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Edited Transcript of OPNT earnings conference call or presentation 9-May-19 8:30pm GMT

Q1 2019 Opiant Pharmaceuticals Inc Earnings Call

SANTA MONICA May 25, 2019 (Thomson StreetEvents) -- Edited Transcript of Opiant Pharmaceuticals Inc earnings conference call or presentation Thursday, May 9, 2019 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* David D. O'Toole

Opiant Pharmaceuticals, Inc. - CFO

* Roger Crystal

Opiant Pharmaceuticals, Inc. - CEO & Director

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Conference Call Participants

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* Brandon Richard Folkes

Cantor Fitzgerald & Co., Research Division - Analyst

* David Bautz

Zacks Investment Research, Inc. - Senior Biotechnology Analyst

* Brian Ritchie

LifeSci Advisors, LLC - MD

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Presentation

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Operator [1]

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Greetings, and welcome to the Opiant Pharmaceuticals First Quarter 2019 Earnings Conference Call (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Brian Ritchie with LifeSci Advisors. Please go ahead, sir.

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Brian Ritchie, LifeSci Advisors, LLC - MD [2]

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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 first quarter ended March 31, 2019.

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, 2018, and subsequent filings. This conference call also contains time-sensitive information that is accurate only as of the date of this live broadcast, May 9, 2019.

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?

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Roger Crystal, Opiant Pharmaceuticals, Inc. - CEO & Director [3]

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Good afternoon. As we advance our pipeline, some of the positive data generated to date has recently been further validated in peer-reviewed journals. Most recently, data for OPNT003, nasal nalmefene, was published online in the Journal of Pharmacology and Experimental Therapeutics. These data demonstrated very rapid absorption of OPNT003 compared to intramuscular injection and we believe it's suitable for administration in an overdose situation when the first minutes are critical. These data, together with the very high potency and long half-life of nalmefene, further validate the potential of OPNT003 as a rescue medication, this is especially well suited to treat an overdose of a synthetic opioid such as fentanyl.

We remain on track to conduct a pivotal PK study and report top line data for OPNT003 this year. In support of our development of OPNT003, we were recently awarded the second tranche of $3 million from the total grant of approximately $7.4 million from the National Institute on Drug Abuse, or NIDA.

Importantly, the award of this second tranche confirms the progress we have achieved to date with OPNT003. As a reminder, this grant includes approximately $5.6 million to be funded through March 31, 2020, with a balance of approximately $7.4 million to be funded in this period beginning April 3, 2020, subject to available government funds and continued progress of the development program.

Moving on. We announced a second peer-reviewed publication recently, this one in support of OPNT002, nasal naltrexone, as a potential treatment for Alcohol Use Disorder, or AUD. Clinical PK data from OPNT002 were published online in The Journal of Clinical Pharmacology. These study results demonstrated the rapid absorption of OPNT002 compared to either an intramuscular injection or tablet and shows that OPNT002 is well suited for on-demand dosing to treat AUD. Evidence indicates that both the activation of new and delta opioid receptors, resulting from alcohol-releasing endorphins in the brain, contribute to the reinforcing and addictive properties of alcohol.

Effective locate of delta opioid receptors requires much higher plasma naltrexone concentration than is achieved by currently approved naltrexone products for AUD. Thus, the ability to rapidly achieve these high plasma levels in anticipation of drinking or once drinking has started, may increase the efficacy of naltrexone for treating AUD.

Importantly, the results and insights from this study have now formed the basis for our OPNT002 formulation selection study in AUD, which is expected to begin in the current quarter followed by the enrollment of patients in a Phase II study later this year. We anticipate completion of this Phase II study by the second half of 2020.

