Otonomy, Inc.
Q2 2022 Earnings Call Transcript

Published: 25 Jul 2022

[Operator:]

Good day, and thank you for standing by. Welcome to the Second Quarter 2022 Otonomy Inc. Earnings Conference call. . Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Robert Uhl with ICR Westwicke. Sir, floor is yours.

[Robert Uhl:]

Thank you, Karmen. Good afternoon, and welcome to Otonomy's second quarter 2022 financial results and business update conference call. Joining me on the call from Otonomy are Dr. David Weber, President and Chief Executive Officer; and Paul Cayer, Chief Financial and Business Officer. Before I turn the call over to Dr. Weber, I would like to remind you that today's call will include forward-looking statements based on current expectations. Such statements represent management's judgment as of today and may involve risks and uncertainties that could cause actual results to differ materially from expected results. Please refer to Otonomy's filings with the SEC, which are available from the SEC or on the Otonomy website for information concerning the risk factors that could affect the company. Otonomy specifically disclaims any obligation to update any forward-looking statements, except as required by law. Now, I will now turn the call over to Dave Weber, President and CEO of Otonomy.

[Dave Weber:]

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[Operator:]

Our first question is from Ken Cacciatore with Cowen.

[Ken Cacciatore:]

Hey, Dave and Paul, real good luck ahead of all this important data disclosures. Dave, maybe I had a 313, can you just remind us the steps that you all took to try to minimize the placebo response in this study? And then maybe either you or Paul can talk about the tinnitus market opportunity, just a review of it would be fantastic. Thanks so much.

[Dave Weber:]

Okay, thanks, Ken. And I appreciate the questions here. So yes, so in terms of minimizing the placebo response, several steps that we've taken, first of all, I think it's important that it is a one-to-one randomization that does help based on historically looking at literature on placebo response, when you have more than two arms, the more arms you have tend to cause more placebo response. Additionally, it's randomized one-to-one, we did increase the level of severity, which we also think will help with the placebo response. So patients are into more of a higher up in the moderate severe level of disease, which we think will help on the placebo. I think the other things that are important for placebo are both the endpoints that we're looking at, the TFI is 25 point questionnaire. So it's not a simple question, or single question. It really is a questionnaire that they have to answer on each of their study visits. And so that really provides, I think, a nice control on placebo response. In addition, they have other endpoints as we know the loudness and annoyance that are done on daily and then the patient global impression of change. And then I think the final thing that really helps in terms of addressing placebo response is the multiple time points required to demonstrate that improvement in their tinnitus, that is that we require improvements at both day at both month one and at month two. So consecutive time points have to demonstrate that clinically meaningful level of improvement. So I think all of those are key factors in helping to manage the placebo response. And obviously, we're looking forward to the results of the study. With regards to the market, well I turn that over to Paul, and let Paul address that question.

[Paul Cayer:]

Yes, thanks, Dave. And thanks for the question, Ken. We have a slide in our slide deck, so I'll just make some comments referencing that if folks want to go and take a look at that after the call. It's a large market, about 10% of people in the US are affected by tinnitus, and about a quarter of those, so 2% to 3% of the adult population raised their tinnitus is sort of moderate to severe. The level of disability these patients have is pretty significant. As you can imagine, if you had a loud noise, roaring, buzzing, humming, that was always on. It would be impactful, not only when you're trying to sleep or concentrate in a quiet room, but just going about your daily life. And so the level of impact these patients have is pretty significant. And unfortunately, there really isn't much to help that. The approaches that are used today are basically coping mechanisms, whether it's a white noise machine, hearing aids will be tried but doesn't actually work for many patients. And then things like cognitive behavioral training that basically just helps the patient deal with it rather than actually providing an underlying treatment. So 313, we were excited about it because it's actually a disease modifying therapy. And that's what patients and physicians really want. In terms of the other parts of the commercial opportunity. I think it fits very nicely into office space treatment as a physician administer drug would fit in under the buy-and-bill model, there's already a CPT code for the intratympanic injection it sell. And so assuming we get the product to market, then we would apply for J code, the product would be covered under that. So it's, just to sum up, large patient population, significant disease burden associated, nothing that really is disease modifying or helping the underlying level of severity in these patients and sort of wide open commercial opportunity. And we think the market opportunity based upon third party research is over a $1 billion here in the US alone. Thanks for the question, Ken.

