All right, welcome back, everyone, to H.C. Wainwright's second annual BioConnect Investor Conference here at Nasdaq. My name is Matthew Caulfield. I'm a senior biotechnology analyst here at H.C. Wainwright, and I'm very grateful to be joined by OptiNose as our next fireside chat. I'm here with Dr. Ramy Mahmoud, CEO of OptiNose, as well as Jonathan Neely, Vice President of Investor Relations and Business Development. So, gentlemen, thank you very much for joining us today. Really exciting times. There's obviously a lot of things that are changing now and that have happened for the company. So maybe to start off at a high level, you could walk us through exactly what defines chronic sinusitis, both with and without nasal polyps. Kind of a little bit about those populations and sort of what the company has achieved most recently with the label extension. Sure. Thanks for asking, Matt. Yeah. Thanks for having us. Absolutely. Chronic rhinosinusitis is a term that's used by the FDA for indications, but it doesn't show up in coding. No doctor can claim for chronic rhinosinusitis. Mm-hmm. What you see there is what it has been historically, which is you see either chronic sinusitis or nasal polyps. Mm-hmm. So chronic rhinosinusitis, with and without nasal polyps, is really two conditions from a regulatory perspective. Historically, our product has been approved... It was initially approved and launched in 2018 for nasal polyps- Right ... which now is called chronic rhinosinusitis with nasal polyps. What's new is that in March, we were approved for this new indication, which is called chronic rhinosinusitis without nasal polyps, or just chronic sinusitis, which is a much, much more common condition, and for which no product has ever been previously approved. So this is a first and only prescription medication for treatment of this extremely common disease. Absolutely. Very exciting. Could you speak maybe to the populations? I know you had originally targeted, kind of approximately about 1 million patients that were treated by allergists and ENTs. Can you speak a little bit more to the sort of the broadness of that overall market? Yeah, it can be a little bit confusing. Let me try to sort of walk you through the structure of that. Yeah. There's about 30 million people overall with chronic rhinosinusitis of one type or the other, and sometimes they can go together. Of those, about two-thirds, about 20 million, are what we call dissatisfied dropouts, meaning they know they have the symptoms, they continue to suffer from the disease, but they're not actively seeking care in any given year. Mm-hmm. The remaining 10 million do actively seek care every year, and those are people we can identify because of claims data so that we know a doctor has seen them and coded that diagnosis at the visit. Okay. Of that 10 million, about one-third, probably on a prevalence perspective, I'll say between 15%-35%, have nasal polyps, but not all of them are diagnosed, right? Many are not diagnosed. And that's different from chronic sinusitis. Chronic sinusitis, everybody that we're talking about has been diagnosed, and knows they have the disease. So... And then it's a little bit confusing because we talk about part of the population that we can access, who we call on specialists. So when we're calling on ENT or allergy specialists, which is about 80% of our call on universe right now- Mm-hmm ... that's only about a third of the patients who are actively seeking care. Mm-hmm. So that's where some of the numbers you're talking about come from. We believe we can currently access, with the new indication we were just approved for, between 3 and 3.5 million patients who are being actively diagnosed and treated today with chronic sinusitis overall. Mm-hmm, by ENTs and allergists. ENTs and allergists, and mostly ENTs and allergists. Okay, very helpful. Then, from that market opportunity, what do you feel is the lowest hanging fruit, and how much of that is about getting existing prescribers to write more versus reaching new prescribers in the space? Yeah. So, Matt, that's not an either/or. Okay. We really have to do both. Mm-hmm. It's important that current prescribers, many of whom know about the product and maybe even like the product, but who constrain their prescribing to nasal polyps, because we've been talking to them about this as indicated for nasal polyps for four or five years now. They need to become familiar with the new data and understand why it's worth trying the product now for their patients who don't have polyps but do have chronic sinusitis. So that's really important. About 60% of the doctors that our new sales alignment are calling on are doctors who have been prescribing the product previously, although we think in a limited way because of the indication. The other 40% of our newly called on alignment universe is doctors that we haven't called on previously. Mm-hmm. With them, it's more initiation by teaching them about the product, showing them how it is different from the alternatives, and helping them understand why this new data