OptiNose, Inc. (NASDAQ:OPTN) Q3 2022 Earnings Call Transcript

OptiNose, Inc. (NASDAQ:OPTN) Q3 2022 Earnings Call Transcript November 13, 2022

Jonathan Neely: Third quarter 2022 performance and our plans for the remainder of the year. I’m joined today by our CEO, Peter Miller; our President and Chief Operating Officer, Dr. Ramy Mahmoud; and our Chief Commercial Officer, Victor Clavelli. The slides that will be presented on this call can be viewed on our website, optinose.com in the Investors section. Before we start, I would like to remind you that our discussions during this conference call will include forward-looking statements. All statements that are not historical facts are hereby identified as forward-looking statements. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those indicated by such statements.

Additional information regarding these factors and forward-looking statements is discussed under the cautionary note on forward-looking statements section of the earnings release that we issued today as well as under the Risk Factors section and elsewhere of OptiNose’s most recent Form 10-K and Form 10-Q that are filed with the SEC and available at their website, sec.gov, and on our website at optinose.com. You are cautioned not to place undue reliance on forward-looking statements. The forward-looking statements during this conference call speak only as of the original date of this call or any earlier date indicated in such statement, and we undertake no obligation to update or revise any of these statements. We will now make prepared remarks, and then we will move to a question-and-answer session.

With that, I will now turn the call over to Peter Miller. Peter?

Peter Miller: Thanks, Jonathan, and good morning. We appreciate you joining us today. Starting on Slide 4. We’ll go into more detail in a moment, but I’d like to highlight 5 key takeaways from today’s presentation. First, consistent with the expectations set in our last call, we met with the FDA in September to discuss our supplemental NDA submission for XHANCE as a treatment for chronic sinusitis. Ramy will cover this further during his prepared remarks in a moment. In summary, we believe it was a positive meeting. Our second key takeaway for today is that following the discussion with FDA, we now expect to submit our supplemental NDA in early 2023. Third, we remain enthusiastic about the potential addition of an indication to treat chronic sinusitis.

CS is diagnosed approximately 10x more frequently than nasal polyps, and in the current health care environment where off-label use is increasingly constrained by payers, we believe the new indication will allow us to access a significantly larger physician and patient audiences to drive growth. Fourth, we plan to materially reduce our use of cash in 2023 while continuing to position XHANCE for successful launch for the first ever CS Indication, a launch that we believe can openly enable tremendous future success for our company. Fifth, I’d like to note that XHANCE reached a milestone in the third quarter when the 1 millionth prescription was filled. I would like to thank my colleagues at OptiNose for the efforts that made it possible to achieve this kind of scale as an approved treatment for nasal polyps.

And importantly, given the significantly larger population diagnosed with chronic sinusitis, it makes us excited for what may come next. I’ll now turn the call over to Ramy to discuss the results of the ReOpen program and next steps.

Ramy Mahmoud: Thank you, Peter. Turning to Slide 6. On our last earnings call, we shared with you our development roadmap for the remainder of 2022, which included a pre-NDA meeting with FDA that was planned for the end of September. That meeting was conducted as planned, and the feedback we received will help guide us as we prepare our submission. Based on our current expectations for the scope of content to include in the submission, we now anticipate submission of the sNDA in early 2023. Previously, we expected that to occur by the end of 2022. The additional time has enabled us to incorporate the feedback we received in September into the preparation of the submission. We continue to anticipate that the standard FDA review period for this type of application would be 10 months, and therefore, we continue to expect the FDA action date to fall in the fourth quarter of 2023.

Overall, we were pleased with the outcome of the pre-NDA meeting and look forward to the possibility of XHANCE being the first drug approved to treat the common disease of chronic sinusitis. The meeting reinforced our belief that our clinical safety and efficacy database is sufficient to support the filing of the supplemental NDA for this novel indication. Turning to the trials for a moment. I’d like to remind you that we have previously reported that both ReOpen trials were positive, showing statistically significant improvement on both co-primary endpoints for patients treated with XHANCE compared to those receiving the placebo comparator. We continue to believe that outcome measures of clinical importance are of particular interest to all stakeholders, including prescribers and patients.

