Outlook Therapeutics, Inc. Q2 FY2024 Earnings Call

Hello, and welcome to the Outlook Therapeutics Inaugural Quarterly Update Conference Call and Webcast. As a brief reminder, all participants are currently in a listen-only mode. Following the presentation, there will be a question-and-answer session. Note that this webcast is being recorded at the company's request and a replay will be made available on the company's website following the end of the event. It is now my pleasure to turn the call over to Jenene Thomas of Investor Relations.

Thank you, Darryl. At this time, I would like to remind our listeners that remarks made during this webcast may state management's intentions, beliefs, expectations, or future projections. These are forward-looking statements and involve risks and uncertainties. Forward-looking statements on this call are made pursuant to the Safe Harbor provisions of the federal securities laws and are based on Outlook Therapeutics' current expectations, and actual results could differ materially. As a result, you should not place undue reliance on any forward-looking statements. Some of the factors that could cause actual results to differ materially from these contemplated by such forward-looking statements are discussed in the Outlook Therapeutics Annual Report on Form 10-K for the fiscal year ended September 30, 2023 and in other reports filed with the Securities and Exchange Commission. These documents are available in the Investors section of the company's website and on the Securities and Exchange Commission's website. We encourage you to review these documents carefully. Additionally, certain information contained in this webcast relates to or is based on studies, publications, surveys, and other data obtained from third-party sources and the company's own estimates and research. While the company believes these third-party sources to be reliable, as of the date of this presentation, that has not independently verified and makes no representation as to the adequacy, fairness, accuracy, or completeness of that or that any independent source has verified any information from third-party sources. During the call, the company will discuss non-GAAP financial measures, which are not prepared in accordance with US generally accepted accounting principles. Definitions of these non-GAAP financial measures, along with reconciliations of the most directly comparable GAAP financial measures, are included in our second-quarter earnings release which has been furnished to the SEC and is available on the company's website at ir.outlooktherapeutics.com. Joining us on the call from Outlook Therapeutics' leadership team are Russell Trenary, President and Chief Executive Officer; and Lawrence Kenyon, Chief Financial Officer of Outlook Therapeutics. I’d now like to turn the call over to Russ. Please proceed.

