Q1 2022 OptiNose Inc Earnings Call
Thank you for standing by and welcome to opt announces first quarter 2022 earnings conference call. At this time all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question during necessity need to press star one on your telephone please be advised that today's conference.
Being recorded should you require any further assistance. Please press star zero I would now like to hand, the call over to your host Jonathan Neely Investor Relations. Please go ahead.
Good morning, and thank you for joining us today as we review <unk> first quarter 2022 performance and our plans for the remainder of the year I'm joined today by our CEO , Peter Miller, Our President and Chief Operating Officer, Rodney Hall, our Chief commercial officer that Gabelli and our CFO Keith build in the slides that will be presented on this call can be viewed on our website at <unk> dot com and the <unk>.
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 is discussed under the cautionary note on forward looking statements section of the earnings release that we issued today as well as under the risk factors section and elsewhere of Optum knows his most recent Form 10-K and Form 10-Q that are filed with the SEC and available at their website SEC Gov and on our website at <unk> Dot com.
You are cautioned not to place undue reliance on forward looking statements forward looking statements. During this conference call.
Only as of the original date of this call or any earlier date indicated in such statement and we undertake no obligation to update or revise any of these statements. We will 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 Miller Peter.
Thanks, Jonathan and good morning, everybody.
We appreciate you joining us today.
Continue to be very encouraged by our progress and are excited about the upcoming data readout of our second pivotal trial for chronic sinusitis a label expansion that we believe has the potential to be transformative for our business.
Starting on slide four.
We will go into more detail in a moment, but I'd like to highlight four key takeaways from today's presentation.
First we reported strong financial performance in the first quarter with 35% year over year growth in quarterly revenue.
In addition to demand growth and important driver of this revenue growth has been a favorable shift in the mix of our business, resulting from modest changes in our co pay assistance program at the start of the year.
Specifically, a greater percentage of our prescription fills a profitable with a smaller percentage having negative profitability.
After making these changes to our co pay assistance program. We've continued to see prescription volume growth in the large profitable segment of our business. While also seeing a desirable reduction in volume in a smaller segment of our business, which is unprofitable.
This first quarter dynamic is dampened apparent near term growth and volume for both total prescriptions and new prescriptions, but we expect this change to have enduring benefit to the business as already reflected in the strong <unk> year over year growth of 21% and average net revenue per prescription.
As I noted we believe this is a desirable shift in business mix that will yield continuing benefits throughout this year and beyond.
Keith will provide some additional details later in the call.
Second our first quarter 2022 revenue growth was aligned with our full year 2022 guidance.
Our guidance of at least $90 million implies year over year growth of at least 22%.
As I mentioned, we're off to a good start with 35% year over year growth in Q1, which will enable continued strong focus on our two core business objectives, driving <unk> revenue growth and success and successfully completing the chronic sinusitis pivotal trials.
Third.
As promised we reported top line results from reopened one in the first quarter and we're pleased with the positive results.
We opened one is a landmark trial in chronic sinusitis and we believe is the first phase III study of a nasal treatment for this common disease to show improvement inside the sinuses.
Briefly in a population where all patients had proven disease inside the sinus cavities at baseline. We opened one found that treatment with <unk> produced a statistically significant improvement relative to eds placebo on both the combined symptom score and on a C. T scan measure of the amount of disease inside the sinuses.
We view this as an important development for the approximately 30 million adults in the United States, who suffer from symptoms of chronic sinus disease.
Fourth.
We continue to expect top line results from reopened two before the end of this quarter.
The last patient in the trial recently completed their final study visits and our clinical team is working diligently on the audits and data cleaning necessary to enable database lock and production of top line results.
<unk> achieved an important place in standard of care for nasal polyp disease by helping patients with these serious symptoms and we're producing nice <unk> revenue growth with the current indication, which we expect to continue.
Nevertheless, we are very enthusiastic about the incremental opportunities for growth that successful chronic sinusitis trials could create.
