Oyster Point Pharma, Inc. (OYST) Q4 2020 Earnings Call Transcript

Oyster Point Pharma, Inc. (OYST)
Q4 2020 Earnings Call
Feb 18, 2021, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good evening, and welcome to Oyster Point Pharma's fourth-quarter 2020 earnings conference call. My name is Josh, and I will be your operator today. [Operator instructions] At this time, I would like to turn the call over to Mr. Daniel Lochner, Oyster Point Pharma's chief financial officer.

Sir, please go ahead.

Daniel Lochner -- Chief Financial Officer

Good evening, everyone, and welcome to the Oyster Point Pharma fourth-quarter earnings conference call for the three months ending December 31, 2020. This evening, we issued a press release containing our fourth-quarter financial results and recent business highlights. In addition, our earnings press release and our Form 10-K that we filed with the SEC this evening are available on our website under the Investor and News section at www.oysterpointrx.com. Joining us on our call today are Dr.

Jeffrey Nau, president and chief executive officer of Oyster Point Pharma; and John Snisarenko, chief commercial officer. Following Dr. Nau, John and 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, including 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 critical trial outcomes, including secondary endpoint analysis, predictions regarding product approvals or the FDA, our efforts to manage the impact of COVID-19 and the industry environment and 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 Food and Drug Administration. They are currently limited by federal laws, investigational use, and no representations made as to their safety or effectiveness for the purposes to which they're 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 risk factors that could cause the 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 annual report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 18, 2021. 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. Good evening, everyone, and thank you for joining us on our call today to discuss our fourth-quarter 2020 financial results and recent business highlights. As you know, on December 17, 2020, we submitted our NDA for OC-01 nasal spray with an indication for the treatment of the signs and symptoms of dry eye disease. In the coming days, we expect to hear back from the FDA regarding the acceptance of our NDA for review and the PDUFA date, if accepted.

Once we are in receipt of the correspondence from FDA, we will issue a press release announcing the NDA acceptance. In addition to our OC-01 nasal spray for dry eye disease, we filed an IND in November to evaluate the potential of OC-01 for the treatment of Stage 1 and Stage 2 neurotrophic keratopathy. We believe that OC-01's unique mechanism of action of stimulating natural tear film by the trigeminal parasympathetic pathway, as seen in preclinical and clinical studies, may be beneficial for patients with corneal epithelial hyperplasia and/or punctate keratopathy, as well as those with persistent epithelial defects. We plan to begin enrollment of the Phase 2 OLYMPIA clinical trial in the first half of 2021.

As we are preparing for a potential launch, there are a number of major ophthalmology meetings that we plan to attend either virtually or live in 2021, dependent on the fluent environment in light of the current pandemic. The 2021 Association for Research and Vision and Ophthalmology Meeting will be held virtually May 1 through the 7. Oyster Point's Phase 3 ONSET-2 data will be presented at this meeting with the time and date details to be announced. The 2021 Royal Hawaiian Eye Meeting at present will be held live from May 8 through the 14 in Maui.

The American Society of Cataract and Refractive Surgery is scheduled for July 23 through the 27 in Las Vegas, and the American Academy of Ophthalmology Annual Meeting will be held in New Orleans from November 12 through the 15. We are looking forward to a year where we are able to showcase at the various ophthalmic meetings, the data from our clinical development program and highlight what we believe is the strongest data set from the treatment of a real-world population in the dry eye space. We expect 2021 to be an incredible year for the company as we transition from a clinical development company to a commercial organization that remains committed to the research and development of therapies to treat diseases of the ocular surface. We plan on bringing innovative and transformative ocular service disease treatments to patients and building Oyster Point Pharma into a best-in-class ophthalmology company.

I would now like to 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 nasal spray in dry eye disease in Q4 2021.

John Snisarenko -- Chief Commercial Officer

Thank you, Jeff. The dry eye disease segment is a large market with over 16 million people diagnosed in the United States alone. Only a small proportion of these patients, approximately 2 million, are currently being treated with a branded therapeutic, and over 7 million people diagnosed with dry disease have tried and abandoned the currently available options. We believe that OC-01 nasal spray has a compelling therapeutic profile that if approved, may address the unmet need of a broad audience, which includes those patients with mild, moderate, and severe dry eye disease and the eye care practitioners who provide care for these patients.

This product has been developed with patient safety and comfort in mind as a preservative-free nasal formulation that naturally spares the ocular surface from harmful preservatives and common ocular side effects associated with topical eye drops. From a commercial perspective, we are planning three phases of launch preparedness, including a disease state awareness campaign, which is kicking off this quarter. We intend to refrain the narrative around dry eye disease to educate on the importance of tear film homeostasis and how tear film instability impacts dry eye disease. Historically, education has been primarily focused on later-stage disease and the inflammatory component of the disease, which, in our opinion, is a long-term sequeli of a disruption in tear film homeostasis.

