buy and bill. That's not necessarily happening as quickly as you would have liked, so it's improving. And then the other it seems like it was just too much back and forth on actually getting these things done and your staffing up to get that improved. I guess which of those two things do you think now that you have our J code in hand, you're on formulary for I think 70% of covered lives, I mean I guess, which one of those two things do you think is the quicker mix? And how do you see some of those tailwinds on the reimbursement on the J code being on formulary, how do see those things kind of helping you maneuver through those two issues?

Lisa Earnhardt -- President and Chief Executive Officer

Yes. I think they're very much interlinked, Rich, in terms of which 1 is more impactful I think all of those things will contribute to our Sinuva success and it is important to note that while we have the preliminary decision on the J code, that is not effective until January 2020. So we do anticipated being more of that if we go throughout the year end, we have reflected in our guidance.

Operator

Our next question comes from Matt O'Brien with Piper Jaffray.

Kevin Farshchi -- Piper Jaffray -- Analyst

This is actually Kevin Farshchi on for Matt. I wanted to put a finer point on some of the things that were asked. I think the first thing is on the updated guidance, just thinking about how it was contemplated, I'm still not able to get to the numbers in terms of -- is still small risk adjusting Q2? Or if I look at the model, if I assume no sequential growth for next quarter I still can get there. So does the base business look more like mid single digits this year versus low-double digit that you talked about? Or are the Sinuva numbers coming further down, just wanted to help us understand the pieces that are getting baked in if you will.

Lisa Earnhardt -- President and Chief Executive Officer

Kevin, when we set out at the beginning of the year, we did not specific products guidance as we did try to help understand our vision of how it might unfold over the year, and what kind of same physicians where there is variability around our expectations for Propel and Sinuva. We understand very clearly what we need to accomplish with product with our force and so on over the next quarter or so. Certainly, Q2, we're going to create space for all of those initiatives to be successful and begin to get traction, and then move forward in the year. And you can understand, there's a range around both Propel and Sinuva and where they may rand but our guidance obviously reflects our best view of how aggregate business should perform this year.

Kevin Farshchi -- Piper Jaffray -- Analyst

OK. That's helpful. I guess the second one is just on the sales force front. I mean coming out of last year, could you talk a little bit about the incentives and the structures, so you're kind of keeping everybody with their eye on the ball relative to the existing base business and Sinuva and along with the CEO transition, what is the communication process been? And are you baking in a little bit of attrition there as a result of these moving parts? I wanted to ask on that.

Lisa Earnhardt -- President and Chief Executive Officer

I would say our outlook for flagship, the totality of everything that we have on the plate both the challenges are basically Sinuva and how that impacts Propel. And clearly there are some transitions that are happening here in particular with me that will impact things. I think that the team is at a great place. I have great conviction and belief in the leadership team and in the commercial organization.

They have not think but pros as we work through the challenges we face with Sinuva. And so there are specific incentives that you might imagine in particular for the sales team to deliver on both Sinuva and Propel. We just make some tweaks there as we typically deal with composition on a quarterly basis to continue to focus them on the things that really matter most for us is driving demand. So that sort of a high level of what I would reflect on it.

Do you have anything to add?

Jeri Hilleman -- Chief Financial Officer

Nothing.

Operator

Our next question comes from Chris Pasquale with Guggenheim.

Chris Pasquale -- Guggenheim Partners LLC -- Analyst

A couple of questions. First on Sinuva, Lisa, can you going to some more detail on why the changes you made nine months ago didn't have the impact you expected and what's different this time? Because as he said, these are the same issues we were discussing then and the proposed solutions then was also throwing more resources at the problem. So there's a difference now that these are going to be intersect employees instead of third-party consultants or is there something else that's materially different here?

Lisa Earnhardt -- President and Chief Executive Officer

Yes. I don't think that's part of that is there no dedicated full-time employees with us. And previously, we had tried to solve for the issue by using a contract still organization to really bolster our Propel sales to make sure that during that Sinuva launch period, we are dropping balls on Propel, and we recognized that that still lacked our sales organization and our sales representative with doing a lot of the work as it relates to Sinuva, which creating the clinical demand, ensuring great clinical outcomes is right in their sweet spot. And I would put our sales team against any other as it relates to their capabilities there.

But what the end started that because it's not their typical medical device job is all the work that's required for proper access and so instead of working primarily just without third parties there to small theme we've actually really bolster that organization and with 20 people start by feel significantly better that I did in retrospect as I look back we definitely underpowered to the market access piece of this launch going into an I think we've learned that the hard way the last several quarters.

Chris Pasquale -- Guggenheim Partners LLC -- Analyst

And you talked about a two-week turnaround for prior audits but clearly the physicians are being put off by something it seems like a bigger issue than just the hassle of some back and forth with the pair. Can you give us any metrics on the percentage of prescriptions that are outright denied after the appeals process today? Or where the final reimbursement amount is well below cost.

