OptiNose, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Opti-Nose Q4 2020 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star then one on your telephone. Please be advised that today's call is being recorded. If you require additional assistance, you may press star then zero to reach an operator. I would now like to hand the call over to Jonathan Neely, Vice President of Investor Relations. Please go ahead.

Good morning, and thank you for joining us today as we review OptiNose's fourth quarter and full year 2020 performance and our plans for the year ahead. I am joined today by our CEO, Peter Miller, our President and Chief Operating Officer, Rami Mahmoud, our Chief Commercial Officer, Vic Covelli, and our CFO, Keith Goldan. The slides that will be presented on this call can be viewed on our website, OptiNose.com, in the Investor section. Before we start, I would like to remind you that our discussions during this conference call will include forward-looking statements. All statements that are not historical facts are hereby identified as forward-looking statements. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those indicated by such statements. Additional information regarding these factors and forward-looking statements is discussed under the Cautionary Note on Forward-Looking Statements section and the Risk Factors section and elsewhere in OPTINOS' Form 10-K that was filed today with the SEC and available at their website, sec.gov, and on our website at optinos.com. Your caution not to place undue reliance on forward-looking statements. The forward-looking statements during this conference call speak only as of the original date of this call or any earlier date indicated in such statement. and we undertake no obligation to update or revise any of these statements. We will now make prepared remarks, and then we will move to a question and answer session. With that, I will now turn the call over to Peter Miller. Peter?

Peter Miller Thanks, Jonathan, and good morning, everybody. We appreciate you joining us this morning. Starting on slide three, I'd like to begin by reviewing our 2020 full-year results. I'm not sure any of us would have predicted a pandemic at the start of the year, and in the face of significant pandemic-related headwinds, I'm very proud of the strong growth our team delivered. Though our results were not as strong as we expected when 2020 began, they reflect continued progress towards our commercial and clinical development objectives. For the full year 2020 versus 2019, enhanced net revenues increased 59% to $48.4 million, enhanced total prescriptions increased by 70%, and enhanced new prescriptions increased by 31%. It's useful to have some context for each of these results. The pandemic environment had two adverse impacts on our ability to grow the business. First, patient visits to physician offices were suppressed due to stay-at-home orders and patient discomfort with going into medical offices. And second, the ability of our territory managers to broadly person with our targeted physicians was constrained due to offices not allowing any sales representatives to meet in person due to the pandemic. Thus, our growth in total prescriptions of 70% was against a category decline of 7%, and new prescription growth of 31% was achieved in a category that declined 13%. Note also that our revenue growth lagged prescription volume growth largely due to a temporary patient assistance program that was put in place early in the pandemic. This program has since been retired and we expect revenue per prescription in 2021 to be more consistent with levels in 2019. In addition, we were disciplined with respect to our expenses. For full year 2020, we had $129 million of operating expense inclusive of chronic sinusitis clinical trial costs. This is aligned with our last guidance range and represents just a 3% increase compared to full year 2019. Turn to slide four. We'll go into more detail in a moment, but I would like to highlight five key takeaways from today's presentation. First, new prescriptions of Exhance achieved another all-time high in the fourth quarter despite continuation of the pandemic-related market challenges I already alluded to. New prescriptions increased 7% over third quarter 2020 and are up 16% compared to fourth quarter 2019. It's worthy to note that market NRX increased 21% from fourth quarter 2019 to fourth quarter 2020. Sorry, market NRX decreased 21%. Second, after making certain adjustments for the effects of the COVID-19 pandemic, our full year 2020 financial performance was aligned with our company guidance. Third, we are providing some initial company guidance related to first quarter and full year 2021 performance. We hope that our ability to drive performance in 2020 lends confidence in our projections for the year ahead. Fourth, and I'll take a moment to dive in here, we believe there are multiple opportunities that will continue to drive revenue growth in 2021. I will highlight five important factors supporting revenue growth in 2021. The first two begin with the market environment. As summarized in third-party data reports, the pandemic reduced the number of diagnostic visits by patients to physician offices and limited the ability of sales representatives to meet in person with physicians. And importantly, these effects were not limited to the second quarter of 2020. Broadly speaking, the effects on the business environment followed the course of the pandemic. There was an initial shock in second quarter, improvement in the third quarter, and then softening late in the year and into early 21 as the wave of infections and deaths attributable to the coronavirus surged again. The fact that we were able to continue to grow new prescriptions in this environment fuels our confidence that enhanced new prescription growth will further strengthen in 2021, as we expect both our access to healthcare offices and patient volumes in those offices to improve throughout 2021. We think these two factors alone could provide strong support for growth in enhanced prescriptions in 2021. Third, We believe there's an opportunity to get more benefit from our partnership with Kaleo as the pandemic environment improves. Since launch in fourth quarter 2020, Kaleo's impact on our business has not been significant as the pandemic has limited their ability to reach many of their enhanced targets. Early signs of success in places where Kaleo has been able to reach our customers leaves us optimistic about the potential for this partnership as vaccination progress serves to both ease physician access and make patients more comfortable resuming office visits. Fourth, and very encouragingly, there is increasing recognition by thought leaders and specialty societies that Xhance plays a distinct and important role in treatment of patients with chronic