Opiant Pharmaceuticals, Inc.
Q4 2019 Earnings Call Transcript

Published: 5 Mar 2020

[Operator:]

Greetings and welcome to the Opiant Pharmaceuticals Fourth Quarter and Full Year 2019 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded.I will now turn the conference over to your host, Vice President of Communications and Investor Relations with Opiant Pharmaceuticals, Ben Atkins. Please go ahead sir.

[Ben Atkins:]

Thank you, operator, and good afternoon, everyone. I recently joined the Opiant team as Vice President of Communications and Investor Relations. I am thrilled to be part of this team, this mission and to work with all of you.On the call today are Opiant’s 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 corporate update for the fourth quarter and full year ended December 31, 2019.Please note that certain information discussed on the call today is covered under the safe harbor provisions 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, March 4, 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. And thank you to everyone for joining us this afternoon. Before I provide you with the operational update, I’d like to begin with a brief discussion, opioid addiction and overdose in the United States. Specifically, as it relates to fentanyl. As is well known, the opioid crisis has evolved into a fentanyl crisis. A new report from the CDC showed the drug overdose death in the U.S. declined in 2018 for the first time in nearly three decades, while fentanyl-related deaths actually increased 10% from 2017.There are many similar statistics and data recently disclosed from cities and states throughout the country. For example, according to preliminary statistics compiled by San Francisco authorities, deaths from overdoses of fentanyl reached 234 in 2019 up from 90 in 2018. Moreover, the news report continues to depict a worsening epidemic. Last month in Columbus, Ohio, 10 fentanyl-related deaths were reported in just a single 24-hour period.Prompted by this upsurge in opioid overdose deaths driven by fentanyl and related synthetics, the NIH has called for the development of stronger, longer-acting formulations of antagonist to counteract these very high potency synthetic opioids as are now claiming thousands of lives each year. Clearly, this is a critical and growing public health crisis in the U.S., and Opiant is well positioned to address this challenge.We believe that OPNT003 nasal nalmefene has the potential to address this issue and it is suited to treat fentanyl-related overdoses. There are several features of nalmefene’s pharmacological properties that we believe to make it both suited treat opioid doses caused by fentanyl and related synthetic opioids.Firstly, higher affinity of nalmefene at mu opioid receptors being at least 5x greater than that of naloxone. Secondly, we believe the rapid absorption and long half life of OPNT003 increases the probability of a successful rescue, while reducing the likelihood of the renarcotization event. Our OPNT003 clinical program is supported by $7.4 million from NIDA and a contract for up to $4.6 million from BARDA to accelerate its development as a medical countermeasure in the event of a fentanyl chemical attack.Late in 2019, we were awarded the second tranche of approximately $2.4 million from the BARDA contract. As we disclosed in January, the FDA informed a status is reviewing certain characteristics of the nasal delivery device we intend to use with OPNT003. As the device is not yet approved, the FDA is requesting this information now as opposed to an NDA submission for the drug device combination. While for competitive reasons, I cannot provide further detail around the FDA’s request. We can say that we continue to work with the FDA to address that question.We aim to clear the FDA information request this month and hope to conduct the complementary PK study in the second quarter of this year. This will be a single-dose study with a duration of two to three weeks in healthy volunteers, and we have already received IRB approval to conduct this study. Importantly, we aim to file an NDA this year, and from a potential commercial standpoint, we remain on schedule.I’d now like to spend a little time discussing its commercial opportunity. Overall, we view the market for opioid overdose reversal agents to be underpenetrated. The market can be broken up into two distinct areas

[David O’Toole:]

