Opiant Pharmaceuticals, Inc.
Q1 2022 Earnings Call Transcript

Published: 14 May 2022

[Operator:]

Greetings, and welcome to Opiant Pharmaceuticals First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ben Atkins, Vice President of Communications and Investor Relations. Thank you, and over to you.

[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; Chief Scientific Officer, Dr. Phil Skolnick; and Chief Financial Officer, David O'Toole. Chief Commercial Officer, Matt Ruth, will join the question section of the call. This afternoon, Opiant issued a press release announcing financial results and providing a business update for the three months ended March 31, 2022. We will also be presenting slides today. Today's press release and the slides for this call are available on our website at www.opiant.com. Before we start, 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 statements 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, 2021 and subsequent filings. This conference call also contains time-sensitive information that is accurate only as of the date of this live broadcast, May 10, 2022. 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.

[Dr. Roger Crystal:]

Thanks, Ben, and a very warm welcome to you all. Thank you for joining our conference call to discuss Opiant's financial results and business highlights for the first quarter 2022. We appreciate everyone's time and attention. At Opiant, we are focused on our mission to advance medicines that better treat addiction and drug overdose. Few companies have dedicated research and development in this area, their entire mission, yet the disease, death and economic costs associated with substance abuse is overwhelming. We are proud to be a leader in this field with a strong pipeline and exciting catalysts in the near term and beyond. The first quarter of 2022 marked another strong quarter for us as we move OPNT003, nasal nalmefene, closer to NDA submission. We are very excited with the recent results of the pharmacodynamic study's top line readout, which builds off the impressive data we saw from our prior clinical pharmacokinetic studies. Dr. Phil Skolnick, our Chief Scientific Officer, will speak to the PD results shortly. At the end of March, we completed a pre-NDA meeting with the FDA. The purpose of the meeting was to discuss our planned NDA submission to ensure that all requirements for a complete application will be met. Based on that meeting, we believe our NDA submission for OPNT003 is on track, and we remain hard at work to ready the filing. Simultaneously, our commercial preparations continue to advance in support of a launch. Opiant's teams continue to execute on our other pipeline programs, while we prepare our regulated submission for OPNT003. Specifically, we are exploring the potential for OPNT002, nasal naltrexone, to reduce heavy drinking associated with alcohol disorder. We are in an ongoing Phase II clinical trial in Europe. This is a condition which affects millions in the United States and for which there continues to be a significant need for better medical treatment. Less than 10% of people classified with alcohol use disorder receive pharmacotherapy. To date, we have enrolled over 80 patients in our trial with a target of 300 patients. We expect to complete enrollment in early 2023. I would also like to highlight OPNT004, drinabant for acute cannabinoid overdose, for which we expect to complete IND-enabling activities this year. Our work is supported by a strong balance sheet and the continued support from our government partners. As I noted at the beginning, we are making good progress with OPNT003. The opioid epidemic has continued to evolve with synthetic opioids like fentanyl now accounting for almost 90% of opioid overdose deaths, which equates to about 70,000 deaths from synthetics in 2021, up from less than 10,000 in 2015. Significantly, fentanyl and other synthetic opioids are now found across non-opioid substances, including cocaine and counterfeit prescription medicines such as Adderall and Percocet. Anecdotal accounts of children and young adults being targeted by dealers selling these counterfeit pills through the use of social media is particularly distressful. In our efforts to develop treatment better able to confront our current opioid overdose crisis, we are very encouraged with the top line data from our pharmacodynamic study. Phil Skolnick, our Chief Scientific Officer, designed the study, working with the FDA, which requested efficacy data compared with naloxone. I have asked Phil to join us today to provide more detail on the PD study and the package of data is complete. Phil, over to you.

[Dr. Phil Skolnick:]