We believe this data has potential to increase product differentiation improved the prescribing environment for <unk> be a basis for new partnerships improve ex U S opportunities and drive significant incremental enterprise value.
As we highlighted in our fourth quarter earnings call in March and approval could roughly triple the number of target patients for whom we can promote <unk> and are currently called on anti allergy specialty universe.
From approximately 1 million diagnosed nasal polyp patients two 3 million diagnose chronic sinusitis patients.
It is also important to consider how the indication will impact the insurance and promotional environment for <unk>.
As we have previously described insurance coverage for <unk> is very good with approximately 80% of commercial lives and a plan that covers <unk>.
However, approximately half of those lives are in our plan that constrains prescribing by requiring by requiring physicians to a test that they are prescribing <unk> for the approved indication which is currently nasal polyps.
This is important because we found that many physicians who routinely diagnose chronic sinusitis.
Do not often make the diagnosis of nasal polyps.
Approval of the additional indication would also enhance enhance potential for a partnering opportunity to reach out to primary care physicians, who treat roughly 7 million additional patients.
With an average value per patient of approximately $1000 per year. Each of these opportunities has the potential to be substantial.
Turning to slide five.
We had strong performance in the first quarter 2022, and I will briefly touch on year over year growth highlights on this slide and the next.
In the first quarter of 2022, there were approximately 28200, new prescriptions for <unk>, a 9% increase compared to first quarter of 2021.
The total number of <unk> prescriptions in the first quarter of 2022 was approximately 8600, which represents 11% growth over the first quarter of 2021 in a market environment and increased 8% over the same period.
As I noted a moment ago, we made intentional changes to our co pay assistance program at the start of the year.
By reducing the segment of loss generating prescriptions. These changes dampen near term growth in overall volume of new and total prescriptions that are already increasing revenue growth in short term and long term profitability potential.
Regarding our environment I would also like to note that our territory managers continue to work through challenges to their ability to meet in person as frequently with and as with a broader audience of physicians as they did pre COVID-19.
While we've seen improvement in this regard we believe the market environment has potential to continue to improve.
Importantly, and as reflected in our first quarter results. Our territory managers are currently driving trial and adoption that is consistent with our stated financial objectives for 2022.
Turning to slide six.
<unk> market share increased from 5% in first quarter of 2021% to five 4% in first quarter of 2022 it.
It is worth noting that we updated the definition of our target physician universe to track progress and the audience to which we promote.
Previously, we track share against an audience of approximately 18000 physicians, including physicians detailed in person by our former co promotion partner.
Moving forward, we are including 21000 physicians, primarily E&P analogy specialists that fit within our targets for in person <unk> digital promotion.
Sure under this new definition is consistent with past performance and we remain excited about the headroom for future growth as more physicians incorporate <unk> into their practice of medicine.
Breadth and depth of physician prescribing as measured by the total number of physicians, who have patients filling <unk> prescriptions increased from first quarter 2021 to first quarter 2022 as well.
Regarding breadth.
In the first quarter of 2020 to approximately 7690 physicians had a patient fill at least one prescription for <unk>, an increase of 11% compared to first quarter 2021.
Regarding depth the number of physicians, who had more than 15 <unk> prescriptions filled by the patients in the quarter grew slightly faster with that number increasing by 14% from first quarter of 2021 to first quarter 2022, with nearly 500 physicians now in this segment.
In a few moments I'll provide some closing remarks, but I'll first turn the call over to our CFO Keith <unk> for comments regarding first quarter 2022 results and perspectives regarding our corporate guidance Keith.
Thank you Peter and thanks to everyone for joining us this morning.
Turning to slide eight.
As we reported <unk> recognized $14 $8 million of <unk> net revenue. This first quarter, an increase of 35% compared to the first quarter of 2021.
Based on available prescription data purchased from third parties and also on data we received directly from our preferred pharmacy network.
