Opiant Pharmaceuticals, Inc.
Q2 2020 Earnings Call Transcript

Published: 9 Aug 2020

[Operator:]

Greetings and welcome to the Opiant Pharmaceuticals' Second Quarter 2020 Earnings Conference Call. [Operator Instructions]. It is now my pleasure to introduce your host, Ben Atkins, Vice President of Communications and Investor Relations for Opiant Pharmaceuticals. Thank you, Mr. Atkins. You may begin.

[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. This afternoon, Opiant issued a press release announcing financial results and providing a business update for the second quarter ended June 30, 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 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, 2019 and subsequent filings. This conference call also contains time-sensitive information that is accurate only as of the date of this live broadcast August 6, 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:]

Good afternoon and thank you for joining us today. Perhaps more than any other health or economic crisis in memory, coronavirus is exposing people every day to triggers of substance use disorders. The numbers bear this out, particularly in our opioid epidemic as I will highlight in a moment. Amid this very difficult period for people around the world, we believe our mission to treat addiction and overdose is an important investment for the future of our healthcare now more than ever before. As a development stage company, we are focused on pressing ahead with our lead program OPNT003 nasal nalmefene opioid overdose. And we have pipeline programs in Alcohol Use Disorder, Acute Cannabinoid Overdose and Opioid Use Disorder. Importantly, we lead our work from a strong financial position, the $30.5 million of cash and David will provide you with a more detailed financial update later with. With that, let's review our pipeline progress. Turning first to opioid overdose. Let me begin with a sobering analysis of the ongoing and in many ways worsening opioid epidemic. I do this because I believe it helps put in perspective just how urgent the need for better overdose therapies truly is. All across America, there is clear and building evidence of the social health and economic consequences of the COVID-19 pandemic are exacerbating the opioid epidemic. In Wisconsin for example for preliminary figures from emergency departments show there were 325 suspected overdoses from March through July, compared with 150 during the same, same time span in 2019. Federal data from ambulance teams, hospitals and police suspected overdoses nationally jump 18% in March, 29% in April and 42% in May. The American Medical Association or AMA recently issued a warning citing reports from officials in 38 states in regard to rising overdoses and then in particular, the increased spread of synthetic drugs. In response, we are seeing a growing effort to emphasize the need for easy access to naloxone. In fact Emergent BioSolutions stated on its earnings call last week that demand NARCAN nasal spray in May and June trended higher than pre-COVID levels along with standing order volume rising 27% since May. Moreover, in order to drive awareness NARCAN and other than naloxone products, the FDA issued a mandate to prescription manufacturers to include information on naloxone in the labels of opioid painkillers and Opioid use Disorder products. As the original developer of the NARCAN nasal spray, Opiant remains incredibly proud of the role it plays in saving lives now more than ever. Yet while NARCAN and other naloxone-based product are critically important, we need to confront an essential fact highlighted by the AMA in its statement, 'The nation's drug overdose epidemic is now being driven by much more powerful synthetic opioids'. The chemical makeup of synthetic opioids like fentanyl allow them to act faster and last longer than heroin. Indeed fentanyl is 50 times more powerful than heroin. In July the CDC released new provisional data for drug overdose deaths in the United States for 2019. The report stated that 51,000 Americans died from an opioid overdose last year, a record-high. Of those, three and four people died by and overdose related to synthetic opioids like fentanyl. Further confirming that America is