Q3 2020 OptiNose Inc Earnings Call
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Good morning, and thank you for joining us today as we review after knows its third quarter 2020 performance and our plans for the remainder of the year.
Joined today by our CEO, Peter Millar, President and Chief operating officer running on mood, our Chief commercial officer Nickel Valley, and our CFO keep gold in the.
The slides that will be presented on this call can be viewed on our website <unk> notes dot com in the investors section before we start I would like to remind you that our discussions during this conference call will include forward looking statements.
All statements that are not historical facts are hereby identified as forward looking statements forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those indicated by such statements.
Additional information regarding these factors and forward looking statements as discussed under the cautionary note on forward looking statements section of the earnings release that we issued today as well as under the risk factor section and elsewhere about knows his most recent form 10-Q and form 10-K that are filed with the SEC and available at their website SCC Dot Gov and on our website at Opta knows dot com.
You are cautioned not to place undue reliance on forward looking statements forward looking statements. During this conference call speak only as of the original date of this call or any earlier date indicated in such statements and we undertake no obligation to update or revise any of these statements.
I'll now make prepared remarks, and then we will move to a question and answer session with that I will now turn the call over to Peter Millar, Peter Thanks, very much Jonathan and good morning, everybody.
We appreciate you joining us for our third quarter update.
To start I'd like to commend and thank everybody on the up in those team for a strong quarter.
We continue to grow our business in the face of challenges presented by the growing buyers pandemic.
While there will likely be continued challenges related to COVID-19, our performance this quarter reinforces my strong belief that with enhanced we have a great product and the weight team to deliver on its potential to become part of standard of care treatment for a large underserved market.
Starting on slide three.
Well go into more detail in a moment, but I'd like to start by providing five key takeaways from today's presentation first new prescriptions of enhanced achieved an all time high in third quarter after experiencing a challenging environment in the second quarter due to a significant decline in patient volumes NTN allergy offices caused by the global pandemic.
With increasing patient volumes and in person promotional activity in the third quarter, new prescriptions increased 23% over second quarter 2020, and are up 29% compared to third quarter 2019 second our co promotion with clay it was underway clay.
Global sales Representatives completed expanse training in the third quarter and commence in person detailing on October onest, leveraging the strong pre existing relationships that they have with physicians.
As a reminder, coil is promoting explains to a large audience of office based health care professionals of up to 6000 prescribers about half of whom are incremental to the current open those called on universe. As a result, Kaleo sales representatives are both inc. are increasing both promotional reach and frequency for his hands, which historically is core.
Weighted with new prescription demand.
Having attended the launch meeting along Spencer alongside Spencer Williamson, the CEO of Colorado, I'm excited by the energy and product enthusiasm the Cleo brings to our partnership and look forward to a productive relationship.
Third.
We are lowering our financial guidance for operating expenses and we continue to expect initial results from chronic sinusitis clinical development programs in the second half of 2021.
We believe the opportunity for growth that would come from successful development of the Sia syndication continues to be under appreciated given that this prospective expansion of our label with an indication that has never been achieved by any other drug product could triple the potential on label patient population for the product and potentially open up the door to reach the substantial.
Number of CF patients that are not seeking treatment by a physician today due to frustration with the largely ineffective treatments that were available historically.
Fourth we continue to believe that expense has enormous headroom for additional growth.
Both our partnership with CLO and the potential to add to see us indication represent potential new growth drivers. In addition, while our business is performing solidly in the current environment market conditions have yet to recover.
At a high level total ins market prescription volumes are still below historical levels and at a granular level. The number of face to face details. Our reps are completing with physicians are still below pre pandemic norms.
As face to face interactions increase.
Leave that will support future growth acceleration.
We're also encouraged by the publication of new peer reviewed data by lead author Dr., Brent Senior Chief of Rhinology at the University of North Carolina Chapel Hill, and others, encouraging healthcare providers to consider nasal polyps and prescribe expanse in patients who remain intact inadequately controlled by conventional inhaled nasal steroids. This.
This population of patients fall squarely in our target.
Concurrently throughs, increasing public recognition by thought leaders and specialty societies have expanse as a distinct and important step in treatment for patients with chronic rhinosinusitis with nasal polyps after they try conventional nasal steroids.
