Opiant Pharmaceuticals, Inc.

Greetings and welcome to Opium Pharmaceutical's second quarter 2022 earnings conference call. At this time, all participants are in a listen-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, Communications and Investor Relations. Please go ahead, sir.

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 three months and six months ended June 30th, 2022. Today's press release is available on our website at www.opiant.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 due 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 31st, 2021, and subsequent filings. This conference call also contains time-sensitive information that is accurate only as of the date of this live broadcast, August 11th, 2022. Opium 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 second quarter and first six months of 2022. We appreciate everyone's time and attention. The first half of 2022 was important for opiates as we continue to advance our pipeline of new medicines for addiction and drug overdose. We have a tremendous sense of mission to create meaningful therapeutics that we believe can help curb substance use harm and relieve the burden it places on our communities and health care. Opient made its first impact by developing Narcan nasal spray for the emergency treatment of known or suspected opioid overdose. It was a new formulation, easier to use and containing a higher dose of naloxone compared to earlier unapproved kits. We remain very proud of Narcan and the role it plays in our communities Yet, we also believe new reversal agents are needed as the potency of illicit synthetic opioids grow. So let me start with a review of our progress with OPNT003 for the treatment of opioid overdose, and then to offer some context as to how we are thinking about its place in the market. OPNT003 is a nasal formulation containing the high affinity opioid antagonist In May, we announced positive results from our pharmacodynamic study evaluating OPNT003 head-to-head with 4 mg nasal naloxone. As we reported, OPNT003 met the primary endpoint of non-inferiority to nasal naloxone, producing a reversal in remifentanyl-induced respiratory depression that was nearly twice that produced by nasal naloxone at five minutes. Further analysis of the data showed it took nasal naloxone 20 minutes to achieve the same level of effect it took nasal nalmothene at only five minutes. Our completion of the PD study concluded the clinical program supporting OPNT003. As we shared, our NDA incorporates extensive data from our PD study and two prior pharmacokinetic studies. Our PK data demonstrated rapid absorption and higher plasma concentrations versus intramuscular injection of nalmothene. On our last earnings call, our chief scientific officer, Dr. Phil Skolnick, explained the full set of PD and PK results and that OPNT003's apparent fast action, strength, and long duration is well matched to address overdoses from illicit synthetic opioids, in particular fentanyl. The value of OPNT003 has been further strengthened by the allowance of certain formulation and method of use patent claims covering OPNT003 and intravail in a nasal formulation. We have already received a notice of allowance and we expect the patent to be granted in the coming weeks and we will also include this in our NDA submission. With our data reported, we are focused on completing the NDA filing for OPNC003, which we announced the start of in May as a rolling submission. We are making good progress. The non-clinical section has been submitted. The CMC section is on the final review and publishing, and the clinical section is in progress. This puts us on track to complete our submission by year end. Our planned filing timeline, if we receive priority review, provides us with a possible PDUFA date in the second quarter of 2023. Work is well underway preparing for a commercial launch of OPMT-003. A record number of people in the United States over 80,000 died of an opioid overdose during the 12 months ending February 2022, according to provisional data from the CDC. For each opioid-induced fatality, according to our own research of existing data, there are about eight non-fatal overdoses which can lead to long-term physical and mental disability. Health experts warn, however, about very troubling trends particular to fentanyl and other illicit synthetic opioids that illustrate the growing need for easy-to-use and effective opioid overdose reversal agents. In April, a report published in JAMA noted that for the first time in a decade, overdose deaths among teens in the United States rose dramatically in 2020 and kept rising through 2021 as well. the study found that fentanyl-related deaths increased from 253 in 2019 to 680 the following year. And in 2021, 77% of all teen overdose deaths involved fentanyl. A major cause is a surge nationwide in so-called Fentapills. These counterfeit pills are laced with fentanyl and are produced to closely resemble legitimate prescription medicines such as Adderall and Xanax. Turning now to the pipeline, we made progress during the course in our Phase II study evaluating OPNC002 nasal naltrexone for alcohol use disorder. We have enrolled over 200 patients, keeping us on track to complete enrollment of our target 300 patients by year end. As you know, OPNT002 is being developed as a nasal spray that someone can take as needed to quell the pleasurable effects of alcohol. We believe this can help someone reduce regular heavy drinking. AUD is a significant cause of disease, and OPNT002 could have a dramatic impact on one's ability to control unhealthy drinking. We're excited to complete this study and further our understanding of its therapeutic potential and the novel approach. We expect to report data in the first half of 2023. In conclusion, I am excited by the progress we have made. We continue to advance our mission to develop new medicines to treat addiction and drug overdose. The coming months will be pivotal for us as we continue to execute on our OPMT-003 program. and we're excited for the journey ahead. I want to thank the entire Opioid Team and our collaborators for the hard work and dedication. With that, I'll turn the call over to David to discuss the financials.

