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Operator
Good day, and thank you for standing by. Welcome to Optinose's third quarter 2023 earnings conference 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'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jonathan Neely, Vice President, Investor Relations and Business Development. Please go ahead, sir.
Jonathan Neely
Good morning, and thank you for joining us today as we review OptiNose's third quarter 2023 performance and our plans for the remainder of the year. I'm joined today by our CEO, Dr. Rami Mahmood, and our Chief Commercial Officer, Paul Spence. 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 today. as well as under the Risk Factor section and elsewhere in Opti-Nose's most recent Form 10-K and 10-Qs 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. 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 Rami.
Rami Mahmood
Thank you, Jonathan, and thank you to everyone listening for joining us this morning. We appreciate you joining us for our third quarter update. Starting on slide three, we're going to more detail in a moment, but I'd like to highlight three key takeaways from today's presentation. First, I'd like to reiterate the significance of the opportunity in front of us, which we believe has potential to reshape our business in the coming months and for years into the future. Claims data suggests that CS is currently being diagnosed by healthcare providers at least 10 times more frequently than nasal polyps. Second, I'd like to remind you that our supplemental new drug application for the new indication for ex-hance is far along in the FDA review window. We submitted our application in February and are rapidly approaching the FDA target action date in December. And last, our results demonstrate that we have continued to successfully execute on our 2023 operating strategy. That strategy has been to greatly increase our operating efficiency and to stabilize revenue in the current comparatively niche indication, while preparing our organization to seize the opportunity created by the potential approval of Exance as the first prescription treatment for one of the most common diseases diagnosed in adult outpatient medicine. We believe the new launch opportunity can enable us to build a profitable ENT and allergy-focused business by accessing greatly expanded net revenue potential through an efficient existing base of commercial capabilities. In addition, as I previously noted, we continue to actively explore commercial partnerships in primary care and other approaches to accessing the incremental value beyond what we can create on our own in the largely specialty segment where we're currently deployed. Turning to slide four, we believe future approval of Xhance as the first and only FDA approved treatment for CS has potential to increase the number of patients for whom the product can be promoted by at least tenfold because medical claims data indicate that an order of magnitude more patients are currently being diagnosed with chronic sinusitis than are being diagnosed with nasal polyps. We believe that nasal polyps is also underdiagnosed relative to the published prevalence, in part because it can be difficult to visualize the part of the nasal labyrinth where polyps emerge in offices that do not have the ability to perform nasal endoscopy. This further accentuates the potential associated with a new indication that is more amenable to office diagnosis by a broad range of physicians. The new indication would create opportunity for strong growth within our existing commercial footprint, promoting largely to specialists who see large numbers of patients with the diagnosis. And the newly expanded universe of patients would also include patients cared for by physicians outside of our current commercial reach. And we are actively exploring commercial partnerships, alternative selling models, and other ways to facilitate future outreach to those physicians and patients. Turning to slide six. Previously, we announced that the FDA accepted our supplemental new drug application in pursuit of an enhanced indication for the treatment of patients with chronic rhinosinusitis. This is a novel indication for which the agency has never previously approved any drug product. Our regulatory and clinical teams have focused on being responsive to the FDA during the review, and they will continue to do so through the remaining weeks of the review process. The FDA action goal date is December 16th of this year. Turning to slide eight. As a reminder, our objective in 2023 has been to stabilize demand trends in our current nasal polyp specialty business with a reduced commercial footprint and materially reduced expense, while both preserving necessary launch capabilities and improving operational efficiency and effectiveness of our commercial resources. This is intended to best set us up for successful launch of XANCE into the new chronic sinusitis space in 2024. With that objective in mind, we are very pleased by Ex-Hance prescription demand results in the third quarter of 2023. As we discussed in our last call, overall prescription demand in the first half of the year for Ex-Hance was stronger than we initially anticipated. This has created the opportunity for us to take thoughtful action to attempt to reduce both the number and proportion of unprofitable prescriptions. We are seeing early evidence in our prescription data that our actions have begun to produce the intended outcome, which is also resulting in an improvement in the average net revenue per prescription. Regarding prescription demand, in the third quarter of 2023, there were approximately 27,400 new prescriptions for expense, a decrease of 4% compared to the third quarter of 2022. In addition, there were approximately 84,100 total prescriptions for expense, in the third quarter of 2023, a decrease of 6% compared to the third quarter of 2022. We measure breadth and depth of physician prescribing by estimation of the total number of physicians who have patients filling various numbers of ex-hance prescriptions. Regarding breadth, in the third quarter of 23, there were approximately 8,400 physicians who had a patient fill at least one prescription of ex-hance, an increase of 5% compared to the third quarter of 2022. Regarding depth, the number of physicians who had more than 15 ex-hance prescriptions filled by their patients in the quarter decreased from 1,485 in the third quarter of 2022 to 1,346 in the third quarter of 2023. I'd like to note that all the data on this slide is estimated based in part on monthly prescription and inventory data from third parties and on data directly reported to us by pharmacies that are part of the ex-hance preferred pharmacy network. I will also note that the third quarter 2022 data we're showing today reflects our current 2023 methodology. For reference, we footnoted our prior estimates based on prior methodology. I'll now turn the call back over to Jonathan to discuss third quarter financial performance.
