OptiNose, Inc.

Good day, and thank you for standing by. Welcome to the Optinose fourth quarter 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 will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, 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 2021 performance and our plans for the remainder of the year. I am joined today by our CEO, Peter Miller, President and Chief Operating Officer, Rami Mahmoud, our Chief Commercial Officer, Vic Covelli, and our CFO, Keith Goldan. During this call, we will refer to the slides that can be viewed on our website, OptiNose.com, in the Investors 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 today, as well as under the risk factor section and elsewhere in OptiNose's most recent Form 10-K that is followed with the SEC, available at their website, SEC.gov, and on our website at OptiNose.com. You are cautioned 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, and good morning, everybody. We appreciate you joining us this morning at a very exciting time for our company. First, because we continue to produce strong revenue growth on our current business, and second, because we recently announced positive results from ReOpen1, the first of our two Phase 3B clinical trials evaluating ExHance and the novel indication of treatment for patients with chronic sinusitis. We also continue to expect top-line data from our second pivotal trial in the second quarter of this year. In a moment, I will discuss why we believe potential approval of ExHance as the first-ever drug treatment for this indication could be a game-changer for both the 30 million patients suffering from symptoms of chronic sinusitis and for our company. Starting on slide three, I'd like to begin by reviewing our 2021 full-year results. For the full year of 2021 versus 2020, enhanced net revenues increased 52% to $73.7 million, enhanced total prescriptions increased by 28%, and enhanced new prescriptions increased by 27%. In my view, these are outstanding results, particularly in context of a pandemic environment which has constrained both patient visits to physician offices and the ability of our territory managers to broadly meet in person with our targeted physicians. Our growth in total prescriptions of 28% was against a category that was flat, and new prescription growth of 27% was achieved in a category that increased only 4%. Revenue growth at 52 percent outpaced prescription volume growth in 2021 as a direct and intentional consequence of changes we made in 2021 to our full-pay assistance program. These changes led to a sizable 19 percent year-over-year increase in average net revenue per prescription from $185 for full year 2020 to $219 for full year 2021. In addition, we continue to be disciplined with respect to our expenses. For full year 2021, we had $132 million of operating expense, inclusive of almost $23 million of development costs associated with the chronic sinusitis programs. This is aligned with our last guidance range and represents just a 4% increase compared to full year 2020. Turning to slide four, as I mentioned up front, We believe that if we are successful in the development of Xhance as the first FDA-approved drug treatment for chronic sinusitis, it could be a game-changer for both the 30 million people who suffer with the disease and for our company. Last night, we reviewed the data from the trial and the potential benefit for patients, so I will focus my remarks today on the value for our company. This new indication creates multiple new opportunities for growth. each of which we believe has the potential to be individually larger than the current market opportunity in nasal polyps. Unlike the largely undiagnosed nasal polyp population, for whom Xhance and other therapies compete today, an approval in chronic sinusitis would make Xhance the only marketed treatment in the large, well-diagnosed, and underserved chronic sinusitis population. At a high level, we believe a CS indication would unlock new value by dramatically expanding our target patient audience and would address key insurance and promotional barriers that constrain broad adoption of exams today. First, I'd like to talk about the market expansion opportunity. The CS indication would increase our current target patient audience of adults being actively treated by a physician from approximately one million patients diagnosed with nasal polyps, a current indication, to approximately 10 million by adding those who are diagnosed with chronic sinusitis. On top of that, there are an additional estimated 20 million patients who suffer from symptoms of the disease who are not receiving care. I'd like to break that down a bit further for you. With our current commercial infrastructure, we call on a physician universe focused on the ENT and allergy specialists who treat most of the roughly 1 million diagnosed nasal polyp patients. While this is a sizable market that we believe represents a total market opportunity for its hands of approximately $1 billion at our current value per patient, a new chronic sinusitis indication would triple the accessible patient population treated by these targeted physicians to 3 million, with no additional investment in our commercial infrastructure. In addition to the population of 3 million target patients treated by specialists, there are an estimated 7 million more candidate patients currently diagnosed and being treated by roughly 50,000 to 60,000 additional physicians in primary care. As we've said previously, we do not plan to build direct selling infrastructure to optimize reach into this primary care opportunity. Instead, we intend to secure a partner with an existing, leverageable primary care deployment to efficiently broaden adoption to clinicians outside of our call-on universe. We have been assessing this space and are optimistic there are multiple partners with potential to jointly benefit from helping us realize this additional value. In addition to the opportunities to create incremental value that I've already mentioned, tripling the patient population in our current commercial footprint and accessing a large new primary care population with a partner, there is an additional potential value lever. An estimated 20 million patients who report symptoms of chronic sinusitis have basically given up seeking regular care by a physician for their symptoms. Hesitancy to progress to surgery, dissatisfaction with prior treatment options, and a belief that a doctor wouldn't have anything new to offer them are among the reasons why so many patients lapse out of the healthcare system. Direct-to-consumer promotional pilots we conducted in several markets support that many patients could be successfully activated via DTC advertising. The proposition of DTC is further supported by research which reveals that the quality of life burden associated with chronic sinusitis is comparable to other serious chronic diseases such as COPD, asthma, and chronic angina, and that the value of