OptiNose, Inc. (OPTN) Q4 2022 Earnings Call Transcript

OptiNose, Inc. (NASDAQ:OPTN) Q4 2022 Earnings Conference Call March 7, 2023 8:00 AM ET

Company Participants

Jonathan Neely - VP, IR and Business Development

Joe Scodari - Chairman

Ramy Mahmoud - Chief Executive Officer

Paul Spence - Chief Commercial Officer

Conference Call Participants

Brandon Folkes - Cantor Fitzgerald

Gary Nachman - BMO Capital Markets

Glen Santangelo - Jefferies

David Amsellem - Piper Sandler

Operator

Good day and thank you for standing by. Welcome to the OptiNose’s Fourth Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Jonathan Neely, Vice President of Investor Relations. Please go ahead.

Jonathan Neely

Good morning and thank you for joining us today as we review OptiNose’s fourth quarter 2022 performance and our plans for the remainder of the year. I am joined today by our Chairman, Joe Scodari; our CEO, Dr. Ramy Mahmoud; and our Chief Commercial Officer, Paul Spence. Joe is contributing to the prepared remarks portion of today's call, Ramy, Paul and I will host the question and answer session. The slides that will be presented on this call can be viewed on our website optinose.com in the investors section.

Before we start, I would like to remind you that our discussions during this conference call will include forward looking statements. All statements that are not historical facts are hereby identified as forward looking statements. Forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those indicated by such statements. Additional information regarding these factors and forward looking statements is discussed under the cautionary note on forward looking statements section of the earnings release that we issued today as well as under the risk factors section and elsewhere in OptiNose’s most recent Form 10-K and 10-Qs that are filed with the SEC and available on the website sec.gov and on our website, optimus.com. You are cautioned not to place undue reliance on forward looking statements.

The forward looking statements during this conference call speak only as of the original date of this call or any earlier date indicated in such statement, and we undertake no obligation to update or revise any of these statements. We will now make prepared remarks and then we will move to the question and answer session.

With that, I will now turn the call over to Joe Scodari. Joe?

Joe Scodari

Thanks, Jonathan, and good morning, everyone. You've all had the opportunity to interact with Ramy over the years in his prior position as President and Chief Operating Officer of the Company. But given the recent decision to name him CEO, I'm taking this opportunity to introduce him and to share some perspectives about him on behalf of the Board of Directors.

As you know, Peter recently made the decision to step down as CEO. In that context, the Board confronted the question of CEO succession, obviously, a very important decision for any company, private or public. As the Board discussed this decision, we recognized that we were in this somewhat unique position for a company of our size to have a ready-now candidate to promote into the position. As you know, Ramy has been a part of building OptiNose from its very beginning and has been a very close working partner with Peter. The fact that he can step into the CEO position, given that history, is an incredible benefit to the Company, its shareholders, the management team, all of our people, and the customers and patients we serve.

I've known Ramy for more than 20 years, dating from the time that we overlap, while we were both employed by Johnson & Johnson, in this case, while Ramy served as a member of the management team at Janssen Pharmaceutical and I served as company Group Chairman and later worldwide Chairman of the pharmaceutical sector.

During that period in the very robust succession planning processes within J&J, Ramy was consistently viewed as a rising star with significant upward potential for senior leadership roles both within and beyond medical affairs and R&D. Over the past five years as Chairman of the Board for OptiNose, I've had the chance to work more closely with him and further recognize his leadership skills. We all recognize Ramy when [indiscernible] lighting the development expanse for chronic rhinosinusitis, but he brings much more to the senior leadership roles he has occupied, and the Board is confident he will do so as the Company's CEO.

It's rare to see a senior executive in our industry that is trained as an MD, served in the military, and combines a history of highly productive drug development with exceptional executive and leadership skills. Ramy has been an integral part of building OptiNose into what it is today. And notwithstanding the challenges the industry and the Company has faced in the last few years, Ramy is ready now to lead the Company into its next chapter of growth. With the filing of the supplemental NDA for the chronic rhinosinusitis indication now behind us, Ramy will lead the effort to ensure the Company is ready to launch its hands for this very important application.

As you know, there is currently no FDA approved therapy for this disease and a high level of patient satisfaction with the therapeutic options currently available. The planning is already underway to get the Company into the position to successfully launch XHANCE into a marketplace with significant unmet medical need in the not too distant future. I can speak on behalf of the entire Board of Directors when I say that we are thrilled that this executive transition has already occurred from the prior to the new CEO.

