Opiant Pharmaceuticals, Inc.

And welcome to Opiant Pharmaceuticals first quarter 2022 earnings conference call. At this time, all participants are in a listener-only mode. A 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. I would now like to turn the conference over to your host, Ben Atkins, Vice President of Communications and Investor Relations. Thank you and over to you.

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 Scientific Officer, Dr. Phil Skolnick, and Chief Financial Officer, David O'Toole, Chief Commercial Officer, Matt Roof, or join the question section of the call. This afternoon, Opeant issued a press release announcing financial results and providing a business update for the three months ended March 31st, 2022. We will also be presenting slides today. Today's press release and the slides for this call are available on our website at www.opeant.com. Before we start, 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 to risks and uncertainties associated with the company's business. These forward-looking statements are qualified by the cautionary statements contained in opiates news releases 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 out of the date of this live broadcast, May 10th, 2022. Opient 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 Opient's financial results and business highlights for the first quarter 2022. We appreciate everyone's time and attention. At Opium, we are focused on our mission to advance medicines that better treat addictions and drug overdose. Few companies have dedicated research and development in this area. Fewer still their entire mission. Yet the disease, death, and economic costs associated with substance abuse is overwhelming. We are proud to be a leader in this field with a strong pipeline and exciting catalysts in the near term and beyond. The first quarter of 2022 marked another strong quarter for us as we move OPMT-003, nasal nalmothene, closer to NDA submission. We are very excited with the recent results of the Pharmacodynamic Studies Top Line Readout, which builds off the impressive data we saw from our prior clinical pharmacokinetic studies. Dr. Phil Skolnick, our Chief Scientific Officer, will speak to the PD results shortly. At the end of March, we completed a pre-NDA meeting with the FDA. The purpose of the meeting was to discuss our planned NDA submission to ensure that all requirements for a complete application will be met. Based on that meeting, we believe our NDA submission for OPNT-003 is on track and we remain hard at work to ready the filing. Simultaneously, our commercial preparations continue to advance in support of a launch. Opium teams continue to execute on our other pipeline programs while we prepare our regulatory submission for OPMT-003. Specifically, we are exploring the potential for OPMT-002, nasal naltrexone, to reduce heavy drinking associated with alcohol use disorder. We are in an ongoing phase two clinical trial in Europe. This is a condition which affects millions in the United States and for which there continues to be a significant need for better medical treatment. Less than 10% of people classified with alcohol use disorder receive pharmacotherapy. To date, we have enrolled over 80 patients in our trial with a target of 300 patients. We expect a complete enrollment in early 2023. I would also like to highlight OPNC004, Drinabant for Acute Cannabinoid Overdose, for which we expect to complete IND enabling activities this year. Our work is supported by a strong balance sheet and the continued support from our government partners. As I noted at the beginning, we are making good progress with OPNC003. The opioid epidemic has continued to evolve with synthetic opioids like fentanyl now accounting for almost 90% of opioid overdose deaths, which equates to about 70,000 deaths from synthetics in 2021, up from less than 10,000 in 2015. Significantly, fentanyl and other synthetic opioids are now found across non-opioid illicit substances, including cocaine and counterfeit prescription medicines such as Adderall and Percocet. Anecdotal accounts children and young adults being targeted by dealers selling these counterfeit pills through the use of social media is particularly distressful. In our efforts to develop treatment better able to confront our current opioid overdose crisis, we are very encouraged with the top-line data from our pharmacodynamic study. Phil Skolnick, our Chief Scientific Officer, designed the study and working with the FDA, which requested efficacy data compared with naloxone. I have asked Phil to join us today to provide more detail on the PD study and the package of data it completes. Phil, over to you.

Thank you, Roger. To understand the significance of our data for OPNT-003, it's helpful to understand the unique pharmacological properties of synthetic opioids like fentanyl. and how they've exacerbated this worsening public health crisis. Next slide, please.

Thank you.