Thank you, Roger. To understand the significance of our data for OPNT003, it's helpful to understand the unique pharmacological properties of synthetic opioids like fentanyl and how they've exacerbated this worsening public health crisis. Next slide, please. Thank you. First, synthetic opioids like fentanyl, our highly lipophilic molecules compared to opioids like heroin. This property results in a very rapid entry into a person's central nervous system and a much more rapid onset of action. This rapid onset effectively shortens the window of opportunity for a successful rescue in an overdose. Like other opioids, fentanyl binds to opioid receptors. These receptors mediate the analgesic and rewarding effects of opioids as well as the respiratory depressant actions. However, fentanyl and related synthetic opioids, in addition to binding with high affinities are very potent in activating mu-opioid receptor associated signaling pathways. On a milligram per milligram basis, a compound like fentanyl is about 50x stronger than heroin. Both a very high potency and rapid entry into the brain, greatly increase the risk for overdose with synthetic opioids. Lastly, and adding yet another level of complexity to treating a synthetic opioid overdose, fentanyl has a plasma half-life of seven to eight hours where the plasma half-life is naloxone is about one to two hours. This means fentanyl as well as many other opioids with longer plasma half-lives than naloxone can lead to a recurrence of respiratory depression after the effects of the reversal agent wears off. This is a phenomenon termed renarcotization. Renarcotization complicates the management of overdose, which can include the need to redose with a reversal agent, if symptoms reoccur to the need for an extended intravenous infusion of reversal agent in emergency room. The half-lives of opioids can vary widely because there is no information about either the opioid or the amount taken as we've seen in an overdose, a rescue agent with a longer duration of action can reduce the risk of renarcotization. Naloxone is currently the only FDA-approved opioid overdose reversal agent. Multiple reports have emerged over the past five years, indicating that more effective rescue agents are needed in an error when illicit high-potency synthetics are responsible for the majority of opioid overdoses. It is within this context that the National Institutes of Health leadership has called for the development of "stronger, longer-acting formulations of antagonists". Like naloxone, nalmefene is mu-opioid receptor antagonist that can reverse the signs and symptoms of any opioid overdose, including respiratory depression. However, we believe that the pharmacodynamic and pharmacokinetic properties of nalmefene may differentiate it as a reversal agent, particularly well suited to a community environment now dominated by synthetics such as fentanyl. I use information learned from a large body of existing research as well as our own clinical development program to demonstrate why this is so. Next slide, please. Thank you. Multiple studies have demonstrated that nalmefene has a five-fold higher affinity at the new opioid receptor compared to naloxone. This higher affinity results in much higher new opioid receptor occupancy than naloxone, even if similar plasma concentrations. Our pharmacokinetic study have demonstrated higher plasma concentration of nasal nalmefene compared to nasal naloxone. This is especially important at early time points, critical for a successful rescue. Illustrated here is our plasma concentrations at five minutes. Data from our PK001 study show that the plasma concentration of nalmefene are almost 3x that reported for nasal naloxone. You can also see here this illustrated here by the Tmax and the Cmax. It took nasal nalmefene 15 minutes to reach Tmax in contrast to 30 minutes with nasal naloxone, and Cmax, the total concentration of reversal agent in the plasma is twice that of nasal naloxone. Finally, multiple studies, including our own have demonstrated that the plasma half-life of nalmefene at 8 to 12 hours is substantially longer than naloxone at one to two hours. In addition to these PK data at the request of the FDA, we also designed the recently completed pharmacodynamic study. This compared nasal nalmefene to nasal naloxone in an experimental model of opioid-induced respiratory depression. This study was powered to show non-inferiority at five minutes post-administration. The primary endpoint agreed to with the FDA. This means demonstrating nasal naloxone to be as good as nasal nalmefene to be as good as -- at least as good as nasal naloxone at this time point in reversing opioid-induced respiratory depression. This was a crossover study conducted in healthy volunteers to compare nasal nalmefene to nasal naloxone in reversing the respiratory depressed effect of the synthetic opioid remifentanil. The two drugs were assessed by measuring changes in minute ventilation, following administration of the respective drug. Minute ventilation is the amount of air inhaled or exhaled per minute. Our primary endpoint, as I indicated before, was five minutes post-administration. An early time point was agreed to as the primary endpoint measure because it is critical for a rescue agent to be able to act quickly in an overdose. This is especially important in the case of synthetic overdose, where there is, in fact, a reduced window of opportunity to affect the successful rescue. Subjects were randomized to receive either naloxone or nalmefene on either day one or day five with a washout in between study drugs. Next slide, please. This figure illustrates how we conducted the study. I'll explain the procedure, then I will go through what we see as the primary endpoint, five minutes and also out to the first 20 minutes in this study. Thank you. To start, all subjects were tight fitting face mask at time zero, which you can see on the extreme left of the graph, subjects were administered a gas mixture containing a high concentration of CO2. You can see in this graph that by 10 minutes after breeding this hypercapnic gas mixture, the minute of inflation substantially increased. At this point, remifentanil infusion was started, and you can see that by the downward arrow, which says Remi infusion I&F. This infusion was started at that point and it lasted through the end of the study. You can see that remifentanil produced a rapid reduction in minutes ventilation. It is this reduction in minutes ventilation that is central to the experimental model of opioid-induced respiratory depression. At 15 minutes into the remifentanil infusion, which is time 25 on that graph, the face mask was briefly removed and the subjects were dosed intranasally with either nalmefene or naloxone. Minute ventilation was then measured over the first 20 minutes, which, of course, includes the primary endpoint at five minutes, which is indicated by the downward arrow on the graph. Let's examine these first 20 minutes in more detail. May I have the next slide, please? Thank you. Working from the left of the slide to the right, the bar graph demonstrates minute ventilation in five minutes. And in five minutes nasal nalmefene produced a greater reversal of respiratory depression that was nearly twice that produced by naloxone. The increases in minute ventilation were 5.745 liters per minute and 3.011 liters per minute with nalmefene and naloxone, respectively. As you can see, the minute -- the difference in minute ventilation between the two groups clearly favorsnalmefene. Now moving to the middle panel. This figure is graphed to illustrate the FDA criteria that have been established to demonstrate non-inferiority is the left. The filled circle is the difference in minute ventilation between naloxone and nalmefene with a 95% confidence interval indicated by the line's bracketing the filled circle. The first out of line to the right is the minute ventilation where there was no difference between the two treatments. That is the line intersect zero, which would mean no net difference. The second line to the right is the point we proposed as non-inferiority where nalmefene could be no more than 20% lower than naloxone. Nalmefene falls well to the left of the slide, indicating that OPNT003 clearly met the primary endpoint of non-inferiority. The third panel shows the first 20 minutes post dosing. At five minutes post nalmefene, increases in minute ventilation were well within the 95% confidence interval of the minute inflation before subjects were given remifentanil. The values at 7.5, 10, 15 and 20 minutes post nalmefene are also within the pre-remifentanil values, and that should be very clear from the slides because those points actually dot that -- or cross that dotted line or come close to it. By contrast, it took nasal naloxone 20 minutes to increase minute ventilation to levels seen at five minutes with nalmefene. And if you look closely at the graph, you can see the circles as opposed to the squares. Recall also this is an experimental model of opioid-induced respiratory depression. This model has a ceiling effect that may underestimate true differences between naloxone and nalmefene with respect to both the speed of onset and efficacy at which an overdose can be reversed. Next slide, please. It is with these compelling PD data, together with the PK studies we conducted, demonstrating both rapid absorption and long plasma half-life that suggests OPNT003 represents a highly promising opioid overdose reversal agent. These studies will form the clinical basis of our NDA submission to the FDA. And if I may, at this point, I'd like to thank our government partners, the Biomedical Advanced Research and Development Authority and the National Institute on Drug Abuse for their support. I'd also like to acknowledge the contributions of my colleague, Dr. Mark Ellison and his clinical development team to the success of these studies. Thank you for your attention. Let me now hand this over to David. David?