We anticipate to not miss a beat and that Ramy will lead this team to the next level of success while maintaining the culture and values that have contributed to the Company winning awards for being a great place to work.

Thank you all for listening. And now, I'll turn it over to Ramy. Ramy?

Ramy Mahmoud

Thank you very much, Joe, for your kind remarks and thank you to everyone listening for joining us this morning. We appreciate you joining us for our fourth quarter update.

Before we get started with our business update, I would like to introduce our new Chief Commercial Officer, Paul Spence. Paul was recently -- most recently, the Senior Vice President of the U.S. Pharmaceutical Commercial Organization at Aimmune Therapeutics, a division of Nestle Health Sciences, and has nearly 30 years of experience in the life science and pharmaceuticals industry as a commercial leader, including responsibility for marketing, sales, market access and commercial operations. His history of relentless focus on commercial execution and lengthy experience building successful commercial organizations and brands out of products with profiles similar to XHANCE is a big part of why we believe he will be successful in his role as the new leader of our commercial team.

So, starting on Slide 3. We'll go into more detail in a moment, but I'd like to highlight three key takeaways from today's presentation. First, we remain enthusiastic about the potential addition of an indication to treat patients who have chronic sinusitis. Claims data suggests that CS is currently being diagnosed by healthcare providers approximately 10 times more frequently than nasal polyps, and in the current healthcare environment, where off-label use is increasingly constrained by payers, we believe the new indication could enable us to access a multifold, larger patient audience and therefore drive significant growth.

Second, we announced the submission of our supplemental new drug application in February for XHANCE as a treatment for patients with chronic sinusitis. This was consistent with our previous guidance and is an important milestone on the road to a potential approval of the new indication in December 2023.

Third, we have refocused our strategy to prioritize the potential launch of XHANCE as the first ever FDA-approved drug treatment for CS. Because of important differences in patient prevalence, frequency of diagnosis and payer dynamics, we believe the potential for return on investment that can be produced by promoting XHANCE following the potential label expansion for CS is significantly greater than the return available from promotion of XHANCE as a treatment for nasal polyps. Because of this, we have, as we enter 2023, structured our business to reduce the use of cash during 2023 and to increase our focus on profitability, while preserving the infrastructure and capabilities that will be important to a rapid and successful launch in CS following the potential approval. These principles have shaped our expectations for 2023, and we will discuss those expectations later in the presentation.

Turning to Slide 4. We believe the future approval of XHANCE as the first and only FDA-approved treatment for CS has potential to increase the number of patients for whom the product can be promoted by tenfold, because claims data suggests that an order of magnitude more patients are currently diagnosed and treated for chronic sinusitis than are diagnosed and treated for nasal polyps.

We expect the greatly expanded universe of potential patients to include those that are currently cared for by physicians in our existing commercial footprint, which would significantly grow our potential within the scope of our current activities. We also expect the expanded universe of patients to include patients who are cared for by physicians outside of our current commercial reach. And we are already exploring a number of ways that future outreach to those physicians and patients is possible, including through commercial partnerships, alternative selling models, modest future expansion of our direct selling efforts, or by other means.

The fact that claims data show a very large number of patients are being diagnosed with CS today up to 10 million office visits per year are coded for chronic sinusitis related diagnoses gives us optimism that it will not be necessary to engage in educational efforts around the prevalence or recognition of chronic sinusitis. The diagnosis is already being made and documented frequently – much more frequently than nasal polyps in the course of ordinary clinical practice.

In addition, you are aware that we believe payer friction is one of the chief hindrances to product uptake and the fact that a diagnosis of chronic sinusitis is commonly documented in routine practice may help address one of the most important challenges to uptake created by payers today.

Specifically, one of the challenges payers create for physicians prescribing XHANCE today, particularly allergists or primary care providers who do not routinely perform nasal endoscopy is asking for attestation to an unlabeled diagnosis which today, of course, is a diagnosis of nasal polyps. The new CF indication may be better aligned with current physician practice behaviors and with payer requirements in addition to addressing a larger patient population.

As a reminder, today, approximately 80% of commercial lives are in a plan that covers XHANCE and of those approximately half are in a plan that requires a primary -- are in a plan that requires a prior authorization that includes physician attestation to an unlabeled diagnosis.

While we believe more patients could be diagnosed with nasal polyps than are currently being diagnosed and that some physicians could independently choose to write XHANCE more broadly for patients with insurance plans that don't require attestation to a nasal polyps diagnosis.

