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Operator
star one on your telephone. Please be advised that today's conference is being recorded. Should you require any further assistance, please press star zero. I would now like to hand the call over to your host, Jonathan Neely, Investor Relations. Please go ahead.
Jonathan Neely
Good morning, and thank you for joining us today as we review Optinose's first quarter 2022 performance and our plans for the remainder of the year. I'm 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. The slides that will be presented on this call can be viewed on our website, optinos.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 Factors section and elsewhere of 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 optinose.com. Your caution not to place undue reliance on forward-looking statements during this conference call, speakers. 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 today. We continue to be very encouraged by our progress and are excited about the upcoming data readout of our second pivotal trial for chronic sinusitis, a label expansion that we believe has the potential to be transformative for our business. Starting on slide four, we'll go into more detail in a moment, but I'd like to highlight four key takeaways from today's presentation. First, we reported strong financial performance in the first quarter with 35% year-over-year growth in quarterly revenue. In addition to demand growth, An important driver of this revenue growth has been a favorable shift in the mix of our business, resulting from modest changes in our copay assistance program at the start of the year. Specifically, a greater percentage of our prescription fills are profitable, with a smaller percentage having negative profitability. After making these changes to our copay assistance program, we've continued to see prescription volume growth in the large profitable segment of our business, while also seeing a desirable reduction in volume in a smaller segment of our business, which is unprofitable. This first quarter dynamic has dampened apparent near-term growth in volume for both total prescriptions and new prescriptions, but we expect this change to have enduring benefit to the business, as already reflected in the strong 1Q year-over-year growth of 21% in average net revenue per prescription. As I noted, We believe this is a desirable shift in business mix that will yield continuing benefits throughout this year and beyond. Keith will provide some additional details later in the call. Second, our first quarter 2022 revenue growth was aligned with our full year 2022 guidance. Our guidance of at least $90 million implies year-over-year growth of at least 22%. As I mentioned, we're off to a good start with 35% year-over-year growth in Q1, which will enable continued strong focus on our two core business objectives, driving enhanced revenue growth and successfully completing the chronic sinusitis pivotal trials. Third, as promised, we reported top-line results from Reopen 1 in the first quarter and were pleased with the positive results. REOPEN-1 is a landmark trial in chronic sinusitis and we believe is the first Phase III study of a nasal treatment for this common disease to show improvement inside the sinuses. Briefly, in a population where all patients had proven disease inside the sinus cavities at baseline, REOPEN-1 found that treatment with EXHANCED produced a statistically significant improvement relative to EDS placebo on both a combined symptom score and on a CT scan measure of the amount of disease inside the sinuses. We view this as an important development for the approximately 30 million adults in the United States who suffer from symptoms of chronic sinus disease. Fourth, we continue to expect top line results from re-open two before the end of this quarter. The last patient in the trial recently completed their final study visits and our clinical team is working diligently on the audits and data cleaning necessary to enable database lock and production of top-line results. EXHANSE has achieved an important place in standard of care for nasal polyp disease by helping patients with these serious symptoms, and we're producing nice EXHANSE revenue growth with the current indication, which we expect to continue. Nevertheless, we are very enthusiastic about the incremental opportunities for growth that successful chronic sinusitis trials could create. We believe this data has potential to increase product differentiation, improve the prescribing environment for Xhance, be a basis for new partnerships, improve ex-U.S. opportunities, and drive significant incremental enterprise value. As we highlighted in our fourth quarter earnings call in March, an approval could roughly triple the number of target patients for whom we can promote Xhance in our currently called on ENT allergy specialty universe from approximately 1 million diagnosed nasal poly patients to 3 million diagnosed chronic sinusitis patients. It is also important to consider how the indication will impact the insurance and promotional environment for Xhance. As we have 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 that they are prescribing ex-hance for the approved indication, which is currently nasal polyps. This is important because we found that many physicians who routinely diagnose chronic sinusitis do not often make the diagnosis of nasal polyps. Approval of the additional indication would also enhance potential for a partnering opportunity to reach out to primary care physicians who treat roughly seven million additional patients With an average value per patient of approximately $1,000 per year, each of these opportunities has the potential to be substantial. Turning to slide five, we had strong performance in the first quarter of 2022, and I will briefly touch on year-over-year growth highlights on this slide and the next. In the first quarter of 2022, there were approximately 28,200 new prescriptions