The second phase will consist of starting dialogue with payers about OC-01's therapeutic profile and value proposition, which will also occur in early 2021. We've done quite a bit of research with payers, including a number of advisory boards, and we remain extremely focused on obtaining the best possible positioning of OC-01 post-approval. The third stage is continuing to build out our sales team throughout the upcoming year. We plan on hiring between 150 to 200 representatives, which would target approximately 90% of the current prescriber base of therapeutic dry eye products.

At launch, post-FDA approval, our focus will be on broad eye care practitioner and patient education and marketing with focused direct-to-consumer campaigns, leveraging the novel MOA and the nasal spray route of administration. As a first-in-class nasal spray to treat the signs and symptoms of dry eye disease, we feel that the target product profile of OC-01 will be compelling to both prescribers, as well as patients. I will now turn the call back over to Dan Lochner, Oyster Point's chief financial officer, to discuss our fourth-quarter financial results.

Daniel Lochner -- Chief Financial Officer

Thank you, John. I will now provide a brief overview of Oyster Point Pharma's fourth-quarter financial results. Additional detail about the fourth quarter, as well as our annual financial results, can be found in our Form 10-K that was filed with the SEC this evening. For the fourth quarter of 2020, Oyster Point Pharma reported a net loss of $22.2 million or $0.86 per share, compared to a net loss of $19.7 million or $1.41 per share for the same period in 2019.

As of December 31, 2020, cash and cash equivalents were $192.6 million, compared to $139.1 million as of December 31, 2019. Total research and development expenses for the fourth quarter of 2020 were $11.7 million, compared to $15 million for the same period in 2019. The company's expenditures for preclinical and clinical programs were $4.6 million lower during the fourth quarter of 2020 primarily due to the completion of the ONSET-2 Phase 3 clinical trial in May 2020. The company incurred higher CMC expense of $2.9 million primarily due to the continued advance in the OC-01.

The decrease in other research and development expenses, cost was primarily a result of the NDA submission fee to the FDA in the amount of $2.9 million made in December 2020 as compared to the $5 million nonexclusive license agreement to Pfizer in October 2019. This decrease was partially offset by higher costs in the amount of $0.5 million related to data management and regulatory costs in connection with the advancement of the OC-01 NDA submission. Total selling, general, and administrative expenses for the fourth quarter of 2020 was $10.5 million, compared to $5.1 million for the same period in 2019. The increase was due to higher employee headcount and reflects an increase in payroll-related expense, including stock-based compensation of $3 million.

The company incurred higher commercialization planned expenses of $1.5 million in anticipation of an expected U.S. launch of OC-01 in the fourth quarter of 2021 if approved. Additionally, there was an increase in other general and administrative expenses of $0.9 million due to the expansion of the company's organization and operating as a publicly traded company. With that overview of our financial results, I will now turn the call over to the operator to open the line for questions.

Questions & Answers:

Operator

Thank you. [Operator instructions] Our first question comes from Anupam Rama with J.P. Morgan. You may proceed with your question.

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

Hi, guys. Thanks so much for taking the question. Just two quick ones for me. It's still 60 days, right, from the December 17 filing for when you would hear at PDUFA, right? And so we're sitting here on February 18, is there something like COVID-related or anything in terms of timelines we should be thinking about here for the PDUFA? And then second question is, you mentioned the medical meetings for OC-01, where the recent data will be highlighted.

Any new additional analyses we should be looking out for at these conferences? Thanks so much.

Jeffrey Nau -- President and Chief Executive Officer

Thanks, Anupam, for the question. I'll take the first question first. So just to remind everyone, the timelines for review from the FDA. So as this is a 505(b)(2) product, we have a standard 10-month review cycle, and the FDA is required to provide feedback to us in writing by day 74.

So just as a reminder, we filed our NDA back in December 17 of 2020, and so we're still within that day 74 window. We've had good conversations with the FDA. And as we stated in our prepared remarks, once we do receive that letter, we will issue a press release. For the second question, we do have a number of acceptances already this year with the data.

It will be probably a combination of top-line data, as well as additional analyses. We have a great medical affairs team we've brought on who's now started to go through some of the additional analyses that are in our fairly robust data set. And so we would expect to be on the podium virtually at the ARVO Annual Meeting and recently were accepted at the ASCRS Annual Meeting. And so we'll be looking to present data at both of those meetings.

And then as we get into the March time frame, we'll get into the window to submit for the American Academy of Ophthalmology, where we intend to have presentations there as well.

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

Thanks so much for taking our questions.

Operator

Thank you. Your next question comes from Tara Bancroft with Piper Sandler. Please proceed with your question.

