Oyster Point Pharma, Inc. (OYST) Q4 2019 Earnings Call Transcript

Oyster Point Pharma (OYST)
Q4 2019 Earnings Call
Feb 27, 2020, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good evening, and welcome to the Oyster Point Pharma MYSTIC Phase 2 Study update conference call. My name is Catherine and I'll be your operator today. [Operator instructions] At this time, I would like to turn the call over to Mr. Daniel Lochner, the company's chief financial officer.

Please go ahead, sir.

Daniel Lochner -- Chief Financial Officer

Good evening, everyone, and welcome to Oyster Point Pharma's fourth quarter and full-year 2019 conference call. Today, after the close, we issued a press release containing fourth quarter and full-year 2019 financial results and recent business highlights. This press release is available on our website under the Investor and News section at www.oysterpointrx.com. Joining us on the call today is Dr.

Jeffrey Nau, president and chief executive officer of Oyster Point Pharma. Following Dr. Nau and my prepared remarks, we will open up the line for questions. During today's call, we will be making 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, timing our expectations, trends, market sizing, competitive position, industry environment and potential growth opportunities, among other things. These statements are based upon the information available to the company today and Oyster Point Pharma assumes no obligation to update these statements as circumstances change. Future events and actual results could differ materially from those presented 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 in the company's press release issued today and the company's filings with the SEC.

Now I'd like to turn over the call to Dr. Jeffrey Nau, president and chief executive officer of Oyster Point Pharma. Dr. Nau?

Jeffrey Nau -- President and Chief Executive Officer

Thank you, Dan. Good evening, everyone, and thank you for joining us on our call today to discuss our fourth quarter and full-year 2019 financial results and recent business highlights. We are proud to have completed 2019 as a newly public company, and we are pleased with what has been achieved as a team in such a short period of time. In 2018, Oyster Point Pharma filed an investigational new drug application for OC-01 nasal spray.

Throughout the remainder of 2018 and into 2019, our experienced team has rapidly moved this asset through the clinical development process and completed the first registrational trial ONSET-1. Our evidence-based approach to clinical development has been characterized by placebo-controlled clinical trials, utilizing prespecified endpoints that have been previously used in registrational trials and improved products for the treatment of dry eye disease. If data from our ongoing ONSET-2 Phase III registration trial is positive, we plan to submit an NDA to the Food and Drug Administration for OC-01 nasal spray during the second half of 2020. In response to a request from the FDA at our end of Phase II meeting, we completed the ZEN clinical trial in healthy volunteers in November 2019.

The ZEN study was an open-label, single center randomized two-way crossover study to evaluate the relative bioavailability of varenicline administered as a preservative-free nasal spray as compared to varenicline administered orally. Top line results indicate that the relative bioavailability was 13 times lower for a single dose of the highest strength of OC-01 nasal spray being studied in our clinical trials as compared to a single dose of the maintenance strength for varenicline tablet. At the beginning of 2020, prior to our presentation at the JP Morgan Healthcare Conference, we released positive top line data from our MYSTIC study. MYSTIC is a Phase II, single center, placebo-controlled study that we had designed to evaluate the safety and long-term chronic efficacy of OC-01 in adult patients with dry eye disease.

We were pleased to report that the study met its primary endpoint, showing a statistically significant improvement in Schirmer score at Day 84 in both doses tested compared to vehicle control nasal spray. Our pivotal Phase III ONSET study is a multicenter, randomized, controlled, double mass clinical trial designed to evaluate the efficacy and safety of OC-01 nasal spray on the signs and symptoms of dry eye disease. Two doses of OC-01, 0.6 milligrams per ml and 1.2 milligrams per ml are being evaluated as compared to placebo. We are currently on track to deliver top line data from our ONSET-2 Phase III study expected by the end of Q2 this year.

A key part of Oyster Point Pharma's strategy is to develop OC-01 nasal spray for additional indications associated with and beyond dry eye disease. The first of these we plan to explore is neurotrophic keratitis or NK, a degenerative disease in which the nerves that supply the cornea do not function properly. This results in progressive damage to the top layer of the cornea. Currently, there is no substitute for natural tear film.

We believe that OC-01 nasal spray, by stimulating natural tear film through a novel pathway, will provide a myriad of beneficial components including growth factors, antimicrobial enzymes and anti-inflammatory components that help heal the damaged ocular surface. We plan to file an IND for OC-01 nasal spray in patients with NK later this year and look forward to providing an update at that time. In addition, we are evaluating pipeline expansion and development opportunities currently. Physician engagement from both the ophthalmology and optometry communities continues to be a focus for 2020 as new key opinion leader support develops and our commercial strategies are finalized.

