Oyster Point Pharma, Inc. (OYST) Q2 2020 Earnings Call Transcript

Oyster Point Pharma, Inc. (OYST)
Q2 2020 Earnings Call
Aug 05, 2020, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to the Oyster Point Pharma second-quarter 2020 earnings conference call. My name is Polly, and I will be your operator today. After the company's formal remarks, there will be a question-and-answer session. At this time, I would like to turn the call over to Mr.

Daniel Lochner, Oyster Point Pharma chief financial officer. Sir, please go ahead.

Daniel Lochner -- Chief Financial Officer

Good morning, everyone, and welcome to the Oyster Point Pharma second-quarter earnings conference call for the three months ending June 30, 2020. This morning, we issued a press release containing our second-quarter financial results and recent business highlights. This press release and our Form 10-Q that was filed with the SEC this morning, are available on our website under the Investor and News section at www.oysterpointrx.com. Joining us on the call today are Dr.

Jeffrey Nau, president and chief executive officer of Oyster Point Pharma; and John Snisarenko, chief commercial officer. Following Dr. Nau in my prepared remarks, we will 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, prediction regarding product approvals or the FDA, our efforts to manage the impact of COVID-19 and 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 representation is made as to their safety or effectiveness for purposes 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 differ materially from those projected 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 June 30, 2020, filed with the SEC on August 5, 2020. I will now turn the call over to Dr.

Jeffrey Nau, president and chief executive officer of Oyster Point Pharma.

Jeffrey Nau -- President and Chief Executive Officer

Thank you, Dan, for the introduction. Good morning, everyone, and thank you for joining us on our call today to discuss our second-quarter 2020 financial results and recent business highlights. First, I would like to acknowledge the ongoing SARS-CoV-2 virus pandemic. Oyster Point Pharma continues to monitor the impact of the SARS-CoV-2 virus pandemic and has taken proactive steps to ensure the safety of its employees, maintain business opportunity of its 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 operation as a result of the SARS-CoV-2 virus pandemic. We are happy to see that after a brief adjustment period to establish new operating procedures, eye care clinics have continued to operate and engaging clinical trial subject recruitment and enrollment with the implementation of additional patient and staff protective measures.

Despite the ongoing pandemic, we are proud to have completed in the first half of 2020 in a strong position. With positive results from the MYSTIC Phase 2 trial announced in January, positive results from our pivotal ONSET-2 Phase 3 trial announced in May and the completion of our first equity follow-on offering also in May, which netted the company $112.6 million in proceeds. For the remainder of 2020, Oyster Point Pharma plans to submit an NDA for OC-01 nasal spray for the treatment of signs and symptoms of dry eye disease to the FDA in the fourth quarter of 2020. Oyster Point is currently formalizing our rest of world clinical and regulatory strategy, specifically in the EU, as well as within the Asia Pacific region.

We intend on beginning clinical development of a second indication for OC-01 nasal spray in the second half of 2020 in the United States. In addition, the company will continue to execute on our launch readiness plan for OC-01 in dry eye disease and advance our R&D pipeline. As we look forward to 2021, if approved by the FDA, the company plans a U.S. launch of OC-01 in the fourth quarter of 2021.

In May, Oyster Point announced top-line results from the ONSET-2 clinical trial, which met its primary endpoint with both the 0.6 milligram per ml and 1.2 milligram per ml doses of OC-01, achieving a statistically significant improvement in Schirmer's score as compared to placebo at week four. These results also translated into a statistically significant improvement in the secondary endpoint of mean change from baseline in Schirmer's score at week four in both doses as compared to placebo, consistent with our data from the ONSET-1 Phase 2b trial. Benefits were also seen on a number of secondary endpoints in the 1.2 milligram per ml dose group, including the mean change from baseline on eye dryness score in the clinic environment at week four and as early as week two. We believe that the results from ONSET-1 and ONSET-2 are the first studies to show sign and symptom improvements in patients presenting with baseline symptoms, mild to severe, a characteristic that we expect to translate from our development program into similar clinical outcomes, something we believe that is an unmet need in the dry eye marketplace.