Having a meaningful number of patients in plans that require attestation we believe is deterring many physicians from writing XHANCE broadly or at all. And of course, our promotional efforts today are constrained to nasal polyps.

With a CS indication, we believe there's significant potential for more physicians to be willing to write for a broader group of their patients because it will be comparatively much more straightforward to a test to a diagnosis that they are routinely documenting today.

Turning to slide six. On February 16, we submitted our supplemental new drug application in pursuit of the additional XHANCE indication for treatment of patients with chronic rhinosinusitis. This is a novel indication for which no drug has ever been approved by FDA. Accordingly, the specific language of this potential future indication is a bit uncertain and may be chronic sinusitis, chronic rhinosinusitis, chronic rhinosinusitis without nasal polyps or other similar language. From a promotional perspective, we view these terms as interchangeable.

Focusing on what's next, we are now in a 74 day window during which FDA will decide whether to accept the sNDA submission for filing. Based on the submission date, we expect that to occur by the start of May. If accepted, the standard FDA review period for this type of application is 10 months from the submission date, which would result in an expected FDA action date in mid-December 2023.

I will not review data from the reopen program in detail during prepared remarks, however, we have included summaries of the co-primary endpoints in an appendix to today's presentation. We opened with our landmark program and a major accomplishment for our organization and for the field. If there are any questions, we'll be happy to address those during the Q&A session.

Turning to slide eight. While our fourth quarter and full year 2022 results were aligned with the expectations that were set in our last call, we are not satisfied with these results. Accordingly, we've made significant changes to our organization as well as to how we plan to operate moving forward. Our initial changes already implemented, will focus on reducing total expenses while concentrating our commercial investments for growth on our most productive territories and programs. In addition, our new Chief Commercial Officer, Paul Spence, and his team are evaluating and acting on a number of key factors that we believe underlie the revenue trends observed in the second half of 2022. He's taken on this challenge energetically and with an eye on both improving the tactical quality of our commercial execution and on a variety of potential strategic changes during the coming months.

Specific examples of areas receiving attention include improving the efficiency with which active physician interest in prescribing XHANCE is converted to fill the prescriptions that drive net revenue, the rate at which prior authorization paperwork is submitted, the structure and implementation of our co-pay program and the size and management of our pharmacy distribution network and our payer strategy. Our commercial team is aware that these and other areas where we are evaluating and considering action this year have potential ramifications not only for our promotional efforts in nasal polyps in 2023, but also for how we are setting the organization up for a successful launch of the much larger new CS indication.

I'd like to note that we'll be looking for evidence of performance improvement before we allow our commercial changes to influence our outlook for the full year 2023. As for results, in fourth quarter 2022, there were approximately 27,700 new prescriptions for XHANCE, a decrease of 7% compared to fourth quarter 2021. While a market defined by INS prescriptions written by any physician for any condition, a large component of which our prescriptions for allergic rhinitis increased by 5% over the same period. For the full year 2022, there were approximately 113,100 new prescriptions for XHANCE, a slight increase compared to full year 2021, while the INS market I just described increased by 7% over the same period.

Turning to slide nine. In fourth quarter 2022, there were approximately 86,200 total prescriptions for XHANCE, a decrease of 8% compared to fourth quarter 2021, while the market, which includes INS prescriptions written by any physician for any condition, a large component of which our prescriptions for allergic rhinitis increased by 3% over the same period. For the full year 2022, there were approximately 341,000 total prescriptions for XHANCE, a 2% increase compared to full year 2021, while the INS market previously described increased by 4% over the same period.

Turning to slide 10. XHANCE market share of 5.7% in fourth quarter of 2022 decreased when compared to the 5.9% share in fourth quarter 2021. In the future, we may eliminate or replace this measure because the denominator will be used to calculate this fraction has limitations. As a reminder, the denominator for this share includes all intranasal steroid prescriptions written by an audience of approximately 21,000 physicians, which includes a substantial number of prescriptions for indications such as allergic rhinitis and which does not include prescriptions for the several biologics that are indicated to treat nasal polyps.

Breadth and depth of physician prescribing as measured by the total number of physicians who have patients filling XHANCE prescriptions had mixed results from fourth quarter 2021 to fourth quarter 2022. Regarding breadth, in fourth quarter of 2022, there were 8,104 physicians who had a patient fill at least one prescription for XHANCE, an increase of 8% compared to fourth quarter of 2021. Regarding depth, the number of physicians who had more than 15 XHANCE prescriptions filled by their patients in a quarter, decreased by 8% from fourth quarter 2021 to fourth quarter 2022 with approximately 1,450 physicians in this segment.