Thank you, Jenene, and thank you to everyone joining us for the company's first earnings call and webcast. To begin, I feel it is important to restate our mission and what we are working to accomplish. Our goal is to enhance the standard of care in the retina anti-VEGF space by achieving the first approval for an ophthalmic formulation of bevacizumab for the treatment of retina diseases in the United States and Europe. Accomplishing this with our product candidate ONS-5010 could provide people afflicted with wet AMD an effective form of bevacizumab that meets the FDA and EU's stringent efficacy, safety, and quality standards. So this is not a distant long-term goal for us. Following our recent positive opinion from the CHMP, we believe we are on the cusp of receiving a potential approval for ONS-5010 in Europe, which we expect this quarter, specifically in calendar Q2 2024, and we are making significant potential progress for approval in the United States as well. We also submitted our MAA, or Marketing Authorization Application, to the Medicines and Healthcare Products Regulatory Agency in the United Kingdom. So in Europe, which represents a significant market opportunity for us, we're making tremendous progress and expect to be in a position to launch in the UK and in the EU in the first quarter of calendar 2025. Regarding the United States, we have been actively engaged with the FDA and will continue to do so, leading up to our expected BLA resubmission. As part of these interactions, earlier this year, we reached agreement with the FDA on a Special Protocol Assessment, or SPA, for NORSE EIGHT, our ongoing 90-day non-inferiority study for which we expect top-line data in the fourth calendar quarter of this year, 2024. Shortly thereafter, our goal is to resubmit our BLA by the end of this calendar year. Turning to our financial picture. We believe we're strongly positioned. We recently closed a private placement with gross proceeds of up to $172 million. Of that, $65 million is in cash from the issuance and sale of common stock, which are accompanied by warrants to purchase shares of common stock and that's already been received, plus an additional $107 million which will be available upon the full cash exercise of the warrants. Assuming the full cash exercise of the warrants, we expect our accessible capital to fund the business through our potential approval and commercial launch in parts of Europe and through the completion of NORSE EIGHT plus a potential FDA approval and the subsequent launch in the United States. Of note, this financing included participation by a couple of long-time supporters of the company, as well as a good number of additional fundamental healthcare-focused institutional investors. Larry will speak to this a little bit later in the call. I would like to drill down a little bit more on our activities in the EU and UK. In the EU, we expect potential approval this quarter and in the UK, we expect potential approval in the third quarter of calendar 2024 this year, with initial launches in the first quarter of calendar 2025. As we await potential approval in the EU, we are working with Cencora, formerly AmerisourceBergen, and their EU units to leverage their existing infrastructure and expertise to support launching ONS-5010 ourselves in Europe. I'd like to emphasize the importance of the opportunity in Europe, which is the second-largest market for wet AMD globally. So not only will it potentially be where we start generating revenue in the first half of calendar 2025, but it will validate all the hard work we've done to date. First, it will validate our entire development program for ONS-5010 including the positive safety and efficacy data we generated in our pivotal NORSE TWO trial plus the learnings from NORSE ONE, which informed our NORSE TWO study design. Also, the additional patient exposures established in NORSE THREE to meet FDA's required safety population size. And it also puts an exclamation point on the entirety and the quality of our CMC work. Now, turning to the US, we reached agreement with the FDA on our SPA and launched NORSE EIGHT, a three-month non-inferiority study with an eight-week efficacy endpoint. This study has progressed as planned, and we have already enrolled over 30% of the patients to date. We continue to expect to complete enrollment in the third quarter of this year as planned and be in a position to report top-line data and resubmit our BLA in the fourth quarter of this year. Additionally, we are meeting with the FDA in Type C and D meetings in order to discuss the resolution of the CMC questions and comments that were received in the CRL last year. The Type C and D meetings are not required by the FDA. These interactions are at our request with the goal of doing everything in our power to address the FDA's CMC questions while streamlining the process for resubmitting our BLA. Importantly, we anticipate these open CMC items will be resolved in calendar Q2 and Q3 this year 2024, in advance of the NORSE EIGHT data readout. I would also like to reiterate that the CMC comments from the CRL do not have any impact on our current supply of ONS-5010. We are working with reputable manufacturers and are actively using ONS-5010 from these partners in the ongoing NORSE EIGHT study. We believe that if successful, these activities will be sufficient for potential approval in the United States in calendar 2025. And now it is my pleasure to turn the call over to Larry Kenyon, our Chief Financial Officer. Larry?

Thank you, Russ. Good morning everyone. To begin, I'm very pleased to report that for the first time in the history of Outlook Therapeutics, we have secured access to the capital to potentially fully execute on our goal to receive approval for and launch ONS-5010. While we still are waiting to receive the EU approval and complete work for our BLA submission at the end of calendar 2024, we believe our successful PIPE financing that closed in March and April provides the necessary cash resources to support launches in the US and Europe. The Outlook Therapeutics team is grateful to GMS Ventures and investments for their continued support of our mission. We also welcome the significant new institutional healthcare fund that sees the opportunity here to upgrade the standard of care for treating wet AMD in patients around the world. Our current cash position, when combined with the expected proceeds from the full exercise of warrants to purchase shares of common stock, subject to meeting the requirements for calling the warrants, should be sufficient to support our operations through calendar 2025. Moving on to our financial results for the second fiscal quarter of 2024. I want to note that going forward, we are and will be using non-GAAP adjusted results to eliminate the noise caused by the non-cash quarterly fair value changes for our warrants and convertible notes that are reflected in the P&L and balance sheet. For the second fiscal quarter of 2024, I can report that we remain on track with our spending plan for the year. The increase in our R&D expenses during the fiscal second quarter versus Q1 of this year came in as expected as we began recruiting and initiating clinical trial sites for NORSE EIGHT and also began enrolling patients. Previously, we had reported that we estimated we could complete NORSE EIGHT for a total of $30 million with most of these expenses to be incurred during the first three calendar quarters of 2024. We have not changed our estimates for NORSE EIGHT and expect that overall R&D expenses will continue to run at these levels for the next two quarters. Fiscal Q2 G&A expenses were in line with fiscal Q1, and we also expect this to continue for the next two fiscal quarters as we prepare for the anticipated approval in the EU and UK and plan for a launch there in early calendar 2025. I’ll now turn the call back over to the operator for the Q&A portion.