for Ex-Hance, a 9% increase compared to first quarter of 2021. The total number of enhanced prescriptions in the first quarter of 2022 was approximately 80,600, which represents 11% growth over the first quarter of 2021, in a market environment that increased 8% over the same period. As I noted a moment ago, we made intentional changes to our copay assistance program at the start of the year. By reducing the segment of loss-generating prescriptions, these changes dampen near-term growth and overall volume of new and total prescriptions, that are already increasing revenue growth and short-term and long-term profitability potential. Regarding our environment, I would also like to note that our territory managers continue to work through challenges to their ability to meet in person as frequently with and as with a broader audience of physicians as they did pre-COVID. While we've seen improvement in this regard, we believe the market environment has potential to continue to improve. Importantly, and as reflected in our first quarter results, our territory managers are currently driving trial and adoption that is consistent with our stated financial objectives for 2022. Turning to slide six, enhanced market share increased from 5% in first quarter of 2021 to 5.4% in first quarter of 2022. It is worth noting that we updated the definition of our target physician universe to track progress in the audience to which we promote. Previously, we tracked SHARE against an audience of approximately 18,000 physicians, including physicians detailed in person by our former co-promotion partner. Moving forward, we are including 21,000 physicians, primarily ENT and allergy specialists that fit within our targets for in-person and or digital promotion. SHARE under this new definition is consistent with past performance and we remain excited about the headroom for future growth as more physicians incorporate Xhance into their practice of medicine. Breath and depth of physician prescribing is measured by the total number of physicians who have patients filling ex-hance prescriptions increased from first quarter 2021 to first quarter 2022 as well. Regarding breath, in first quarter 2022, approximately 7,690 physicians had a patient fill at least one prescription for ex-hance, an increase of 11% compared to first quarter 2021. Regarding depth, the number of physicians who had more than 15 enhanced prescriptions filled by their patients in a quarter grew slightly faster, with that number increasing by 14% from first quarter 2021 to first quarter 2022, with nearly 1,500 physicians now in this segment. In a few moments, I'll provide some closing remarks, but I'll first turn the call over to our CFO, Keith Goldan, for comments regarding first quarter 2022 results and perspectives regarding our corporate guidance.
Jonathan
Keith? Thanks, Peter, and thanks, everyone, for joining us this morning. Turning to slide eight. As we reported, Opti-Nose recognized $14.8 million of enhanced net revenue this first quarter, an increase of 35% compared to the first quarter of 2021. Based on available prescription data purchased from third parties and also on data we received directly from our preferred pharmacy network, Exhance average net revenue per prescription for the first quarter of 2022 was $183, an increase of 21% compared to $151 of revenue per prescription in the first quarter of 2021. As Peter described earlier, we made a change to our copay assistance program that balances the needs of our business while retaining an affordable option for patients who want treatment with Exhance. Specifically, the subset of patients in high-deductible insurance plans now have an out-of-pocket copay of $25 for the first prescription, which is comparable to the cost of over-the-counter nasal steroids instead of the previous $0 out-of-pocket. This change to our copay assistance program is important going forward as it was intended to increase ongoing revenue and average net revenue per prescription by reducing the rate of growth in prescriptions filled by commercially insured patients earn plans that have a high deductible, while sustaining the rate of growth in covered plans where prescriptions are profitable. Patients who are covered but in a high deductible plan can end up costing us more as a group than what we receive for providing ex-hance. As intended, this change is already reducing unprofitable fills. We expect the benefits to average net revenue per prescription to continue moving forward. Turning to slide nine. Our first quarter 2022 financial performance was in line with our prior guidance, and as a result, our guidance for full year and the remainder of 2022 is unchanged. First, we expect enhanced net revenue to exceed $90 million for the full year 2022. Second, with respect to enhanced average net revenue per prescription, we expect to see improvement over the remaining three quarters of 2022, and to exceed $220 for the full year of 2022. That's an increase compared to our prior expectation for net revenue per prescription to exceed $210. Finally, for the full year of 2022, we continue to expect total operating expenses to be in the range from $135 million to $140 million of which approximately $10 million is stock-based compensation. Total operating expenses excluding stock-based compensation are therefore expected to be in the range from $125 million to $130 million. Turning to slide 10. Regarding our CS trials, as Peter discussed earlier, we announced positive topline results from ReOpen 1 in March. For a more in-depth review of those results, a webcast from the announcement is still available on our website in the investor section. With respect to ReOpen 2, we expect those results to be available in June, and our plan for announcing them is similar to how we announced top-line results for ReOpen 1, in a press release followed by a conference call and presentation. Now I'll turn the call back over to Peter for closing remarks. Peter? Thanks very much, Keith.