I will now turn the call over to Jonathan to discuss fourth quarter and full year financial performance and guidance.

Jonathan Neely

Thank you, Ramy. Turning to slide 12. As we reported, OptiNose recognized $20.9 million of XHANCE net revenue in the fourth quarter of 2022, a decrease of 7% compared to fourth quarter 2021 net revenues of $22.5 million. The primary driver of the year-over-year decrease in the fourth quarter is the prescription demand that Ramy just discussed. Full-year 2022 XHANCE net revenue was $76.3 million, an increase of 4% compared to the prior year.

Turning to slide 13. Based on available prescription data purchased from third parties and on data we received directly from our preferred pharmacy network, XHANCE average net revenue per prescription for the fourth quarter of 2022 was $242, an increase of 1% compared to $240 of revenue per prescription in fourth quarter of 2021.

Full year 2022, average net revenue per prescription was $224 and reflects an increase of approximately 2% compared to $219 for the full-year of 2021. As we discussed on prior calls, we made a change to our co-pay assistance program at the start of 2022 that was intended to increase average net revenue per prescription by reducing the number of proportion of prescription fills by commercially insured patients and plans that have a high deductible. We believe this change had the intended effect, reduced our co-pay assistance expense and increased average net revenue per prescription in the early part of the year.

We believe the increase in average net revenue per prescription due to the change in co-pay assistance help offset effects of an increasing proportion of our prescription volumes through government plans and increases to contracted rebates and commercial plans, both of which have the effect of decreasing average net revenue per prescription.

Turning to slide 15. Today, we announced our initial financial guidance for 2023. Our guidance reflects our commitment to refocus our strategy to prioritize the potential launch of XHANCE as the first ever FDA-approved drug treatment for chronic rhinosinusitis. And I hope the message our investors take home today is that we are focused as a Company on preserving cash that we believe will generate a higher return if used to support a CS launch while maintaining the infrastructure necessary to rapidly and successfully launch the new indication upon approval.

First, for the full-year of 2023, we expect total operating expenses to be in the range from $90 million to $95 million, of which approximately $8 million is stock-based compensation. This is a reduction of approximately $30 million or 25% compared to the $123 million reported for the full-year of 2022 and reflects actions taken to reduce both employee-related and third-party expenses. Approximately half of the $30 million reduction is attributable to sales and marketing, and the remainder is available to general and administrative expenses and reduced research and development that follows from the conclusion of the reopen program. As part of that, we intended to reduce total operating expenses for full-year 2023, the Company reduced its number of territory managers by approximately 15% at the end of 2022.

Second, bearing in mind the level of sales and marketing expense reductions and our second half 2022 prescription trends, our expectation for XHANCE net revenue for the full-year of 2023 is between $62 million to $68 million. It is important to note that we are not assuming revenues from a CS launch in our full-year 2023 guidance.

Third, as part of our expectation for full-year 2023, we expect first quarter 2023 XHANCE net revenue to be approximately $10 million. The year-over-year decrease to XHANCE net revenue for the first quarter of 2023 is a consequence of an expected increase in gross to net deductions and an expected decrease in unit shipped. The expected increase in gross to net deductions in the first quarter of 2023 includes increased rebates and changes in business mix that also influenced our full-year 2023 net revenue expectations and average net revenue per prescription. We expect average net revenue per prescription to be approximately $200 for the full-year of 2023.

Finally, as we noted in our earnings press release this morning, all of our financial obligations under the amended and restated Pharmakon note purchase agreement have been classified as current liability under GAAP. Each quarter, we perform forward-looking analysis to evaluate the alignment of the projected performance of our current business, our current liquidity in terms of our debt agreement.

Under GAAP, the projections we are permitted to use in the analyses are generally based only on the business that we have today. That is XHANCE approved as a treatment for chronic rhinosinusitis with nasal polyps. On that accounting basis, we believe it is probable that it will not be -- that we will not be able to maintain compliance with certain financial and liquidity covenants in the agreement. It is important to note that this assessment does not account for revenues from a CSO approval, the potential to add a partner for primary care and other events that could lead to us achieving [clients] (ph) in the future.

I will now turn the call back over to Ramy for closing remarks. Ramy?

