Viatris Inc. (VTRS) Q3 2020 Earnings Report, Transcript and Summary

Good evening and welcome to Oyster Point Pharma's third-quarter 2020 earnings conference call. My name is Dilem, and I'll be your operator today. [Operator instructions] I'd like to turn the call over to Mr. Daniel Lochner, Oyster Point Pharma's chief financial officer. Sir, please go ahead.

Good evening, everyone, and welcome to Oyster Point Pharma's third-quarter earnings conference call for the three months ending September 30, 2020. This evening we issued a press release containing our third-quarter financial results and recent business highlights. In addition, given the company recently passed the one year anniversary of our initial public offering, the company filed a shelf registration statement and established an after-market offering to provide additional financial flexibility going forward. Our earnings press release and our Form 10-Q and Form S-3 that were filed with the SEC this evening are available on our website under the Investor and New section at www.oysterpointrx.com. Joining us on our call today. Our Dr. Jeffrey Nau, president and chief executive officer of Oyster Point Pharma; and John Snisarenko, chief commercial officer. Following Dr. Nau and my prepared remarks, we'll open up the line for questions. This conference call contains forward-looking statements regarding future events and the future performance of Oyster Point Pharma. Forward-looking statements include statements regarding Oyster Point's possible or assumed future results of operations, expenses and financial position, business strategies and plans, research development and commercial plans or expectations, trends, market sizing, competitive position, our belief regarding our clinical trial outcomes, including secondary endpoint analysis, predictions regarding product approvals or the FDA, our course to manage the impact of COVID-19, and the industry environment and potential growth opportunities among other things. In addition, this conference call discusses products that are under clinical investigation, which have not yet been approved for marketing by the U.S. Food and Drug Administration. They are currently limited by federal law to investigational use and no representations made as to their safety or effectiveness for the purpose for which they are being investigated. These statements are based upon the information available to the company today and Oyster Point assumes no obligation to update these statements as circumstances change. Future events and actual results could different maturely from those projects in the company's forward-looking statements. Additional information concerning factors that could cause results to differ materially from our forward-looking statements are described in greater detail under the caption Risk Factors in the company's filings with the SEC, including our quarterly report on Form 10-Q for the quarter ended September 30, 2020 that was filed with the SEC on November 5, 2020. I will now turn the call over to Dr. Jeffrey Nau, president and chief executive officer of Oyster Point Pharma.