gives them a new tool that they can treat all their patients with. Okay, very helpful. And kind of along those lines, can you give a little more context for the standard of care and sort of off-label therapy that people may have been relying on, and also the impact of surgery? I know a lot of these patients ultimately end up pursuing an ethmoid surgery, sinus surgery as well. That's right. right. Ethmoid or maxillary or other surgery. Yeah. Yeah, very common. So prior to the advent of our product- Mm-hmm ... patients would present, often to a primary care doctor or to an allergist or ENT specialist, and, when they had these symptoms, the suggestion for treatment would be essentially over-the-counter, or a generic prescription, which is the same as the over-the-counter, for a standard delivery nasal steroid. So that would be products like Flonase or Nasonex or Rhinocort, or there are a number of them that are standard delivery sprays with topically acting steroid. So that with saline lavage, to try to get the mechanical lavage. Mm-hmm. If that didn't work, and most of the time it was better than nothing, but not very effective. The data suggests a little over 80% of people treated that way do not get satisfactory symptom response. Hmm. If they didn't, they could be offered a surgery. As you noted, there's between 600 and 650,000 or so surgical procedures every year, endoscopic sinus surgery, it's called, which is effective. It's very common to either have symptoms be incompletely resolved in the first place or to have them recur over time. But it's non-curative? It's non-curative. Okay. People sometimes have repeated surgeries. You can have two or three multiple surgeries over time. The rate of using medication to try to control symptoms after surgery is similar to the rate before surgery. Hmm ... these patients are still trying to get back to their baseline healthy condition. Mm-hmm. Very frustrating, I can imagine. So you've talked about strategically targeting ENT and allergy specialists. Obviously, there's a huge opportunity as well in primary care prescribers. Can you talk a little more to your kind of targeted focusing on that specialist community of prescribers? Yeah. So, there's a couple of reasons it's helpful to target the specialist community. The first is that, like with other diseases, sometimes the primary care community takes their lead from specialists. Mm. and patients go back and forth. They may refer a patient to a specialist to get that patient back for ongoing care. And, you know, if the product is initiated in primary care, and the specialist doesn't know about the product or doesn't believe in the product, the specialist may actually discontinue the product when that patient goes into specialty care. So- Mm. It's true for many diseases that it's important to get a foothold in the specialty space in order to make the product more accessible, and to, you know, generate belief in the product in the primary care community. So we wanna start in the specialty space. There's also a P&L issue. It's very expensive to go after a very, very large- Sure Population of primary care providers. There might be 500,000 or 600,000 primary care prescribers, and there might be, I don't know, 10-15 thousand specialists. Right. It's an enormous difference in numbers. Eventually getting into the primary care space will require a different strategy. Okay, that makes a lot of sense. What type of color have you been getting so far on the launch? Well, it's early days so far. We just had our national launch meeting the week of April 8th. Yeah, the week of April 8th. And then, the week of April 15th is sort of the first full week in the field for our sales reps, with all the training and all their new tools. So it's very early days. Having said that, my box is filled with all kinds of anecdotal reports of how things are going. Give you a couple examples. Yeah. I had a sales rep reported, going into a doctor they'd been seeing routinely before, who said they liked the product. Walked into the doctor's office, talked about the product, walked out. Doctor came out afterwards, this time said, "Can you come back for a minute and show me how to actually do that in my EHR?" So they were actually motivated this time to go ahead and give it a try. Mm-hmm. I think some of that is because they just didn't see nasal polyps very often, sometimes, depending on what kind of doctor it was. But they see chronic sinusitis all the time. So we've had multiple examples. There's a health plan. There's, you know, thousands of health plans, so I don't wanna make one anecdote- Yeah sound like it's everything. But health plan that we know has already added chronic sinusitis into their paperwork, alongside nasal polyps as an FDA-approved indication for the product. So we have a lot of positive anecdotes. Okay. Now we have to just sort of see how that pans out, you know, how that translates into actual uptake of the product. I expect this to take a little time to get rolling. You know, I expect an S-shaped adoption curve, where it takes a little time