After our first year as a public company, we are proud of what Oyster Point Pharma has accomplished. In 2020, we expect the same strategic focus and financial discipline. Throughout the balance of the year, we plan to attend multiple medical and financial conferences where physicians and investors will have the opportunity to receive company updates from our senior team. In summary, we remain committed to bringing innovative and transformative ocular surface treatments to patients and building Oyster Point Pharma into a best-in-class ophthalmology company.

I will now turn the call back over to Dan Lochner, Oyster Point Pharma's chief financial officer.

Daniel Lochner -- Chief Financial Officer

Thank you, Jeff. I will now provide a brief overview of Oyster Point Pharma's financials. Additional detail about our fourth quarter and full-year 2019 financial results can be found in our Form 10-K that was filed with the SEC this evening. For the fourth quarter of 2019, Oyster Point Pharma reported a net loss of $19.7 million compared to a net loss of $4 million for the same period in 2018.

As of December 31, 2019, cash and cash equivalents were $139.1 million compared to $5.2 million as of December 31, 2018. We believe that those cash and cash equivalents will be sufficient to fund our projected operations for at least 12 months from the issuance date of our financial statements as of and for the year ended December 31, 2019. Research and development expenses for the fourth quarter of 2019 were $15 million compared to $3.3 million for the same period in 2018. The increase in research and development expenses were primarily due to the advancement of OC-01 and reflected an increase in fees due to CROs and CMOs, an increase in $5 million related to the license acquisition payment made to Pfizer and an increase in payroll and personnel-related expenses.

General and administrative expenses for the fourth quarter of 2019 were $5.1 million compared to $0.7 million for the same period in 2018. The increase in general and administrative expenses was primarily due to the expansion of our organization and reflected an increase in payroll and personnel-related expenses, including salaries, benefits and stock-based compensation expense of $1.8 million; an increase in professional services and other expenses incurred in relation to the IPO process and operating as a public company of $1.5 million; an increase in marketing expenses of $0.4 million; an increase in facilities expenses, primarily consisting of rent and depreciation of $0.1 million; and an increase in other general and administrative expenses of $0.6 million. With that brief overview of our financials, I will now turn over the call to the operator to open up the line for questions.

Questions & Answers:

Operator

Thank you. [Operator instructions] And our first question comes from Tyler Van Buren with Piper Sandler. Your line is open.

Tyler Van Buren -- Piper Sandler -- Analyst

Hey, guys. Good afternoon. Congrats on all the progress. With respect to ONSET-2 data coming later next quarter.

Could you just briefly review what data we should expect to receive and how we should expect to receive it? And then also, differentiation that could occur on the label upon potential approval relative to RESTASIS and XIIDRA.

Jeffrey Nau -- President and Chief Executive Officer

Sure. Well, thanks, Tyler. It's a great question. We will expect to receive at the outset, top line data, which will include primary endpoint data, multiple secondary endpoint data as well as safety data.

It is our intent to include in the label at the end of the day, both primary and secondary endpoint data as well as the safety data. I think some of the differentiated data that you would see here as compared to the competition would be one of our main secondary endpoints will be eye dryness score as assessed in the controlled adverse environment. We feel that this is very important for not only patients, but the clinician base as this shows the product working, not only in the clinic in a normal humidity and normal airflow environment, but in the controlled adverse environment chamber, which is a low humidity, high airflow environment. So these are two environments in which the patients will experience.

And this will be the first product really to elucidate that data. In addition, the primary endpoints and secondary endpoints are all taken at Day 28. I think this will highlight the fact that the product also works very rapidly, and will allow patients to benefit early in their treatment progress, and some additional secondary endpoint data that we'll be collecting will be around earlier assessment of symptom resolution or improvement. And so that will be unique for this product.

Our intent would be to analyze the top line data. We will likely, as we have in the past with both ONSET, ZEN and MYSTIC, then have a call to go over that top line data. And because this is such a robust data set, my thought process would be that we would likely have a later call to go over some of the additional data at a later point in the year.

Tyler Van Buren -- Piper Sandler -- Analyst

Great. Thanks so much.