The common adverse events seen with OC-01 in the ONSET-2 trial were sneezing and cough, nasal and throat irritation were reported in less than 15% of subjects in each Sales group. This is consistent with the data from the ONSET-1 trial and no new safety signals. There were no reports of serious adverse events related to nasal administration. We believe that the ONSET-2 Phase 3 trial data supported by trial data from the ONSET-1 Phase 2b trial will support an indication for the treatment of the signs and symptoms of dry eye disease and serve as clinically meaningful data that will prove useful to the patient and the eye care practitioner.

Currently, there is no substitute for the body's own natural tear film. Natural tear film consists of a mixture of thousands of compounds with beneficial components, including growth factors, anti-inflammatory compounds, lubricating and hydrating components and is inherently antimicrobial in nature. OC-01 provides therapy to the ocular surface that we believe will provide an early and sustained symptomatic relief while treating the underlying disruption of tear film homeostasis. OC-01 nasal spray has a unique and well-differentiated mechanism of action designed to reestablish tear film homeostasis via stimulation of the parasympathetic nervous system using a nasal spray.

OC-01 nasal spray has been developed as a preservative-free nasal spray to avoid the potential toxicity associated with preservatives to ciliated T cells within the nasal mucosa as the therapeutic benefit to the ocular surface from OC-01 is from the patient's own natural tear film, the product is also designed to avoid the delivery of preservatives to the ocular surface, which is an unmet need for patients seeking treatment for the signs and symptoms of dry eye disease. We look forward to the planned filing of our first NDA in the fourth quarter of 2020. We expect physician engagement from both ophthalmology and optometry communities will be a focus in 2020 as we build and refine our commercialization and pipeline development strategies. In summary, we remain committed to bringing innovative and transformative ocular surface treatments to patients and building Oyster Point into a best-in-class ophthalmology company.

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

Dan Lochner -- Chief Financial Officer

Thank you, Jeff. I will now provide a brief overview of Oyster Point Pharma's second-quarter financial results. Additional detail about our second-quarter financial results can be found in our Form 10-Q that was filed with the SEC this morning. For the second quarter of 2020, Oyster Point Pharma reported a net loss of $15.5 million or $0.66 per share, compared to a net loss of $10.7 million or $7.60 per share for the same period in 2019.

As of June 30, 2020, cash and cash equivalents were $226.7 million, compared to $128.6 million as of March 31, 2020. This increase in cash balance reflects $112.6 million in net proceeds from our equity follow-on offering completed in May of this year, partially offset by cash used in operations, driven primarily by the continued development of the company's product candidates. Total research and development expenses for the second quarter of 2020 were $8.6 million, compared to $8.1 million for the same period in 2019. The increase in research and development expenses were primarily due to an increase in expense related to CROs and CMOs in connection with the advancement of OC-01, as well as higher employee headcount, which resulted in an increase in payroll and personnel-related expenses, including salaries, bonuses, benefits, and stock-based compensation.

Total general and administrative expenses for the second quarter of 2020 were $6.9 million, compared to $3.1 million for the same period in 2019. The increase was due to headcount and reflects an increase in payroll and personnel-related expenses, including salaries, bonuses, benefits, and stock-based compensation of $1.8 million. Additionally, there was an increase in other general and administrative expenses of $1.6 million due to the expansion of the company's organization and operating as a publicly traded company. The company also incurred higher commercial planning expenses of $0.4 million in anticipation of a planned U.S.

launch of OC-01, if approved, in the fourth quarter of 2021. With that brief overview of our financials, I will now turn the call over to the operator to open up the line for questions.

Questions & Answers:

Operator

Thank you. [Operator instructions] And our first question will come from the line of Georgi Yordanov from Cowen. You may begin. Georgi, your line may be on mute.

