Q4 2019 Earnings Call
Greetings and welcome to the Opiate Pharmaceuticals fourth quarter and full year 2019 earnings conference call.
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I'll now turn the conference over to your host Vice President of Communications and Investor Relations with Opiate Pharmaceuticals Bakken. Please go ahead Sir.
Thank you operator, and good afternoon, everyone.
I recently joined the European team as Vice President of Communications and Investor Relations.
To be bought this team this mission and to work with all of you.
On the call today against Chief Executive Officer, Dr., <unk> project, Crystal and Chief Financial Officer, David I too.
It's often there I'd be has issued a press release announcing financial results and providing a corporate update for the fourth quarter and full year ended December 31st 2019.
Please note that certain information discussed on the call today is covered under the safe Harbor provision of the private Securities Litigation Reform Act.
We caution listeners that during the school <unk> management will be making forward looking statements actual results could differ materially from those stated or implied by these forward looking statements due to risks and uncertainties associated with the company's business.
These forward looking statements are qualified by the cautionary statements contained in opiates news releases and FCC filings, including annual reports on form 10-K for the year ended December 31st 2019 and subsequent filings.
This conference call also contains time sensitive information that is accurate only as of the date of this live broadcast watch for 2020.
Okay undertakes no obligation to revise or update any forward looking statements to reflect events or circumstances. After the date of this conference call.
No I'd like to turn the call day, but the Roger.
Thank you Ben and thanks, everyone for joining us this afternoon.
Before I provide you with the operational update I'd like to begin with a brief discussion opioid addiction and overdose in the United States, specifically as it relates to send to know.
Hi, this is well known the opioid crisis has evolved into a fence no crisis.
New reports from the CDC showed the drug out but there's that's in the U.S. declined in 2018. The first time in nearly three decades pop and snow related that's actually increased 10% from 2017.
There are many it's the most statistics and data recently disclosed from cities and state throughout the country.
For example, according to preliminary statistics compiled by Sun and Cisco authorities. That's from overdoses tend to know reached 234 in 2019 up from 90 in 2018.
Moreover, the news report continues it takes a worsening epidemic.
Month in Columbus, Ohio, 10 cents snow related deaths were reported in just a single 24 hour area.
Prompted by this upsurge in acute emphasized that driven by fence no unrelated synthetics. The NIH has called the development of stronger longer acting formulations of on agonist to counteract these very high potency synthetic opioids as it now claiming thousands of lives each yeah.
Well you need this is a critical and growing public health crisis in the U.S. opioids is well positioned to address this challenge.
We believe that Oh PNC is there is there are three nasal now machine has the potential to address this issue and it's it's a suited to treat and snow related overdoses.
There are several features it now machines pharmacological properties, we believe it make it well suited to treat a few days days is caused by fence known related synthetic opioids.
Lastly, higher affinity of non the scene. That's me opioid receptor is being at least five times greater than that naloxone.
Secondly, we believe the rapid absorption and long haul flights if I can see there's every three increases the probability of a successful rescue while reducing the likelihood of a read knocked ization event.
Alright PNC there there are three clinical program is supported by 7.4 million dollar grants from nine to under contract for up to $4.6 million from part, though to accelerate its development as a medical countermeasure in the event that has gotten to know chemical attack.
Late in 2019, there were awarded the second tranche of approximately $2.4 million from that bought a contract.
As we disclosed in January yes, the I informed us that it just reviewing certain characteristics the nasal delivery device, we intend to use with Opn teams. There is the right right.
As a device is not yet it proves the FDA is requesting this information now as opposed to it and be a submission for the drug device combination.
Well for competitive reasons I cannot provide said a detail around yeah. The ace request. It can say that we continue to work with 58 to address that question.
<unk>, where the FDA information request this month I hope to conduct a complementary PK study in the second quarter this year.
This will be a single dose study with the duration of two to three weeks in healthy volunteers and have already received I'll be approval to conduct this study.
Fortunately, we aim to fall and then D.A. This yeah. So from a potential commercial standpoint, we remain on schedule.
I'd now like to spend little time discussing its commercial opportunity.
Overall, we view the market's procure David Dykstra this with agents to be Underpenetrated market can be broken up into two distinct areas.
The the institutional market that includes government agencies, such as high a lease the M.S. services and schools.
Second the retail market that includes prescriptions of patients I'm really in trend to carry opioid overdose reversal agent.
Co prescribing of opioids everyday service agents alongside prescription opioid represents a substantial growth opportunity has only 5% of at risk patients currently have no locks and prescription.
Nine states, including California, Florida, Ohio, and Virginia have enacted co prescribing lows.
Additional states with potential co prescribing building Twentytwenty include New York, Tennessee, Illinois, Maryland, and Georgia.