Thanks, Roger. Our financial results for the three and six months ended June 30th, 2022, are detailed in our press release issued this afternoon. I'd like to take a moment to provide some context and highlight a few key points from the quarter. We reported second quarter revenues of $3.9 million. This includes $2.3 million of revenue attributable to the sales of Narcan nasal spray from our license agreement with EBS. Revenue from Narcan was lower than expected because EBS under the royalty owed to us based on this quarter's U.S. sales of Narcan. Under the generic reduction clause of our license agreement, EBS should pay a tiered royalty on U.S. Narcan sales when the net sales in a given quarter are greater than 70% of the net Narcan sales in Q3 2021. Second quarter U.S. sales, as reported to us by EBS, were above 70% of U.S. net sales in Q3 2021. However, instead of applying correctly the terms of the license agreement, EBS chose to apply an arbitrary 2% rate on U.S. net Narcan sales. If EBS had applied the tiered royalty rates correctly, as provided in the license agreement, we believe the correct amount EBS should have paid us is approximately 9.1 million for the second quarter, a difference of approximately 6.8 million. On August 10th, we provided EBS a default notice of a material breach of its license agreement for underpayment of royalties. This gives EBS 60 days to meet its obligation under the license agreement and pay the correct amount owed. If EBS fails to do so, We will pursue the remedies available to us under the agreement, which includes termination of the agreement and potential return of Narcan nasal spray to opiates. Turning now to our second quarter operating expenses. Research and development expenses increased to $7.9 million in the second quarter of 2022, compared to $3.1 million for the same period in 2021. The $4.8 million increase was primarily due to increased activity on our lead product, OPNT-003, nasal nalmophene for opioid overdose, as well as personnel and non-cash stock-based compensation expense. Sales and marketing expenses for the three months ended June 30, 2022, were approximately $2.8 million, as compared to approximately $1.5 million in the comparable period in 2021. The 1.8 million increase was due to personnel and non-cash stock-based compensation expense, which increased by 1.1 million, and external third-party spend related to pre-commercial activities, which increased by 0.7 million. General and administrative expenses for the second quarter were approximately 4 million, as compared to approximately 2.7 million in the comparable period in 2021. The 1.3 million increase was primarily due to increases in personnel and related expenses as well as non-cash stock-based compensation. We reported a net loss this quarter of 11.8 million or a loss of $2.31 per basic and diluted share compared to net income of 1.7 million or income of $0.39 per basic and $0.31 per diluted share in the second quarter of 2021. We ended the second quarter with cash and cash equivalents of $40.2 million. We also received from BARDA an additional award of $2.1 million to support OPNT-003. This brings total BARDA funding to $10.8 million. We remain grateful to BARDA for its support. Looking ahead, we are prudently managing expenses while maintaining our good financial position with multiple value creating catalysts expected over the next 12 months. With that said, we intend to ensure the terms of the Narcan License Agreement are appropriately enforced. Thank you, and with that, let me open the call for questions.