Ramy Mahmoud

Thank you, Jonathan. Before moving to Q&A, and as we turn our attention fully forward to 2023, I'd like to take a moment to reiterate our strategic focus this year. First, we believe achieving the first ever chronic sinusitis indication will be a crucial driver of future value for patients and for our Company. It's therefore our top priority.

Second, we are dissatisfied with our commercial results in 2022. Mindful of the importance of the cash we have today and of the potentially greater value of commercial investment following the future potential CS indication, we have taken and will continue to take action to efficiently generate XHANCE revenue with the current indication.

Third, we must prepare our organization to seize the potential opportunity created by a new chronic sinusitis indication by planning for a successful launch aimed at rapidly making the product available to millions of patients in need. This will require a range of efforts during 2023 to position ourselves for an inflection in 2024.

With that, I'd like to thank you for your attention this morning and open the call for Q&A.

Question-and-Answer Session

Operator

[Operator Instructions]. Our first question comes from Brandon Folkes with Cantor. Your line is now open.

Brandon Folkes

Thanks for taking my questions and congratulations, Ramy, on your appointment. Maybe just from me. How quickly can you ramp the CS label uptake, just given sort of we go back to the revenue covenants in the first quarter of 2024? And then similarly, can you just elaborate a bit more on the first quarter headwinds you're seeing in 2023? And what could those different 2024 with the CS indication in the label? Thank you.

Ramy Mahmoud

Brandon, thank you. So obviously, we're not sharing a CS forecast for 2024 at this time. But I'll just share a couple of general thoughts about the nature of the launch for CS. The first thing I'll say is that this is the launch of a new indication, not a de novo launch of a new product into the market.

So we have the advantage of physicians who are already in established relationships with our commercial organization. We have the advantage of the distribution channels that are already in place. We have the advantage of many of the prescribers that we'll be talking to already having a general familiarity with the product, which all of which may not be the same as we are launching a product de novo into the marketplace.

So, those things, I think, will facilitate the adoption of the product more rapidly than it might be if we were launching new. On the other hand, it's never a good idea to underestimate the potential impact of payer barriers. We are aware of that, and we'll be working to address that. And as I noted earlier, there's a variety of reasons to think that the CS indication actually will be much easier to prescribe than the nasal polyp indication for the reasons I discussed earlier. So those are just general thoughts that I think could suggest the rapid and successful launch of CS in 2024. I don't know Paul or Jonathan, if you wish to add anything.

Paul Spence

I think that's good. I think in terms of typical first quarter cadence for 2024, I think each year we talk a little bit about the start of year resets on out-of-pocket expenses for patients. I think typically, that results in a lower revenue per prescription in the first quarter as patients meet that out-of-pocket minimum. And there's kind of greater reliance on our co-pay assistance program during that period. I think our expectations at the beginning of next year would be similar to what they are each year in terms of that dynamic.

Brandon Folkes

Great. Thank you very much.

Operator

Please stand by for our next question. Our next question comes from Gary Nachman with BMO Capital Markets. Your line is now open.

Gary Nachman

Hi guys, good morning. So, with a lot of the evaluation of the commercial components and strategies that you highlighted that you're doing this year, it sounds like you're taking a close look at everything. So what are the areas where you think you need to have the greatest change and how long it will take to affect those changes? And then with the reduction in territory managers by 15%, where does that put the size of the sales force currently?

Ramy Mahmoud

So Gary, I'll start, and then I'll ask Paul if he has any additional comments to add. And thank you, Gary, for your question. The first thing I'll address is the last question. The current number of territories that we have deployed is 77 and we think that allows us to cover the sort of most potential, the physicians with the greatest potential from our current universe not understanding, of course, the product has been on the market for several years, and we have a better sense of physicians who are prescribing today than we had when we initially launched.

So with regard to the areas of action, you observed that it founded to you, I think, like we were acting in every area of commercial. And I'm kind of glad that you reached that conclusion because we sort of opened the full book to reevaluate all aspects of our commercialization. So nothing is off the table for consideration.

Having said that, the areas that I specifically mentioned as examples, are areas where we think a greater focus or attention is likely to produce the greatest potential for the change, the greatest difference during 2023. The time line for the expectation for change varies depending on which of those areas we're talking about. So some of those things, Paul and his team have already acted to look for changes. Some of those things have been subjected to a fairly intensive analysis, and we expect action to be following here later during March or during the spring. And the time frame for seeing the difference in the market, again, varies by which of those tactics we're talking about.

Paul, would you like to add anything?