<unk> average net revenue per prescription for the first quarter of 2022 was $183 an increase of 21% compared to $151 of revenue per prescription in the first quarter of 2021.
As Peter described earlier, we made a change to a co pay assistance program that balances the needs of our business, while retaining an affordable option for patients who want treatment with <unk>.
Specifically the subset of patients in high deductible insurance plans now have an out of pocket co pay of $25 for the first prescription which is comparable to the cost of over the counter nasal steroids instead of the previous $0 out of pocket.
This change to our Copay assistance program is important going forward as it was intended to increase ongoing revenue in average net revenue per prescription by reducing the rate of growth in prescriptions filled by commercially insured patients.
Are in plans that have a high deductible.
While sustaining the rate of growth in covered plans, where prescriptions are profitable.
Patients who are covered but in a high deductible plan, Canada can end up costing us more as a group.
Then what we received for providing <unk>.
As intended this changes already reducing unprofitable fills.
We expect the benefits to average net revenue per prescription to continue moving forward.
Turning to slide nine.
Our first quarter 2022 financial performance was in line with our prior guidance and as a result, our guidance for full year and the remainder of 2022 is unchanged.
First we expect <unk> net revenue to exceed $90 million for the full year 2022.
Second with respect to <unk> average net revenue per prescription we expect to see improvement over the remaining three quarters of 2022 and to exceed $220 for the full year of 2022.
That's an increase compared to our prior expectation for net revenue per prescription to exceed $210.
Finally for the full year of 2022, we continue to expect total operating expenses to be in the range from $135 million to $140 million of which approximately $10 million is stock based compensation.
Total operating expenses, excluding stock based compensation are therefore expected to be in the range from 125 million to $130 million.
Turning to slide 10.
Regarding our CF trials as Peter discussed earlier, we announced positive topline results from reopened one in March.
For a more in depth review of those results a webcast with the announcement is still available on our website in the investors section.
With respect to reopen too.
We expect those results to be available in June and our plan for announcing them as similar to how we announced topline results for reopened one.
In our press release, followed by a conference call and presentation.
Now I'll turn the call back over to Peter for closing remarks Peter.
Thanks, very much Keith.
Before moving to Q&A I'll take a moment to reiterate that we believe 2022 has the potential to be transformative for our business.
We have two very clear objectives drive revenue growth for <unk> and successfully complete our pivotal trials in chronic sinusitis I look forward to providing updates on our progress throughout 2022.
Thank you and now I'd like to open up the call for Q&A.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key please standby, while we compile the Q&A roster.
Our first question comes from the line of Stacy Joe.
Cowen Your line is open.
Hi, good morning.
A question.
We have a few.
Can you talk about the broad market.
<unk>.
No offices reopen coming at the pandemic allows.
Rod chronic pain that is writing and how at Panther in relation to that and we have a few follow ups.
I'll take that.
<unk>, our chief commercial officer can add any additional comments, but.
I think what we're seeing is from a patient perspective, there's obviously two factors. We look at the first is our patients returning to offices and I think it's fair to say on that dimension. We're.
We're seeing pretty much of a return to pre COVID-19.
Vic I think it's fair to say the doctors, we're talking to what we hear from our territory managers is offices are busy.
So on that dimension.
We're seeing a reasonable return to normal.
The second dimension when we look at is the accessibility of our reps to be able to promote in offices.
And on that dimension, we're still seeing a slower reopening probably is the best way to describe it.
And Vic can comment more of the third thing that actually does impact us a little bit more than we originally expected as there's been pretty significant turnover in office staff in physician offices and that just creates a little bit more work for our territory managers on the backend of making sure that prescribing processes is managed in the offices, but that kind of if you have any.
To add Peter that's a good assortment.
Okay.
And so we have a few more.
A few more follow ups.
As you think about the cadence of Exane.
<unk>.
We see strong kind of repeat prescribing.
How should we think about.
With your guidance might evolve over the course of the year.