[David O'Toole:]

Thank you, Phil. The details of our financial results are in the press release, so I'll focus now on a few highlights. For the first quarter of 2022, we reported revenues of $4.5 million, of which $2.2 million of revenue was attributable to royalties from the license agreement with Emergent BioSolutions, Inc. or EBS for the sale of NARCAN Nasal Spray. This compared to approximately $6.4 million in revenue and $4.3 million in royalties for the same period of 2021. The decrease in royalty revenue was due to a reduction in the royalty rate to 2% from tiered royalties with rates ranging from 6% to 12%. This is the result of EBS applying the generic reduction clause provided for in the license agreement, a prospect that we anticipated, included in our current financial plan and discussed on our last earnings call. This provision in the agreement states that once a generic is launched in a particular country, each subsequent quarter's performance in that country is measured against NARCAN sales for the same country in the quarter immediately preceding the quarter in which the generic launched. The first commercial sale of Teva's generic occurred in the U.S. in December 2021. First quarter 2022 sales of NARCAN Nasal Spray in the U.S. and Canada were approximately $93.1 million as reported by EBS. This was actually a 25% increase over net sales during the first quarter of 2021. However, based on information provided by EBS, the U.S.-specific net sales decreased more than 30% when compared to U.S. sales in the third quarter of 2021, the reference quarter. The royalty rates applied to net NARCAN sales in Canada were not impacted as no generic version has been launched to date in Canada. This calculation is completed separately each quarter, which means that the application of the generic reduction cause this quarter has absolutely no bearing on whether it is triggered in the remaining quarters of 2022. Total operating expenses for the first quarter were $16.3 million compared with $8.7 million for the same period in 2021. Operating expenses included $4.4 million in general and administrative expense compared with $2.6 million in 2021, $8.8 million in research and development compared with $4.1 million in 2021 and $2.7 million in sales and marketing compared with $1 million in 2021. The increase in investment in R&D and sales and marketing were primarily associated with the completion of our clinical work for OPNT003 and heightened precommercialization efforts, respectively. Net loss for the three months ended March 31, 2022, was approximately $12.2 million or a loss of $2.43 per basic and diluted share compared to a net loss of approximately $2.8 million or a loss of $0.66 per basic and diluted share for the comparable period of 2021. From a capital resource perspective, we ended the first quarter with approximately $51 million of cash, which puts us in a position to execute on our key commercial and R&D initiatives. We also potentially have access to an additional $30 million under the existing debt facility if certain milestones are met. Thank you. And with that, let me open the call for questions.