Importantly, emergent Biosolutions reports that they used to reversal agent is approximately four times higher in states type describing both.
As we look at the entire market landscape, we expect the U.S. sales and I Hope you, Dave Dykstra This LAGE and it's a billion dollars by 2022.
Institutional sales the reversal agents are expected to double and with increasing type ascribing retail sales are anticipated to reach approximately half a billion dollars.
Before I give an update on Oh, the pipeline programs I would like to spend a few minutes on recent developments regarding ongoing litigation with Teva and Perrigo [laughter], which has filed abbreviated new drug application for Anders.
Seeking to market generic versions of knocking nasal spray.
Last month, we announced the we and the imagine I solutions and entered into a settlement agreements to resolve the ongoing litigation the three.
Under the terms at the settlement Grieger has received a nonexclusive license under our patent license to adapt pharma subsidiary as an emergent biosolutions to make well have made the market, it's generic naloxone hydrochloride nasal spray under its own.
[laughter] for you guys license will be effective as of January the since 2033 or are they a under certain circumstances, including those related to the outcome of the current litigation against have a well litigation against future Anda filers.
In regard to the type of trial closing arguments were heard on February 26, 2020, and we await the ruling.
Now I'd like to discuss during append opn tease it or is there for for the treatment at the keys kinda, but now we'd overdose or a C O which was licensed from Sanofi in December 2018.
You see a resulted in approximately 1.3 emergency department visits in the U.S. in 2016, the latest yes voice data are available.
The number of reports it emergency room visits is expected to rise with the increasing legalization of kind of this in North America.
Currently never approved treatments for a CIO and we never know others that are currently in development.
Okay and plans to reformulate driven event as an injection. So they can rapidly reverse the simpsons that they see a in an emergency room setting.
We have completed the necessary manufacturing work flow panties. There is there a fall and intend to initiate formulation the formulation development studies shortly.
So this end, we recently signed a letter of intent with and cats to collaborate on the development of Opn Tees, there is very full.
And got a division of the NIH will provide development resources around certain preclinical activities in order to support opiates I in these timing of their reserve pool.
This collaboration will be carried out and I talked <unk> research and development agreement fall prey to between open on the NIH formulation studies will begin shortly after the traders formulate in place.
The formulation studies conducted within the anticipated timeline, we maybe in a position to initiate a clinical study trial this year.
Moving on to open season or is there a full nasal now trucks and which we are developing for alcohol use disorder, where you see.
The results from a completion dose selection study allows us to select a suitable boasts the phase two clinical trial.
The initiation of patient recruitment will be the next two to three weeks, we aim to complete patient recruitment this year.
The trial is a randomized double blind placebo controlled study.
Each of the sequential parallel comparisons study design aiming to reduce placebo response.
The study will be conducted in a number of countries in Europe with enrollment targeted at 300 patients.
According to recent publication by the National Center of Health Statistics, the number of alcohol related that's yeah. Among people aged 16 and over has doubled from 35900, an unforeseen 72558 from 1999 to 2017 in total nearly 1 billion.
An alcohol related deaths were recorded.
These data supports our view that new treatment urgently needed for patients with you dig.
Existing medications in existing medication is not sufficient typically requiring prior <unk> then the potential for withdrawal symptoms.
Requirements for the talks.
We believe again Tees. There is there are two can help address these limitations and all the patients a more accessible efficacious treatment.
With that I will not pay the to discuss our financial results David.
Thank you Roger.
Before I review, our financial results for the fourth quarter and for your 2019, I'd like to discuss our financial expectations for 2020.
Based on the midrange of the full year 2020 guidance for sales of New York and nasal spray provided by you'd be us up 300 million. We expect full year 2020, nor can royalty revenue of around $26.2 million.
I will now briefly review the results for the fourth quarter ended December 30, Onest 2019.
For the fourth quarter, we recognized approximately 7.7 million of revenue from the license agreement with Hebei us for the sale of nor can nasal spray.
Paired to approximately 4.8 million in the comparable period of 2018.
The increase of 2.9 million a royalty revenue represents an increase of 60% year over year Andrews driven by net nor can sales of approximately 66.8 million in the fourth quarter of 2019 as reported by you'd be us.
DNA expenses were 2.8 million in each of the three months ended December 31st 2019, and December 30, Onest 2018.
R&D expenses were 2 million and 2.5 million for the three months ended December 30, Onest 2019, and December 30, Onest 2018, respectively.
The decrease was primarily due to Oh, how familiar and decrease and third party expenses associated with our research and development programs.
Sales and marketing expense for the three months ended December 30, Onest 2019 were approximately 471000 compared to none in the comparable period of 2018.
The increase was due to compensation related expenses and third party consulting expense as we consider our commercialization strategy for Opn T 003.