Thank you, Dan. Good evening, everyone, and thank you for joining us on our call today to discuss our third-quarter 2020 financial results and recent business highlights. I would like to continue to provide an update regarding the ongoing SARS-CoV-2 virus pandemic. Oyster Point Pharma continues to monitor the impact of the SARS-CoV-2 virus pandemic and is taking proactive steps to ensure the safety of its employees, maintain business continuity of our operations, and to advance our R&D pipeline. To date, Oyster Point Pharma has continued to maintain a remote working environment for its employees. In addition, the company remains in close contact with its R&D contractors. And to date, the company's contractors have not reported significant disruption to their operations as a result of the SARS-CoV-2 virus pandemic. In May, Oyster Point announced positive top-line results from onsite to Phase 3 trial of OC-01 in subjects with dry eye disease. The Oyster Point team has continued to finalize our NDA package and is targeting submission to the Food and Drug Administration in Q4 2020. If approved by the FDA, OC-01 nasal spray would be on track for a Q4 2021 launch. As we have compiled our NDA, we've been able to take a deeper dive into the data, as you will see in the November corporate deck that we made public on our website. We have provided top line data from our integrated Phase 2b ONSET-1and Phase 3 ONSET-2 analyses. From these analyses on Slide 21 of our November corporate deck, you will see that both the 0.6 milligram per mill and 1.2 milligram per mill dose groups show statistically significant improvements in the categorical and mean changes in Schirmer's scores. Importantly, we see this effect in both the study eye and fellow eye, illustrating the bilateral treatment benefit seen with our nasal spray approach. When looking at the symptom improvement data from our integrated efficacy analysis, we see a statistically significant improvement in both those groups versus vehicle. Although we see a larger symptom benefit versus vehicle with the 1.2 milligram per mill dose group in the clinic environment, with that benefit in the higher dose group, even more pronounced in the low humidity, high-airflow controlled adverse environment, illustrative of an environment that many patients will experience. In addition to these analysis of the integrated data, we may include the use of concomitant artificial tears as a covariant in our statistical models, the difference between treatment and placebo is even more pronounced in both groups. We believe this highlights the benefit we might expect eye care providers to see with the real world use of OC-01 nasal spray. Based on integrated analysis and the totality of data from our development program, we believe that the data supports our decision to seek FDA approval of the 1.2 milligram per mill dose of OC-01 for the treatment of the signs and symptoms of dry eye disease. In addition to our development of OC-01 for dry eye disease, we intend to file an IND this quarter to evaluate the potential of OC-01for the treatment of Stage 1 and Stage 2 Neurotrophic Keratitis. We believe that OC-01's unique mechanism of action of stimulating natural tear film via the trigeminal parasympathetic pathway may be beneficial for patients with corneal epithelial hyperplasia and/or [indiscernible] as well as those with persistent epithelial defects. If the IND is accepted by the FDA, our clinical development team will begin enrolling the Phase 2 Olympia clinical trial in the first half of 2021. In summary, we remain committed to bringing innovative and transformative ocular surface disease treatments to patients and building Oyster Point Pharma into a best-in-class ophthalmology company. I will now turn the call over to John Snisarenko, Oyster Point's chief commercial officer, to discuss our ongoing preparations for the potential commercial launch of OC-01 in Q4 of 2021.

Thank you, Jeff. The dry eye disease segment is a large market with over 16 million adults diagnosed in the United States alone. Only a small proportion of these patients, approximately 2 million, are currently being treated with therapeutic and over 7 million people diagnosed with dry eye disease have tried and abandoned the currently available options. We believe that OC-01 has a compelling therapeutic profile that, if approved, may address some of the unmet needs of this large addressable dry market. As we continue to build out our commercial organization with an experienced team, in the second half of 2021, we are planning on sealing a sales force of between 150 to 200 reps, which would target close to 90% of the current prescriber base of therapeutic dry eye products. We also believe that patient access to OC-01 will be critical. Our access strategy includes competitive contracting for broad payer coverage, comprehensive pharmacy distribution, along with patient support programs to enable broad patient access to OC-01. I will now turn the call back over to Dan Lochner, Oyster Point's chief financial officer, to discuss our third-quarter financial results.

Thank you, John. I will now provide a brief overview of Oyster Point Pharma's third-quarter financial results. Additional detail about our third-quarter results can be found in our Form 10-Q that was filed with the SEC this evening. For the third quarter of 2020, Oyster Point Pharma reported a net loss of $16.3 million or $0.63 per share, compared to a net loss of $11.5 million or $8.10 per share for the same period in 2019. As of September 30, 2020, cash and cash equivalents were $214.3 million, compared to $139.1 million as of December 31, 2019. Total research and development expenses for the third quarter of 2020 were $8.2 million, compared to $8.1 million for the same period in 2019. The company's clinical and pre-clinical expense was $1.2 million lower during the third quarter in 2020, primarily due to the completion of ONSET-2 Phase 3 clinical trial in May 2020. The company incurred higher CMC and other research and development expense of $1.3 million, primarily due to the advancement of OC-01 as well as costs associated with the NDA submission planned in the fourth quarter of 2020. Total general and administrative expenses for the third quarter of 2020 were $8.1 million, compared to $3.8 million for the same period in 2019. The increase was due to a higher headcount and reflects an increase in payable -- payroll-related expenses, including stock-based compensation of $2.1 million. The company incurred higher commercial planning expenses of $1 million in anticipation of a U.S. launch of OC-01 if approved in the fourth quarter of 2021. Additionally, there was an increase in other general and administrative expenses of $1.2 million due to the expanse units -- expansion of the organization and operating as a publicly traded company. With that overview of our financials, I will now turn the call over to the operator to open the line for questions.

