Oyster Point Pharma, Inc.
Q1 2021 Earnings Call Transcript

Published: 9 May 2021

[Operator:]

Good evening, and welcome to Oyster Point Pharma's First Quarter 2021 Earnings Conference Call. My name is Sarah, and I will be your operator today. After the company's formal remarks, there will be a question-and-answer session. At this time, I would like to turn the call over to Mr. Daniel Lochner, Oyster Point Pharma's Chief Financial Officer. Please go ahead.

[Daniel Lochner:]

Good evening, everyone, and welcome to the Oyster Point Pharma First quarter earnings conference call for the 3 months ending March 31, 2021. This evening, we issued a press release containing our first quarter financial results and recent business highlights. In addition, our earnings press release and our Form 10-Q that was filed with the SEC after the close of the market today, are available on our website under the Investor and News section at www.oysterpointrx.com.

[Jeffrey Nau:]

Thank you, Dan. Good evening, everyone, and thank you for joining us on our call to discuss our first quarter 2021 financial results and recent business highlights. As you may know, on March 2, 2021, we announced that the FDA had accepted for filing the NDA for OC-01 varenicline nasal spray for the treatment of signs and symptoms of dry eye disease and the PDUFA target action date for OC-01 nasal spray is set for October 17, 2021.

[John Snisarenko:]

Thank you, Jeff. The dry eye segment is a large market with over 17 million people diagnosed in the United States alone. Only a small proportion of these patients, approximately 2 million, are currently being treated with a branded therapeutic. Over 7 million people diagnosed with dry eye disease have tried and abandoned the currently available options. We believe that OC-01 varenicline nasal spray has a compelling therapeutic profile that, if approved, may address the unmet needs of patients with mild, moderate and severe dry eye disease and the eye care practitioners who provide care for these patients.

[Daniel Lochner:]

Thank you, John. I'll provide a brief overview of Oyster Point Pharma's first quarter financial results. Additional details about our first quarter as well as our quarterly financial results can be found in our Form 10-Q that was filed with the SEC this evening. For the first quarter of 2021, Oyster Point Pharma reported a net loss of $18.9 million or $0.73 per share compared to a net loss of $16.5 million or $0.77 per share for the same period in 2020. As of March 31, 2021, cash and cash equivalents were $175.9 million compared to $192.6 million as of December 31, 2020. The total research and development expenses for the first quarter of 2021 were $5.8 million compared to $11.3 million for the same period in 2020. The company's expenditures for preclinical and clinical programs were $4.2 million lower during the first quarter of 2021 than the same period in 2020, primarily due to the completion of the ONSET-2 Phase III clinical trial in May 2020. The company incurred higher CMC expense of $1.8 million, primarily due to the continued advancement of OC-01 and, if approved by the FDA, anticipated commercial launch. The $3.1 million decrease in other research and development expenses was primarily due to the company's recording of a $2.9 million gain in the first quarter of 2021 in connection with the small business waiver granted by the FDA for the NDA application fee in February 2021. The NDA's application fee was paid and expensed in December 2020 and subsequently refunded by the FDA in April 2021. Selling, general and administrative expenses for the first quarter of 2021 were $13.1 million compared to $5.6 million for the same period in 2021. The increase was primarily driven by additional payroll-related expense of $4.6 million due to an increase in headcount as well as higher commercial planning expenses of $1.7 million in anticipation of a U.S. launch of OC-01, if approved in the fourth quarter of 2021. Additionally, there was an increase in other general and administrative expenses of $1.2 million due to an increase in cost for administrative and professional services fees and increased spending in medical affairs. With that overview of our financials I will now turn the call over to the operator to open up the line for questions.

[Operator:]

Our first question comes from the line of Ken Cacciatore with Cowen & Company.

[Ken Cacciatore:]

Just a couple of questions. Jeff, I wondered if you would just comment on the review process so far. I know it's still early, but anything that you could give us any color on kind of the interaction that you're having with the agency. And then, John, maybe give us a sense of the pricing environment right now for the branded products, Restasis and Xiidra. Is there any reason to believe we could be at a premium? Or just any commentary around that?

[Jeffrey Nau:]

Thanks a lot for the question, Ken, and I hope you're doing well. With regards to the FDA review, as you know, we had our PDUFA date set in October of this year. In the compound, it doesn't go through the same pathway as new chemical entity. So a little bit different than having your formal mid-cycle review process that you'd expect with a new chemical entity. We have received some information requests from the agency to clarify some things in the filing. I would characterize them as minor, often things around temperatures and settings and code of federal regulations, documents for components in the CMC process. So nothing that's of concern. And we expect that the FDA will continue to ask those questions as the review continues. So today, we just wait patiently for the FDA to do their review, and we're happy that they've begun that process.

