Opiant Pharmaceuticals, Inc.

Greetings and welcome to the Opiate Pharmaceuticals fourth quarter and full year 2021 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ben Atkins, Vice President of Investor Communications and Investor Relations of Opient Pharmaceuticals. Thank you, Ben. You may begin.

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, Chief Commercial Officer, Matt Roof, and Chief Financial Officer, David O'Toole. This afternoon, Opient issued a press release announcing financial results and providing a business update for the three and 12 months ended December 31st, 2021. 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, opiate 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 statement contained in Opium's news release and SEC filings, including in our annual report on Form 10-K for the year ended December 31, 2021, and subsequent filings. This conference call also contains time-sensitive information that is accurate only as of the date of this live broadcast, March 15, 2022. OPNs 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.

Thanks, Ben, and a very warm welcome to you all. Thank you for joining our conference call to discuss opiates, financial results, and business highlights for the fourth quarter and full year 2021. We appreciate everyone's time and attention. In 2021, we have four overarching goals. One, advance OPMC 003 naval now machine towards MDA submission. Two, establish leadership to potentially self-commercialize OPMC 003 if approved. Three, advance our pipeline. Four, maintain a strong balance sheet in support of our development and commercial goals. I am pleased to say that we have made significant progress in all four areas of focus. Starting first with OPNC003, our investigative treatment for opioid overdose. In 2021, we reported multiple achievements around its advancements. This included the results of our confirmatory pharmacokinetic study and initiation of two further studies, a multidose study and a pharmacodynamic study, both requested by the FDA. Moreover, in November, the FDA granted OPNT003 fast-track designation. This momentum has continued in early 2022. In February, we reported positive topline results from our multidose study. in which OPMT003 demonstrated safety, tolerability, and pharmacokinetic equivalence across multiple nasal doses. Importantly, these data are fully consistent with the rapid delivery of high plasma concentrations of nalmophene observed in our earlier single-dose PK study, which we reported in July 2021. I am also pleased to announce that we have completed enrollment and reached our target of 46 subjects in the pharmacodynamic study. This study is comparing OPMT-003 with nasal naloxone in reversing the respiratory depression produced by the synthetic opioid remifentanil in healthy volunteers. As a reminder, we designed this novel PD study at the request of and in consultation with the FDA. This is the first study ever conducted directly comparing the PD effects of nasal nalmophene and nasal naloxone in an experimental model of opioid-induced respiratory depression. We are confident the data generated in this study will support the data generated in our pharmacokinetic studies and provide additional valuable information on the attributes of OPMT003 relative to the current standard of care. In this study, Healthy volunteers were administered high concentrations of carbon dioxide to elevate respiration, and once this occurred, were administered an infusion of the synthetic opioid remifentanil. Like other opioids, remifentanil suppresses carbon dioxide-stimulated increases in respiration. The subjects then received either nasal naloxone or nasal nalmophene. The rate and extent of reversal was measured over time. Using a crossover design, subjects were dosed with either nasal naloxone or nasal melmothene on days one and five of the study. So, each subject received one dose of each opioid antagonist. The study was managed to strict safety criteria agreed with the FDA and the Institutional Review Board. As a reminder, as agreed to with the FDA, the study is powered to demonstrate non-inferiority between nalmophene and naloxone, with a primary endpoint measuring the change in minute ventilation at five minutes. Additional secondary endpoints cover a range of different time points. As the study progressed, there was a high rate of dropouts related to study conditions, including the wearing of a tight-fitting mask for an extended period and the side effects produced by remifentanyl infusion, which includes nausea, emesis, and dizziness. Unfortunately, this meant that the study took longer to complete than anticipated. With enrollments now complete, however, we are now diligently preparing our study data for analysis. Although we had initially hoped to have top line data by the end of Q1, given the completion of the clinical portion earlier this month, we now anticipate these results coming which results in the coming quarter. We believe this significant milestone completes all clinical studies required by the FDA. Earlier this year, we requested a pre-NDA meeting with the FDA, which is scheduled for later this month. Pending the outcome of this meeting, we anticipate a mid-year NDA submission, which, if approved, could position OPNC003 for commercial launch in the US by early 2023. As we progress OP&T 003, we continue to attract strong and experienced talent to key roles. In November, we welcomed Tanya