[noise] royalty expense for the three month months ended December 30, Onest 2019 was approximately 1.7 million compared to approximately 1 million in the comparable period in 2018.
The increase was due to an increase in payments due to our net profit partners for the royalties earned from the net sales of nor can nasal spray.
Net income for the three months ended December 31st 2019 was approximately 1.1 million or 26 cents per basic and 20 cents per diluted share compared to a net loss of approximately 9.5 million or a loss of $2.49 per basic and diluted share.
And the comparable period of 2018.
Now, let's focus on the results for the year ended December 30, Onest 2019, we recognized 40.5 million in revenue during the year ended December 30, Onest 2019, compared to 14 million and the corresponding period of 2018.
For the year ended December 30, Onest 2019, we recognize 37.6 million of revenue from the licensing agreement with <unk> as compared to 13.3 million in the comparable period of 2014.
The 24.3 million increase year over year was attributable to 10.8 million ABR LT revenue from an increase in sales of Narcan nasal spray do approximately 280 million for the 12 months ended December 31st 2019 as reported by you'd be us.
And 13.5 million from a onetime mail milestone payment as sales of New York and nasal spray exceeded 200 million through the third quarter of 2019.
Just a expenses were 12.2 million an 11.5 million for the year ended December 31st 2019, and December 31st 2018, respectively.
The increase was due to a 1.4 million increase in personnel and related expenses, including Reis, creating expense and a 900000 dollar increase on legal and professional fees, partially offset by a 1.6 million decrease in stock based compensation expense.
R&D expenses for the year ended December 30, Onest 2019 were approximately 9.1 million compared to approximately 8.5 million and the comparable period of 2018.
Yeah, and keep the increase was attributable to a 1.1 million increase in third party expenses associated with Opiods research and development programs and a 600000 in dollar increase in employee related compensation expense offset by $1.1 million decrease and stock based compensation expense.
Sales and marketing expense for the year ended December 30, Onest 2019 was approximately 612000 compared to none in the comparable period of 2018.
Again, the increase was due to compensation expense and third party consulting expense.
Royalty expense for the year ended December 31st 2019 was approximately 7.7 million compared to approximately 1.5 million in the comparable period in 2018.
The increase was due to a 4.9 million increase in payments to our net profit partners for the royalties on sales milestones earned from the net sales of Mark and nails spray and the 1.3 million dollar payment made to buy out the net profit.
Partner interest in Opn T 003, nasal now machine held by certain investors, who had initially supported the development of dark and nasal spray.
There were no license fees recorded for the year ended December 30, Onest 2019, we recorded 13.7 million in licensees. During the year ended December 31st 2018. These third party license fees related to our obligation under the license agreement with the us for certain payments made by you'd be us to third parties.
Net income for the year ended December 30, Onest 2019 was approximately 11.6 million or $2 in 88 cents per basic and $2 in 17 cents per diluted share compared to a net loss of approximately 21.2 million or a loss of $7.10.
Per basic and diluted share for the comparable period of 2018.
As of December 30, Onest 2019, we had cash and cash equivalent to 31.9 million.
Paired to 24.6 million at December 30, Onest 2018.
The cash balance at December 30, Onest 2019 does not include the full impact of the night, a grant of approximately 7.4 million or the BARDA contract of approximately 4.6 million.
We are in a strong financial position as we began 2020.
We have our pipeline funded through multiple government sources, and we also benefit from a significant royalty stream from net sales of Narcan nasal spray.
With that I'd like to turn the call back to the operator today I'll open the call up for questions operator.
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Our first question comes from the line of Brandon Folkes of Cantor Fitzgerald. Please proceed with your question.
Hi, Thanks for taking my questions and congratulations on the previous journey Uh Huh.
Yes, he could you break perhaps just elaborate a little bit more on the work youve tenant assumptions around the $1 billion.
Traction for the acute reversal agents market 2022.
Are you thinking about the number of product and that assumption geography and.
And then secondly, maybe David just for you how should we think about <unk> and R&D spending twentytwenty. Thank you.
Thanks, Brian I'm, sorry around the addressable market have you guys. Congratulations geographies, we consider that to be overall, U.S. and actually categories. While the predominant U.S. when we think about U.S. as certain parts of the U.S., which are more hot spots.
CP causality, even high rates about your David dose.
That's right.
[noise] alongside the certain areas, where it's very high rates of opioid prescription describing I said hotspots, there and then as.
A lot of overlap as well as certain states, which I am I.
Hi rates of.
Hi, guys rights high rates of object describing.
Yes no.
I'd said access to naloxone, so that's one way or considering it we also look at.
Areas, where.
Moment as a high usage just stand that naloxone injections.
Which.
I think an injection needle base not satisfactory in terms of how we deal with this crisis I think there's a she she's got the hot areas to grow as well.