Thank you, Roger. Before I review our financial results for the fourth quarter and full year 2019, I’d like to discuss our financial expectations for 2020.Based on the mid-range of the full year 2020 guidance for sales of NARCAN Nasal Spray provided by EBS, of $300 million, we expect full year 2020 NARCAN royalty revenue of around $26.2 million.I will now briefly review the results for the fourth quarter ended December 31, 2019. For the fourth quarter, we recognized approximately $7.7 million of revenue from the license agreement with EBS for the sale of NARCAN Nasal Spray, compared to approximately $4.8 million in the comparable period of 2018.The increase of $2.9 million in royalty revenue represents an increase of 60% year-over-year and was driven by net NARCAN sales of approximately $66.8 million in the fourth quarter of 2019, as reported by EBS.G&A expenses were $2.8 million in each of the three months ended December 31, 2019 and December 31, 2018. R&D expenses were $2 million and $2.5 million for the three months ended December 31, 2019, and December 31, 2018 respectively. The decrease was primarily due to a $0.5 million decrease in third-party expenses associated with our research and development programs.Sales and marketing expense for the three months ended December 31, 2019, were approximately $471,000 compared to none in the comparable period of 2018. The increase was primarily due to compensation-related expenses and third-party consulting expense as we consider our commercialization strategy for OPNT003.Royalty expense for the three months ended December 31, 2019, was approximately $1.7 million, compared to approximately $1 million in the comparable period of 2018. The increase was due to an increase in payments due to the – our net profit partners for the royalties earned from the net sales of NARCAN Nasal Spray.Net income for the three months ended December 31, 2019, was approximately $1.1 million, or $0.26 per basic and $0.20 per diluted share, compared to a net loss of approximately $9.5 million, or a loss of $2.49 per basic and diluted share in the comparable period of 2018.Now let’s focus on the results for the year ended December 31, 2019. We recognized $40.5 million in revenue during the year ended December 31, 2019, compared to $14 million in the corresponding period of 2018. For the year ended December 31, 2019, we recognized $37.6 million of revenue from the license agreement with EBS as compared to $13.3 million in the comparable period of 2018.The $24.3 million increase year-over-year was attributable to $10.8 million of royalty revenue from an increase in sales of NARCAN Nasal Spray to approximately $280 million for the 12 months ended December 31, 2019, as reported by EBS, and $13.5 million from a one-time milestone payment, as sales of NARCAN Nasal Spray exceeded $200 million through the third quarter of 2019.G&A expenses were $12.2 million and $11.5 million for the year ended December 31, 2019 and December 31, 2018 respectively. The increase was due to a $1.4 million increase in personnel and related expense, including recruiting expenses, and $900,000 increase in legal and professional fees, partially offset by a $1.6 million decrease in stock-based compensation expense.R&D expenses for the year ended December 31, 2019, were approximately $9.1 million, compared to approximately $8.5 million in the comparable period of 2018. The increase was attributable to a $1.1 million increase in third-party expenses associated with Opiant’s research and development programs, and a $0.6 million increase in employee-related compensation, offset by $1.1 million decrease in stock-based compensation expense.Sales and marketing expenses for the year ended December 31, 2019, was approximately $612,000, compared to none in the comparable period of 2018. Again, the increase was due to compensation expense and third-party consulting expense.Royalty expense for the year ended December 31, 2019, was approximately $7.7 million, compared to approximately $1.5 million in the comparable period in 2018. The increase was primarily due to a $4.9 million increase in payments to our net profit partners for the royalties and sales milestones earned from the net sales of NARCAN Nasal Spray and $1.3 million payments made to buyout the net profit partner interests in OPNT003 Nasal Nalmefene held by certain investors who had initially supported the development of NARCAN Nasal Spray.There were no license fees recorded for the year ended December 31, 2019. We recorded $13.7 million in license fees during the year ended December 31, 2018. These third-party license fees related to our obligation under the license agreement with EBS for certain payments made by EBS to third-party.Net income for the year ended December 31, 2019, was approximately $11.6 million, or $2.88 per basic and $2.17 per diluted share, compared to a net loss of approximately $21.2 million, or a loss of $7.10 per basic and diluted share for the comparable period of 2018.As of December 31, 2019, we had cash and cash equivalents of $31.9 million, compared to $24.6 million at December 31, 2018. The cash balance at December 31, 2019 does not include the full impact of the NIDA grant of approximately $7.4 million or the BARDA contract of approximately $4.6 million.We are in a strong financial position as we begin 2020. We have our pipeline funded through multiple government sources, and we also benefit from a significant royalty revenue stream for net sales of NARCAN Nasal Spray.With that, I’d like to turn the call back to the operator to open the call up for questions. Operator?

[Operator:]

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

[Brandon Folkes:]

Hi, thanks for taking my questions and congratulations on the progress during the year. Firstly, could you perhaps just elaborate a little bit more on the work you’ve done and assumptions around the $1 billion projection for the opioid reversal agent market for 2022? How are you thinking about the number of products in that assumption, geographies and growth? And then secondly, maybe, David, just for you. How should we think about SG&A and R&D spending in 2020? Thank you.

[Roger Crystal:]

Thanks, Brandon. So around the addressable market for opioid overdose reversal agent, geographies, we consider that to be overall in U.S. and actually Canada as well, but predominantly, the U.S. When we think about U.S., there is certain parts of the U.S., which are more hotspot, obviously, because of even higher rates of opioid overdose rates. Alongside there are certain areas where there’s very high rates of opioid prescription – prescribing. So hotspots there and then there’s a lot of overlap as well and there’s certain states which have both, high rates of overdose rates, high rates of opioid prescribing, yet low rates that access to the naloxone.So there’s – that’s one way of considering it. We also look at areas where at the moment there’s a high use of the standard naloxone injection, which, obviously, the injection needle based not satisfactory in terms of how we deal with this crisis. And we think there’s few scope for that areas to grow as well. Those are some of our considerations that get us to that number. And we do, therefore, think that this opportunity is going to grow year-on-year.And the question about SG&A, David?

[David O’Toole:]

Yes. Thanks, Brandon. I appreciate you being on the call and the question. As far as the S part of G&A, I’m going to defer that for a second. But the G&A expenses, we have historically run really lean. And we don’t see our G&A expenses increasing significantly for 2020. The area where we will – and we haven’t given any guidance and again at this point in time is around our sales and marketing. We are still looking into what our strategy is going to be there. And when we have more information on what that commercialization strategy is, we will share it with everybody.