First, synthetic opioids like fentanyl are highly lipophilic molecules compared to opioids like heroin. This property results in a very rapid entry into a person's central nervous system and a much more rapid onset of action. This rapid onset effectively shortens the window of opportunity for a successful rescue in an overdose. Like other opioids, fentanyl binds to mu opioid receptors. These receptors mediate the analgesic and rewarding effects of opioids as well as the respiratory depressant actions. However, fentanyl and related synthetic opioids, in addition to binding with high affinities, are very potent at activating new opioid receptor associated signaling pathways. On a milligram per milligram basis, a compound like fentanyl is about 50 times stronger than heroin. Both the very high potency and rapid entry into the brain greatly increase the risk for overdose with synthetic opioids. Lastly, and adding yet another level of complexity to treating a synthetic opioid overdose, Fentanyl has a plasma half-life of 7 to 8 hours, while the plasma half-life of naloxone is about 1 to 2 hours. This means fentanyl, as well as many other opioids with longer plasma half-lives than naloxone, can lead to a recurrence of respiratory depression after the effects of the reversal agent wears off. This is a phenomenon termed renarketization. Renarketization complicates the management of overdose, which can include the need to redose with a reversal agent if symptoms reoccur, to the need for an extended intravenous infusion of reversal agent in an emergency room. The half-lives of opioids can vary widely because there is no information about either the opioid or the amount taken at the scene of an overdose. A rescue agent with a longer duration of action can reduce the risk of re-narcotization. Naloxone is currently the only FDA approved opioid overdose reversal agent. Multiple reports have emerged over the past five years indicating that more effective rescue agents are needed in an era when illicit high potency synthetics are responsible for the majority of opioid overdoses. It is within this context that the National Institutes of Health leadership has called for the development of, quote, stronger, longer-acting formulations of antagonists, end quote. Like naloxone, nalmophene is a mu opioid receptor antagonist that can reverse the signs and symptoms of any opioid overdose, including respiratory depression. However, we believe that the pharmacodynamic and pharmacokinetic properties of nalmophene may differentiate it as a reversal agent particularly well-suited to a community environment now dominated by illicit synthetics such as fentanyl. I use information learned from large bodies of existing research as well as our own clinical development program to demonstrate why this is so.

Next slide, please. Thank you.

Multiple studies have demonstrated that nalmofin has a five-fold higher affinity at the mu opioid receptor compared to naloxone. This higher affinity results in much higher new opioid receptor occupancy than naloxone, even at similar plasma concentrations. Our pharmacokinetics studies have demonstrated higher plasma concentrations of nasal nalmophene compared to nasal naloxone. This is especially important at early time points critical for a successful rescue. Illustrated here are plasma concentrations at five minutes. Data from our PK-001 study showed that the plasma concentration of nalmophene are almost three times that reported for nasal naloxone. You can also see here this illustrated here by the TMAX and the CMAX. It took nasal nalmophene 15 minutes to reach TMAX in contrast to 30 minutes with nasal naloxone. And CMAX, the total concentration of reversal agent in the plasma, is twice that of nasal naloxone. Finally, multiple studies, including our own, have demonstrated that the plasma half-life of nalmophene at 8 to 12 hours is substantially longer than naloxone at 1 to 2 hours. In addition to these PK data, at the request of the FDA, we also designed the recently completed pharmacodynamic study. This compared nasal nalmophene to nasal naloxone in an experimental model of opioid-induced respiratory depression. This study was powered to show non-inferiority at five minutes post-administration, the primary endpoint agreed to with the FDA. This means demonstrating nasal naloxone to be as good as nasal nalmophene to be at least as good as nasal naloxone at this time point in reversing opioid-induced respiratory depression. This was a crossover study conducted in healthy volunteers to compare nasal nalmophene to nasal naloxone in reversing the respiratory depressed effect of the synthetic opioid remifentanil. The two drugs were assessed by measuring changes in minute ventilation following administration of the respective drug. Minute ventilation is the amount of air inhaled or exhaled per minute. Our primary endpoint, as I indicated before, was five minutes post-administration. An early time point was agreed to as the primary endpoint measure because it is critical for a rescue agent to be able to act quickly in an overdose. This is especially important in the case of a synthetic overdose where there is, in fact, a reduced window of opportunity to affect a successful rescue. The objects were randomized to receive either naloxone or naloxone on either day one or day five with a washout in between study drugs.

Next slide, please. This figure illustrates how we conducted the study.

I'll explain the procedure, then I will go through what we see at the primary endpoint, five minutes,

and also out to the first 20 minutes in this study. Thank you.