All right. Our next question will come from the line of Tara Bancroft from Piper Sandler. Your line is open.

Tara Bancroft -- Piper Sandler -- Analyst

Thanks. Hi there, and congrats again on the great data and the progress so far. But now that you're close to your NDA submission in Q4, can we talk about your launch preparations over the next year in terms of sales force, marketing, and commercial supply ramp-ups?

John Snisarenko -- Chief Commercial Officer

Yes. Hi. This is John Snisarenko, I'm the chief commercial officer. We're starting the launch prep this year.

We plan to do a lot of commercial hiring early to mid next year. As we've stated publicly already, we're looking to feel the sales force of between 150 and 200 reps, which we'll call on about 80% of the prescriber base of prescription therapeutics in the dry eye space. We're also doing a lot of prep in regards to assembling the dossier for payers, both commercial and eventually Medicare, so that we're well-prepped by the time we're commercialized in Q4 of '21 that there would be a very good access for the patient base.

Tara Bancroft -- Piper Sandler -- Analyst

Great. Thanks so much.

Operator

Thank you. And our next question will come from the line of Anupam Rama from JP Morgan. You may begin.

Anupam Rama -- J.P. Morgan -- Analyst

Hey, guys. Thank you so much for taking my question. Just a quick one from me. What are the final gating factors here to completing the NDA filing for OC-01? And when you're thinking about the filing and the totality of the data that we saw from ONSET-2 and ONSET-1 and is there plans on filing for having multiple doses in the label or just maybe a single dose? Like how should we be thinking about that? Thanks so much.

Jeffrey Nau -- President and Chief Executive Officer

Yeah. Great question. Thanks a lot. So I think to answer your first question with regards to the NDA and gating items, the development program for OC-01 moved quite quickly.

If you remember back, we filed the IND for this product in 2018. So the clinical team has been so efficient that we've actually got ourselves a little bit ahead of CMC, which often doesn't happen. But in this case, we've moved the clinical trials quite efficiently. And so the big gating item at the moment is just having that stability data to support the shelf life for the drug.

And so we're on track. One of the nice things, if there's any positive about this pandemic is we've had our team home working remotely. Heads down, we've really got a great jump on the NDA. So a little bit fortuitous there in being able to get the filing completed from a clinical data and sort of package perspective.

We're just waiting for those last bit of samples to age and test them from a stability perspective. And then that'll allow us to file the NDA. And as we think about regulatory strategy, we feel very strongly that both doses are approvable. What I would say is as we see the data today, we see both doses approvable for tear film production, although we see the 1.2 mg per mil dose as signs and symptoms and much stronger on the symptoms side.

So we will likely go into the filing with both doses from an approvable standpoint, but we would only commercialize 1 dose.

Anupam Rama -- J.P. Morgan -- Analyst

Got it. Thanks so much for taking our questions.

Operator

And our next question will come from the line of Patrick Dolezal from LifeSci Capital. You may begin.

Patrick Dolezal -- LifeSci Capital -- Analyst

Hi. Thanks for taking the question, and congrats on the progress. Just curious if you guys have begun any conversations with payers at this point and if you could provide any emerging thoughts on pricing. And then I have a follow-up as well.

Dan Lochner -- Chief Financial Officer

Sure. Thanks for your question. In regards to pricing, we want to make sure we're going to be very competitive with the branded products that are approved at the time of our commercialization. So that's the strategy.

In regards to the payer homework that we're doing right now, we've had many ad boards to talk with existing commercial payers, medical directors to see what it is from a data perspective, from a package perspective that they want to see in order to lift -- eventually list OC-01 in a competitive position on the commercial plans. As we stated earlier, Medicare, it's all based on the timing of the submission to Medicare for reimbursement. And within the commercialization in Q4 of '21, we do not expect to have Medicare until probably 2023. So we haven't had direct conversations with payers just yet until we see the regulatory package and provide the full dossier.