I think it's going to remain as it has been I mean, we've been averaging you see a very healthy growth in both breadth and depth. So I think when you mean cadence I wanted to actually be clear Stacy you mean, the timing of the writing or can you be clear of what you mean on cadence just trying to make sure I answer.
Your question.
As we think about that revenue guidance of at least $90 million for the year and we are.
Obviously, our Q1 sales so as we think about how it might progress through the year.
This is going to be as we think about that more face to face interaction.
Especially with these repeat prescribers are we thinking about kind of the second half.
We are really going to see that inflection.
Our focus Stacy is entirely on driving new scripts and.
Our model, we really have really pretty consistency that for when we get a new script, we generate roughly four prescriptions per patient per year, so that sort of improvement over the last couple of years. So our focus is entirely on generating new prescriptions.
As we see.
Continued growth or even acceleration of that which is caused by multiple factors. The first being the market environment, which already described I think there could be more favorability in the back half of the year, we're not necessarily counting on that in our guidance so to be clear.
But I think there could be favorability, there and what we're seeing Stacy is it with a 6% share roughly of the market. We just still have so much upside both in terms of the doctors, who are writing to write more as well as.
Doctors, who aren't writing to be right. So.
I think what youre going to see is that as our business has been over the past couple of years very steadily growing new prescriptions, which is driving refills, which drive grabs totaled <unk> and Stacy. This is Keith will then if I could just add to Peter's comments.
I think you were you were.
Maybe digging in on how to get to them, how we get to the $90 million and I just wanted to add that we posted an average net revenue per script of 183 in this first quarter over 20% growth from where we were last year.
We expect growth in that figure as we've seen in prior years, we expect the cadence to be similar so we expect to see.
Continued growth in the average net revenue per script, which we use as a proxy for the profitability of a chance.
Which caused us to raise our guidance rate we had previously.
<unk> said publicly that we expect average unit revenue script to be at least $210.
Raised that today to 'twenty so.
The floor, we're setting now as an expectation so in states such as to add to that I mean, I'm going to reiterate something we said in the call about the changes to our co pay program effect on a dampening of prescriptions. We actually are able to track written prescriptions and then we're also able to track prescriptions.
They are filled and the dynamic we have gone on here is that we still have good writing, but we have patients choosing some patients choosing not to fill in the high deductible segment. So we feel very good about the achievement of at least $90 million in revenue, we feel very good about our ability to continue to drive new prescription growth.
Okay. That's very helpful. Thank you very much.
Hum.
Thank you. Our next question comes from David <unk>.
Piper Sandler your line is open.
Thanks.
Helpful.
Can you talk about the rate.
And in men's.
Regarding prescriptions in other words.
The payer landscape being what it is you have a sense of.
Portions.
That's correct.
Okay.
Regarding that.
Number one and then number two is that.
That metric of about four <unk> per year Thats helpful. Just sort of wondering though what.
The attrition rate is.
Or if you have a sense of that.
What is the extent to which you've got patients that are just falling off.
Over time.
Thanks.
David you broke up a little bit on your first question and I think you were asking about abandonment and the portion of scripts in which there is a band above by patients can you just clarify that question yes.
Yes, sorry about that Thats correct, yes, the portion of <unk>.
Abandoning scripts that go on film.
So what we are seeing David is no change in abandonment among.
The profitable script portion of our business, what we did see in first quarter was more abandonment in the high deductible segment that is not yet met a copay and as we referenced in the call. These are costly scripts for us because we in essence through the Copay assistance program when essence fund.
Yeah.
Those scripts through the insurance plans, so that is where we did see a.
Significantly higher level of abandonment that we've seen historically purposely driven by the changes that we made in the co pay program.
So hopefully we were clear on that.
Regarding four <unk> per year.
That's been very consistent David.
Now I will say that changes in the high deductible plan.
We're not going to get as many fills on high deductible patients.