[Operator:]

Our next question comes from Chris Raymond with Piper Sandler.

[Chris Raymond:]

Hey, thanks, guys. And just on 413, just on the timeline, you getting that initiation that dose ranging Phase 2 in the first quarter, I think the last time you guys guided it was a yearend. Can you just maybe walk through that it's a slight delay? But maybe I think I remember you talking about end to Phase 1 meeting that -- that you were going to have with FDA, if I'm remembering correctly, maybe is that driving the delay? Or is there some other driver just to getting that up and running? Thanks.

[Dave Weber:]

Yes. Hi, Chris. Thanks. No, I don't believe there's a delay there. I think we were originally, we are actually ahead on that. There was maybe a slight change there, and that we did enroll 19 patients versus the original plan of 12 patients. So we did go up on our enrollment, which of course for the additional cohorts and an additional group of patients. So in terms of our timing, I mean, the key focus that we have is to initiate a Phase 2 program before the end of the year. And I feel like we are on track with that, with the timing that we have. And so I think one of the things that's actually remarkable, and it kind of speaks to the unmet need that Paul was talking about for tinnitus is that each of our clinical trials has enrolled ahead of schedule. And even when we've increased the number of patients, so even for tinnitus, for example, going from 140 to 153. And that was still ahead of schedule, so I think it's actually quite remarkable.

[Operator:]

Our next question is from Francois Brisebois with Oppenheimer.

[Francois Brisebois:]

Hi, guys. Thanks for taking the questions. Just a couple of here on my end. Sorry, so in terms of the compliance on the 313, it's been excellent. As you mentioned, is there -- is this surprising, maybe were your expectations maybe a little more difficult based on maybe the pandemic still kind of never ending, lingering, or any reason to why this compliance might have been so good here?

[Dave Weber:]

Yes, thanks for the question, Franc. Absolutely. It's this unmet need. I can tell you that only is the compliance just, we saw this in the Phase 1/2 study for the program. And so it wasn't a surprise to us. Based on what we've seen there that we're going to have very good compliance here, it still is even above our expectation. I think we were highly confident and having a 90% plus compliance, but 98% compliance is absolutely amazing. And I think ultimately, it goes down to the patients, the patients are highly motivated and committed to the study. Now, I will say there are things that we've done to make that very useful for them, for example, in terms of making sure they have access to complete the questionnaires. This was important because of COVID if patients couldn't make it to the clinical center, so we did have ability to manage that. But I think it truly is a testament to the unmet need, really. And I can tell you as well, that even when you look at the enrollment, as I mentioned, we were ahead of schedule over enrollment, our target from 140 up to 153. I think it again just speaks to that tremendous number of patients out there with the unmet need.

[Francois Brisebois:]

Okay, great. And then if I can sneak another one here, are you just focused on the responder analysis for this, this Phase 2, or is the end number here big enough for potentially seeing efficacy on the overall population? And I guess got a two part question. Has there ever been in precedent here with just responder analysis with in tinnitus with the FDA?

[Dave Weber:]

Not with regards to the tinnitus, responder has been utilized for approval of some drugs. I can't go specifically into those, but they're ones that are statisticians are familiar with, and regulatory people. But we will be getting a full set of data. So clearly the responder analysis is our primary. Based on the Phase 1/2, we've carried that forward. But I think what people can expect is a full set of data. If you look at our corporate deck, we provide a good solid base of data there both on the overall population as well as on the responder analysis as well as the secondary endpoints, loudness and annoyance and patient global impression of change. So it will actually be a very large dataset. And we will obviously look at it in a variety of different ways. It's all part of our pre-specified statistical analysis plan.