We've had preliminary discussions on what it takes to include OC-01 in the reimbursed class of dry eye disease.

Patrick Dolezal -- LifeSci Capital -- Analyst

Great. And I guess one on the competitive landscape. Dry eye is having kind of a shift. There's a few therapies in development in the pipeline, one of which is a novel topical steroid with dry eye on label, which may be approved this fall.

Could you just touch on the differentiation of OC-01 versus this class and provide any thoughts on whether having a topical steroid on label has potential to meaningfully shift the treatment paradigm?

Jeffrey Nau -- President and Chief Executive Officer

Yeah. So great question. The way we look at the OC-01 molecule is that it's very well-differentiated among all of the dry eye therapies that are out there. So it has a very unique mechanism of action, novel route of administration.

It's the only product out there that is specifically designed to stimulate natural tear film production. So we see this as very unique within the armamentarium of all the clinician and how they may use the product. When we look at the landscape today, we do see some physicians utilizing topical steroids in their treatment paradigm today, although we think that because the OC-01 nasal spray product is so unique, that it will fit in basically with any of the other products that are in the dry eye market, regardless of whether they're a pharmaceutical approach or a medical device approach, we think that reestablishing this tear film homeostasis is critical and certainly something that we'll be able to provide patients with early symptomatic relief, but also a chronic benefit over time. So we don't see anything that's in the pipeline at the moment or on the horizon that will meaningfully shift how physicians will use our product once it's approved.

Patrick Dolezal -- LifeSci Capital -- Analyst

Great. Thank you.

Operator

Thank you. Our next question will come from the line of Georgi Yordanov from Cowen. You may begin.

Georgi Yordanov -- Cowen and Company -- Analyst

Hey, guys. Can you hear me?

Jeffrey Nau -- President and Chief Executive Officer

We can. Thanks, Georgi.

Georgi Yordanov -- Cowen and Company -- Analyst

That's perfect. So I guess what we were wondering is, how are you guys thinking about the ex-U.S. opportunity for OC-01? Would you need to run a separate clinical program, for example, in Europe? And do you have any guidance in terms of timing on that? And would you consider partnering before running any additional studies? Or would that be something that would happen after you actually go into additional studies? And then I have a follow-up.

Jeffrey Nau -- President and Chief Executive Officer

Sure. That's a great question. So as we look to formalize our plans to move into both the Europe and the Asia Pacific region, I think the way that we would characterize it is we want to continue to maintain optionality. What we were hoping to see with the submission of Xiidra was that the EU would accept three-month data package.

It looks like they're still holding steady on six months needed for approval. As we were developing the product, we've been very clear that we realized we would do additional clinical development in the European theater to support the approval, and I don't think that we have changed our messaging at all with regards to our plans to do some additional clinical development work in the European theater to support approval. We're currently working on arranging those discussions with the EMA and formalizing that study design. But I think now that we've seen that the regulators want those six months endpoints, we have a pretty clear picture of what our study designs would look like.

In the Asia Pacific region, as you know, which is common, the Chinese, as well as the Japanese regions both want pharmacokinetic work done in their specific populations with natural-born citizens. And so we're working on those studies as we speak. I have really a lot of faith in our clinical development team. So my team has run multi-center global clinical trials in the past.

So we have no problems certainly tackling these Phase I studies, as well as beginning the Phase 3 studies in Europe. And from a partnering standpoint, obviously, we will be looking for a partner to support commercialization. It's unlikely that we would want to build out that commercial infrastructure ourselves in those regions. But for the time being, we will remain -- keeping that optionality and being able to do that development ourselves.

And obviously, if there is an opportunity to partner on the development side, we're open to those discussions. But for the time being, we're pretty confident in our own team being able to do the clinical development in those regions.