to get going and then accelerates and accelerates over time, until we ultimately reach the peak that we're aiming for. Mm-hmm. Absolutely. And can you speak to the changes that you made to your physician target universe to support the CS launch? And were the doctors in the new universe selected because they prescribed standard steroid sprays leading up to that? Yeah. So, Matt, what I described earlier, our current sales alignment, and we realigned our sales for first quarter of this year- Right ... in preparation for this approval. Our current alignment is about 60% doctors we previously called on, and about 40% new doctors that we haven't previously called on. Mm-hmm. The way we identified the doctors for inclusion in the new alignment was not based on their prescribing of generic standard delivery nasal steroids. It was based on the claims data for their diagnosis of chronic sinusitis. So it's based on chronic sinusitis volume. This is a little bit different than some pharmaceutical spaces, because you can't use prescription data to define the market very well, because part of the market is generic, but part of it is OTC- Right ... and therefore, not captured in prescribing data. Okay, thank you. So one factor I did wanna point out was, with the former label, patients needed to have the presence of nasal polyps, right, for XHANCE. And on our side, we considered that prospective nasal endoscopy could have been sort of a barrier to prescription, because, as you mentioned, ENTs or allergists are, more times than not, not performing an endoscopy or a nasal endoscopy for confirmation of polyps. Now, with the labeling independent of polyp status, what are your thoughts on the near-term prospective growth? Yeah. I think the fact that many doctors, most allergists, essentially all primary care doctors, they don't do the kind of deep fiberoptic Right ... nasal endoscopy that you need to diagnose nasal polyps. So they weren't in a position to make the diagnosis. The only time they were treating nasal polyps was sort of a known diagnosis, as if the patient came into them already having the diagnosis from a previous evaluation. Mm-hmm. This opens up the ability to appropriately diagnose a patient and attest to the presence of an on-label diagnosis- Mm ... for doctors who were not able to do that in the past. Mm. That makes it much easier to address utilization management barriers that payers put up, to try to make sure that patients are only getting the drug for an on-label indication. Did you feel like that was kind of a barrier? Yes ... in the previous XHANCE- Absolutely -experience? We do feel like that was a barrier. Yeah. It was very common. When there was a prior authorization, for example- Sure ... it typically did require a diagnosis of nasal polyps. Mm-hmm ... because that was the only FDA-approved indication. We expect that now to be nasal polyps or chronic sinusitis- Right because they're both FDA-approved indications. Which is great, because it's basically a wide net for the indication. It's a much wider net. I think an important distinction here is about the deep nasal exhalation delivery system, or EDS delivery. Basically using an established corticosteroid-... Can you talk about the therapeutic differentiation offered by the, the drug device approach, for instance? Yeah, it's a really important question. I'm glad you asked that, Matt- Yeah -because, if you look at the generic name, it just has azelastine propionate. Right. It sounds like it's the same as Flonase. It's important to understand that the innovation is the device. We could have picked any of several different drugs that would have worked equivalently. We just needed a safe, topically active medication that would be minimally absorbed into the body. So the difference is the device. What the device enables is the delivery of the drug into the part of the nose where the sinuses are and the sinus drainage tracts are, where you get almost no drug with a standard spray. Mm-hmm. So it's like if you're treating poison ivy with a cream, you got to put the cream on the rash to treat it. Mm-hmm. If you put it on some other part of your body, it does nothing. Mm. It's not that the medicine is wrong, it's not that the molecular activity is, you know, insufficient. It's that you have to put it in the right spot to get topical activity, and our device makes it possible for the first time to put the drug in the right spot to treat the sinuses and sinus drainage tracts. So that's what's the breakthrough, and that's why you can treat patients even who have had inadequate response using the same drug in a standard delivery nasal spray. Mm-hmm. It's also the source of the differentiation and protection of the product over time. So- From an IP standpoint. From an IP perspective. Yeah ... we have 13 Orange Book listed patents, the last of which expires in 2036. It's a drug device combination product with topical activity. So these typically, historically, have been very difficult to engineer around- Mm-hmm ... and to get AB-rated generics for. Understood. And looking back