And fifth we have a strong balance sheet with 143 million of cash as of September thirtyth.
In addition, we now have the option to draw an additional $20 million from our debt facility.
As a result of exceeding the 14.5 million dollar expense net sales threshold for the third quarter 2020.
Turning to slide five.
The third quarter 2020 that were 23000, new prescriptions for a 10th a 23% increase in new prescriptions compared to second quarter 2028, 29% increase compared to third quarter 2019, and the best quarter for expanse since launch.
After a strong start for tax in the first quarter of 2020, the COVID-19 related collapse and patient flow through our target physician offices negatively affected effective new treatment initiation in the early part of the second quarter.
Following that reset new prescriptions returned to strong growth trend with content, which continued in third quarter.
We're encouraged by this performance because new prescriptions grabbed the refills, which currently make up approximately two thirds of the expanse business.
As claimed details begin that impact and the volume of in person interactions between our own sales team and physicians continues to increase we remain confident in our ability to drive growth in new prescriptions.
Turning to slide six we.
Refill prescriptions continue to continue to increase year over year and quarter over quarter to 46100 in third quarter 2020 full.
Pulling together, the new and refill prescriptions. The total number of Ricks hands prescriptions in the third quarter of 2020 was approximately 69000. This represents 61% growth over the third quarter of 2019, very encouragingly. The number of prescriptions per patient per year is continuing to increase and is now solidly over four.
We believe this was good news for the business and reflective of the clinical benefit to patients who are offered the product are experiencing.
Turning to slide seven.
Expanse market share continued to increase in third quarter 2020.
Shares expresses as a proportion of all international story prescriptions written by the roughly 10000 physicians in our target audience.
And see that shares nearly doubled from 3% in third quarter of 2019% to 5.7% in third quarter of 2020 with much of the increased earned despite disruptive flows of both patients and territory manager access to physician offices during the pandemic period.
As these market conditions improve we are well positioned to build off this strengthened base.
As we move into 2021, we expect to increase the number of physicians included in our definition of the market. When we describe our market share. This will reflect the addition of physicians Cleo detailed for us plus additional physicians, we are reaching through our optimal sales team.
This will increase the total from approximately 10000 physicians to approximately 15000 physicians.
We believe this expanded target audience will help to drive enhanced growth. However in the short term. This larger denominator of prescribers will result in a lower stated share.
Turning to slide eight.
Breadth and depth of physician prescribing as measured by the total number of physicians with patients filling exams prescriptions continue to grow as well but.
Regarding breadth in third quarter 2020, approximately 6400 physicians had a patient for at least one prescription of expense an increase of 27% compared to third quarter 2019.
Regarding depth the number of physicians, who had more than 15, its hands prescriptions filled by their patients in the quarter has grown even faster with that number increasing by 73% from third quarter 2019 to third quarter 2020 with more than 1100 physicians now in this segment.
While the strong growth trend in breadth and depth was boosted by the pandemic environment, we believe that as market conditions improve we will see continued growth in both breadth and depth.
In a few moments I'll provide some closing remarks, but I will first turn the call over to our CFO Keith Goldan for comments regarding third quarter 2020 results and perspectives regarding our corporate guidance.
Keith.
Thank you Peter and thank you to everybody joining today.
Turning to slide 10.
As we reported up to those recognized $50.4 million of expense net revenue in the third quarter of 2020.
As noted on prior calls one of the metrics that we track is expanse average net revenue per prescription.
Which is calculated by dividing net revenue for the quarter by the estimated number of it expands prescriptions dispensed during the quarter.
We continue to believe this is a useful metric to evaluate the net revenues generated per prescription. However, we remind you that this metric is subject to variability.
That variability is result of factors that do not necessarily reflect a change in the price that is paid for an individual unit of expense, including ordering patterns inventory levels for our wholesale customers and pharmacies that we sell to directly utilization rates of patient affordability programs. The proportion of patients acquire next hands through in the <unk>.
Terence benefit and other factors.
Based on available prescription data purchased from third parties and also on do we received directly from our preferred pharmacy network expands average net revenue per prescription for the third quarter of 2020 was $224 a $60 increase compared to $164 in the second quarter of 2020 and consist.