To start, all subjects wear a tight-fitting face mask. At time zero, which you can see on the extreme left of the graph, subjects were administered a gas mixture containing a high concentration of CO2. You can see in this graph that by 10 minutes after breathing this hypercapnic gas mixture, the minute ventilation substantially increased. At this point, remifentanyl infusion was started. You can see that by the downward arrow where it says remi infusion, INF. This infusion was started at that point, and it lasted through the end of the study. You can see that remifentanyl produced a rapid reduction in minute ventilations. It is this reduction in minute ventilation that is central to the experimental model of opioid-induced respiratory depression. At 15 minutes into the remifentanyl infusion, which is time 25 on that graph, the face mask was briefly removed and the subjects were dosed intranasally with either nalmophene or naloxone. Minute ventilation was then measured over the first 20 minutes, which of course includes the primary endpoint at five minutes, which is indicated by the downward arrow on the graph. Let's examine these first 20 minutes in more detail. May I have the next slide, please? Thank you. Working from the left of the slide to the right, the bar graph demonstrates minute ventilation at five minutes. And at five minutes, nasal naumophene produced a greater reversal of respiratory depression that was nearly twice that produced by naloxone. The increases in minute ventilation were 5.745 liters per minute and 3.011 liters per minute with nalmofine and naloxone, respectively. As you can see, the difference in minute ventilation between the two groups clearly favors nalmofine. Now, moving to the middle panel. This figure is graphed to illustrate the FDA criteria that have been established to demonstrate non-inferiority. To the left, The filled circle is the difference in minute ventilation between naloxone and nalmothine with a 95% confidence interval indicated by the lines bracketing the filled circle. The first dotted line to the right is the minute ventilation where there was no difference between the two treatments. That is, the line intersects zero, which would mean no net difference. The second line to the right is the point we proposed as non-inferiority where nalmophene could be no more than 20% lower than naloxone. Nalmophene falls well to the left of this line, indicating that OPT-003 clearly met the primary endpoint of non-inferiority. The third panel shows the first 20 minutes post-dosing. At five minutes post-nalmophene, increases in minute ventilation were well within the 95% confidence interval of the minute ventilation before subjects were given remifentanil. The values at 7 1⁄2, 10, 15, and 20 minutes post-nalmophene are all also within the pre-remifentanil values. And that should be very clear from the slide because those points actually dot that or cross that dotted line or come close to it. By contrast, it took nasal naloxone 20 minutes to increase minute ventilation to level seen at five minutes with nalmophene. And if you look closely at the graph, you can see the circles as opposed to the squares. Recall also, this is an experimental model of opioid-induced respiratory depression. This model has a ceiling effect that may underestimate true differences between naloxone and nalmofine with respect to both the speed of onset and efficacy at which an overdose can be reversed.

Next slide, please.

It is with these compelling PD data, together with the PK studies we conducted, demonstrating both rapid absorption and long plasma half-life that suggests OPNT-003 represents a highly promising opiate overdose reversal agent. These studies will form the clinical basis of our NDA submission to the FDA. And if I may, at this point, I'd like to thank our government partners, the Biomedical Advanced Research and Development Authority, and the National Institute on Drug Abuse for their support. I'd also like to acknowledge the contributions of my colleague, Dr. Mark Ellison, and his clinical development team to the success of these studies. Thank you for your attention. Let me now hand this over to David.

David? Thank you, Phil. The details of our financial results are in the press release, so I'll focus now on a few highlights. For the first quarter of 2022, we reported revenues of $4.5 million, of which $2.2 million of revenue was attributable to royalties from the License Agreement with Emergent BioSolutions, Inc., or EBS. for the sale of Narcan nasal spray. This compared to approximately $6.4 million in revenue and $4.3 million in royalties for the same period of 2021. The decrease in royalty revenue was due to a reduction in the royalty rate to 2% from tiered royalties with rates ranging from 6% to 12%. This is the result of EBS applying the generic reduction clause provided for in the license agreement, a prospect that we anticipated, included in our current financial plan, and discussed on our last earnings call. This provision in the agreement states that once a generic is launched in a particular country, each subsequent quarter's performance in that country is measured against Narcan sales for the same country in the quarter immediately preceding the quarter in which the generic launched. The first commercial sale of Tevas generic occurred in the U.S. in December 2021. First quarter 2022 sales of Narcan nasal spray in the U.S. and Canada were approximately 93.1 million, as reported by EBS. This was actually a 25% increase over net sales during the first quarter of 2021. However, based on information provided by EBS, the U.S. specific net sales decreased more than 30% when compared to U.S. sales in the third quarter of 2021, the reference quarter. The royalty rates applied to net Narcan sales in Canada were not impacted, as no generic version has been launched to date in Canada. This calculation is completed separately each quarter, which means that the application of the generic reduction clause this quarter has absolutely no bearing on whether it is triggered in the remaining quarters of 2022. Total operating expenses for the first quarter were $16.3 million compared with $8.7 million for the same period in 2021. Operating expenses included $4.4 million in general and administrative expense, compared with 2.6 million in 2021, 8.8 million in research and development compared with 4.1 million in 2021, and 2.7 million in sales and marketing compared with 1 million in 2021. The increase in investment in R&D and sales and marketing were primarily associated with the completion of our clinical work for OPNT-003 and heightened pre-commercialization efforts, respectively. Net loss for the three months ended March 31, 2022, was approximately $12.2 million, or a loss of $2.43 per basic and diluted share, compared to a net loss of approximately $2.8 million, or a loss of $0.66 per basic and diluted share for the comparable period of 2021. From a capital resource perspective, we ended the first quarter with approximately $51 million of cash, which puts us in a position to execute on our key commercial and R&D initiatives. We also potentially have access to an additional $30 million under the existing debt facility if certain milestones are met. Thank you. And with that, let me open the call for questions.

Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in a question queue. You may press star two 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. The first question comes from the line of Brandon Fox with Cantor Fitzgerald. Please go ahead.

Hi, thanks for taking my questions and congratulations on the data and appreciate all the color. Maybe just firstly, could you... provide maybe some insight into the feedback you've received so far just on that onset of action. I guess it seems pretty significant, but just any color you've received so far. And then maybe secondly, anything in the market currently and market dynamics that you're seeing within the overdose market that may not be playing out as you expected or without giving away your commercial strategy, and you do have the ability to obviously evolve it, but just how are you seeing that market play out currently, granted in a very different and differentiated product. Thank you.

Thank you, Brandon. Thanks for the question. So in terms of the feedback and onset of action, bearing in mind this is our top-line data, but very encouraging. What we know for a successful opioid overdose dose rescue, delivering as much of a potent opioid overdose reversible agent into ultimately the brain as quickly as possible is key. And the feedback that we've had so far when we speak to our KOLs and our advisory board is that's very much what they're seeing as represented in this pharmacodynamic study. And the other consideration isn't just around whether you save a life or not. It's also whether the person can avoid longer-term disability, And even in the immediate setting, if you can reduce the amount of acute medical care required, such as the expense of intensive care, so anything that can reduce that is actually not just well received from a clinical perspective, but also from a health economic perspective as well, which is why we are confident that this product, as you say, we think will be differentiated and will have a significant value proposition as well as from a clinical and economic angle. Then in terms of the market dynamics, we knew when we embarked on this program, this is a competitive market. You have a strong player and has a majority market share. And there's other products in the market as well. And we welcome that in a sense of we want competition, we want innovation. The important aspects of market dynamics are around that competition should continue. So when we look at some of the opioid settlements around free goods from Teva, for example, that's important to increase access to opioid overdose reversal agents in communities that otherwise don't have satisfactory solutions, such as some of these harm reduction communities. But what's important when we think about the market dynamics is that this isn't a long-term solution because innovation is here and should continue, and we should allow for that. But the Addressable market, this is my final comment in terms of market dynamics, continues in many ways, unfortunately, continues to grow. We're seeing increasing year-on-year, quarter-on-quarter of not just opioid overdose deaths, but in parallel the proportion of those deaths that are due to synthetic opioids.

Thank you.

The next question comes from the line of Lel Gershel with Oppenheimer. Please go ahead.

Thanks for taking the questions and also my congratulations on the terrific data. Two questions. One first for David. David, if you could just, to the extent you're able... remind us of any interplay between the authorized generic and what you may take to expect royalties versus sales of the branded Narcan nasal spray. And then also just, I think you mentioned that Matt would be on the Q&A. Just wanted to ask Matt if you could provide some more color. I know it's a little bit early, but just as you gear up for commercial for 003, what those preparations are looking like. Thank you.

Thanks, Leland. Appreciate you being on the call and the questions. I'll answer first and then Matt is here and he can answer the second question for you. As far as the authorized generic and the branded, the interplay there, the branded Narcan, under the agreement, those two amounts are combined as far as the dollar amounts and we receive royalties based on the total of that. There is no differentiation between the authorized generic, and the branded as far as what royalty rate applies.