[Operator:]

The first question comes from the line of Brandon Folkes with Cantor Fitzgerald.

[Brandon Folkes:]

Congratulations on the data, and I appreciate all the color. Maybe just firstly, could you provide maybe something right into the feedback that we've seen so far just on that onset of action. I guess it seems pretty significant, but is there any color you received so far? And then maybe secondly, anything in the market currently and market dynamics that you're seeing within opioid overdose market that may not be playing out as you expected or without giving away your commercial strategy, just -- I mean you do have the ability to obviously evolve it. But just how are you seeing that market play out currently go on to get a very differentiated product?

[Dr. Roger Crystal:]

Thank you, Brandon, and thanks for the question. So in terms of the feedback and onset of action, and bear in mind this is our top line data, but very encouraging. What we know for a successful opioid overdose rescue delivering as much of a potent opioid overdose reversal agent into the ultimately, the brain as quickly as possible is key -- and the feedback that we've had so far when we speak to our KOLs and our advisory board is that's very much what they're seeing as represented in this pharmacodynamic study. And the other consideration isn't just around whether you save a life or not. It's also whether the person can avoid longer-term disability. And even in the immediate setting, if you can reduce the amount of acute medical care required such as the expensive intensive care. So anything that can reduce that is actually not just well received from a clinical perspective, but also from a health economic perspective as well, which is why we are confident that this product as you said, we think will be differentiated and we'll have a significant value proposition as well as from the clinical and economic angle. Then in terms of the market dynamics, I mean, we knew when we embarked on this program, this is a competitive market. You have a strong player and has a majority market share. And there's other products in the market as well. And we welcome that in a sense of we want competition, we want innovation. The important aspect of market dynamics are around competition should continue. So when we look at some of the opioid settlements around free goods, Teva, for example, that's important to increase access to opioid overdose reversal agents and communities otherwise don't have satisfactory solutions such as some of these harm-reduction communities. But what's important when we think about the market dynamics is that, this isn't a long-term solution because innovation is here and should continue, and we should allow for that. But the addressable market, this is my final comments in terms of market dynamics continues in many ways, unfortunately, continues to grow. We're seeing increasing year-on-year, quarter-on-quarter, not just opioid overdose death, but in parallel, the proportion of those deaths are due to synthetic opioids.

[Operator:]

The next question comes from the line of LelGershell with Oppenheimer.

[Leland Gershell:]

My congratulations on the terrific data. Two questions. One first for David. David, if you could just to the extent you're able remind us of any interplay between the authorized generic and what you may take royalties versus sales of the branded NARCAN Nasal Spray. And then also just -- I think you mentioned that Matt Ruth will be on the Q&A. Just wanted to ask Matt, if you could provide some more color and now it's a little bit early, but just as you gear up for commercial for 003, what those preparations are looking like?

[David O'Toole:]

Thanks, Leland. I appreciate you being on the call and the questions. I'll answer first, and then Matt is here, and he can answer the second question for you. As far as the authorized generic and the branded, the interplay there, the branded NARCAN, under the agreement, those two amounts are combined as far as the dollar amounts, and we receive royalties based on the total of that. There is no differentiation between the authorized generic and the branded as far as what royalty rate applies.

