Opiant Pharmaceuticals, Inc.
Q2 2018 Earnings Call Transcript

Published: 15 Aug 2018

[Operator:]

Good day everyone and welcome to the Opiant Pharmaceuticals Second Quarter 2018 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to [Brian Richie]. Please go ahead, sir.

[Unidentified Company Representative:]

Thank you, operator and thank you all for joining us this afternoon. With me on today's call our Chief Executive Officer, Dr. Roger Crystal; and Chief Financial Officer, David O'Toole. In addition Dr. Phil Skolnick, will be as Chief Scientific Officer will also be available during the Q&A session. This afternoon Opiant issues a news release announcing financial results and providing a business update for the second quarter ended June 30, 2018. 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 news releases and SEC filings, including the report on Form 10-K for the transition period at August 1st to December 31, 2017, and subsequent filings. This conference call also contains time sensitive information that is accurate only as of the date of this live broadcast August 9, 2018. 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?

[Dr. Roger Crystal:]

Thank you Brian, and good afternoon to everyone who is joining us on our first ever earnings call today. On today's call I'll provide a brief overview on why we are so excited about Opiant and the opportunities that lie ahead to the company. Following this David will review our financial results and then I will discuss each of our core pipeline products in detail. Finally, we will open up the call for your questions. With that let me begin by providing you with a brief overview of Opiant's leading position as an antibiotic addiction and over dose focus specialty Pharma company. We are a development stage specialty Pharma company with the focus on addiction and drug overdose on a growing revenue stream from royalties from net sales of NARCAN nasal spray. We are a unique company that is developing medicine to the millions of patients suffering from addiction who urgently require suitable treatment. Our products target multiple substantial markets with significant unmet needs within the area of addiction. Importantly, while most investment in Opiant's is the NARCAN nasal spray which we developed for the emergency treatment of opiate overdose our pipeline has the potential to be a substantial longer term growth driver for our company and we are extremely excited about that. First though, a bit of color on our target market. Addiction is a brain disease and the use of effective medication as first-line treatment are essential for longer term recovery and relapse prevention. Nevertheless the U.S. Surgeon General in 2016 reported that just one in nine patients with addictions received the appropriate treatment. We view this as a unacceptable and our core focus is on addressing the substantial treatment gap through developing more effective and better tolerated medicines. While significant favorable legislation and regulatory trends are emerging for existing drug overdose products including NARCAN which I will discuss further in a moment. Our initial target market is opiod overdose. Unfortunately the opoid epidemic continues to grow across the U.S. and has become a significant public health crisis. Opiod overdose is now the leading cause of death in American males under the age of 50. Quite simply opioid has become the analgesic of choice and the issue has worsened with increasing fentanyl abuse. There were approximately 53,000 opioid related deaths in 2016 and this number is expected to be higher in 2017. Fentanyl is 50 times more potent than heroin yet is easier and cheaper to manufacture. There are over 2 million opioid addicts in the United States. We estimate the total addressable markets for opioid overdose reversal agents could be as large as $2 billion. This addressable market includes stress responders such as [indiscernible] opiod addicts and also the co-prescribing of an opiod overdose reversal agent alongside all opiod prescriptions. So the opportunity is clear and we believe that we are well positioned to support patient and to grow our business. Our predominant expertise is developing opioid antagonist delivered via Opiant nasal spray technology. Our developments of NARCAN nasal spray demonstrates our capabilities in this space. This product went from concept to approval in three years and has unlocked the tremendous market opportunity. NARCAN is commercializing the U.S. and Canada by our partner Adapt Pharma. All CVS involving pharmacies stock NARCAN and ot is available with minimal or zero co-pay under multiple insurance plans including ETNA and Harvard Pilgrim. Opiant is also in a strong financial position with cash of approximately $11.2 million at the end of the second quarter. This strong financial position will further enhance beyond our balance sheet through the recently awarded grants of approximately 7.4 million from the National Institutes of Health and National Institute of Drug Abuse for the development of OPNT003, internasal nalmefene, a long-acting opioid antagonist for the treatment of opioid overdose and the company's lead product candidate. This grant will fund OPNT003 to an NDA ready stage. So we believe our financial resources are sufficient to come to the completion of a registration study for OPNT003 and the expected results from two Phase 2 studies for our other product candidates - OPNT001 for Bulimia Nervosa and OPNT002 for Alcohol Use Disorder. Before I turn the call over to David for his review of the financials I'd like to welcome Rich Daly to our Board of Directors. Rich Daly has supported a successful launch of 10 drugs during his 27 year career in the Biotech and Pharmaceutical industry. With that I'll now ask David to discuss our financial results.

