Oyster Point Pharma Inc (OYST) 2020 Q3 法說會逐字稿

Good evening, and welcome to Oyster Point Pharma's Third Quarter 2020 Earnings Conference Call. My name is Dilem, and I'll 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. Sir, please go ahead.

Good evening, everyone, and welcome to Oyster Point Pharma's Third quarter Earnings Conference Call for the 3 months ending September 30, 2020. This evening, we issued a press release containing our third quarter financial results and recent business highlights. In addition, given the company recently passed the 1-year anniversary of our initial public offering, the company filed a shelf registration statement and establish an at-the-market offering to provide additional financial flexibility going forward.

Our earnings press release and our Form 10-Q and Form S3 that were filed with the SEC this evening 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 and my prepared remarks, we'll open up the line for questions.

This conference call contains 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, predictions regarding product approvals or the FDA, our efforts to manage the impact of COVID-19 and the industry environment and potential growth opportunities, among other things.

In addition, this conference call discusses products that are under clinical investigation, which have not yet an approved from marketing by the U.S. Food and Drug Administration. They are currently limited by federal law to investigational use and no representation is made as to their safety or effectiveness for the purpose for which they are being investigated. These statements are based upon 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 those 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 under the caption Risk Factors in the company's filings with the SEC, including our quarterly report on Form 10-Q for the quarter ended September 30, 2020, that was filed with the SEC on November 5, 2020.

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 today to discuss our third quarter 2020 financial results and recent business highlights. I would like to continue to provide an update regarding the ongoing SARS-CoV-2 virus pandemic. Oyster Point Pharma continues to monitor the impact of the SARS-CoV-2 virus pandemic and has taken proactive steps to ensure the safety of its employees, maintain business continuity of our operations and to advance our R&D pipeline.

To date, Oyster Point Pharma has continued to maintain a remote working environment for its employees. In addition, the company remains in close contact with its R&D contractors. And to date, the company's contractors have not reported significant disruption to their operations as a result of the SARS-CoV-2 virus pandemic.

In May, Oyster Point announced positive top line results from ONSET-2 Phase III trial of OC-01 in subjects with dry eye disease. The Oyster Point team has continued to finalize our NDA package and is targeting submission to the Food and Drug Administration in Q4 2020. If approved by the FDA, OC-01 nasal spray would be on track for a Q4 2021 launch. As we have compiled our NDA, we have been able to take a deeper dive into the data, as you will see in the November corporate deck that we made public on our website.

We have provided top line data from our integrated Phase IIb ONSET-1 and Phase III ONSET-2 analyses from these analyses on Slide 21 of her November corporate deck, you will see that both the 0.6 milligram per ml and 1.2 milligram per ml dose groups show statistically significant improvements in the categorical and mean changes in Schirmer's score. Importantly, we see this effect in both the study eye and fellow eye, illustrating the bilateral treatment benefit seen with our nasal spray approach.

When looking at the symptom improvement data from our integrated efficacy analysis, we see a statistically significant improvement in both dose groups versus vehicle. Although we see a larger symptom benefit versus vehicle, with the 1.2 milligram per ml dose group in the clinic environment, with that benefit in the higher dose group even more pronounced in the low humidity, high airflow, controlled adverse environment, illustrative of an environment that many patients will experience.

In addition to these analyses of the integrated data, when we include the use of concomitant artificial tiers as a covariant in our statistical models, the difference between treatment and placebo is even more pronounced in both groups. We believe this highlights the benefit we might expect eye care providers to see with the real-world use of OC-01 nasal spray. Based on integrated analysis and the totality of data from our development program, we believe that the data supports our decision to seek FDA approval of the 1.2 milligram per ml dose of OC-01 for the treatment of the signs and symptoms of dry eye disease.

In addition to our development of OC-01 for dry eye disease, we intend to file an IND this quarter to evaluate the potential of OC-01 for the treatment of Stage 1 and Stage 2 neurotrophic keratitis. We believe that OC-01's unique mechanism of action of stimulating natural tear film via the trigeminal parasympathetic pathway may be beneficial for patients with corneal epithelial hyperplasia and/or punctate keratopathy as well as those with persistent epithelial defects.

