Opiant Pharmaceuticals, Inc.
Q3 2021 Earnings Call Transcript

Published: 11 Nov 2021

[Operator:]

Good day, ladies and gentlemen and welcome to the Opiant Pharmaceuticals Third Quarter 2021 Financial Results and Business Update Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. I would now like to turn the call over to your host Ben Atkins, Vice President, Communications and Investor Relations of Opiant Pharmaceuticals. Please go ahead.

[Ben Atkins:]

Thank you, operator, and thank you all for joining us this afternoon. With me on today's call are Chief Executive Officer, Dr. Roger Crystal; and Chief Financial Officer, David O'Toole and Chief Commercial Officer, Matt Ruth. This afternoon, Opiant issued a press release announcing financial results and providing a business update for the three and nine months ended September 30, 2021. Please note that certain information discussed on the call today is covered under the Safe Harbor provision of the Private Securities Litigation Reform Act. We caution listeners that during this call, Opiant management will be making forward-looking statements. Actual results could differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company's business. These forward-looking statements are qualified by the cautionary statements contained in Opiant's news releases and SEC filings, including in our annual report on Form 10-K for the year ended December 31, 2020, and subsequent filings. This conference call also contains time-sensitive information that is accurate only as of the date of this live broadcast, November 11, 2021. Opiant undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call. Now I'd like to turn the call over to Roger.

[Roger Crystal:]

Thanks, Ben, and a very warm welcome to you all. Given our focus on OPNT003, most of my remarks today will cover our development progress, as we look ahead to NDA submission next year. Joining me today is our Chief Commercial Officer, Matt Ruth, who will elaborate on our commercial readiness activities. These activities reflect our transformation from a development stage company to a commercial business, as we anticipate the launch of OPNT003. Also on today's call is David O'Toole, our Chief Financial Officer who will remark on our financial performance and strong cash position as we approach the end of the year. Turning to the quarter, our development of OPNT003 continues to make good progress. Last week, we announced the FDA granted us Fast Track designation. This underscores the potential for OPNT003 to represent a major advance in opioid overdose treatment, which we believe can help communities’ better respond to this escalating crisis. Fast track is an FDA process designed to facilitate the development and expedite the review of potential therapies that seek to treat serious conditions and fill an unmet medical need. Programs with Fast Track designation may benefit from early and frequent communication with the FDA in addition to the potential for a rolling submission of New Drug Application. This designation comes as regulators and communities across the United States grapple with a worsening opioid epidemic driven by synthetic opioids such as fentanyl. Opioid overdoses claimed an estimated 63,000 lives in the 12 months ended March 2021. Synthetic opioids were linked to over 80% of these deaths. This makes opioid overdose the number one cause of death for individuals between 25 and 64 years old, and a significant contributor to the decline in average lifespan. Beyond this, there are hundreds of thousands of non-fatal overdoses each year. In October, the Peer-Reviewed Journal Pharmacology & Therapeutics, published a review by our Chief Scientific Officer, Dr. Phil Skolnick, titled Treatment of Overdose in the Synthetic Opioid Era. The paper highlights that for each opioid induced fatality are between 6.4 and 8.4 non-fatal. Most people don't realize that even if revived from an opioid overdose, victims can experience long-term physical and mental disabilities depending on how long the brain is deprived of oxygen during the overdose. The synthetic opioid’s responsible for the great majority of overdose deaths are far more potent and have a longer duration of action in opioids such as heroin. They can quickly depress a person's breathing and continue to deprive the brain of oxygen even after administration of naloxone. Given the widening prevalence and greater potency of synthetic opioids such as fentanyl, leadership at NIH has called for the development of stronger and longer acting opioid antagonists. To meet this challenge, we are developing OPNT003 using nalmefene. Nalmefene are also an opioid antagonist different from naloxone in several important ways. It has a longer half-life and the fivefold higher affinity than naloxone that makes it more potent at the Mu-opioid receptor in the brain. The recent data from a confirmatory pharmacokinetic study demonstrated that OPNT003 surpassed intramuscular nalmefene induction across all key metrics, exhibiting fast absorption and long duration. We believe that this data supports OPNT003 being a potentially major advance in opioid overdose reversal. We are also on track this quarter to complete a study comparing the effects of one dose of nalmefene in each nostril to two sequential doses. We expect top line data by January. To further support our New Drug Application, on the FDAs request, we design a novel pharmacodynamic study comparing OPNT003 with nasal naloxone in reversing the respiratory depression produced by the synthetic opioid remifentanil in healthy volunteers. The study is powered to demonstrate non inferiority between nalmefene and naloxone, the primary endpoint measuring the change in minutes of ventilation at five minutes. Additional secondary endpoints cover a range of different time points. This is a novel clinical study that seeks to address important clinical questions not previously answered by other studies. As a result, we anticipate that we would be eligible to receive three years of market exclusivity if OPNT003 is ultimately approved. The study consists of two sequential parts. Part 1 determines the study conditions including the optimal dose of remifentanil to allow for a safe and meaningful comparison. Part 2 is a head-to-head comparison against nasal Naloxone. I’m pleased to update that we have completed Part 1 and expect to complete recruitment and dosing in Part 2 by year end. We anticipate having top line data to share in the first quarter of next year. We had originally anticipated having top line data in the fourth quarter of this year. However, we made the decision during Part 1 of the study to modify the dose of remifentanil. This modification was reviewed by the FDA and was subsequently approved by the IRP. Completion of the PD study represents the last step to finalizing a robust set of clinical data that will form the basis of our NDA, which we anticipate completing in the first half of 2022. Turning to the rest of our pipeline, we are working on startup activities for our Phase 2 study evaluating OPNT002 nasal naltrexone for the treatment of alcohol use disorder. You will recall that we did not initiate recruitment in 2020 as we had planned due to COVID. But I'm pleased to say we expect to recruit our first subjects this quarter with dosing to follow soon thereafter. This will be a randomized 300 participants double blind placebo controlled study to determine whether OPNT002 reduces heavy drinking in patients as measured by a change in the World Health Organization drinking risk levels. The study is anticipated to take about a year. In a Phase 1 PK study, OPNT002 showed potential to become an as needed nasal spray treatment when a patient anticipates drinking or is craving alcohol. With alcohol use disorder so prevalent in our society, we believe OPNT002 proven effective in this trial could dramatically improve the treatment landscape. Turning to OPNT004, drinabant, for the treatment of acute cannabinoid overdose. We continue to advance our development of a perennial formulation of drinabant in collaboration with NCATS. And we see the potential opportunity to initiate clinical trials next year. Overall, we’re really pleased with our pipeline progress, and particularly OPNT003. As I mentioned at the start of my remarks, we're joined today by Matt Ruth, our Chief Commercial Officer. Matt joined the team in July. Prior to Opiant, he led the launch of NARCAN Nasal Spray at Adapt Pharma. I ask Matt to join us today to share some insight into the work he's leading, as we look ahead to transitioning to a commercial company. Matt?