Which is good because those are unprofitable scripts for us, but relative to the fills in the profitable segment of our business.
Looking at our data, which we have very granular data, it's been very consistent across the past couple of years.
Okay and then in terms of do you have an attrition rate.
Is there sort of a ballpark range.
In terms of attrition.
I will say, David we're very sticky I mean, it's we have a significantly high number of patients who once they get into the product with name with the product and they don't obviously don't fill 12 scripts per year, but they sort of come in and out if you will we think base.
On symptom, we don't know that but based on they use more when they are highly symptomatic but.
We don't.
It's hard for us to really calculate patient true abandonment from the beginning of time, but the data we look at David says that we're sticky patients the thing I'll reiterate about the product David and you know this from the last four years, you've been covering US this product works it doesn't work a little bit better than other products.
In the area. It works a lot better as evidenced by the data that we have and the feedback we get from patients. So.
It's a sticky product with not significant abandonment.
Okay. Thanks Peter.
Thank you David.
Thank you. Our next question comes from Gary Management of BMO capital markets. Your line is open.
Hey, good morning, guys.
Reopened one are there any incremental data points you can share. Following further analysis of the data such as subgroup analysis between CF patients with or without nasal polyps and when can we expect to see more data from that study.
And then based on reopening one.
Anything you plan on doing differently with the announcement of reopened to anything you are modifying and reopen too I think that was may be a consideration.
And also any changes in utilization since the reopening one data are you hearing physicians using it any differently in CF patients, whether with or without nasal polyps.
Ron I'll take the first couple and with Vic and I can probably add answer some comments on the third sure happy to Gary Thanks for the questions.
First with regard to new analyses, we have done.
A wide range of additional exploratory analyses to try to better understand the results of reopened one.
As a result of that we have not determined that it was desirable to change anything about our planned analysis for reopening too, which I think was one of your questions also.
With regard to when the data will be released.
Shared data with our scientific steering committee and with a number of advisers.
And we expect to release, some sort of yield over time incremental results from the trial in normal scientific settings, So scientific congresses and in a peer review publication.
Over the course of the latter part of this year.
With regard to changes in utilization.
Start the answer to that by saying that we've gotten what we view as very positive feedback.
From the from the groups of scientific consultants and advisers that we have shared the results with they are excited to see the the nature of the results that we got in.
And reopened one and very much looking forward to the results of reopening too.
Yeah, and I'll add to that that you can jed anything that you feel could be incremental what I'm going to say, but we have not broadly.
Shared information on that trial, Gary so its not most physicians are potentially aware of the data because of press releases or things that they may have seen but as you know we've not published data we plan to this year, but the information is probably not broadly well understood by the by the broader prescriber.
<unk> community.
That kind of healing.
Rami made the most important partner in saying that most physicians are going to wait until there's some availability of the data in the scientific Cros in order to really incorporate it into their practice they already have a lot of confidence and experience with expense.
They're really waiting for.
Or more presentation of that data and frankly also FDA review of that data in order to expand their use.
Okay great.
And then on those changes in the Copay program, you have gone back and forth with that in the past so.
Why do you think now is the right time to do it.
Your confidence it won't dampen Rx business too much.
And I'm curious are there more patients overall in the high deductible plans now.
The bigger portion of volume than it was maybe a couple of years ago.
Yes.
I don't know that we've gone back and forth honestly I mean, I would say we made an initial change a bunch of years ago.
Around the launch of the product and everything since then it's been very evolutionary very sort of modest if you will so as Keith said in his remarks. This is a really modest change from no out of pocket expense to $25, that's still a very reasonable cost.
And obviously, what we're balancing Gary is we don't want any changes to sort of have an unintended consequence of dampening physician prescribing because doctors start to hear that hey, your product just too expensive from an out of pocket standpoint and.
That's why we talked about $25 being the cost of OTC Flonase. It is still a very very reasonable price now what that's done though is it does cause a number of patients to decide not to fill.
