Opiant Pharmaceuticals, Inc.
Q1 2020 Earnings Call Transcript

Published: 13 May 2020

[Operator:]

Greetings, and welcome to the Opiant Pharmaceuticals First Quarter 2020 Earnings Conference Call. [Operator Instructions] As a reminder this conference is being recorded.I will now like to turn the conference over to your host, Mr. Ben Atkins, Vice President of Communication and Investor Relations of Opiant Pharmaceuticals Please go ahead.

[Ben Atkins:]

Thank you, operator, and thank you all for joining us this afternoon. I hope everyone is safe and remaining healthy during this unprecedented time. With me on today’s call are Chief Executive Officer, Dr. Roger Crystal; and Chief Financial Officer, David O’Toole. This afternoon, Opiant issued a press release announcing financial results and providing a business update for the first quarter ended March 31, 2020.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 statement contained in Opiant’s news releases and SEC filings including in our annual report on Form 10-K for the year ended December 31, 2019 and subsequent filings. This conference call also contains time-sensitive information that is accurate only as of the date of this live broadcast, May 12, 2020. 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:]

Thank you, Ben. Good afternoon. Let me start by first acknowledging the challenging situation, the global COVID-19 pandemic has created for so many people. Our hearts go out to everyone who’s been impacted, and extend our deep appreciation and thanks to the many first responders and healthcare workers serving our communities each and every day.While our society’s focus is necessarily on COVID-19 how Coronavirus lockdown threatened the heightened wave of substance abuse. The COVID-19 pandemic has given new way, how we help people vulnerable to and suffering with addiction and Substance Use Disorders, particularly those at risk of opioid overdose.So many people deal with the impact of COVID-19 on their own health and employment, their family and friends we are also unfortunately observing an increase in opioid overdose. In fact, it has been reported that Montgomery County Ohio, which led the nation in overdoses in 2017 on a per capita basis has seen a 50% jump in overdoses as compared to last year. In addition, authorities in counties across Florida, Texas, Pennsylvania and New York are also reporting rises in overdoses during the COVID-19 crisis. This serves as a stark reminder of the opioid epidemic continues to put a significant strain on the U.S., even as we now face another health emergency.As we have said before, Opiant is well positioned to address this challenge. We believe that OPNT003, nasal nalmefene is well suited to treat opioid overdoses and particularly those involving fentanyl, which is 50 times more powerful than heroin and accounts for more overdose deaths than any other opioids. I’ll provide you with an update of our lead-program in a moment. However, I’d like to begin by highlighting the strength of our company as we operate in an evolving healthcare environment.While, David will review our financials in greater detail, let me just say that we are in a strong financial position to support our key business objective on the emerging pipeline. As of the end of the first quarter, we had $32.2 million in cash and cash equivalent on our balance sheet and no debt. We also have benefits from a royalty stream from sales of NARCAN nasal spray. Importantly, our licensee Emergent BioSolutions recently reiterated its 2020 guidance on sales of NARCAN in the range of $285 million to $315 million.Moreover, we have the financial support and collaboration of multiple government agencies including the National Institute on Drug Abuse, NIDA; the National Center for Advancing Translational Sciences, NCATS; and the Biomedical Advanced Research and Development Authority, BARDA collectively these unique attributes of our company allows us to continue investing in and advancing a broad pipeline across multiple compelling therapy areas in addiction and overdose.With that, let’s now turn to our pipeline. I’m pleased to confirm that the FDA has lifted its linical hold on OPNT003 for opioid overdose reversal. As we previously reported in January, the FDA placed our development OPNT003 on hold as it reviewed system characteristics of the intra-nasal delivery device. After reviewing our response, the FDA lifted its hold based on our agreement to amend slightly up for the protocol, which means we can now move forward with this study.I want to take this opportunity to thank the diligent work of my Opiant colleagues for helping us compile and submit our detailed response. Separately, we have also agreed with the FDA to conduct a pharmacodynamic study in healthy volunteers that we believe will enhance the clinical profile of the OPNT003. As we’ve progressed towards our regulatory filing for OPNT003, we are also having to factor into our timeline the impact of prolonged COVID-19 related travel restrictions on our equipment engineers in Europe. Based on these collective modifications to our development program, our NDA filing is now likely to occur in early 2021 still aiming for commercial launch later next year.With respect to OPNT002 for Alcohol Use Disorder, as previously communicated, we have posted the initiation of recruitment for the Phase 2 study. Our decision follows the COVID-19 related state of emergency declaration from the United Kingdom and across the European Union where our study is to be conducted.We will continue to monitor the situation closely and commence recruitment as conditions allow. We will recall that we had previously aimed complete enrollment this year. Once we have further clarity around when recruitment can begin, we will provide an update on this time line. As a reminder, this trial is a randomized, double-blind, placebo-controlled study and features a sequential parallel comparison study design, aiming to reduce placebo response. The study will be conducted in a number of countries in Europe with enrollment targeting 300 patients.Moving on to OPNT004, drinabant, for the treatment of acute cannabinoid overdose. We signed a cooperative research and development agreement and started our collaboration with NCATS to formulate OPNT004 for human studies. NCATS is providing its development resources in support of our IND filing and to reformulate OPNT004 as an injection for our planned clinical study.Turning to our employees. We have transitioned to a remote work environment. Our team is performing extraordinarily well, quickly adjusting to work-from-home arrangement, while staying connected with our partners and suppliers. This ability to adapt working practices quickly and effectively will remain especially important as we will likely face restrictions on travel and disruptions of business operations for many months to come. Meanwhile, we have donated funds to support our four programs committed to helping those most vulnerable to addiction.The organizations included the International Association of Fire Fighters Foundation, the Association of Recovery and Higher Education, Harm Reduction Coalition and the U.K.’s Action on Addiction. These actions reflect our continued purpose as Opiant to support our community the best we can. Indeed, this experience also underscores to me the essential need for Opiant’s spirit of innovation and investment in the development of new medicines for addiction and overdose. Eventually, we will move past COVID-19, however, addiction and overdose will unfortunately remain significant and devastating conditions for many years to come.With that, I will now ask David to discuss our financials in more detail. David?