[Francois Brisebois:]

Okay, and I lied, I apologize. One last one for me, on the 413, in terms of the higher dose that you'll see, I guess, two higher doses here in the fourth quarter. Is there any, there's some look on TFI for 313 in the higher dose and bilateral but any sign of efficacy here to expect on the 413 side in the fourth quarter?

[Dave Weber:]

Well, I think that's what we will be looking for. As I mentioned, unlike the 313, where it is a safety evaluation, although we will have to TFI in one month, so we will be able to look into tinnitus, the patients weren't actually randomized to the same inclusion exclusion criteria that we had in the Phase 2 for tinnitus. Whereas for 413, it was all kept consistent. So the same inclusion exclusion criteria, and all of the same endpoints. And so we're be able to look at those patients, again, 19 patients per group, we're be able to look at that data for efficacy in the case of the 413, which will then inform of course, what we will do for Phase 2.

[Operator:]

We have a question from the line of Oren Livnat with H.C. Wainwright.

[Oren Livnat:]

Thanks for taking the questions. I have a couple. Just following up on Ken's question about potential placebo response. I mean, obviously, that's a crucial variable here. And can you just remind us what the lead -- what the sort of total lead in and screening process was here to sort of get a robust, persistent tinnitus population? And are you able now to give us any sort of color on what type of screen or lead in exclusions or failures you had such that you did, in fact, throw out a lot of patients that might not have been reliable.

[Dave Weber:]

Yes, thanks, Oren. With regard to placebo and the lead in time, so it's a two week lead in period. Now patients must have had persistent tinnitus from at least two months of onset. So they've already coming in, where we believe that will, that two months will exclude patients who have spontaneously resolving tinnitus what our research or what's in the literature suggests and work with KOL suggests that usually, within the first month, if it's going to spontaneous resolve, it will and so that two month gives us extra color. And by the time patients are actually done with the lead in phase, which is two weeks, they're almost into their third month. So you can see that helps obviously from that standpoint. The other thing that we require is for consistency in the TFI. So these patients are taking the TFI at both their, at their screening visit. And then at baseline, and so we're able to look at the consistency of that result. And it is something that we do look at to ensure that there's consistency and not a wide differentiation between the screening and baseline. So we have a very stable disease. And we think that's important as well for screening out maybe patients who are not really responding to the questionnaire appropriately, that will help us then address that placebo response as well. And I think I just point out, remember that there was only one patient that really drove placebo response as we looked at the higher levels of response and clinically meaningfulness in the Phase 1/2, so it was a very stark contrast with just that really one patient driving placebo response there. So obviously, this trial will tell us a lot, but I think those steps in the lead in as well as then the nature of the endpoints themselves. And then, of course, again, the multiple time points required to be a responder we think will help us address placebo response.

[Oren Livnat:]

And maybe you aren't fully dodged this portion, but I guess it could help us from a commercial perspective too in terms of identifying truly chronic patients, but of that 150 something patients who enrolled, were there many more who screened out because of a sort of waxing and waning nature of their or inconsistent nature of their TFI scores.

[Dave Weber:]

No, not really, really wasn't a matter of the inconsistency of their scores, it really was more of other inclusion exclusion criteria. And the inconsistency of their scores, it really was more of other inclusion exclusion criteria. And that would either be the level, some of the majority were the level of the TFI, because we had increased the threshold to have a higher level of moderate severity. And so that was really the number one driver of patients failing inclusion and exclusion was just where their tinnitus was the scale that was acquired.

[Oren Livnat:]

All right. And I know in the past, you've spoken about the study, the Phase 2 for tinnitus being conducted in the fashion of a potentially registration quality or a pivotal study. So can you just remind us what might you now and that could change, obviously, once you see the data, but what do you think you need to see in the study, for it to potentially be registration quality or fileable? And I guess, as importantly, is that higher dose data crucial for just, crucial to deciding what you do in Phase 3? If you see better efficacy signal in Phase 3, are you more likely to just add that as a second dose and have two dose Phase 3? Are you think you would risk potentially just moving up entirely for Phase 3?