[David O'Toole:]

Thank you, Roger. Good afternoon and thank you all for attending our conference call. I'd like to begin by highlighting the significant sequential growth of over 70% in royalty revenue that we recorded in the second quarter of 2018. While we are precluded from discussing actual or projected sales of NARCAN under our license agreement with Adapt the increase in our royalty revenue in the second quarter provides a strong foundation for potential further NARCAN success in the second half of the year. With this growing royalty revenue base a healthy balance sheet and the recently awarded NIDA grant of 7.4 million, which does not show up on our balance sheet we are confident in our current financial position. Before I review our financial results I would like to briefly summarize the terms of our license agreement with Adapt for NARCAN under which we are eligible to receive one-time sales milestones and annual royalties. To date, we have received a total of 33 million in milestone payments based on announced net NARCAN sales of at least 75 million buys out in the calendar year 2017. Please note that we were required to pay 26.25 million of these milestone payments to SWK Capital under the royalty monetization agreement between Opiant and SWK. Our final one-time milestone payment would be for 50 million and is based on Adapt reaching 200 million in net NARCAN sales in a calendar year. Our royalty rate is based on certain ranges of net NARCAN sales buys out. Our blended royalty rates for the first 100 million and 200 million in net NARCAN sales in a calendar year are approximately 7.1% and 8.6% respectively; if and when NARCAN sales by Adapt eclipse 200 million in any one calendar year, our royalty rates would increase to 12% for net sales above that net sales number. With that I'll now briefly review our second quarter results; the company recognized approximately 3.2 million of revenue during the three months ended June 30, 2018, and 3.8 million in the comparable period in 2017; for the three months ended June 30, 2018 Opiant recognized 3.1 million of royalty revenue from the license agreement between us and Adapt for sales in NARCAN; for the three months ended June 30, 2017, the company recognized 3.8 million of revenue from the sales to SWK of our right to receive royalties arising from the sales NARCAN by Adapt. This 3.8 million payment from SWK was a one-time payment as provided on the royalty monetization agreement between Opiant and SWK; general and administrative expenses were 2.9 million and 1.9 million for the three months ended June 30, 2018 and June 30, 2017, respectively. The increase in G&A was primarily due to an increase in stock based compensation of 0.7 million and an increase in employee salaries and related expense of 0.3 million; research and development expenses were 1.6 million and 1.4 million during the three months ended June 30, 2018 and 2017, respectively. The increase in R&D expenses was primarily due to an increase in stock based compensation, employee salaries and related expenses of 0.7 million offset by a decrease of 0.5 million in third-party expenses. Net loss for the three months ended June 30, 2018 was 1.4 million, or loss of $0.52 per basic and diluted share, compared to net income of 0.2 million or income of $0.12 per basic share and $0.11 per diluted share for the comparable period of 2017. Now let's focus on the results for the six months ended June 30, 2018 we recognized 4.9 million of revenue for the six months ended June 30, 2018 and the comparable period in 2017, we recognized 3.8 million of revenue. During the six months ended June 30, 2018, the company recognized 4.7 million of royalty revenue from the license agreement between us and Adapt for the sale NARCAN; during the six months ended June 30, 2017 Opiant reported 3.8 million from the sale to SWK and its right to receive royalties arising from the sale of NARCAN by Adapt. As was mentioned earlier this 3.8 million of revenue in 2017 was the one-time payment from SWK as provided under the royalty monetization agreement between Opiant and SWK. G&A expenses were 5.8 million and 3.7 million for the six months ended June 2018 and June 30, 2017 respectively. The increase of 2.1 million was primarily due to a 1.6 million increase associated with stock based compensation and 0.5 million increase in corporate overhead. Research and development expenses were 4.4 million or 4 million and 2.3 million during the six months ended June 30, 2018 and 2017 respectively. The increase of 1.7 million was attributed to 0.7 million increase in stock based compensation, 0.6 million increase in personnel and related expense and 0.4 million increase in third-party expenses associated with R&D development program. License fees for the six months ended June 30, 2018 were 5.6 million the license fees relate to our obligation under the license agreement with Adapt for certain payments made by Adapt to third parties. There were no license fees for the six months ended June 30, 2017. At June 30, 2018, we had cash and cash equivalents of approximately 11.2 million compared to approximately 8.1 million at December 31, 2017. However, as I said earlier this does not tell the full story on our financial position. The majority of the recently awarded 7.4 million NIDA grant does not appear on our balance sheet. We did however receive $500,000 of this grant in the three months ended June 30, 2018. In conclusion, as Roger indicated previously, we believe our financial resources are sufficient to support our currently planned activities through the completion of our registration study for intranasal nalmafene and the completion of the Phase 2 studies in Bulimia Nervosa and alcohol use disorder. I'll now hand the call back to Roger for his review of the pipeline. Roger?