With the expectations, we communicated previously.
For the nine months ended September Thirtyth expanse average net revenue per prescription is $175.
Moving to slide 11.
This morning, we are lowering previous guidance for operating expenses and maintaining previous guidance regarding clinical trial timing.
First for the full year 2020, we are lowering our guidance for operating expenses.
We now expect those to be in the range from 127 million to $132 million.
Of which approximately $10 million is expected to be noncash stock based compensation.
Total operating expenses, excluding stock based compensation, our therefore expected to be in the range from 117 million to $122 million.
Previously operating expenses are expected to be in the range from $131 million to $136 million of which approximately $11 million was expected to be noncash stock based compensation.
Second regarding our clinical trials with enhanced in pursuit of a new potential indication for the treatment of chronic sinusitis.
While we acknowledge that the worldwide COVID-19 related challenges to trial conduct remain fluid and add some uncertainty we continue to expect topline results from both trials in the second half of Twentytwenty one.
Third and this is new.
Third quarter 2020 cents net revenue exceeded the $14.5 million threshold and our debt facility and as a result.
We are now eligible to draw an additional $20 million at our discretion between now and February 15th of next year.
We expect to draw the $20 million by early 2021 subject to meeting continuing eligibility requirements.
In addition, as a reminder, theres a final $20 million tranche from the debt facility that is available subject to the achievement of expense net revenue of at least $26 million in the second quarter of 2021.
I will now turn the call back over to Peter to give brief closing remarks.
Thanks Keith.
For some closing remarks on expanse I'd like to take a moment to discuss the Opn 019 program that we announced at the end of June.
We have initiated this new program to address an area of great need during this pandemic by using our proprietary nasal actuation delivery system to target delivery of a proven in any viral in aseptic throughout the deep surface areas of the nasal cavity that are subject grown a virus infections. As a reminder, the active ingredient of the broad spectrum any.
Septic formulation, we are developing has already been shown and published peer review literature to kill the Sars koby to virus in vitro and multiple other pathogens.
As we all know now cobot is caused by respiratory type of virus that often infects people through the upper Airways, which is why we use masculine FIS physical distancing to reduce transmission.
We believe that by being able to coat the entire high indeed surface area of the nasal cavity, including a factory area that is so often affected by this virus is important but it's also a major barrier to using otherwise promising new local active ingredients to kill the virus.
Fortunately, we believe our EPS may enable us solution for the problem in a way that standard approaches like nasal sprays do not.
Our approach.
Our prior research suggested EPS drug delivery technology is well suited to spreading medicine throughout deep areas of the nasal cavity, including difficult to reach regions with a novel Corona virus appears to be multiplying in shedding.
We think that the combination of a known powerful in aseptic with this unique delivery technology has potential to be a winning combination in the fight against the core buyers more.
More specifically, we believe that a safe and effective product, especially one that is easy to use at home aimed at early treatment of people, who test positive for high risk profile laxness could be a valuable addition to the any coated armamentarium, both before and after the availability of potential vaccines.
The plan components of this drug device combination product candidate include both the active including both the active drug delivery device are currently commercially available in the US and there was a wealth of prior data separately supporting both the drug and device.
Because of that and because of the pressing societal need for an intervention that fills the role that opn. A one nine is intended to fill we anticipate streamlined and accelerated development.
Subsequent to a pre IDE submission, we've engaged with the FDA regarding an R&D and clinical development pathway.
In addition, we have performed in vitro testing against Sars Koby too with the candid formulation in which a four log reduction in virus count was produce which to be candid as a result, we expected.
In addition, we are performing test against other pathogens and expect results in November.
We are committed to supporting the inexpensive initial stages of development within our current operating expense plan and are seeking grants partnerships and or other sources other sources of capital to support further development to.
To be clear, while we know the parties are excited by the potential of this new drug device combination to help combat both the current pandemic and future public health crises.
Our focus remains on growing expanse and building, a leading TNT and allergy company.
Turning to slide 13.
2020 has certainly not been a year than any of us expected it to be when the calendar turned in January. However, this team has made the most of opportunities that presented themselves and more importantly, Cree aided opportunities when it appeared that options were limited.
