OptiNose: Future Outlook Beyond The Coronavirus Crisis (NASDAQ:OPTN)

Introduction

The share price of OptiNose (OPTN) has not been performing well in 2020. Investors seemed to have lost confidence in the company and shares have suffered again after the company initiated an additional equity offering in mid-August. This might be short-sighted without having the predicted sell-side consensus of over $600 million (2029) in their mind. Moreover, the company expects top-line results for OPN-375 as a potential treatment for Chronic Sinusitis in H2 2021.

Chronic Sinusitis

Chronic sinusitis is an inflammation of the sinus or nasal passage and a relatively common diagnosis throughout the US. Chronic sinusitis affects approximately 14.6 percent of the US population. It is the 5th most common condition treated with antibiotics, accounting for 18-22 million physician visits, and costing 3.4-5 billion annually. Chronic sinusitis may present as (1) chronic sinusitis without nasal polyps, (2) chronic sinusitis with nasal polyps, and (3) allergic fungal rhinosinusitis.

Figure 1: The symptoms of sinusitis

As for treatment, there is no consensus on an approach to the management of chronic sinusitis. The treatment should focus on modulating triggers, reducing inflammation, and eradicating the infection. First-line treatment is nasal saline irrigation and intranasal corticosteroid sprays. If medical management fails, endoscopic sinus surgery may be effective.

Figure 2: Intranasal corticosteroid

OPN-375 is a highly effective and well-understood topical corticosteroid medication (fluticasone), a first-line treatment, combining with OptiNose’s patented technology. This new technology could make a big difference for patients, as it can deliver medication to the targeted areas.

Competition

Some treatments have been proven to effectively relieve the symptoms.

Table 1: Competition of OPN-375

Name of drugs

Pros

Cons

Steroid nasal sprays

+ reduce swelling in the sinuses and ease the symptoms.

+ can cause any polyps that might be there to shrink.

+ there are various steroid sprays

+ to relieve the symptoms permanently, patients need to take medication for several months or even over a year

+ steroids can have side effects when taken in high doses and over a longer period: irritate or dry out the membranes lining the nose, temporary headaches, nosebleeds.

antibiotics

+ antibiotics need to be taken quickly to prevent serious complications such as meningitis

+ many studies are not able to find out how effective they are.

Decongestant nose drops

+ soothe the mucous membranes and reduce swelling

+ makes it easier to breathe

+ after just a few hours, the membranes lining the nose may start to swell again.

+ have to use many times

+ not a good idea to use this medication continuously for more than a few days.

Nasal irrigation and inhalation

+ reduces swelling in the mucous membranes and to help loosen the mucus

+ not enough scientific research on saline solutions or steam inhalation to say for sure how effective they are.

Painkillers

ibuprofen, acetaminophen, or acetylsalicylic acid

+ can relieve the pain

+ not able to make sinusitis to go away faster

+ it might make their chronic sinusitis worse, or even trigger asthma attacks

Dupilumab

+ has been approved in Germany since October 2019 for the treatment of severe chronic sinusitis and nasal polyps in adults.

+ is only used in addition to a steroid nasal spray, and injected under the skin every two weeks

In comparison, OPN-375 has the potential to become part of the standard of care for the treatment of patients with this disease:

+ Although there are no FDA-approved products for the treatment of chronic rhinosinusitis without nasal polyps, many published clinical practice guidelines recommend intranasal steroids as the first line for the treatment of this disease.

+ OPN-375 contains fluticasone propionate, a potent and well-characterized anti-inflammatory corticosteroid with low bioavailability. It has fewer side effects compared to other steroids with the same mechanism.

+ Use a unique technique to improve effectiveness.

Scientific aspect and clinical results

OPN-375 works on multiple cell types involved in causing inflammation and uses an exhalation delivery system (EDS) to deliver the medicine to targeted areas deep in the nose.

Figure 3: OPN-375 drug delivery system

Besides, due to low bioavailability, steroid nasal sprays have far fewer side effects than steroids taken in tablet form or as an infusion (DRIP). Steroids in tablets or infusions are carried throughout the entire body, whereas nasal sprays mainly affect only the area they are applied to.

Results from two supportive open-label Phase 3 clinical trials in adults with symptoms of chronic sinusitis with or without nasal polyps (EXHANCE-3 and EXHANCE-12) showed that OPN-375 was generally well tolerated. The most common AEs were local (in the nose) and not systemic. Most AEs were mild and resolved with continued use of OPN-375.

Among those patients entering the clinical trials with endoscopic evidence of edema within the nasal cavity, approximately 35% with polyps and 53% without polyps in EXHANCE-3, and 50% with polyps and 56% without polyps in EXHANCE-12 no longer had observable edema by the end of the study.

Table 3: Summary of Adverse Events Reported in 3% of Patients in EXHANCE-3 AND EXHANCE-12

Furthermore, in Embryofetal development studies with pregnant rats and mice dosed by the subcutaneous route throughout organogenesis, fluticasone propionate was teratogenic in both species.

Market potential

There are two key points to consider for the market potential of this drug:

+ Chronic significantly impacts an estimated 30 million adults in the United States. The U.S. healthcare system spends approximately $60 billion annually on indirect costs.

+ Physicians typically prescribe intranasal corticosteroid although there are no FDA-approved products for the treatment of chronic sinusitis without nasal polyps. Thus, the company intends to broaden its marketing outreach to primary care physicians that treat an additional estimated 6.4 million U.S. patients. Based on internal estimates, the total annual U.S. market opportunity for OPN-375 in the specialty segment is over $3.4 billion.

Sell-side consensus shows that the company might hit peak sales of $600 million in 2029. To evaluate possible upsides for the company, we use a more conservative method and estimate the peak sales of OPN-375 in 3 scenarios as follow:

Scenario

Low

Mid

High

Expected peak sales ($, million)

250

375

500

Then, using this model, we estimate the company’s revenues in the upcoming years:

Year

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

Percentage of peak sales (%)

5

20

35

50

65

75

85

90

95

99

100

Expected peak sales ($, million)

Low

12.5

50

87.5

125

162.5

187.5

212.5

225

237.5

247.5

250

Mid

18.75

75

131.25

187.50

243.75

281.25

318.75

337.50

356.25

371.25

375

High

25

100

175

250

325

375

425

450

475

495

500

Sales margin 65% ($, million)

Low

8.13

32.50

56.88

81.25

105.63

121.88

138.13

146.25

154.38

160.88

162.50

Mid

12.19

48.75

85.31

121.88

158.44

182.81

207.19

219.38

231.56

241.31

243.75

High

16.25

65

113.75

162.50

211.25

243.75

276.25

292.50

308.75

321.75

325.00

From that, we can calculate the NPV of the drug in each scenario:

Scenario

Low

Mid

High

Drug net present value (11% discount rate) ($, million)

555.20

832.81

1110.41

Compared to the current market capitalization of $224 million, the NPVs show that there is still room for the company’s valuation to increase, even in the case of low peak sales.

Risk

The company’s future is linked to the possible success of OPN-375. Here, a failure might lead to heavy losses and the fall of the stock price.

Conclusion

Despite the recent underperformance of the share, OptiNose seems to have a more optimistic perspective to offer in the future. The company’s valuation is currently low and the sale numbers of its main asset are likely to continue rising in the future. Furthermore, after the recent equity offering, another stock dilution is not probable and the success of OPN-375 for Chronic sinusitis might help the share price to recover.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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