Otonomy, Inc.
Q2 2019 Earnings Call Transcript

Published: 2 Aug 2019

[Operator:]

Good afternoon, ladies and gentlemen, and welcome to the Quarter Two 2019 Otonomy Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]Thank you. I would now like to turn the call over to your host, Mr. Stephen Jasper. The floor is yours, sir.

[Stephen Jasper:]

Good afternoon and welcome to Otonomy's second quarter 2019 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 judgments, as of today, and may involve risks and uncertainties that could cause actual results to differ materially from expected results. Such statements include, but are not limited to timing of results, patient recruitment and enrollment plans for, and design and conduct of the Phase 3 clinical trial for OTIVIDEX and the Phase 1/2 clinical trial for OTO-313, and the timing of initiation and results, patient recruitment and enrollment plans for, and design and conduct of the Phase 1/2 clinical trial for OTO-413, expectations regarding preclinical development, expectations regarding the benefits and value potential of Otonomy's programs, funding of clinical development, program advancement and company operations into 2021, and expectations regarding financial guidance, including operating expenses for 2019.Please refer to Otonomy's filings with the SEC, which are available from the SEC or on Otonomy website for information concerning the risk factors that could affect the company.I will now turn the call over to Dave Weber, President and CEO of Otonomy.

[David Weber:]

Thank you, Stephen. Good afternoon everyone and thank you for joining us on this call to discuss Otonomy's business updates and second quarter 2019 financial results. There are two key takeaways from our quarterly update. First, our clinical stage programs are on track with results expected from the OTIVIDEX Phase 3 trial, the OTO-313 Phase 1/2 trial and the OTO-413 Phase 1/2 trials in 2020. And second, we have the capital on hand to fund the company through these three catalysts and into 2021.In my remarks, I'll briefly review the pipeline and corporate updates. I'll then turn the call over to Paul, who'll provide a brief review of the financial results for the quarter. We will then open up the call for any questions.Beginning with the OTIVIDEX Phase 3 trial in Ménière’s disease, enrollment is on track. The conduct and design of this study is based on the successful AVERTS-2 trial, which achieved its primary endpoint as well as a number of secondary endpoints. We plan to enroll approximately 160 patients in the United States and Europe, with results expected in the first half of 2020. As is our practice, we will not be disclosing any metric from the ongoing trial other than timing to top line results.The next product candidate in our clinical development pipeline is OTO-313, a sustained-exposure formulation of the NMDA-receptor antagonist gacyclidine, in development for the treatment of tinnitus. In April, we announced the initiation of a Phase 1/2 trial in tinnitus patients. The trial design consists of two cohorts. The first cohort included eight patients assessed for safety and tolerability, following a single intratympanic injection of OTO-313 or placebo. We have successfully completed this cohort and are now enrolling patients in the exploratory efficacy part of the study.Cohort 2 will enroll approximately 50 patients with persistent tinnitus, who will be assessed across a number of endpoints, including the Tinnitus Functional Index or TFI, which is a validated clinical instrument that measures tinnitus severity and its impact on patients. Importantly, for entry into cohort 2 patients must have tinnitus severity that exceeds a specified level during the lead-in period, ensuring an adequate baseline level. Patients in cohort 2 receive a single intratympanic injection of OTO-313 or placebo, randomized 1

[Paul Cayer:]

Thank you, Dave, and good afternoon everyone. In summary, our expenses for the second quarter of 2019 were in line with our financial guidance for the year and we are on track with our plan to utilize existing capital to fund the company through the three clinical trial readouts next year and into 2021.Now let me briefly recap the financial results and guidance that are more fully described in today's earnings release and 10-Q filing. In the second quarter of 2019, we reported total GAAP operating expenses of $11.8 million with non-GAAP operating expenses totaling $10.6 million.Regarding the breakdown of expenses, GAAP R&D expenses for the quarter totaled $8.9 million with SG&A expenses totaling $2.9 million. The SG&A number reflects payments made by Mission Pharmacal in Glenmark Therapeutics, related to their co-promotion of OTIPRIO. As mentioned in the 10-Q, we have been informed by Glenmark that they had discontinued their promotional support of OTIPRIO, due to the delay in FDA approval of their Ryaltris allergy product, and are in discussions with them regarding the financial and contractual terms impacted by this decision.As of June 30, we held a cash balance, including cash, cash equivalents and in short-term investments totaling $78.5 million. Based on our non-GAAP operating expense guidance of $45 million to $50 million for 2019 and lower spending plan for 2020, we expect that our current capital will fund the company's operations through the three clinical trial readouts in 2020 and into 2021.With that, I'll turn the call back over to Dave.

[David Weber:]

Thank you, Paul. In summary, I am very pleased with the team's continued execution of our clinical trial plans and product development activities during the second quarter. Our three clinical stage programs addressing vertigo, tinnitus and hearing loss represents three of the largest market opportunities in neurotology and reinforce our leadership position in this untapped field.Furthermore, the OTIVIDEX Phase 3 trial, OTO-313 Phase 1/2 trial and OTO-413 Phase 1/2 trial provide multiple value-creation catalysts for the company in 2020, which is fully funded by our existing capital. I am proud of our continued execution across our clinical and development programs and look forward to sharing further updates with you in our future communications.Operator, we are now ready for questions.

[Operator:]

[Operator Instructions] Your first question comes from the line of Ms. Stacy Ku. Your line is open, ma'am.

[Stacy Ku:]

Thanks for taking my questions. Congratulations on the progress. I have two questions. Looking forward, beyond the current ongoing OTIVIDEX study, have you initiated any pre-commercialization activities? Are ENTs in neurotology familiar with the buy-and-bill model? And I have another question, follow-up question.

[David Weber:]

I think, first, Stacy, thank you for your questions. Yes. Beyond OTIVIDEX, obviously, we've had some experience with working with ENTs in terms of their familiarity with buy-and-bill. And it is something relatively new with them as we have learned through our work with OTIPRIO. But obviously that's something that others, both in their practice environment, for example, their practice managers, as well as very common colleagues in their practice environments such as ophthalmologists are very familiar with it.So, I think it is something that the buy-and-bill is a relatively widespread model that is used by many programs and products. And I think it is something we feel that is easily – we can easily educate and inform clinicians and their office managers in the use of buy-and-bill.

[Paul Cayer:]

Maybe just one other comment to jump in there, Dave. So, Stacy, the other sort of important factor here is that with respect to the intratympanic injection itself, there's already a CPT code. So, reimbursement has already been established for the administration. So, the piece that we would need to execute is getting a J code for the product, which we've already been through with OTIPRIO, and then as Dave said, educating them. But, I think it's important to note that there already is adequate reimbursement for the intratympanic injection itself in existing CPT code.

[Stacy Ku:]

That's really helpful. And moving onto the OTO-313 program in tinnitus, were the patients in the first 50 cohort suffering from tinnitus? And if yes, was there any descriptive examples of efficacy?

[David Weber:]

Yes, thanks Stacy. So, they were tinnitus patients in the safety cohort. Obviously, it's a very small number of patients and they were randomized to placebo. But they did not complete all of the efficacy measures that we are exploring in the second cohort. So, they were primarily a pure safety cohort and it's the second cohort that will be exploratory efficacy component of the study.

[Stacy Ku:]

Thank you.

[Operator:]

[Operator Instructions] I am now showing no further questions at this time. I would now like to turn the call over back to Dr. David Weber. Sir, you may continue.

[David Weber:]

Thank you everyone for participating in our call today. Have a good evening.

[Operator:]

Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day. You may now disconnect.