Thomas as our VP of Regulatory and Medical Affairs. Tanya joined us after 15 years at Pfizer and GSK, having held senior positions leading regulatory affairs teams both in the US and globally. She has a demonstrated track record in supporting successful US and ex-US regulatory approvals. We look forward to Tanya leading our efforts with the FDA to obtain approval for OPMC-003. Now, turning to commercial, pipeline, and our balance sheet. Commercially, as we get closer to NDA submission, our preparations for the potential launch of OPMT-003 are progressing well. Matt Ruth, our chief commercial officer, will speak to that in a moment. In R&D, we continue to advance our pipeline and have several exciting milestones expected over the next 12 to 18 months. We reported in January that the initiated enrollment in our 300 patients phase two randomized double-blind placebo-controlled study evaluating OPNT002 nasal naltrexone for the treatment of alcohol use disorder, or AUD. The study, which we are conducting in Europe, has already reached 10% of our recruitment goals. We anticipate data from this trial in the first half of 2023. OPNT002 potentially represents a major breakthrough for treating AUD as its rapid onset of action and short half-life are ideally suited for administration on an as-needed basis without the need for prior abstinence. As we also previously reported, we are progressing OPNC004, Drinabant, a treatment for acute cannabinoid overdose, or ACO, towards IMD-enabling studies, working in partnership with the National Center for Advancing Translational Sciences. As more and more states legalize both the medical and recreational use of cannabis, and particularly edibles, which contain very large amounts of THC, there is an increased need for an effective treatment of ACO in the emergency room setting. For example, a study recently published in JAMA reports Ontario saw nine times more emergency department visits per month for cannabis poisoning in young children under the age of 10 after Canada legalized recreational cannabis in 2019. We hope to have a pre-IMD meeting by the end of this year and have OPMC-004 in clinical studies next year. Lastly, we managed our balance sheet in 2021 beyond the high end of our, which David will go into in more detail a little later. Let me end my remarks by reminding you of what we do at Opium and why. Our mission is to develop medicines with the potential to treat addictions and drug overdose. America is facing a deadlier opioid epidemic. From September 2020 to September 2021, opioids accounted for roughly three-quarters of the more than 104,000 deaths in the U.S. from drug overdoses. Since the mid-2010s, the opioid epidemic has transitioned to very potent and illicit synthetic opioids, in particular fentanyl. As we've discussed on previous calls, fentanyl and other emerging synthetic opioids are distinct from heroin and prescription opioids. Synthetics are highly lipophilic and enter the brain more quickly than other opioids. They act with far greater potency, and many of these compounds have long half-lives relative to heroin and prescription opioids. These longer half-lives increase the risk of re-narcotization if a victim is rescued with a short-acting agent like naloxone. In the few years since illicit synthetic opioids began to proliferate in the U.S., yearly drug overdose deaths have more than doubled, making this one of the most rapidly spreading epidemics in history. The increase in deaths due to opioid overdose has given rise to concerns about the longer-term effectiveness of current overdose reversal treatment and led to calls for innovation in this space. In a 2016 report, an FDA advisory committee indicated that higher or multiple doses of naloxone often were needed in the community setting to revive individuals when stronger opioids like fentanyl were involved. Since then, the CDC, the NIH, and other public health agencies have issued similar warnings. Opioid overdose is the leading cause of death amongst Americans aged 18 to 45. This is robbing us of lives and our future. In February, a new government report concluded that overdose deaths cost the economy a trillion dollars a year in health expenses, reduced productivity and other losses, equivalent to nearly half of America's economic growth last year. And this trajectory is getting worse. Recent estimates in the medical journal The Lancet suggest that opioid overdose could kill up to an additional 1.2 million Americans by 2029. Since opiates original development of the Narcan nasal spray and its FDA approval in 2015, Narcan nasal spray has helped lead the fight against opioid overdose. It has made a clear and extremely positive difference in communities across America. It has fundamentally changed how we respond to overdose by engaging bystanders within our homes and communities. Yet, the crisis today is different than it was when we developed Narcan nasal spray. The limitations when matched against far stronger and more lethal opioids are becoming more and more evident. To serve public health and to save lives, we must make progress on prevention and treatment of opioid overdose. New medicines are needed as the potency of illicit drugs flooding America grows. As the overdose crisis heightens, our colleagues across opiates are more determined than ever to be part of the next potentially game-changing breakthrough. And with that, I'll turn it over to Matt, our Chief Commercial Officer.