[Dave Weber:]

Oh, I don't think I've risked moving up entirely. I think, I mean, clearly, this is an area of significant unmet needs. So I think if we see a strong treatment response, similar to what we saw in Phase 1/2, I think it is a totally commercially available, viable product with a 40% responder rate. So I think that really the exploration of the higher dose is one that allows us great flexibility. I would not see us jumping to the higher dose alone, if anything, we would include the higher dose in our development program. But I think that all depends on the benefit that we see here with this current dose. And whether we can replicate what we saw in Phase 1/2, so I think it gives us a lot of opportunity to look at how we want to proceed based on what we learned from the Phase 1/2. In addition, of course, that covers off the bilateral safety, which will be important for our safety program. So I think together that information, and then going in with the FDA with all of that in hand, will be very informative. And they help us lay out what the program looks like. Just on the current Phase 2, yes, it is a Phase 2 that we've ran as a fully potential registration program, in that it has a statistical analysis plan that had been reviewed by the FDA. Now, at that point, obviously, we have not talked about our endpoints with the FDA at this point that was the plan for end of Phase 2. So we will need to discuss the endpoints and selection with them. But of course, I think the FDA recognizes that there's tremendous unmet need here. And I think that with success of the Phase 2, I think it'll give us a good approach into the Phase 3 program.

[Oren Livnat:]

And just lastly, and pardon me if I should know this, can you remind us, are there any pre-specified subgroup analysis for this Phase 2?

[Dave Weber:]

Yes, there are. Yes, there are. There are, as you know, we increase the duration of tinnitus from looking at just up to six months to looking up to one year. So we will be looking at the duration of tinnitus as one of our pre-specified subgroup analysis.

[Oren Livnat:]

All right. It’s coming back me to now. Thanks.

[Dave Weber:]

No problem. There's a lot of studies here between 413 and 313, there's a lot of data and that we've both collected to date as well as what's coming ahead of us. So we're very excited, but it does. It does make it complicated to make sure we remember what's what for each of the studies.

[Operator:]

Thank you. And we have a follow up one moment please. Francois, your line is open.

[Francois Brisebois:]

Okay, yes. Sorry. Just in terms of when you were enrolling for 313, just on the bilateral side. Can you discuss is the 50

[Dave Weber:]

Well, I don't think anyone really knows in a clinical setting. I mean, that's part of what we obviously are doing is really the first ones to apply the TFI to pharmaceutical therapy in these studies, I mean, it has been applied before I shouldn't say that it hasn't. It has been applied. But in terms of looking rigorously, at a unilateral versus bilateral will really be something that we're able to learn from. The enrollment of the 313 bilateral groups went very smoothly. Again, we did that ahead of schedule, and largely driven by the fact that there's such large populations of both bilateral and the unilateral. So I think we feel the 50

[Francois Brisebois:]

Okay, great. And so if a patient just to be clear, sorry, if a patient is bilateral, but has mild tinnitus in one ear and then severe in the other ear, if you would that be not eliminated not allowed, because overall, it's not moderate to severe, it does have to be moderate to severe in both ears. How did that work?

[Dave Weber:]

Well, you're testing when you're testing bilateral patients, you're only doing the TFI. I mean, so the TFI score is based on whatever they're feeling, so you don't know the interaction between the ears with the TFI. It is what their overall -- their score is, which is what makes it again, what will be interesting to look at the data and see how it responds and how patients report it. So it is something that is not as clean as in the unilateral patient.

[Francois Brisebois:]

Perfect. All right. Thank you.

[Dave Weber:]

So that's also why we're looking at those patients more from a safety perspective, as opposed to efficacy in the bilateral patients.

[Operator:]

Thank you. And I would now like to turn the conference back to Dave Weber for closing remarks.

[Dave Weber:]

Yes. Well, thank you, everyone. I appreciate you participating in our call today. We look forward to talking with you soon. We have you have a good evening. Thank you.

[Operator:]

And this concludes today’s conference call. Thank you for participating. And you may now disconnect.