Thank you. We will now be conducting a question-and-answer session. Our first questions come from the line of Julian Harrison with BTIG. Please proceed with your questions.

Hi, good morning. Congrats on all the progress and thank you for taking my questions. First, I'm wondering if there are any preceding data sets, in particular, you would highlight as being especially derisking for NORSE EIGHT? And second, great to see the positive CHMP opinion back in March. I'm curious how large the Europe market opportunity for ONS-5010 is relative to the US? And sorry if I missed it. Is this something you could pursue alone, or is a partner there the most likely path forward?

Thank you, Julian. I will start with the market size. Europe presents a significant opportunity for us. The number of off-label bevacizumab injections in Europe is similar to that in the United States, with approximately 3 million injections per year. Although there's some price compression in Europe compared to the US, it’s still a compelling market for us, and we are eager to take advantage of it. We plan to collaborate with Cencora, which was formerly AmerisourceBergen. They have the capabilities to handle all 3PL activities, along with strong connections to HTA payers and pharmacovigilance, which we will utilize. In the US, they also provide GPO contracting services and medical literature distribution, and we intend to leverage these functionalities in both the US and Europe. Our role will be to serve as the customer-facing entity in both regions with our sales representatives and MSLs. Regarding the data set you asked about, which may indicate the potential success of NORSE EIGHT, that's an insightful question. Our NORSE TWO pivotal trial had impressive data throughout its year-long duration. A detail that might not be widely recognized is that the first 90 days of this trial followed an identical dosing regimen to our current NORSE EIGHT trial. Both trials involved doses of ONS-5010 or ranibizumab, commonly known as Lucentis, on day 0, day 30, and day 60. When we evaluate the data from the NORSE TWO trial during this timeframe, we observe non-inferiority between the ONS-5010 and Lucentis. Since the primary endpoint for NORSE EIGHT is best corrected visual acuity and there was minimal difference in letter gains between Lucentis and ONS-5010 during that period in NORSE TWO, we fully expect similar results in NORSE EIGHT.

Julian, did you have a follow-up question?

That was it from me. Very helpful. Thank you very much.

Great. Thanks, Julian.

Thank you. Our next questions come from the line of Eddie Hickman with Guggenheim Securities. Please proceed with your question.

Hi, good morning. Congrats on all the progress. Just a couple of questions for me. Can you talk about how many sites you currently have enrolling patients? And what's the goal and sort of cadence of that site coming online will be? And then if you could remind us of your pricing discussions with both commercial and government plans. I know the landscape will be a little bit different next year than it was last year, given some of the new approvals. So I'm just sort of curious if you could update us on those discussions. Thanks.

Yes. So I think this is the first month, Eddie that we have 60 sites or more that are enrolling patients. We had almost that same number in April. So we kind of look at April as the first month where we were fully operational. I think we've got one more site that still needs to be activated, but we are pretty much at full strength right now. So for us to have just reached mostly full strength in April, being fully operational in May and with March having been a partially operational month to already have 30% of the patients enrolled is really encouraging. The sites are very happy about the study design, the ease with which recruiting is going. Patients get either a product that the doctors have been using for several decades or ONS-5010. So they feel like it's a win-win no matter which arm the patient gets randomized into. So very encouraging start. And we are going to try to keep the pedal to the metal and get this thing enrolled inside the third quarter of this year. In terms of pricing, we really like how it's shaping up because I think if you looked over last year and the year before, you started to see relatively speaking some price declines among the major brands in the United States and in Europe, and now with the launches of some of the super high-priced brands, that ASP for the anti-VEGF space we expect to go up. The important thing for people to understand about this space is the following: It's always been a two-segment market. There has always been a low-cost bevacizumab segment, albeit one that was off-label, given – meeting ophthalmic standards, didn't really have the type of quality that the doctors were necessarily looking for, but it was oftentimes mandated by payers to start with that before moving on to something that was multiples more expensive than the off-label. So that part of the market, that's almost 50% of the injections has always been there and it's been untouchable until we are going to come along. The other 50% has been the battleground for the biosimilars, the major brands, and now the new launches that have come out from other companies. The new launches from the other companies are driving the ASP up, they're switching a lot of their own customers to their higher-priced brand, or they are taking market share from others from their product into a higher price. So we like how the pricing is working for us. And we think the paradigm of having a two-segment market will continue. There will still be a lower-cost bevacizumab market, that is about half of the injections, and then the other half being the battleground for everybody else. Is that everything you were looking for, Eddie?

