OptiNose [OPTN] Conference call transcript for 2022 q1
2022-05-12 11:29:03
Fiscal: 2022 q1
Operator: Good day, and thank you for standing by. Welcome to the OptiNose 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. Please be advised that today's conference is being recorded. . I would now like to hand the conference over to your host, Jonathan Neely, Investor Relations. Please go ahead.
Jonathan Neely: Good morning, and thank you for joining us today as we review OptiNose's first quarter 2021 performance and our plans for the remainder of the year. I'm joined today by our CEO, Peter Miller; President and Chief Operating Officer, Ramy Mahmoud; our Chief Commercial Officer, Vic Clavelli; and our CFO, Keith Goldan. The slides that we’ll be presented on this call, can be viewed on our website, optinose.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 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 in OptiNose's most recent Form 10-K and Form 10-Q that is filed with the SEC and available at their website, sec.gov and on our website at optinose.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 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?
Peter Miller: Thanks, Jonathan. And good morning, everybody. We appreciate you joining us today. We 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 4, we'll 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. An 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 are 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 has 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 has already reflected in the strong 1Q year-over-year growth of 21% in 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 we'll 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 enhanced revenue growth and success and successfully completing the chronic sinusitis pivotal trials. Third, as promised, we reported top-line results from ReOpen1 in the first quarter and we're pleased with the positive results. ReOpen1 is a landmark trial in chronic sinusitis, and we believe is the first Phase 3 study of a nasal treatment for this common disease to show improvement inside the sinuses. Briefly, in a population we're all patients had proven disease inside the sinus cavities at baseline, ReOpen1 found that treatment with XHANCE produced a statistically significant improvement relative to EDS placebo on both a combined symptom score and on a CT 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. Forth, we continue to expect top-line results from ReOpen2 to 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. XHANCE has achieved an important place in standard of care for Nasal Polyp disease by helping patients with these serious symptoms, and we're producing nice, enhance 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, improve the prescribing environment for XHANCE, 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, an approval could roughly triple the number of target patients for whom we can promote XHANCE and are currently called on ENT allergy specialty universe from approximately 1 million diagnosed Nasal Polyp patients to 3 million diagnosed chronic sinusitis patients. It's also important to consider how the indication will impact the insurance and promotional environment for XHANCE. As we have previously described, insurance coverage for a XHANCE is very good with approximately 80% of commercial lives in a plan that covers XHANCE. However, approximately half of those lives are in a plan that constrains prescribing by requiring -- by requiring physicians to attest that they are prescribing XHANCE 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 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 $1,000 per year. Each of these opportunities has the potential to be substantial. Turning to Slide 5, we had strong performance in the first quarter of 2022. And I will briefly touch on year-over-year growth highlights on this slide and the next. In the first quarter 2022, there were approximately 28,200 new prescriptions, for XHANCE a 9% increase compared to first quarter 2021. The total number of enhanced prescriptions in the first quarter of 2022 was approximately 80,600 which represents 11% growth over the first quarter of 2021 in a market environment that 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 and overall volume of new and total prescriptions that are already increasing revenue growth and 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 the ability to meet in person as frequently with and as with a broad an audience of physicians as they did pre-COVID. And 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 on adoption that is consistent with our state of financial objectives for 2022. Turning to Slide 6, XHANCE market share increased from 5% in first quarter of 2021 to 5.4% in first quarter of 2022. It is worth noting that we updated the definition of our target physician universe to track progress in the audience to which we promote. Previously we track share against an audience of approximately 18,000 physicians, including physicians detailed in person by our former co-promotion partner. Moving forward, we're including 21,000 physicians, primarily ENT and allergy specialists that sit with our targets for in person and/or digital promotion. Share under this new definition is consistent with past performance and we remain excited about the headroom for future growth as more physicians incorporate XHANCE into their practice and medicine. Breadth and depth of physician prescribing is measured by the total number of physicians who have patients filling exams prescriptions increased from first quarter of 2021 to first quarter 2022 as well. Regarding Breath, first quarter 2022 approximately 7,690 physicians had a patient fill at least one prescription for XHANCE, an increase of 11% compared to first quarter 2021. Regarding deaths, the number of physicians who had more than 15 XHANCE prescriptions filled by their patients in a quarter who's slightly faster, with that number increasing by 14% from first quarter 2021 to first quarter 2022 with nearly 1,500 physicians now in the segment. In a few moments I'll provide some closing remarks, but I'll first turn the call over to our CFO, Keith Goldan for comments regarding first quarter 2022 results and perspectives regarding our corporate guidance. Keith?
