Oyster Point Pharma Inc (OYST) 2022 Q1 法說會逐字稿

Good evening, and welcome to Oyster Point Pharma's First Quarter 2022 Earnings Conference Call. My name is Shannon, 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. Arty Ahmed, Oyster Point Pharma's VP, Investor Relations. Please go ahead.

Thank you, and good evening, everyone, and welcome to Oyster Point Pharma's First Quarter 2022 Earnings Conference Call. This evening, we issued a press release containing our financial results and recent business highlights for the first quarter ended March 31, 2022. In addition, our earnings press release and Form 10-Q, which were filed with the SEC after the close of market today, are available on our website under the Investors & Media section at www.oysterpointrx.com.

Joining us on our call today are Dr. Jeffrey Nau, President and Chief Executive Officer of Oyster Point Pharma; Dan Lochner, our Chief Financial Officer; and John Snisarenko, our Chief Commercial Officer. Following our prepared remarks, we will open up the line for questions.

Please note that during the call today, we will be making forward-looking statements regarding potential future events, including statements on Oyster Point Pharma's potential future financial status and results of operations and our plans and potential for success relating to commercializing TYRVAYA Nasal Spray. These forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause our actual results to differ materially from any future results, performance or achievements expressed or implied by such statements. For a description of these factors, please see our quarterly report on Form 10-Q for the quarter ended March 31, 2022, filed with the SEC after the close of the market today.

I will now turn the call over to Dr. Jeffrey Nau, our President and Chief Executive Officer.

Thank you, Arty. Good evening, everyone, and thank you for joining us on the call today. 2022 continues to be very exciting for Oyster Point. We've had a great first quarter, and I'm pleased to report strong quarterly results related to the sales of TYRVAYA. In November 2021, we launched TYRVAYA as the first and only FDA-approved nasal spray for the treatment of signs and symptoms of dry eye disease. Today, I will provide you with an update on the commercial progress during our first full quarter in the marketplace and perspectives on the significant opportunity ahead for us with TYRVAYA Nasal Spray. I will then review additional business highlights and our pipeline progress.

Dry eye disease and ocular surface disease in general has historically been addressed by topical eye drop therapy. Topical dry eye disease drops can sting and burn when administered to an already irritated ocular surface, often resulting in poor patient compliance. Compounding the problem of patient compliance and persistence is the fact that these products often take such a long time to work for most patients. TYRVAYA Nasal Spray is an effective treatment option with a new innovative pathway to treating the signs and symptoms of dry eye disease for the estimated 38 million people impacted by dry eye disease in the United States.

Over the past few months, I have spent a considerable amount of time in the field throughout the United States, meeting with eye care professionals and listening to their feedback. I continue to see high levels of interest and enthusiasm for TYRVAYA among the eye care community. Ophthalmologists and optometrists consistently tell me they are excited to finally have an effective, well-tolerated treatment option with a new mechanism of action, leveraging the biologically active natural tear film to treat dry eye patients. Most importantly, though, we are hearing significant positive feedback from dry eye disease patients on their satisfaction with TYRVAYA and continue to be encouraged by the stories from patients using TYRVAYA as their first prescription dry eye therapy as well as for those who have tried and failed many of the other existing prescription dry eye therapies.

In addition, I want to take a moment to congratulate the Oyster Point team for the amazing work that they are doing to significantly advance patient care in ophthalmology and optometry. In my estimation, we truly have the best team in the eye care space.

In the first quarter of 2022, approximately 19,000 TYRVAYA prescriptions were filled, and these were written by over 4,500 unique prescribers. The company recognized $2.7 million of net product revenue related to sales of TYRVAYA during the quarter.

Since our last earnings call, Oyster Point's market access team has made significant progress in establishing formulary coverage for TYRVAYA with top payer organization. According to a third-party syndicated source, TYRVAYA now has commercial coverage for up to approximately 95 million lives, or 52% of all U.S. commercial lives. Additionally, we have continued to support patients in getting access to TYRVAYA through our unique patient assistance program, TEAMTyrvaya. John Snisarenko will shortly provide details regarding the commercial performance of TYRVAYA during the quarter.