[Dr. Roger Crystal:]

Thank you, David. Opiant has development programs that we believe has the potential to be game changing drugs in the addiction of drug overdose space. The use of a nasal spray allows us the easy to use and rapid delivery of the medicine. This is important for an overdose when timing of delivery can determine whether a patient survives. These processes of nasal delivery are also important to Bulimia Nervosa and alcohol use disorder when patient takes the medicine on demand which allows a maximum amount of medicine to be delivered at the optimal time and we believe should increase patients' compliance and adherence to medication resulting in better patient outcomes. Let me again with the closer look at OPNT003. With increasing overdoses from synthetic opiods such as fentanyl longer acting most open reversal agents are needed. In 2016 more than 40% of opiod overdose contained fentanyl. In fact, NIH leadership recently called for the development of stronger longer acting formulations of antagonists to counteract the very high potently synthetic opiods that are now claiming thousands of lives each year. Earlier this year we announced positive data from a Phase 1 clinical study of OPNT003 that showed that an intranasal nalmafene formulation containing a proprietary absorption enhancer resulted in rapid increases in plasma levels with an onset faster an intramuscular injection and the comparatively long top life of 6.7 hours to 7.8 hours. Naloxone the only FDA medication currently available to treat opoid overdose has a half life of approximately 2 hours. With these data in hand we conducted a meeting with the FDA regarding our development plans for OPNT003. Based on FDA's feedback we intend to pursue a 505B2 development path we anticipate the potential to submit an NDA for the drug and internasal delivery device combination in 2020. Nalmefene for injection was previously approved by the FDA to treating suspected or confirmed opioid overdose. The 505B2 path way allows company to rely in part on the FDAs findings of safety and efficacy that previously approved project and to supplement these findings with a more limited sets of their own studies to satisfy FDA requirements as opposed to conducting a full array of preclinical and clinical studies that would typically be required. In summary we believe we have a long acting product which will especially relevant to fentanyl related overdoses and also investing with limited rapid access to emergency services. Shortly after our meeting with the FDA we were awarded the 7.4 million NIDA development grant I referenced earlier. We have recently received the first round of $500,000 from this grant. These initial funds will further drill down the sequence in subsequent courses to be used to advance the development of OPNT003 formulation. Forming completion of these formulation studies we intend to initiate the confirmatory promontory genetic study in 2019. This will position us to submit the previously referenced NDA in 2020. Importantly Opiant retains full commercial rights of OPNT003. Our second product candidate OPNT001 is currently in Phase 3 development for the treatment of Bulimia Nervosa an eating disorder characterized by binging and purging which impacts approximately 2.5 million Americans annually. Currently only one drug xoxafene is approved for this indication however it has shown a limited efficacy for the potential 1.3 billion addressable market and very few competitive products in development Bulimia Nervosa represents a very attractive market opportunity for Opiant. OPNT001 has already demonstrated a rapid absorption profile which together with oxytocin strategy may address the unique need of patients suffering from this eating disorder. We expect data from our ongoing Phase 2 study as the OPNT001 in Bulimia Nervosa in the first quarter of 2019. This indication may also be attractive with self commercialization. Moving onto OPNT0002 for Alcohol Use disorder or AUD. This is another potentially large market opportunity for Opiant with approximately 16.4 million Americans suffering from AUD annually. Of which 1.4 million need treatment and approximately 400,000 receive pharmacotherapy. Existing drugs however are purely tolerated and 50 require subscriptions from the specialist and prior abstinence. We believe that more effective better tolerated and more accessible medicines would increase the number of patents taking medication and need to improve outcome. OPNT002 is unique because it taken whenever a patient has the urge to drink meaning on an as needed basis without the need for prior abstinence. This on demand dosing regime should improve compliance. In addition rapid nasal absorption versus oral ensures that the maximum amount of the drug is available when needed. The company has already generated encouraging pharmacokinetic data for OPNT002 that demonstrates its rapid nasal absorption making it highly suitable for on-demand dosing. Importantly as with OPNT003 the FDA support the 505B2 development path for OPNT002 and also supports a harm reduction primary endpoint. We're currently engaged in the formulation activities with this product candidate and I expect to initiate patient enrollment in a Phase 2 study in 2019. To summarize our products -- our pipeline of products is targeted at potentially large markets where access to effective medicines is currently limited. We believe the drugs we're developing have the potential to save thosands of lives and we're excited to continue advancing each in the clinic. I will now turn the call over to the operator to begin the Q&A session. Operator would you please provide the instructions? Thank you.