in the firm grip of a third synthetic wave of the opioid epidemic. On the beginning of 2015 to the end of 2019 deaths involving synthetic opioids increased from 5,076 to 36,509. These brutal statistics drive our sense of responsibility at Opiant to develop an advance OPNT003 nasal nalmefene as a potential new treatment for opioid overdose. Based on those profile and its Phase 1 trial results, we believe OPNT003 could prove uniquely suited to treat synthetic opioid overdoses in three important ways. First, i's higher binding affinity at the opioid receptors gives OPNT003 higher potency. Second, it's longer half-life reduces the potential of a renarcotization. Third it's fast absorption, which is important due to the shorter window to save a life from a synthetic like fentanyl. As we look ahead, we believe the potential of OPNT003 will be further borne out in the confirmatory pharmacokinetic and pharmacodynamic studies we intend to conduct later this year and include as part of a robust body of data we expect to submit with our new drug FDA review in 2021. I'll now move to the rest of our portfolio, focused on the treatment of addiction and overdose. We are pleased to have now kicked off our collaboration with the National Center for Advancing Translational Sciences to formulate OPNT004, drinabant for human studies for Acute Cannabinoid Overdose or ACO. We expect to begin these studies in 2021. As we've discussed previously ACO can be caused by the over consumption of edible cannabinoids and through the use of synthetic cannabinoids. Commonly known as K2 spice or fake weed synthetic cannabinoids are cheap artificially manufactured recreational drugs that have emerged as a major public health threat in various regions of the United States. A study of 30 patients published in JAMA in July concluded that the ingestion of synthetic cannabinoids can lead to life-threatening complications, including severe toxic encephalopathy, acute respiratory failure and even death. We estimate that there are over 1.7 million hospitalizations annually for ACO. Regarding OPNT002 Nasal Naltrexone for Alcohol Use Disorder. In the phase of a resurgence in the COVID-19 pandemic in Europe and subsequent resumption of restrictions on business and travel in certain regions, we are maintaining our temporary pause on initiating the Phase 2 study. We will begin patient's recruitment when the impact of COVID-19 sufficiently subsides. In July, we entered into an agreement with Summit Biosciences to support the development and manufacture of an additional nasal spray device for opioid overdose and potentially other development programs. We will use a device delivery system previously evaluated to deposit other FDA approved nasal spray products. Finally, let me also provide you with some additional corporate updates. Firstly on the TEVA patent litigation. In June, the District Court of New Jersey ruled in favor of the defendant, TEVA Pharmaceuticals in validating various NARCAN patents. We disagree with this ruling. Together with Emergent BioSolutions we have filed an appeal to the U.S. Court of Appeals Federal Circuit. I would also like to share some senior staffing updates. We are very pleased to welcome to Opiant and our senior leadership team, Brian Gorman, our new General Counsel. Brian brings extensive expertise and experience in the Life Sciences industry. He was most recently Vice President and Assistant General Counsel at Endo Pharmaceuticals. Before that Brian spent more than 10 years collectively at AstraZeneca and Wyeth-Pfizer but regained substantial [indiscernible] and advising on a broad range of matters across multiple therapeutic areas in dynamic rapidly in changing environments. Also, our Chief Commercial Officer Aziz Mottiwala will be leaving Opiant for personal reasons. During his tenure at Opiant, Aziz has built a strong foundation and senior commercial team and he leaves us in a good position to further expand our commercial infrastructure. Aziz has been a great colleague and leave him with all of our best wishes and support for his future endeavors. We will begin a search for a new Chief Commercial Officer in due course. With that, I will now ask David to discuss our financials in more detail. David?

