Oyster Point Pharma Inc (OYST) 2021 Q1 法說會逐字稿

Good evening, and welcome to Oyster Point Pharma'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 Pharma's Chief Financial Officer. Please go ahead.

Good evening, everyone, and welcome to the Oyster Point Pharma First quarter earnings conference call for the 3 months ending March 31, 2021. This evening, 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 the 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 Nau, President and Chief Executive Officer of Oyster Point Pharma; and John Snisarenko, Chief Commercial Officer. Following Dr. Nau, Mr. Snisarenko and my prepared remarks, we will open up the line for questions.

During the call, we will make forward-looking statements regarding future events and the future performance of Oyster Point pharma. Forward-looking statements include statements regarding Oyster Point's 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 Oyster Point assumes no obligation to update these statements as circumstances change. Future events and actual results could differ materially from projected in the company's forward-looking statements. Additional information concerning factors that could cause results to differ materially from our forward-looking statements are described in greater detail on the caption Risk Factors in the company's filings with the SEC, including our quarterly report on Form 10-Q for the quarter ended March 31, 2021, filed with the SEC on May 6, 2021, and our annual report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on February 18, 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

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its 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 Nau, 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 2, 2021, we announced that the FDA had accepted for filing the NDA for OC-01 varenicline nasal spray for the treatment of signs and symptoms of dry eye disease and the PDUFA target action date for OC-01 nasal spray is set for October 17, 2021.

In addition to our development of OC-01 nasal spray for dry eye disease, we filed an IND in November to evaluate the potential of OC-01 for the treatment of stage 1 and stage 2 neurotrophic keratopathy. We believe that OC-01's unique mechanism of action of stimulating natural tear film via the trigeminal parasympathetic pathway as seen in preclinical and clinical studies may be beneficial for patients with corneal epithelial hyperplasia and/or punctate keratopathy 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 1 through 7th. Oyster Point's Phase III ONSET-2 data was presented by Dr. Michael Raizman in the dry eye clinical treatment section on May 1. The American Society of Cataract and Refractive Surgeons, ASCRS, is scheduled for July 23 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 Matossian will be presenting data during a session at the Women in Ophthalmology 2021 Summer Symposium, August 26 through to 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 OC-01 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 Snisarenko, Oyster Point's Chief Commercial Officer, to discuss our ongoing preparations for the potential commercial launch of OC-01 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 OC-01 varenicline 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 3 key prelaunch initiatives that we outlined last quarter. In Q1 '21, we introduced our disease state awareness campaign. The website for this program can be found at www.dryeyeland.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 OC-01's therapeutic profile and value proposition. Plans are being put in place to meet with many of the key payers in the next 2 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 OC-01 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 of therapeutic dry eye disease products. In Q1 '21, we hired sales leadership and are continuing to build out 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 2 large ophthalmology and optometry congresses that are scheduled to take place shortly after our PDUFA date.

At launch, post FDA approval, our focus will be on broad eye care professional and patient education and marketing with the plans for direct-to-patient, DTP, campaigns, leveraging OC-01's novel MOA and nasal spray route of administration. As a potential first-in-class nasal spray to treat the signs and symptoms of dry eye disease, OC-01's product profile may be compelling to both prescribers as well as patients. I will now turn the call back over to Dan Lochner, Oyster Point's Chief Financial Officer, to discuss our first quarter financial results.

Thank you, John. I'll provide a brief overview of Oyster Point 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 Pharma 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 31, 2021, cash and cash equivalents were $175.9 million compared to $192.6 million as of December 31, 2020.

The total research and 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-2 Phase III clinical trial in May 2020. The company incurred higher CMC expense of $1.8 million, primarily due to the continued advancement of OC-01 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's application fee was paid and expensed in December 2020 and subsequently refunded by the FDA in April 2021.

Selling, general and 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 $1.7 million in anticipation of a U.S. launch of OC-01, 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 cost for administrative and professional services fees and increased spending in medical affairs.

With that overview of our financials, I will now turn the call over to the operator to open up the line for questions.

(Operator Instructions) Our first question comes from the line of Ken Cacciatore with Cowen & Company.

Just a couple of questions. Jeff, I 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 Xiidra. Is there any reason to believe we could be at a premium? Or just any commentary around that?

And then also, you're in a bit of a unique position that the Xiidra 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?

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

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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 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 their 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 WAC 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 OC-01, 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 Xiidra 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 Xiidra launch is probably growing at low single digits per annum, but the investment of DTC and those efforts on education really drove that market to double-digit growth in the first, call it, 1.5 years, 2 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 will take some education, and it will take some market expansion efforts and activities as well.

Our next question comes from the line of Anupam Rama with JPMorgan.

This is Tessa on the call on behalf of Anupam. Just one from us. Can you outline for us the key payer considerations for OC-01? 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 OC-01?

Yes. 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. So with those 2 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, and speaking with some of the payers, differentiation is going 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 time frame to get Medicare coverage.

Our next question comes from the line of Joseph Catanzaro with Piper Sandler.

I have 2 for you, maybe both along sort of similar line of thought. But as we think about launch preparations and raising physician awareness around the OC-01 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 whether there are opportunities at such meetings to have more one-on-one like conversations around the OC-01 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 OC-01?

Yes. Great, Joe. And so I'm going to -- I'll take the first part of your question and -- just turn 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 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, we're seeing sometimes as many as hundreds to thousands of people on that 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 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.

Yes. Thanks, Jeff. And Joe, thank you for your question. In regards to the disease state awareness campaign, called our DSA dryeyeland.com campaign, it did start with the website that we launched just literally about a month, 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 working with the conferences and associations, kind of banner advertising, where we have very targeted efforts with different partners.

And specifically, the conferences that are coming up, we're going to be looking at even symposia to drive that education of disease state awareness, which in turn 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 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 reframe that dialogue and narrative around the approach to treating dry eye.

(Operator Instructions) Our next question comes from the line of Patrick Dolezal with LifeSci Capital.

Can you just remind us of the mechanistic rationale for OC-01 to address dry eye in a more holistic manner relative to some of the existing dry eye therapeutics? And more specifically, do you foresee a broader population being accessed potentially that encompasses multiple subsets of dry eye patients versus being niched and kind of the inflammatory dry segment, for example? And then the second question is, besides neurotrophic keratitis, you all have additional plans to potentially pursue label expansion and other indications for OC-01, 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?

Yes. Thanks, Patrick, for the question. We appreciate that. As it pertains to the mechanistic action of OC-01, I think this is one of the reasons why when we initially started the company, we were so excited about the -- not only the route of administration, but the mechanism of action. 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 released 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 up-regulation 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, the meibomian glands are atrophic, and they may not be able to produce meibum, and that's where that muco-aqueous gel that we put up onto the ocular surface with the goblet cells and 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 sub-basal 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 on to 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 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.

We plan to begin a robust investigator-initiated trials program as we get closer to the 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, Oyster Point for is, we are focused on science. We are focused on continuing to bring therapies to patients where there's unmet clinical need. And so we will 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 an R&D-focused clinical-focused, and then hopefully, with FDA approval, commercial-focused organization that is very targeted to ocular surface disease. So more to come on the pipeline, hopefully soon. But at the moment, we have plans to begin that OLYMPIA NK trial this quarter and very busy inside with all the commercial preparations.

There are no further questions. I will now turn the call back over to Dr. Nau 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 OC-01 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.