Beyond the United States, we continue to engage with international partners, with a goal of leveraging our product portfolio, evaluating additional strategic opportunities and providing our shareholders with long-term value. During 2021, the company entered into an exclusive licensing agreement with Ji Xing Pharmaceuticals to develop and commercialize OC-01 and OC-02 nasal sprays in China, where over 200 million people are impacted by dry eye disease. On March 21, 2022, Ji Xing announced regulatory clearance to conduct a Phase III clinical trial of OC-01 nasal spray for the treatment of the signs and symptoms of dry eye disease in China. This progress demonstrates the potential for OC-01 nasal spray to be a disruptive therapy for dry eye disease in China. We are excited to continue to partner with Ji Xing in their efforts to initiate the Phase III clinical trial as we add to the clinical evidence supporting TYRVAYA's safety and effectiveness in the large population of patients of Asian descent.

Moving on to our pipeline. While we remain focused on continuing the successful execution of our commercial plan for TYRVAYA, our R&D team is committed to developing breakthrough therapies that address clinical unmet needs in eye care. We are excited about the potential for OC-01 to play a role in treating stage 1 neurotrophic keratopathy, which may represent as much as 15% of the 38 million dry eye disease patients in the United States and can overlap with other comorbidities, such as late-stage diabetes. We believe that activating the natural tear film via the trigeminal nerve is an innovative approach to treating NK, as currently available dry eye therapies such as anti-inflammatories and immunomodulators do not address the underlying disease process. We continue to enroll patients in our OLYMPIA Phase II study of OC-01 nasal spray aimed at treating stage 1 NK. We remain on track to expect results of this trial in the second half of this year.

Additionally, a lead asset from our Enriched Tear Film Gene Therapy platform, OC-101, an AAV vector encoding human nerve growth factor for the treatment of stage 2 and 3 NK, has been progressing in preclinical animal studies to support an IND filing. Much like the promise of mRNA technology harnessing the body's cellular machinery to address infectious diseases and cancer, we believe that injecting AAV into the lacrimal gland could change the way we think about therapeutic delivery of protein peptides and enzymes to treat disease in the ocular surface. Key milestones in these studies included the safety of the intralacrimal gland injection procedure as well as the production and secretion of nerve growth factor into the tear film. We have now observed positive results across multiple animal studies, with nerve growth factors secreted into the tear film as early as 7 days post injection and continuing through our last assessment at 42 days. Importantly, the intralacrimal gland injection has been safe and well tolerated in all studies, even in a safety study where we administered repeated injections.

Topical nerve growth factor has already been shown to heal the corneal epithelium and improve corneal sensitivity in humans. However, current treatments are expensive and laborious, involving topical drops applied as many as 8 times per day over 56 days and needing to be constantly refrigerated. Our platform aims to harness the body's own machinery, in turn, reducing cost, increasing patient compliance and raising the quality of life for stage 2 and 3 NK patients. We plan to meet with the FDA in the second half of this year to progress this excited therapy.

In summary, I'm very pleased with the company's performance in the first quarter of this year. I'm encouraged by the strong commercial performance of TYRVAYA in its first full quarter of sales post approval as well as the progress we are making on our exciting pipeline. At Oyster Point, we strive to deliver innovative and transformative therapies for ophthalmic diseases with unmet needs. This vision guides our work every day and is reflected in the company's achievements so far in 2022.

I will now turn the call over to John Snisarenko, Oyster Point's Chief Commercial Officer, to discuss our commercial activities related to TYRVAYA.

Thank you, Jeff, and good evening, everyone. We are very excited about the progress we've made during the quarter. I'm happy to report continued strong uptake of TYRVAYA Nasal Spray 6 months post launch. Our vision for TYRVAYA has always been to transform and improve the lives of the estimated 38 million people in the U.S. alone who experience dry eye.

As Jeff highlighted previously, we are very pleased with the first quarter net product revenue of $2.7 million. Sales force have been meeting with and educating eye care professionals, or ECPs, including both optometrists and ophthalmologists. In the first quarter of 2022, approximately 19,000 prescriptions have been filled and were written by over 4,500 unique ECPs. This reflects the enthusiasm for TYRVAYA from ECPs and patients alike. TYRVAYA's market position continues to strengthen as it increasingly considered an exciting and effective new treatment for the signs and symptoms of dry eye disease.

