Outlook Therapeutics, Inc. (OTLK) Earnings Call Transcript & Summary

Hello, and welcome to Outlook Therapeutics Corporate Update Conference Call and Webcast. [Operator Instructions] 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. At this time, I'd 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 law 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 can cause actual results to differ materially from these contemplated by such forward-looking statements are discussed in the periodic reports Outlook Therapeutics files 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. Joining us on today's call from the Outlook Therapeutics leadership team are Bob Jahr, President and Chief Executive Officer; Lawrence Kenyon, Chief Financial Officer; and Dr. Jennifer Kissner, EVP, Medical, Clinical and Regulatory Affairs. I would now like to turn the call over to Bob. Please proceed.

Good morning, and thank you all for joining us today. As you've seen from our announcement, we received a complete response letter, or CRL, from the FDA regarding our BLA resubmission for LYTENAVA for the treatment of wet AMD. I want to be very clear here that this was not the outcome that we had hoped for, and we share the disappointment that many of you feel. At the same time, I want to emphasize this is not the end of the road for Outlook Therapeutics. The CRL identified only one deficiency that relates specifically to evidence of efficacy. In their letter, the FDA noted that while our pivotal NORSE TWO study met its primary endpoint and demonstrated that LYTENAVA was effective and well-tolerated, the confirmatory NORSE EIGHT trial did not meet its primary efficacy endpoint under the criteria set by the agency. As a result, the FDA concluded that there was not sufficient confirmatory evidence to support approval at this time. To be clear, the FDA did not state that another study is necessary. It is important to note that no other deficiencies were cited in the letter. There were no issues raised with safety, manufacturing or with any other element with their BLA, and we believe that distinction matters. It means the foundation of our program is solid and that the path forward depends on addressing one defined issue. Again, while this outcome is very disappointing, we intend to meet with the FDA through a Type A meeting request in the near term to gain clarity on their expectations and to determine the best path forward in the United States. Let me take a moment to explain why our mission remains so important. Compounded bevacizumab has been used off-label as a first-line treatment for wet AMD for years, representing about 55% of the anti-VEGF market in the U.S. But compounded bevacizumab is not manufactured under the same rigorous conditions as FDA-approved biologics and have significant concerns around sterility, consistency and regulatory oversight. Yet despite those concerns, compounded bevacizumab continues to be widely used because of its efficacy, affordability and accessibility. LYTENAVA was specifically designed to change this. It is the first ophthalmic formulation of bevacizumab that has been manufactured and packaged specifically for intravitreal use. That distinction ensures consistent dosing, reliable quality and the oversight of a regulated product. Physicians and patients deserve this level of assurance, and that is why we are committed to continuing this process with the FDA. It is also important to highlight that our story is not defined by this single decision. While the FDA has asked for more, we are already making progress globally with marketing authorization in the European Commission and MHRA in the U.K., LYTENAVA is now commercially available in Germany and the U.K., and we are absolutely moving forward with our commercial plans in these territories and look forward to participating in the Euretina Congress next week. LYTENAVA is now the first and only authorized ophthalmic formulation of bevacizumab for wet AMD in Europe. That is a milestone achievement, not just for our company, but for patients and physicians in those markets. Importantly, we estimate that we have cash for at least the next quarter, and we will be laser-focused on cash conservation while we continue with our ongoing launch in Europe. Looking ahead, our priorities are clear. We will engage directly with the FDA to define a path forward in the U.S. We will continue to expand our commercial footprint in Europe, ensuring that patients there can benefit from this important therapy, and we'll remain focused and disciplined as a company committed to our mission and to the patients who stand to gain from our work. To our shareholders, I want to thank you for your continued support and patience. The physicians and patients who rely on bevacizumab, I want to reaffirm our commitment to pursuing LYTENAVA as a safe, consistent on-label alternative in the United States. And to our team, I want to thank you for your resilience and dedication throughout this process. To close, this was not the outcome we had hoped for today, but it is not the end. LYTENAVA has already begun to make a difference in Europe, and we will work with the FDA here in the United States for approval. I'll now turn it over to the operator for questions.

[Operator Instructions] Our first questions come from the line of Eddie Hickman with Guggenheim Securities.

Obviously, disappointing results. So wondering if you could sort of provide any extra clarity on what your base case assumption for what you would need to do for another study and sort of how long that might take and what that might cost? And then sort of any sort of changes to your operating plan in Europe, given this news and sort of refocusing efforts or cash across the Atlantic? Any help would -- any details would help.

