Oyster Point Pharma, Inc.

Good evening and welcome to Oyster Point Farmer's first quarter 2021 earnings conference call. My name is Sarah and I will be your operator today. After the company's formal remarks, there will be a question and answer session. At this time, I would like to turn the call over to Mr. Daniel Lochner, Oyster Point Farmer's Chief Financial Officer. Please go ahead.

Good evening, everyone, and welcome to the Oyster Point Pharma First Quarter Earnings Conference Call for the three months ending March 31, 2021. This year, we issued a press release containing our first quarter financial results and recent business highlights. In addition, our earnings press release and our Form 10-Q that was filed with the SEC after the close of market today are available on our website under the Investor and News section at www.oysterpointrx.com. Joining us on our call today are Dr. Jeffrey Now, President and Chief Executive Officer of Oyster Point Pharma, and John Snizerenko, Chief Commercial Officer. Following Dr. Now, Mr. Snizerenko, and my prepared remarks, we will open up the line for questions. During the call, we will make forward-looking statements regarding future events in the future of Oyster Point Pharma. Forward-looking statements include statements regarding oyster points possible or assumed future results of operations, expenses and financial position, business strategies and plans, research, development, and commercial plans or expectations, trends, market sizing, competitive position, our belief regarding our clinical trial outcomes, including secondary endpoint analysis regarding product approvals or FDA decision-making, our efforts to manage the impact of COVID-19 and the industry environment and potential growth opportunities, among other things. These statements are based upon the information available to the company today, and Worcester Point assumes no obligation to update these statements as circumstances change. Future events and actual results could differ materially from what is projected in the company's forward-looking statements. Additional information concerning factors that could cause the results to differ materially from our forward-looking statements are described in greater detail on the caption risk factors in the company's filings at the SEC, including our quarterly report on Form 10-Q for the quarter ended March 31st, 2021, filed with the SEC on May 6th, 2021, and our annual report on Form 10-K for the year ended December 31st, 2021, which was filed with the SEC on February 18th, 2021. In addition, this conference call discusses products that are under clinical investigation, which have not yet been approved for marketing by the U.S. Food and Drug Administration. They are currently limited to investigational use, and no representation is made as to their safety or effectiveness for the purposes for which they are being investigated. I will now turn the call over to Dr. Jeffrey Now, President and Chief Executive Officer of Oyster Point Pharma.

Thank you, Dan. Good evening, everyone, and thank you for joining us on our call to discuss our first quarter 2021 financial results and recent business highlights. As you may know, on March 2nd, 2021, we announced that the FDA had accepted for filing the NDA for OCO-1 varenicline nasal spray for the treatment of signs and symptoms of dry eye disease, and the PDUFA target action date for OCO-1 nasal spray is set for October 17th, 2021. In addition to our development of OCO-1 nasal spray for dry eye disease, we filed an IND in November to evaluate the potential of OCO-1 for the treatment of stage 1 and stage 2 neurotrophic keratopathy. We believe that OCO-1's unique mechanism of action of stimulating natural tear film by the trigeminal parasympathetic pathway, as seen in preclinical and clinical studies, may be beneficial for patients with corneal epithelial hyperplasia and or punctate keratopathy and as well as those with persistent epithelial defects. We plan to begin enrollment in the Phase II Olympia clinical trial this quarter. As we prepare for a potential launch, there are a number of major ophthalmology meetings important for Oyster Point to attend either virtually or live during the summer of 2021, depending on the environment in light of the current pandemic. The 2021 Association for Research and Vision in Ophthalmology was held on May 1st through the 7th, OysterPoint's phase three onset two data was presented by Dr. Michael Raisman in the dry eye clinical treatment section on May 1st. The American Society of Cataract and Refractive Surgeons, ASCRS, is scheduled for July 23rd through the 27th in Las Vegas. Dr. Ed Holland will have a podium presentation with a date and time to be determined. And finally, Dr. Cynthia Matosian will be presenting data during a session at the Women in Ophthalmology 2021 Summer Symposium, August 26th through the 29th. We expect 2021 to be a pivotal year for the company as we evolve from a clinical development company to a commercial organization that remains committed to the research and development of therapies to treat diseases of the ocular surface while launching OCO and nasal spray. If approved by the FDA, our vision and focus on bringing innovative and transformative ocular disease treatments to patients and building Oyster Point Pharma into a best-in-class ophthalmology company remains steadfast. I would like to now turn the call over to John Snizerenko, Oyster Point's Chief Commercial Officer, to discuss our ongoing preparations for the potential commercial launch of OCO-1 nasal spray in dry eye disease in Q4 of 2021. Thank you, Jeff.

