OptiNose, Inc. (OPTN) Q4 2018 Earnings Conference Call Transcript

The continued definite feedback we are receiving from physicians, who are reporting improvement can their hold patients imply that both our promotional efforts and expanding personal experience, are contributing ought this improved perception. Our quantitative just investigation because robust imply a growing surgeon appreciation of apt patient types and increasing surgeon commerce of the manufacture compatible with a differentiated manufacture profile. can addition, the blend of broad just access and the patient affordability programs we implemented can September, read created an environment, where many commercial patients can fill and refill XHANCE because low out-of-pocket costs.

We confide we read an attractive patient access and affordability offering because XHANCE, however, we are finding that our offering is no however fully appreciated by many purpose physicians.

We progposal this positively, because it provides latent because additional growth because we thrive our outreach and educational efforts because purpose physicians around our access and affordability programs.

Importantly, I'd comparable ought point out, we read implemented our modern patient access and affordability programs around September 2018, nevertheless growing volume and increasing median net revenue per prescription. can supplement ought driving growth by continuing ought slaughter against our heart tactic and our modern commercial footprint, can April of this year, we desire ought enlarge our sales might and increased our surgeon purpose attain by around 25%. This is a clean venture ought direct employ can expanded audience of purpose physicians and ought invent a new source of prescription growth because XHANCE, with our new sphere managers, largely detailing previously above -- called-on physicians.

Next, we desire ought invent our 7-day case manufacture available ought physicians and patients can the second district of 2019. The 7-day case will furnish physicians with the venture ought benefit patients started exact away above XHANCE, can the time of an office visit. We will because robust lease a patient ought receive treatment during the time it can receive per prescription be filled over a classification of available channels, including by mail. We confide this can assist increase initial fill rates and increase patient and surgeon satisfaction with the process of starting treatment. This offering is obviously different from the modern 30-day sample, which has comparatively limited distribution and has latent ought assist motivate additional new prescriptions.

We thrive ought employ with payers with an disagree ought increase the amount of commercial lives that are can a design that covers XHANCE. This is a driver that has two benefits. First, coverage increases the probability that patients who filled their prescription can retail, will be able ought carry out so because a rational out-of-pocket cost.

Second, coverage improves our profitability, by reducing the dollar quantity of co-pay help that we furnish over our patient access and affordability programs.

Finally, and this is more of a long-term driver, I thrive ought be excited by the latent growth that could arise from control ought consumer marketing of XHANCE. This chronically suffering patient population is great with high unmet need. The symptoms are such that patients read a good venture of recognizing them and many patients who are no currently being treated had been previously diagnosed. Given complete of this, we confide DTC has the latent ought unlock future growth because XHANCE and we will sphere quiz pilots can 2019.

Turning ought slip six. I'm encouraged by fourth district prescription volume growth. sum XHANCE prescription volume because the fourth district was impartial above 14,000 representing 50% growth above third quarter.

Turning ought slip seven. We are because robust pleased with prescription volume trends continuing into early 2019. can the left panel, you can look sum XHANCE prescription volume because January 2019 of around 6,300, which represents growth of around 38% above December 2018. We don't read results because the sum month of February yet, however, can the exact panel, you can look the sum XHANCE prescription volume because the 4 weeks ending February 22, was around 7,200, which represents growth of around 39% compared ought the previous four weeks ended January 25.

Encouragingly, this growth is being driven by no maiden new prescription growth, besides because robust an acceleration of refills with both areas demonstrating robust double-digit growth.

Slide eight. ago turning the bark above ought Keith, because his newspaper of the financials, I will briefly newspaper some additional commercial updates. above the just access front, nationally, based upon third-party syndicated data and inner analysis, we confide that greater than 75% of commercial lives are currently can a design that covers XHANCE. This includes complete commercial lives that can be covered with Tier 3 formulary status. can 2019, we are focused above increasing this criterion of just access.

In 2018, we admit that no complete coverage is match and we pursued limited hassle coverage, which we defined because Tier 3 formulary nation with unrestricted access a maiden step compile or a stupid previous authorization that can require, because example, maiden a confirmation of previous intranasal steroid use. We estimate that around 60% of complete commercially insured lives read formulary access that embrace limited hassle. And nevertheless we will no read a formal purpose because this criterion can 2019, it will linger an significant opinion because us because we hunt ought enlarge overall coverage because XHANCE .