At this time, we will be conducting a question and answer session If we would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the 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 for you to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from Brandon Foulkes with Cantor Fitzgerald. Please proceed with your question.

Hi, thanks for taking my questions and congratulations on all the progress. Maybe just three from me. If you don't mind, I'll just ask them up front. Do you think the onset of action data will actually likely be the bigger driver uptake than the longer half-life? I think it's just quite an impressive differentiation there. And then secondly, and this one sort of goes with the first one a bit, how do you think about the market you're going to launch into now that generic Narcan is in the market? And if we don't see a meaningful reduction in opioid overdose deaths with the generics in the market, how should we think about maybe the need to re-look at the strategy from a government perspective? Do they then move to different agents such as 003, showing that cost maybe wasn't the impediment there? Just any market dynamics there I think could be quite interesting. And then lastly, just on the alcohol use disorder, any learning from the recent trial or competitor readout? you know, there's a bit of mixed data there, so I guess any learnings across to your trial. Thank you.

Thank you, Brandon. I'll try and get all those answers, but I might need to ask you to repeat a couple of those questions as I noted them down. So the first one, so in terms of the onset of action and long half-life, in terms of being differentiated, discussing that, both are very important. When we think about saving a life, there's two considerations. There's how much of an opioid overdose reversal agent you can get into the body and ultimately to the brain as quickly as possible. And that's what in principle is going to determine a successful rescue. But in fact, within that, when you talk about onset of action, what really makes a big difference is binding affinity. On a molecular level, how hard, how tight the opioid antagonist can bind to the mu opioid receptor, which drives breathing. That's a real key consideration, which is why higher affinity agents, we believe, so much more needed today because of fentanyl having such high affinity, the mu opioid receptor, when we compare it. to older opioids such as heroin, et cetera. The other consideration around long half-life relates to this issue around re-overdosing. So even though someone can be successfully rescued from an opioid overdose, the real issue that we hear continuously is how someone can fall back into an overdose, and that's happening a lot more in recent years with fentanyl, which has so much of a longer half-life. So that's another consideration, and those are the key attributes and differentiators we believe we have with what we're developing with OPMT-003. Your question about how do we see the marketplace with generic Narcan, I mean, this is all always anticipated, and it really relates to your first question around we still see this as a hugely differentiated drug that we are developing. That can potentially save more lives. And also, when we think about the potential cost per overdose, we think given its higher potency, faster absorption, and longer duration of action, we think that this could still make absolute economic sense. regardless of, in fact, the increased potential to save more lives. And we believe that will be very well received by people out there in both the public interest sector, who are currently the majority of people using opioid overdose reversal agents, as well as in the retail segment as well. Just bear in mind, this isn't just, although we think the attributes are particularly well suited for fentanyl and synthetic opioid overdoses, we still believe this will be a better drug to be used in all opioid overdoses, such as just opioid painkillers. I think those are your OPNT003 questions. Please add more, but otherwise there was a question on AUD, but have I captured everything you wanted on 003?

Hello? You're on mute. Hi, sorry.

Yeah, thank you very much, Roger.

So just moving on to AUD, I mean, yes, I'm aware of exactly another company developing a product for alcohol use disorder, and it failed, and it first phase three study. I mean, for several reasons. Well, firstly, the attraction of AUD remains particularly high given the fact that there's not many compelling products out there on the market. What we're developing is quite different from what that product was or remains in that, firstly, it's an entirely different mechanism of action. We are using an opioid antagonist to reduce the effects of endogenous opioids. when you drink alcohol. So the mechanism of action is different. Second, this drug naltrexone that we're using has already been used and is FDA approved in the US taken orally. So it's already got some demonstrated efficacy and safety for the fact that it's on the market as an oral compound and as a depot injection in the case of Vivitrol. So that gives us high confidence. And then the real differentiator is how we are able to deliver such a high dose of nasal naltrexone in a very short timeframe, which we think is really important to couple the peak enjoyment people are experiencing and the peak release of endorphins and being able to intercept at that key moment in time. And with the high doses of naltrexone that we're delivering in that very short timeframe, We also believe we have the potential to block what's called the delta opioid receptors, which are particularly implicated in alcohol use disorder. And then finally, our phase two study design helps address one of the issues that we see more broadly in any CNS trials, which is that of a placebo response. I won't go into too much detail on this call, but I need to say that we have designed the trial to try and eliminate as much of the placebo response as possible, and we think that puts us in a good place.