Therefore, we are pleased to report that ReOpen is the first Phase III program that we’re aware of ever to show that a nasal therapy can significantly reduce the number of acute exacerbations of chronic rhinosinusitis. For context, exacerbations are a major source of disability for CRS patients. Data suggests that there are approximately 10 million physician office visits for CRS annually, and that approximately 70% of patients who visit a doctor for CRS receive an antibiotic, making this a top driver of all adult ambulatory care antibiotic use in the United States. As you’re aware, acute exacerbations not only mediate loss of quality of life for CRS patients but frequent antibiotic use can pose risks to both individuals such as changes to the nasal or gut microbiome and to society, such as the emergence of antibiotic-resistant organisms.

It’s comparatively easy to convey to all stakeholders the clinical importance of the finding that in pooled data from the ReOpen trials treatment with XHANCE produced up to 66% reduction in acute exacerbations of CRS. Turning to Slide 7. The successful ReOpen program is creating multiple opportunities for presentation of new and compelling data on XHANCE at scientific meetings. In September, the results from the first of our 2 Phase III trials ReOpen1 were presented at the American Rhinologic Society Annual Meeting during the top-rated abstract and Clinical Rhinology section. In October, we presented a late-breaking abstract podium presentation at IDWeek 2022. IDWeek is a major conference for specialists in infectious disease. The significant reduction in acute exacerbations and associated antibiotic use in chronic rhinosinusitis is important information for a range of stakeholders beyond our current targets of ENT and allergy specialty physicians, and this was an opportunity to begin to engage with that larger audience.

Finally, we look forward to presenting the results from the second of our 2 Phase III trials, ReOpen2 on November 12 at the American College of Asthma, Allergy and Immunology Annual Scientific Meeting. In addition, we look forward, of course, to publishing the results of ReOpen1 and ReOpen2 in the peer-reviewed scientific literature. We’re working actively with our distinguished scientific steering committee and look forward to sharing an update when a primary report of findings manuscript is published. I’ll now turn the call over to Peter to discuss our third quarter commercial performance.

Peter Miller: Thanks, Ramy. Turning to Slide 9. Before reviewing performance for the third quarter of 2022 and a revised guidance for full year 2022, I’d like to take a moment to remind everybody that we continue to believe there are multiple factors to support future growth of XHANCE. First and foremost, we believe approval of XHANCE as the first and only FDA-approved treatment for CS, should we achieve that, we’ll create a tenfold opportunity based on the number of patients diagnosed and treated for nasal polyps versus those diagnosed and treated for chronic sinusitis. We believe we can access 1/3 of that opportunity within our current commercial footprint and create an attractive opportunity for a partner in primary care.

We are encouraged by what has been achieved with a nasal polyp indication to date. In the third quarter of 2022, the 1 millionth prescription of XHANCE was filled. This supports our belief that we can achieve a significant magnitude of product adoption in the much more commonly diagnosed condition of chronic sinusitis. Importantly, we are also encouraged that with growing experience using XHANCE, both by physicians and patients, the product has become recognized as offering benefits in a real-world practice. In addition to the large number of patients, physicians have chosen to treat both the comparatively high refill rate and our market research on physician and patient perceptions all suggest that both physicians and patients are finding an XHANCE offers meaningful treatment benefits.

Among physicians, we have seen XHANCE recognized as having a distinct place in stepwise care for CRS with nasal polyps as reported in a publication by leading independent experts from both the ENT and Allergy Thought Leader communities and a shared decision tool at sinushealth.com. On the payer side, today approximately 80% of commercial lives are in a plan that covers XHANCE for the approved indication. Given the clinical and economic value proposition XHANCE offers compared to multiple alternatives, we believe there is potential to increase coverage in the future and obviously see significant opportunity if there is an expansion of the approved indications to include chronic sinusitis. Those factors support our belief that an XHANCE approval in CS has potential to drive the long-term success of our business.