Peter Miller
Before moving to Q&A, I'll take a moment to reiterate that we believe 2022 has the potential to be transformative for our business. We have two very clear objectives. drive revenue growth for expense, and successfully complete our pivotal trials in chronic sinusitis. I look forward to providing updates on our progress throughout 2022. Thank you, and now I'd like to open up the call for Q&A.
Operator
As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from the line of Stacy Kuh. Cohen, your line is open.
Cohen
Hi, good morning. Thanks for taking our questions. We have a few. The first is, can you just talk about the broad market as you're seeing, you know, offices reopen, we're coming out of the pandemic lows, just the broad chronic science that is writing and how Expanse is doing in relation to that. And we have a few follow-ups.
Peter Miller
I'll take that, and Vic, you know, Clovelly, our chief commercial officer, can add any additional comments. But, you know, I think what we're seeing is, from a patient perspective, you know, there's obviously two factors we look at. The first is our patients returning to offices. And I think it's fair to say, on that dimension, we're seeing pretty much a return to pre-COVID. You know, Vic, I think it's fair to say the doctors we're talking to, what we hear from our territory managers is, offices are busy. So on that dimension, you know, I think we're seeing a reasonable return to normal. The second dimension we look at is the accessibility of our reps to be able to promote in offices. And on that dimension, we're still, you know, seeing a slower reopening probably is the best way to describe it. And, Vic, you can comment more. The third thing that actually does impact us a little bit more than we originally expected is there's been pretty significant turnover in office staff in physician offices, and that just creates a little bit more work for our territory managers on the back end of making sure the prescribing process is managed in the offices. But I don't know if you have anything to add. No, Peter, that's a good summary.
Cohen
Okay, great. And so we have a few more follow-ups to that. As you think about the cadence of ex-hance writing, We see strong kind of repeat prescribing. So how should we think about, with your guidance, how it might evolve over the course of the year?
Peter Miller
You know, I think it's going to remain as it's been. I mean, we've been averaging, you know, you see a very healthy growth in both breadth and depth. So I think when you mean cadence, I want to actually be clear, Stacey, do you mean the timing of the writing? Or can you be clear of what you mean on cadence? Just so I can make sure I answer your question.
Cohen
Yeah, as we think about that revenue guidance of at least 90 million for the year, we obviously have our Q1 sales. So as we think about how it might progress through the year, this is going to be as we think about this more increased basis-based interaction, especially with these repeat prescribers, are we thinking about kind of the second half where we're really going to see that inflection?