[David O’Toole:]

Thank you, Roger. Prior to beginning my comments on our first quarter financial performance, I want to highlight that we entered 2020 with a strong cash position and no debt, and that momentum continued through Q1 2020. In addition, we have had no need to seek any form of U.S. Federal, State or United Kingdom Aid, and we have no intention of implementing any COVID-19-related layoffs at this time. We believe our business model and meaningful stream of revenue from sales of NARCAN Nasal Spray is a unique strength in a time like this.I will now review our financial performance, highlighting various factors to provide you with a sense of our performance and then wrap up with a commentary on our outlook. We recognized $4.3 million in revenue in the three months ended March 31, 2020, compared to $5.4 million in the corresponding period of 2019. The revenue for the first quarter of 2019 included $1.7 million in revenue from the NIDA brand and the contract from BARDA. Revenue in the current year quarter included approximately $4.2 million from the licensing agreement between us and EBS as compared to $3.7 million in the corresponding period of 2019. The increase of $0.5 million in royalty revenue represented an increase of 12% year-over-year and was driven by net NARCAN sales of approximately $72.2 million in the first quarter of 2020, as reported by EBS.G&A expenses were $2.6 million for the three months ended March 31, 2020, compared to $3.4 million in the first quarter of 2019. The decrease of $800,000 was attributable to managing cost diligently, especially third-party consulting expenses. R&D expenses were $1.4 million and $3.6 million for the three months ended March 31, 2020 and March 31, 2019 respectively. The $2.2 million decrease was primarily attributable to a reduction in third-party clinical trial and development expense.Sales and marketing expense were approximately $1.1 million compared to none during the first three months in 2019. As we continue to advance OPNT003 towards potential regulatory approval, we anticipate that our sales and marketing expenses will increase as we invest in multiple key areas in order to support the development of a commercial platform that would allow us to potentially commercialize OPNT003 as well as future pipeline products. The development of this commercial infrastructure includes increasing commercial personnel, prelaunch sales and marketing planning activities, supply chain and distribution. As we build this infrastructure, we are continuing to evaluate the ideal go-to-market strategy that will allow us to maximize the full commercial potential of OPNT003.Net loss for the three months ended March 31, 2020 was $1.7 million or a loss of $0.40 per basic and diluted share. In the comparable period in 2019, we also had a net loss of $1.7 million or a loss of $0.44 per basic and diluted share. At March 31, 2020, we had cash and cash equivalents of $32.2 million compared to $30.9 million at December 31, 2019. As a reminder, the current cash balance does not include the majority of the $7.4 million NIDA grant or the $4.6 million BARDA contract.Looking at the remainder of the year, as Roger noted, EBS reiterated its NARCAN 2020 sales guidance range of $285 million to $315 million. At the mid-range of $300 million, we would expect to receive royalties of approximately $26.2 million.With that, I will now ask the operator to open the call up for questions. Operator?