In supplement ought the lives covered by commercial plans, we're making contribute and creating opportunities because XHANCE ought utilize patients covered by Medicare and Medicaid plans. because mentioned earlier, we are working ought hire and teach new sphere managers ought begin calling above around 1,800 previously uncalled ENT and allergy specialist physicians, which is an supplement ought the around 7,600 physicians that we're calling above now.

As mentioned, we progposal DTC because a key commercial initiative because the company and confide it has latent ought motivate future XHANCE growth. Therefore, we desire ought sphere DTC pilots including declare television can three markets this year. can a little moments, I'll update you above our pipeline and furnish some closing remarks.

And now, I'll grow the bark above ought our CFO , Keith Goldan because comments regarding fourth district results and perspectives regarding first district and sum year 2019.

Keith Goldan -- Chief economical Officer

Thanks, Peter, and thank you ought everybody who has joined this morning. Turning ought slip 10, because we reported earlier this morning, OptiNose recognized $3 million of revenue can the fourth district of 2018. Based above available XHANCE prescription data purchased from third-parties and data from preferred pharmacy network partners, our median net revenue per prescription because the fourth district of 2018 was around $214, which is favorable compared ought the median net revenue per prescription of around $202 can the third district of 2018.

Average net revenue per prescription is calculated by dividing net revenue because the district by the estimated amount of XHANCE prescriptions dispensed during that quarter. because a result, this metric is question ought variability, that variability is impacted by factors that carry out no necessarily muse the change can the price that is paid because an especial unit of XHANCE including ordering patterns and inventory levels because our wholesale customers and preferred pharmacy network partners, patient utilization rates of affordability programs, the proportion of patients acquiring XHANCE over an insurance utilize and other factors.

In addition, there is because robust the latent ought third parties providing prescription data ought change their estimation methodology and revise historic estimates of prescription volumes. One such change occurred can a third dinner IQVIA, that affected no impartial XHANCE, besides around complete prescription products dispense can retail pharmacies.

If you listen ought our final call, we referenced third district 2018 median net revenue per prescription of $192. when we explain because the back looking revision can prescription volume estimates because the third district from IQVIA that figure is now $202 per prescription.

With fame ought fourth district 2018 median net revenue per prescription, the favorability was driven largely by lower rates of utilization of patient affordability programs than occurred can the third district of 2018.

We had anticipated our fourth district median net revenue per prescription ought be lower than our third district median net revenue per prescription owing ought increased utilization of our patient affordability program. improve than expected reimbursement, which reduces the burden above co-pay help resulted can improvement.

In the persist three apartment of 2018, median quarterly net revenue per prescription ranged from a low of $148(ph)in the second district ought high of $214 can the fourth district with an median of $193 because the three apartment ended December 31st.

In a moment, I'll newspaper our expectations because the first district and sum year 2019. besides first, I'll newspaper our 2018 operating expenses.

Moving ought slip 11. Operating expenses defined because sales, commonplace and administrative expenses plus investigation and development expenses were $27 million because the fourth district and $105.7 million because the sum year 2018. because the sum year 2018, operating expenses were favorable compared ought our guided hill of $112 million ought $115 million.

Moving ought slip 12. Our initial guidance because 2019 operating expenses includes increases associated with key commercial and development activities. These embrace expansion of our sales might and the accompany of chronic sinusitis clinical trials, because Peter impartial described earlier above the bark today.

For the sum year 2019, we desire sum operating expenses ought be can the hill from $135 million ought $142 million, of which $10 million ought $12 million is expected ought be stock-based compensation. sum operating expenses excluding non-cash stock based compensation are expected ought be can the hill of $125 million ought $130 million.

Based above data available ought date, we desire first district 2019 net revenue per prescription ought be between $155 ought $175. This lessen from the fourth district 2018 is a effect of the reset of many patient insurance deductibles can January. because a arise of this annual reset, we desire greater co-pay help ought be provided by us beneath our help programs, which are designed ought help continued volume growth.