Peter Miller
I mean, our focus, Stacey, is entirely on driving new scripts. And, you know, our model, we really have really pretty consistency that for when we get a new script, we generate roughly four prescriptions per patient per year. So that's sort of been proven over the last couple years. So, you know, our focus is entirely on generating new prescriptions. As we see, you know, continued growth or even acceleration of that, which is caused by multiple factors, the first being the market environment, which you already described. I think there could be more favorability in the back half of the year. We're not necessarily counting on that in our guidance, though, to be clear. But I think there could be favorability there. And, you know, what we're seeing, Stacey, is that, you know, with a 6% share roughly of the market, we just still have so much upside, both in terms of the doctors who are writing to write more, as well as doctors who aren't writing to write. So I think what you're going to see is that as our business has been over the past couple years, very steadily growing new prescriptions, which is driving refills, which drives total TRX.
Jonathan
Yeah, and Stacey, this is Keith Goldan. If I could just add to Peter's comments, you know, I think you were maybe digging in on how to get to the, you know, how we get to the 90 million. And I just want to add that, you know, we posted an average net revenue per script of 183. in this first quarter, over 20% growth from where we were last year. We expect growth in that figure, as we've seen in prior years, we expect the cadence to be similar. So we expect to see continued growth in that average net revenue per script, which we use as our proxy for the profitability of accounts, which caused us to raise our guidance, right? We had previously said publicly that we expect Average Net Revenue Script to be at least $210, raise that today to $220. So that's the floor we're setting now as an expectation.
Peter Miller
And Stacey, I'll just add to that. I'm going to reiterate something we said in the call about the changes to our copay program effect on the dampening of prescriptions. We actually were able to track written prescriptions And then we're also able to track prescriptions that are filled. And the dynamic we have going on here is that we still have good writing, but we have patients choosing, some patients choosing not to fill in the high deductible segment. So we feel very good about the achievement of at least $90 million in revenue. We feel very good about our ability to continue to drive new prescription growth.
Cohen
Okay, that's very helpful. Thank you very much.
Operator
Thank you. Our next question comes from David Amselem of Piper Sandler. Your line is open.
David Amselem
Thanks. So I just have a couple. First, can you talk about the rate of abandonment, if you will, regarding prescriptions? In other words, with the painter landscaping, what it is, do you have a sense of the portion of script regarding that. That's number one. And then number two is that metric of about four RXs per year, that's helpful. I'm just sort of wondering, though, what the attrition rate is, or if you have a sense of that, what is the extent to which, you know, you've got patients that are just falling off over time? Thanks.
Peter Miller
David, honestly, you broke up a little bit on your first question, and I think you were asking about abandonment and the portion of scripts in which there's abandonment by patients. Can you just clarify that question?
David Amselem
Yeah, sorry about that. That's correct, yes, the portion of abandonment scripts that go unfilled.
Peter Miller
Yeah, so what we're seeing, David, is no change in abandonment among patients. you know, the profitable script portion of our business. What we did see in first quarter was more abandonment in the high deductible segment that is not yet met a copay. And as we referenced in the call, these are costly scripts for us because we, in essence, through the copay assistance program, you know, in essence fund those scripts through the insurance plans. So that is where we did see a significantly higher level of abandonment that we've seen historically, purposely driven by the changes that we made in the copay program. So hopefully we were clear on that. Regarding four TRXs per year, that's been very consistent, David. Now, I will say the changes in the high deductible plan you know, we're not going to get as many fills on high deductible patients, which is good because those are unprofitable scripts for us. But relative to the fills in the profitable segment of our business, you know, looking at our data, which we have very granular data, it's been very consistent across the past couple years.
David Amselem
Okay. And then in terms, do you have an attrition rate or is there sort of a ballpark rate?
Peter Miller
terms of nutrition it's I will say David we're very sticky I mean it's um we have a significantly high number of patients who you know once they get into the product remain with the product and they don't obviously don't fill 12 scripts per year but you know they sort of come in and out if you will we think based on symptom you know we don't know that but based on they use more when they're highly symptomatic but It's hard for us to really calculate patient true abandonment from the beginning of time, but the data we look at, David, says that we're sticky. Patients, the thing I'll reiterate about the product, David, and you know this from the last four years you've been covering us, this product works. It doesn't work a little bit better than other products in the area. It works a lot better as evidenced by the data that we have and the feedback we get from patients. It's a sticky product with not significant abandonment.
