Opiant Pharmaceuticals, Inc. (NASDAQ:OPNT) Q2 2022 Earnings Conference Call August 11, 2022 4:30 PM ET
Ben Atkins - VP Communications and Investor Relations
Roger Crystal - President, Chief Executive Officer
David O’Toole - Chief Financial Officer
Conference Call Participants
Brandon Folkes - Cantor Fitzgerald
Carl Byrnes - Northland Capital Markets
Trevor Allred - Oppenheimer
Greetings, and welcome to Opiant Pharmaceuticals Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host, Ben Atkins, Vice President of Communications and Investor Relations. Please go ahead sir.
Thank you, operator, and thank you all for joining us this afternoon. With me on today's call are Chief Executive Officer, Dr. Roger Crystal; and Chief Financial Officer, David O'Toole. This afternoon, Opiant issued a press release announcing financial results and providing a business update for the three months and six months ended June 30, 2022. Today's press release is available on our website at www.opiant.com.
Before we start, please note that certain information discussed on the call today is covered under the safe harbor provision of the Private Securities Litigation Reform Act. We caution listeners that during this call, Opiant management will be making forward-looking statements. Actual results could differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the Company's business. These forward-looking statements are qualified by the cautionary statements contained in Opiant's news releases and SEC filings, including in our Annual Report on Form 10-K for the year ended December 31, 2021 and subsequent filings.
This conference call also contains time-sensitive information that is accurate only as of the date of this live broadcast, August 11, 2022. Opiant undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call.
Now I'd like to turn the call over to Roger.
Thanks, Ben, and a very warm welcome to you all. Thank you for joining our conference call to discuss Opiant's financial results and business highlights for the second quarter and first six months of 2022. We appreciate everyone's time and attention. The first half of 2022 was important for Opiant as we continue to advance our pipeline of new medicines for addiction and drug overdose. We have a tremendous sense of mission to create meaningful therapeutics that we believe can help curb substance use harm and relieve the burden it places on our communities and healthcare.
Opiant made its first impact by developing NARCAN nasal spray for the emergency treatment of known or suspected opioid overdose. It was a new formulation easier to use and containing a higher dose of naloxone compared to earlier unapproved kits. We remain very proud of NARCAN and the role it plays in our communities. Yet we also believe new reversal agents are needed, but the potency of illicit synthetic opioids growth.
So let me start with a review of our progress with OPNT003 for the treatment of opioid overdose. And then to offer some context as to how we are thinking about its place in the market. OPNT003 is a nasal formulation containing the high affinity opioid antagonist nalmefene. In May, we announced positive results from our pharmacodynamic study evaluating OPNT003 head-to-head with 4 milligrams nasal naloxone.
As we reported OPNT003 met the primary endpoint of non-inferiority to nasal naloxone, producing a reversal in remifentanil induced respiratory depression that was nearly twice that produced by nasal naloxone it's five minutes. Further analysis of the data showed it took nasal naloxone 20 minutes to achieve the same level of effect it took nasal nalmefene at only five minutes.
Our completion of the PD study concluded the clinical program supporting OPNT003. As we shared our NDA incorporates extensive data from our PD study and two prior pharmacokinetic studies. Our PK data demonstrated rapid absorption and higher plasma concentrations versus intramuscular injection of nalmefene.
On our last earnings call, our Chief Scientific Officer, Dr. Phil Skolnick explained the full set of PD and PK results and OPNT003 is apparent fast action, strength and long duration is well max to address overdoses from illicit synthetic opioids, in particular fentanyl. The value of OPNT003 has been further strengthened by the allowance of certain formulation and method of use patent claims over an OPNT003 and Intravail in a nasal formulation. We have already received a Notice of Allowance and we expect the patent to be granted in the coming weeks and we will also include this in our NDA submission.
With our data reported, we are focused on completing the NDA filing for OPNT003, which we announced the start of in May as a rolling submission. We are making good progress. The non-clinical section has been submitted. The CMC section is on the final review and publishing and the clinical section is in progress. This puts us on track to complete our submission by year end. Our planned filing timeline if we receive priority review provides us with a possible PDUFA date in the second quarter of 2023.