Keith Goldan : Thanks, Peter. And thanks, everyone for joining us this morning. Turning to Slide 8. As we reported, OptiNose recognized $14.8 million of expense 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 receive directly from our preferred pharmacy network, XHANCE 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 Co-Pay Assistance Program that balances the needs of our business over business will retain an affordable option for patients who want treatment with a XHANCE. Specifically, the subset of patients in high deductible insurance plans now have an out-of-pocket copay of $25 for the first prescription, which is comparable to the cost of over the counter nasal steroids instead of the previous zero dollars out of pocket. This change for Co-Pay Assistance Program is important going forward, as it was intended to increase ongoing revenue and average net revenue per prescription by reducing the rate of growth in prescriptions filled by commercially insured patients earn plans that have a high deductible, while sustaining the rate of growth in covered plans, where prescriptions are profitable. Patients who are covered in a high deductible plan can end up costing us more as a group than what we receive for providing XHANCE. 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 9, 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 XHANCE net revenue to exceed $90 million for the full year 2022. Second, with respect to XHANCE 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 CS trials, as Peter discussed earlier, we announced positive top-line results from ReOpen1 in March. For more in-depth review of those results, our webcasts from the announcement is still available on our website in the investor section. With respect ReOpen2, we expect those results to be available in June. And our plan for announcing on the similar to how we announced top-line results for ReOpen1 in a press release followed by a conference call and presentation. Now I’ll turn the call back over to Peter for closing remarks. Peter?
Peter Miller: 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 XHANCE, and successfully complete our pivotal trials and 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.
Operator: Our first question comes from the line Stacey Ku of Cowen. Your line is open.
Stacey Ku : Hi, good morning. Thanks for taking our questions. We have a few. The first is can you just talk about the broad market as you're seeing offices reopen, we're coming at the pandemic lows. Just the broad chronic science that is writing and how XHANCE is doing in relation to that. And we have a few follow ups.
Peter Miller: I'll take that. And Vic Clavelli, 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 seeing pretty much a return to pre-COVID. 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, I think we're seeing a reasonable return to normal. The second dimension we look at is the accessibility of our reps to be able to promote in offices. And on that dimension, we're still you know, seeing a slower reopening probably is the best way to describe it. And Vic can comment more than a third thing that actually does impact us a little bit more than we originally expected is 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 back-end of making sure that prescribing processes is managed in the offices. But, Vic, I don’t know, if you have anything to add.
Vic Clavelli: No. That’s a good summary.
Stacey Ku : Okay, great. And so we have a few more a few months all up to that. As think about the XHANCE rating. We see strong kind of repeat prescribing. So how should we think about with your guidance? How it might evolve over the course of the year?
Peter Miller: I think it's going to remain as it's 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 want to actually be clear, Stacy, do you mean, the timing of the writing or can you be clear of what you mean on cadence? Just so I can make sure I answer your question.
Stacey Ku : Yes. As we think about that revenue guidance of at least $90 million for the year, we obviously have our Q1 sales. So as we think about how it might progress to the year, this is going to be as we think about this more face increased face-to-face interactions with, especially with these repeat prescribers. Are we thinking about kind of a second half, we're really going to see that that inflection?
Peter Miller: Our focus, Stacey 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's 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 though so to be clear. But I think there could be favorability there. And, what we're seeing, Stacey is that 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 to write. So I think what you can see, is that as our business has been over the past couple years, very steadily growing new prescriptions, which is driving refills, which drive total TRx.
Keith Goldan: And Stacey. This is Keith Goldan. And if I could just add to Peter's comments, I think you were maybe digging in on how to get to them -- how we get to the $90 million. And I just want 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 that average net revenue per script, which we use as a proxy for the profitability of XHANCE which caused us to raise our guidance right. We previously expected said publicly that we expect average net revenue per script to be at least $210, raise that today to 220 so that's the floor we're setting now as an expectation. So ---
Peter Miller: And Stacey, just add to that. I mean, I'm going to reiterate something we've said in the call about the changes to our Co-Pay Program effective on a day dampening prescriptions, we actually are able to track written prescriptions. And then we're also able to track prescriptions that 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 I, 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.
