OptiNose, Inc. (NASDAQ:OPTN) is a specialty pharmaceutical company focused on the development and commercialization of products for patients treated by ear, nose and throat (ENT) and allergy specialists. The company's first commercial product, XHANCE® (fluticasone propionate) nasal spray, is a therapeutic utilizing the company's proprietary Exhalation Delivery System™ (EDS®) that delivers a topically-acting corticosteroid for the treatment of chronic rhinosinusitis with and without nasal polyps.
In March 2024, XHANCE was approved by the FDA for the treatment of chronic rhinosinusitis without nasal polyps in patients 18 years of age and older, making it the first and only drug therapy approved by the FDA for this indication. This expanded approval represents a significant market opportunity for OptiNose, as chronic sinusitis is currently being diagnosed by healthcare providers at least 10x more frequently than nasal polyps.
Financial Overview
For the full year 2023, OptiNose reported annual net revenue of $70.99 million, annual net loss of $35.48 million, annual operating cash flow of -$20.53 million, and annual free cash flow of -$20.86 million.
In the first quarter of 2024, the company reported net product revenues of $14.88 million, a 26% increase compared to the first quarter of 2023. This increase was primarily attributable to revisions made to the company's co-pay assistance program in the second half of 2023 and early 2024, which were intended to enhance average net revenue per prescription by reducing co-pay support to patients in commercial insurance plans that either do not cover XHANCE or have high deductibles.
Based on prescription and inventory data, the estimated average XHANCE net revenue per prescription in the first quarter of 2024 was $227, a 63% increase compared to the first quarter of 2023. The company believes the disruption in services at Change Healthcare, the claims processor for the vendor that administers the XHANCE co-pay support program, also had a favorable effect on net revenue per prescription in the first quarter, which they expect to be isolated to that period.
For the full year 2024, OptiNose expects XHANCE net revenues to be between $85 million and $95 million, representing growth of 20% to 34% compared to 2023. The company also expects average XHANCE net revenue per prescription to exceed $230 for the full year 2024, up from their previous expectation of approximately $220.
Total operating expenses (consisting of selling, general & administrative expenses and research & development expenses) for 2024 are expected to be between $95 million and $101 million, of which approximately $6 million is expected to be stock-based compensation expense. This projection of operating expenses exceeding projected revenues raises concerns about the company's ability to achieve operational income in 2025 as previously stated.
Business Overview
OptiNose was founded in 2000 and is headquartered in Yardley, Pennsylvania. The company's first commercial product, XHANCE, was approved by the FDA in September 2017 for the treatment of nasal polyps in patients 18 years of age or older. XHANCE utilizes the company's proprietary Exhalation Delivery System (EDS) to deliver a topically-acting corticosteroid high and deep into the nasal passages.
In March 2024, XHANCE was approved by the FDA for the treatment of chronic rhinosinusitis without nasal polyps in patients 18 years of age and older. Chronic rhinosinusitis is a serious nasal inflammatory disease that is treated using therapies, such as intranasal steroids (INS), which have significant limitations. OptiNose believes XHANCE has a differentiated clinical profile with the potential to become part of the standard of care for this disease because it is able to deliver medication to the primary site of inflammation high and deep in the nasal passages in regions not adequately reached by conventional INS.
Launch Plan for Chronic Sinusitis Indication
To support the launch of XHANCE for the treatment of chronic sinusitis, OptiNose is leveraging a multi-pronged approach in the second quarter of 2024:
1. Sales Force: The company's 75-person sales organization plans to reach approximately 7,500 target healthcare providers and make over 35,000 total sales calls. They are also supplying the field with 50% more XHANCE samples to stimulate additional physician and patient trial.
2. Non-Personal Promotion: OptiNose is supplementing the field force with non-personal promotion targeting a total of 22,000 of the highest potential largely specialty prescribers. These tactics include digital media, search engine marketing and social media.
3. Peer-to-Peer Education: The company is deploying a peer-to-peer speaker program with approximately 80 specialist prescribers familiar with both XHANCE and the clinical trial data to host educational events for their peers.
4. Medical Meetings: OptiNose is planning a strong presence at 10 national and 20 regional medical meetings for ENTs and allergists during the second quarter, including booth presence and promotional events such as product theaters.
In addition, the company has recently implemented hub services intended to increase the service level for prescribers and patients, which they expect will result in an improvement in the rate of written prescriptions that are ultimately filled and the rate at which insurance coverage and co-pay support are correctly applied.
Liquidity
As of March 31, 2024, OptiNose had $51.6 million in cash and cash equivalents. On May 10, 2024, the company completed a $55 million registered direct offering, which, combined with the recent approval of the chronic sinusitis indication, has strengthened the company's financial position.
The additional capital, along with the recent amendments to the company's debt agreement, provide OptiNose with a cash runway to operate its business and service its debt obligations through 2025, when the company expects to produce income from operations for the full year.
Risks and Uncertainties
While the approval of XHANCE for the treatment of chronic sinusitis represents a significant market opportunity, there are several risks and uncertainties that the company faces:
- Successful commercialization of XHANCE in the chronic sinusitis indication, including continued patient and physician adoption.
- Ability to maintain adequate insurance coverage and reimbursement for XHANCE.
- Outcome and timing of clinical development plans for XHANCE, including studies mandated under the Pediatric Research Equity Act.
- Ability to maintain compliance with the financial covenants under the company's debt agreement.
- Potential competition from new or existing therapies for the treatment of chronic sinusitis.
Conclusion
The approval of XHANCE for the treatment of chronic sinusitis represents a transformative opportunity for OptiNose. With the company's recent financing and revised debt agreement, OptiNose is in a strengthened financial position to execute on its launch plan and capitalize on this significant market opportunity. While challenges remain, the company's multi-pronged approach to the chronic sinusitis launch, combined with its existing commercial infrastructure, positions OptiNose well to drive growth and create shareholder value in the years ahead.