Yes, that's very helpful. Is this study only for three months? What are the doctors saying about what they would do for those patients after the three months are completed? They definitely wouldn't want to revert to non-branded versions. I'm curious about your plans for recruiting those doctors for a future launch.

Yes, I believe the most effective way to recruit doctors for a significant launch is to involve them in the study, allowing them to observe the clinical results we anticipate will demonstrate non-inferiority to Lucentis. This is shaping up nicely for us. You are right; it is a 90-day study. There will be three injections administered: one on the day of randomization (day 0), and then additional injections on day 30 and day 60, with patients exiting the study by day 90. The primary endpoint will be assessed at day 60, focusing on best corrected visual acuity, and we will aim for a non-inferiority margin of 3.5 letters compared to Lucentis, which was indeed achieved in the NORSE TWO study, although it wasn’t a required statistic for that study's outcomes. We expect this new study to again demonstrate non-inferiority. After patients complete the study, the decision on subsequent therapies will be left to the doctors and payers.

Thank you. Our next question comes from the line of Douglas Tsao with HC Wainwright. Please proceed with your question.

Hi, good morning. Thanks for taking the question. I just want to clarify a couple of things. Was the 30% enrollment figure as of today or was it as of March 31?

So that was as of yesterday.

And what was the number of sites? You mentioned there are 60 sites currently. What was the progression of sites from when you started in March and April?

In March, we had around half of the sites enrolled. By April, we completed the enrollment of the remaining sites, either at the end of March or the beginning of April. Therefore, we considered April to be a fully operational month for us, and May will be the same.

Okay, great. I'm curious, given the progress in the wet AMD market and the funding, what's the latest thinking regarding DME and the BRVO indication? Thank you.

Yes, it's a great question, Doug. We do have in our pipeline studies for DME and BRVO planned. It's interesting today that DME and BRVO were also treated with off-label Avastin. So we don't know how that will develop necessarily in the future. But for us, we want to make sure that our sales organization is always in the safest position to promote across the full breadth of the capabilities of ONS-5010, which we believe will include DME and BRVO; we're going to have to do those studies to prove that. Initially, our first approval will be in wet AMD, which as you know, Doug is up to about 70% of the market in that category.

Yes, absolutely. Considering some of the changes within the FDA division, do you think it's necessary to revisit what would be needed to obtain those approvals? Specifically, regarding NORSE EIGHT, which had a favorable study in terms of duration, do you think an eight-week endpoint for DME or BRVO would be sufficient? Thank you.

Yes, we are currently in ongoing discussions with the FDA. Our relationship has significantly improved, and we plan to address the accomplishments of NORSE TWO and our anticipated success with NORSE EIGHT, along with the safety data from NORSE THREE. It is essential that we and the FDA have a clear understanding of the requirements for the DME and BRVO studies. We will consider continuing our previous strategy of using Type A Meetings and possibly SPA approvals to ensure alignment with the FDA regarding these studies.

Okay, great. I will jump back into the queue.

Thank you. Our next questions come from the line of Tim Chiang with Capital One. Please proceed with your question.

Hi, thanks. As you guys prepare for the launch in Europe, can you talk a little bit about what some of your contract manufacturers are, your partnerships with those, your packaging partners, what they are doing to prepare for the launches in Europe and also in the US next year?