Thank you. [Operator instructions] And our first question comes from line of Stacy Ku from Cowen. You may begin.

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

Yes, thanks a lot, Stacy, for the question. We have had over the summer a pre-NDA meeting with the FDA that primarily focused on CMC. We continue to be on track with all of the CMC requirements for meeting our NDA timeline, including that stability pull, which will occur toward the end of the quarter. And so no gating items currently that we foresee at this point in time with filing of the NDA. As we go into 2021, we will be focused on working with our manufacturing organization to pull together validation batches to prepare for launch. And so those three sets of validation batches are -- which are pretty standard in the industry, will allow us to go into the launch in very good shape with regards to supply. So nothing out of the ordinary with regards to your typical commercial launch of the product.

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

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

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

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

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

Got it. That's really helpful. Thanks so much and congrats on another good quarter.

Our next question will come from the line of Anupam Rama from JP Morgan. You may begin.

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

Yes. Thanks, Tess. So I'll answer the first part of the question and then I'll pass it over to John. We, obviously, have been navigating the current conference schedule as with all of our peer companies. And as these meetings have gone virtual, we've been presenting pretty regularly. So we've presented at the ASCRS meeting. We've presented at the American Academy of Optometry. Although we will be announcing shortly the American Academy of Ophthalmology is coming up, and that'll be another virtual meeting. And then as we go into 2021, many of the meetings are continuing in a virtual environment. And so we will plan to continue to present data and we have some really exciting data sets that we look forward to presenting out of the ONSET-1 and ONSET-2 programs as we move forward. So that'll be a part of our plan. We are also planning to move forward with a peer review submission of a number of different studies as well as many of the articles of surrounding science of OC-01, and so that'll be a part of our plan. So I think when you look at our overall plan to disseminate the message, really focus on the science, trying to focus on being present at these virtual meetings, putting the peer reviewed journal articles in front of the physicians, and obviously, we've continued to do outreach in a virtual fashion as much as we possibly can. And I think that will continue as John builds his team out more on the commercial side as well as our medical affairs team continues to grow as we get closer to launch. So, obviously, not the perfect environment that we'd all like to be in where we would be at in-person meetings but I think these meetings have been fairly well attended. There are new virtual conferences coming up all the time and so we've been able to get that message out and be able to share our data. And then maybe John can talk a little bit more about some of the activities as it relates to the market and launch.

Yes. Thanks, Jeff. So our main focus, pre-launch in 2021. It's going to be to introduce and launch an extensive disease state education program that targets kind of the high-care professional audience. And it will focus really on the importance of tear film homeostasis and the role of natural tears. The current options on the market tend to be reserved and used for more kind of the moderate to severe dry segment. They target kind of the inflammatory component. We also want to educate on the role of natural tear film and the loss of homeostasis when you do suffer from dry eye. And in regards to your question about segmentation, one of the things we looked at when we designed the Phase 3 pivotal trial is that we wanted to address a broad audience of dry eye patients. So in terms of the inclusion criteria, we included a broad set of patients ranging from mild, moderate, through to the severe or the most severe of patients. Because of that and the results of the Phase 3 trial, when we do commercialize, we plan to really address the huge unmet need of a broader audience right from the mild through to the severe patients.

Thank you. [Operator instructions] Our next question will come from line of Patrick Dolezal from LifeSci Capital. You may begin.