As a reminder, there are approximately 10 million patient visits to a physician for nasal polyps or CS annually. Of those, up to approximately 3 million patients are treated by physicians in the specialties that are the focus of our current commercial deployment. Based on our experience in nasal polyps, we believe the compelling clinical data from the Phase III ReOpen program may lead to not only a new indication in late 2023, but also ultimately to recognition by physicians, payers and patients of the clinical and economic value of using XHANCE to treat the large population with these serious chronic nasal inflammatory diseases. Turning to Slide 10. That said, let me now discuss our expectations for the full year 2022 and then review the results for the third quarter.

On our last call, we noted that June and July were challenging months for new prescriptions based on factors, including fewer physicians and offices and reps calling on physicians due to what we believe to be a greater-than-expected summer seasonality. In addition, we had a greater than typical vacancy rate in our sales territories. At that time, we believe that the fall allergy season would drive a market rebound and the new promotional materials, including exacerbation data from the ReOpen program, filling vacant sales territories and other initiatives would enable us to increase market share and deliver the prescriptions necessary to achieve $85 million to $92 million of XHANCE net revenues for full year 2022. In August and September, we observed a rebound in the INS market but not the anticipated share gains for XHANCE.

And based on the partial data available for October, both trends appear to be continuing. Although we believe that physician interest in prescribing XHANCE and actual writing of XHANCE continues to grow, we believe payer constraints, especially for off-label indications is decreasing the proportion of written prescriptions being filled. In addition, the other programs expected to support share gains have not yet delivered their expected growth in the volume of filled prescriptions. Because of these factors, we no longer expect market share gains for the remainder of the year and now expect revenues between $74 million to $78 million for full year 2022. In third quarter 2022, there were approximately 28,000 new prescriptions for XHANCE, a modest increase compared to third quarter 2021, while the market which includes INS prescriptions written by any physician, for any condition, a large component of which our prescriptions for allergic rhinitis increased 1% over the same period.

For the first 9 months of 2022, there were approximately 85,400 new prescriptions a 3% increase compared to the first 9 months of 2021, while the INS market increased 8% over the same period. Turning to Slide 11. In third quarter 2022 there were approximately 86,600 total prescriptions for XHANCE, which is flat compared to third quarter 2021, while the market increased 1% over the same period. For the first 9 months of 2022, there were approximately 255,000 total prescriptions for XHANCE, a 5% increase compared to the first 9 months of 2021, while the market increased 4% over the same period. Turning to Slide 12. XHANCE market share of 5.7% in the third quarter of 2022 was unchanged compared to prior year. Breadth and depth of physician prescribing is measured by the total number of physicians who have patients filling XHANCE prescriptions did increase from third quarter 2021 to third quarter 2022.

Regarding breadth, in third quarter 2022, 7,892 physicians had a patient fill at least 1 prescription of XHANCE, an increase of 10% compared to third quarter of 2021. Regarding depth, the number of physicians who had more than 15 XHANCE prescriptions filled by the patients in the quarter grew as well, with that number increasing by 2% from the third quarter of 2021 to third quarter 2022 with approximately 1,500 physicians in this segment. I’ll now turn the call over to Jonathan to discuss third quarter financial performance.

Jonathan Neely: Thank you, Peter. Turning to Slide 14. As we reported, OptiNose recognized $20.1 million of XHANCE net revenue in the third quarter of 2022, a decrease of 8% compared to the third quarter 2021 net revenues of $21.8 million. The primary driver of the year-over-year decrease is a onetime refund of disputed rebates of approximately $1.6 million in the third quarter of 2021 that did not repeat this year. For that reason, year-to-date results may be a better measure of performance. XHANCE net revenue for the 9 months ended September 30, 2022, $55.4 million, an increase of 8% compared to the prior year. Turning to Slide 15. Based on available prescription data purchased from third parties and on data we received directly from our preferred pharmacy network, XHANCE average net revenue per prescription for the third quarter of 2022 was $232 a decrease of 8% compared to $253 of revenue per prescription in the third quarter of 2021.