The dry eye segment is a large market, with over 17 million people diagnosed in the United States alone. Only a small proportion of these patients, approximately 2 million, are currently being treated with a branded therapeutic. Over 7 million people diagnosed with dry eye disease have tried and abandoned the currently available options. We believe that OCO-1, VeronicaLin nasal spray, has a compelling therapeutic profile that, if approved, may address the unmet needs of patients with mild, moderate, and severe dry eye disease and the eye care practitioners who provide care for these patients. This product has been developed with the patient in mind, and it has the potential to provide a preservative-free nasal formulation that naturally spares the ocular surface from harmful preservatives and common ocular side effects associated with topical eye drops. From a commercial perspective, launch preparations are underway, And we are progressing on the three key prelaunch initiatives that we outlined last quarter. In Q1 2021, we introduced our disease state awareness campaign. The website for this program can be found at www.dryisland.com. That's spelled D-R-Y-E-Y-E-L-A-N-D.com. The goal of this disease state awareness campaign is to reframe the narrative around dry eye disease and to educate practitioners on the importance of tear film homeostasis and how tear film instability impacts dry eye disease. Historically, education has been focused primarily on later stage disease and the inflammatory component of the disease, which in our opinion is the long-term sequelae of a disruption in tear film homeostasis. The second phase in our launch preparation is in the area of market access and reimbursement. We are finalizing the pre-approval product dossier and compiling the information needed in order to start the dialogue with payers about OC01's therapeutic profile and value proposition. Plans are being put in place to meet with many of the key payers in the next two quarters. We've done quite a bit of research with payers, including a number of advisory boards, and we remain extremely focused on obtaining the best possible positioning of OC01 post-approval. The third stage is continuing to build out our sales team throughout the upcoming year. As we mentioned previously, we plan on hiring between 150 to 200 representatives, which would target greater than 90% of the current prescriber base at therapeutic dry eye disease products. In Q1 2021, we hired sales leadership and are continuing to build up the sales team with the hiring of sales managers, followed by sales representatives. Our goal is to have the entire sales team hired onboarded, trained, and certified in order to be ready for two large ophthalmology and optometry congresses that are scheduled to take place shortly after our PDUPA date. At launch, post-FDA approval, our focus will be on broad eye care professional and patient education and marketing with a plan for direct-to-patient DTP campaigns leveraging OCO-1's novel MOA and nasal spray route of administrations. As a potential first-in-class nasal spray to treat the signs and symptoms of dry eye disease, OCO-1's product profile may be compelling to both prescribers as well as patients. I will now turn the call back over to Dan Lochner, OysterPoint's Chief Financial Officer, to discuss our first quarter financial results.