[Matt Ruth:]

This is Matt. I'll go ahead and answer the second question. So in regards to our commercial preparation, we have secured a very strong leadership team and all of the different functions required to effectively launch a commercial drug. So we've got trade and distribution where we're securing distribution licensing and distribution methods for when we launch this. Obviously, we've got a strong marketing team, sales leadership, government affairs initiatives and market access. So we are in preparation building the foundation by which we will be able to launch this pending FDA approval.

[Operator:]

Carl, please go ahead. Your line is unmuted. You can speak now. Carl Edward Byrnes Northland Capital Markets, Research Division – MD & Senior Research Analyst Congratulations on the progress. What clinical differentiating data language do you hope or anticipate to have in the 003 label versus nasal naloxone. And then I have a follow-up as well.

[Dr. Roger Crystal:]

Thanks, Carl. So again, this will all depend on our interaction with the FDA. They've been very receptive to this program overall. And with Fast Track designation, we're able to have that interaction in real time. However, when we think about the overall differentiating factors of this product, we see it as faster, stronger and longer, faster in terms of the absorption, both on the PK and now the PV study as well when we look at the minute ventilation naloxone versus nalmefene. As Phil said, just to reemphasize, the response we see with nalmefene at five minutes in the PV study is achieved with naloxone, nasal naloxone until 20 minutes. The stronger is also related to that, where we look at the PD study, the 202 data points were stronger, if you like. There's the PD study that again shows that the minute ventilation that's grant of respiratory recovery from remifentanil infusion. The minute ventilation of nalmefene appears to be almost double that of naloxone. The other stronger aspect is the inherent properties of the nalmefene molecule where it appears to have at least 5x greater affinity of that critical mu-opioid receptor when compared to naloxone. And then finally, the longer piece, well, actually, the longer piece from our data, although our data support this is actually in the existing label for injectable Revac, which was the original branded nalmefene in the language in that label that includes the fact that nalmefene acts for longer than naloxone. So those are the -- that's the underlying supporting data, and that's the discussion with the FDA as to how that will fit into the label itself. Carl Edward Byrnes Northland Capital Markets, Research Division – MD & Senior Research Analyst Great. That's very helpful. And then the follow-up question, this is probably more for David. How should we look at SG&A and R&D spending for the balance of the year, understanding that in the current quarter or the first quarter, rather, you had $2.7 million that was related to pre-commercialization activities. And then in the R&D line, you had $2.2 million from the BARDA grant?

[David O'Toole:]

Yes. So a couple of things on BARDA, I think that's -- and thanks, Carl, for the question and thanks for being on the call, first of all. But for BARDA, the total contract, as you remember, was $10.3 million, and we've recognized $6.8 million of that through March 31, 2022. So we have another $3.5 million that will be recognized and received this year. So the R&D spend for 003 will be offset for the year, for the next quarters will be offset by the $3.5 million that we do get in revenue from BARDA. We are, as we've mentioned, in the process of doing the 002 study out of and for alcohol use disorder. And so we would see that the R&D spend would not be as great in the first quarter because most of that work was done for 003 and won't be continued. Obviously, we're at the clinical end of 003. So the R&D spend for the rest of the year will be focused primarily on 002 and finishing up the regulatory and FDA approval for 003. SG&A as we get closer to FDA approval towards the end of the year, the sales and marketing spend will increase. Many of the hires will be contingent upon FDA approval. So many of those -- a lot of that expense won't be incurred until we get really FDA approval for the sales side of it. G&A, we're going to keep that as lean as possible going through the end of the year to save -- to expeditiously watch our expenses and make sure that we have all of those -- all of our resources focused on commercializing 003.

[Operator:]

The next question comes from the line of David Bautz with Zacks.

[David Bautz:]

My first question is about 003. I'm curious if you've had any discussions with the FDA regarding the need to do any type of drug-drug interaction studies. And in addition, I wonder if you feel like there's going to be the need to do any additional studies to understand the risk of precipitated or abrupt withdrawal from the use of nalmefene.

[Dr. Roger Crystal:]

Thank you, David. Yes, so there's nothing simply around drug-drug interaction. Again, that was already well known with the existing FDA-approved Revex. In terms of withdrawal in additional studies, at this point, the FDA hasn't specifically said we need to do any additional studies regarding this as well.

[Operator:]

Ladies and gentlemen, we have reached the end of question-and-answer session. And I would like to turn the call back to Roger Crystal for closing remarks.

[Dr. Roger Crystal:]

Thank you, operator. Thank you for joining us today and for your interest in Opiant. Please enjoy the rest of your day. Thank you.

[Operator:]

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