Im incredibly proud of the effort and results industry, so far but im very focused on plans to continue to accelerate growth.
The next time, we catch up with all of you on the call today it will be 2021.
And I am very fired up about the potential for what next year can be for this company.
Most immediately we just launched our co promotion with collateral to expand the breadth and depth of physician details. Their audience includes nearly 6000 prescribers about half of whom are outside the approximately 10000 healthcare professionals in the current called on universe for opt in those territory managers.
We look forward to sharing updates regarding their progress in 2021.
Further out in 2021, we expect topline data from the chronic sinusitis trials.
We believe we are building a nice business with a nasal polyps indication and that we can build a great business. If we had to see us indication.
CS also creates potential for partnership and productive expansion of commercial efforts well beyond the specialty physician audience.
In the near term, we believe there is an emerging clinical expert consensus that a stepwise care pathway for patients with chronic rhinosinusitis and nasal polyps and optimize medical therapy.
In that pathway conventional nasal steroids will often be considered first but expanse should be considered for those patients for whom conventional treatments are not adequate.
Knowing what we know about the number of patients treated and current physician and patient dissatisfaction with conventional steroids a broader embrace of this emerging consensus could provide significant tailwind for expense growth in 2021.
Thank you and now I would like to open up the call for QNX.
You know I'll, just say that.
The performance was as expected and as we've guided.
Throughout going back to 2018, when we launched six hands, we've seen gradual increases.
As the years progressed.
And you know for the reasons that we've noted.
It's the the underlying market access that we have a strong it's remained pretty consistent around 75%.
And the way we have our co pay assistance program structured as you know the what we call. The zero 30 50 program as patients continue to meet.
Either out of pocket, maximums or or deductibles throughout the year the amount of money that we contribute to the co pay assistance decreases, thereby increasing our average net revenue per prescription.
This year I would say the one thing that's been different.
Is in reaction to the or in response to.
The pandemic, we did put in place what we've talked about publicly is the what we call. The assist program, which provided up to three prescriptions at no cost to new commercial patients.
Again that was put in place in response to the pandemic it really helps us achieve record market share.
And the second and third quarter.
And was very well received and we expect that the benefits of getting those patients on board to continue but it did cost us some average net revenue per prescription in the second quarter.
For the fourth quarter.
I'll just I'll cut we're not going to give specific guidance, but I'll comment that if you look historically, we've been above $200 for average net revenue per prescription every third quarter in fourth quarter from launch.
And.
And.
The our guidance remains the same that we can continue to expect the yearly average net revenue per prescription to increase throughout the year because of the reasons I mentioned earlier.
With respect to revenue we had if you recall, we had revenue guidance out pre pre covid.
He did withdraw that guidance as many companies did.
In response to the pandemic when we had our to call.
I believe in in May and at this point, we're not we're not comfortable putting new guidance out there for the full year now I'll, just I will point, though to the to the prescription growth that we've continued to see in spite of the pandemic I think 11% queue to to Q3 and Trs growth.
And the the continued.
The strength of the average no revenue prescript, which I just talked about so would keep both of those mine is you're thinking about what <unk> will look like.
Thank you so much.
Next question, David Steinberg Jeffrey.
Thanks, and good morning at three questions. The first one is could you give me some more color in the Calea.
Ever Asian.
And in fact are they.
Starting to help generate scratch or that'd be until next year.
Update on resales, what's the current thinking in terms of what you're saying in terms of average patient resales.
For years, and finally, I'm just checking out a few years, what's your latest thinking Peter on what kind of revenue need for X hands to breakeven. Thanks.
Thanks, David I appreciate the questions.
As I said in my remarks, David I'm really excited about <unk>. They just their team that's built a very strong business with our <unk> product. So.
They know how to build a business they have pre existing relationships already with the roughly 3000 offers fibers, they're going to call on incrementally in addition to.
The other audience that it's going to be overlapped with our territory managers. So I'm very very excited about it I think it can take some time David.
To really see the impact of Colorado.
We are hearing and anecdotally already for sure we trained them literally they really went out on their first calls in early October so.
So I think it's the fourth quarter progresses.
