Based in Plymouth, MN, Entellus Medical (Pending:ENTL) scheduled a $70 million IPO on Nasdaq with a market capitalization of $279 million at a price range midpoint of $16 for Thursday, Jan. 29, 2015. Priced at $17, no change in conclusion.

The full IPO calendar is available at IPOpremium

SEC Documents

Manager, Joint-managers: BofA Merrill Lynch, Piper Jaffray
Co-managers: William Blair, Canaccord Genuity

End of lockup (180 days): Tuesday, July 28, 2015
End of 25-day quiet period: Monday, February 23, 2015

Summary
ENTL is a medical technology company focused on the design, development and commercialization of products for the minimally invasive treatment of patients in the physician office setting or operating room who are suffering from chronic sinusitis.

ENTL’s XprESS family of products is used by ear, nose and throat, or ENT, physicians to open narrowed or obstructed sinus drainage pathways using balloon sinus dilation to treat patients with symptomatic inflammation of the nasal sinuses.

Valuation
Glossary

Accumulated deficit ($mm) . . -$103
Per share dilution . . -$12.85
———————————————————————–
Valuation Ratios Mrkt Cap ($mm) Price /Sls Price /Erngs Price /BkVlue Price /TanBV % offered in IPO
annualizing Sept 9 mos
Entellus Medical $278 6.1 -36.6 5.1 5.1 25%

Conclusion
Neutral plus

Minimally invasive sinusitis treatments

Rev up 57%

Loss decreased to -17% of rev from -51% of rev

Gross profit of 78%

Price-to-sales 6.1

Relatively low cash burn rate relative to market cap: P/E -36.6

Price-to-book of 5.1

Insiders may purchase $18.15mm, 26%

Almost 80% funded by VCs

To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above.

Business
ENTL is a medical technology company focused on the design, development and commercialization of products for the minimally invasive treatment of patients in the physician office setting or operating room who are suffering from chronic sinusitis.

ENTL’s XprESS family of products is used by ear, nose and throat, or ENT, physicians to open narrowed or obstructed sinus drainage pathways using balloon sinus dilation to treat patients with symptomatic inflammation of the nasal sinuses.

Market size
ENTL estimates the annual total addressable market for its products in the United States is approximately 630,000 patients, which, based on ENTL’s estimate of the average revenue per procedure in the balloon sinus dilation market, represents an annual market opportunity of nearly $1.0 billion.

Over 75,000 patients treated with the XprESS product
ENTL estimates that physicians have treated over 75,000 patients with its XprESS products since the launch of the first XprESS product in February 2010. For the year ended December 31, 2013, ENTL generated revenue of $32.5 million and had a net loss of $13.4 million. For the nine months ended September 30, 2014, ENTL generated revenue of $34.4 million and had a net loss of $5.7 million. As of September 30, 2014, ENTL had an accumulated deficit of $102.6 million.

Sales & Marketing
ENTL currently markets its products in the United States and Canada and sells products through a direct sales force in the United States.

The commercial organization consists of sales, marketing and reimbursement personnel, and has grown from 47 people as of December 31, 2010, to 114 people as of September 30, 2014.

Health insurance coverage for stand-alone balloon sinus dilation performed in the physician office setting is in place with Medicare, Medicaid and other third-party payors covering approximately 76% of covered lives in the United States as of December 31, 2014.

In addition, as of December 31, 2014, coverage for hybrid procedures involving balloon sinus dilation performed together with FESS (the surgical alternative) in the operating room is estimated to be approximately 86% of covered lives in the United States.

Recent growth
Minimally invasive balloon sinus dilation devices have enabled a shift towards office-based treatment of chronic sinusitis patients who are candidates for sinus surgery in the operating room.

Recent revenue growth for ENTL has been driven by, and ENTL expects revenue to continue to increase in the future as a result of, increased physician awareness of the clinical efficacy of stand-alone balloon sinus dilation and our products and increasing insurance coverage for balloon sinus dilation procedures.

Balloon dilation instead of surgery
When used as a stand-alone therapy, ENTL’s balloon sinus dilation products are the only devices proven in a sufficiently powered prospective, multicenter, randomized, controlled trial to be as effective as functional endoscopic sinus surgery, or FESS.

