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Edited Transcript of OPNT.OQ earnings conference call or presentation 12-Nov-20 9:30pm GMT

·18 min read

Q3 2020 Opiant Pharmaceuticals Inc Earnings Call SANTA MONICA Nov 13, 2020 (Thomson StreetEvents) -- Edited Transcript of Opiant Pharmaceuticals Inc earnings conference call or presentation Thursday, November 12, 2020 at 9:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Ben Atkins Opiant Pharmaceuticals, Inc. - VP of Communications & IR * David D. O'Toole Opiant Pharmaceuticals, Inc. - CFO * Roger Crystal Opiant Pharmaceuticals, Inc. - President, CEO & Director ================================================================================ Conference Call Participants ================================================================================ * Brandon Richard Folkes Cantor Fitzgerald & Co., Research Division - Analyst * Carl Edward Byrnes Northland Capital Markets, Research Division - MD & Senior Research Analyst * David Bautz Zacks Investment Research, Inc. - Senior Biotechnology Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Greetings, and welcome to the Opiant Pharmaceuticals Third Quarter 2020 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ben Atkins, VP of Investor Relations Communications of Opiant Pharmaceuticals. Please go ahead. -------------------------------------------------------------------------------- Ben Atkins, Opiant Pharmaceuticals, Inc. - VP of Communications & IR [2] -------------------------------------------------------------------------------- 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 third quarter ended September 30, 2020. Please note that certain information discussed on the call today is published 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, 2019, and subsequent filings. This conference call also contains time-sensitive information that is accurate only as of the date of this live broadcast, November 12, 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, Opiant Pharmaceuticals, Inc. - President, CEO & Director [3] -------------------------------------------------------------------------------- Good afternoon, and thank you for joining us today. We are pleased to share today's results that reflect the progress of our lead program in opioid overdose, and the overall essential value proposition of our mission to treat addiction and overdose as well as our strong cash position. I will begin with an update on our lead development program then our CFO, David O'Toole, will review our financials. With a focus on strong execution, we have achieved important progress in further advancing our lead development program OPNT003 nasal nalmefene for opioid overdose. As announced recently, we will use Aptar Pharma's proven unit dose nasal spray device for OPNT003. This nasal spray device has already been approved by the FDA with many other drug products currently marketed in the United States, including NARCAN Nasal Spray. Developing nalmefene nasal spray using the Aptar unit dose device, aligns with the FDA's focus on proven device safety and helps mitigate device-related risks to the program. We have also made recent advancements with our U.S.-based development and manufacturing partner Summit Biosciences to manufacture our nalmefene nasal spray. Importantly, the Summit facility has successfully passed FDA inspections and has commercial capacity. Summit is on track with the production of the clinical and registration batches. Adding to the momentum, we will meet with the FDA in December to review the protocol of our planned pharmacodynamic study of healthy volunteers as well as our overall data generation and 505(b)(2) submission strategy. We look forward to showing further details following receipts of formal feedback from the agency. We continue to expect that our NDA submission to the agency will occur by the end of 2021. Moving on. I should highlight that the need for improved treatment to help prevent deaths from opioid overdose was further amplified this quarter. In his latest provisional data published in September, CBC reported an increase in fatal drug overdoses in the first 3 months of 2020 when compared to the year before, and the most from opioids and many from synthetic opioids. This puts the U.S. on pace for a record year of drug overdose deaths during the ongoing coronavirus pandemic. The trajectory of America's opioid crisis is also rapidly evolving, fueled by the availability of fentanyl and related synthetic opioids. Fentanyl is around 50x stronger than heroin, very small amount approximate to just a few grains of salt, can kill. In July, the San Diego based laboratory, Millennium Health, analyzed 500,000 urine drug tests and found that there was a 32% increase in the national usage of non-prescribed fentanyl. Presence of fentanyl and other synthetic opioids in the U.S. drug market should be a cause of concern. People use it without knowing they are getting it, and people get something that is more potent than what they've previously been using. It overwhelms that tolerance and can cause the respiratory depression that leads to opioid overdose death. Compounding this public health challenge is the fact that despite the effectiveness of naloxone in rescuing individuals from opioid overdose, the risk of overdose and debt from a synthetic opioid remains very high, even after rescue with naloxone. Our numerous studies suggesting the multiple sequential doses of naloxone are needed in the new synthetic opioid era. These circumstances underscore while the NIH has called for stronger, longer-acting formulations of opioid antagonists. By potentially providing an effective and longer duration of protection, following rescue from an opioid overdose, nasal nalmefene could have proven and ultimately approved, be a significant improvement over naloxone. With radioligand binding and