Thank you, Jim. I'll now provide a brief overview of OysterPoint Pharma's first quarter financial results. Additional details about our first quarter as well as our quarterly financial results can be found in our Form 10-Q that was filed with the SEC this evening. For the first quarter of 2021, Oyster Point Farmer reported a net loss of $18.9 million, or $0.73 per share, compared to a net loss of $16.5 million, or $0.77 per share, for the same period in 2020. As of March 31st, 2021, cash and cash equivalents were $175.9 million compared to $192.6 million as of December 31st, 2020. Total research development expenses for the first quarter of 2021 were $5.8 million compared to $11.3 million for the same period in 2020. The company's expenditures for preclinical and clinical programs were $4.2 million lower during the first quarter of 2021 than the same period in 2020, primarily due to the completion of the onset to Phase III clinical trial in May 2020. The company incurred higher CMC expense of $1.8 million, primarily due to the continued advancement of OCO-1 and, if approved by the FDA, anticipated commercial launch. The $3.1 million decrease in other research and development expenses was primarily due to the company's recording of a $2.9 million gain in the first quarter of 2021 in connection with the small business waiver granted by the FDA for the NDA application fee in February 2021. The NDA application fee was paid in expense in December 2020 and subsequently refunded by the FDA in April 2021. Selling general administrative expenses for the first quarter of 2021 were $13.1 million compared to $5.6 million for the same period in 2021. The increase was primarily driven by additional payroll-related expense of $4.6 million due to an increase in headcount as well as higher commercial planning expenses of $1.6 million in anticipation of a U.S. launch of OC01 if approved in the fourth quarter of 2021. Additionally, there was an increase in other general and administrative expenses of $1.2 million due to an increase in costs for administrative and professional services fees and increased pending in medical affairs. With that overview of our financials, I will now call over to the operator to open up the line for questions.

Thank you. To ask a question, you will need to press star then 1 on your telephone. To withdraw your question, please press the pound key. Our first question comes from the line of Ken Cacciatore with Cowan & Company. Your line is now open.

Thanks so much. Hey, guys, just a couple questions. Jeff, wondered if you would just comment on the review process so far. I know it's still early, but anything that you could give us any color on kind of the interaction that you're having with the agency. And then, John, maybe give us a sense of the pricing environment right now for the branded products, Restasis and Gladrozer. Any reason to believe we could be at a premium or just, you know, any commentary around that? And then also, you're in a bit of a unique position that the Zydra initial rollout wasn't too long ago. So I was wondering if you could talk about some of the learnings there, some things that could have been done maybe differently, more efficiently. I know Part D, you've already previewed to us, Part D is going to take a little bit of time. So maybe how that might impact the pacing to make this the kind of most efficient launch that you can make. Thank you.

Thanks a lot for the question, Ken, and I hope you're doing well. With regards to the FDA review, as you know, we had our PDUFA date set in October of this year. In the compound, it doesn't go through the same pathway as new chemical entity, so a little bit different than having your formal mid-cycle review process that you'd expect with a new chemical entity. We have received some information requests from the agency to clarify some things in the filing. I would characterize them as minor, often things around temperatures and settings and you know, code of federal regulations, documents for components in the CMC process. So nothing that's of concern, and we expect that the FDA will continue to ask those questions as the review continues. So today we just wait patiently for the FDA to do the review, and we're happy that they've begun that process.

Great. Thanks, Jeff, and thanks, Ken, for your question. Let's start with the pricing of the branded product. from a kind of a monthly whack wholesale acquisition cost basis, most of the branded products kind of range between the low 500s into the low 600s. And we plan to introduce OCO-1 when approved to be very competitive with that range. So we haven't announced exact pricing, but rest assured we want to be competitive in that branded price range. I think, Ken, your second question was around learnings around the Zydra launch. One of the things that we did realize quickly, and I think these learnings are transferable into this dry eye segment, is that this category, this landscape is very, very promotionally sensitive, whether it's field force detailing the eye care prescribers or investment in direct to patient, direct to consumer. The market, the therapeutic dry eye market prior to the Zydra launch is probably growing at low single digits per annum but the investment of dtc and those efforts on on education um really drove that market to double digit growth in the first call it year and a half two years so those are some learnings we want to take we want to be very precise in our direct to patient efforts once we do get approval and we want to be able to definitely expand and grow that market as we feel our therapeutic product profile is very compelling and can be used for mild, moderate, and severe patients, not just kind of reserved for the later stage disease. So that'll take some education, and it'll take some market expansion efforts and activities as well. Great. Thanks so much.

Thank you. Our next question comes from the line of Anupam Rama with J.P. Morgan. Your line is now open.

Hi, guys. This is Tessa on the call on behalf of Anupam. Thanks for taking our question. Just one from us. Can you outline for us the key payer considerations for OCO-1? When is the expectation that you will have formulary coverage post-approval? And from a payer perspective, will you require a step-through in order to use OCO-1? Thanks so much.