[David O'Toole:]

Thank you, Roger. With a strong balance sheet, our ongoing government support for our clinical development programs and a steady royalty stream from net sales of NARCAN, we continue to have the resources to focus on advancing our pipeline of potential new treatments for addiction and overdose. I'll begin with a brief discussion of the results for the second quarter ended June 30, 2020. We recognized approximately $6.3 million in revenue compared to approximately $6.8 million during the corresponding period of 2019. The approximate $6.3 million of revenue this quarter represented royalties from our license agreement with EBS for the sale of NARCAN Nasal Spray, compared to approximately $6.1million in the same period of 2019. Second quarter 2020 net sales of NARCAN were approximately $72.8 million as reported by EBS. General and administrative expenses for the second quarter were approximately $2.8 million, essentially flat as compared to the same period in 2019. Research and development expenses were approximately $0.6 million as compared to approximately $1.6 million in the second quarter of 2019. The one million decrease was primarily attributable to $0.8 million-dollar UK R&D tax credit, as 0.4 million decrease in external costs related to clinical trials, offset by an increase of $0.2 million in personnel and related expense during the three months ended June 30, 2020 compared to the three months ended June 30, 2019. Sales and marketing expenses were approximately $1.7 million compared to none during the second quarter of 2019. Personnel and related expense including stock-based compensation was 0.5 and $1.2 million was related to third party expenses for various pre-commercial activities, including market research and assessments and strategic planning. As Opiant continues to advance OPNT003 towards potential market approval, we anticipate that our sales and marketing expenses will increase in several areas to support the development of a commercial platform that would allow Opiant to potentially commercialize OPNT003 as well as future pipeline products. Royalty expense for the second quarter was approximately $1.4 million compared to $0.9 million for the same period in 2019. Royalty expense represent payments to net profit partners for the royalties received from the net sales of NARCAN. Net loss for the second quarter was approximately $216,000 or a loss of $0.05 per basic and diluted share, compared to net income of approximately $1.6 million or 0.39 and $0.31 diluted share for the second quarter of 2019. Now turning to the results for the six months ended June 30, 2020. For the first half of 2020, Opiant recorded approximately $10.5 million in revenue compared to approximately $12.2 million during the corresponding period of 2019. We recognized $10.4 million of royalty revenue from our license agreement with EBS for the sale of NARCAN compared to $9.9 million in the first half of 2019. Net sales of NARCAN for the six months ended June 30, 2020 were approximately $145 million as reported by EBS. General and administrative expenses for the six months ended June 30, 2020 were approximately $5.4 million compared to approximately $6.2 million in the comparable period of 2019. The decrease of $0.8 million was primarily due to $0.6 million decrease in legal and professional fees and a $0.2 million decrease in personnel and related expense including stock-based compensation expense compared to the six months ended June 30 2019. Research and development expenses for the six months ended June 30th, 2020 were approximately $2 million compared to approximately $5.2 million in the comparable period of 2019. This resulted from a decrease in third-party clinical trial and development expense of $4.1 million of which $0.8 million was attributable to a UK R&D tax credit, offset by an increase of $0.1 million in personnel and related expense during the six months ended June 30, 2020. Sales and marketing expenses for the six months ended June 30th, 2020 were approximately $2.8 million compared to none during the same period in 2019. For the six months ended June 30, 2020 personnel and related expenses, including stock-based compensation was 0.8 and $2 million was related to third party expenses for various pre-commercial activities including market research and assessments and strategic planning. Royalty expense was approximately 2.3 and $1.2 million during the six months ended June 30, 2020 and 2019 respectively. The increase of $1.1 million is primarily attributable to no third-party license fee expense used to determine net profit partner income for the six months ended June 30, 2020 compared to the six months ended June 30, 2019. Net loss for the six months ended June 30, 2020 was approximately $1.9 million or a loss of $0.45 per basic and diluted share. This compared to a net loss of approximately $158,000 or a loss of $0.04 per basic and diluted share for the comparable period of 2019. As of June 30, 2020 Opiant has cash and cash equivalents of $30.5 million compared to approximately $31 million at December 31, 2019. As we have discussed, our lead program OPNT003 is funded through a NIDA grant of approximately $7.4 million and the BARDA contract of approximately $4.6 million. In addition, with EBS as reiterated NARCAN 2020 sales guidance range of $285 million to $315 million, we still expect 2020 royalty revenue of approximately $26.2 million. This keeps us in a strong financial position with a number of cash resources to develop and advance our lead program OPNT003 and broader pipeline in addiction and overdose. With that, I will now ask the operator to open the call up for questions. Operator?

[Operator:]

[Operator Instructions]. Our first question comes from the line of Brandon Folkes with Cantor Fitzgerald. Please proceed with your question.

[Brandon Folkes:]

Hi. Thanks for taking my questions and congratulations on all the progress. Firstly just on OPNT003, should we think about when the product comes to market that the initial positioning or market pitch to break in would be aimed at the fentanyl overdose and then from there, good widespread use in terms of your pharmaceutical opioid overdoses? And then secondly, maybe just on R&D, it was quite low in the quarter. Can you just elaborate a little bit about if COVID was to continue and we may get a second wave, how should we think about your ability to run the OPNT003 trial? Could this be impacted? And then lastly with the sales and marketing spend, should we expect this to continue? Thank you.