Paul Spence

Yes, Gary, thank you for the question. So to start the year, there's actually several areas that are receiving particular tension, as Ramy had mentioned, of particular note, we just came from our national sales meeting, where we were focused on several things. One, most importantly, was improving the efficiency with which active written XHANCE prescriptions are converted to filled dispense prescriptions that ultimately are going to drive greater revenue, in particular around that, stronger patient positioning and improving the quality and speed of PA submission was a lot of our attention last week as we were together. In addition, the structure and implementation of our coking program, the size and management of our pharmacy distribution network and our payer access strategy are all receiving particular tension as well.

Gary Nachman

Okay. That's helpful. Yes, yes. No, it did. I mean it sounds like things are going to be evolving over the course of the year, and I'm sure we'll get updates on all these different areas. But when it comes to thinking about the CF launch, how -- do you have any sense of how much of an effort you're going to need behind that at this point? And just Ramy, talk about some of the discussions you might be having with potential co-promote partners and what some other sales alternatives might be you mentioned that in the prepared remarks?

Ramy Mahmoud

Yes, sure. Gary, and thanks for that question. So we are doing a lot during 2023 to prepare to be able to have a rapid and successful launch as we head into next year with the new indication should we receive that in December. And some of those things require this kind of lead time. So Paul alluded to payer access, payer access has ramifications not just now, obviously, ramifications for 2024. And matter of fact many of the negotiations happening now are specific to contracts, which will come into force at the beginning of 2024. So, there's a lot of things we have to do now to be ready for next year.

The overall commercial investment, the size and distribution, sort of footprint of our direct selling structure and sort of some of the other major selling efforts, I don't expect that to change substantially in size. It's not so much about having to ramp up the size of it going into 2024. It's more about changing the content and the strategy and the manner of execution in order to shift the focus to this newer, more commonly diagnosed easier to see sort of widespread uptake indication. So it's not an issue so much of size as of style or quality of the work that we'll be doing, if that's sort of what you were getting at with regard to the plans for our commercial infrastructure. Is that getting up the issue you're asking about, Gary?

Gary Nachman

Yes. No, I mean that's helpful. But as far as potential co-promotes and then you said other types of selling alternatives for chronic sinusitis. And if you're not going to change the size of the footprint, then there's other ways that you'd be able to tap into that larger market, I presume.

Ramy Mahmoud

Well, so Gary, here's -- the way we're thinking about this is that there's a substantially increased potential within our current specialty audience. And that's what I was talking about before. But as you said, there's a lot of potential outside of our current specialty audience also. And we have to think creatively about the ways in which our Company can realize the benefits of getting the product in the hands of patients who need it in that much larger audience.

The most obvious way, and one we would like to see, if possible, of course, is if we're able to engage in some kind of commercial partnership with an organization that has an existing infrastructure that allows promotion into that primary care audience. And we are planning to continue to actively pursue conversations with organizations that have the necessary infrastructure and an interest in a product that creates leverage with that infrastructure. So that would be one way of our organization seeing potential benefit from that.

I also alluded to the possibility that there are other ways we might see those benefits, ways that might not involve having to share value in the same way as we might have to in a primary care partnership. And those ways are a little less certain, but worthy of exploration right now during our lead time up to the new indication. For example, there appear to be emerging models in the marketplace for mechanisms of reaching out directly to patients and sort of using nontraditional promotional mechanisms to engage those patients, get them access to providers able to make an appropriate diagnosis and, if appropriate, prescribe the product for them. And to fill that prescription, in ways that include our current pharmacy network or potentially other mechanisms for fulfillment that may increase efficiency and outreach for a broader population that's not sort of within our current specialty universe.

I don't want to define what that looks like yet because, as I said a minute ago, it's something that we are beginning to actively explore. It looks like there are some potential mechanisms by which this may be possible. And I want to be clear that we are not close minded, we are open-minded to a variety of potential mechanisms for getting the hand -- the product in the hands of patients who may need it that are outside of our specialty care universe.

Gary Nachman

Okay. Great. And then just last one, a little bit more on the net revenue per prescription coming down to $200 from $240 if you guys are going to be focusing more on profitability this year? Is that mostly volume-driven? Or are there different programs that you're factoring into that? And should we expect you if this is just going to be a transition year with the CS indication to get it back up to the levels we saw last year? Thanks.

Ramy Mahmoud

Yes. That's a really good question. And it is a significant decrease in our projected average net revenue per prescription. Jonathan, would you like to comment on that?