Work is well underway preparing for a commercial launch of OPNT003. A record number of people in the United States of 80,000 died of an opioid overdose during the 12 months ending February 2022 according to provisional data from the CDC. For each opioid induced fatality, according to our own research of existing data, there are about eight non-fatal overdoses, which can lead to long-term physical and mental disability.
Health experts warn however, about very troubling trends particular to fentanyl and other illicit synthetic opioids that illustrates the growing needs for easy to use and effective opioid overdose reversal agents. In April, a report published in JAMA noted that for the first time in a decade, overdose deaths among teens in the United States rose dramatically in 2020 and kept rising through 2021 as well. The study found that fentanyl related deaths increased from 253 in 2019 to 680 the following year. And in 2021 77% of all teen overdose deaths involved fentanyl. A major cause is a surge nationwide and so called Fenta pills. These counterfeit pills are laced with fentanyl and are produced to closely resemble legitimate prescription medicines, such as Adderall and Xanax.
Turning now to the pipeline. We made progress during the quarter in our Phase 2 study evaluating OPNT002 nasal naltrexone for alcohol use disorder. We have enrolled over 200 patients keeping us on track to complete enrollment of our target 300 patients by year end. And as you know, OPNT002 is being developed as a nasal spray that someone can take as needed to quell the pleasurable effects of alcohol. We believe this can help someone reduce regular heavy drinking. AUD is a significant cause of disease, and OPNT002 could have a dramatic impact on one's ability to control unhealthy drinking. We're excited to complete this study and further our understanding of its therapeutic potential and a novel approach. We expect to report data in the first half of 2023.
In conclusion, I am excited by the progress we have made. We continue to advance our mission to develop new medicines to treat addiction and drug overdose. The coming months will be pivotal for us as we continue to execute on our OPNT003 program. And we're excited for the journey ahead. I want to thank the entire opioid Opiant team and our collaborators for the hard work and dedication.
With that, I'll turn the call over to David to discuss the financials.
Thanks, Roger. Our financial results for the three and six months ended June 30, 2022 are detailed in our press release issued this afternoon. I'd like to take a moment to provide some context and highlight a few key points from the quarter. We reported second quarter revenues of $3.9 million this includes $2.3 million of revenue attributable to the sales of NARCAN nasal spray from our license agreement with EBS.
Revenue from NARCAN was lower than expected as EBS under the royalty owed to us based on this quarters U.S. sales of NARCAN. Under the generic reduction clause of our license agreement, EBS should pay a tiered royalty on U.S. NARCAN sales when the net sales in a given quarter are greater than 70% of the net NARCAN sales in Q3 2021.
Second quarter U.S. sales, as reported to us by EBS were above 70% of U.S. net sales in Q3 2021. However, instead of applying correctly, the terms of the license agreement, EBS chose to apply an arbitrary 2% rate on U.S. net NARCAN sales. If EBS had applied the tiered royalty rates correctly, as provided in the license agreement, we believe the correct amount EBS should have paid us is approximately $9.1 million for the second quarter, a difference of approximately $6.8 million.
On August 10th, we provided EBS a default notice of a material breach of its license agreement or underpayment of royalties. This gives EBS 60 days to meet its obligation under the license agreement and pay the correct amount owed. If EBS fails to do so, we will pursue the remedies available to us under the agreement, which includes termination of the agreement and potential return of NARCAN nasal spray to opioids.
Turning now to our second quarter operating expenses. Research and development expenses increased to $7.9 million in the second quarter of 2022 compared to $3.1 million for the same period in 2021. $4.8 million increase was primarily due to increase in activity on our lead product OPNT003 nasal nalmefene for opioid overdose, as well as personnel and noncash stock-based compensation expense.
Sales and marketing expenses for the three months ended June 30, 2022 were approximately $2.8 million as compared to approximately $1 million in the comparable period in 2021. The $1.8 million increase was due to personnel and non-cash stock-based compensation expense, which increased by $1.1 million and external third-party spend related to precommercial activities, which increased by $0.7 million.
General and administrative expenses for the second quarter were approximately $4 million as compared to approximately $2.7 million in the comparable period in 2021. The $1.3 million increase was primarily due to increases in personnel and related expenses, as well as non-cash stock-based compensation. We reported a net loss this quarter of $11.8 million or a loss of $2.31 per basic and diluted share, compared to net income of $1.7 million, or income of $0.39 per basic and $0.31 per diluted share in the second quarter of 2021.