Thank you, Roger. As we get closer to NDA submission and FDA consideration of OPMT-003, we are ahead of schedule in building our foundation for launch. I'm very pleased with the response we've received to hiring. We now have all of the elements for launch covered in our leadership team, including government affairs, trading distribution, marketing, and market access. As I mentioned on our last earnings call, We have the very experienced Mike Potestio, who will lead our field sales recruiting and execution as we get closer to a potential commercial launch. We have our external agency partners in place and have established and begun executing a comprehensive strategy in preparation for commercialization of OPMT-003. We are building experience depth in critical commercial and government affairs functions and will continue to build as appropriate and necessary. As we build and execute our strategy, the call for action rings loud. As we speak with and listen to those confronting the opioid epidemic and with the families tragically affected by overdose, it is clear that we must elevate the education, awareness, preparedness, and importantly, increase access to appropriate reversal agents. While nasal naloxone is a vital tool, we continue to hear strong enthusiasm for advancement in opioid overdose reversal agent options. With the rise of fentanyl and synthetics, we hear strong support for a treatment option with a faster action, longer duration, and is stronger to combat higher-potency opioids. Data generated so far indicates Opiant 003 exhibits these attributes. When my team and I launched Narcan, the first FDA-approved nasal naloxone in 2016, we changed the game. Narcan empowers medically untrained citizens and responders to administer potentially life-saving emergency treatments. Now, it is a great privilege to work for Narcan's original creator, Opiant, which remains dedicated in its pursuit of even more effective treatment of opioid overdose in America. In summary, we have the experienced team, we have the unique and relevant market expertise, and we are well advanced in establishing the conditions to successfully commercialize Opiant's 003 if approved, and I hope to deliver a much needed new tool to fight the escalating severity of opioid overdose. And with that, I'll turn it over to David, who will provide a summary of our financial performance.