And the high deductible segment to be clear.
Which we think is a good thing.
Relative to the percentage of patients in that high deductible segment, it's really been pretty stable through the for the past couple of years like that I mean, I think it's fair to say, it's not dramatically.
Up or down our decision to do this was we really believe we're not going to influence pen to paper. If you will to physicians in interest in writing it.
We will reduce some people filling in the high deductible segment, but because we lose money on those prescriptions that is going to be a good thing ultimately for the business.
Okay, No thats fair enough.
And a quick one on that.
The only thing I'll add to that is we do a fair amount of research before any of these tweets get implemented in the market. So we have.
Pretty good sense of what the impact from patients and physicians will be and largely it's just a function of decreased spills.
Hello, Gary Youll recall, we made a tweak last year and it was that tweak also produced really nice favorability.
In our average net revenue prescription across the course of the year and as far as we can tell really did not significantly influence physician intent to prescribe.
Okay, and then just lastly related to that.
With the specialty pharmacy network how.
How much volume that's going through that is it still expanding in helping drive our ex growth.
I guess with some of these changes like does that impact how you're thinking about the specialty pharmacy network at all how does that play into it.
You take that.
Thank the specialty pharmacy network is really a strong sort of.
A portion of the component if you will of how we go to market, but I'll, let you talk and answered Gary's question, Yes, it's clearly been a competitive advantage for the business to have the preferred pharmacy network operating behind the <unk> They do a great job.
The vast majority of our prescription volume continues to go through it and we've seen it really be a stable part of our mix frankly since launch is the thing you know Gary we get two benefits. There. One is we tend to get more refills for patients through the network because the pharmacies to a really good job and follow up with patients.
The second is if their rps involve the pharmacies can actually help office staff.
Making sure that the.
It's as easy as possible and the prescribing side.
This is Keith Gary just to get a little more granular just over 85% of our gross sales in the first quarter went through our ppm and it's a very stable network area, we've actually gotten to the point that we have a couple of national players. We have regional players we're constantly evaluating the network based on performance of the pharmacies.
As well as which pharmacies are more profitable for us. So it's a I think the team does a really nice job of managing that network.
Okay. That's helpful. Thank you.
Thank you next question comes from Brandon Folkes from Cantor Fitzgerald Your question. Please.
Alright, Thanks for taking my questions just two for me just following on from the earlier question have you seen any change in prescribing all the time.
Without nasal polyps since the reopened one data.
On way or the other.
As we get past really open to question.
That reduction in R&D.
Catherine.
Opex guidance for the year, but going forward are you expecting to reach.
That reduction in spend back into the business or should we think about I think your bottom line. Thank you.
I'll take the first one case I'll pass the second to you.
It's too early Brandon on.
As we said earlier that we open one data is not broadly understood in the market. So we've not really seen any material change in writing outside of nasal polyp indication and Keith I'll, let you take the second one Ken and Burton you broke up a little bit, but I think I got the gist of your question. If I don't answer all of it just just please follow up.
So with respect to R&D expense.
As we conclude.
The chronic sinusitis program like we said on the <unk> call back in March we do expect going forward.
I E next year.
R&D expense on our Opex to drastically decline.
I think we commented that last year about $23 million of our total R&D costs were.
Specifically related to the chronic sinusitis program. So I'll just remind you that we do not have a program R&D program behind that so as of right now we would expect those savings to drop to the bottom line.
Although if we lost you Brandon I think we lost Brendan.
Yes.
Alright, I am just hoping between two calls.
Got it.
Hopefully I answered your question.
Thank you very much sure thing.
At this time I would like to turn the call back over to Peter Miller for closing remarks.
I just wanted to thank everyone again for joining the call. This morning, and I'll say stay tuned we have some exciting news on the horizon relative to our reopened two trials. So we look forward to following up when that data is available.
Thanks very much.
Okay.
This concludes today's conference call. Thank you for participating you may now disconnect.
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