Jonathan Neely

Yes, sure. I mean Gary, thanks for the question. So the guidance that we put out of approximately $200 for average net revenue per prescription. It incorporates some changes in business mix as well as higher gross to net deductions within lines of business. And I believe that I think in a rising interest rate environment that may lead to customers carrying less inventory at the end of 2023 than they did in 2021, 2022. Yes, I think some of where we ended up, I think, in 2022 was the result, I think, of some benefits that you wouldn't necessarily plan for at the start of the year. As a reminder, last year, we started out with guidance for the year of approximately $210 per TRx. And so we ended up the year at approximately $224. So, I think in terms of looking at business trends around mix of business, also making some choices to contract a little bit further into certain government lines of business, which is driving mix into those lines of business, which are relatively less profitable but still good lines of business that can have halo effect with physicians who also serve commercial patients. Those things are all kind of in the mix for our initial guidance here for an expectation of $200 per TRx.

Gary Nachman

Okay. But it sounds like this might be more of the new normal. So even with CS, it will be more in this level? Or could it get back up a little bit, even if not to the $224.

Jonathan Neely

I think probably the other thing that I would note is that at the start of the last two years, we made some changes to our co-pay assistance program. In 2021, we made a change to the co-pay assistance program that was focused on reducing the number of proportion of prescriptions that were coming from patients who are in commercial plans that did not cover XHANCE in 2022. We made a change to the co-pay assistance program. Again, kind of intended to reduce the number of proportion of prescriptions but this time from patients who are in commercial plans with a high deductible, which cover XHANCE. Both of those kind of lines of businesses are relatively less profitable for us or, in certain cases, can actually be unprofitable lines of business for us. We haven't made a similar kind of profitability, optimizing change to co-pay assistance at the start of 2023. But that doesn't mean that we can't look at things like that as we move forward.

Gary Nachman

Okay. That's helpful. Thank you.

Operator

Please stand-by for our next question. Our next question comes from Glen Santangelo with Jefferies.

Glen Santangelo

Thanks for taking my question. I just wanted to talk about the balance sheet a little bit. I mean you're ending the year with $94 million in cash and sort of based on that new revenue guidance of $62 million to $68 million versus the outlook for operating expense that you're providing. I mean you kind of gave us enough of the pieces here, but I was wondering if you could just sort of summarize that and give us your expected sort of cash burn in 2023?

Ramy Mahmoud

Glen, thank you for the question. I'll turn that one over to Jonathan also.

Jonathan Neely

Yes, sure. Thanks, Glen. Yes, I think you kind of hit the nail on the head. I think we've given you enough pieces to maybe put the math together yourself or yourselves. But obviously, we ended the year with $94 million in cash. As you pointed out, we structured our business to reduce use of cash in 2023, again, while preserving the infrastructure and capability is important to a rapid and successful launch in CS following potential approval. The midpoint of our revenue and operating expense ranges, they imply approximately a $20 million improvement to operating income relative to full-year 2022. And I think the way we're structured this business, we expect that similar improvement to the use of cash. And so then as a note for folks if you don't have the press release open or the 10-K opened later on, our use of cash in 2022 was approximately $67 million.

Glen Santangelo

Right. So that -- so correct -- sort of assuming that burn kind of comes down in the $30 million to $40 million range.

Jonathan Neely

Yes, I mean, I think the kind of the midpoint of the operating expense and revenue view would imply approximately $20 million, if you want to kind of range it out with the high and low ends of those things, it's probably somewhere between $15 million and $25 million improvement. I think as an organization, we would try to aim for the higher end of that range, not pair up low case revenues with high case operating expenses. So, I think we would strive to be approximately 20%, but maybe a little bit better than 20% a little bit better in 20% within those ranges.

Glen Santangelo

Alright, perfect. Jonathan, that's fine. Then just sort of as a follow-up. I did want to talk about sort of where that will leave you, right? I mean I think the Company has always been pretty much leaning towards the opportunity to enter into some type of commercial partnership, right, in anticipation of the CS indication. I mean, any thoughts with respect to timing around that? I mean you're sort of laying out a timeframe for hopefully a PDUFA in mid-December. I mean, have those conversations started? Do you think we could expect to see something in the second half of the year? Or do you think that's kind of more would come in 2024 post approval?