ex-hance, distribution of drug high and deep in the nasal cavity, is intuitive to patients. Partnership with the right primary care partner could open up substantial opportunity to add these estimated 20 million dissatisfied dropout patients to the 10 million diagnosed and actively treated patients I discussed a moment ago. Turning to slide five. While the dramatic expansion of our target patient population with the chronic sinusitis indication is an obvious lever for potential future value creation, it's also important to consider how the indication will impact the insurance and promotional environment for ExHance. As we've previously described, insurance coverage for Xhance is very good, with approximately 80% of commercial lives in a plan that covers Xhance. However, approximately half of those lives are in a plan that constrains prescribing by requiring physicians to attest they are prescribing Xhance for the approved indication, which is currently nasal polyps. This is important because we have found that many physicians who routinely diagnose chronic sinusitis do not often make the diagnosis of nasal polyps. Ultimately, claims data suggests that CS is diagnosed 10 times more often than nasal polyps. Accordingly, another important implication for value creation with the potential chronic sinusitis indication is that in an insurance environment where some payers interrogate the diagnostic decisions of physicians, many HCPs report hesitating before diagnosing nasal polyposis, a condition which is already underdiagnosed. For the more readily diagnosed chronic sinusitis population, a much broader swath of physicians are expected to prescribe the product, to prescribe it for more patients, and to ultimately be successful in overcoming insurance-associated challenges to secure a chance for their patients. Turning to slide six, additionally, Thanks to our CS development program, objective evidence from large, controlled trials of effect on inflammation deep inside the sinuses is available for Xhance for the first time. On this slide, you can see before and after CT images of a patient treated with Xhance from the REOPEN1 trial. This is an example of a coronal image, which you can see is a front-to-back view with the eye spaces visible on each side. These images are from a patient randomized to one spray per nostril, twice daily of his hands, who was calculated to have an absolute 6.4% improvement in APOP. As you can see in this patient, there was an obvious increase in the sinus open space or the black region representing air in the right image at week 24 compared to the left image at baseline. As you can tell, We are very excited about the potential value of a chronic sinusitis indication for our company. We are also feeling very good about the business we are currently building with a nasal polyp indication and would now like to turn to those results. Turning to slide eight. With respect to our Q4 2021 performance, I'd like to highlight four key takeaways from today's presentation. First, Consistent commercial execution drove strong year-over-year growth in fourth quarter 2021. Across the board on revenue, prescriptions, and size of our top physician prescriber segment, ExHANDS delivered strong growth rates. Second, we are providing initial financial guidance for full year 2022. Importantly, please be aware that for 2022, We believe that our territory managers' access to our target position offices will not meaningfully improve from the levels that existed in 2021. We expect a year-over-year growth rate implied by the guidance range for Ex-Hance full-year net revenues to be at least 22 percent, which is strong double-digit growth. Keith will have more on financial guidance later in the presentation. There is an increasing recognition in our target physician audience of the important role ex-hands can play in a medically appropriate and fiscally prudent stepwise care paradigm for treating nasal polyps. Moreover, with our fresh reopen one results, physician adoption in 2022 will have new support from controlled trial evidence for nasal polyp patients treated with ex-hands who also have chronic sinusitis. As I've already discussed, looking beyond this year and assuming positive data from ReOpen2 and FDA approval, we expect greater potential value from Promotion of Exhance as the first drug treatment for patients with chronic sinusitis. And fourth, getting results from both chronic sinusitis trials this year has been a key objective for our organization. As highlighted earlier, we successfully completed that objective for ReOpen1 and remain on track for top line data from ReOpen2 in Q2 2022. Given the positive results of Reopen 1, if Reopen 2 is also positive, we plan to move quickly to file a marketing application with the FDA. Turning to slide 9, we had strong performance in fourth quarter 2021, and I will briefly touch on the year-over-year growth highlights on this slide and the next. In fourth quarter 2021, there were approximately 29,900 new prescriptions for Ex-Hance a 21% increase compared to fourth quarter 2020, while the market increased 14% over the same period. We remain pleased with the relative strength of enhanced prescriptions. It is important to note that in addition to increasing the number of new prescriptions through 2021, we also have durably improved the quality of our new prescriptions due to changes in our copay assistance program. Changes in 2021 increased the proportion of covered versus uncovered patients filling first prescriptions, which has improved average revenue per prescription. Covered patients also tend to have higher reflow rates, a benefit that takes more time for us to realize, but we are seeing improvement there as well. The total number of enhanced prescriptions in the fourth quarter of 2021 was approximately 93,700. This represents 27% growth over the fourth quarter of 2020 in a market environment which increased only 6% over the same period. Turning to slide 10, enhanced market share increased from 5.1 percent in the fourth quarter of 2020 to 6.3 percent in the fourth quarter of 2021. As market volumes potentially grow in the future, we are focused on continuing to grow our market share in the near term, and there remains lots of headroom for continued share growth, especially if we should achieve the new chronic sinusitis label expansion. breadth 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 fourth quarter 2020 to fourth quarter 2021 as well. Regarding breadth, in fourth quarter 2021, approximately 7,500 physicians had a patient fill at least one prescription of ex-hance, an increase of 12% compared to fourth 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 25% from fourth quarter 2020 to fourth quarter 2021, with nearly 1,600 physicians now in this segment. In a few moments, I'll provide some closing remarks, but first I'll turn the call over to our CFO, Keith Koldan, for comments regarding fourth quarter 2021 results and perspectives regarding our corporate guidance.