Jonathan Neely
Thank you, Rami. Turning to slide 10, we are encouraged by our third quarter 2023 financial results. They are shaped by our strategy to prioritize capital resources for the potential launch of Xhance as the first ever FDA-approved drug treatment for chronic sinusitis. As we reported earlier, Optinose recognized $19.3 million of SG&A plus R&D expenses in the third quarter of 2023. This is approximately a $9 million or 33% decrease compared to third quarter 2022 expenses of $28.8 million. Regarding revenue, OptiNose recognized $19.8 million of extant net revenue in the third quarter of 2023, a 1% decrease compared to third quarter 2022 net revenues of $20.1 million. As Rami referred to earlier, the strength in demand in the first half has afforded us the opportunity to make gradual changes that we intend to have a positive influence on profitability now and in the future. As an example, in third and fourth quarter, we revised our co-pay assistance program in a way that we expect will result in exchanging some of the first half 2023 demand strength within the uncovered commercial patient segment for increased profitability. Based on available prescription and inventory data purchased from third parties and on data that we received directly from our preferred pharmacy network, the estimated expense Average net revenue per prescription for the third quarter of 2023 was $236, a 6% increase compared to $223 of estimated revenue per prescription in the third quarter of 2022. Overall, our results for the first nine months of the year continue to align with our intent to reduce use of cash in 2023. We reduced operating expenses by $32 million or 33% in the first nine months of 2023 when compared to the first nine months of 2022. We have also outperformed our initial expectations for revenue, and we achieved this while sustaining product demand and maintaining the capabilities and resources that we believe will be necessary to enable a successful launch of the potential new indication for exams in 2024. As a final note on results, we reported a cash position of $66.8 million as of September 30th, 2023, a use of $27.4 million on a year-to-date basis. Turning to slide 12. As I just mentioned, ExanceNet revenues remain stable and strong in third quarter. As a result of that performance, we've increased our revenue expectations for full year 2023 by raising the low end of the range. We now expect ExanceNet revenue for the full year of 2023 to be between $66 million and $70 million. Previously, we expected ExanceNet revenue to be between $64 million and $70 million. With respect to advanced average net revenue per prescription, we continue to expect our average net revenue per prescription to be approximately $200 for the full year of 2023. Finally, we continue to expect operating expenses defined as sales, general, and administrative, plus research and development expenses for full year 2023 to be in the range from $88 million to $93 million, of which approximately $6 million is stock-based compensation. I will now turn the call back over to Rami for closing remarks. Rami?
Rami Mahmood
Thank you, Jonathan. Before moving to take any questions, I'd like to reiterate the significance of the opportunity in front of us, which we believe has potential to really reshape our business in the coming couple of months and for years into the future. We've continued to successfully execute on our 2023 operating strategy, which has been to greatly increase operating efficiency and stabilize revenue, while preparing our organization to seize the opportunity created by potential approval of exams as the first prescription treatment from one of the most common diseases diagnosed in adult outpatient medicine. We believe the new launch opportunity could enable us to build a profitable ENT and allergy-focused business by accessing greatly expanded net revenue potential through an efficient existing base of commercial capabilities. In addition, as I said before, we continue to actively explore commercial partnerships in primary care and other approaches to accessing the incremental value beyond what we can create on our own in the specialty segment where we're currently deployed. With that, I'd like to thank you for your attention and open up the call for Q&A.