I think you'll start to see impact and I think when you really see impact as a cost 2021.
Is my expectation.
Regarding refills.
Again, I'm really encourage David.
As a reminder, typical refills in the intranasal steroid category about two per year. So with typical lying ask us about two refills per year. We came in believing that four was a reasonable target for the product and we are in fact gotten to four and we're still growing and refills. We're currently.
Between four and four and a half on a monthly basis than I expected. Some point, that's going to start to top out David because they are just as.
There's only so many months in a year candidly, but it's a really good clear indication that patients are really well satisfied with the product and understand the importance of using it every day.
And that's part of the messaging that we work on trying to deliver to patients about proper use of the product.
In terms of.
Revenue.
Looking forward.
And to get into your into breakeven is probably better if I pass that the key so Keith out and you said sort of address that David.
Comment that we've said before we have a pretty robust infrastructure here.
If you just look at look at our Opex for last year, which was $125 million.
Our latest guidance right now.
Is the updated guidance that we gave today is 120 732 for this year. So so we have two years of basically flat alpex yet.
Obviously, you're going to be able to grow to grow revenue.
Quite substantially.
That infrastructure, we are going to continue to get leverage on as we as we continue to grow a chance.
So.
I'll, let you guys do the math, but we have robust.
Gross profit margins.
Storage, we have been in the in the mid eighties.
And.
With an expense base that I think I'm not going to give guidance, but I think you can expect it to grow modestly, but not not incrementally again, we we have a lot of leverage to get on our on our fixed cost base. So with that in mind and you can do the math in terms of where where accents needs to be to turn the corner.
One other comment on making this is again obvious and you guys can do the math, but I am glad you ask the questions on refills, David because.
We've made the comment in the in the remarks that as we continue to build new prescription.
That should we call at the top of the funnel that then turns into significant number of refills downstream. So we have the combination of continuing to grow anorexia and.
Very high refill right now and even continue to increase.
It's why we just feel really good about the business right now and the last thing I'll add David is that we have a pretty heavy investment in R&D really on the <unk> side.
This year next year as we're kind of all.
All in on the two phase three trials.
Exploring enhanced for the treatment of chronic sinusitis.
With.
Pearl guidance, we expect topline data in both of those trials next year. So after that we have we have R&D optionality I'll say.
So we can either either choose to invest in new programs or the expectations should be our development costs and the R&D line should decrease.
In 22 and beyond as those trials complete.
Okay. Thanks, Thanks for the question of the day.
<unk>.
Next question random fault.
Right.
<unk>.
Hi, Thanks for taking my questions and congratulations.
On the results and a quarter and maybe just drilling down on the results in the quarter can you just comment in terms of do you think there's any benefit from a brainless patients in terms of cancer in person visit and the empty space and a maybe just commentary in terms of what you're seeing and that in person.
T space very soon.
Telemedicine post the end of the quarter and how we should think about that going forward.
Secondly, maybe and maybe you can and can we just it's just it's a nasal steroids market continues to decline is that just private Audi at as fast as we said today.
And then lost me on yes.
There is a competitor running a trial quite a ways behind your address you'd think a first mover advantage is going to be significant in that space and.
In terms of what's product kind of it you said, it's all going to come down to your comparative data whenever it's on the market. Thank you.
I'll take the majority of in Vicky can jump and if you'd like on a couple of questions.
Relative to our benefit from a bolus of patients in <unk> I do not think that was the case at all Brandon.
Uhm.
There was a limit on the surgical side, you did see a pretty healthy return on the Emt's surgery cases.
But clinically.
There was not a bolus of patients that just sort of immediately sort of showed back up in three Q.
Courage by the way that from anecdotal comments from physicians, they're they're clinical days and we obviously benefit.
We get prescribing clinical day, obviously as opposed with surgical PSY crew that distinction.
But the physician as we talk with on average I would say the patient volume on a clinical day is not quite back to where it was pre pandemic, but probably in the 90% range and I just had dinner last night with one of the leading physicians in the world and they're seeing they believed by the way that they're going to <unk>.
Until you to see.
A reasonable return of patients, but it was not a bolus that's not something that really affected.