We ended the second quarter with cash and cash equivalents of $40.2 million. We also received from BARDA an additional award of $2.1 million to support OPNT003. This brings total BARDA funding to $10.8 million. We remain grateful to BARDA for its support. Looking ahead, we are prudently managing expenses while maintaining our good financial position with multiple value creating catalysts expected over the next 12 months. With that said, we intend to ensure the terms of the NARCAN license agreement are appropriately enforced. Thank you. And with that, let me open the call for questions.
At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Brandon Folkes with Cantor Fitzgerald. Please proceed with your question.
Hi, thanks for taking my questions, and congratulations on all the progress. Maybe just three from me, if you don't mind, I just ask upfront. Do you think the onset of action data would actually likely be the biggest driver of uptake in the longer half-life? I think, just quite an impressive differentiation there. And then secondly, and this one sort of goes with the first one, how do you think about the market, the market is going to launch into, now that generic NARCAN is in the market. And if we don't see a meaningful reduction in opioid overdose deaths within generics in the market, how should we think about maybe the need to relook at the strategy from the government perspective, do they then move to different agents, such as 003 showing that cause maybe wasn't the impediment there. Just any market dynamics there I think could be quite interesting. And then lastly, just an alcohol use disorder, any learning from the recent trial or competitor radar, it's a bit of mixed data, this I guess any learnings across [indiscernible]? Thank you.
Thank you, Brandon. I'm trying to get all those answers. But might ask you to pick up those questions that I've noted them down. So the first one, so in terms of the onset of action and long half-life in terms of being differentiated, if that's discussing that, both are very important. When we think about saving a life, there's two considerations and how much of an opioid overdose reversal agent you can get into the body and ultimately to the brain as quickly as possible.
And that's what in principle is going to determine a successful rescue. But in fact, what's within that onset of action, what really makes a big difference is binding affinity, on a molecular level, how hard, how tight the opioid antagonists can bind to the Mu opioid receptor which drives breathing, that's a real key consideration, which is why higher affinity agents, we believe so much more needed today, because of fentanyl having such high affinity the Mu opioid receptor when we compare it to our data, older opioid such as heroin et cetera. The other consideration around long half-life relates to this issue around re-overdosing. So even though someone can be successfully rescued from an opioid overdose, the real issue that we hear continuously is how someone could fall back into an overdose.
And that's happening a lot more in recent years with fentanyl, which has so much of a longer half-life. So that's another consideration. And those are the key attributes and differentiators we believe we have with what we're developing with OPNT003. And your question about how do we see the marketplace with generic NARCAN and this is always anticipated. And it really relates to your first question around we still see this as a hugely differentiated drug that we are developing that can potentially save more lives.
And also when we think about the potential cost per overdose, we think given its higher potency, faster absorption and longer duration of action. We think that this could still make economic sense, regardless of the fact that increased potential to save more lives. And we believe that will be very well received by people out there in both the public interest sector, who are currently the majority of people using opioid overdose reversal agents, as well as in the Retail segment as well.
Just bear in mind, this isn't just we think the attributes are particularly well suited for fentanyl and synthetic opioid overdoses. We still believe this will be a better drug to be used in all opioid overdoses such as just opioid painkillers. I think those are the affinity 003 questions. Otherwise there was a question on AUD but I captured everything what you wanted on 003? Hello, you are mute.
Hi, sorry. Thank you very much, Roger.
So just I was moving on to AUD, yes I'm aware of exactly another company developing product for alcohol use disorder and it failed in its first Phase 3 study, I mean for several reasons. Firstly, the attraction of AUD remains particularly high. Given the fact that there's not many compelling products out there on the market. What we're developing is quite different from what that product was or remains in that first place an entirely different mechanism of action, we are reduced, we are using an opioid antagonist to reduce the effects of endogenous opioids when you drink alcohol.
So the mechanism of action is different. Second, this drug naltrexone we're using has already been used, and is FDA approved in the U.S. taken orally. So it's already got some demonstrated efficacy and safety for the fact that it's on the market as an oral compound and as a depo injection in the case of Vivitrol. So that gives us high confidence. And then the real differentiator is how we are able to deliver such a high dose of nasal naltrexone in a very short timeframe, which we think is really important to couple the peak enjoyment people are experiencing in their peak release of endorphins, and being able to intercept at that key moment in time.