Patients treated with ENTL’s products in this trial in the ENT physician office also experienced faster recovery, less bleeding at discharge, less use of prescription pain medication and fewer post-procedure debridements than patients receiving FESS.

Sinusitis
Sinusitis occurs when the soft, moist layer of mucus-producing tissue called mucosa that lines the sinuses and sinus drainage pathways inside the nose becomes swollen and inflamed, leading to narrowing or obstruction of sinus drainage pathways and causing symptoms such as facial pain, pressure, congestion, headache, fatigue, infection and loss of sense of smell.

These persistent symptoms can have a significant impact on the day-to-day life of the patient and can result in numerous physician office visits, absenteeism from work and lost productivity.

Primary care and ENT physicians rely on medical management, which often consists of antibiotics, steroids or decongestants, for first-line therapy to treat chronic sinusitis.

In cases where patients remain symptomatic despite extensive medical management, a physician may recommend FESS, which is performed in an operating room using surgical tools to enlarge the sinus pathways and remove the inflamed tissue and underlying bone to allow for sinus drainage and aeration.

Balloon sinus dilation as a treatment for chronic sinusitis was introduced in 2005 and was initially used primarily in the operating room in a hybrid procedure with FESS.

In recent years, however, balloon sinus dilation is increasingly used in the ENT physician office as a stand-alone, effective alternative to FESS.

Chronic sinusitis
Chronic sinusitis is a common medical condition that according to estimates from the Centers for Disease Control and Prevention, or CDC, impacts approximately 12% of the adult population aged 18 and over in the United States, or approximately 29 million people based on 2013 U.S. Census Bureau data, making it more prevalent than asthma or heart disease.

ENTL’s addressable patient population consists of a portion of patients who undergo FESS, as well as patients who fail medical management, but do not undergo sinus surgery.

ENTL currently estimates the annual total addressable market for its products in the United States to be approximately 630,000 patients, which, based on its estimate of the average revenue per procedure in the balloon sinus dilation market, represents an annual market opportunity of nearly $1.0 billion.

Intellectual property
As of December 31, 2014, ENTL owned 19 issued U.S. patents relating to the field of sinusitis treatment and have at least 16 pending patent applications for U.S. patents.

Four of these issued patents includes claims directed towards the XprESS products and methods of using the XprESS products.

As of December 31, 2014, at least nine of ENTL’s pending patent applications currently include claims directed towards one or more aspects of its XprESS family of products.

Competition
ENTL competes with companies and products used to treat chronic sinusitis, including traditional FESS, medical therapies and other balloon sinus dilation products.

ENTL’s balloon sinus dilation products compete with medical management by providing a procedure and treatment option that may be chosen to be performed by ENT physicians after fewer rounds of medical management than historically employed due to the minimally disruptive nature of balloon sinus dilation as compared to FESS.

ENTL’s balloon sinus dilation products compete with FESS by providing a comparably effective in-office alternative for patients with uncomplicated sinusitis.

Accordingly, ENTL’s balloon sinus dilation products are increasingly positioned in the middle of the treatment continuum between medical management and FESS, drawing patients from medical management who might not have chosen any treatment beyond medical management due to the invasive nature of FESS, as well as patients who would have chosen FESS if not for ENTL’s less invasive alternative.

ENTL’s balloon sinus dilation products also compete with other companies selling balloon sinus dilation products to ENT physicians.

ENTL’s PathAssist products also compete with companies selling devices for use in balloon sinus dilation.

Additionally, ENT physicians may use competing devices, intead of ENTL’s PathAssist products, to confirm sinus location and placement of its XprESS device.

5% shareholders pre-IPO
Essex Woodlands Health Ventures 26.0%

SV Life Sciences 23.9%

Split Rock Partners, LP 21.1%

Covidien Ventures S.a.r.l. 7.2%

Brian E. Farley 5.0%

Dividends
No dividends are planned.

Use of proceeds
ENTL expects to receive $63 million from its IPO and use it for the following:

For product development and clinical research, sales, marketing, working capital, and general corporate purposes.

ENTL may use a portion of its net proceeds to co-develop, acquire or invest in products, technologies or businesses that are complementary to its business. However ENTL currently has no agreements or commitments to complete any such transaction.