[Roger Crystal:]

Thanks, Brandon. Thanks for your questions and good afternoon to you. So when you ask about how, I guess the entry of OPNT003 in the marketplace and how we are positioning it - we will be providing more detailed updates based on the data we get, and particularly, from the pharmacodynamic study; only to say that we view this relevant for all opioid overdoses. But particularly well suited to fentanyl, given its essentially differentiated profile. So I think that's how we really consider this and our view is this fentanyl crisis will continue to get worse way. For example, a greater amount of fentanyl being even manufactured illegally on U.S. soil. So that's how we see this addressable market growing. And then David is going to answer the second question. Actually the COVID question, I can answer as well. In terms of COVID-19 and its impact on the OPNT003 development, the different thing that are impacted by COVID that we learn day by day, what I will say from what we know so far is the CROs we've identified to conduct the study are standalone units as opposed to being associated with the hospital and therefore, it's a situation whereby a hospital was overwhelmed, that wouldn't directly impact the ability to conduct these trials. However, we've experienced some impacts already, for example, through the delivery of machinery and the availability of engineers in Europe who needed to travel, that has been an impact. So I can't accurately say that we won't be impacted in the future. It just depends on the nature of COVID in terms of location and severity. And David can answer your third question.

[David O'Toole:]

Brandon, thanks for the question and thanks for joining. As far as sales and marketing, we are going to continue to spend to get ready for a potential commercial launch. But at the same time we're going to diligently and look at the spend to make sure that we don't ramp up that spend until we get to closer to an NDA filing. So the sales and marketing cost that we have for the second quarter, that will be in the range of where we will be for the next couple of quarters until we get closer to an NDA filing.

[Brandon Folkes:]

Great, thank you very much.

[Operator:]

Thank you. Our next question comes from the line of David Bautz with Zacks Small Cap Research, please proceed with your question.

[David Bautz:]

Hey, good afternoon guys. Roger, I'm curious if there has been any data generated on the percentage of overdose patients that have required more than one dose of naloxone. That would probably get some good information on who would be best served by something like [indiscernible]?

[Roger Crystal:]

There's actually quite a lot of data in the literature, the show, the national data to support that. We have done our own primary market research that support and in multiple doses of naloxone on average being needed. But literature include for example, cohorts of patients who have overdosed on fentanyl and for example, required not just multiple doses upon the arrival of the emergency services but also once transferred to the hospital, they required continuous intravenous infusion of naloxone. The substantial evidence, I would say, the populations certainly they are impacted. But here is the consideration. It is this very hard to predict who is going to need multiple doses until it happens and then it might be too late if you don't have certainly multiple doses available or if you are going to wait. It's actually long to see further doses required. You're kind of bringing in an element of clinical uncertainty and if that's and then an experienced first responder or perhaps a late bystander, we can eliminate that judgment call by giving equivalent to the much higher dose initially head on. The other thing is you don't know what someone is overdosed on. So it's not that someone - how the sign say, 'I only overdose of heroin', but because of the data, where over 70% of opioid overdose deaths in 2019 involve fentanyl, one, they show it statistically, you had to assume - you have to assume the worst.

[David Bautz:]

Okay, great. Now you've previously discussed the potential for OPNT003 to be put into the national stockpile in case of the chemical attack. I'm just curious if you could walk us through what the process would be to get the drug into the stockpile?

[Roger Crystal:]

Yes. So we're not able to provide that much detail because we are still at the development stage. So I don't want to be overreaching and suggest that we automatically have any entitlement whatsoever to be in that position. However BARDA have supported part of the development costs for OPNT003 and it's absolutely for the reasons that that ultimate desire and interest is to be able to stockpile the product. So it's a nasal nalmefene for emergency situations involving mass casualties where there might be a fentanyl chemical attack.

[David Bautz:]

Okay. Thanks for taking the questions.

[David O'Toole:]

Thank you, David.

[Operator:]

There appear to be no further questions at this time, I'd like to turn the floor back over to management for closing comments.

[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 remain compelling given the significant medical 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 teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.