Yes. I mean, we've got inventory now. So we have already been through the process of developing the drug substance out of FUJIFILM Diosynth in College Station, Texas, as well as the fill-and-finish operation that occurs with Ajinomoto Biopharma in San Diego, California. Our packaging takes place, and labeling and serialization takes place with PCI. So we have got inventory sitting on the shelf. We are going to have to wait for final approval and final labeling before we get that product into final packaging and labeling. So we've got the beginning of the pipeline stope, and we just need to get that product in the final packaging and labeling. From there on, it’s just really just continuing to place orders with our manufacturers and be in a position to have enough to ship to both Europe as well as the United States.

Okay, super. Is there anything else that you think you need to remediate or update leading up to your meeting with the FDA, the Type A meeting?

Yes. We do not have any more Type A meetings scheduled with them regarding this product. We are holding Type C and Type D meetings, which focus on specific agenda items related to CMC. In these meetings, we discuss the studies we've conducted, our analyses, statistics, and the data addressing all questions raised in the CRL. We have already held one of these meetings and have another scheduled. Our interactions with them have been very successful. This ensures mutual understanding between us and the FDA, and so far, everything is going well. It also guarantees that the CMC data we've produced in response to their inquiries is being reviewed by the FDA. By the time we resubmit this BLA, they will have reviewed our CMC data multiple times: during the initial application, at the Type C and D meetings, and in the resubmission. We believe this approach not only streamlines our submission process but also the FDA's review process. This strategy was recommended by the FDA during our first Type A meeting last year, where they suggested continuous engagement. I think our relationship with the FDA has become very positive through our ongoing interactions during this process.

Okay, that’s very helpful. Thanks, Russell.

Our next questions come from the line of Douglas Tsao with H.C. Wainwright. Please proceed with your questions. Douglas, could you check in? You're on mute, please?

Thanks for taking the questions again. Just to clarify, Russ, your comments earlier about how you're thinking about commercialization in Europe, is it the plan now to pursue this independently, or are you still contemplating potential partnerships with companies that have established pricing already? Thanks.

Yes, thanks, Doug. Yes, we're focused on executing the things that we can do ourselves. We will always entertain conversations with other partners. If we ever come to a determination that they can do it better than we can, our job is to maximize shareholder value and ensure that we do the best job of creating great top-line and bottom-line results on behalf of our shareholders. So right now, we are focused on what we can do, but we are not close-minded. We will listen to people who might want to feel like they can be helpful to us.

Thank you. Our next questions come from the line of Kemp Dolliver with Brookline Capital Markets. Please proceed with your question.

Great, thank you. How does the EU differ from the US in the context of how the health plans will position your product versus all the other options? Because in the US, they will pretty much have you at a full position initially until patients fail therapy and then move on to something else. Focusing on the EU 5, how do they differ, if at all?

Yes, Kemp, there are significant differences not only in five specific ways but also within countries due to regional variations. For instance, in the UK, off-label bevacizumab usage is minimal. This presents us with an opportunity to establish a strong brand positioned at a price that meets the expectations of doctors and payers, mirroring the strategy we implemented in the United States. Unlike many predecessors in the US market, our pricing approach was designed to convey our value proposition clearly to doctors and payers, who are aware of the competitive landscape. They recognize the extent of switching from off-label bevacizumab to a branded option and now understand the reasons behind this trend. Much of it stems from off-label bevacizumab's inability to fulfill the regulatory requirements needed for ophthalmology approval. When we educate the market on this, we ultimately ask how they would prefer us to price our product and what they consider to be fair. It's important to acknowledge that while we may start with an off-label price, the actual price often increases. Over a three-year period, factoring in patient switching, the average cost per injection nears $1,000, contrasting sharply with the off-label price of $100 or less per injection. This pricing dynamic generally applies across Europe as well. Most markets deal with off-label options, along with a collection of high-priced brands. Although prices in Europe tend to be somewhat lower than those in the United States, there are instances where wholesale acquisition costs exceed $2,600 per injection. While Europe also has high prices, they are not as extreme as in the US. The injection patterns and the perspectives of payers and physicians in Europe are quite similar to those in the United States, albeit with some adjustments in pricing.