Relative to your question on telemedicine or in person certainly in the Emt's space. They really don't do a lot of telemedicine because so much of the value then and E&P provides is an actual examination and discopathy a visualization of what's happening in the nasal cavity. So there's really minimal telemedicine in that space.
And I don't think there will be.
Regarding allergy telemedicine, there is more telemedicine in the allergy space, but again, because so much of the allergist do shots and do things that require an actual visit in an office.
That specialty is another specialty does not quite embraced telemedicine, but the good news is I said patients, but appear to be returning to reasonably close to where they they've been historically.
Relative to the Inf's market. We are we have noticed Brandon that there has been a.
It's roughly being treated in a broader physician audience and we believe this the see us indication will enable a broadening to that audience. We think ideally via partnership. It also presents an opportunity to get back into the market roughly 20 million people, who are lapsed from physician care. So.
We think the opportunity for see US just generally is a very very big opportunity.
I think it's if things progressed the way, they're progressing we will be first and candidly Brandon I. Just think we are are really.
Optimal treatment for that population that.
We're going to we've established how well we work in Quantico on Ah sinusitis with nasal polyps is getting more and more and more recognized by physicians and the very simple idea of we have a.
An inflammatory condition that is very difficult to reach behind the nasal cavity, we're reaching it really effectively as our device. It's a very simple compelling story clinically advantage of being first and in my view, obviously, a more compelling message.
Great. Thank you very much that's very helpful.
[noise] next question pairing accident with BMO.
Hi, Good morning, it's where I'll say on for Gary.
I was hoping you could provide an update on <unk> payer coverage and whether you anticipate any changes heading into 2021.
Thanks for the question.
I always like to remind people, we really have good pair coverage as we sit here today.
It's a I made this I made the several times that Clovelly has joined us from Pfizer, where Vic was running a very big business advisor in one of the things that impressed him was the the coverage that we've achieved on the product. So as a reminder, we have 75% to 80% of commercial lives have X hance is a covered benefit.
Having said that we were we see wins on the horizon to actually increase that.
I think I can talk about some wounds, we had just recently reiki. So a blue cross Blue Shield of Florida, We just picked up coverage.
In October this year, Florida is a very big market for our business. So that's a great. When the team just very recently achieved and and some of the conversations that we're having with Payors as I mentioned in the call.
We're really encouraged by the thought leader community in Rhinology really more and more and more recognizing how it's hands fits in the treatment paradigm for this disease and as that more and more gets recognized there had been publicly some of the some of the society.
And talked about a consensus algorithm.
In their meetings and we believe is that becomes more and more public that gives us really good ammunition to go talk to the payers because it's recognition by the thought leaders in the community of how to treat this disease and we have line of site to continue to grow that 75% to 80% commercial coverage and.
New to expand coverage in Medicare Medicaid. So we feel we do see improvement in that across next year.
Thanks, and then I was hoping you could talk a bit more about your explore program that you've mentioned in the past, what's the expected duration of that program and how effective hasn't been potentially reaching new prescribers.
It's been really effective we had two waves of it. Unfortunately, it got interrupted by the pandemic. So we have a couple of hundred physicians that we got into the program in the first quarter of this year and we now have several hundred more that we enrolled in the program in the third quarter of this year as we sort of got back post.
Pandemic and.
One $5 Sandler.
Hi, This is zack on for how to do it. Thank you for taking my question. Just a couple quick one for me first could you provide an update on the current split between prescriptions written for patients with Uhm nail Polish and those with chronic sinusitis and then also just following up on the reimbursement of Friday.
Could you just remind us of orange or are on the Medicare part two side I think I remember you mentioned previously that you work as we're working to complete that so and I played on that that would be helpful. Thank you.
Sure we haven't really seen change Irrelative you quit thanks for the question you know relative to the share of business. If you will that is in nasal polyps versus outside of nasal polyps, we haven't seen any dramatic changes in that for the past year year and a half as a reminder, roughly about a third of the business.
By the way in the data set that we have and I want to remind you that the data set we have it is not a really perfect dataset because physicians don't have a great incentive to actually say, whether it's nasal polyps or chronic rhinosinusitis are allergic rhinitis and as a reminder.
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