to the successful Phase III REOPEN I and REOPEN II trials, can you talk about the importance of not only reaching the deep sinus drainage pathways, but specifically reducing the CS symptoms, the intrasinus opacification, and exacerbations, and how that's been kind of a game changer? Yeah -for patients' perspective? The first thing I'll say is these trials are hard. Mm-hmm ... as illustrated by the fact that you've seen Phase III failures, recently, from other company. Sure. And you've seen cancellations of the programs, from, you know, from last year. But to my knowledge, there's nobody in Phase III right now still trying to pursue this. It is very difficult. We're very proud of the fact that we were able to successfully complete these trials. The primary endpoints, as you alluded to, were reduction of symptoms, which is what doctors and patients care the most about. Right. Proof of reduction of inflammation inside the sinuses, which is evidence that you're treating sinus disease and not just nasal symptoms. But also in Type I error controlled endpoints, we demonstrated a large reduction in acute exacerbations. Mm-hmm. It's one of the problems that's very common to people with chronic sinusitis, is they get acute sinusitis frequently. Mm-hmm. We also demonstrated efficacy in a Type I error controlled endpoint in the population of patients who was previously using a standard delivery nasal steroid, but still continued to have symptoms. So, those are all important things that we demonstrated, in you know, replicate controlled clinical trials. Mm-hmm, with real world value, for sure. Absolutely. Yeah. These are important things for us to promote. They're things that matter to both patients and doctors. Mm-hmm, that makes sense. And kind of alluding to your discussion of growth, for XHANCE, what's your view on XHANCE revenue throughout 2024? Do you expect growth trends to be similar to 2023, but with an additional tailwind from the label expansion, or what's sort of the best way for investors to think about that? We have a completely different strategy in 2024 than we had in 2023. Yeah. In 2023, our strategy was sort of a retrenching strategy. We wanted to maximize our cash runway and preserve cash- Mm-hmm ... for the launch that we knew was coming in 2024 with approval. So we had a sharp reduction in operating expenses, reduced the number of sales territories. We were extending our cash runway. In 2024, it was about getting the approval, realigning our sales force, improving our payer structures, and now launching. Mm-hmm. So 2024 is going back to being a growth year for us. You know, our guidance suggests 20%-34% growth in 2024 over 2023. You know, and we're doing everything possible to grow that. I know it sounds like that implies a lot of increased operating expense- Mm-hmm ... because drug launches typically imply a lot of increased operating expense. Mm-hmm. But this is a launch of a new indication that's much bigger. It's not putting the drug on the market for the first time. So I expect our operating expense to increase a little bit, but not, not enormously, very modestly. Do you feel the sales footprint and prescriber familiarity from the original indication with nasal polyps will be able to inform sort of what you're working from now with the expanded label? Yeah, absolutely. I mean, several features make this different from a regular launch. Yeah. You know, we already have payer coverage, so we're not getting brand-new insurance coverage with the launch. Mm. We have familiarity, not in all the doctors we need, but in a meaningful, you know, percentage of them. We have existing relationships. Again, not in all the doctors that our sales force is calling on, but in a meaningful fraction of the doctors that our sales force is calling on. So we have a number of things working in our favor that I think create some tailwind to help us sort of get started with the launch here. Mm-hmm. But, you know, I don't want to oversimplify what's involved in a launch. It is still a launch. There's still a lot of new training for reps. There's a lot of education for doctors who become cynical and maybe disillusioned with the efficacy of standard delivery nasal steroids. Like I said earlier, they just usually don't work. Mm-hmm. We need to educate them and show them our data, and they need to try it and get some personal experience to see success, and I think that will snowball into increasing adoption over time. Yeah, absolutely. And do you think the payer reimbursement landscape needs to change at all, for that to happen, to achieve that level of growth? And how do you anticipate that could, how long do you anticipate that it could take for insurers to reimburse for CS, Yeah- indications? ... so, I can't prognosticate on the insurance landscape. Yeah. I don't know that you could ask an insurer and tell them to tell you, you know, what's gonna happen a year from now, but I don't think we need to see substantial changes in order to get meaningful growth. Okay. You know, a branded product like ours, with the kind of use that we