If the IND is accepted by the FDA, our clinical development team will begin enrolling the Phase II OLYMPIA clinical trial in the first half of 2021.

In summary, we remain committed to bringing innovative and transformative ocular surface disease treatments to patients and building Oyster Point Pharma into a best-in-class ophthalmology company.

I will 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 in Q4 of 2021.

Thank you, Jeff. The dry eye disease segment is a large market, with over 16 million adults diagnosed in the United States alone. Only a small proportion of these patients, approximately 2 million, are currently being treated with the therapeutic, and over 7 million people diagnosed with dry eye disease have tried and abandoned the currently available options. We believe that OC-01 has a compelling therapeutic profile that, if approved, may address some of the unmet needs of this large addressable dry eye market.

As we continue to build out our commercial organization with an experienced team, in the second half of 2021, we are planning on fielding a sales force of between 150 to 200 reps, which would target close to 90% of the current prescriber base of therapeutic dry eye products.

We also believe that patient access to OC-01 will be critical. Our access strategy includes competitive contracting for broad payer coverage, comprehensive pharmacy distribution, along with patient support programs to enable broad patient access to OC-01.

I will now turn the call back over to Dan Lochner, Oyster Point's Chief Financial Officer, to discuss our third quarter financial results.

Thank you, John. I will now provide a brief overview of Oyster Point Pharma's third quarter financial results. Additional detail about our third quarter financial results can be found in our Form 10-Q that was filed with the SEC this evening.

For the third quarter of 2020, Oyster Point Pharma reported a net loss of $16.3 million or $0.63 per share compared to a net loss of $11.5 million or $8.10 per share for the same period in 2019. As of September 30, 2020, cash and cash equivalents were $214.3 million compared to $139.1 million as of December 31, 2019.

Total research and development expenses for the third quarter of 2020 were $8.2 million compared to $8.1 million for the same period in 2019. The company's clinical and preclinical expense was $1.2 million lower during the third quarter in 2020, primarily due to the completion of the ONSET-2 Phase III clinical trial in May 2020. The company incurred higher CMC and other research and development expense of $1.3 million, primarily due to the advancement of OC-01 as well as costs associated with the NDA submission planned in the fourth quarter of 2020.

Total general and administrative expenses for the third quarter of 2020 were $8.1 million compared to $3.8 million for the same period in 2019. The increase was due to higher headcount and reflects an increase in payroll-related expenses, including stock-based compensation of $2.1 million. The company incurred higher commercial planning expenses of $1 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 the expansion of the organization and operating as a publicly traded company.

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) And our first question will come from the line of Stacy Ku from Cowen.

Congrats on the progress. So my first question is about whether you've had any additional interactions with the FDA regarding the NDA submission? And just to check if there are any remaining gating items beyond stability. And assuming acceptance of the filing, can you walk us through some of the manufacturing and maybe some of the other regulatory requirements and your level of preparedness there? And I have a follow-up.

Yes. Thanks a lot, Stacy, for the question. We have had, over the summer, a pre-NDA meeting with the FDA that primarily focused on CMC. We continue to be on track with all of the CMC requirements for meeting our NDA time line, including that stability pull, which will occur towards the end of the quarter. And so no gating items currently that we foresee at this point in time with filing of the NDA.

As we go into 2021, we will be focused on working with our manufacturing organization to pull together validation batches to prepare for launch. And so those 3 sets of validation batches, which are pretty standard in the industry, will allow us to go into the launch in very good shape with regards to supply.

So nothing out of the ordinary with regards to your typical commercial launch of the product.

Got it. And then in your early payer conversations, can you help us understand how you'll be pricing in terms of the competitive landscape? Can you remind us how you'll be thinking about branded dry eye products as well as products like generic Restasis?

Yes, sure. I'm going to turn that question over to John Snisarenko.

