Opiant Pharmaceuticals, Inc.
Q3 2018 Earnings Call Transcript

Published: 10 Nov 2018

[Operator:]

Good day and welcome to the Opiant Pharmaceuticals Third Quarter 2018 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Brian Ritchie of LifeSci Advisors. Please go ahead, sir.

[Brian Ritchie:]

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; in addition, Dr. Phil Skolnick, will be as Chief Scientific Officer will also be available during the Q&A session. This afternoon Opiant issued a news release announcing financial results and providing a business update for the third quarter ended September 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 in the report on Form 10-K for the transition period 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 November 7, 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.

[Dr. Roger Crystal:]

Thank you, Brian, and good afternoon to everyone who is joining us on our third quarter earnings call today. On today’s call, I’ll provide you with an update on our recent accomplishments and review the opportunities that lie ahead with the Company. Following this, David will discuss our financial results. Finally, we will open up the call for your questions. With that, let me begin by discussing the operational highlights from the past few months. Importantly, I will discuss the recent progress and further advancing our pipeline especially OPNT003, nasal nalmefene, which we believe support our position and it fits [0

[David O'Toole:]

Thank you, Roger. Before I review our financial results, I would like to begin by highlighting the current financial position of our company. As of September 30,, we had approximately 25 million of cash on our balance sheet compared to a year ago when we had less than 6 million of cash. In addition, we continue to receive significant royalty revenue each quarter from our partnership with the Adapt now EBS from the sales of NARCAN. As Roger mentioned, EBS provided NARCAN sales guidance for 2019 during their initial conference call announcing the Adapt acquisition. The 2019 guidance for net NARCAN sales provided by EBS was after any potential royalty payable under the original Adapt agreement. Therefore, the gross numbers were net NARCAN sales projected for 2019 are in the range of 220 million to 250 million, which should translate into royalty revenue in 2019 of approximately 18 million to 21 million to Opiant. Besides the annual royalty, a one-time sales milestone of 15 million will be payable, if net NARCAN sales exceed 200 million in any calendar year. Opiant will receive 90% of this $15 million sales milestone. Based on the conference call EBS held last week, they continue to be optimistic about growth in NARCAN sales, citing recent initiatives including co-prescription, more direct-to-consumer activity and increased federal and state funding. With that, I will now briefly review our third quarter results. We recognized approximately 4.4 million in revenue during the three months ended September 30, 2018, compared to 22,000 during the course ending period of 2017. For the three months ended September 30, 2018, we recognized approximately 4.2 million of revenue from the license agreement between us and Adapt to the sales of NARCAN. General and administrative expenses were 3.4 million and 2.2 million for the three months ended September 30, 2018 and September 30, 2017, respectively. The increase in G&A was primarily due to 0.7 million increased associated with stock-based compensation expense and 0.5 million increase in corporate overhead during the three months ended September 30, 2018, as compared to the three months ended September 30, 2017. Research and development expenses worth 1.9 million and 0.7 million for the three months ended September 30, 2018 and September 30, 2017, respectively. The increase in R&D expenses was primarily due to an increase in stock-based compensation of 0.4 million or 0.5 million increase in clinical trial costs, and a 0.3 million increase in personnel and related expense. Net loss for the three months ended September 30, 2018 were 0.9 million or loss or $0.32 per basic and diluted share compared to net loss of 3.4 million or loss of $1.68 per basic and diluted share for the comparable period of 2007. Now, let’s focus on the results for the nine months ended September 30, 2018. We recognized $9.2 million in revenue for the nine months ended September 30, 2018. In the comparable period in 2017, we recognized $3.8 million of revenue. During the nine months ended September 30, 2018, the Company recognized $8.9 million of revenue from the license agreement between us and Adapt for the sales of NARCAN. During the nine months ended September 30m 2017, Opiant recorded $3.8 million from the sale through SWK Capital of its right to receive royalties arising from the sales of NARCAN by Adapt. The $3.8 million of revenue in the 2017 period was a one-time payment from SWK as provided under the royalty monetization agreement between Opiant and SWK. G&A expenses were $9.2 million and $6.3 million for the nine months ended September 30, 2018 and September 30, 2017 respectively. The increase of $2.9 million was primarily due to a $2.3 million increase associated with stock based compensation expense and a $0.5 million increase in corporate overhead. R&D expenses were $5.9 million and $3.0 million during the nine months ended September 30, 2018 and September 30, 2017, respectively. The increase of $2.9 million was attributed to a $1.1 million increase in stock based compensation expense, a $1.1 million increase in personnel and related expense and a $0.7 million increase in third-party expenses associated with R&D program. License fees for the nine months ended September 30, 2018 were $5.6 million. The license fees related to our obligation under the license agreement with Adapt for certain payments made by Adapt to third party. There were no license fees for the nine months ended September 30, 2017. At September 30, 2018, we had cash and cash equivalents of approximately $24.8 million compared to approximately $8.1 million at December 31, 2017. This includes the net proceeds of approximately $12.7 million from the public offering of common stock that closed at the end of the third quarter. As we stated previously, the majority of the recently awarded $7.4 million NIDA grant and $4.6 million BARDA contract do not appear on our balance sheet. In conclusion, with a growing royalty revenue base from NARCAN, a healthy balance sheet and the recently awarded NIDA grant of $7.4 million and $4.6 million BARDA contract, Opiant is in a strong financial position which will allow us to aggressively advance our development programs forward in 2019. With that, I will now ask the operator to open the call up for questions. Operator?