Operator
Thank you. As a reminder, to ask a question, you'll need to press star 11 on your telephone. To withdraw your question, please press star 11 again. Please wait for your name to be announced. One moment while we compile the Q&A roster. One moment for our first question, please. Our first question will come from the line of Thomas Flatton with Lake Street. Your line is now open.
Thomas Flatton
Thank you. Good morning, guys. Appreciate you taking the questions. Rami, you mentioned the FDA review was far long. I'm curious if you could confirm if you've started label negotiations.
Rami Mahmood
Thanks for the question, Tom. We are 37 days away from our target action date, which is a little before the time when we would expect label negotiations to start. No, they haven't started yet, but neither have we expected them to start quite yet. They may start soon, you know, within this month.
Thomas Flatton
Great. And Jonathan, you mentioned that there was some copay restructuring that you were doing that might make Q4 more profitable. I'm assuming you meant on a revenue per prescription basis. You guys are averaging ahead of the $200 for the year, which would imply that you'd have a downshift to get to $200. I know you say approximately, but Could you give us some more color on what you expect that sequential move in revenue per prescription to be based on the changes to copay, et cetera, that you mentioned?
Jonathan Neely
Yeah. First, I guess on a year-to-date basis, there's some additional material in the presentation today in the appendix. But just to confirm, we're actually at $197 on a year-to-date basis. So we are still slightly below that $200 mark. But as you point out, you know, in third quarter, you know, we had a $236 revenue per prescription. And so, you know, we think that we're in a really good shape in terms of going into the fourth quarter where, you know, typically, you know, the last three quarters of the year, you have better revenue per prescription than you do in the first quarter of the year. And, you know, we should, you know, close out the year in our expectations, you know, somewhere around that $200 mark.
Thomas Flatton
And then for the final one for me, just the final one, Rami, in your prepared comments right at the conclusion there, you said you're continuing to explore primary care partnerships, and I don't know how you phrased it, but you said something like other approaches. I was curious if you might flesh out for us what other approaches might be aside from a primary care partnership.
Rami Mahmood
Well, and I'll invite Paul to comment if he likes as well, but there are a variety of emerging promotional approaches that do not involve pure reliance on direct selling, for example, leverage of direct-to-consumer outreach and telemedicine. And we are exploring a variety of different kinds of approaches that might be applicable to our product and our audience for commercializing the product, other than just the traditional direct sales model.
Thomas Flatton
Great. Appreciate you guys taking the questions. Thank you.
Operator
Thank you. One moment for our next question, please. Our next question will come from the line of David Amselem with Piper Sandler. Your line is now open.
David Amselem
Hi, thanks. This is Skylar on for David. First, I just have a hypothetical. If somehow the label expansion did not occur for some reason, how do you think about strategic options, and how would that impact the overall company and long-term plans for excellence? And then I have a follow-up after.
Rami Mahmood
Hi, Skylar, and thanks for the question. So, you know, the strategic future as a company will be significantly different if the product is not approved on December 16th. The specifics of what the company's strategic options would be and the kind of options that would be most appropriate for us will in part be governed by the nature of the FDA response and the kinds of actions that might be required to continue to pursue the indication. So it's a little premature for us to to speak specifically about what strategic options we'd be pursuing. I can only say that we would remain open to a variety of strategies driven by whatever the circumstances are that emerge when we get the actual response letter.
David Amselem
Got it. That makes sense. And then next on the payer landscape, with the expanded label, what would you think would be the net pricing per prescription would look like? Any additional details you could give there would be helpful. Thank you.
Rami Mahmood
So, you know, it's hard to speak with confidence about the future when a variety of actors are involved, so I can't be certain. But our belief, as I think we've said before, is that we don't think there will be any material change to the pricing of the product based purely on the approval. In other words, you know, the price of the product and the net price of the product, you know, the day after approval will be the same as it was the day before approval.
Operator
Got it. Thank you. Thank you. I'm showing no more questions at this time. I'd like to hand the conference back over to Dr. Mahmoud for closing remarks.
Rami Mahmood
So in conclusion, I think we're all very happy with how this year has gone so far. As you've seen illustrated through third quarter, the company has really delivered on stabilizing revenue at dramatically lower cost. we think the company is now very well positioned to be a stable foundation to efficiently launch into a new indication in next year. And in the next month or two here, we're really looking forward to that opportunity. Thank you all again for joining this morning, and we look forward to talking to you again soon.
Operator
This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.
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