[Brandon Folkes:]

Great. Thanks. And maybe one follow-up, if I may, Roger, just obviously, you talked about the crisis, how it’s morphed into really a fentanyl crisis. And we’re seeing a lot of growth in the retail channel from co-prescribing. Given OPNT003’s longer half-life, and if you spin this against fentanyl overdoses, how should we think – or how do you think about the opportunity for OPNT003 with co-prescribing? Do you foresee this as being something that’s driven by co-prescribing or something that’s really in the first responders hands, and that’s what’s really going to be driving sale? Thank you.

[Roger Crystal:]

Well, thanks for the question. I consider it to be applicable in both sectors in the OPNT003. Yes, it has a long half-life as well as against fentanyl, but bear in mind, it’s also very rapidly absorbed. And with the inherent of nalmefene having higher affinity of mu-opioid receptors, yes, it’s particularly well-suited for fentanyl but even for, let’s say, standard opioid and painkiller overdose or heroin overdose, you’re still getting a potent reversal agent into the body and not the brain relatively quickly. So we still see it as being very relevant there as well.

[Brandon Folkes:]

Great. Thank you very much.

[Operator:]

Next question comes from the line of Carl Byrnes with Northland Securities. Please proceed with your question.

[Carl Byrnes:]

Great. Thank you and congratulations on the progress. Can you possibly give us a little clarity on the timing of recognition of the second tranche of the BARDA grant as well as any additional information you might be able to give on the timing of recognition of the NIDA grants in 2020? Thanks.

[David O’Toole:]

Thanks, Carl. And again, thanks for joining the call and the question. Both the BARDA and the NIDA grants, the recognition of that revenue is, as we actually incur the cost. And as we move forward through this year with, as Roger indicated, the anticipation of filing an NDA later part of this year, the end of this year. Most of that revenue recognition will be in this year. The BARDA contract itself covers everything that the NIDA grant doesn’t and including the NDA filing fee. And so if we are successful in moving our programs, OPNT003 to NDA filing at the end of this year, most of that revenue recognition as already indicated would be this year.

[Carl Byrnes:]

Great. Perfect. Thank you.

[Operator:]

Our next question comes from the line of Brian Marckx with Zacks Investment Research. Please proceed with your question.

[Brian Marckx:]

Hey, good afternoon guys.

[Roger Crystal:]

Good afternoon.

[Brian Marckx:]

In the beginning of the year the New York Attorney General came to an agreement with the Emergent BioSolutions, where they’re talking about nasal delivery devices for naloxone. And I’m curious if this has any bearing on NARCAN or on OPNT003? And then kind of a similar question. Are the delivery devices for NARCAN and OPNT003 the same or they different?

[Roger Crystal:]

Thank you. So as far as I’m aware, this relates specifically to make the device more available of nasal nalmefene to developers of nasal nalmefene, I’ll comment on what it says around on nasal naloxone. In terms of the delivery devices, the device we are using for OPNT003 is a different one to that we used for NARCAN Nasal Spray.

[Brian Marckx:]

Okay. And so another thing coming out of this agreement was it looks like Emergent is developing a nasal nalmefene. Are you aware of any other companies developing a similar product?

[Roger Crystal:]

It’s not that Emergent are developing a nasal nalmefene as far as you are aware. They are developing nalmefene as depot injection more to treat opioid use disorder in a more chronic manner. We are aware, as I mentioned before, we’re aware of at least one other company is developing nasal nalmefene as far as we can tell that as a way from finding an NDA than ourselves. I’m not aware of other nasal nalmefene program beyond that.

[Brian Marckx:]

Okay. And David quickly for you. Are there any more payments due or expected to emerging – like there were last year with the licensing agreement payments.

[David O’Toole:]

There are no additional payments that will be due under that agreement.

[Brian Marckx:]

Okay. Thanks for taking the questions.

[Roger Crystal:]

Thank you.

[David O’Toole:]

Thank you.

[Operator:]

[Operator Instructions] There are no further questions at this time. We have reached the end of the question-and-answer session. I will now turn the call back over to management for any closing remarks.

[Roger Crystal:]

Thank you, operator. To summarize, our R&D funds are well supported by our financial resources and we are targeting significant market opportunity. Most importantly, we truly believe that the medicines we are developing have the potential to impact thousands of lives and we excited to continue advancing each in the clinic. As we advance our pipeline and execute on our key near-term catalysts, including top line data for OPNT003, and the initiation of the trial for OPNT002 for AUD, we anticipate additional value creation. Thank you for joining us today and for your interest in Opiant. We look forward to keeping you updated on our progress in the upcoming months. Enjoy the rest of your day. Thank you.

[Operator:]

This does conclude today’s conference. You may disconnect your lines at this time. Thank you for your participation and have a great day.