have, is frequently subjected to utilization management. I expect we will continue to be subjected to utilization management, but I think it will be much easier for patients and doctors to overcome the utilization management, because on-label prescribing for chronic sinusitis is so much more commonly seen and done- Mm-hmm ... than for nasal polyps. So, and again, that's based on claims data. We're not. It's not market research. You can actually look and see that doctors today, without any change in their practice, are diagnosing chronic sinusitis frequently. So if that's what's required, like in a prior authorization form, it will be there in the medical record, for you know, medical assistant to find, for a pharmacist to find. It will be much easier to overcome prior authorizations that require on-label diagnosis. Got it. And now with independence from an endoscopy, where they can- Yeah, I mean- The patient can have polyps or not have polyps. Endoscopy is not required to make a diagnosis of chronic sinusitis. Right. And then kind of along the growth lines, to reach your expectations, for XHANCE peak revenues, the guidance you provided of being at least $300 million at peak- Yeah ... based on the current specialist prescriber base, are you also expecting double-digit growth during 25 at this stage? Absolutely. Absolutely. Yeah, we are expecting double-digit growth during 2025. We've guided to an expectation for annual revenue in 2024 of $85-$95. Right. but as you said, we also guided that by the end for calendar 2025- Mm-hmm ... we expect to be cash flow producing from operations. Mm-hmm. We expect ultimately to reach peak year revenue of $300 million or more, in our sort of specialty space. Right. It's important to recognize, though, that we have a lot of growth potential outside of the specialty space or outside of our current footprint in the specialty space. Mm-hmm. Number one, we can increase the number of reps we have in specialty. We have 75 sales territories today. That's less than the optimum number. So we could increase the number of sales reps materially. We could increase into primary care. Right ... either digitally by ourselves or with a partner for direct selling. Mm-hmm. We could increase to the other 20 million patients I talked about before- Mm-hmm ... who are, essentially diagnosed but not actively treated because they dropped out, if there's anything for them. And we can use our infrastructure in the ENT allergy space for other products. We don't want to be a single product company indefinitely. Sure. And we should point out, those numbers that you're discussing are U.S.-based. That's, that's only looking domestically. Thank you, Matt. Yeah. That's absolutely right. That's a purely U.S. projection, and we have maintained our intellectual property in multiple major markets. Very exciting. Just one more progression there. Yeah. So our guidance for 2025 was not a cash flow metric that we're actually projecting to be positive income from operations. From operations. Yes, the P&L metric. I just want to be clear. Sure. So I think we're low on time here, but maybe just to close things out, what, if anything, do you think investors might be missing about the story currently? Well, I hope everyone can recognize the size of the chronic sinusitis opportunity. Sure. It's enormous. Even if we don't penetrate it fully, we can grow significantly from where we are today, and we're already a revenue-producing company. We produced $71 million in revenue last year. We don't expect to need to increase our expenses very much in order to access that enormous opportunity. There's a fairly wide moat around our product. Mm-hmm. It's difficult for this product to be duplicated in an AB substitutable fashion. So we think we'll enjoy a fairly long period of effective exclusivity with the product. And there's a bunch of opportunities for us to do more, like we were just talking about, either with this product or with additional products. Mm-hmm. Any thoughts on what could possibly be down the pipeline from here, looking beyond XHANCE within CRS? Well, there's a spectrum of things from co-promotes that might be leveraging our current infrastructure in ENT and allergy- Mm-hmm ... to development. You know, as time goes by- Mm-hmm ... we have strategic flexibility, especially with the successful, registered direct offering we did recently. We have financial flexibility to evaluate our strategic options and think about various things we can do, either for growing XHANCE or for bringing pipeline in for the future. Sure. Not a lot of companies can say they've successfully brought two products from pre-IND through FDA approval and launch. Mm-hmm. We have high quality development infrastructure, and at some point in the future, I'd like to see us be able to put that back to work and bring new innovations to patients in this space. Great. Very exciting. Well, with that, in the interest of time, I'd like to thank Optinose. Thank you so much for being here. Ramy, Jonathan, it was great to see you guys. Thanks again. Thank you very much, guys.