Longer term, with a plasma half-life essentially identical to naloxone, yet with greater potency than naloxone, OPNT002 may also have the potential as a treatment for opioid overdose. The most recent addition to our pipeline is Drinabant, or OPNT004, a cannabinoid receptor antagonist for the treatment of Acute Cannabinoid Overdose or ACO. We licensed this promising asset from Sanofi late last year. ACO, an emergency characterized by psychosis, hallucination and feelings of paranoia, has the potential to be a significant market opportunity for Opiant. There are currently no approved treatments for ACO, which based on available data, we believe resulted in over 1 million emergency department visits in the United States in 2016.

Moreover, with an increasing number of states legalizing marijuana for personal and recreational use, ACO rates are expected to rise. In a previous clinical study conducted by Sanofi, when healthy patients were given oral Drinabant and then inhaled THC, both subjective and objective effects were blocked. Opiant will develop an injectable version that can be rapidly used in the emergency room setting.

Our focus this year will be on reformulating oral Drinabant into an injectable and we intend to commence clinical study in 2020. We are further encouraged by the extensive safety database with oral Drinabant generated in Sanofi's previously conducted studies, including multiple Phase I and Phase II/I -- Phase II study on more than 700 subjects for up to 24 weeks.

I would also like to mention OPNT005, Opiant's heroin vaccine, which was co-developed by researchers at the U.S. Military HIV Research Program, or MHRP, and NIDA. Opiant acquired exclusive development and commercialization rights for this product in 2016. This program is well funded as researchers at the U.S. MHRP at the Walter Reed Army Institute of Research and SUNY, Upstate Medical University, received grant funding in the fourth quarter of last year to potentially advance OPNT005 through the Phase IIa clinical trial.

Moving on to NARCAN Nasal Spray, which we developed and licensed to ADAPT Pharma which was acquired by Emergent BioSolutions, or EBS, in 2018. EBS believes that NARCAN has significant growth potential and has publicly stated its expectations that net NARCAN sales will exceed $200 million in 2019, which would translate into higher royalties during the year for Opiant as well as a potential onetime sales milestone. David will provide further details on NARCAN-related financials shortly.

Finally, because of our clinical development program, Opiant has remained in a strong financial position with cash of approximately $23.8 million at March 31, 2019, which did not include the majority of the $4.6 million BARDA contract to accelerate the developments of OPNT003 as a medical countermeasure in the event of a fentanyl chemical attack, or the remaining funds from the NIDA grant.

With that, I will now ask David to discuss our financials.

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David D. O'Toole, Opiant Pharmaceuticals, Inc. - CFO [4]

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Thank you, Roger. We recognized $5.4 million in revenue in the 3 months ended March 31, 2019 compared to $1.7 million in the corresponding period of 2018. For the 3 months ended March 31, 2019, we recognized approximately $3.7 million of revenue from the license agreement between us and EBS, as compared to $1.6 million in the corresponding period of 2018. This $2.1 million increase in royalty revenue represents an increase of approximately 130% year-over-year and was driven by higher net NARCAN sales of approximately $65.5 million in the first quarter of 2019 as reported by EBS.

G&A expenses were $3.7 million and $3 million for the 3 months ended March 31, 2019, and March 31, 2018, respectively. The increase in G&A was primarily driven by a $0.3 million increase in royalty expense and a $0.4 million increase in legal and professional fees. R&D expenses were $3.6 million and $2.4 million for the 3 months ended March 31, 2019, and March 31, 2018, respectively. The increase in R&D expenses was primarily due to a $1.2 million increase in expenses associated with our product developing program.

There were no third-party license fees recorded in the first quarter of 2019 compared to $5.6 million in license fees in the first quarter of 2018. The third-party license fees in the 2018 period related to our obligation for certain payments under the Adapt License agreement.

Net loss for the 3 months ended March 31, 2019, was $1.7 million or a loss of $0.44 per basic and diluted share compared to a net loss of $9.3 million or a loss of $3.68 per basic and diluted share in the comparable period of 2018.

At March 31, 2019, we had cash and cash equivalents of $23.8 million compared to $24.6 million at December 31, 2018. Again, the current cash balance does not include the majority of the $7.4 million NIDA grant and the $4.6 million BARDA contract.