As I just mentioned, the primary driver of this difference is the onetime refund of disputed rebates in the third quarter of 2021 that did not repeat this quarter. Net revenue per prescription would have been approximately $20 lower in the third quarter of 2021 without that refund. The growth of year-to-date net revenue per prescription is less influenced by onetime items than individual quarters are and thus may be more informative to some. Year-to-date, 2022 average net revenue per prescription stands at $218, an increase of 3% compared to $211 for the 9 months ended September 30, 2021. As we discussed on our second quarter call, we made a change to our co-pay assistance program at the start of 2022 that was intended to increase net revenue and average net revenue per prescription by reducing the number and proportion of prescription fills by commercially insured patients and plans that have a high deductible.

We believe this change had the intended effect and increased revenues per prescription in the early part of the year. We believe the increase in revenue per prescription due to the change in co-pay assistance helped offset the effects of increasing volumes through government plans and increases to contract rebate rates and commercial plans, both of which have the effect of decreasing net revenue per prescription. Turning to Slide 16. We have revised our financial guidance for full year 2022 for both net revenues and operating expenses. For the reasons Peter discussed earlier, we now expect XHANCE net revenue to be between $74 million to $78 million for the full year 2022. Previously, we expected net revenue to be between $85 million to $92 million.

Second, we now expect average net revenue per prescription to be approximately $220 for the full year of 2022. Previously, we expected average net revenue per prescription to exceed $220 for the full year 2022. For the full year 2022 we now expect operating expenses to be in the range from $127 million to $131 million, of which approximately $9 million of stock-based compensation. That’s down from prior expectations of operating expenses in the range from $129 million to $134 million, again, of which approximately $9 million was stock-based compensation. With respect to operating expenses, as Peter alluded to in his opening comments, we expect operating expenses in 2023 to decrease materially compared to 2022, both because of the natural reductions related to the conclusion of our CS research program and because of operational and promotional efficiencies that will reduce use of cash while continuing to position XHANCE for a successful CS launch.

Finally, as noted in the press release this morning, we amended our agreement with Pharmakon to eliminate the September 30, 2022, and December 31, 2022, trailing 12-month revenue covenants. I will now turn the call back over to Peter for closing remarks. Peter?

Peter Miller: Thanks, Jonathan. Before moving to Q&A, I’d like to take a moment to reiterate that overall, we are pleased with the progress we made in the third quarter of 2022 towards submission of our supplemental NDA for XHANCE. CS is an enormous opportunity relative to nasal polyps. And while our nasal polyp business is facing some headwinds, it is a clinically important product that has achieved a scale that we believe creates an excellent launch pad for achieving the business potential that would be created by the first ever approval in CS, and now I’d like to open the call up for Q&A.

Q&A Session

Operator: Our first question comes from Glenn Santangelo with Jefferies.

Glenn Santangelo: I just want to follow up on some of the comments related to the revenue shortfall this quarter. It kind of sounds like you’re making the case that you’re not really seeing a prescribing problem, but really more was related to a decrease in the number of prescriptions being billed. I was wondering if you could elaborate on that point, maybe unclear to me. And then as it relates to the sort of the 4Q guidance, it kind of assumes no improvement again in the fourth quarter. And I just want to confirm if you’re seeing any sort of change in the pattern at all in 4Q?

Peter Miller: Well, Glen, thanks for the question. you understand it the way we communicated it, Glen, which is what we are seeing based on pretty good data sources, and we believe to be true, is that physician interest in prescribing actually is growing, so in our view, this really isn’t an issue of physician interest. And I think that’s proven Glen. The product really works. That’s the one thing we know for sure. And patients know that, and I think physicians know that. You’re correct that what we’re seeing is the number of prescriptions that are actually being filled is not as high as a proportion as it was historically especially with the payers focusing on limiting the product to the nasal polyp indication. So and as I said, it makes us feel encouraged that the physicians continue to write it.