Lisa Earnhardt -- President and Chief Executive Officer

No. It is not that quick, I wish we could point to that but the good news is the vast majority of prescriptions that get written for Sinuva and getting a prior authorization and the payment rates continue to be very healthy, which is appropriate markup over what the ASP is. It really is that back and forth that taking time across taking time for the physician but it's taking time for the office staff. And you have to recognize there's an opportunity cost there and back and forth in some of the point is here there's other things that they could quote and unquote, do with their business or do their time that we be greater profit generators.

So I think that really is the issue that is just become a thing a household that's gone above and beyond what they see are the benefits. So there clearly some physicians who are still bought in. We mentioned we work with about 600 physicians so far and so it's not as if there aren't some of you who are weighing the benefits of the clinical outcome versus the active challenges, but it certainly -- it's hampered our ability to really accelerate growth with Sinuva.

Chris Pasquale -- Guggenheim Partners LLC -- Analyst

OK. And just lastly from me, the strategy behind the allocating sales resources versus adding absolute resources to the sales force committee obviously thought that the reps that you had in place previously when necessary to drive growth in the business, now your reshuffling some stuff around. How is that not impact future growth? And why not given the balance sheet situation may be invest some more today to ensure that you've got your over resource across the board instead of any situation we were again underpowered?

Lisa Earnhardt -- President and Chief Executive Officer

Chris, it's a good question and one that we've spent quite a bit of time on. As we look at field dynamics, where reps really need help with little bit of offloading and some of the interactions physician offices, we think there's to accomplish with the Sinuva specialists structure and in terms of how many people we're leaving the territory structure we have basically in place, and we have about 80 territories, 80 territory managers that's not changing. This is adding additional horsepower if you will focus directly on Sinuva as a complement to that. And with a number of physicians that we regularly interact with and work with David talking to Sinuva we think that redeployment is really the important element of furthering Sinuva along with keeping our territory structure in place, and we really have thought deeply about that and feel that's going to be a very effective structure for our sales force.

Operator

Our next question comes from Brian Weinstein with William Blair.

Andrew Brackmann -- William Blair and Company -- Analyst

This is actually Andrew Brackmann. Maybe Kieran, a question for you. Could you maybe give us a little more perspective on what sort of where you're looking for as you search for a replacement, what sort of qualifications that you're looking for? And then maybe a little bit of more additional detail on the time line.

Kieran Gallahue -- Board of Directors

Yes. Sure. So let's just talk about this transition time to and process so as part of our normal point and processed the port had always sort of looked at opportunities that if there was a succession of the CEO level. How we could handle it in a way that we could contribute the business would allow for seamless transfer of leadership and make sure that we don't miss it be.

And so as part of that there is overlap between Lisa and I is going to be a great time for me personally to get very deeply in getting to know to work very closely with the team and to be a force in continuity between Lisa and as we transition to a new layer so it's a step one is to make sure that there is seamless news that there's continuity and quite frankly it's always a privilege to have the opportunity to dig in more deeply with the team. As we at the board level will be searching for replacement of thinking about individual who has experience in ramping up organizations that has dealt with growth markets and all the natural bumps and grinds that everybody goes through in the growth market. We always look back at organizations think about it in a straight line, but we all know that that's not the way it happens. So we want some of you to live through that and experience it and we're also looking at individuals who have the experience of having been in large organizations and understand the benefits of structure and in scaling.

So we'll be looking across all those boundaries spread very importantly were also going to be looking at the fifth at the integrity and the core values and the individual and their ability to lead teams and their experience and having successfully how that comes. So hopefully that helps.

Andrew Brackmann -- William Blair and Company -- Analyst

Yes. Certainly. Thank you. And then I guess maybe just thinking a little bit more longer term and strategically, you're obviously the guidance here is sort of mid single digits in 2019.

But as we think longer term, the expectation for this business is still growing in the sort of 20% growth over the longer term?

Lisa Earnhardt -- President and Chief Executive Officer

Andrew, we really continue to hold that this is a growth company we're excited both by the ongoing potential for Propel, which as you know is in one in eight procedures, and I think really does have opportunity to grow. For Sinuva, with all the initial reporting insight and we also have the drug-coated balloon trial ongoing and a pipeline beyond that so certainly, with all those initiatives we continue to see ourselves as a very strong growth company.

Operator

Our next question comes from Ravi [Inaudible] from Berenberg markets. Please go ahead with your question. And Ravi, your line is open. Is it possible your phone is on mute? [Operator instructions] Our next question comes from Kyle Rose from Canaccord Genuity.

Please go ahead with your question.