All right. That's very helpful. Thanks, Roger.

Our next question comes from Carl Burns with Northland Capital Markets. Please proceed with your question.

Thanks for the questions, and congratulations on your progress. particularly the notice of patent allowance and the additional BARDA funding. Just with respect to the timeline, if memory serves me, when Narcan was initially approved, it was a priority review and approved within four months. Is there any reason to think that O03 may have a similar timeline given this ongoing fentanyl crisis and the PKPD data that you've demonstrated? And then I have a follow-up as well. Yeah.

i mean we had very good interaction with the agency to date um we do we believe we have a good regular case to go priority review especially on the back of fast track as well and the precedent set by um other opioid antagonists that have been approved for opioid overdose um and the fact of your point that despite more naloxone being out there than ever before, opioid overdose deaths continues to skyrocket. So we think there's a broader public health need that we hope the agency will be mindful of. Absolutely. You have another question?

Yeah, and then a follow-up to that is, again, given the rapid onset of action, the favorable comparison with respect to reversing respiratory depression and longer half-life of 11, I believe it's 11.2 hours. It seems pretty straightforward or logical to think that the public interest markets would adopt O3 as a first-line therapeutic right away. I mean, it would be almost unethical not to do so. Is that something you would agree with?

I mean, it's a decision for these customers, absolutely, as to how they would see it. But our view is that given the data we have, absolutely, we would believe that this has the potential to be first line in this setting. Absolutely.

And do you think with respect to that, there could be something specific in the label that would bootstrap that first line of defense position?

Well, I mean, it's unclear yet how exactly the label will be, so it would be premature for me to comment on this stage.

No worries. I'll hop back in the queue. Thanks so much. Thanks.

Our next question comes from Trevor Allred with Appenheimer. Please proceed with your question.

Hey, guys. Thanks for taking my question. So, I guess, can you just discuss the recent patent application some thoughts as to why you anticipate it'll provide better protection than beyond that which EBS has on Narcan. And then can you also just give any granularity on how EBS supports their position with the 2% royalty rate this quarter? Thanks.

Sure. In terms of the patent protection overall, we believe we're in a good position because we have a sort of moat-like approach to protecting the products. So the patent in itself is a use and formulation patent, and it builds on the excipient for which we have the exclusive license for, which is Intravail. And the PK profile in particular is particularly dependent on the use of Intravail. So we believe we are in a good position there. And that patent goes out to 2037 on the expectation it will be granted very soon. And we also believe we have the potential to build on that with additional data we continue to generate on this product. And that is in addition to what we would expect to be three years exclusivity just from a regulatory standpoint because we've done the clinical study. with nasal namophene, when we developed the Narcan nasal spray, there was no, it was just PK work, there was no clinical study, so one didn't get that three years exclusivity either. And likewise, the excipients that we, by using Intravail, that we have an exclusive license to this, whereas the excipients used in the Narcan nasal spray were more like, how can I put it, off-the-shelf, easily available excipients.

And then David can take the second part of your question. Trevor, thanks for the question. The answer to the question probably is not going to give you much more information, but we really at this point can't comment or have really any insight on their motivation or the position on why they decided not to follow the terms of the agreement signed back in 2015 with ADAPT. We believe the terms of the agreement are very clear. And I guess over the next 60 days, we will find out what their motivation and reason for doing that.

Okay. Thanks, David. Thanks, Roger.

Ladies and gentlemen, we have reached the end of the question and answer session. And I'd like to turn the call back over 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.

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