Thank you, Stacy. In regards to our initial payer conversations, we will be pricing OC-01 upon approval in the end of Q4 of '21 competitively with the existing branded products that are on the market at the time. We feel that's competitive, and also the payer feedback based on their initial look at our therapeutic product profile is that we have some good differentiation. And if we remain at the level of the branded products, they're very interested in adding OC-01 to the payer mix.

And just a follow-up on the generic Restasis, how you're thinking about that in terms of OC-01?

In terms of the generic Restasis, we're all awaiting the generic entries any day now. And we do feel that the way payers manage this class, there will be a step through the generic for any branded product. So the generic Restasis would be a Tier 1, and then the branded product would follow thereafter. One interesting statistic over the many years that Restasis has been on the market and along with Xiidra, over 7 million patients have already tried these 2 products. And for reasons -- different reasons have abandoned them. So there's a lot of patients that have already stepped through and can go directly onto something new, a new offer that's available for dry eye disease.

And our next question will come from line of Anupam Rama from JPMorgan.

This is Tess on the call on behalf of Anupam. I hope all is well. Just 2 quick ones from us. Perhaps you can talk about some of the physician awareness activities that are ongoing at the company ahead of a potential launch for OC-01, particularly in the virtual environment we're all living in? And I guess, are there any medical conferences that you're targeting? And how is the current messaging resonating with physicians so far? And then, I guess, one more question on launch prep, maybe how are you all thinking about market segmentation by patient type?

Yes. Thanks, Tess. So I'll answer the first part of the question, and then I'll pass it over to John. We obviously have been navigating the current conference schedule as with all of our peer companies. And as these meetings have gone virtual, we've been presenting pretty regularly. So we've presented at the ASCRS meeting. We've presented at the American Academy of Optometry. Although we will be announcing shortly, the American Academy of Ophthalmology is coming up and that will be another virtual meeting. And then as we go into 2021, many of the meetings are continuing in a virtual environment.

And so we will plan to continue to present data, and we have some really exciting data sets that we look forward to presenting out of the ONSET-1 and ONSET-2 programs as we move forward. So that will be a part of our plan. We are also planning to move forward with peer review, submission of a number of different studies as well as many of the articles surrounding science of OC-01. And so that will be a part of our plan. So I think when you look at our overall plan to disseminate the message, really focused on the science, trying to focus on being present at these virtual meetings, putting the peer-reviewed journal articles in front of the physicians.

And obviously, we've continued to do outreach in a virtual fashion as much as we possibly can. And I think that will continue as John builds his team out more on the commercial side as well as our medical affairs team continues to grow as we get closer to launch.

So obviously, not the perfect environment that we'd all like to be in where we would be at in-person meetings. But I think these meetings have been fairly well attended. There are new virtual conferences coming up all the time. And so we've been able to get that message out and be able to share our data.

And then maybe John can talk a little bit more about some of the activities as it relates to market and launch.

Yes. Thanks, Jeff. So our main focus prelaunch in 2021 is going to be to introduce and launch and extensive disease state education. Program that targets kind of the eye care professional audience. And it will focus really on the importance of tear film homeostasis and the role of natural tears. The current options on the market tend to be reserved and used for more kind of the moderate-to-severe dry eye segment. They target kind of the inflammatory component. We also want to educate on the role of natural tear film and the loss of homeostasis when you do suffer from dry eye.

And in regards to your question about segmentation, one of the things we looked at when we design the Phase III pivotal trial is that we wanted to address a broad audience of dry eye patients. So in terms of the inclusion criteria, we included a broad set of patients ranging from mild, moderate right through to the severe and the most severe patients. Because of that and the results of the Phase III trial, when we do commercialize, we plan to really address the huge unmet need of a broader audience right from the mild through to the severe patients.