[Operator:]

[Operator instructions] And we’ll take our first question from Arthur He with Cantor Fitzgerald.

[Arthur:]

I have two questions. First, as given the market dynamics around NARCAN and the potential benefit of OPNT003 over NARCAN, can you guys provide some color on how you see the Opiant overdose market shaping up? And where you see the 003 position in the market? And I have a follow-up.

[Dr. Roger Crystal:]

It’s Roger Crystal here. I can answer that question. I mean, in general, we see the market is growing. We have -- not just on the federal level or state level, other initiatives taking place that in general show that market will grow. And as far as we’re concerned, we actually believe the OPNT003 can have potentially quite important place in this market, not just in the existing market that has been identified already through the sales in NARCAN nasal spray, but as we are, what we get something excited as well as what we'll potentially be doing with BARDA given this opioid epidemic really being essential epidemic. And as we said on the most essential for OPNT003, the important again potential fentanyl chemical attack.

[Arthur He:]

And my second question is given the reason to OTC guideline pulled out from the agency. Can you share your thoughts on the potential for NARCAN and OPNT003 to go over the current? And how do you could help or maybe hinder the effort to increase the affordability and access to the NARCAN or the future in the 003?

[Dr. Roger Crystal:]

I think as I mentioned, the Company is fairly consistent with what we have found in the Emergent BioSolutions on the general positioning of altered overdose reversal agent and desire by the country and the FDA, by access in the field to further increase access to what is currently in the [indiscernible] nasal nalmefene as well. So, in general, greater access of these opioid overdose reversal agent, the questions for us is with OTC status is the health overall [indiscernible] potentially and our concern is that OCT might not necessarily achieve [indiscernible] the agencies are wishing to actually address, which is our availability. And we also agree that for example, the pharmacists can actually be an important stakeholder and helpful for the opioid crisis by advising patients on whether it'd be appropriate to have an opioid overdose reversal agent alongside and opioid description, and a situation where you have an OTC availability then the [indiscernible] on the patient to in fact volunteer to buy an opioid overdose reversal agent and should be an OTC. So, these are some of our initial thinking. We are not directly involved in that given that we don’t have a market product today ourselves licensed that we continue to check with that very carefully.

[Operator:]

And I’ll take our next question from David Bright, Zacks Investment Research.

[David Bright:]

I’m curious since the acquisition of Adapt by Emergent Bio, I’m curious, if you've seen any change in interest from potential commercialization partners for OPNT003?

[Dr. Roger Crystal:]

In general, I think what the acquisition has done, has essentially put some numbers around the market potential and potentially seen some good growth than what we see 2019 of NARCAN Nasal spray. And therefore opioid overdose reversal agents in general, we have already had reasonable amount of interest, but I'm not really able to give any specifics around [indiscernible] how many et cetera at this stage. And nevertheless as a company, I think what's important to [indiscernible] [0

[David Bright:]

Now, you've mentioned that you're going to be doing a CK study next year in order to get approval for OPNT003. Are there any additional studies that you need to do in order to have it stockpiled as a potential medical countermeasure?

[Dr. Roger Crystal:]

Well, the general principles of the agreement of BARDA, they are instead most of products which are [indiscernible] used meaning that something has been approved by the FDA would automatically be relevant for that purposes as well. So, today our expectation is that there wouldn't be any obvious additional things we would have to be doing. However, part of the contract is also regular interactions with efforts of BARDA, and we are absolutely able to be responsive to them as there're certain requirements that they have which are met FDA approval. So, we will learn and due course for now we're not aware of anything in particular.

[David Bright:]

And lastly, can you talk a little bit about the timing of receiving the grant and contract money from NIDA and BARDA?

[David O'Toole:]

Yes, David this is David O'Toole. Thanks for the question. Appreciate it. Regarding both the NIDA grant and the BARDA, those are for the most part as you incur the expenses, you get reimbursed by those agencies. And so, as we do that as we move forward through this next 12 months, we will receive the grant funding at least for the first year and then after every year you have basically an application that is done to get the rest of the money, and then, depending on the progress and funds available. But it is basically on a reimbursement of expenses being incurred at the time.

[David Bright:]

So, will both of those, the contract and grant money is majority of it going to be received next year, do you estimate for that?

[David O'Toole:]

Yes, in both of our announcements we had indicated the timing of those funds. Just to reiterate, the first, as far as the BARDA contract, the first year ends in September 30, 2019 for that funding, and the first funding is only a little over $600,000. The remaining of those funds would be received after in subsequent years probably in the next year and a half or two years. NIDA grant, the first finding is again around $2.5 million and that was in the public disclosure through April of 2019. And with the remaining received subject to funding, it would be received over the next two years after that.

[David Bright:]

Okay, thanks for taking my questions.

[David O'Toole:]

Yes, I just would say one more time. The timing of the receipt is through NDA filing.

[Operator:]

Thank you. [Operator Instructions] With no additional questions, I’d like to turn the conference back over to Mr. Dr. Crystal for additional and closing remarks.

[Dr. Roger Crystal:]

Thank you. So to summarize, our pipeline and product is essentially large market where efforts to effect is note [indiscernible] limited. We believe this drug is developing, has the potential to save thousands of lives, and we’re excited to be advancing them into the new clinic. Thank you 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 on our future progress. Please enjoy the rest of your day.

[Operator:]

Thank you. This does conclude today’s conference. Thank you all for your participation.