We clearly have to find ways to address the payer constraints such that we can get an improvement in that area. Regarding 4Q, Glen, we just have to look at the trends that we saw in September and into early October. We did — we just, at this point in time, have to believe those trends are going to continue, and that’s what led to the guidance in 4Q. Jonathan, do you have anything to add there?

Jonathan Neely: No, I think that’s well said.

Glenn Santangelo: Maybe I just want to ask one other quick question on the expense side of the equation. In the release, you said you expect expenses to decrease materially in 2023. And I can understand why that’s the case, but I would also assume that there maybe some incremental expenses around the commercial launch and I know you plan on doing this via partnerships, so maybe there won’t be that much. But sort of given the current burn rate, right, you push the supplemental NDA filing out into 1Q if you get the standard 10-month review, now you’re kind of almost at the end of next year. And when we look at the cash on the balance sheet, could you maybe talk about the balance sheet and sort of how you see that playing out? And do you feel confident based on the reduction in expenses next year that you have enough cash to make it through to some type of an approval.

Peter Miller: Glen, I’m going to take the first part, and then I’m going to let Jonathan really handle the majority of it. But the one thing that’s unique about the opportunity that we have here is that the label expansion for CS, we really built all of the deployment necessary to capitalize on a significant portion of that opportunity. So we already have our territory managers deployed against the physicians who not only are writing for the nasal polyp market, but who really are the best — will be the best writers of chronic sinusitis. So there really is not a need for significant additional expense to prepare for the launch, unlike a lot of other launches. So I’ll make that comment and then Jonathan, I’ll let you handle the other questions.

Jonathan Neely: Yes. And so I think, Glen, the way we’re thinking about the operating expense plan for next year, there’s obviously the natural reductions in expenses that are going to come with the end of the clinical trial program that will remove a significant amount of expense from the R&D line. But the other thing that we’re thinking about is when you look at our SG&A in particular, sales and marketing, I think we can look to be a little bit more efficient with how we spend capital to support the business with the nasal polyps indication and look to preserve capital and position XHANCE for launch in CS, which we think can be the significant value driver for us in the future. I actually wanted to also maybe touch on or ask Ramy to touch on your points about the timing of the sNDA filing.

Previously, we had expected that to come at the end of 2022. What we’ve communicated is early 2023 for that submission. Maybe, Ramy, you want to chime in on thoughts about what the expectation should be for the date — an action date from FDA.

Ramy Mahmoud: Thanks, Jonathan. I think, Glen, you understood correctly. We’re not talking about a large delay. We do still expect this filing and the 10-month clock associated with that to put the FDA action date in the fourth quarter. And so we’re talking about a few weeks. We’re not talking about an extended period of time. The purpose of that, of course, is to allow us to optimize the filing itself, the content of the submission in response to the comments we got back from FDA during the pre-NDA meeting in September. And of course, that’s the purpose of that meeting is to allow us to better understand what FDA wants and make sure all those things are baked into that filing. I’ll just reiterate also something else that Peter was saying, which is that for the launch, many of the things that you think about having to do in a typical drug launch are already in place for our product.

We — the product is already in distribution channels. The managed care contracts are already in place for the product, the footprint of the commercial organization covers already the range of doctors that we think are going to be most productive in prescribing of the new indication. So a lot of the things that you normally think of in a launch are sort of already in place.

Peter Miller: And the last comment I’m making that, Glen, is that just as it’s unusual to have such a broad label expansion in the exact target audience you’re already calling on that they’re familiar with the product and what has the potential, and I’m — we’re certainly not giving any guidance in this area, but it has the potential to have a reasonably rapid uptake because of all of those — reasonably rapid expansion, if you will, or growth because of all those factors.

Operator: Our next question comes from David Amsellem with Piper Sandler.