functional assays have demonstrated that the potency of nalmefene is more than 5-fold higher than naloxone at mu opioid receptors. Moreover, its reported plasma halflife is up to 8 hours, significantly longer than naloxone, which is less than 2 hours. This longer duration reduces the likelihood of remarketization if a victim has taken a long-acting opioid like fentanyl, which has a halflife of 7 to 8 hours. We believe this potential will be further borne out in our upcoming PD and PK studies. With that, I will now ask David to discuss our financials in more detail. David? -------------------------------------------------------------------------------- David D. O'Toole, Opiant Pharmaceuticals, Inc. - CFO [4] -------------------------------------------------------------------------------- Thank you, Roger. We had another solid quarter with royalties from NARCAN Nasal Spray increasing and a continued focus on minimizing expenses. For the 3 months ended September 30, 2020, Opiant recorded approximately $9.1 million in revenue compared to approximately $20.6 million during the corresponding period of 2019. For the 3 months ended September 30, 2020, we recorded approximately $8.6 million of revenue from our license agreement with EBS for the sale of NARCAN. This compared to approximately $20.5 million in the same period of 2019, which included a final milestone payment of $13.5 million as sales of NARCAN Nasal Spray exceeded $200 million for 2019. Third quarter 2020 sales of NARCAN were approximately $88.8 million, as reported by EBS, which is a greater than 20% increase from the second quarter of 2020. G&A expenses for the quarter were $2.7 million compared to $3.2 million for the same period in 2019. The decrease was primarily attributable to lower legal and professional fees of $0.8 million, partially offset by an increase of $0.3 million in personal and related expense. Research and development expenses were $2.8 million compared to $1.8 million in the third quarter of 2019. This $1 million increase was due to external development expenses as well as personnel and related costs. Sales and marketing expenses were $0.9 million compared to $100,000 in the third quarter of 2019. The increase of $800,000 was due to pre-commercial efforts related to OPNT003 nasal nalmefene. Royalty expense for the second quarter was approximately $2 million compared to $4.9 million for the same period in 2019. Royalty expenses for payments that we make to our net profit partners on the royalties we receive from the net sales of NARCAN. Net income for the third quarter was approximately $700,000 or $0.17 per basic and $0.15 per diluted share. This compares to net income of approximately $10.7 million or $2.64 per basic and $1.97 per diluted share for the comparable period of 2019. For the 9 months ended September 30, 2020, Opiant recorded $19.7 million in revenue compared to $32.9 million during the corresponding period of 2019. This includes $19.1 million of revenue from our license agreement with EBS for the sale of NARCAN compared to approximately $30.4 million in the comparable period of 2019. The decrease in revenue of $11.3 million was primarily attributable to a milestone payment of $13.5 million earned in the third quarter of 2019, offset by increased royalties for the current quarter compared to the third quarter of 2019. Sales of NARCAN for the 9 months ended September 30, 2020, were approximately $233.8 million as reported by EBS. EBS also slightly adjusted their guidance for sales of NARCAN for the year -- full year 2020, increasing the lower end of the range from $285 million to $295 million and keeping the higher end of the range at $315 million. G&A expenses for the 9 months ended September 30, 2020 were $8.1 million compared to $9.4 million in the comparable period of 2019. The decrease of $1.3 million was primarily due to a $1.5 million decrease in legal and professional fees, partially offset by a $0.2 million increase in personnel and related expense including stock-based compensation. R&D expenses were $4.8 million compared to approximately $7 million in the comparable 9-month period of 2019. The decrease of $2.2 million resulted from a decrease in third-party clinical trial and development expense of $2.5 million, partially offset by an increase in personnel and related expense of $0.3 million. Sales and marketing expense were $3.7 million compared to $100,000 during the same period in 2019. For the 9 months ended September 30, 2020, personal and related expense, including stock-based compensation, was $0.9 million. A further $2.8 million was related to third-party expenses for various pre-commercial activities, including market, research and assessments, and strategic planning. Royalty expenses were $4.3 million and $6.1 million during the 9 months ended September 30, 2020 and 2019, respectively. Again, royalty expense is for payments to net profit partners for the royalties received from the net sales of NARCAN. Net loss for the 9 months ended September 30, 2020, was approximately $1.2 million or a loss of $0.28 per basic and diluted share. This compares to net income of approximately $10.6 million or $2.64 per basic share and $1.98 per diluted share for the comparable period of 2019. As of September 30, 2020, Opiant had cash and cash equivalents of approximately $31.1 million compared to approximately $31 million at December 31, 2019. The current cash balance does not include the full impact of the NIDA grant of approximately $7.4 million or the BARDA contract of approximately $4.6 million. For the full year 2020, we have increased our projection of royalty revenue to approximately $28 million. In addition, we now expect to end 2020 with a cash balance of approximately $30 million. With that, I will now ask the operator to open the call up for questions. Operator? ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Our first question comes from Brandon Folkes with Cantor Fitzgerald. -------------------------------------------------------------------------------- Brandon Richard Folkes, Cantor Fitzgerald & Co., Research Division - Analyst [2] -------------------------------------------------------------------------------- Congratulations on the progress during the quarter. Firstly, maybe just on the Aptar device. I understand probably you make it, the way I see it, but I'd like to get your input, if you think that it actually creates less friction when the product comes to market in terms of switching, just given that it will be a device that, I think especially in the (inaudible) channel, that they are familiar with. And then maybe just staying on that, do you look at stability in the app using this device? Did you have that stability before? Any color there would be helpful? And then lastly, what are the gating factors between now and filing for NDA 4003? -------------------------------------------------------------------------------- Roger Crystal, Opiant Pharmaceuticals, Inc. - President, CEO & Director [3] -------------------------------------------------------------------------------- Thank you, Brandon. So just to answer your -- probably your last question first, if that's okay. The factors factors are this upcoming FDA meeting to, as I said, as on the final protocol of the PD study and our 505(b)(2) registration strategy. The other 2 gating items are the pivotal PK study. So we already have some very encouraging initial PK data, as you know, and it's recreating that in a larger group of healthy volunteers. We will aim to start patient recruitment at the end of this year, healthy volunteer, they proven at the end of this year for that. So that's a Q1 2021 activity. And then on the basis of that FDA meeting and conducting this pharmacodynamic study also in Q1 on healthy volunteers. So those are gating activities and then is the final one and that then relate to your second question around stability. So because we are using a different device to what we're using before, we will need to generate sufficient stability data in this new device before we can submit the NDA. However, it's essentially using the same formulation that was used in the previous device. So we have high competence that the -- that there won't be any issues here. I never know until we've actually gone through all that work, nevertheless. And once we have the 12 months of stability data, then that's another like gating item before one can submit for an NDA. So those are pretty much the key activities as well. And in terms of the Aptar device and the familiarity, I mean the differences between the initial device we were using and the Aptar device in terms of their functionality are very similar to both single shop devices, nasal spray devices that can be used in a multidirectional manner that they need priming. So it's not necessarily that there's a significant change in the usability and familiarity or sum, but it's more around that because this Aptar device has been used and is approved in multiple FDA-approved products that we believe there's a significant opportunity to derisk the program. Now that this Aptar unit-based device has been made available to us. So that's the key change. Thanks for the question. -------------------------------------------------------------------------------- Brandon Richard Folkes, Cantor Fitzgerald & Co., Research Division - Analyst [4] -------------------------------------------------------------------------------- Grat. That's very helpful. Could I make in one more, if I may. Not very little discussion about the rest of the pipeline today or in the press release. Is that just given COVID? I know you have talked about the COVID impact there in the past or is that a strategic decision to focus on 003 for the near term until we get that over the line? -------------------------------------------------------------------------------- Roger Crystal, Opiant Pharmaceuticals, Inc. - President, CEO & Director [5] -------------------------------------------------------------------------------- That's a fair question. I mean the headline is for the Alcohol Use Disorder program, we are still ascertaining when we can pick that off. So it's not a decision, not to do it at this stage. It's a matter of -- we hope to do it by now, kick it off and then with the U.K. being the main country that the Phase II studies plan to place in, again, you see they've gone into -- towards national lockdown as well. It's like the first time we hope to kick it off was the March, April time, where some of us had deep and they are peaking or getting even worse than they were then. So that's the base of decision. On 004, we are actually progressing that still. We have this collaboration with NCATS, part of NIH. And work is underway to reformulate that as an injectable that could be then taken into clinical development and ultimately use it in the ER to reverse kind of an opioid overdose. -------------------------------------------------------------------------------- Operator [6] -------------------------------------------------------------------------------- Our next question comes from Carl Byrnes with Northland Securities. -------------------------------------------------------------------------------- Carl Edward Byrnes, Northland Capital Markets, Research Division - MD & Senior Research Analyst [7] -------------------------------------------------------------------------------- Congratulations on the great results. I'm wondering if you can quantify the remaining balances on the NIDA and BARDA grants? And also, if you can talk to the anticipated timing of recognition from those grants over the next -- for 5 quarters or whatever time frame that you're comfortable discussing. And then also, if you have any comments with respect to cash requirements