Thank you, Matt. The details of our financial results are in the press release, so I'll focus now on a few highlights. For the fourth quarter and full year 2021, we reported revenues of $13.8 million and $48 million, respectively. Continued demand for Narcan nasal spray in the last quarter of 2021 meant we exceeded our previously provided full-year 2021 royalty revenue guidance of approximately $38 million, with actual 2021 royalty revenue of approximately $41 million, a 49% increase over full-year 2020. We also recorded approximately $7.1 million in grant and contract revenue compared to approximately $2.2 million for full year 2020. This was due to funding received from the National Institute of Drug Abuse and Biomedical Advanced Research and Development Authority for the development of OPNT-003. Total operating expenses for the fourth quarter were $12.5 million compared to $11 million for the same period in 2020. Operating expenses were $42.6 million for the full year 2021, compared to $31.9 million in 2020. Full year increase was primarily due to our investments in R&D, which were approximately $16.8 million, as compared to approximately $9.2 million in the comparable period in 2020. Net income for the three months ended December 31st, 2021 was approximately 0.8 million or income of 17 cents per basic share and income of 11 cents per diluted share compared to a net loss of approximately 0.7 million or a loss of 16 cents per basic share and diluted share for the comparable period of 2020. For the full year 2021, net income was approximately 3 million or income of 68 cents per basic share and income of 51 cents per diluted share compared to a net loss of approximately 1.9 million or a loss of 44 cents per basic and diluted share for full year 2020. As we have noted on prior calls, with opioid-related deaths increasing throughout the pandemic, NARC and nasal spray sales have also been on the rise. We expect demand for community-based reversal agents to increase significantly in the coming years. However, on its most recent earnings call, EBS provided 2022 Narcan revenue guidance of $240 million to $310 million. This is significantly less than the $434 million of net Narcan sales reported by EBS in 2021 and apparently reflects the impact of at least one generic entrant and branded competitors into the nasal naloxone market. In December 2021, Taba Pharmaceuticals announced the launch of its generic nasal naloxone. At the same time, Sandoz, through an agreement with EBS, launched an authorized generic of Narcan. In addition, during 2021, HICMA Pharmaceuticals launched Coloxo, Coloxo, an 8 milligram nasal naloxone. We do not yet have data to determine the evolution of the nasal naloxone market, but we'll await information from EBS when it reports Q1 Narcan sales next quarter. As a reminder, we received tiered royalty payments on Narcan net sales with rates ranging up to 12%. However, with the launch of a generic equivalent in December of 2021, the royalty amount will reduce to 2% on a country-by-country and quarter-by-quarter basis when the sales of Narcan, including sales of the authorized generic, are cumulatively less than 70% of what the net Narcan sales were in the third quarter of 2021. It is important to note that this will be calculated separately each quarter. This means we could have some or all quarters in 2022 at the standard tiered rates. However, we could also have some or all quarters at 2%. It will depend on Narcan sales performance in a given quarter. Royalty revenue from net Narcan sales will continue in 2022. However, until we have further clarity around net Narcan sales in the coming months, we are not currently in a position to provide royalty revenue guidance for the full year 2022. With that said, we start the year with approximately $53 million of cash and continue to prudently manage our capital resources, providing us with a strong financial foundation to support our planned commercial and R&D initiatives this year. We also have access to additional $30 million under the existing debt facility upon achievement of certain milestones. To conclude, a generic entrance of nasal naloxone into the marketplace doesn't change the dynamic that exists where most opioid overdose relate to higher potency opioids. And the innovation in treatment of overdose will need to evolve calling for the introduction of new products, such as ROPNT003 nasal nalmophene. Thank you, and with that, let me open the call for questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question comes from Brandon Foltz with Cantor Fitzgerald. Please proceed with your question.

All right, thanks for taking my questions and congratulations on all the progress. Maybe just two on 003 and maybe they're related, but I guess firstly, will the pre-NDA meeting inform anything around the PD data? Just any comments on the sequence of events there? Is it really just that the PD data took a little longer for the reasons you mentioned and it was the most efficient use of time to keep it at that date? Or is there something that could inform the PD data before we see it? And then I know this is a tough one to answer, but how do you think about a label at this stage? And I mean that in terms of when we think about detailing this product, I agree with the attributes and the need for stronger agent against these synthetic opioids. I guess, how direct do you think you can be in your marketing with the data generated to date that this is a data product in what's on the market? Thank you. Thank you, Brandon.

So in terms of the pre-NDA meeting, we wanted to schedule that because we have a ton of existing data anyway, and we want the FDA to ideally allow us to proceed with a rolling review. With the PD data, even though they won't have it in hand when we have the meeting, again, they've already left the study design and statistical plans. So really, it's everything else but that that's still important to bring to the table so that we're in the best place to submit an NDA in a timely manner. On the labels, One of the key attributes and advantages, we believe, of OPMT-003 is the long half-life. And in fact, that data is already in the existing REVEX label that was when namophene was approved as an injection, where it actually states it has a longer half-life, a longer duration than naloxone. So that data we are able to use from the existing label. In addition, we'll be able to provide all the additional data we generate into the package insert, such as existing well-known data around the actual potency of namophene, the affinity, et cetera, and the speed of absorption, which appears to be faster than naloxone as well. Ultimately, the PD data, I think, is going to be a key piece as well. And even though it's power to non-inferiority, if we are, for example, seeing the majority of patients or healthy volunteers having their breathing restored faster, then that's something that will also very much appear in the entirety of the data that we have supporting this product. So that's what makes it so exciting. Thanks.