Thanks. Hi, everyone. This is Valentina on for Patrick. Thanks for taking our question. Congrats on the continued progress. Two from us. So given the historic success of the DTC campaigns in the marketing of dry eye products, own much emphasis do you guys plan to place on DTC versus your sales force? And is DTC something you would roll out immediately versus maybe waiting for some PDMs to come on board? And then an additional question on Neurotrophic Keratitis, can you just describe the rationale here for us and maybe characterize the market opportunity in this indication as well? Thanks.

Sure. So, I'll turn it over to John to address the first part of the question.

Yes. Thanks, Jeff. In regards to the DTC program and the DCC efforts, we're looking at kind of the three pillars of our commercialization strategy equally. So the sales force will be an important component. Of course, patient access and payer access to the drug will be important and, of course, educating the consumer the patient and the eye care prescriber. So in terms of ordering of that, we will probably reserve our investment in direct-to-consumer after we get a lot of the pears to list OC-01 one after approval. And then we do plan to invest quite substantially because we have seen historically that this is a very promotional sensitive market. And when DTC is applied, we've seen the growth of the prescription dry eye market to be in the double digit area. So it's an important component but timing will be everything from that perspective. Our initial efforts will be really to make sure that payer uptake is as quick and we get broad coverage, and we're going to definitely target our field force from that perspective as well.

Great. And so on dealing with the second part of the question with Neurotrophic Keratitis, this is a disease by recent estimates affects approximately 11 out of 10,000 patients in the United States. The we know that the epidemiology is probably shooting very low and we've heard estimates as high as half of patients with diabetes in the United States may have some form of Neurotrophic Keratitis. We're really focused on the Stage 1 and Stage 2 Neurotrophic Keratitis patient. And really, the concept behind OC-01 is that we do feel that OC-01 contains -- or it has a mechanism of action which allows for us to stimulate the natural tear film which contains a number of helpful components to the ocular surface, which could include things like growth factors, including nerve growth factor a whole host of different proteins lipids and will allow for the patient to actually stimulate their own natural tear films. So one of the treatments that's available today for these patients is autologous serum tears, which is obviously very close in its makeup to the natural tear film, although not perfect. And with many of these patients, they're experiencing a corneal hyperesthesia. So, they're not feeling their corneal surface. That feedback loop that currently would exist in a healthy patient that tells the brain we need to stimulate the lacrimal gland to lubricate the ocular surface is often impaired. And so, the unique mechanism of action of OC-01, by being able to stimulate the lacrimal glands, the [indiscernible] glands and the goblet cells, through the nasal passage allows that patient to stimulate good, healthy tear film that forms that barrier onto the ocular surface. And oftentimes when there's a diseased cornea, we do know that there is a feedback mechanism that occurs that increases transcription of messenger RNA in the lacrimal gland of various helpful proteins. And so, what we want to do is really harness the lacrimal gland's healing potential for the cornea and really stimulate those proteins to be secreted onto the ocular surface. What's interesting about this indication is this is the first of a number of indications that we do think OC-01 will be applicable for. And because this does not take any additional sales force, this is another disease state that just adds to the dry eye population directly without us having to invest in any other sales force. And so we'll begin the Phase 2 study this year, and hopefully from that data, we'll move on to Phase 3 development very shortly.

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

Thank you, operator. We believe that Oyster Point Pharma developed strong clinical trial data in the dry eye disease space showing signs and symptoms improvements in dry eye disease in both the ONSET-1 and ONSET-2 pivotal trials. We believe that the clinical trial data we have generated our development program that includes a broad population of patients should translate into similar outcomes in the clinic. We're excited to go into 2021 with the potential for bringing to market a differentiated product for the treatment of dry eye disease. We continue to build Oyster Point into a world class ophthalmology company and have bolstered our R&D capabilities with a strong medical affairs as well as a commercial organization in preparation for our launch of OC-01 nasal spray in the fourth quarter of 2021, if approved. I would like to thank everyone for joining us today. I hope that you and your family stay safe and healthy through the holiday season.

Ladies and gentlemen, this will conclude today's conference call.