For the surplus of 2019, we confide median net revenue per prescription will perfect and we desire that the sum year 2019 median net revenue per prescription will be between $185 and $205. Factors supporting this expected growth embrace patients assembly their out-of-pocket charge thresholds, expected improvements can insurance coverage, and an increase can the proportion of prescription refills.

I will now grow the bark help above ought Peter ought give a concise pipeline update and closing remarks.

Peter K. Miller -- Chief Executive Officer, Board of Directors

Thank you, Keith. Turning ought slip 14. can supplement ought the launch of XHANCE, we confide important additional long-term estimate could be created by the pursuit of a follow-on symptom because the treatment of chronic sinusitis or CS. This is an symptom because which we are aware of no previous FDA approved drugs and a situation with a prevalence estimated ought be around twice the size of the nasal polyp population that XHANCE is indicated ought treat today.

In the fourth district of 2018, we announced the begin of the first experiment inherent ought hunt this first-in-class indication. can the first district of 2019, our main concentrate because the experiment is activation of clinical experiment sites. can addition, we thrive ought desire ought begin a second CS experiment can 2019.

Turning ought slip 16. can conclusion, we are encouraged by the sustained estimate of growth can prescription volume that we are reporting today. We are because robust pleased that we are making contribute toward our other strategic objectives. Based above our progress, I feel stronger than ever that XHANCE has latent ought be a successful manufacture that we can vertical a company around and which can empowers ought attain our long-term purpose of creating a major ENT allergy and specialty Company.

I feel exceptionally good around the talented group of colleagues, who read joined us can OptiNose and cannot be prouder of the large profession we read done and thrive ought carry out so together.

Thank you. Now, I'd comparable ought blank up because Q&A.

Questions and Answers:

Operator

Thank you. (Operator Instructions) Our first question comes from Brandon Folkes with Cantor Fitzgerald. Your queue is now open.

Brandon Folkes -- Cantor Fitzgerald -- Analyst

Hi. Thanks because taking my question and congratulations above complete the progress. I impartial expect ought dig into a little things. so -- because we exhibit out ought 2019 versus what you've seen, what carry out you believe is resonating with physicians that is driving XHANCE's growth here. Is it awareness of XHANCE data? Or is it impartial increased access? And then with that, how to we believe around the increased access can 2019? I understand you touched above the call, besides are you prioritizing hassle-free access or impartial access can general? Thank you.

Peter K. Miller -- Chief Executive Officer, Board of Directors

Yes, Brandon. Thanks because the question, this is Peter. I'll receive it, and Tom and others can spring in, if you'd comparable ought add additional color. But, if you exhibit can the growth we've been experiencing, we complete understand based above our clinical experiment results we read a manufacture that works. We then -- because most nation are aware from research profession that we did can the just based above actual apply can the market, the manufacture really works. so I believe the acceleration that you're seeing can surgeon and classify of commerce of the manufacture has ought carry out with two things. amount one, our sphere managers can my view, read done a identical robust profession of educating doctors above the efficacy profile of the product. besides can supplement ought that, because we said can our remarks, doctors are getting their hold undergo with the patients -- with their hold patients and many of them are reporting ought us results that they've impartial no seen can patients historically with the apply of medical therapies.

So I believe it's those two factors that we're going ought thrive ought drive. so therefore, profession one is we speak complete the time is making nation confide the manufacture really is differentiated specially from an efficacy perspective and no can my view, the data suggests just research, we're achieving that, based above the two things that I mentioned.

The other key maiden brand, and because you know, is making certain that doctors confide that patients can benefit it filled can a rational cost. And this is where we really believe, we got the tactic completely exact with the introduction of our patient affordability program can September, because that allows our sphere managers ought speak physicians that read patients however over the specialty channel that we've created, the maximum out-of-pocket they're going ought wage is $50 and most patients will wage $30, with the first prescription being free.

So it really is the blend of both those things. And because I said, earlier can the call, we believe it candidly, small slice of good news that no complete physicians completely understand our patient affordability program, because, because we thrive ought invent them aware of it, that can furnish continued upside can the business.

Tom, I don't understand if you read anything ought add?