That's great, Ian, and very helpful. Maybe just one more, if I may, for David. So just to clarify, so the royalty will drop to 2% if sales in a quarter drop below 70% of 3Q 2021. So I guess it's that 70% of that 133. And then does that include the authorized generic? And then do you get a royalty on the authorized generic?

Thanks, Brandon. Thanks for the question also. Point of clarification, and you did point it out that the third quarter was $133 million in total Narcan sales. However, this is on a country-by-country basis. And the $133 million is not all U.S. sales. It includes also Canada. And that information is not publicly available. But since there is not a generic in Canada, all of the revenue from Canada is not subject to the generic reduction clause at this point in time. So there is a bifurcation that needs to be done on a country-by-country basis. And then you are correct on the 70%. And the total revenue that we'll be measuring for that will be the branded product Narcan plus the authorized generic. And so that has to dip, that total has to dip below 70% of the sales of Narcan in the third quarter on a country-by-country basis. And I'm emphasizing that because it's an important thing to consider.

That's very helpful. Thank you, David. And just so I'm 100% clear here, The two, yeah, I'm just using that 2% for illustrative purposes here. Is that on a country-by-country basis, Narcan sales, branded Narcan, and authorized generic, or just branded Narcan? On both of them. Okay. Narcan sales plus authorized generic. Thank you. I appreciate the comment. Thanks, everyone.

Thank you. Our next question is from Carl Burns, private investor. Please proceed with your questions.

Hi, this is Karl Barth from Northland Capital Markets. First, thanks for taking the question and congratulations on the progress. My first question is for Matt. Matt, I'm wondering how you envision the Salesforce account or target for a launch of 003, and will you be looking at extending offers to candidates subject to approval, obviously prior approval? And then what might you add with respect to field managers in medical or medical specialist liaisons. Does anyone have a follow-up question? Thanks.

Sorry, Carl, I'll jump in and then I'll let Matt continue there. Roger here. Just to say, I mean, our commercial plans, we're not going to provide significant detail around numbers at this point. I need to say that Matt's obviously hired an initial commercial team who are doing tremendous work in the pre-launch world, if you like. And then given our view of where we see the market opportunity at the moment, the balance between the public interest sector and the retail, again, we're going to be hiring shortly after towards approval and at approval in particular. But one thing is that this is not like building out a huge sales force like most drugs out there. A lot of it is in the around government affairs activities, and I think that's where Matt has tremendous experience.

But Matt, anything you want to add to that? No, I think you've covered most all of it. I will just add that when I built the ADAPT Salesforce or market team to address this market, we had a tremendous amount of learnings because it is such a unique marketplace and market space with different customer bases. So I plan on using the same intelligence that we learned way back when. You know, the good news is we probably won't make some of the mistakes that we made at ADAPT early on, as I've learned from those.

Great, thanks. That's very helpful. And then if I could have a follow-up question, and this is transitioning back over to Narcam. Maybe we can talk just a little bit about the dynamics and the difference in the dynamics in the retail space where you do have a generic and you have an authorized generic, which is the EBS Sandos product, which obviously collect royalties on, and I believe retails roughly 35 or so percent of the market versus the public sector where, as I understand, there's not a launch of the authorized generic and also potential sort of encumbrances for things that may encumber rather from using a generic in that space. And then given that 65 or so percent of the market, anything that you could help with respect to dynamics would be great. Thanks.

I mean, Matt, I'll let you talk about how you see the retail in particular. I think, I mean, I can call that the overriding point for us is that this is a product that we think has clear clinical differentiation. And that's what in our mind will drive choice. and absolutely there will be people that still prefer to use naloxone-based products. But we're highly confident that with the data we have, plus essentially the data we continue to generate, that this is what will drive choice, bearing in mind that in both sectors there's good retail and in the public interest sector there is good funding and reimbursement available. Matt, do you want to expand on that?

Yeah, that's right. I think you hit all the key elements. If we get clear differentiation from a label perspective, our objective and our strategy will be to ensure that access is widely available and obviously that it's affordable, and then we'll detail physicians as necessary and by the means necessary to inform them of opium 003.