Yes. So I'll first tackle the first one. We will have to discuss with the FDA. They did not -- they specifically said in the CRL, they did not call out that another trial was needed. So we'll have to wait until we engage with them on what the confirmatory information that they're looking for and if we possess it. So that is still to be determined with most of what we've been able to share is what we know right now from the CRL. So at this stage, we have not even discussed an additional trial design or cost or time frame for that because that wasn't indicated to us in the CRL that, that was necessary. So more to come when we meet with the FDA. Regarding the operating model in Europe. So we'd already -- over the summer, where we started first commercializing, we've been talking about how we want to scale and grow there. So Germany and the U.K. are the markets where the first patients have been treated. Within the U.K., we plan to expand into Scotland and Ireland. And then obviously, Germany, which is the largest bevacizumab market, we're resourcing and going to expand our footprint in there to make sure that we have the right footprint with the commercial team to scale for that as we've gone through the reimbursement hurdles, and we've got now broad access. And then we'll start looking at the other countries such as Austria, the Netherlands. And then we'll assess the other countries in terms of like the timing to get approval and the timing for reimbursement. So we started to be doing that prior to the CRL, and we'll just continue to do that and ramp. Most of our -- as we said, we'll have laser focus on cash reserves, but what cash and reserves we have now will be really focused to drive the top line revenue growth in the European markets where we're approved and where we can expand to.

Got you. I appreciate that. Any ideas on sort of what your estimates, at least sort of in these initial company -- countries in Germany and U.K. and Scotland and Ireland, sort of what the sort of peak penetration or peak sales estimate could be? Or just in terms of what the opportunity might be, given there's sort of different usages of other anti-VEGFs in those different countries. I'm just wondering how we should think about the penetration across those countries.

Yes. I mean, as we've looked at our previous corporate deck, roughly Europe overall is around peak about a $600 million market. It will obviously take some time to penetrate to that market or to that peak sales. I don't think we've given any specific estimates. I'll turn it over to Larry by a country region, but we still look at European as a total market. Obviously, Germany is a very large bevacizumab market when you compare it to the U.K. So each country represents a different opportunity. And then also depending upon how they are delivering the vial, they're compounding it, that also makes a difference in what we can do in the forecast. So I don't believe we've given any direct market share or forecast for those numbers yet. I'll turn it over to Larry, but we're not commenting on that at this time.

Yes. Thanks, Bob. Just that's right. We haven't broken everything down by country in our public statements. We've looked at Europe in total. And we haven't changed any of our estimates at this time for the total opportunity in Europe. So we're still excited by that opportunity, and we continue to do what we need to, to maximize the payout there.

Our next questions come from the line of Daniil Gataulin with Chardan.

And Bob, while you mentioned that the FDA did not explicitly request an additional study, what data do you have in hand that the FDA or that you haven't shared with the FDA to this point that you believe could support the potential approval?

So I'll turn that over to Dr. Kissner to answer. I think that what I will address is what they're looking for is confirmatory of efficacy data. So looking at the NORSE EIGHT and the entire NORSE program, we will go back and we will reassess with our stats what data do we have there that will confirm what they saw in NORSE TWO. Now our path to do that, we're still waiting to talk to the FDA to see if they have some specific criteria that they want to meet to. But I'll turn it over to Dr. Kissner for providing some specifics on how we're thinking about that approach.

Thanks, Bob. Yes. So we are evaluating this. And certainly, we're going to have to get in front of the agency to find out exactly what they're looking for. But our data sets as far as clinical trials are concerned are already in front of the agency. So it's a matter of how we're looking at that data or what exactly the agency is looking for, and then we'll be able to evaluate timing and what's necessary to provide it to them.

Got it. Okay. And then just a quick follow-up. In their CRL, did they acknowledge the positive 12-week data from NORSE EIGHT at all? Or did they mainly focus on the primary endpoint?

They focused on the primary endpoint for that. They did acknowledge the NORSE TWO study as a positive successful trial. But for NORSE EIGHT, they focused on the primary endpoint.

Our next questions come from the line of Doug Tsao with H.C. Wainwright.

So I'm just trying to understand, and I know this is very fresh and you obviously haven't had a chance to interact with the agency, but the types of -- if you could help us just sort of understand when you talk about alternative confirmatory evidence, what that could possibly be, just given the fact that at this point, you obviously -- they determined that NORSE EIGHT was not sufficient. I'm just sort of trying to see what additional evidence they could possibly find acceptable in place of NORSE EIGHT.

Well, I think, as Jennifer said that -- okay, thanks, Jennifer. Go ahead.