David Amselem
Okay. Thanks, Peter.
Peter Miller
Thank you, David.
Operator
Thank you. Our next question comes from Gary Notchman of BMO Capital Markets. Your line is open.
Gary Notchman
Hey, good morning, guys. For ReopenOne, are there any incremental data points you can share following the further analysis of the data, such as subgroup analysis between CF patients with or without nasal polyps, and when could we expect to see more data from that study? And then, you know, based on re-open one, anything you plan on doing differently with the analysis of re-open two, anything you're modifying in re-open two, I think that was maybe a consideration. And also, any changes in utilization. since the ReOPEN-1 data. Are you hearing physicians using exams any differently in CS patients, whether with or without nasal polyps?
Peter Miller
Ron, I'll let you take the first couple, and Vic and I can probably answer some comments on the third.
Ron
Sure, happy to. Gary, thanks for the questions. First, with regard to new analyses, we have done a wide range of additional exploratory analyses to try to better understand the results of ReOPEN 1. As a result of that, we have not determined that it was desirable to change anything about our planned analysis for ReOPEN 2, which I think was one of your questions also. With regard to when the data will be released, we have shared data with our scientific steering committee and with a number of advisors. and we expect to release sort of, you know, over time, incremental results from the trial in normal scientific settings, so at scientific congresses and in a peer review publication over the course of the latter part of this year. With regard to changes in utilization, I'll just start the answer to that by saying that we've gotten what we view as very positive feedback from the groups of scientific consultants and advisors that we have shared the results with. They're excited to see the nature of the results that we got in ReOpen1 and very much looking forward to the results of ReOpen2.
Peter Miller
And I'll add to that, Vic, you can add anything that you feel could be incremental what I'm going to say, but we've not broadly shared information on that trial, Gary, so it's not most physicians are potentially aware of the data because of press releases or things that they may have seen. But as you know, we've not published the data we plan to this year, but the information is probably not broadly well understood by the broader prescribing community.
Vic
That kind of feeling. Yeah, I mean, I think Rami made the most important point there in saying that most physicians are going to wait until there's some availability of the data in the scientific press in order to really incorporate it into their practice. They already have a lot of confidence and experience with XANTS. They're really waiting for, you know, formal presentation of that data and frankly also FDA review of that data in order to expand their use.
Gary Notchman
Okay, great. And then on those changes in the copay program, you've gone back and forth with that in the past. So why do you think now is the right time to do it and you're confident it won't dampen Rx's too much? And I'm curious, are there more patients overall in the high deductible plans now Is that just a bigger portion of volume than it was maybe a couple of years ago?
Peter Miller
Yeah, Gary, I'll say I don't know that we've gone back and forth, honestly. I mean, I would say we made an initial change a bunch of years ago, you know, right around the launch of the product. And everything since then has been very evolutionary, you know, very sort of modest, if you will. So, you know, as Keith said in his remarks, this is a really modest change, you know, from no out-of-pocket expense. to $25, that's still a very reasonable cost. And obviously what we're balancing, Gary, is we don't want any changes to sort of have an unintended consequence of dampening physician prescribing, because doctors start to hear that, hey, your product is too expensive from an out-of-pocket standpoint. And, you know, it's why we talked about $25 being the cost of OTC Flonase. It is still a very, very reasonable price. Now, what that's done, though, is it does cause a number of patients to decide not to fill in the high deductible segment, to be clear, which we think is a good thing. You know, relative to the percentage of patients in that high deductible segment, it's really been pretty stable, you know, for the past couple years. Right, Vic? I mean, I think it's fair to say it's not dramatically going up or down. Our decision to do this was We really believe we're not going to influence pen to paper, if you will, to physicians' interest in writing it. We will reduce some people filling in the high deductible segment, but because we lose money on those prescriptions, that's going to be a good thing ultimately for the business.
Gary Notchman
No, that's fair.