[John Snisarenko:]

Great. Thanks, Jeff, and thanks, Ken, for your question. Let's start with the pricing of the branded product. From a kind of a monthly WAC wholesale acquisition cost basis, most of the branded products kind of range between the low 500s into the low 600s. And we plan to introduce OC-01, when approved, to be very competitive with that range. So we haven't announced exact pricing, but rest assured, we want to be competitive in that branded price range. I think, Ken, your second question was around learnings around the Xiidra launch. One of the things that we did realize quickly, and I think these learnings are transferable into this dry eye segment is that this category, this landscape is very, very promotionally sensitive, whether it's field force detailing, the eye care prescribers or investment in direct-to-patient, direct-to-consumer. The market -- the therapeutic dry eye market prior to the Xiidra launch is probably growing at low single digits per annum, but the investment of DTC and those efforts on education really drove that market to double-digit growth in the first, call it, 1.5 years, 2 years. So those are some learnings we want to take. We want to be very precise in our direct-to-patient efforts once we do get approval, and we want to be able to definitely expand and grow that market as we feel our therapeutic product profile is very compelling and can be used for mild, moderate and severe patients, not just kind of reserved for the later stage disease. So that will take some education, and it will take some market expansion efforts and activities as well.

[Operator:]

Our next question comes from the line of Anupam Rama with JPMorgan.

[Tessa Romero:]

This is Tessa on the call on behalf of Anupam. Just one from us. Can you outline for us the key payer considerations for OC-01? When is the expectation that you will have formulary coverage post approval? And from a payer perspective, will you require a step-through in order to use OC-01?

[John Snisarenko:]

Yes. Thanks for your question, Tessa. From a payer perspective, we've started doing a lot of that homework right now, building that dossier on the value proposition, along with starting to get some of those meetings in the books in the next couple of quarters. The key part of our efforts there is really to show that this is a very differentiated product, not just in its MOA, but also in its route of administration as well as being very competitive from a contracting perspective. So with those 2 considerations, we do plan on some pretty good commercial coverage during that first 12 months, ranging by the end of that first year to be kind of 80% plus covered lives in the commercial space. In the same aspect we will be starting the dialogue and negotiations with Medicare Part D as well. And again, and speaking with some of the payers, differentiation is going be key here as well as being very competitive from a contracting perspective. So we do expect coverage for Medicare to come later, probably a good year after we get our approval. So we're targeting kind of the 2023 time frame to get Medicare coverage.

[Operator:]

Our next question comes from the line of Joseph Catanzaro with Piper Sandler.

[Joseph Catanzaro:]

I have two for you, maybe both along sort of similar line of thought. But as we think about launch preparations and raising physician awareness around the OC-01 data set, I was just wondering if you could speak to the level of engagement you have at the ophthalmology meetings that are still virtual with physicians, and whether there are opportunities at such meetings to have more one-on-one like conversations around the OC-01 data? And if so, how would you characterize those discussions? And then similarly, in terms of the disease state awareness campaign, just curious how you're currently driving traffic to the website and what the implications of getting traffic to the website could be for the longer-term picture of OC-01?

[Jeffrey Nau:]

Yes. Great, Joe. And so I'm going to -- I'll take the first part of your question and -- just turn it over to John. One of the things that I think -- and I'm sure this is also happening on the investor side of the industry has happened with us is we have this virtual platform in order to share our data, talk about the product. The sheer number of people that are often able to attend those talks and engage in those talks has gone up exponentially as compared to if we were at an in-person meeting on a podium presentation. Obviously, there are some big rooms at some of the meetings that we go to. But in many cases, we're seeing sometimes as many as hundreds to thousands of people on that presentation in an ophthalmology or an optometry meeting and the ability to engage and ask questions in this digital world. I think in the beginning of the pandemic, we were all trying to figure it out the platforms. But many meetings are doing it really well now. And we've had some great engagement up until this point. We obviously continue to look forward to going back to meetings very soon. And it is our intention to do that this summer because that in-person engagement is just so important with us. But across the company, even outside of talking about our clinical data, engaging with our IIT program, our clinical development program, we've been able to keep that going rather robustly throughout this virtual time period. And so I'll turn it over to John to talk a little bit about some of the other parts of the question.

[John Snisarenko:]

Yes. Thanks, Jeff. And Joe, thank you for your question. In regards to the disease state awareness campaign, called our DSA dryeyeland.com campaign, it did start with the website that we launched just literally about a month, month and a little bit ago. And traffic has been very, very good. And that's without the efforts that we're just about to undertake to start to get more traffic to that website. So definitely, we're targeting kind of the digital way to get there through working with the conferences and associations, kind of banner advertising, where we have very targeted efforts with different partners. And specifically, the conferences that are coming up we're going to be looking at even symposia to drive that education of disease state awareness, which in turn pushes the eye care provider to the website to get more information. So symposia, whether they're virtual or whether they're live towards kind of the back half of the year, we're going to be flexible and nimble to address both those kind of media channels. And with these efforts, we feel that we'll be able to drive quite a bit of awareness and start to reframe that dialogue and narrative around the approach to treating dry eye.