Ramy Mahmoud

So Glen, I'll comment on that. So it's very difficult in advance of reaching an agreement to say exactly when an agreement might be reached. I can say that we have in the past, and I certainly intend right now during 2023 to engage in a variety of conversations with organizations that may have interest in promoting the product into the large audience that were not reaching with our own commercial footprint. Whether those organizations will prove to be interested in closing an arrangement prior to the PDUFA date, whether they may be interested in seeing the PDUFA approval before closing an arrangement and what exactly the terms of such an arrangement might be, those are uncertain. I don't know the answer to those questions yet. But with regard to whether we'll be engaged in active conversations during the course of this year, the answer is definitely, yes.

Glen Santangelo

Okay. Thanks.

Operator

Please stand by for our next question. Our next question comes from David Amsellem with Piper Sandler.

David Amsellem

Thanks. So, I guess I'll just sort of talk to maybe an obvious question, but I think an important one, you're entertaining a co-promote here. I know that's something you talked about going back to the IPO, but just given where things are with the business and given the potential challenges regarding interest in owning a piece of the asset here. Why don't you just entertain a sale of the company? And do you think that may be the better alternative here just given all the moving parts, how do you think about that?

Ramy Mahmoud

So David, I'll comment on that and then Jonathan I'll invite you to comment if you have anything to add. So, all of the reasons that you've described, David, and others, we are evaluating a wide range of strategic options. And I think sales of the Company is within the range of options that we're considering, it always has been and it will continue to be. It's certainly not the only possibility we're considering. As I said earlier, we are actively planning to engage in conversations about a primary care promotional partnership and plan to do everything necessary to continue to operate the company independently. But in no way does that preclude the possibility of conversations about M&A type transaction either. So we will continue to entertain all strategic options as we go forward through 2023.

David Amsellem

And then as a follow-up, as you look at the launch in CS, you've talked about the potential for greater penetration within your existing prescriber base. So, is it fair to say that, that's where at least early on in the rollout, that's where most of your growth is going to come from. And if that is certainly the case then, what is the urgency to entertain a primary care partnership ahead of approval or around the approval?

Ramy Mahmoud

So David, the potential for the product, we think, is very substantial within our current sort of commercially contacted our direct selling audience and indirect selling. Our specialty audience has a lot of new potential with the new indication. And we do intend to go after that assertively with our own infrastructure. But that doesn't mean that there's not a lot of additional potential outside of the audience that we're currently calling on. And we really don't have the resources to go after that, certainly not with a traditional direct selling model. So, it means that if we are able to reach a primary care partnership starting on day one after the approval, there is potential in a very large audience that we're just not going to be able to efficiently access ourselves. And primary care partnership would give us a vehicle for being able to increase the potential value available to us and increase the number of patients who are able to be treated. So it would be incremental value, very much worth having for a variety of reasons that we'd like to see. But that doesn't mean that we're not going to see substantial incremental value within our current audience. So, I'm not sure though, if I've answered your question, David. Did that address what you asked?

David Amsellem

It did. I guess I'm just struggling with the urgency to find a primary care partner. I mean don't you call on a certain basket of high-volume general practitioners already? And if so, how many do you call on?

Ramy Mahmoud

David, I think it's appropriate for us to have a sense of urgency around finding a primary care partner. And that's not because there's not a lot of potential in our current audience, there is. But the sooner we can get a primary care partner, the sooner we can access an otherwise untapped large potential audience. And while it's true that we do have a small number of, I'll call it, a specialist like primary care physicians in our called on universe. It's a very small number in comparison to the number of primary care physicians that one might ideally choose to engage if you had a primary care promotional infrastructure. What's our current number right now?

Jonathan Neely

Yes. I mean, David, just for a sense of scale, I think when you think about the number of specialty like primary care physicians and our current call on the universe we're talking about a number that's a few thousand as opposed to when you look at the broader opportunity in primary care, I think historically, we've looked at -- there's potentially an audience of somewhere around 50,000 physicians who are kind of the higher-value prescribers in the chronic sinusitis space. And so it's just a completely different order of magnitude in terms of the number of physicians that somebody with appropriate infrastructure that would be leverageable there’s opportunity could reach if we were to partner with them.

David Amsellem

Okay. Got it. Thank you.

Operator

I show no further questions at this time. I would now like to turn the conference back to Ramy for closing remarks.

Ramy Mahmoud

I'd like to thank you all very much for joining us this morning for our review of the full-year performance in 2022 and our forward look into what we expect may be coming in 2023. And we look forward to talking to you again in a few months with our first quarter results. Everyone have a wonderful day.

Operator

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