Additionally, our market access team has had continued success in securing coverage for TYRVAYA with top payer organizations. As mentioned during our last earnings call, effective February 19, 2022, TYRVAYA was placed on Express Scripts National Preferred, Basic, and High Performance Formularies, which collectively make up around 26 million lives. Since then, we have successfully obtained coverage with additional payers. According to a third-party syndicated source, TYRVAYA now has commercial coverage for up to approximately 95 million lives, which represents 52% of all U.S. commercial lives. As we continue to gain commercial coverage, we expect an increase in the propensity of physicians to write prescriptions for TYRVAYA. We are pleased with the progress in commercial coverage of TYRVAYA since launch and anticipate receiving coverage determinations for all major commercial payers in the U.S. by mid-2022. In addition to commercial coverage, we expect Medicare coverage determinations in time for 2023.

During the first quarter, we continued to offer patient support program known as TEAMTyrvaya. By leveraging technology and experience, this program has helped patients get access to TYRVAYA with multiple benefits, including assistance in ensuring home delivery and support in the insurance process. For more information on TEAMTyrvaya, please visit the website www.tyrvaya-pro.com.

In addition, we continue to observe strong refill rates for TYRVAYA. Since launch, approximately 65% of prescriptions have been refilled within 60 days, which is an indicator of a positive response for patients and confidence from ECPs. As expected, a few months post launch, there are ebbs and flows in the progression of new and total prescriptions written. Given TYRVAYA's novel mechanism and route of action, many prescribers want to see the patients back 4 to 8 weeks after starting treatment to evaluate response to TYRVAYA. Despite strong progress in establishing commercial coverage and offering a best-in-class patient support program, we are consistently optimizing our approach to drive growth in prescriptions.

For example, we are continually refining our sales rep direction and incentive comp to drive new prescribers and depth of prescriptions per prescriber. Additionally, we are continuing to explore ways to maximize fill rates across our distribution network. Also, to further promote TYRVAYA, we just launched peer-to-peer speaker programs in April. So with 6 months of launch learnings, we continue to fine-tune our tactics and optimize our approach to drive TRx and NRx.

Our multifaceted marketing approach continues to be led by education and promotional efforts directed towards eye care professionals and patients. This is supported by direct-to-patient digital campaigns that emphasize TYRVAYA's unique benefits, including the simpler nasal spray administration and unique mechanism of action. Direct marketing efforts have been bolstered by leveraging the latest technology, including virtual detailing, digital and social media activities and partnerships as well as best-in-class analytics. Additionally, our use of digital pharmacy system has made the process of procuring TYRVAYA even simpler for patients. We intend to continue using the latest technologies and most effective strategies to drive adoption and market share of TYRVAYA. I remain very proud of our commercial team's continued efforts and success during the quarter.

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

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

For the first quarter of 2022, Oyster Point Pharma reported a net loss of $47.9 million compared to a net loss of $18.9 million for the same period in 2021. As of March 31, 2022, cash and cash equivalents were $143.4 million compared to $193.4 million as of December 31, 2021. Net product revenues for the first quarter of 2022 were approximately $2.7 million following the commercial launch of TYRVAYA in the U.S. in November 2021. The company did not generate any revenues during the 3 months ended March 31, 2021. Cost of product revenue for the 3 months ended March 31, 2022, was $0.3 million and consisted of product royalty expenses, third-party manufacturing costs, reserves for inventory obsolescence and material costs of $0.7 million. This was partially offset by a $0.4 million of supplier credit recognized during the 3 months ended March 31, 2022.

Inventory manufactured prior to the FDA approval of TYRVAYA Nasal Spray was charged to R&D expense. And as a result, the company expects this unit cost of product revenue will be lower until the company fully utilizes the product that was manufactured pre-FDA approval. The company started expensing preapproval inventory in 2020.