[Matt Ruth:]

Thank you, Roger. I appreciate the opportunity to speak with you all today because I am extremely excited to be part of the Opiant team. As our development team continues to advance OPNT003 towards NDA submission next year, we’re working to prepare Opiant for a successful launch if approved. And based on our strong financial position, which David will go through, I'm confident we are well positioned to execute on our commercial plan. As Roger mentioned, at Adapt, I built the commercial organization that launched NARCAN Nasal Spray in 2016. Prior to the launch of NARCAN, the public interest market for opioid reversal agents did not exist, as it does today. By establishing this market, I'm proud how we help change the way communities and first responders confront the opioid crisis. In building the commercial team at Opiant, we've been fortunate to attract former team members who were instrumental in our work at Adapt. This includes most recently, our new Vice President of Commercial Development, Mike Potestio, who previously served as Vice President of Sales for NARCAN Nasal Spray. The opioid crisis is much more dangerous than it was when I started at Adapt. As Roger mentioned, in 2020, over 80% of opioid related deaths were attributable to synthetic opioids, driven largely by fentanyl. This compares to less than 30% in 2015. Federal and state governments have responded by increasing access to opioid reversal agents with greater funding and important co-prescribing and Good Samaritan legislation. For this reason, the time is ripe for a new stronger opioid overdose reversal agent for those on the front line of this national public health crisis. Our launch plan includes four strategic imperatives. First, ensure current laws and funding for opioid overdose reversal agents include nasal nalmefene. Second, secure widespread distribution that ensures broad access. Third, establish comprehensive and affordable coverage. And fourth, partner with key stakeholders in education, awareness and funding that ideally will result in more distribution and access to opioid reversal agents. We're already making great progress on all four imperatives. In addition, we're onboarding skilled agencies to support us with public awareness to the ever changing landscape of the opioid epidemic. And, if approved, assist with messaging to ensure widespread adoption of OPNT003 as an important new treatment option for opioid overdose reversals. I look forward to sharing more about our launch plans in the coming months. And with that, I'll turn it over to David O'Toole, who will provide an update to our financials.