Vic
Yeah, I don't know if that's going to add. You know, the only thing I'll add to that is we do a fair amount of research before any of these tweaks get implemented into the market, so we have a pretty good sense of what the impact from patients and physicians will be, and largely it's just a function of decreased fills.
Peter Miller
By the way, Gary, you'll recall we made a tweak last year, and it was that tweak also produced really nice favorability in our average net revenue prescription across the course of the year, and as far as we can tell, really did not significantly influence physician intent to want to prescribe.
Gary Notchman
Okay. And then just lastly, it's related to that, but where are you with the specialty pharmacy network? How much volume is going through that? Is it still expanding and helping drive our X growth? And I guess, you know, with some of these changes, like, does that impact how you're thinking about the specialty pharmacy network at all. How does that play into it?
Peter Miller
Yeah, Vic, I'll let you take that. We think the specialty pharmacy network is really a strong sort of a portion of a component, if you will, of how we go to market. But, Vic, I'll let you talk and answer Gary's question.
Vic
Yeah, it's clearly been a competitive advantage for the business to have this preferred pharmacy network operating behind Exant. They do a great job. The vast majority of our prescription volume continues to go through it, and we've seen it really be a stable part of our mix, frankly, since launch.
Peter Miller
The thing you know, Gary, is we get two benefits there. One is we tend to get more refills for patients through the network because the pharmacies do a really good job and follow up with patients. The second is if there are PAs involved, the pharmacies can actually help office staff, you know, instead of making sure that the, you know, it's as easy as possible on the prescribing side.
Jonathan
Just to get a little more granular, just over 85% of our gross sales in the first quarter went through our PPN.
Peter Miller
And it's a very stable network, Gary. We've actually gotten to the point that we have a couple national players. We have regional players. We're constantly evaluating the network based on performance of the pharmacies, frankly, as well as, you know, which pharmacies are more profitable for us. So I think the team does a really nice job of managing that network.
Gary Notchman
Okay, that's helpful.
Operator
Thank you. Thank you. Our next question comes from Brandon Folks of Cancer Fitzgerald. Your question, please.
Brandon Folks
Hi, thanks for taking my questions. Just two for me. Just following on from an earlier question, have you seen any change in prescribing of accounts without nasal polyps since the reopen one data, either one way or the other? And then secondly, as we get past reopen two, I should... that reduction in R&D? I know you had to gap up its guidance for the year, but going forward, are you expecting to see that reduction in spend back into the business, or should we think of that dropping to the bottom line? Thank you.
Peter Miller
I'll take the first in case I pass the second to you. It's too early, Brandon. As we said earlier, the reopen one data is not broadly understood in the market, so we've not really seen any material change. in writing outside of nasal polyp indication. And Keith, I'll let you take the second one.
Jonathan
Yeah, and Brandon, you broke up a little bit, but I think I got the gist of your question. If I don't answer all of it, just please follow up. So with respect to R&D expense, as we conclude the chronic sinusitis program, like we said on the 4Q call back in March, we do expect going forward, i.e. next year, the R&D expense on our OPEX to drastically decline. I think we commented that last year about $23 million of our total R&D costs were specifically related to the chronic sinusitis program. So, you know, just remind you that we do not have a program, R&D program behind that. So as of right now, we would expect those savings to drop to the bottom line. I don't know if we lost you, Brandon. Yeah, I think we lost Brandon.
Brandon Folks
Sorry, I am here. I was just hopping between two calls.
Jonathan
Got it. So hopefully I answered your question.
Operator
It did. Thank you very much. Sure thing. Thank you. At this time, I'd like to turn the call back over to Peter Miller for closing remarks.
Peter Miller
Well, I just want to, you know, thank... everyone again for joining the call this morning. And, you know, I'll say stay tuned. We have some exciting news on the horizon relative to our REUP and 2 trial. So we look forward to following up when that date is available. Thanks very much.
Operator
This concludes today's conference call. Thank you for participating. You may now disconnect.
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