And with the high doses of naltrexone that we're delivering in that in that very short timeframe, we are also -- we also believe we have the potential to block what's called the Delta opioid receptors, which are particularly implicated in alcohol use disorder. And then finally, our Phase 2 study design helps address one of the issues that we see more broadly in any CNS trials, which is that of a placebo response. I'm going to get too much detail on this call, but only to say that we have designed the trial to try and eliminate as much of the placebo response as possible. And we think that puts us in a good place.
Great, that's very helpful. Thanks, Roger.
Our next question comes from Carl Byrnes with Northland Capital Markets. Please proceed with your question.
Thanks for the questions, and congratulations on your progress, particularly the notice of patent allowance and the additional BARDA funding. Just with respect to the timeline, if memory serves me when NARCAN was initially approved, it was a priority review and approved within four months, is there any reason to think that 003 may have a similar timeline, given the ongoing Fentanyl crisis and the PK PD data that you've demonstrated and then I have a follow-up as well?
Yes, I mean we had very good interaction with the agency to-date. We do we believe we have a good -- very good case to get priority review, especially on the back of Fast Track as well. The precedent set by other opioid antagonists been approved for opioid overdose. And the fact that your point that despite more Naloxone being out there than ever before, opioid overdose deaths continues to skyrocket. So we think the broader public health need that we have the agency will be mindful of absolutely. You had another question?
Yes, and then a follow-up to that is, again given the rapid onset of action, the comparative -- favorable comparison with respect to reversing respiratory depression and longer half-life with 11, I believe it's 11.2 hours, it seems pretty straightforward or logical to think that the public interest markets would adopt 003 as a first line therapeutic right way, I mean, it would be almost unethical not to do so, is that something you would agree with?
I mean vision for these customers absolutely as to how they would see it. But our view is that, given the data we have, absolutely, we believe that this has the potential to be first line in this setting, absolutely.
And do you think with respect to that, there could be something specific in the label that would bootstrap that first line of defense position?
Well, I mean, it doesn't clear yet how exactly the label will be. So it'd be premature for me to comment on this stage.
I will hop back in the queue, thanks so much.
Our next question comes from Trevor Allred with Oppenheimer. Please proceed with your question.
Hey, guys, thanks for taking my question. So, I guess can you just discuss the recent patent application and some thoughts as to why you anticipate will provide better protection? And beyond that what that which EBS has on NARCAN. And then can you also just give any granularity on how EBS supports their physician with the 2% royalty rate this quarter? Thanks.
So, in terms of the patent protection overall, we believe we are in a good position, because we have a sort of moat like approach to protecting the products. So patent in itself is a use and formulation pattern. And it builds on the Excipient that for which we have the exclusive license for which is Intravail and the PK profile in particular is particularly dependent on the use of Intravail. So we believe we are in a good position there. And that path goes up to 2037 on the expectation it will be granted very soon.
And we also believe we have the potential to build on that as with additional data we continue to generate on this product. And that is in addition to the -- what we would expect to be three years exclusivity, just from a regulatory standpoint, because we've done the clinical study with nasal nalmefene, when we developed the NARCAN nasal spray, there was no just PK work, there was no clinical study.
So one didn't get that three years exclusivity either. And likewise, the Excipients that we are using Intravail that we have an exclusive license to this, whereas the Excipients used in NARCAN nasal spray were more like having off the shelf easily available excipients. And then David can phrase the second part of your question.
Trevor, thanks for the question. The answer to the question is probably is not going to give you much more information. But we really at this point can't comment or have really any insight on their motivation or the position on why they decided not to follow the terms of the agreement signed back in 2015 with Adapt. We believe that the terms of the agreement are very clear. And I guess over the next 60 days, we will find out what their motivation and reason for doing that.
Okay, thanks, David. Thanks, Roger.
Ladies and gentlemen, we have reached the end of the question-and-answer session. And I'd like to turn the call back over to Roger Crystal for closing remarks.
Thank you, operator. Thank you for joining us today and for your interest in Opiant. Please enjoy the rest of your day. Thank you.
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.