Tara Bancroft -- Piper Sandler -- Analyst

Hi guys. Thanks for taking the question. I guess using the TrueTear experience as a lens of sorts, do you anticipate any read-through from that from payers on an intranasal delivery of your product? And -- so I guess in the same vein, have you had more detailed discussions on coverage yet and the positioning and the treatment paradigm? And if you can't provide details of that, what is the general sentiment you're hearing, especially for coverage in the first-line setting? Or do you think a step-through will be required?

Jeffrey Nau -- President and Chief Executive Officer

Yeah. Sorry. Go ahead, John.

John Snisarenko -- Chief Commercial Officer

Yeah. Thanks, Tara. I will address the question around the payers. From a TrueTear perspective, TrueTear was a medical device that was not reimbursed from a traditional payer perspective, since this is a proctology agent, we do expect the standard commercial insurance, as well as Medicare down the line to list on formulary OC-01.

What we've had to date we've done quite a bit of extensive research, and we've had some ad boards with payers. So we have a good idea of what they're looking for really differentiation of the product, as well as competitive contracting is going to be key to get competitive listing on the commercial plans. And then we have to wait for the cycle of contracting for Medicare that we expect the 2023 year. We are building a compelling dossier to be used as monotherapy first line for dry eye disease for the signs and symptoms.

And we're going in with that position with very competitive contracting strategy.

Tara Bancroft -- Piper Sandler -- Analyst

Great. Thank you.

Operator

Our next question comes from Ken Cacciatore with Cowen and Co. You may proceed with your question.

Ken Cacciatore -- Cowen and Company -- Analyst

Thanks for the call. Appreciate it. I was wondering, maybe, John, you could talk a little bit about some of the lessons learned from the Xiidra launch. I know you have some innovate understanding of what went right, what went wrong.

And a little bit of maybe a background around the pricing issues that Xiidra and Restasis had. It seems they kind of got locked into a little bit of a pricing battle. So wondering where that has shaken out? If you feel that the marketplace is kind of condition now for you all and more stable around that? And also, it was real interesting. You mentioned DTC and kind of fascinated by that.

Obviously, Shire went out pretty hot on DTC, and just how that really plays into the game plan here? And then lastly, just how is the marketplace evolving? Now, we have Novartis a little bit more aggressively back in the market with Xiidra and advertising. So just kind of the underlying trends that you're seeing that you can share with us. Obviously, it's an interesting time with COVID, but any thoughts there? So kind of a lot of just general market commentary. Thank you.

John Snisarenko -- Chief Commercial Officer

Yeah. Ken, I'll address these questions. Let's start with kind of the marketplace in general. One of the things that we did learn from the Xiidra launch was that the market is very promotionally sensitive, both from a field force perspective as well as an investment in direct-to-consumer.

We've seen the market grow as high as double digits, 30% when good effort is put behind educating the consumer around dry eye disease and getting your eyes checked and getting treatment. So that's a very positive lesson that we've taken away. We're going to be much more precise with our DTC efforts initially as we're getting payer coverage, we're going to be really targeting a lot more digitally and not casting the net as wide. But as we do get more favorable coverage and then eventually Medicare, we plan on having quite an extensive direct-to-consumer campaign as we've seen this market react quite well to it, especially with our therapeutic product profile, the only nasal spray on the market for dry disease, it's something that the patients could easily identify and ask for when they're coming into the eye care provider.

You mentioned also pricing. I think all the branded products out, there are four of them approved on the market, they all range between $500 and $600 WAC, wholesale acquisition cost, on a monthly basis. And I think that pricing has kind of settled. The branded products are at that price.

I think it's going to be important how we approach the payers from a contracting strategy. But I think, overall, that market has stabilized and that pricing has kind of been that for quite a few years now. And last on the question around the market evolving. This phase has been around 15-plus years, Xiidra now four.

There are some new competitors that have come on the market. We feel that this market still has a lot of headroom in regards to market potential. A lot of these products do focus in on kind of later-stage disease, the inflammatory component, we feel that a product such as OC-01 that is acting more upstream on restoring natural tear film and tear form homeostasis is conducive for the market to be used more upstream such as mild and moderate disease in addition to moderate to severe disease. So we're quite excited that we'll be able to grow the segment, the prescription therapeutic segment.

And a lot of our commercialization efforts are going to be around that education, as well as expansion of that market.

Ken Cacciatore -- Cowen and Company -- Analyst

Great. Thanks so much.

Operator

Thank you. [Operator instructions] Our next question comes from Patrick Dolezal with LifeSci Capital. You may proceed with your question.

Patrick Dolezal -- LifeSci Capital, LLC -- Analyst

Hi. Thanks for taking the questions. So a few for me. Perhaps you could help us think about the unmet need in neurotrophic keratopathy and the rationale for OC-01 in this indication.