We continue to project a cash balance of $17 million to $20 million at the end of 2019. This anticipated range does not include the potential onetime milestone payment of $13.5 million due to Opiant from EBS should net NARCAN sales exceed $200 million in the 2019 calendar year.

Pursuant to the Adapt License agreement, as amended by Amendment No. 2, on March 18, 2019, in the event that this milestone is achieved, EBS may reduce the amount payable to Opiant by the remaining $2.7 million of the maximum $8.1 million third-party license fees payable. When assessing the likelihood of Opiant earning this $13.5 million sales milestone, it is important to consider both the strong start in the first quarter of 2019 of reported net NARCAN sales of approximately $65.5 million by EBS as well as their reiteration of the full year guidance of NARCAN sales previously provided of over $200 million.

In conclusion, with a promising late-stage pipeline that is partially funded via multiple external sources and expanding royalty revenue base from NARCAN and a strong balance sheet, Opiant is well positioned operationally and financially for continued success throughout 2019 and beyond.

With that, I will now ask the operator to open the call up for questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question today is coming from Brandon Folkes from Cantor Fitzgerald.

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Brandon Richard Folkes, Cantor Fitzgerald & Co., Research Division - Analyst [2]

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Firstly, can you help us think through what you believe we need to see in the 003 data in terms of a meaningful half-life to combat this synthetic opioid that we are seeing driving a lot of the overdose deaths when we do see that data. And secondly, Emergent noted they are working on a multidose NARCAN naloxone. Is my understanding correct that provided that this is a naloxone intranasal, you still will be entitled to royalties on that product? And then lastly, can you just help us think through the clinical development program for CB-1. I know you mentioned you'll start clinical studies in 2020. But assuming those are positive, how should we think about the development program from it?

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Roger Crystal, Opiant Pharmaceuticals, Inc. - CEO & Director [3]

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Thank you for your question. So the first question around the half-life of 003 relating to synthetic, is that what you were asking? Just to be clear on that first one.

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Brandon Richard Folkes, Cantor Fitzgerald & Co., Research Division - Analyst [4]

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Correct. Right. What do you think you need to show to have a commercially differentiated product that can really address the synthetic opioid problem.

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Roger Crystal, Opiant Pharmaceuticals, Inc. - CEO & Director [5]

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Well, I think, in terms of product differentiation, I think, some of the properties that are inherent in the molecule of nalmefene, which has a high affinity at mu opioid receptors. So when we think about the synthetic opioids in fentanyl that they themselves have a much higher affinity than -- we think it's in a better space to be able to potentially address this. And when we think of the other property of the synthetic opioid like fentanyl, the longer half-life of fentanyl, which we believe therefore has a longer duration of action. So in order to counter that longer duration of action, having higher amount of the overdose reversal agent in the bloodstream for longer, we think allows us to counter that. That's the -- and that demonstrates in our pilot PK profile already. Then when one thinks about the other -- inherent nature of an overdose from synthetic, we talk about the window of intervention. The window of intervention for compounds like heroin and -- is about more in a window of minutes -- tens of minutes. But the extremely rapid nature, rapid action of compounds like fentanyl, it's more in the realm of seconds to minutes that one needs to intervene. So again, characteristics such as high Tmax are also we think quite important.

And the third question around the multidose device. So yes, under the terms of our license with Adapt, any nasal naloxone product that is developed for opioid overdose falls under -- in terms of our license, in terms of we would receive royalty from that. It's not specific to NARCAN Nasal Spray. And then you asked about the CB-1 antagonist and the development program. So yes, (inaudible) we're very excited about this program overall. It's something that -- in many ways -- quite a few years ago, yes, we have high opioid overdose rate but it was very difficult to have anticipated the extent that opioid crisis has truly grown to where we are today.