Stacey Ku : Okay, that's very helpful. Thank you very much.
Operator: Thank you. Our next question comes from Dave Amsellem of Piper Sandler., Piper Sandler. Your line is open.
Dave Amsellem : Thanks. So I just have a couple. First, can you talk about the rate of abandonment, if you will, regarding prescriptions? In other words, if with the pair landscaping, what it is? Do you have a sense of the portion of script with -- regarding that? That's number one. And then number two, is that metric of event four TRxs per year, that's 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 overtime? Thanks.
Peter Miller: David, I honestly broke up a little bit on your first question. And I think you were asking about abandonment in the portion of scripts in which there's a backup of my patients. Can you just clarify that question?
Dave Amsellem : Yeah, sorry about that. That's correct. Yes. The portion of abandonment scripts that go unfilled.
Peter Miller: Yeah. So what we're 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 Co-Pay. As we referenced in the call did these are costly scripts for us, because we, in essence through the Co-Pay Assistance Program, in essence fund 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 for TRxs per year, that's been very consistent, David. Now, I will say the 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 years.
Dave Amsellem : And then in terms of -- do you have an attrition rate? Or is there a sort of a ballpark range in terms of attrition?
Peter Miller: I will say, David, we're very sticky. I mean, we have a significantly high number of patients who -- once they get into the product will mean with the product. And they obviously don't fill 12 scripts per year. But, they sort of come in and out, if you will, we think based on symptom, we don't know that. But based on their use more when they're highly symptomatic. But 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.
Dave Amsellem : Okay, thanks, Peter.
Peter Miller: Thank you, David.
Operator: Thank you. Our next question comes from Gary Nachman of BMO Capital Markets. Your line is open.
Gary Nachman : Hey, good morning, guys. So ReOpen1, are there any incremental data points you can share following further analysis of the data such as subgroup analysis between CFS patients with or without nasal polyps. When can we expect to see more data from that study? And then, based on ReOpen1 anything you plan on doing differently with the analysis of ReOpen2 anything you're modifying. And ReOpen2 to I think that was maybe a consideration. And also any changes in utilization since the ReOpen1 data? Are you hearing physicians using accents any differently in CFS patients whether with or without nasal polyps?
Peter Miller: Why don’t you take the first couple, Vic? And then I can probably add answer some comments on Xsail .
Vic Clavelli: Sure. Happy to. Gary, thanks for the questions. First, with regard to new analysis, we have done a wide range of additional exploratory analyses to try to better understand the results of ReOpen1. As a result of that, we have not determined that it was desirable to change anything about our planned analysis, for ReOpen2 which I think was one of your questions also. With regard to when the data will be released, we have shared data with our scientific steering committee, and with a number of advisors. And we expect to release sort of, overtime incremental results from the trial in normal scientific settings. So at that scientific congresses, and in a peer review publication over the course of the latter part of this year. With regard to changes in utilization, I'll just start the answer to that by saying that we've gotten what we view is very positive feedback from the groups of scientific consultants and advisors that we have shared the results with. They're excited to see the nature of the results that we got in ReOpen1 and very much looking forward to the results of ReOpen2.
Peter Miller: And I'll add to that, and Vic you can add anything that you feel could be incremental, what I'm going to say. But we've not broadly shared the information on that trial, Gary. So it's not -- most physicians are potentially aware of the data because of press releases or things that they may have seen. But as we've not published the data we plan to this year. But it's the information is probably not broadly well understood by the broader prescribing community.
Gary Nachman : Yeah, kind of healing.
Peter Miller: Yeah, I think Ramy made the most important point in there in saying that most physicians are going to wait until there's some availabilities of data and the scientific process in order to really incorporate it into their practice. They already have a lot of competence and experience with XHANCE. They're really waiting for, formal presentation of that data, and frankly also FDA review of that data and will expand their use.
Gary Nachman : Okay, great. And then, on those changes in the Co-Pay Program, you've gone back and forth with that in the past. So why do you think now is the right time to do it? And your confidence, it won't dampen Rx’s too much? And I'm curious, are there more patients overall in the high deductible plans now? Is that just a bigger portion of volume than it was maybe a couple of years ago?