Some of our considerations that get us to that number and we do that will think this opportunity is going to grow year on year.
No question about Messianic David Yeah. Thanks, Thanks, Brandon I appreciate you being on the call and the question.
You know as far as the as part of DNA I'm going to defer that for a second but the DNA.
Expenses.
We have historically run really lean and we don't see our DNA expenses, increasing significantly for 2020.
The area, where we will and we haven't given any guidance and again at this point in time is around our sales and marketing.
We are still looking into what our strategy is going to be there and when we have.
More information on what that commercialization strategy is we will share it with everybody.
Great. Thanks, It maybe one follow up if I may Roger just and obviously you've talked about the crisis and how its morphed into really fentanyl crisis.
And are we seeing a lot of gross in the retail channel from prescribing.
Given zero jury threes.
Longer half life and its usefulness against.
Fentanyl everybody says how should we think well how do you think about the opportunity for years every three and.
With co prescribing do you foresee this is being something that's driven by coke, describing what somebody that's really in the first responders hands and that's what's really going to be driving sales. Thank you.
Sometimes the question.
Because it had to be applicable imposed sectors and that there is there yes. It has a long haul flights as well seats with fentanyl, but bear in mind is also very rapidly absolved under the inherent seasonality and having such higher affinity and good receptors.
Yes, particularly well see fentanyl, but even further.
Let's have standardized hearing aid colorados sort of heroin overdose, you're still getting.
Reversal agent and to the holidays brain, its where I need to be quickly. So we still see it as being very relevant there as well.
Great. Thank you very much.
Our next questions come from the line of Carl Burns of Northland Securities. Please proceed with your question.
Great. Thank you and congratulations on the progress.
Can you, possibly give us a little clarity on the timing of recognition of the second tranche of the BARDA grants.
As well as any any additional information might be able to give on the timing of recognition of 90 grants in 2020. Thanks.
Thanks, Carl and again, thanks for joining the call and the question both the BARDA and the night at brands the recognition of that revenue as as we actually incur the cost.
And as we move forward through this year with as Roger indicated the anticipation of filing and then D.A. later part of this year the end of this year.
Most of that revenue recognition will be in this year.
The BARDA contract itself covers everything.
Everything that the night at grant doesn't and including the NDA filing fee and so if we are successful and moving our program zeros or a free to end the a filing at the end of this year. Most of that revenue recognition has already indicated would be this year.
Oh, great perfect. Thank you.
Our next questions come from the line of Brian marks of Zacks investment Research. Please proceed with your question.
Hey, good afternoon guys.
Good afternoon.
In the beginning of year, the New York Attorney General came to an agreement with a emergent biosolutions, where they were talking about nasal delivery devices for.
For the lock sound and I'm curious if this has any bearing on a dark can or on Oh, three and then kind of a similar question or the delivery devices for nor can and O. Three the same or are they different.
Thank you so.
The as far as I'm glad this.
Relates specifically to make the device more available.
Developed the nasal now mifid.
Can comment on what it says around nasal naloxone.
In terms of the delivery devices.
The device we are using for there is is there is a different one so that that will you used for knock on nasal spray.
Okay and yeah. So another thing coming out of this agreement was it looks like emergent is developing a.
Nasal now machine are you aware of any other companies developing a similar product.
Well actually I know the immersion are developing a nasal now being as far as we're aware.
But they are developing new policy as a CFO injection more to.
Treat opioid use disorder animal chronic manner.
We are aware of.
Mentioned before aware of at least one of the company.
Developing nasal anomalous seen as far as we can tell that.
As far away from filing and day than ourselves.
I'm not aware of other nasal nominal seen programs beyond that.
Okay and David quickly for you.
Are there any more payments due or expected to emerging itself like there were last year with the licensing agreement payments.
There are no additional payment that will be due under that agreement.
Okay. Thanks for taking the questions.
Thank you. Thank you.
As a reminder, if he would like to ask the question. Please press star one on your telephone keypad.
Yes.
There are no further questions at this time, we have reached the end of the question answer session. I will now turn the call back over to management for any closing remarks.
Thank you operator summarize our R&D plans are well supported by our financial resources and we are targeting significant market opportunities. Most importantly, we truly believe that the medicines we are developing.
Central to impact thousands of life. So we are excited to continue advancing each in the clinic.
As we advance our pipeline and execute on all key near term catalysts, including topline data. Okay. He is there is there are three.
Jason if the trial Opn Tees, there is there to for eight you'd be anticipate additional value creation. Thank you for joining us today and for your interest in European It affords to keeping you updated on our progress in the upcoming months enjoy the rest of your day. Thank you.
This does conclude todays conference you may disconnect. Your lines at this time. Thank you for your participation I have a great day.