Kyle Rose -- Canaccord Genuity -- Analyst

Great. Thank you very much for taking the questions. And Lisa, congrats on the new role. It sounds like a great opportunity.

I just wanted to know a lot of announcements I knew. I just wanted to know if we could go back and talk a little bit about the 600 accounts in Sinuva you get 600 accounts, 600 patients treated, you know, it sounds like there's certainly a disconnect from, I guess, patient enrollments to the conversion process to getting these patients treated. Could you maybe talk about what has worked for those 600 accounts in those 1,600 patients. Your first 100 accounts, are they comfortable with the process in using things more frequently and you've got a smaller number of accounts that are maybe trialing one-off patients and seeing how the process goes.

Just help us understand what's going on beneath the top line that we see.

Lisa Earnhardt -- President and Chief Executive Officer

Yeah. I think you're absolutely right is that we do have a smaller number of accounts that have figured this out. It's really those accounts that in particular have done buy and bill because they recognize, in order to be able to offer Sinuva for all of their patients putting aside what insurance they have, they need to feel comfortable with doing buy and bill, right. Because we've talked about that at length before and that's the way you know the practices who have really embraced SInuva, who've embraced buy and bill, those are the ones who are starting to happen to be a little bit more turnkey.

Is absolutely not turnkey for anyone today but it certainly is a smoother process there and I think they've embraced that, they've also seen proof of payment. And as you know, we continue to collect a few and we have a really strong library now a proof of payment across the country and we think that's really helpful and we have less than 200 of accounts really started getting this right. And I think they're also putting the right resources you know on there on their office team. So oftentimes it's having one person on their office who is running point on things versus having multiple, sometimes having that resident knowledge with one individual.

And so there are there definitely are some accounts you've started, you know, this is kind of a routine part of their process but it is by any stretch of imagination it's the minority today. And so that's exactly why we're rolling out the program like the master class the signing of a master class because that gives us a great opportunity to go to all of our accounts, whether they're using Sinuva or not to educate them about the product and also even more importantly educate them about access because a lot has changed since we've rolled it out. But there is a lot positive to that, as well as you know between the proof of payment between the payer coverage that we have, the clinical outcomes and a lot of great things to educate our clinicians about Sinuva.

Kyle Rose -- Canaccord Genuity -- Analyst

Great. And then I wanted to circle back on a previous question from... that Chris had. You know, if I understand the commercial structure you've got the 80 territory managers then you've got the associate reps and now you're going to have this increased resource for the reimbursement side to the 20 members there.

It feels like there's some investment going on but you're also talking about bringing down opex by $6 million. So can you maybe talk to us specifically about what investment is coming out this year. And I understand the reasoning for why, but maybe just help us understand specifically what resources have changed and where it's allocated.

Lisa Earnhardt -- President and Chief Executive Officer

Yeah. It's a good question as we think about how we allocate our resources, we continue to prioritize support of our commercial objectives and that includes the sales force. The field reimbursement team you're talking about has the we have talked about has long been in our operating plan and remains in our operating plan. The flight rebalancing we're doing in the sales force, we see as a net positive but it doesn't represent a change in resources.

It's really more that we have found ways just through managing how we process things some of our things internally. We'll be reducing our hiring which will be beneficial to the non-GAAP element of our office going forward. So we continue to do that. And I should also mention that we are continuing to invest in our pipeline.

We have the Ascend trial. We have other products that we're working on. So we believe the way that we're spending is very supportive of both our current and our long term growth needs and that by just making sure that that remains our focus we can also achieve a little bit of rebalancing on the spending side.

Kyle Rose -- Canaccord Genuity -- Analyst

OK. Thank you for taking the question.

Lisa Earnhardt -- President and Chief Executive Officer

Sure.

Operator

And ladies and gentlemen, at this time we're going to conclude today's question-and session. I'd like to turn the conference call back over to Lisa Earnhardt for any closing remarks.

Lisa Earnhardt -- President and Chief Executive Officer

Well, thank you all for joining us today. We certainly appreciate your interest and support. Have a wonderful afternoon and look forward to touching base with you all soon. Bye-bye.

Operator

[Operator signoff]

Duration: 49 minutes

Call participants:

Jeri Hilleman -- Chief Financial Officer

Lisa Earnhardt -- President and Chief Executive Officer

Kieran Gallahue -- Board of Directors

Na Sun -- Wedbush Securities -- Analyst

Allen Gong -- J.P. Morgan -- Analyst

Richard Newitter -- SVB Leerink -- Analyst

Kevin Farshchi -- Piper Jaffray -- Analyst

Chris Pasquale -- Guggenheim Partners LLC -- Analyst

Andrew Brackmann -- William Blair and Company -- Analyst

Kyle Rose -- Canaccord Genuity -- Analyst

More XENT analysis

All earnings call transcripts