And similarly, though, we see a lot of characteristics around the abuse of cannabinoids both synthetic not just regular cannabis, which, in our mind, could result in a cannabis crisis in the next few years. So trying to look ahead and develop medicines that can be effective against this is important. So when we think of an Acute Cannabinoid Overdose, the compound we have licensed from Sanofi, as I mentioned earlier, we -- in some ways we're kind of halfway there because already we show that this compound blocks the effect of inhaled THC, once -- if you're given our compound first and then essentially try and get high, we're showing it blocking that already. And what's key in terms of what the clinical trial next year that we'll be looking to initiate, is to demonstrate the reversibility. Meaning, once someone has potentially got high already, taken on lots of THC, can we actually reverse that and administer (inaudible) to just bring them back down again. So that's what we'd be looking to set up into clinical trial next year and if we are successful in doing so then we'll provide more guidance around the exact nature of the clinical trials that would be required. And ultimately, what would be exciting is that once it gets approved, is that the target market is emergency department and again, so this we don't think would require a huge commercialization effort and sales force should we choose to go about it ourselves.

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Operator [6]

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Our next question today is coming from David Bautz from Zacks Investment Research.

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David Bautz, Zacks Investment Research, Inc. - Senior Biotechnology Analyst [7]

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When thinking about the market opportunity for OPNT003, do you see the largest opportunity being on the retail side? Or more on the first responder/government stockpile side?

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Roger Crystal, Opiant Pharmaceuticals, Inc. - CEO & Director [8]

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Yes. I think we look at the opportunity in the broader sense at the moment in that in many ways, we think this is a well-suited product for an opioid overdose, no matter where that takes place and by who. So in many ways, we don't look at necessarily where it's going to be well suited. And we do think there is kind of a special role, meaning, where there's -- where they've already put out that they're (inaudible) is BARDA. So in that setting that's something that we would continue to have discussions with should we get these both approved. And the first instance because you know that's something that's more of contracting in nature rather than requiring full scale commercialization efforts with a sales force to be consistent with other pharma products. So that gives some idea of how we think about things currently but we'll provide further updates as we make further progress.

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David Bautz, Zacks Investment Research, Inc. - Senior Biotechnology Analyst [9]

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Okay. And quickly, if a generic NARCAN makes it onto the market, does that affect your royalty structure at all?

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Roger Crystal, Opiant Pharmaceuticals, Inc. - CEO & Director [10]

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So just like generic getting onto the market, no, it doesn't affect our royalty. There's no -- to be more specific, there's no specific trigger that just by the very nature of a generic getting onto the market, that, that impacts our royalty. Our royalty essentially comes from net sales of NARCAN. David, is there anything you want to add to that?

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David D. O'Toole, Opiant Pharmaceuticals, Inc. - CFO [11]

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The only thing I would say and it's in the agreement, is that if a generic gets on the market and it takes a significant market share, then there is a potential for a reduction in the royalty. But getting the generic on the market itself doesn't have any impact whatsoever on our royalty.

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David Bautz, Zacks Investment Research, Inc. - Senior Biotechnology Analyst [12]

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Okay. And then lastly, the follow-up on the multidose NARCAN device that is potentially being developed. If that ended up making it to market, you indicated you would get royalties from that. But would you also be eligible for a new set of sales milestone payments?

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David D. O'Toole, Opiant Pharmaceuticals, Inc. - CFO [13]

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No, we wouldn't get that.

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Operator [14]

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Ladies and gentlemen, we've reached the end of our question-and-answer session. I'd like to turn the floor back over to Dr. Crystal for any further or closing comments.

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Roger Crystal, Opiant Pharmaceuticals, Inc. - CEO & Director [15]

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Thank you, operator. To summarize, we are very excited about the prospects of our pipeline and the large market opportunities we are targeting. We believe that the drugs we're developing have the potential to impact thousands of lives and we look forward to continuing to advance each in the clinic and beyond. Importantly, our development plans are well supported by our financial resources.

Thanks for joining us today and for your interest in Opiant. We look forward to keeping you updated on our progress throughout 2019. Please enjoy the rest of your day.

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Operator [16]

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Thank you. That does conclude today's teleconference. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.