[Operator:]

Thank you. [Operator Instructions] Your first question comes from Brandon Folkes from Cantor Fitzgerald. Please go ahead.

[Brandon Folkes:]

Hi, thanks for taking my question and congratulations on the progress. Maybe first, on the pharmacodynamic study, can you just elaborate there in terms of what the FDA wants to see? Just given my understanding, nalmefene is quite a well-understood molecule? And secondly, then maybe can you just elaborate on the European manufacturing equipment engineer delays you caught up, is there additional work being done on this device currently? And if so, does this at all reset the stability time line? And then lastly, to the extent you can, can you just elaborate on the changes that were agreed in the PK Study? Is this just a in design? Or should we think of additional patients as well? Thank you.

[Roger Crystal:]

Thanks for your questions, Brandon. So on pharmacodynamic study, this is just something that’s been agreed with them because we want to make sure we have a product that has the compelling profile and not at this point, closing the exact study design. I need to say, it’s a short study in healthy volunteers that we think will essentially generate a more meaningful value proposition for the product. So less necessarily, yes, we’re – requiring it more discussion with them around what would allow us to present something that we think most compelling for – are ultimately for patients.In terms of the supply chain you mentioned in the manufacturing, headline is you’re asking in terms of it impacting by stability, not really. Essentially the – again, we’re bound by confidentiality commitment to our partner here, but I need to say that engineers were needed in order to establish commercial scale filling and because of restrictions of travel, they just weren’t allowed to make the journeys in the manner that we’d hoped.But there’s no inherent issue. It wasn’t that there was some issue with the equipment or anything like that. It was just the normal course of business took longer because of travel restrictions. And in terms of the PK Study and the change in the design, they are, with regard very minor amendment, and we still anticipate the PK study to be a short-duration study in healthy volunteers and no significant increase in the number of volunteers or the duration of that study as a result.

[Brandon Folkes:]

Great. Thanks for match-up. I appreciate it. This is not easy. Maybe just one follow-up. Just circling back to your interactions with the FDA. Just given the sort of patient population you’re going after, is this something you expect the FDA would take an ADCOM?

[Roger Crystal:]

It’s quite possible. Yes.

[Brandon Folkes:]

Okay. Thank you.

[Operator:]

Thank you. Your next question comes from Boris Peaker from Cowen and Company. Please go ahead.

[Boris Peaker:]

Right. My first question is on just the competitive landscape in nalmefene. There are several, obviously, injectable products in development. I’m just curious, what is the time line potential approval of those products? And I just want to kind of get a sense how that compares to your approval time line?

[Roger Crystal:]

Yes. As far as I’m aware, nothing has been disclosed on the exact timing of injectables. Bear in mind that I think one of those products I’m aware of is not for opioid overdose, it’s more of a depot injection of nalmefene for opioid use disorder. So it wouldn’t be a part of the competitive landscape for opioid overdose. And it’s to say the other form is an injection, yes for overdose. That time frame hasn’t been disclosed as far as I’m aware. But certainly not under the impression that we’d see on the market this year.

[Boris Peaker:]

Got you. And then maybe just a general – more competitive, dynamic question. When you get an approval for your 003 nalmefene Nasal Spray, what is going to be the pitch or the commercial message to compete with NARCAN? And are there any kind of subgroups of NARCAN buyers right now that you think are going to be maybe lower hanging fruit for nalmefene than others?

[Roger Crystal:]

Well, ultimately, I think it depends on what the data show. And with that in mind, our position, we believe, is – certainly, from the initial data we have, that this has the potential to be a better product again, [indiscernible], when I say better, meaning greater likelihood of saving a life, that’s what we’re aiming for.In terms of the market overall, we do see that continuing to grow. We believe the NARCAN will remain a very successful product. And many people will absolutely remain loyal and – with this product as well. So in terms of competition, yes, there’s overlap, but we see that there’s absolutely place in the market for two very good products. So we think that with the data we hope to generate, though, people will be persuaded by this being – product with a greater livelihood of saving a life.I’d say the other segment of the market where I think there’s less relevance than NARCAN, or should I just say, not certainly NARCAN, but naloxone-based product because there are a few in development. So why we think nalmefene has – does have a – or exclusive area where it can perform is around the potential of fentanyl being used as a chemical attack. So this is an area of concern for BARDA, where they see large amounts of fentanyl continuing to be fees on U.S. soil and with – in the past in fentanyl having been used in a chemical attack in Russia in nearly 2000, killing over 100 people.And their interest in supporting our OPNT003 development program is to position it in a stockpiling manner because of the potential of a chemical attack on vulnerable hotspots in the U.S. So that’s an area where they have said they don’t believe that naloxone is sufficient and that nalmefene could be quite important.

