OptiNose, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to the Optimals Q3 2021 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 need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to turn the call over to your host, Jonathan Neely, VP Investor Relations. You may begin.

Good morning, and thank you for joining us today as we review OptiNose's third quarter 2021 performance and our plans for the remainder of the year. I'm joined today by our CEO, Peter Miller, our President and Chief Operating Officer, Rami Mahmoud, 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 of the earnings release that we issued last night, as well as under the Risk Factors section and elsewhere in Opti-Nose's most recent Form 10-K and Form 10-Q. that are filed with the SEC and available at their website, sec.gov, and on our website at optinnotice.com. Your caution not to place undue reliance on forward-looking statements. 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?

Thanks, Jonathan. Good morning, everybody. We appreciate you joining us today. We have important information to share regarding our commercial and clinical progress in third quarter, our expectations for full year 2021, and a comprehensive plan to address our financial profile that we announced last night and updated this morning. However, I'd like to start today by providing perspectives regarding the longer-term potential for our business because there are significant clinical milestones in the first half of 2022 that I believe create an imperative to first appreciate the business we have today, and second, understand how approval of Xhance as the first ever FDA-approved drug treatment for people with chronic sinusitis could create significant new opportunities and the magnitude of those opportunities. Turning to slide four, we believe the potential for our business as it exists today is attractive. Today, we promote Xhance for its current indication of nasal polyps to an audience of largely ENT and allergy specialist physicians. Nasal polyps is an indication for which up to approximately 1 million diagnosed patients are treated annually. In our target audience, despite continuing challenges created by COVID-19 environment, Xhance continues to be a growth brand, expected to produce 71 to 75 million in net revenue for full year 2021, or growth of 47 to 55% compared to full year 2020. And there are factors that we believe will continue to support growth, including a leading target physician preference share, and substantial headroom in our market share. Our current efforts continue to drive adoption of Xhance, and there is early recognition in our target physician audience of the important role Xhance can play in a logical step care paradigm for patients with nasal polyps. Turning to slide five. If we are successful in developing Xhance as the first FDA-approved drug treatment for chronic sinusitis, our business will have multiple new opportunities for growth each of which is significantly larger than the current market opportunity. Promotionally, we continue to produce strong growth and have succeeded in achieving a leading physician preference share for Xhance among our target audience for treating patients with nasal polyps. Although Xhance is already used off-label by some physicians for chronic sinusitis, we are not permitted to promote its use for this indication, and some payers limit coverage to nasal polyps. There is abundant headroom in market share to support strong continued growth. However, these dynamics highlight substantial future opportunity with a new CS indication. Notably, without changing the size or deployment of our current sales force and without disrupting current physician relationships, a chronic sinusitis indication would have potential to triple the number of patients for whom we actively promote XANTS. Going a bit deeper, Today we promote Xhance for nasal polyps to ENT and allergy specialist physicians. That is an indication for which approximately one million diagnosed patients are treated each year. In our target universe, we have established a leading physician preference share for Xhance for nasal polyps, and this strong positive physician preference in the nasal polyp population is important for the specialty business we are building. The future opportunity for Optinose within the specialty business is that there is a much larger total number of patients, approximately 3 million, who have either nasal polyps or chronic sinusitis and who are also being treated by specialty physicians. Successful development in CS would enable us, with our current sales infrastructure, to extend the physician preference share we have successfully established in nasal polyps to this greatly expanded patient population. It would also enable us to pursue importantly expanded insurance coverage based on the new first-in-class approval as the only drug indicated for chronic sinusitis. Based on our experience and on electronic medical record data, we believe that many physicians can more readily diagnose chronic sinusitis than nasal polyps. In an insurance environment where some payers ask physicians to attest their patients are being treated for the indication on the label, the value of label expansion is not just in promotion. It is a factor that has potential to open prescribing by physicians who want or need the label to match what they diagnose to satisfy the demands of payers. Turning to slide six. In addition to the major growth opportunity that would be created in our specialty business, we have found that there are potential partners that have a primary care promotional infrastructure and current sales deployment that already has a high audience cross-match with Xhance targets. These partners could efficiently expand promotion of Xhance to reach up to 30 million patients That is because there are an incremental six to seven million patients with chronic sinusitis currently treated in primary care. We believe this is a particularly receptive setting where today a primary care physician has few options other than referral for patients who continue to have symptoms on generic nasal steroid treatment. Further, there are an additional 20 million lapsed patients that could be activated. More specifically, for the six to seven million patients that are currently being treated in primary care, We believe there are 50 to 60,000 primary care physicians with high potential value as targets. We analyze the overlap of these physicians with current sales efforts of potential partners and