The company's sales and marketing expenses increased by $22.4 million during the 3 months ended March 31, 2022 compared to the same period in 2021. The increase was primarily due to higher payroll-related expenses of $11.6 million, inclusive of an increase in stock-based compensation of $0.7 million as well as sales commission expense, which was driven by onboarding a commercial field force in the second half of 2021. The company also incurred higher marketing expenses of $8.5 million in connection with advertising, sample expense, trade shows and other marketing efforts related to the U.S. commercial launch of TYRVAYA.

The company's general and administrative expenses increased by $4.4 million during the 3 months ended March 31, 2022 compared to the same period in 2021. The increase was primarily driven by increased payroll-related expenses of $2.6 million due to an increase in headcount to support the company's business operations, inclusive of an increase in stock-based compensation of $0.7 million. The company also incurred $1.3 million of other general and administrative expenses related to accounting, legal and other professional services and insurance. The increase in these other general and administrative expenses was driven by the company's transition from a clinical-stage to a commercial-stage company.

The company's research and development expenses decreased by $1.1 million during the 3 months ended March 31, 2022, compared to the same period in 2021. The decrease was primarily due to lower expenses after FDA approval of TYRVAYA in October 2021.

The company incurred interest expense of $3.1 million during the 3 months ended March 31, 2022 related to the credit agreement with OrbiMed. Interest expense included contractual interest of $2.1 million as well as noncash expense of $1 million related to the amortization of loan commitment fees and accretion of other long-term debt-related costs. The company had no interest expense during the 3 months ended March 31, 2021.

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

(Operator Instructions) Our first question comes from Ken Cacciatore with Cowen and Company.

Team, well, a lot of good metrics here. I just want to tick through a few of them. On the pricing, it seems like you're actually driving that a little faster than we would have thought. So the gross to net here of 75%, I'm seeing like a per prescription valued about $140. Just wondering, can you talk about the pacing through the balance of the year? And then maybe that would dovetail to -- the consensus is around $30 million. It looks as kind of we peak in our model and some of these metrics, you're nicely on track, but wondering if you would speak to that.

And then also, John gave some nice data points around the refill rate. Can you just talk about that in comparison to Restasis and Xiidra so we have a little bit of a feel for where that compares?

Yes. Thanks, Ken. I'll jump in. As we progressed through Q1, we clearly have a little bit more clarity on various gross-to-net items related to folks on bridge or on commercially paid product. So we're happy where we came in, in Q1. We would expect Q2 to be more or less around where Q1 is and then an improvement in the second half versus the first half.

And then related to the revenue outlook for 2022, while we haven't, at this point, provided that guidance, of course, assuming continual growth in prescriptions and TRx, which will -- John will get a little bit more into, we're comfortable with where consensus is at.

Ken, thanks for your question on refill rates. Yes, we are quite pleased with the initial refill rates. So we're seeing kind of aggregate around 65% refills over 60 days. The interesting stuff is that we've seen actually patients that were put on TYRVAYA in the early parts of launch, November, December, that are still on drug, getting their sixth refills now, 6 months in.

So in comparison to Xiidra/Restasis, I mean, we haven't quite done the math to see what persistence will be. But with these refill rates, we do feel that we're really performing a little bit above expectations on TYRVAYA's persistence rate. So we'll get that number for you as the year progresses. But overall, the leading indicators are quite positive on the acceptance of TYRVAYA by both patients as well as our prescriber base.

Okay. And then, John, maybe I'll sneak one more in. In terms of the prescribers, can you talk about repeat prescribers, kind of what percent you're seeing? Obviously, you're nicely expanding the clinician base, but if you have that data point.

Yes. In terms of unique writers, we mentioned for Q1, we were close to 4,500. If I'm looking launch to date, we're now at 5,500, and a good proportion of them do repeat and write. We're currently running around 75% of those. One thing we have fine-tuned in our launch is when we initially went out with trying to get breadth of prescriptions, we're now also doing a lot of follow-up calls to make sure that the prescription -- the physicians that have already written a prescription actually continue to follow up with their patients and continue to write. So that's been a bit of a fine-tuning in our approach, and we're seeing kind of higher and higher repeat prescriptions based on that.

Our next question comes from Chris Neyor with JPMorgan.

Congrats on the progress. First one is on payer coverage. Just wanted to get a bit more color on the additional covered commercial lives you added. Were these patients kind of downstream from ESI? Or were there additional kind of major payers that you brought on board? Or maybe any additional color you could provide there would be helpful.