rhinosinusitis with nasal polyps after they try and fail conventional nasal steroid sprays. For example, a recent peer-reviewed publication in the Journal of the American Rhinologic Society, The International Forum of Allergy and Rhinology, from lead author Dr. Brent Sr., chief of rhinology at the University of North Carolina at Chapel Hill, encourages healthcare providers to consider prescribing Xhance in chronic rhinosciencitis patients with nasal polyps who remain inadequately controlled by conventional nasal steroid sprays. Additionally, several medical societies, including the American College of Allergy, Asthma, and Immunology, and the American Rhinological Society, have made available patient-centric materials also illustrating the growing recognition of the differentiated role Xhance can play in treatment. We think that this kind of expert specialty recognition of Exhance both reflects growing appreciation for the role of the product in treating the inflammation of chronic sinusitis with nasal polyps and offers potential to support broader adoption by making it clear that Exhance is an important option for maximizing medical therapy for patients with inadequate response to standard nasal sprays. And fifth, as I alluded to earlier, We also expect 2021 revenue to benefit from a stronger ex-hance average net revenue per prescription compared to full year 2020 because we expect to not field the assistance program this year compared to last year's program. Finally, our last major takeaway for today's presentation is that we expect top line data from at least one of our two pivotal clinical trials evaluating ex-hance for the treatment of patients with chronic sinusitis by the end of 2021. Note that pandemic-related issues, including temporary research site closures and decreased patient flows in many countries during 2020, slowed enrollment in our trials. This is the reason we now expect top-line results from one of our two trials to be delayed in the first half 2020 instead of being available by the end of 2021 as previously guided. As you are aware, Xhance could be the first drug ever approved and promoted for the treatment of the 30 million U.S. patients who suffer from chronic sinusitis. We believe this data could lead to a multifold expansion of our target patient population, driving significant additional value for the company, potential primary care partnerships, and opportunities for approval of Xhance XUS. Turning to slide six. In fourth quarter 2020, there were 24,600 new prescriptions for Xhance, a 7% increase in new prescriptions compared to the third quarter 2020, a 16% compared to the fourth quarter 2019, and the highest number of new quarterly prescriptions, for example, since launch. While the pandemic interrupted our new prescription growth trend in second quarter 2020, we returned to setting record highs in third and fourth quarter. As previously mentioned, the magnitude of our full year 2020 growth was constrained by factors related to the pandemic environment, which we expect to improve through the course of 2021. The return to growth in new prescriptions, even during the second half of 2020, when the overall market was still substantially down is a reminder of the high unmet need in the marketplace. We anticipate the continued new prescription growth leveraged through the high refill rates that result from high patient satisfaction with ExHance will lead to strong total prescription growth in 2021. Turning to slide seven, refill prescriptions continue to increase year over year and quarter over quarter to 49,300 in fourth quarter 2020. and now compromise approximately two-thirds of the enhanced business. Note that the slower flow of new prescriptions into the business in Q2 during the peak of the pandemic temporarily slowed refill growth in subsequent months. However, we see this impact washing out as new prescriptions return to growth. Pulling together the new and refill prescriptions, the total number of enhanced prescriptions in the fourth quarter of 2020 was approximately 73,900. This represents 36 percent growth over the fourth quarter of 2019 in a market environment which declined 13 percent over the same time period. Turning to slide eight, as we discussed on our third quarter 2020 earnings call, we've historically defined market share as a proportion of all intranasal steroid prescriptions written by the approximately 10,000 physicians that were targeted by our territory managers. Our co-promotion with Caleo gives us potential to reach up to approximately 3,000 physicians that were not in the call-on universe of our own territory managers. Given that significant change, we are taking the opportunity to update the target physician audience we use to track market share. Going forward, we will include approximately 18,000 physicians in our target audience for calculation of market share. This target audience includes all ENT and allergy specialist physicians based on third-party data write intranasal steroid spray prescriptions. In addition, our current target audience includes specialty-like primary care physicians called on by our territory managers or Kaleo sales representatives. Note that all displayed historical numbers on slide eight have been restated based on this expanded universe. Expanse market share continued to increase in fourth quarter 2020 and has increased from 3.4% in fourth quarter of 2019 to 5.1%, in fourth quarter of 2020, an increase earned despite the previously mentioned disruption to both patient flow through doctor's offices and territory manager access to physician offices during the pandemic period. Turning to slide nine, breadth and depth of physician prescribing is measured by the total number of physicians who have patients filling ex-hance prescriptions also continue to grow through the fourth quarter and 2020 as a whole. Regarding breadth, in fourth quarter 2020, approximately 6,700 physicians had a patient fill at least one prescription of Exhance, an increase of 14% compared to fourth quarter 2019. Regarding depth, the number of physicians who had more than 15 Exhance prescriptions filled by their patients in a quarter has grown even faster, with that number increasing by 54% from fourth quarter 2019 to fourth quarter 2020, with more than 1,200 physicians now in this segment. While increasing depth drove more growth than increasing breadth during the pandemic, we see the continuing growth trend for both depth and breadth as encouraging markers of product uptake and continue to believe that driving growth in both depth and breadth is important in focused promotional efforts against this objective. In a few moments, I'll provide some closing remarks, but I will first turn the call over to our CFO, Keith Goldan, for comments regarding fourth quarter 2020 results and perspectives regarding our corporate guidance. Keith.