Operator

Thank you. [Operator instructions] Our next question comes from Georgi Yordanov with Cowen and Company. Your line is open.

Georgi Yordanov -- Cowen and Company -- Analyst

Hi, guys. First of all, congratulations on all the progress. And I just have two questions. First, if you could remind us of the opportunity for OC-01 and where do you think it will fit into the treatment paradigm for patients with dry eye disease.

And I guess, next, what are your thoughts regarding your potential commercial strategy with reaching clinicians and patients?

Jeffrey Nau -- President and Chief Executive Officer

Yes. Great. Thanks, Georgi, for those questions. I think in addressing the first one, this product is unique in a number of different ways.

The main way in which we would characterize our product would be that it has a novel mechanism of action. It's the only product on the market today from a pharmaceutical perspective, that increases the amount of natural tear film on the ocular surface. When we look at the treatment landscape for those patients with dry eye disease, not only do we feel that this will add to the armamentarium that the ophthalmologists and optometrists have to treat their patients, we do think that it addresses the fundamental or underlying cause of dry eye disease. And so therefore, we feel that this product fits into a very large population of dry eye patients.

And the second question, if we were to think about the commercial strategy, what we've said to date is we will be building a commercial organization inside the company. We've already started to hire that senior leadership team, and they are in place. And our plan will be to have about 150 to 200 reps that will address both ophthalmology and optometry.

Georgi Yordanov -- Cowen and Company -- Analyst

Thank you. This is very helpful.

Operator

Thank you. Our next question comes from Anupam Rama with JP Morgan.

Tess Romero -- J.P. Morgan -- Analyst

This is Tess on the call today for Anupam. Two from me on ONSET specifically. The first one is perhaps you could put some context around how we should be thinking about potential baseline differences between ONSET-1 and ONSET-2 ? And I'm thinking specifically around baseline Schirmer's and mean EDS score. And then the second one is, can you just remind us how ONSET-2 is powered on the primary endpoint at Schirmer's score at week four.

Thanks so much.

Jeffrey Nau -- President and Chief Executive Officer

Yes. Thanks, Tess. Thanks for those questions. So to address the first question, well, maybe I'll address the powering question first.

So with regards to powering of the study, again, as was elucidated by the ONSET-1 study, we had statistically significant improvements in both the signs and symptoms of dry eye disease. The ONSET-2 study is being driven by the need for a minimum number of safety patients in the population to support an NDA submission. And therefore, we're lucky enough to have enrolled population of patients that will allow that primary endpoint to be powered greater than 99%. And so the two primary secondaries are also powered greater than 99%.

And again, that's based on the fact that we need a minimum number of safety patients at both three months of follow-up and then also at one year of follow-up. And then remind me the first question again, Tess.

Tess Romero -- J.P. Morgan -- Analyst

Yes. Sure. So just on how we should be thinking about kind of baseline characteristics between ONSET-1 and ONSET-2.

Jeffrey Nau -- President and Chief Executive Officer

Yes. OK. Great question. So ONSET-1 and ONSET-2 are very similar in study design.

I think one of the important characteristics of the enrollment criteria is that we enroll patients in our studies that have Schirmer's score of less than 10 millimeters at baseline. Our eligibility criteria between the ONSET-1 and ONSET-2 study are fairly identical in nature. The differences between the two studies is obviously now with the larger sample size, we'll go to more clinical centers within the U.S., but both of those studies are both U.S.-based. Some of the centers will also be in ONSET-2.

But as we increase the sample size, we will go from three centers to about 20 centers in the U.S. We would expect the baseline characteristics to be fairly similar across those two studies. So with regards to Schirmer's score and baseline eye dryness score, we would expect very similar characteristics in both ONSET-1 and ONSET-2.

Tess Romero -- J.P. Morgan -- Analyst

Great. Thanks so much for taking our questions.

Operator

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

Jeffrey Nau -- President and Chief Executive Officer

Thank you, operator, and thank you all for joining us again at the end of your day today. We look forward to keeping you informed of our progress during 2020 and beyond as well as advancing our pipeline for the treatment of patients with ocular surface diseases. Thank you all again very much.

Duration: 18 minutes

Call participants:

Daniel Lochner -- Chief Financial Officer

Jeffrey Nau -- President and Chief Executive Officer

Tyler Van Buren -- Piper Sandler -- Analyst

Georgi Yordanov -- Cowen and Company -- Analyst

Tess Romero -- J.P. Morgan -- Analyst

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