Thanks. Hi, this is Matt. I'll go ahead and answer the second question. So in regards to our commercial preparation, we have secured a very strong leadership team in all of the different functions required to effectively launch a commercial drug. So we've got trade and distribution where we're securing drugs distribution licensing, and distribution methods for when we launch this. Obviously, we've got a strong marketing team, sales leadership, government affairs initiatives, and market access. So we are in preparation, building the foundation by which we will be able to launch this pending FDA approval.

Great. Thanks very much for taking the question. Carl, please go ahead.

Your line is unmuted. You can speak now.

Oh, great. Thanks for the question, and congratulations on the progress. What clinical differentiating data or language do you hope or anticipate to have in the OO3 label versus nasal naloxone? And then I have a follow-up as well. Thanks.

Thanks, Carl. So, again, this will all depend on our interactions with the FDA. They've been very receptive to this program overall, and with FastTrack designation, we're able to have that interaction real-time. However, when we think about the overall differentiating factors of this product, we see it as faster, stronger, and longer. Faster in terms of the absorption, both on the PK and now the PD study as well, when we look at the minute ventilation, naloxone versus nalmothene. Nalmothene, as Phil said, just to reemphasize, it's like the response we see with nalmothene at five minutes in the PD study isn't achieved with naloxone, nasal naloxone, until 20 minutes. The stronger is also related to that, where we look at the PD study. There's two data points for stronger, if you like. There's the PD study that, again, shows that the minute ventilation, that strength of respiratory recovery from remifentanyl infusion, the minute ventilation of nalmophene appears to be almost double that of naloxone. The other stronger aspect is the inherent properties of the nalmophene molecule, where it appears to have at least five times greater affinity at that critical new opioid receptor when compared to naloxone. And then finally, the longer piece. Well, actually, the longer piece is, in a sense, less from our data, although our data support this, but actually in the existing label for injectable Revex, which was the original branded Naumafine, in the language in that label, it includes the fact that Naumafine acts for longer than naloxone. So those are the... That's the underlying supporting data, and that's the discussion with the FDA as to how that will fit into the labor itself.

Great. Thanks. That's very helpful. And then the follow-up question, this is probably more for David. How should we look at SG&A and R&D spending for the balance of the year, understanding that in the current quarter, the first quarter rather, you had $2.7 million that were It was related to pre-commercialization activities. And in the R&D line, you had $2.2 million from the BARDA grant. Thanks.

Yes. So a couple of things on BARDA. And thanks, Carl, for the question, and thanks for being on the call, first of all. But for BARDA, the total contract, as you remember, was $10.3 million. And we've recognized $6.8 million of that through March 31, 2022. So we have another $3.5 million that will be recognized and received this year. So the R&D spend for the year for the next quarters will be offset by that $3.5 million that we do get in revenue from BARDA. We are, as we mentioned, in the process of doing the 002 study. for alcohol use disorder. And so we would see that the R&D spend would not be as great in the first quarter because most of that work was done for 003 and won't be continued. Obviously, we're at the clinical end of 003. So the R&D spend for the rest of the year will be focused primarily on 002 and finishing up the regulatory and FDA approval for 003. SG&A, as we get closer to FDA approval towards the end of the year, the sales and marketing spend will increase. Many of the hires will be contingent upon FDA approval, so many of those hires a lot of that expense won't be incurred until we get really FDA approval for the sales side of it. G&A, we're going to keep that as lean as possible going through the end of the year to save, you know, to expeditiously watch our expenses and make sure that we have all of those, all of our resources focused on commercializing 003.

Great, thanks so much.

Thank you. The next question comes from the line of David Botts with Zaxx. Please go ahead.

Hey, good afternoon, everyone. My first question is about 003. I'm curious if you've had any discussions with the FDA regarding the need to do any type of drug-drug interaction studies. And in addition, I wonder if you feel like there's going to be the need to do any additional studies to understand the risk of precipitated or abrupt withdrawal from the use of nalmophene.

Thank you, David. Yes, so there's nothing simply around drug-drug interaction. Again, that was already well known with the existing FDA-approved Revex. In terms of withdrawal and additional studies, at this point, the FDA hasn't specifically said we need to do any additional studies regarding this as well.

Okay. Thanks for taking the question.

Thank you. Ladies and gentlemen, we have reached the end of question and answer session, and I would like to turn the call back to Roger Crystal for closing remarks.

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

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