And then more specifically, on the OLYMPIA study, just curious about any takeaways from the broader OC-01 experience and dry eye that might speak to the ability of OC-01 to improved corneal staining. And then maybe in a more general sense, just you guys could contextualize how you're thinking about pursuing additional label expansion and whether there's anything else that might be expected in the relative near term?

Jeffrey Nau -- President and Chief Executive Officer

Yeah. Great. Thanks, Patrick. Those are great questions.

So as we think about neurotrophic keratopathy, one of the things that I think is important is to understand the disease state. When we think about patients with this disease, think about it almost as a patient who's diabetic that has peripheral neuropathy only it's in their cornea. So that underlying nerve plexus in the cornea is not providing feedback back to the brain to say, blink or tear. And so we get a breakdown, not only from the lack of blinking and tear production but also because those underlying nerves keep that corneal epithelium healthy.

The way in which OC-01 nasal spray works is by completely bypassing the ocular surface. Therefore, we think this is actually a really important product for these patients because we can stimulate natural tear form production. We can do it many times a day. We are contemplating actually treating more than twice a day that we did in the dry eye program in the NK program, and we think that these patients will benefit because we don't rely on that underlying nerve plexus.

And as we have stated previously, the lockerman land produces a whole myriad of growth factors, including nerve growth factor, epidermal growth factor, and we think that those are going to be important for healing that corneal surface. When we look at the different stages of neurotrophic keratopathy, we're really focused with OC-01 as a stand-alone agent right now for Stage 1 and Stage 2 NK in our clinical trials. As we develop the pipeline internally, there may be other things that we look at for those Stage 3 patients. But we think that actually all three patients -- all three stages of patients could benefit from a treatment such as OC-01 because regardless of whether you have corneal hyperplasia or you have a corneal ulcer, that stimulation of the natural tear film could be beneficial to those patients.

And as we know today, one of the only therapies that's out there for those Stage 3 patients, it's taking quite a long time for that therapy to get to the patient and work its way through the payer system. And so we think that this could potentially be a product that we may ultimately look at to sort of bridge those patients during that time. So more to come, but right now, we're really focused on Stage 1 and Stage 2 patients. And we think that this product just has a very unique mechanism of action to be able to improve the health of the corneal surface.

When we look at the cornea staining data that we did see in ONSET-1 and ONSET-2 studies, a couple of different points. One is we're really encouraged by the data. As you saw in the ONSET-1 study, we had statistically significant improvement in multiple areas of the cornea. And again, we're one of the few companies that have shown our data across all areas of the NEI scale, not just one specific area.

And then in the OC -- or sorry, the ONSET-2 program, again, we saw a directional benefit in all of the areas of the cornea with regards to sustaining. And we will be presenting some additional data as we go forward on certain subsets of that patient population. But two things to keep in mind on the dry eye side. One is we only treat it for 28 days.

So sometimes staining resolution takes some period of time. And second, because we were focused on looking at the patient's Schirmer scores, we had to give topical proparacaine pretty often over the course of the study, which we know can also exacerbate staining. So when we look at neurotrophic keratitis, we obviously won't have as much proparacaine on the ocular surface. We'll be treating over a 56-day period, so a much longer period of time, and we're really excited to see the data in that patient population.

Patrick Dolezal -- LifeSci Capital, LLC -- Analyst

Great. that was super helpful. Thanks so much.

Operator

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

Jeffrey Nau -- President and Chief Executive Officer

Thank you, operator. I'm extremely proud of the progress that the Oyster Point team has made in developing OC-01 nasal spray specifically through the efficient development program that began in May of 2018 when we filed the initial IND application for this product. I look forward to the team's continued execution through developing and advancing additional pipeline assets, in line with our goal to expand the pipeline to other ophthalmic indications, initially focused on transformative therapies for diseases of the ocular surface. In addition, we have continued to bolster our R&D and clinical development capabilities, as well as strengthen our manufacturing team.

In 2021, we will also continue to enhance our commercial capabilities, including a planned competitively sized ophthalmic sales force to launch OC-01 nasal spray in the fourth quarter of 2021 if approved. We are driven to build Oyster Point into a world-class ophthalmology company. In closing, I'd like to thank everyone for joining us today, and I hope that your family stays safe and healthy.

Operator

[Operator signoff]

Duration: 31 minutes

Call participants:

Daniel Lochner -- Chief Financial Officer

Jeffrey Nau -- President and Chief Executive Officer

John Snisarenko -- Chief Commercial Officer

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

Tara Bancroft -- Piper Sandler -- Analyst

Ken Cacciatore -- Cowen and Company -- Analyst

Patrick Dolezal -- LifeSci Capital, LLC -- Analyst

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