[David O'Toole:]

Thank you, Matt. Today I'll summarize our financial results for the third quarter and year-to-date. For full details of our financial results for the third quarter and first nine months of 2021, please refer to today's press release. As usual, a report on the quarter will also be available in our form 10-Q. However, because the SEC is closed today, our 10-Q will be available tomorrow morning. In summary, further increased demand for NARCAN Nasal Spray in the current quarter meant we again recognized higher than expected royalties this quarter. This continued strong revenue for the third quarter and the continued positive outlook for NARCAN Nasal Spray also led to an upward revision of our full year financial guidance in 2021. We also maintain discipline cost containment while executing on the clinical development and regulatory advancement of OPNT003. Now for our detailed financial results, total revenues were 16.3 million in the third quarter and 34 million for year-to-date in 2021. This compares to 9.1 million and 19.7 million respectively during the corresponding periods of 2020. Growth over 2020 reflects increased revenue from NARCAN Nasal Spray royalties from EBS as well as increased funding received from NIDA and BARDA for the development of OPNT003. Third quarter and year-to-date 2021 sales of NARCAN Nasal Spray were approximately 133.3 million and 313.6 million respectively as reported by EBS. Research and development expenses were 4.9 million in the third quarter and 12.1 million for the first nine months of 2021. R&D expenses have increased significantly over the same periods in 2020, which we anticipated from the increased activity on OPNT003. G&A expenses were 3.4 million for the third quarter and 8.7 million for the first nine months of 2021, up slightly compared to 2.7 million and 8.1 million for the same comparable periods in 2020. Sales and marketing expenses were 1.1 million in the third quarter and 3 million for the first nine months of 2021 as compared to 0.9 million and 3.7 million for the comparable periods in 2020. We expect to increase spending on our commercial activities in future quarters. Net income for the three months ended September 30, 2021 was approximately 3.4 million, or income of $0.77 per basic share, and $0.56 per diluted share, compared to net income of approximately 0.7 million, or income of $0.17 per basic and $0.15 per diluted share for the comparable period of 2020. Net income for the nine months ended September 30, 2021 was approximately 2.3 million or income of $0.52 per basic share and an income of $0.41 per diluted share, compared to net loss of approximately 1.2 million, or a loss of $0.28 per basic and diluted share for the comparable period of 2020. As of September 30, 2021, we had 50.3 million in cash, cash equivalents and marketable securities. As indicated previously reflecting higher than expected sales of NARCAN Nasal Spray, we are raising our 2021 financial guidance. We are aligning our guidance to the upper range of the modified full year 2021 guidance for sales of NARCAN Nasal Spray provided by EPS of 420 million. We now expect for year 2021 royalty revenue from the sale of NARCAN Nasal Spray of approximately 38 million. We are also now expecting to end 2021 with cash, cash equivalents and marketable securities in the range of approximately 50 million to 52 million, which is 8 million greater than the guidance we provided during the second quarter conference calls. In conclusion, we expect to start 2022 in a very strong cash position that supports the progression of our pipeline and our commercial strategy as we look forward to a potential launch of OPNT003 in the latter half of next year. Thank you. And with that, let me open the call for questions. Operator?

[Operator:]

Thank you. At this time, we'll be conducting a question-and-answer session. Our first question comes from Brandon Folkes with Cantor Fitzgerald. Please proceed with your question.

[Brandon Folkes:]

Alright, thanks for taking my questions and congratulations on the progress. Maybe just three for me if that's okay. Maybe Roger just the first one, any color and the thinking behind modifying the dose of remifentanil? And then maybe Roger or Matt, I guess how should – how are you thinking about market dynamics at launch? Do you think the differentiation in your product is going to be appreciated at launch based on the PD data or maybe do we think about it more experienced in use? And then Matt, you talked about those pillars. How long do you think – or how long should we think about it taking to establish sort of commercial reimbursement, but also sort of getting into those codes describing and some of that other blanket legislation that intranasal naloxone enjoys currently. Thank you.

[Roger Crystal:]

Thanks Brandon, and thanks for the questions. So related to the remifentanil dose. And this pharmacogenomics study is a novel study that's never been done before. So it's really just a matter of optimizing the dose of remifentanil so that we can successfully complete the second part of the study comparing OPNT003 to nasal naloxone. So that's really what it's about and until we do Part 1 to get that information, you're essentially learning on the job, so to speak and that's really what that entails. Regarding market dynamics, launch – our real excitement already is around the confirmatory PK data where we look at the very rapid absorption along half-life and therefore long duration. That in itself, we think has real promise in terms of demonstrating differentiation from naloxone and the good thing about the PD study, as we mentioned, is what we do need to demonstrate as non-inferiority for the basis of an FDA approval. And nevertheless, we do think that there will be additional data that come out of that studies, which when combined with the PK data, plus just the inherent known properties of nalmefene in totality, really do, I think, have the potential to show a very differentiated product compared to naloxone, which is out there today. I'll let Matt add to that in terms of the timing for the inverses, et cetera. Yeah, over to Matt.