Okay. And Russ, just to be clear, so the practice in those countries where there is activity is they will start a patient on the off-label Avastin and then switch if necessary?

Yes, some of that behavior exists in Europe as it does in the United States. Let's be clear: there are some patients who are high responders. There are some patients who, even with off-label that does not meet ophthalmic requirements for approval in the EU and the United States, can sometimes take a patient from start to finish. However, if you look at the entire cohort and all of the patients who start on off-label, there is so much switching going on that it drives the price way higher than people might have expected in both the United States and Europe because they don't necessarily continue to respond to an off-label bevacizumab that does not meet the requirements for regulatory approval. We believe that by bringing ours on, which meets all the same requirements for a lack of particulates, or the right drug protein concentration, approved packaging, the right pH levels, and the right endotox levels, are specifications for osmolarity, we check all of those boxes that are not or cannot be met by an off-label product that ends up being removed from its original packaging and allocated and refiltered back into small volume syringes and bio. We believe that by bringing regulatory approved quality, that's why we expect regulatory approval with our safety and efficacy data.

Thank you very much.

Thank you. Our next questions come from the line of Ed Woo with Ascendiant Capital Markets. Please proceed with your questions.

Congratulations on the progress. My question is on the manufacturing and supply for Europe. Do you anticipate having to move production there as you commercialize the product?

We don't need to initially, but we will always be looking to expand our global presence in that regard. Our partners also operate facilities in Europe. As we plan for the future, we will balance the needs of Europe and the United States, taking into account the costs associated with distributing the product in Europe from our current locations or potential future sites. But for now, we are set to proceed.

Great. Well thanks for answering my questions. And I wish you guys good luck. Thank you.

Thanks so much, Ed.

Thank you. Our next questions come from the line of Daniil Gataulin with Chardan. Please proceed with your questions.

Good morning guys. Thank you for taking the question, and congrats on the progress. Can you talk about the timing for the Type C and D meetings for the CMC questions? And do you anticipate providing a separate communication when the issues have been fully addressed?

We expect all of the Type C and Type D meetings to take place in the second and third quarters of this year. We won't be providing updates because discussing those meetings would be similar to giving you an update on my staff meeting. These Type C and Type D meetings are very focused and technical. However, I can confirm that based on our experience in a previous meeting, the FDA has expressed satisfaction with our approach and the data we've provided. They are appreciative of the opportunity to review this information before we resubmit. Our belief that this would be beneficial for them and assist in the review process has been confirmed.

Okay. Thank you. And one more quick question. Initially, with your product, was supplied in vials, and are you still conducting work for pre-filled syringes?

We are progressing on our prefilled syringe project and have one more arm of the study, the NORSE SEVEN study. The first arm, which is the control arm, has already been enrolled. Once we complete the necessary stability work for the syringe, we will proceed to enroll the second arm for NORSE 7. We do not plan to seek approval for the prefilled syringe until we receive final approval from the FDA. As you may know, we are engaging with both the pharmaceutical and biologics group and the medical device group at the FDA, which means we have to communicate with them on two fronts for this project. Learning from the experiences of other companies, we aim to ensure we secure our approval before applying for the prefilled syringe.

Got it. Thank you for taking the questions.

Thank you. We have reached the end of our question-and-answer session. I would now like to turn the floor back over to Russ Trenary for closing remarks.

Great. Thanks so much. While I believe the future of Outlook Therapeutics has never been brighter, 2024 has already proven to be a pivotal year for the company. To summarize, in Europe, the second largest market for wet AMD, we received a positive CMP opinion already and expect potential approval this quarter. This sets the stage for our first commercial launch expected in the first quarter of calendar 2025. In the United States, we reached agreement with the FDA on a path to potential approval and are targeting resubmission of our BLA this calendar year. Assuming cash exercise of the warrants from our recent PIPE financing, we expect to be funded through key anticipated milestones, potentially realizing our mission of bringing the first approved ophthalmic formulation of bevacizumab to patients with retina disease. We look forward to continued progress and the opportunity to bring an enhanced level of care to the retina anti-VEGF space. Thanks for joining us today.

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.