[Operator:]

[Operator Instructions] And we'll first hear from Brandon Folkes of Cantor Fitzgerald.

[Unidentified Analyst:]

Hey good afternoon, it's Arthur for Brandon and congrats on all the progress in the quarter, could you talk us through some of the potential benefits for the OPNT003 over NARCAN?

[Dr. Roger Crystal:]

Well obviously we've frankly we've not probably done this direct study, we don't actually need to for the purposes of FDA approval but this goes back to how the opiod crisis is evolving with an increasing number of opioid overdose deaths coming from fentanyl and if you use fentanyl not only is it far more potent and easier and cheaper to make compared to heroin it also acts much longer, so it's half lies in the order of about seven hours and we believe the OPNT003 with a similar half life is therefore a potentially better match to address overdoses that arise from fentanyl but of course we don't know fentanyl overdoses is what they've overdosed on but definitely we do know that the 40% of opioid overdose deaths are fentanyl comparing so there is the issue and that's what we think OPNT003 can address.

[Unidentified Analyst:]

Thanks, that's great. And also given the NARCAN is projected to reach sales in excess of about $200, and OPNT003 is potentially a better product, do you guys expect O3 peak sales in excess of more than 200 really?

[David O'Toole:]

I mean first of all we've not -- we've not done any forecasting for us we see the market to continue to grow and we see a very attractive market share opportunity for OPNT003, very difficult today to give you the exact what we anticipate the product to do but we do think that we've got this quality that make it potentially attractive over [indiscernible] based product and we will see how that plays out.

[Operator:]

[Operator Instructions] Next we will hear from David Bells of Zacks Investment Research.

[David Bells:]

So just a kind of follow-up on the last question do you see 003 and NARCAN nasal spray potentially co-existing in the market?

[Dr. Roger Crystal:]

Quite likely and there may other be products in the future as well and for us we see how they the market plays out over time I mean just to remind you that and up until the FDA approval of the NARCAN nasal spray there was no FDA approved nasal opiod overdose reversal product available at all, and 2017 represents the first full calendar year of sales of the NARCAN nasal spray. So in many ways the market is young but we believe it's growing rapidly and absolutely it's going to play out and as this opiod crisis plays out and I would put to you that hardly in a couple of years ago no one could have forecast or believed that fentanyl was going play such an important and worrying role in this crisis. So we're even trying to say in three years time this will be the safety play it is very challenging for us, but we're sufficiently confident if we consider the fact that overall this product is going to be $7.4 million NIDA takes it to an NDA led stage and we think that market opportunity is very attractive, justifies this investment without and keep in mind that that investment is nondilutive.

[David Bells:]

Now is the company interested in partnering any of the development products they are currently working on?

[Dr. Roger Crystal:]

We overall as a company our vision is to become and continue to be if you like a leading addiction company and to do so we would involve actually taking products to market ourselves for Alcohol Use Disorder and Bulimia program there's an attractive self commercialization opportunity with that being actually quite a limited set of prescribers which we think we can essential serves as our own focus sales force and we are continuing to undertake more assessment of these markets to further validate that and with the opiod overdose reversal market and at the same time we could follow suit but already we've seen the very attractive ways of taking this through partnership as well and that does remain an option as we progress but we are not, that here today because we have the funding right through programs much better along we are not desperate to do a deal in the near term.

[David Bells:]

Okay and then really quick lastly so for the grant supporting 003 is that paid out as through milestone is that milestone pace or do you apply for reimbursement as expenses occur?

[David O'Toole:]

This is David O'Toole. We have the ability to draw down on that grant as we are incurring expenses and so we can make sure that our the cash that we draw down is funding that those expenses before we actually have to incur them. Just to clarify the total grant is 7.4 but just to make sure that you understand there is only 2.5 is for the next 12 months, 2.5 million and then the rest of it would be over the next year and a half after that.

[David Bells:]

When did that 12 month timeframe start? For this calendar year.

[David O'Toole:]

April.

[Operator:]

And it appears there are no further questions at this time. I'll turn the conference back over to Dr. Roger Crystal for any additional and closing comments.

[Dr. Roger Crystal:]

Thank you. Well, thank you everyone for joining us today and for your interest in Opiant. We are excited about the opportunities that lie ahead of us. And look forward to keeping you updated with our future progress. Enjoy the rest of your day. Thank you.

[Operator:]

That does conclude today's conference. Thank you all for your participation. You may now disconnect.