Yes, sorry. So it's a good question. It's one that we are debating internally as well. In the regulations for the FDA, there are different types of confirmatory evidence that could be provided. But we won't know exactly what they're looking for. The CRL didn't specify. So we're going to have to get in front of the agency and get clarity on that.

Okay. And then a follow-up, if I can. Just in terms of the European business, I mean, do you have a sense of what the run rate from a revenue standpoint you need to get that to be sort of breakeven and even just on the region, not necessarily at a corporate level.

Yes, I'll take that...

I'll turn that over to -- yes, Larry.

Yes. Sorry, I was going on mute. We haven't said that publicly yet, Doug. I think we've told everybody with the -- in relation to our most recent 10-Q that we filed, which had basically 1 month of revenue in it that we'd be providing more details once we complete the current quarter. So we'll be able to provide more guidance or at least directionally how things are looking and what we need there. But overall, what we've said is that the European business gets to breakeven pretty quickly. And we haven't changed any of those estimates. So by itself, it doesn't take much for us to be breakeven. It's probably early 2026 when that happens, depending on how much investment we make in other countries to ramp that up.

Okay. And so -- and Larry, just as a follow-up then, not to parse your words too much, but based on what you've seen so far in the calendar fiscal quarter and the launch to date in U.K. and Germany, you have no reason to sort of change expectations or think that you'll need more commercial infrastructure and so forth?

Yes. We're making no changes to that at this point. We need to see the whole quarter. And as of right now, we haven't made any significant changes to any of our planning for Germany. As we've said publicly before, our real focus here is on Germany. Bob mentioned it earlier in his opening remarks that Germany is a key market for us, and we're looking forward to being successful there.

And again, one -- I'm just curious what makes you prioritize Germany over the U.K.?

Sure. Part of it is just the size of the bevacizumab market. So it's a large compounded bevacizumab market with like over 55% of patients getting compounded bevacizumab there. Whereas in the U.K., again, it's a good VEGF market, but bevacizumab has a lower market share. So I would just say the -- so first, you have a market that's very comfortable using bev in first-line treatment for wet AMD, and also just by the size of the number of patients treated and the number of injections provided makes Germany a larger market than the U.K.

Our next questions come from the line of Julian Harrison with BTIG.

Sorry to hear this news. I was interested in the near-term LYTENAVA ramp in Europe. I don't know to what extent you could comment on beyond what you've already said, but any additional details there would certainly be helpful and appreciated. And then second, the debt on your balance sheet, how should we be thinking about that in the near term?

I'll hand that over to Larry to touch base on the debt piece. And then on the ramp-up, I think, we haven't commented on the addressing that. But if we can add any more context, I'll defer to Larry.

Yes. So I think, Julian, kind of answered everything we can really on the ramp-up in Europe. We're marching towards -- the plan is to get the peak revenues there. It's 3 to 5 years out from launch. So we're just in the opening innings, if I can use a baseball analogy for Europe. So more to come on that as we finalize our plans for the other countries. On the debt side, we've got probably about $30 million of convertible notes outstanding. There is some debt service associated with that. But we're confident that we'll need to work with -- that we'll be able to work with our lender on that. Obviously, we need to get through what the next steps here are in the U.S. in the short term. It's not a very big impact on us. And in fact, we've actually had some conversions of our note recently. So I think the number is smaller than it was. But I don't think that it's a hurdle for us in the short term at all. Just to be clear, the debt has a maturity date of July 1, 2026. So it's something that we need to focus on, but there's no immediate pressure for us from the note.

Our next questions come from the line of Kemp Dolliver with Brookline Capital Markets.

Two questions. First, are you aware of any precedents with FDA where you can leverage the "real-world data" in Europe to help address their data requirements?

Jennifer, I'll hand that over to you.

Sure. Good question. Real-world evidence is being accepted by the agency more and more. So that's one of the possible avenues that we could go down, but we won't know until we get in front of them exactly what they're willing to accept as confirmatory evidence.

And second question, apologies for being obtuse. But when you refer to having cash -- adequate cash for the next quarter, are we talking about the December quarter or the September quarter?

Thanks for the question. I'll hand that to Larry.

Yes. Thanks, Kemp. Yes, we've got -- we feel comfortable that we've got at least cash that gets us through the next 3 months. So I don't want to be confusing people on quarters. But that's where things stand right now. As Bob noted, we're looking at the spending model as we speak and looking where we can conserve that even more and still support everything that we're doing in Europe, especially in Germany and the U.K.

Thank you. We have reached the end of our question-and-answer session. With that, that does conclude today's teleconference and webcast. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.