[Matt Ruth:]

Yeah, thanks for the question. I appreciate it. Obviously, as Roger mentioned, a lots going to depend on the label, ultimately, hopefully approved by the FDA, as to what the market position will be. As to the four strategic imperatives, obviously, each one of them will vary in length of time and requirements. I think the most important thing that we have to consider now is that we're building the foundation organizationally to address each of those, so that we will be ready and in a good position when we're ultimately able to launch OPNT003 at FDA approval.

[Brandon Folkes:]

Can I just ask a follow up there Matt? Sorry, you just said something quite interesting. You talked about, it's going to depend on the label. Is that just – did you mean that statement more just, depending on what the data is, and what the data is in the label? Or are you kind of thinking about a differentiated label again, some sort,

[Roger Crystal:]

The label – the alternate label would be the same as the existing label that was out there for nalmefene. So this is a 505(b)(2). And we can think about the label though, all the data we generate will be a part of that package. So that's where we can look at the potential differentiators. And that's already there with the PK data in hand, it's looking pretty strong.

[Brandon Folkes:]

Okay. That’s what I thought you mean, but I Just thought let's just clarify that. Thanks very much. Roger and Matt, that's very helpful and congrats on the progress.

[Roger Crystal:]

Thanks Brendan.

[Matt Ruth:]

Thank you.

[Operator:]

Our next question comes from Karl burns with Carl Byrnes with Northland Capital Markets. Please proceed with your question.

[Carl Byrnes:]

Thanks for the question and also congratulations on the progress. Just briefly, how does EBSs intend to launch an authorized generic change your viewpoint with respect to the NARCAN franchise going forward? And then I have a follow up as well. Thanks.

[Roger Crystal:]

The EBS – sorry, in terms of – their intents in terms of are we on the NARCAN franchise or ultimately how would we think of 003?

[Carl Byrnes:]

In terms of the NARCAN franchise, just given the royalty stream.

[Roger Crystal:]

I mean, we can comment – I comment broadly and have David or Matt add to this. Under our agreement with Adapt, which is now Emergent Biosolutions, any form of nasal naloxone that is sold by them, we receive a royalty on and that would include the authorized generic that they announced their earnings last week. So that's the headline, really. It doesn't change anything as a result of that. And it does have NARCAN will perform versus an authorized generic, I could anyway be guided by what they've commented on publicly already.

[Carl Byrnes:]

No, sorry, I understood. I guess where I was going with this is if you have an authorized generic, it just seems very unlikely in the public sector space, the public interest space that an AB rated generic would be used. And even in a retail segment, there would still be a favorability of using an authorized generic over an AB rated generic. Would you disagree or agree with that?

[Roger Crystal:]

I can't really comment. I understand where you're coming from with the question, but I can’t. We're not out there in the marketplace today. So again, we just have to take guidance from what EBS comments on publicly, I'm afraid Carl.

[Carl Byrnes:]

Fair enough. And then just kind of switching over to cash. Obviously, cash balances strong, the royalties are up significantly, to go up about 65% year-over-year, at 14 million this quarter, as you reported. You'll receive that in the fourth quarter, which I believe is correct. And then also in the fourth quarter, when you recognize in the fourth quarter, it's going to be in the higher 12% royalty recognition, which basically kind of secures strong cash balances through the first quarter and probably even then some. Is that a safe sort of way to look at things?

[David O'Toole:]

Yeah, Carl, thanks for the question. And thanks for attending the call, really appreciate it. You have it exactly correct. We received the third quarter royalty this quarter. And then the revenue recognized this quarter. If you go to the upper end of the range, we'll all be north of 100 million, again, based on their guidance, not ours. And all of that will be at the 12% range. And that will be received in the first quarter of 2022.

[Carl Byrnes:]

Great, thanks and congratulations again.

[David O'Toole:]

Thank you.

[Operator:]

Our next question is from David Bautz with Zacks Small Cap Research. Please proceed with your question.

[David Bautz:]

Hey, good afternoon, everyone. I'm curious, what do you ascribe for the reason or reasons for this large increase in NARCAN sales this quarter? I mean, as it obviously, the opioid epidemic is not getting any better, it's only getting worse, but is it just a function of that? Or are we starting to see some effect of these co-prescribing laws in the country?