Georgi Yordanov -- Cowen and Company -- Analyst

That's great. And just one more question. Can you remind us of the IP around OC-01 and also the agreement that you have with Pfizer for varenicline? What are the, I guess, upcoming milestone payments that you have previously disclosed?

Jeffrey Nau -- President and Chief Executive Officer

Yeah. So on the IP front, what I would say is we have filed our IP globally in all the major countries throughout Europe, as well as in the Asia Pacific region. We have exclusivity based on our own patent filings out to 2035 in almost every one of those regions. And we have the opportunity to move forward with some additional filings with regards to methods in other areas of the world.

With regards to the Pfizer agreement, I think as we stated before, we paid an upfront payment on that agreement. This agreement is specifically for the U.S. So it does not cover ex U.S. regions.

Although the composition of matter intellectual property will not be enforced in many of these regions by the time that we would seek approval. So we would be protecting the asset with our own method and formulations, as well as our unique delivery system on the nasal spray side.

Georgi Yordanov -- Cowen and Company -- Analyst

That is very helpful. Thank you so much.

Operator

Thank you. [Operator Instructions] And our next question will be from the line of Tara Bancroft from Piper Sandler. You may begin.

Tara Bancroft -- Piper Sandler -- Analyst

Yeah. Thanks. Just one more question. So can you give us any more color on which of the follow-on indications you think you're pursuing? Do you still expect to enter the clinic in neurotrophic keratitis in H2?

Jeffrey Nau -- President and Chief Executive Officer

Yeah. That's a great question. So we are still currently on track to look at that indication. As we've stated in the past, we have looked at -- we are interested in other indications as well.

So we think that the unique mechanism of action of this product in providing stimulation of tear film also would play into indications of contact lens intolerance, also pre and post-prep therapy for cataract and refractive surgeries. There are other indications, such as some different ocular surface disorders that fall into similar categories as neurotrophic keratitis, which is corneal neuropathic pain, where there's a very unmet medical need there with patients. So we are looking really to be the first therapy in the dry eye space with more than one indication on the label, and that's our plan from a clinical development perspective. We think that that would pose a very unique situation for Oyster Point and that none of the other products are indicated for more than one condition.

And we can -- we want to continue to build that label, build the body of evidence to really support the physician community, as well as provide support for reimbursement across various different indications.

Tara Bancroft -- Piper Sandler -- Analyst

Great. Thanks.

Jeffrey Nau -- President and Chief Executive Officer

Thank you.

Operator

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

Jeffrey Nau -- President and Chief Executive Officer

Thank you, operator. So in closing, we believe that OC-01 has some of the strongest clinical trial to data yet in the dry eye space and will represent a transformative treatment to address the large unmet medical need that currently exists with dry eye disease patients via our hypothesis of restoring tear film homeostasis with natural tear production. We produced positive efficacy results on multiple endpoints of signs and symptoms in several randomized placebo-controlled clinical trials. We've purposely designed our trials to address a real-world dry eye patient population, which we believe will allow eye care practitioners to translate the clinical trial results from our clinical trials into practice and strategize how best to use the product within their treatment armamentarium.

We feel that this is one of the underlying reasons that patients do not persist with current dry eye therapies as the benefits seen in the clinical trials do not translate to the broader dry eye population. I'd like to thank everyone for joining us today, and I hope that you and your families stay safe and healthy. Thank you.

Operator

[Operator signoff]

Duration: 29 minutes

Call participants:

Daniel Lochner -- Chief Financial Officer

Jeffrey Nau -- President and Chief Executive Officer

Dan Lochner -- Chief Financial Officer

Tara Bancroft -- Piper Sandler -- Analyst

John Snisarenko -- Chief Commercial Officer

Anupam Rama -- J.P. Morgan -- Analyst

Patrick Dolezal -- LifeSci Capital -- Analyst

Georgi Yordanov -- Cowen and Company -- Analyst

More OYST analysis

All earnings call transcripts