Isaac Somekh: This is Isaac on for David. Just a few from us on — so on the commercial front, how do the payer constraints that we’ve seen this year adjust your thinking or your strategy with regards to volume growth for the product in 2023. I mean, do you think revamping the sales force or your efforts here is needed at all? And are you in a position now to tell us how penetrated you are in your current call universe? And then quickly, I noticed that volume growth for the category as a whole was sort of sluggish this quarter versus the previous year 2. So any color on the puts and takes here would be super helpful? And lastly, we noticed that you revised the sales covenants of Pharmakon for this quarter and the coming quarter. But how do you think about the covenant requirements in 2023? And what’s the approach really if you can’t meet them, any color there would be helpful.

Peter Miller: Well, thanks very much, Isaac. I’ll take the first couple. Vic, you potentially can chime in if you feel like I’m missing pieces. Relative to the adjustments to the strategy, as we said on the call, Isaac, the thing we’re encouraged by is our data suggests we really are driving a continued interest in prescribing in terms of the written prescriptions. What we are seeing, as I mentioned, is a — the proportion of those being filled are being impacted by some of the payer constraints that I mentioned on the call, mostly, as I said, around limiting the product to people with nasal polyps. And that’s the dampening effect that we’ve seen sort of occurring more than we expected, honestly, that obviously led to the change in our thoughts around our projections for the year.

In terms of changing strategy, we believe we have a very strong sales force that has done a very good job driving the interest in the prescribing. We obviously have to shift some of the focus to what we call pull through. which is giving the — our sales force and then the doctors, the tools they need to make sure that the written prescriptions ultimately get filled because we have good data, Isaac, that when — where we have a significant number of physicians, the 1,500 physicians that we mentioned in that — in our what we call our believer group, they’re writing a lot of prescriptions for a large audience. And they obviously are managing the payer issues. So we need what we need to do more effectively is more broadly have that management, if you will, applied to other physician groups, and that’s going to be our focus, in addition to continuing to drive the interest in the product from an efficacy standpoint, we have to focus — we have to get better, frankly, on the pull-through side.

But as I said, there’s evidence that we have a reasonably sizable number of doctors that are getting it done. We just have to find a way to translate that to a broader audience. In terms of penetration, we just continue to believe even in the nasal polyp business, we can grow. We are — as I said, we are generating the interest in the writing side. We just have to continue to work in making sure that gets pulled through on the back end, if you will. Jonathan, I’ll let you address question on covenants.

Jonathan Neely: Yes. I’ll also take on Isaac, your question about the category growth on a year-over-year basis. One thing to remind you is that what we pointed to for summer months, June, July and kind of into August, both July and August are part of Q3. And I think what we saw over this summer was maybe a deeper trough than what’s been historically seen in the category. What we did see is that in the fall, which includes September, there was a good return to volumes inside of that market. But obviously, the net of 1% growth on a year-over-year basis. That has to capture the summer trough as well as kind of the return to what may look more like a typical fall. On the covenant side, as we noted in the press release in the Q this morning, we entered into the fourth amendment the Pharmakon agreement.

Pharmakon waived the Q3 and Q4 trailing 12-month revenue covenants. I think what you’ve seen historically is that as we’ve come into points where we needed relief on that agreement, that was the point in time that we addressed those things. And I’ll just leave it at that.

Operator: Our next question comes from Gary Nachman with BMO Capital Markets.

Gary Nachman: Okay. Great. First, Ramy, maybe you could elaborate more. What was the feedback from FDA causing the slight delay to the CS filing? What are some of the things you’re specifically looking for when considering the much broader indication, were there any surprises there? You said you needed more content. So maybe you could just give a little bit more color on that. So that’s number one. And then two, Peter, have you been able to accelerate any of the partnership discussions for primary care? What’s a reasonable time frame to get that done? And how much of a possibility is it that you’ll be able to get that deal done. It also sounds like maybe you’re planning more to do CS on your own, but I’m assuming that would just be in the specialty area. Is there even a possibility that you would do primary care on your own as well.