believe that there are multiple organizations that could create substantial value for both themselves and optinos through partnering. In addition to the opportunity created by the six to seven million patients currently treated in primary care, I alluded to approximately 20 million patients who are believed to know they have chronic sinusitis symptoms but who have stopped seeking regular care from a physician for nasal symptoms. A novel chronic sinusitis indication could enable activation by a primary care partner of these dissatisfied but lapsed patients through direct-to-consumer promotion. Turning to slide seven. One of the reasons we are highlighting CS today is that top-line results from re-open one and re-open two, our two chronic sinusitis pivotal trials, are expected in the very near term. In fact, it is possible that top line results from re-open one will be available to announce before our next call when we announce our fourth quarter and full year 2021 earnings. With the recruitment phase for both trials behind us, our clinical team is now focusing on successful completion of both trials and plans to have top line results from re-open one in the first quarter of 2022 and re-open two in the second quarter of 2022. Turning to slide nine. With respect to our Q3 2020 performance, I would like to highlight four key takeaways from today's presentation. First, consistent commercial execution drove strong year-over-year growth in third quarter 2021. Across the board on revenue, prescriptions, and our top physician prescriber segment, Xhance delivered strong double-digit growth rates. Despite the strong continued growth, I'd like to note that the pandemic-related environment is continuing to limit growth that we believe we otherwise would be achieving. Most notably, restrictions are continuing to meaningly limit sales territory manager access to target physician offices. That is why we believe volume trends, particularly in our fall season of September and October, did not emerge as anticipated. That is why we are adjusting guidance today for the full year of 2021. Keith will have more about that later. There are factors that we believe will support continued growth of ex-hands. For example, as I referred to earlier, there is an increasing recognition in our target physician audience of the important role ex-hands can play in a stepped care paradigm for nasal polyps. The consensus algorithm published in the major specialty journal IFAR by a panel of experts this past June has featured prominently this fall in discussions with our target audience. Increased patient flow and improved physician access are still potential drivers for future growth. Market conditions have improved this year over 2020, but the number of diagnostic visits by patients to ENT and allergy offices, and as I just mentioned, our sales representative access to those physician offices, remain below pre-pandemic norms. Although the future is not entirely clear, we believe our specialty physician environment will slowly improve with respect to both patient volumes into physician offices and with respect to our representatives' access to those physicians. Given the historical high promotional response we have seen with Xhance, we believe this could be beneficial in driving future growth. Another example of a factor we believe will support future growth is potential for improvement in the average number of prescriptions filled per year because of the refinements we continue to make to our copay assistance program. Third, we are adjusting our financial guidance for full year 2021. While lower than previously expected, the year-over-year growth rate implied by the new range for enhanced full-year net revenues remains robust, ranging from 47 to 55 percent. The changes we are making reflect current business conditions with ongoing pandemic-related business influences. Again, Keith will have more on financial guidance later in the presentation, including changes that mitigate the operating income and cash effects of the new revenue range. Getting both chronic sinusitis trials enrolled was a key objective for our organization this year. As highlighted earlier, we successfully completed that objective and are on track for top-line data in Q1 and Q2-22. Turning to slide 10, we had strong performance in the third quarter of 2021, and I will briefly touch on year-over-year growth highlights on this and the next slide. In the third quarter of 2021, there were approximately 27,900 new prescriptions for Ex-Hance, a 22 percent increase compared to third quarter 2020, while the market increased only 9 percent over the same period. We remain pleased with the relative strength of new Ex-Hance prescriptions. What is important is that in addition to increasing the number of new prescriptions, we've also improved the quality of our new prescriptions due to changes in our copay assistance program. This has increased the proportion of covered patients filling first prescriptions, which has improved average revenue per prescription. Covered patients also tend to have higher refill rates, a benefit that takes some time for us to realize, but we are seeing signs of improvement there as well. The total number of enhanced prescriptions in the third quarter of 2021 was approximately 86,300. This represents 25% growth over the third quarter of 2020, in a market environment which increased only 4% over the same period. Turning to slide 11, enhanced market share increased from 4.9% in the third quarter of 2020 to 6% in third quarter of 2021. As market volumes potentially grow in the future, we are focused on holding onto and continuing to grow our market share. Breath and depth of physician prescribing as measured by the total number of physicians who have patients filling ex-hance prescriptions and the numbers of prescriptions filled for writing physicians, respectively, increased from third quarter 2020 to third quarter 2021 as well. Regarding breadth, in third quarter 2021, approximately 7,200 physicians had a patient fill at least one prescription of an ex-hance, an increase of 12% compared to third quarter 2020. Regarding depth, The number of physicians who had more than 15 enhanced prescriptions filled by their patients in a quarter has grown even faster, with that number increasing by 27% from third quarter 2020 to third quarter 2021, with more than 1,400 physicians now in this segment. 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 third quarter 2020 results and perspectives regarding our corporate guidance.