[Roger Crystal:]

Thank you, David. And I can only speculate. We don't have any insights in particular from EBS as to what's driving it, but I will give you my thoughts. I think you're absolutely – the latter point about co-prescribing exactly. So I think that that can trigger. This is what EBS have commented on in general, that's the trigger spiking and knock unnecessary sales. My view is not just a worsening opioid crisis in terms of the number of opioid overdoses. But for each opioid overdose, more naloxone is required to revive a patient. So when we developed the NARCAN Nasal Spray, the mindset was perhaps just one NARCAN Nasal Spray would be sufficient, especially because it was a heroin and oxycontin kind of situation. But now with fentanyl and other related synthetic opioids, being the main perpetrator, far more doses of naloxone are required. And that I suspect is reflected in the increased demand.

[David Bautz:]

Okay, and then when 003 is hopefully approved, and you have both NARCAN and 003 out there in the marketplace, I'm curious, if there's some type of independent organization committee, someone that could – maybe you could get kind of a recommendation from. Is there – I don't know if the group exists out there for this, but is there something like that, to try to maybe differentiate your product from NARCAN?

[Roger Crystal:]

I think the main source of differentiation is ultimately the data we generate. And that will then be up to the prescriber, person that it's in the – of intersect for sale, the organization responsible for procurement to determine whether the data we have is sufficiently important and relevant for the opioid crisis we're now facing. And therefore, more suitable product rather than being an official organization that would be the determinant – be able to determine, which would be more suitable. In general we see the market growing the addressable market, as I just mentioned, continues to grow. And the decision will we made at the – at an individual level or an organization level from state to state, person to person to which product might be seemed more suitable.

[David Bautz:]

Okay, all right. Well, I appreciate you taking the questions.

[Roger Crystal:]

Thanks for the question.

[David O'Toole:]

Thank you.

[Operator:]

Our next question is from Mark Walsh, a Private Investor. Please proceed with your question.

[Mark Walsh:]

Good afternoon, Roger and staff. Longtime investor I appreciate the opportunity to participate in the call. Basically I’ve two questions. First pertains to the extension of the PD study in the second to any updates you might provide regarding self-commercialization or partnership. Regarding the extension of the PD, obviously came just a short period of time before the FDA grant of Fast Track approval. Quick question about whether the – whether Opiant had communications with the FDA whether the FDA, prior to granting the Fast Track was aware of the modifications, I assume that's the case. But if you could provide any color on that. And second on that point, in addition to the increase in dose of remifentanil, I noticed that the study participants were increased from 54 to 60. Seems like an awfully small number. I'm not a statistician, but wondering if you could provide any input as to why the number of participants increased. Thank you.

[Roger Crystal:]

So thank you for the questions Mark and thank you for being an investor. The two aren't really connected in terms of Fast Track designation, and the extension of the PD study. Really, one nice thing about this PD study is being a novel study that's never been done before. So we started initial dose of remifentanil and then learn that we'd need to modify that in order for that second half – the Part 2 of the study to become relevant. So that's really what has been reflected both in this extension as such. We always had two parts of the study design – in the study design, and likewise, the increased number of subjects because more people are needed to participate in order to modify the first part of the study. And then on the second question, around – sorry, run your second question, so I want to make sure I answer it correctly.

[Mark Walsh:]

Sure. So in the past, in regards to the option to self-commercialize or to engage in partnerships going forward. You'd said in previous calls that the operation will be done in the best interest of the investors, I'm just wondering if there's been any updates that you can provide in terms of how that might go?

[Roger Crystal:]

Well, obviously, the opportunity to self-commercialize to have maximum shareholder value remains. And we’re sufficiently capitalized to launch 003 ourselves. And that was the basis of bringing Matt on board. He's done this before successfully, and therefore knows what it takes to do this. However, we always operate in the interest of our investors. So if alternatives arise, that make more sense, and of course, we would absolutely entertain that. But as far as we can tell the best opportunities to shareholder value is through self-commercialization with the strong balance sheet that we have.

[Mark Walsh:]

Thank you.

[Operator:]

We've reached the end of the question-and-answer session. I would now like to turn the call back over to Roger Crystal for closing comments.

[Roger Crystal:]

Thank you, operator. It is an important time for our company. We're building our teams and capabilities to transform from an R&D company into one that is also a commercial organization. Thank you for joining us today and for your interest in Opiant.

[Operator:]

This concludes today's conference. You may disconnect your lines at this time. And we thank you for your participation.