Yeah, thanks for your question, Tessa. From a payer perspective, we've started doing a lot of that homework right now, building that dossier on the value proposition, along with starting to get some of those meetings in the books in the next couple of quarters. The key part of our efforts there is really to show that this is a very differentiated product, not just in its MOA, but also in its route of administration, as well as being very competitive from a contracting perspective. With those two considerations, we do plan on some pretty good commercial coverage during that first 12 months, ranging by the end of that first year to be kind of 80% plus covered lives in the commercial space. In the same aspect, we'll be starting the dialogue and negotiations with Medicare Part D as well. And again, in speaking with some of the payers, differentiation is going to be key here as well as being very competitive from a contracting perspective. So we do expect coverage for Medicare to come later, probably a good year after we get our approval. So we're targeting kind of the 2023 timeframe to get Medicare coverage.

Thank you. Our next question comes from the line of Joe Catanzaro with Piper Sandler. Your line is now open.

Hey, guys. Thanks so much for taking my questions here. I have two for you, maybe both along sort of similar line of thought. But, you know, as we think about launch preparations and raising physician awareness around the OCO-1 data set, I was just wondering if you could speak to the level of engagement you have at the ophthalmology meetings that are still virtual with physicians and And whether there are opportunities at such meetings to have more one-on-one-like conversations around the OCO-1 data? And if so, how would you characterize those discussions? And then similarly, in terms of the disease state awareness campaign, just curious how you're currently driving traffic to the website and what the implications of getting traffic to the website could be for the longer-term picture of OCO-1.

Yeah, great, Joe. And so I'll take the first part of your question and send it over to John. One of the things that I think, and I'm sure this is also happening on the investor side of the industry, has happened with us is we have this virtual platform in order to share our data, talk about the product. the sheer number of people that are often able to attend to those talks and engage in those talks has gone up exponentially as compared to if we were at an in-person meeting on a podium presentation. Obviously, there are some big rooms at some of the meetings that we go to, but in many cases, you know, we're seeing sometimes as many as hundreds to thousands of people on a presentation in an ophthalmology or an optometry meeting, and the ability to engage and ask questions in this digital world. I think in the beginning of the pandemic, we were all trying to figure it out, trying to figure out the platforms. But many meetings are doing it really well now. And we've had some great engagement up until this point. We obviously continue to look forward to going back to meetings very soon. And it is our intention to do that this summer, because that in-person engagement is just so important with us. But across the company, even outside of talking about our clinical data, engaging with our IIT program, our clinical development program, we've been able to keep that going rather robustly throughout this virtual time period. And so I'll turn it over to John to talk a little bit about some of the other parts of the question.

Yeah, thanks, Jess. And Joe, thank you for your question. In regards to the disease state awareness campaign, calling it our DSA, dryisland.com campaign, it did start with the website that we launched just literally about a month and a little bit ago. And traffic has been very, very good. And that's without the efforts that we're just about to undertake to start to get more traffic to that website. So definitely we're targeting kind of the digital way to get there through through working with the Congresses and associations, kind of banner advertising where we have very targeted efforts with different partners. And specifically, the Congresses that are coming up, we're going to be looking at even symposia to drive that education of disease state awareness, which in turn, you know, pushes the eye care provider to the website to get more information. So symposia, whether they're virtual or whether they're live towards kind of, you know, the back half of the year, we're going to be flexible and nimble to address both those kind of media channels. And with these efforts, we feel that we'll be able to drive quite a bit of awareness and start to, you know, to reframe that dialogue and narrative around the approach to treating dry eye.

Okay, great. Thanks so much for taking my question. Thank you.

As a reminder to ask a question, you will need to press star, then one on your telephone. Our next question comes from the line of Patrick Dolezal with Lifestyle Capital. Your line is now open.