[Operator:]

Our next question comes from the line of Patrick Dolezal with LifeSci Capital.

[Patrick Dolezal:]

Can you just remind us of the mechanistic rationale for OC-01 to address dry eye in a more holistic manner relative to some of the existing dry eye therapeutics? And more specifically, do you foresee a broader population being accessed potentially that encompasses multiple subsets of dry eye patients versus being niched and kind of the inflammatory dry segment, for example? And then the second question is, besides neurotrophic keratitis, you all have additional plans to potentially pursue label expansion and other indications for OC-01, such as contact lens intolerance, which I know has been mentioned previously or related indications like allergic conjunctivitis and perhaps in a more general sense, you could just speak to how you're thinking about pipeline expansion?

[Jeffrey Nau:]

Yes. Thanks, Patrick, for the question. We appreciate that. As it pertains to the mechanistic action of OC-01, I think this is one of the reasons why when we initially started the company, we were so excited about the -- not only the route of administration, but the mechanism of action. We've shown in a number of trials that we can clearly increase lacrimal fluid from the lacrimal gland. We've shown in our imperial study that we can degranulate goblet cells on the surface of the eye to release those mucins. One of the things that I think is really important to also understand is, not only do we release mucins from the goblet cells on the surface of the eye, but we also released them from the lacrimal gland. So the human lacrimal gland is a seromucous gland and so all of those beneficial components of placing the various proteins, growth factors, mucins onto the eye. The lacrimal gland is really an important organ to keep our eyes healthy. Even when we injure the ocular surface, if we were to scratch it, for example, we get up-regulation of transcriptional factors inside of that lacrimal gland that will heal the cornea. And so the concept of harnessing that pathway, that nervous pathway with the trigeminal parasympathetic pathway has been something that we're very interested in. We do know from animal models and also from electrical stimulation that, that pathway in the nasal cavity can also stimulate those meibomian glands. Unfortunately, for many dry eye patients, the meibomian glands are atrophic, and they may not be able to produce meibum, and that's where that muco-aqueous gel that we put up onto the ocular surface with the goblet cells and the lacrimal gland come into play. As you mentioned, we do think that this product has benefits to other disease states such as neurotrophic keratopathy. With neurotrophic keratopathy, we know that there's damage to that sub-basal nerve plexus in the cornea. And because we're bypassing that route of stimulation, we're actually able to stimulate tear film that is then put on to the ocular surface. And so we think for certain disease states, this is going to be very important. We know that with neurotrophic keratopathy as well, that there is some overlap with the dry eye space. Many patients that have either herpetic infections or diabetes are often diagnosed with dry eye disease. But in fact, it may be NK, and we're very interested in increasing awareness around diagnosis, but also having a product that we think has a mechanism that's suitable for this disease. There are other indications that we are very interested in. Obviously, we do think that things like contact lens intolerance, potentially other uses around ocular surgeries, all interesting. We plan to begin a robust investigator-initiated trials program as we get closer to the launch. And we are continuing to want to expand indications on the label. So one of the things that I think that I'm very proud of, Oyster Point for is, we are focused on science. We are focused on continuing to bring therapies to patients where there's unmet clinical need. And so we will continue to develop and will continue to expand our indications for various different diseases of the ocular surface. We do have a very robust R&D program, and we hope to be able to talk about some of those programs as we move forward. But we are continuing to be an R&D-focused clinical-focused, and then hopefully, with FDA approval, commercial-focused organization that is very targeted to ocular surface disease. So more to come on the pipeline, hopefully soon. But at the moment, we have plans to begin that OLYMPIA NK trial this quarter and very busy inside with all the commercial preparations.

[Operator:]

There are no further questions. I will now turn the call back over to Dr. Nau for any closing comments.

[Jeffrey Nau:]

Thank you, operator. The Oyster Point team has continued to build our commercial capabilities in a strategic fashion, including plans for a competitively sized ophthalmic sales force to launch OC-01 nasal spray in the fourth quarter of 2021, if approved. As there are a few companies in the ophthalmology space with a dedicated ocular surface disease-focused sales force, we see this as an important step in the evolution and capabilities of this company. In addition, we have continued to bolster our R&D and clinical development capabilities as well as to strengthen our manufacturing team. We are driven to build Oyster Point into a world-class ophthalmology company. In closing, I'd like to thank everybody for joining us today. And I hope that you and your families are staying safe and healthy.

[Operator:]

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