Ramy Mahmoud: Okay. Gary, thank you very much for that question. So — as we said, the pre-NDA meeting was at the end of September. Just as a quick reminder, the primary purpose of a pre-NDA meeting is to have a discussion with FDA that helps to clarify the content of the planned submission. So you go through all the different kinds of things that they would like to see presented to facilitate their review and as a consequence of that conversation, we identified a number of incremental sort of tables and figures that would be helpful to them in the review. It took a little time to generate those additional tables and figures, which is complete by the way. And that it takes a few weeks to do that kind of work, and that’s the reason why rather than the end of 2022, we expect the submission to be in the early part of 2023. Peter, I’ll turn the other question over to you.

Peter Miller: Yes. Gary, on partnering, I’ll begin with the opportunity that there really is a substantial opportunity in primary care, as you’ve heard us say many times. There’s 7 million patients being treated in primary care. And the thing about the primary care audience is they really do not have good treatment options for patients who have chronic sinusitis. Really, they try the intranasal sprays. Their only real option is to refer patients into ENT or allergies. So we just continue to believe based on all the work we’ve done with primary care doctors, there’s a substantial opportunity there. So I’ll start there. Regarding partnership, as you know, Gary, and as we’ve reiterated, as we’ve said a couple of times, because of the opportunity, I continue to believe there is a — that we will find a someone who’s interested in the partnering, it’s a question of the timing of that.

If you look at deals that have been done historically, it’s across a range of preapproval as well as post approval. So our focus there is on value maximization relative to the partnering deal. And as I said, I continue to have confidence that we will have a partnership to take advantage of the primary care opportunity. Regarding doing it on our own, Gary, that is not in our plans currently. I mean we do believe, by the way, that there are a significant — there are a reasonable number of primary care doctors that we could shift our sales force to call on, there’s about 2,000 primary care doctors that actually write — they see as many CS patients as some of the larger ENT and allergy offices. So I think — our thinking right now is we could very well deploy or redeploy a portion of our sales efforts against those 2,000 doctors in the primary care space to capitalize on what could be a very good opportunity with our own sales force.

But right now, our plans are not to expand in a significant way with our own sales team to take advantage of the primary care opportunity.

Gary Nachman: Okay. Great. And maybe just a follow-up. When you guys say that 2023 expenses will decrease materially. Just what’s the order of magnitude there, if you could quantify that in any way? And are you doing any real restructuring? So will you be modifying the sales team at all or just not backfilling vacancies. And if you do that, how will you be able to grow next year in nasal polyps, like you said, you think you’ll be able to.

Peter Miller: Yes. On the sales side of it, we feel really good about our sales team, Gary. As we’ve said, we know that, that team is driving real interest in the product, especially on, as we said, on the written side. We have to get more focused with that team, giving them all the tools in order to get the pull-through on the back end because of the payer constraints. So our belief is the sales team can really continue to grow this business even in a nasal polyp indication. So right now, that’s our view. And Jonathan, I’ll let you sort of handle the rest.

Jonathan Neely: Yes. And so Gary, in terms of a precise number for 2023 operating expenses, our typical practice has been to provide a specific operating expense guidance in connection with our fourth quarter earnings call. So we’re not here today with a specific target for operating expenses for 2023. But I think if you were to look at our current expectation for 2022, if you were to remove a significant component of the R&D expenses, that’s going to create good momentum towards a $100 million operating expense level. But we’ll come back and be more specific about what our expectation would be for 2023, at some point in the future. But that’s probably one way to start thinking about the order of magnitude of change.

Operator: Our next question comes from Stacy Ku with Cowen.

Stacy Ku: We have a few. So first, for 2023, thank you for describing in detail all the dynamics underlying average net revenue per prescription, so for next year, what are your expectations for net pricing per prescription? Any additional color would be appreciated. And then a follow-up, kind of as you think about your updated thoughts on strategic discussions, what options are you considering and the potential avenues to maximize value creation, we follow up with this question as recently we saw another company that was acquired outright by Atres. They had noted the initial conversations were for ex U.S. rights. So Peter, we appreciate any updated commentary.