[Boris Peaker:]

Got it. Got it. And lastly, in terms of shelf life, we’ve heard EBS say that they’re looking to expand the NARCAN shelf life labeling. Just curious where your OP – 003 would come out and your thoughts on the importance of shelf life?

[Roger Crystal:]

The shelf life, we would look to have a standard two-year shelf life. And for – our understanding is that certainly in the emergency services sector NARCAN and other [indiscernible] naloxone gets used quite frequently. So it doesn’t appear that there’s significant stockpiling as such. They get used and reordered, as we’re aware, quite frequently. So we think that a two-year shelf life should be absolutely sufficient.

[Boris Peaker:]

Great. Thank you very much for taking my question.

[Operator:]

Thank you. Your next question comes from Carl Byrnes from Northland Securities. Please go ahead.

[Carl Byrnes:]

Thanks. Well first, congratulations on your progress. Can you tell me if you have any – what are your expectations for additional states potentially adopting mandatory co-prescribing programs in 2020? And then I have a follow-up question to that, thanks.

[Roger Crystal:]

So in terms of mandatory co-prescribing, so as a reminder that there’s nine states that currently have some form of mandatory co-prescribing and for 2020, that’s five more states are having it on the docket for review and potential approval, now whether they will all adopt it, but certainly we see co-prescribing in general to grow and we’ll see now as the year progresses, how many of these states take it on. One of the states – New York is part of one of those states that has it on that docket for this year.

[Carl Byrnes:]

Great, thanks. And do you have any update or any visibility in terms of the timeline of the patent litigation, really? Thank you.

[Roger Crystal:]

No, I mean, thanks. Yes, we ask ourselves same question. We’re expecting the ruling any day. But there’s no definite commitment as to when that might be.

[Carl Byrnes:]

Fair enough. Thanks again.

[Operator:]

Thank you. Your next question comes from David Belt from Zacks Investment Research. Please go ahead.

[David Belt:]

Hey, good afternoon guys. Roger, you had mentioned that there’s been an increase in opioid overdoses recently. I’m just curious if you know what percentage of those have been due to fentanyl is that information available?

[Roger Crystal:]

The most complete data set for the country overall related to 2018 and there were approximately 49,000 opioid overdose there, at least 66% were fentanyl related. I didn’t have like complete data set for what we’re experiencing now with COVID. We’re just getting multiple reports of increases at a county level for example, that base will obviously be compiled and we’ll get more updates over the course of the year and next year as well.

[David Belt:]

Okay. Now when you’re able to get the OPNT003 studies underway, where will those be taking place, is this single center that you’ll be working at or multiple centers?

[Roger Crystal:]

Yes. They’re in healthy volunteers, so there’ll be singles-center site not attached to a large hospital or the emergency services or anything like that. That might be more likely to be impacted as a further COVID operate. And certainly, beside the well – the company we’re working with the site that we’re going to be using for the PK study has been fully operational.

[David Belt:]

Okay. and David you had mentioned that the sales and marketing expenses in the first quarter, now, should we expect a similar amount spend in that category in the coming quarters?

[David O’Toole:]

Well, I think it’s a good start as far as the precedent sort of number. We’re just starting sales and marketing. We wouldn’t see that number going down, from that 1.1 million and it just depends on how we progress over the next few quarters, how and whether or not we make a decision on how we’re going to commercialize 003, but to answer your question, I would say yes, that’s good number to at least project for the next couple of quarters.

[David Belt:]

Okay, great. Thanks for taking my questions.

[David O’Toole:]

Thank you.

[Operator:]

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

[Roger Crystal:]

Thank you, Operator. Thank you for joining us today and for your interest in Opiant. We believe that our opportunities for value creation may remain compelling given the significant need in the diseases we are pursuing. We look forward to keeping you updated on our progress in the months ahead. Enjoy the rest of your day and please stay healthy.

[Operator:]

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