Yes. Thanks, Chris. Yes, we did have some downstream plans from ESI that continue to be added to the original national preferred formularies. I think there's another big group, the UnitedHealth Group that was added during the period. Kaiser, TRICARE, and we're very pleased that we're now able to be providing covered drug to the VA as well. Those are kind of the top 6 plans and payers that make up the majority of those 95 million lives that we currently cover.

Great. That's a great progress to hear. And maybe just one kind of tangential but related point. So if we think about kind of the expansion of coverage through the remainder of the beginning of the year, and you guys have had the bridge program in place. So how effective has that been really for patients who are either facing script rejections or who don't currently have coverage? How successful have you been in converting those patients over and making sure they actually do get scripts?

I noticed oftentimes there is some -- there could be some timing issues and there can be some friction in -- of getting them through the patient hub. So maybe -- so some color there? And then also, should we expect that as you expand coverage that you -- we're going to see some flow-through in terms of the script trends? Or should we think about that impact being more on pricing?

Yes. Let me comment first on the -- our progress with commercial payer listing. So we do expect coverage determinations by midyear this year with the other 2 large PBMs that control the majority of commercial lives. So while we're awaiting that coverage, we do encourage our physicians to enroll the patients into our TEAMTyrvaya program. If they're deemed insured but not covered, they automatically get enrolled into our bridge program. And we've seen very, very good kind of fulfillment rates through our partner. 90% of those scripts that do get processed get shipped to the patients. So very, very pleased with that partnership with our third-party hub provider.

And as we do get additional commercial listings on board, we expect to start to convert these patients to revenue patients over time. And we'll keep that bridge program going while there's still a need for the patients. So we want to make sure that if an appropriate patient deem to be prescribed TYRVAYA and the physician feels that the patient is appropriate that we want to make sure that, that script gets to that patient.

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

This is Cory on for Patrick. Just a quick one from us. So looking forward into 2022, how do you plan on -- or how is your commercial strategy looking to shift over the course of the year? Do you have any granularity on when a DTC focus might emerge? And when that does occur, what are some of the implications you have on cash burn and runway of that campaign?

Yes. So I'll talk a little bit around the DTC efforts. Right out of the gate, we launched a lot of digital efforts targeting both the patients as well as our physicians, so a lot of focus on social media, on search, on digital efforts and then very, very targeted. We don't plan to really go broad on DTC until we get good coverage, not just commercially, but in 2023, we do want to -- we do expect to get Medicare coverage. Only then we'll start to consider kind of a broader DTC effort. We feel that the more targeted digital efforts that we've started since launch have been working quite well for us.

Got it. And can you provide any additional guidance on where SG&A spend might net up going forward? And thinking about cash runway, what are some of the near-term payouts you're anticipating from the Ji Xing agreement? And is this included in your guided cash runway?

Yes. So at the moment, I would say that our OpEx as reported in Q1 would likely remain pretty consistent on a quarterly basis going forward. Throughout 2022, we've really built out all the internal infrastructure to effectively market TYRVAYA, whether it's on the SG&A side as well as everything that we need provision on the R&D side. So stopping short of providing quarterly consensus, I would say that we feel comfortable with the current OpEx run rate. And then we'll look at that as we enter into 2023, of course, adding an additional buckets of capital, as John alluded to, on the DTC spend.

To date, we've been pretty adamant on taking a direct-to-patient perspective with digital, and we've been spending a decent amount of capital on social media that John can kind of speak a little bit closer to. But at the current cash runway, we're still seeing about 12 months forward on our current budget.

I will now turn the call back to Dr. Nau for closing comments.

Thank you, operator, and thanks to all of you for joining the call today. In closing, we hope you have a clear picture of the strong trajectory of TYRVAYA as a truly unique and innovative option for the treatment of dry eye disease. We're extremely excited about the potential for significant growth ahead for TYRVAYA as well as our pipeline assets. We endeavor to continue to bring transformational ophthalmic therapies to patients while delivering long-term value to shareholders. I want to thank everybody for joining the call today. Have a great evening.

This concludes today's conference call. Thank you for participating. You may now disconnect.