Peter Miller: John, I’ll let you take the first one. I’ll take the second one.

Jonathan Neely: Yes. So I think, Stacy, again, in terms of our expectations for 2023 I think what we’ve done historically is we’ve talked about expectations for revenue, full year operating expenses and revenue per prescription, more in connection with our Q4 earnings call. So again, I don’t think we have an expectation to set today in terms of revenue per prescription for next year. And I’ll turn it back over to Peter to talk about the rest of the questions.

Peter Miller: Yes. And Stacy, we’ve been very clear on value the creation front that our really singular focus is on optimizing shareholder value and within that frame we are going to consider all opportunities that could accomplish that. And I’ll stop there.

Operator: Our next question comes from Brandon Folkes with Cantor.

Brandon Folkes: I do want to just come back to the insurer headwind, I’m sure interpreting anything in the CS data negatively in terms of this kind of down of off-label script at this point in the year? Or can you just elaborate in terms of what that driver is, only how I think that we open on imaging. Just anything there would be helpful. And then — is this just a headwind in the off-label CS scripts? Or are they putting in more sort of requirements at the stations and stuff like that in nasal polyps actually a headwind in the nasal polyps scripts getting approved as well. And then can you just remind us of the percentage of XHANCE scripts maybe year-to-date that have been off-label for years?

Peter Miller: Yes. Brandon, thanks for the question. I think you’ve understand it stood it pretty well, Brandon, that the — really, the limitation is because we are indicated for nasal polyps, we, in essence, have increased enforcement, if you will, of plans that are asking doctors to a test that the patient has nasal polyps. And so the issue we’re having is really that, that obviously has an issue around the potential outside of nasal polyp writing. And our data indicates that the majority of physicians are because of the payer environment, not because of their belief in how the product works are limiting us to patients with nasal polyps which is as you know, a much smaller segment than the group that has chronic sinusitis.

Within nasal polyp approvals, Brandon, we have high approval rates. So if a patient — if the physician diagnoses it has the right diagnosis code, we have very high approval rates for nasal polyps. So that is, by the way, why we believe working with our sales team to on that what we call the pull-through, and we can continue to build this business because we know we can drive — based on what we shouldn’t say I know, but we believe based on current trends, that we can continue to grow physician prescribing interests. We just have to work to make sure the sales team is giving the offices and the doctors all the tools necessary to make sure that the approvals happen. So by the way, what this bodes for CS is we believe that we obviously are going to have a substantial opportunity with CS because the population is much larger, our contracts, many of our payer contracts are to the indication.

So when CS is approved, that becomes something that is in our contracts is something that could be written for and therefore, we could potentially see a nice uptake of the business, potentially very large uptake of the business once we get the indication. In terms of the business being written off label, there is a reasonably large portion in total, Brandon, but it’s being driven by the roughly 1,500 doctors that are writing broadly. So there is a segment of the population of our physicians that is writing broadly for the product. What’s interesting, by the way, Brandon, is that even though doctors are — most doctors do not write outside of nasal polyps, when the product is written outside of nasal polyps, it gets approved a reasonably high percentage, so our issue is it’s not necessarily on that.

It won’t get approved. By the way, the approval rate outside of indication is much lower than CS — than nasal polyps, excuse me. But it’s still reasonably large, so again all of these factors sort of lead us to believe that with the CS indication, we really could see a substantially larger business. we have headwinds on nasal polyps. We think we can absolutely get our sales team more focused, as I said, on the pull-through. And with the CS label, we think we can have a substantially larger business.

Operator: I am showing no further questions at this time. I would now like to turn the conference back to Peter Miller for closing remarks.

Peter Miller: Yes. Well, thanks, everybody, for joining us this morning. We appreciate the interest and look forward to being in touch.

Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.