Hi, thanks for taking the questions. Can you just remind us of the mechanistic rationale for OCO-1 to address dry eye in a more holistic manner relative to some of the existing dry therapeutics and More specifically, do you foresee a broader population being accessed potentially that encompasses multiple subsets of dry patients versus being niched in kind of the inflammatory dry segment, for example? And then the second question is, you know, besides neurotrophic keratitis, do you all have additional plans to potentially pursue label expansion and other indications for OCO1, such as contact lens intolerance, which I know has been mentioned previously, or related indications like allergic conjunctivitis And perhaps in a more general sense, you could just speak to how you're thinking about pipeline expansion. Thanks.

Yeah, thanks, Patrick, for the question. We appreciate that. As it pertains to the mechanistic action of OCO-1, I think this is one of the reasons why when we initially started the company, we were so excited about not only the route of administration but the mechanism of action that We've shown in a number of trials that we can clearly increase lacrimal fluid from the lacrimal gland. We've shown in our imperial study that we can degranulate goblet cells on the surface of the eye to release those mucins. One of the things that I think is really important to also understand is not only do we release mucins from the goblet cells on the surface of the eye, but we also release them from the lacrimal gland. So the human lacrimal gland is a seromucous gland. And so all of those beneficial components of placing the various proteins, growth factors, mucins onto the eye, the lacrimal gland is really an important organ to keep our eyes healthy. Even when we injure the ocular surface, if we were to scratch it, for example, we get upregulation of transcriptional factors inside of that lacrimal gland that will heal the cornea. And so the concept of harnessing that pathway, that nervous pathway with the trigeminal parasympathetic pathway has been something that we're very interested in. We do know from animal models and also from electrical stimulation that that pathway in the nasal cavity can also stimulate those meibomian glands. Unfortunately, for many dry eye patients, those meibomian glands are atrophic, and they may not be able to produce meibom, and that's where that mucoaqueous gel that we put up onto the ocular surface with the goblet cells in the lacrimal gland come into play. As you mentioned, we do think that this product has benefits to other disease states, such as neurotrophic keratopathy. With neurotrophic keratopathy, we know that there's damage to that subbasal nerve plexus in the cornea. And because we're bypassing that route of stimulation, we're actually able to stimulate tear film that is then put onto the ocular surface. And so we think for certain disease states, this is going to be very important. We know that with neurotrophic keratopathy as well, that there is some overlap with the dry eye space. Many patients that have either herpetic infections or diabetes are often diagnosed with dry eye disease, but in fact, It may be NK, and we're very interested in, you know, increasing awareness around diagnosis, but also having a product that we think has a mechanism that's suitable for this disease. There are other indications that we are very interested in. Obviously, we do think that things like contact lens intolerance, potentially other uses around ocular surgeries, all interesting things. We plan to begin a robust investigator-initiated trials program as we get closer to launch. And we are continuing to want to expand indications on the label. So one of the things that I think that I'm very proud of OysterPoint for is we are focused on science. We are focused on, you know, continuing to bring therapies to patients where there's unmet clinical need. And so we will continue continue to develop and will continue to expand our indications for various different diseases of the ocular surface. We do have a very robust R&D program, and we hope to be able to talk about some of those programs as we move forward. But we are continuing to be a R&D focused, clinical focused, and then hopefully with FDA approval, commercial focused organization. that is very, very targeted to ocular surface disease. So more to come on the pipeline hopefully soon, but at the moment, you know, we have plans to begin that Olympia NK trial this quarter and, you know, very busy inside with all the commercial preparations.

Great. That was super helpful. Thanks.

Thank you. There are no further questions. I will now turn the call back over to Dr. Now for any closing comments.

Thank you, operator. The Oyster Point team has continued to build our commercial capabilities in a strategic fashion, including plans for a competitively sized ophthalmic sales force to launch OCL1 nasal spray in the fourth quarter of 2021, if approved. As there are a few companies in the ophthalmology space, with a dedicated ocular surface disease-focused sales force, we see this as an important step in the evolution and capabilities of this company. In addition, we have continued to bolster our R&D and clinical development capabilities, as well as to strengthen our manufacturing team. We are driven to build Oyster Point into a world-class ophthalmology company. In closing, I'd like to thank everybody for joining us today, and I hope that you and your families are staying safe and healthy.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.