Great, thanks. As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. Our next question is from David Bouts with DAX. Please proceed with your question.

Hey, good afternoon, everyone. Matt, I have a question about the sales of... in the public health sector. I guess I don't really understand the dynamics of that. And then what is going to be the most difficult aspect of kind of breaking into that market with 003?

You can say that, Matt.

Yeah, so... So in regards to the sale of Naloxone in the public interest, if you could just add a little more clarity in terms of the question that you're looking to learn from.

So basically what I'm wondering is, is this something where the EMS units or whatever order, they just have it on autopilot in order, like they get so many units per month and just keep refilling every month like that?

Sure. Sure. Okay. So I think I understand the question now. So without going through a long process of the distribution flow, basically every state first and foremost is very different in how they order, but for departments of health, for law enforcement, community-based organizations, those types are typically ordered by individuals in the state department of health and then product is then funneled out. Now, It's complicated because every state is very different in how they interact. EMS is typically done traditionally through distributors. There are a couple distributors that supply EMS across the country, which is pretty clean cut, pretty traditional distribution model. And I think your follow-up question was how we intend to interact and engage those. And if that's correct, The advantage is that I've done this before and had to build out the market with the ADAPT team. We've gotten a couple of those folks from the ADAPT team on the opiate pharmaceutical team right now. So we know where to go. We know how to access the different market channels, and that's effectively what we plan to do.

Okay, thanks. That's helpful. And then, Roger, I had kind of, I guess, a technical question about the PD trial. So you're looking at the reversal of respiratory depression. I'm just curious if you can quantify how low these individuals' breathing rates get. So what kind of differences are you going to be looking at there?

Yeah, I mean, it's hard to – I can't give you a number at this stage – We've not made that public, only to say that in the PD study, we're confident we will achieve non-inferiority. But this is, if you like, an experimental science kind of study that the FDA wanted to see. We can't fully entrench one in a full-scale overdose. So I think we'll be in a position where we can potentially show meaningful differences, which is great. But if anything, what's going to be really interesting is in the field, once first responders get to use this in a true overdose, a fentanyl overdose, not a remifentanyl overdose, that's where I think even more data will generate post-approval to show the true differences at that point as well. So headline note, the PD study will generate the data we need for FDA approval and for decent differentiation. which we can build on post-approval.

Okay, great. I appreciate the answers and for taking the questions.

Thank you. Our next question is from Carl Burns with Northline Capital Markets. Please proceed with your question.

Thanks again. I was just wondering what your expectations were in terms of grant funding and timing of grant funding, given that the BARDA grant largely funds the NDA submission. That's going to be obviously tied to the timing of the NDA submission and costs associated with preparation of the NDA submission. And then as another item on cash, you ended with $53 million in cash and $13 million in royalties. So on a pro forma basis, is it safe to assume that your cash balances are really kind of effectively pro forma for the royalties of $13 million or in excess of $60? Thanks.

Yeah, Carl, thanks again for the additional question. On the government funding, the NIDA grant has been completely funded, and we've received all of those funds already as of December 31st. Of the 10.3 million in BARDA funding, that includes the additional 2.2 million that we got, we had already billed BARDA 5.7 million. And so that leaves another $4.6 million for this year, including the filing fees. So the majority of that would probably be done, would be billed this year, the way I see that. And then your second question, again, was what, Carl? I'm sorry.

Yeah, so you had $53 million at the end of the year. Yeah, I got it.

So, yeah, we do receive the fourth quarter royalty in 2022, the fourth quarter royalty in 2022. It's a large number, as you indicated. As you know, we pay out about 26% of that to our certain investors that invested in the company early on. And so we end up with somewhere around 70% to 75% of that number. And so the answer to your question on a pro forma, just looking at the two numbers together, yes, that would be the case.

Excellent. Thanks again.

Thank you. There are no further questions at this time. I'd like to turn the floor back over to Roger Crystal for any closing comments.

Thank you, operator. Thank you for joining us today and for your interest in opiates. Enjoy the rest of your day, and please stay healthy.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.