Ramy Mahmoud: Look, I would say, 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 right around the launch of the product. And everything since then has been very evolutionary, very sort of modest, if you will. So, you know, 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 is too expensive from an out of pocket standpoint. And, that’s why we talked about $25 being the cost of OTC furnace . It is still a very, very reasonable price. Now, what that done, though, is, it does cause a number of patients to decide not to fill in 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 for the past couple of years like that. I mean, I think it's fair to say it's not dramatically going up or down. Our decision to do this was we really believe we're not going to influence pen to paper, if you will. So physicians interest in writing it. We will reduce some people filling in the high deductible segment, but because we lose money on those prescriptions, that's going to be a good thing ultimately for the business.
Gary Nachman : Okay, that's fair enough. Yeah, that’s fair. I don’t think you want to add.
Peter Miller: Yeah. The only thing I'll add to that is we do a fair amount of research before any of these tweaks get implemented into the market. So we have a pretty good sense of what the impact on patients and physicians will be. And largely, it's just a function of decrease spills from that high --
Keith Goldan: Gary, you'll recall, we had 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 we -- as far as we can tell, we really did not significantly influence physician intent to want to prescribe.
Gary Nachman : Okay. And then just lastly, it's related to that, but what are you with the specialty pharmacy network? How much volume is going through that? Is it still expanding and helping drive Rx growth? And 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?
Peter Miller: Yeah. Well, we think especially specialty pharmacy for example, is really a strong sort of a portion of that new component, if you will, of how we go to market. But I’ll let you talk and answer Gary's questions,
Keith Goldan: Yeah. It’s clearly been a competitive advantage for the business to have the preferred pharmacy network operating behind XHANCE. 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
Peter Miller: These are things, Gary's, we get two benefits there. One is we tend to get more refills for patients through the network, because the pharmacies do a really good job and follow up with patients. The second is, if there are PAs involved, and the pharmacies can actually help office staff instead of making sure that the it's as easy as possible on the prescribing side,
Ramy Mahmoud : Just good. And Keith, just to get a little more granular, but just over 85% of our gross sales in the first quarter went through a PPN.
Keith Goldan: 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, frankly, as well as you know, which pharmacies are more profitable for us. So it's -- I think the team does a really nice job of managing that network.
Gary Nachman : Okay, that's helpful. Thank you.
Operator: Thank you. Our next question comes from Brandon Folkes of Cantor Fitzgerald. Your question, please.
Brandon Folkes : Hi, thanks for taking my questions. Just two from me. Just following on from your question. Have you seen any change in prescribing other times without nasal polyps since ReOpen1 data one way or the other? And then secondly, as we get past reopen to that reduction in R&D. I know you’re catching gaps up its guidance for the year. But going forward, are you expecting to route that reduction and spin back into the business? Or should we think about dropping to the bottom line? Thank you.
Peter Miller: I'll take the first and Keith, I’ll pass the second to you. It's too early Brandon, on -- as we said earlier, that the ReOpen1 data is not broadly understood in the market. So we've not really seen any material change in writing outside of niche qualification. And Keith, I'll let you take the second one, Dan,
Keith Goldan: Yeah. And you broke up a little bit. But I think I got the gist to your question. If I don't answer all of it, just please follow up. So with respect to R&D expense, as we conclude the chronic sinusitis program, like we said on the 4Q call back in March, we do expect going forward, i.e. next year, the R&D expense on our OpEx to drastically declined. I think we commented that last year, but $23 million of our total R&D costs were specifically related to the chronic sinusitis program. So 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. If think you lost, Brandon.
Keith Goldan: Yeah, I think we lost Brandan.
Brandon Folkes : Sorry, I am here just jumping between two calls.
Keith Goldan: Hopefully that’s exciting. Hopefully that answered your question.
Brandon Folkes : It did. And thank you very much.
Keith Goldan: Sure, Brandon.
Operator: Thank you. And at this time, I'd like to turn the call back over to Peter Miller for closing remarks.
Peter Miller: Well, I just want to thank everyone again for joining the call this morning. And stay tuned. We have some exciting news on the horizon relative to our ReOpen2 trial. So we look forward to following up when that date is available. Thanks very much.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