Tom Gibbs -- Chief Commercial Officer

Yeah. impartial a mix of other things ought add that I believe can help what Peter is saying, and thanks because the question, Brandon. I believe there's three things that really motivate surgeon utilize can trying XHANCE, the first is making certain that we're defining the apt patient classify because XHANCE because the patient -- because the surgeon ought begin using XHANCE.

Second is, we've really been able ought increase our efficacy data with no impartial clinical trials, besides because robust videos ought emerge the collision that XHANCE is having -- because authentic patients using endoscopy videos. And, third is the patient affordability program, so that's really what drives the interest.

And I believe second, what's really driving the belief of physicians, and we're seeing more and more prescribers can condition of breadth and depth, is what they're seeing can their hold patients and it's that belief and they look it, the efficacy they're seeing can their hold patients, which is what is driving that -- I believe what's driving the uptake that we're seeing.

And then, your second question was around access. And our concentrate is ought thrive ought motivate what we bark hassle-free access, we always attempt ought contribute can ought benefit a maiden step or better, and if we can't benefit the maiden step, a very, identical stupid previous authorization.

Brandon Folkes -- Cantor Fitzgerald -- Analyst

Thank you, identical much . And perhaps one follow-up if I may. Next month can April, you're bringing above the sphere managers and internalizing the commerce sales force. to we desire any selling disruption, nevertheless you carry out this or will it be a seamless transition? Thank you.

Peter K. Miller -- Chief Executive Officer, Board of Directors

Tom, I'll lease you retort that.

Tom Gibbs -- Chief Commercial Officer

Thanks, Brandon. I believe you carry up a identical significant question and that's something that we've been identical considerate about. We expect ought minimize disruption wherever and whenever we -- because possible. And I used to speak that we to no desire any disruption can April, because the physicians that we are adding are going ought be what we bark XHANCE naive patients, they read -- XHANCE naive physicians, they read no been called above before. so based upon that, we're really no disrupting any relationships can the sphere flat because our sales team.

Brandon Folkes -- Cantor Fitzgerald -- Analyst

Great. Thank you identical much.

Operator

Thank you. And our next question comes from David Amsellem with Piper Jaffray. Your queue is now open.

David Amsellem -- Piper Jaffray -- Analyst

Thanks. so impartial a couple. so first above the ASPs, I wanted ought drill down above the hill that you provided. Is it -- one safe ought speak that you will be can the lower aim of the hill can 1Q, impartial owing ought the seasonal factors that are prevalent can the industry comparable annual deductible resets. besides then, secondly, because we benefit afterward into the year, you mentioned that there was lower than expected utilization of patient affordability programs can the fourth quarter.

So I'm wondering, if given the color that you've provided qualitatively, if that ASP hill especially can 2Q over 4Q perhaps somewhat conservative and assist us understand, what your thinking is there? can other words, the step down from the $214 ought going ought help ought lower 2s and flat beneath that. so impartial assist us understand that.

And then impartial lastly, quickly above the money position, can you impartial assist us understand your runway and the extent ought which you can exhibit ought access major down the road? Thanks.

Keith Goldan -- Chief economical Officer

Sure, David. Thanks because the question. This is Keith. I'll receive your second question first, and then I'll comment above the median net revenue per prescriptions. so from a money perspective, we ended the year with -- around $200 million above the rest sheet, and we did -- although, we didn't embrace included can our prepared remarks, we did embrace a statement can the 10-K that we filed earlier this morning, that we desire that money ought final us into the fourth district of 2020.

I did expect ought point out that, that does no consider the additional $25 million that perhaps available ought us from Athyrium.

Moving ought your first question, you referenced ASPs and it's a small nuance, besides we are -- when we explain the price per prescription, we address around that can condition of median net revenue per prescription, which I described as, taking the net revenue because the era the district can this case, and then dividing by the amount of prescriptions dispensed during that quarter. so I carry that up because ASP is a more -- I'll speak can inner can depth calculation that contemplates a destiny of other factors. And we don't expose the ASP publicly.

But because the median net revenue per prescription impartial ought reground everybody, we gave guidance, a hill of $155 ought $175 median net revenue per prescription can the first district and then expanded t