for 2021? -------------------------------------------------------------------------------- David D. O'Toole, Opiant Pharmaceuticals, Inc. - CFO [8] -------------------------------------------------------------------------------- Carl, thank you for the question. Your first question around the NIDA grant and BARDA contract. Most of that, both the grant and the contract balances will be incurred over 2021 because they are for the -- basically the development program, the PK and PD studies and the FDA filing fee. So all of that money, primarily, a good portion of it. I'm not going to quantify it exactly, Carl. But a big portion of it will all be -- will be considered as income, and we'll draw it down from NIDA and BARDA next year. And then your second question around cash requirements for 2021. At this point in time, we're in a very strong cash position and as we go into 2021, I believe that NARCAN sales -- and EBS believes that NARCAN sales will continue at -- unfortunately, at a quick pace. And so our royalties for next year will give us some cash coming in the door and until we get through the PK and PD study, we aren't going to really be deciding on what we're going to do as far as commercialization of 003. That will be in the latter part of next year as we get closer to an NDA filing. And so the cash requirements for this upcoming year, at this point in time, we're in a very strong position. -------------------------------------------------------------------------------- Operator [9] -------------------------------------------------------------------------------- (Operator Instructions) Our next question comes from David Bautz with Zacks Investment Research. -------------------------------------------------------------------------------- David Bautz, Zacks Investment Research, Inc. - Senior Biotechnology Analyst [10] -------------------------------------------------------------------------------- Roger, I'm curious about Aptar Pharma's unit-dose systems. And since that have been used for NARCAN Nasal Spray, why would is it not being used originally for 003? -------------------------------------------------------------------------------- Roger Crystal, Opiant Pharmaceuticals, Inc. - President, CEO & Director [11] -------------------------------------------------------------------------------- Simply put because it wasn't accessible to us originally. So we went with another supplier. -------------------------------------------------------------------------------- David Bautz, Zacks Investment Research, Inc. - Senior Biotechnology Analyst [12] -------------------------------------------------------------------------------- Was it an IP issue or? -------------------------------------------------------------------------------- Roger Crystal, Opiant Pharmaceuticals, Inc. - President, CEO & Director [13] -------------------------------------------------------------------------------- There was an agreement that allowed other companies to use it for this purpose, but that agreement has now been revoked. So it allows other companies to use it. -------------------------------------------------------------------------------- David Bautz, Zacks Investment Research, Inc. - Senior Biotechnology Analyst [14] -------------------------------------------------------------------------------- Okay. Great. Appreciate that. And I'm curious, so over the next year, if you have any insight into how many additional states in the U.S. may pass co-prescribing laws? -------------------------------------------------------------------------------- Roger Crystal, Opiant Pharmaceuticals, Inc. - President, CEO & Director [15] -------------------------------------------------------------------------------- Yes. This is an interesting question, because when we talk about co-prescribing laws, we have seen New Jersey, as an example, rather than go through formal legislation in the local house. They had their Attorney General enact, if you like, emergency legislation in response to COVID-19. So they have, if you like, a temporary co-prescribing mandate. So just to give you interesting example where that might be formalized long-term, and it might be that we see other states undertake this as we see further growth in opioid overdose deaths as a result of COVID-19. If we didn't have COVID-19, so there wasn't this potential for emergency enactment, then there are about 5 states who have -- have it, if you like, on the legislative docket for 2020, again, some of that seen being delayed again because of COVID-19, but in a year or so, these 5 states in the year 2020, no guarantee that all of them will formally take it on. One of those states, for example, is New York. So that's a significant state in terms of the size of the population who clearly see the merits of doing this. -------------------------------------------------------------------------------- Operator [16] -------------------------------------------------------------------------------- Thank you. I would like to turn the floor over to Roger for closing remarks. -------------------------------------------------------------------------------- Roger Crystal, Opiant Pharmaceuticals, Inc. - President, CEO & Director [17] -------------------------------------------------------------------------------- Thank you, operator. Thanks for joining us today and for your interest in Opiant. We believe that our opportunities for value creation remain compelling given the significant medical need in the diseases we are pursuing. We look forward to keeping you updated on our progress in the months ahead. Enjoy the rest of your day, and please stay healthy. Thank you. -------------------------------------------------------------------------------- Operator [18] -------------------------------------------------------------------------------- This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.