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

This is Valentyna on for Patrick. Congrats on the continued progress. Two from us. So given the historic success of D2C campaigns in the marketing of dry eye products, how much emphasis do you guys plan to place on D2C versus your sales force? And as D2C something you would roll out immediately versus maybe waiting for some PBMs to come on board? And then an additional question on neurotrophic keratitis. Can you just describe the rationale here for us and maybe characterize the market opportunity in this indication as well?

Sure. So I will turn it over to John to address the first part of the question.

Yes. Thanks, Jeff. In regards to the D2C program and the DCC efforts, we're looking at kind of the 3 pillars of our commercialization strategy equally. So the sales force will be an important component. Of course, patient access and payer access to the drug will be important. And of course, educating the consumer, the patient and the eye care prescriber. So in terms of ordering of that, we will probably reserve our investment in direct-to-consumer after we get a lot of the payers to list OC-01 after approval, and then we do plan to invest quite substantially because we have seen historically that this is a very promotionally sensitive market.

And when D2C is applied, we've seen growth of the prescription dry eye market to be in the double-digit area. So it's an important component, but timing will be everything from that perspective. Our initial efforts will be really to make sure that payer uptake is quick and that we get broad coverage. And we're going to definitely target our field force from that perspective as well.

Great. And so dealing with the second part of the question with neurotrophic keratitis, this is a disease by recent estimates affects approximately 11 out of 10,000 patients in the United States. We know that the epidemiology is probably shooting very low, and we've heard estimates as high as half of patients with diabetes in the United States may have some form of neurotrophic keratitis. We're really focused on the Stage 1 and Stage 2 neurotrophic keratitis patient. And really the concept behind OC-01 is that we do feel that OC-01 contains -- or it has a mechanism of action, which allows for us to stimulate the natural tear film, which contains a number of helpful components to the ocular surface, which could include things like growth factors, including nerve growth factor, a whole host of different proteins, lipids and will allow for the patient to actually stimulate their own natural tear film.

So one of the treatments that's available today for these patients is a autologous serum tears, which is obviously very close in its makeup to the natural tear film, although not perfect. And with many of these patients, they are experiencing a corneal hypoesthesia, so they're not feeling their corneal surface. That feedback loop that currently would exist in a healthy patient that tells the brain, we need to stimulate the lacrimal gland to lubricate the ocular surface is often impaired. And so the unique mechanism of action of OC-01 by being able to stimulate the lacrimal glands, the meibomian glands and the goblet cells, through the nasal passage, allows that patient to stimulate good, healthy tear film that forms that barrier onto the ocular surface.

And oftentimes, when there's a diseased cornea, we do know that there's a feedback mechanism that occurs -- that increases transcription of messenger RNA in the lacrimal gland of various helpful proteins. And so what we want to do is really harness the lacrimal gland healing potential for the cornea and really stimulate those proteins to be secreted onto the ocular surface.

What's interesting about this indication is this is the first of a number of indications that we do think OC-01 will be applicable for. And because this does not take any additional sales force, this is another disease state that just adds to the dry eye population directly without us having to invest in any other sales force. And so we'll begin this Phase II study this year. And hopefully, from that data, we'll move on to Phase III development very shortly.

And I'm not showing any further questions at this time. I'd like to turn the call back over to Jeff now for any closing remarks.

Thank you, operator. We believe that Oyster Point Pharma has developed strong clinical trial data in the dry eye disease space, showing signs and symptoms improvements in dry eye disease in both the ONSET-1 and ONSET-2 pivotal trials. We believe that the clinical trial data we have generated in our development program that includes a broad population of patients, should translate into similar outcomes in the clinic. We are excited to go into 2021 with the potential for bringing to market a differentiated product for the treatment of dry eye disease.

We continue to build Oyster Point into a world-class ophthalmology company and have bolstered our R&D capabilities with a strong medical affairs as well as a commercial organization in preparation for our launch of OC-01 nasal spray in the fourth quarter of 2021, if approved.

I would like to thank everyone for joining us today. I hope that you and your families stay safe and healthy through the holiday season.

Ladies and gentlemen, this does conclude today's conference call. Thank you for participating. You may now disconnect.