Executive Summary

Q3 revenue was $20.4M, up 3% y/y but flat sequentially (Q2: $20.5M); diluted EPS was ~$0.00 versus $(0.08) y/y, with operating margin at -10.0% as the launch ramp remains gradual .
Management cut FY24 net revenue guidance to $75–$79M (from $85–$90M) but raised average net revenue per Rx to ~$270 (from ≥$250) and reduced GAAP OpEx to $90–$93M (from $95–$101M) as mix and cost controls improved profitability metrics .
New prescriptions inflected in September; 4‑week moving average rose to ~2,300–2,500/week in October (+20%–40% vs ~1,760–1,960 range through early September), aided by revamped sales execution, HUB efficiency, and improved Express Scripts coverage pull‑through .
Stock-relevant catalysts: guidance cut; “going concern” language expected in the 3Q24 10‑Q due to covenant risks (all debt classified current at 9/30), offset by $82.5M cash and an improving NRx trend; Q3 revenue also included sub‑$3M inventory build from HUB pharmacy onboarding, tempering Q4 optics .

What Went Well and What Went Wrong

What Went Well

Average net revenue per prescription rose to $320 in Q3 (Q2: $309; Q3’23: $236) on mix and co‑pay program changes; YTD through September was $285 (+45% y/y) .
New Rx trend inflected positively starting in September; October 4‑week average reached ~2,300–2,500/week (+20%–40% vs summer range), with 5 of the top 6 weeks of 2024 occurring in the most recent six weeks .
Insurance access improved: XHANCE added to Express Scripts national formularies (>24M lives), reducing PA burden when prior standard nasal steroid use is documented; sales teams focused on ESI targets .

Management quote: “While our revenue in third quarter was not in line with our expectations, we believe that we are now observing a clear inflection in new prescription demand.” – CEO Ramy Mahmoud .

What Went Wrong

FY24 revenue guidance cut to $75–$79M (from $85–$90M) due to slower-than-anticipated demand ramp and refill lag; Q3 benefited from sub‑$3M channel inventory build, creating a lower implied Q4 net revenue per Rx and demand uncertainty .
“Going concern” disclosure expected in the 3Q24 10‑Q tied to probable non‑compliance with debt covenants; all outstanding principal/fees classified as current liabilities at 9/30/24 .
HUB transition required more optimization time than anticipated; added pharmacies in September to improve fulfillment capacity and experience .

Financial Results

Income Statement Snapshot (USD Millions, except per-share; margins calculated from cited figures)

Metric	Q3 2023	Q1 2024	Q2 2024	Q3 2024
Revenue	$19.823	$14.880	$20.490	$20.437
Cost of Product Sales	$2.225	$1.231	$1.981	$2.065
Gross Profit	$17.598 (calc)	$13.649 (calc)	$18.509 (calc)	$18.372 (calc)
Gross Margin %	88.8% (calc)	91.7% (calc)	90.3% (calc)	89.9% (calc)
Operating Income (Loss)	$(1.694)	$(8.075)	$(6.548)	$(2.052)
Operating Margin %	-8.5% (calc)	-54.3% (calc)	-32.0% (calc)	-10.0% (calc)
Net Income (Loss)	$(9.294)	$(14.067)	$(7.581)	$0.467
Diluted EPS	$(0.08)	$(0.12)	$(0.07)	$0.00

Notes: Q3 included sub‑$3M inventory build tied to HUB onboarding; management highlighted lower typical net revenue per Rx seasonally in Q4 historically .

KPIs and Operating Items

KPI	Q3 2023	Q2 2024	Q3 2024
Avg Net Rev per Rx	$236	$309	$320
New Rx (4‑wk avg)	n/a	~1,760–1,960/wk Jul–early Sep	~2,300–2,500/wk Oct to Oct 25
Cash & Cash Equivalents (period‑end)	$73.684 (12/31/23)	$91.358 (6/30/24)	$82.497 (9/30/24)
SG&A + R&D	$19.3 (Q3’23)	$25.1 (Q2’24)	$20.4 (Q3’24)
Debt (disclosed)	n/a	$130M (as of 6/30/24)	$130M (as of 9/30/24)
Coverage/Access	n/a	ESI national formularies (>24M lives)	~70% lives covered; ~50% of commercial lives subject to PA

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
XHANCE Net Revenue	FY 2024	$85–$90M	$75–$79M	Lowered
Avg Net Revenue per Rx	FY 2024	≥$250	~ $270	Raised
GAAP Operating Expenses (SG&A+R&D)	FY 2024	$95–$101M (SBC ~ $6M)	$90–$93M (SBC ~ $6M)	Lowered
Positive Income from Operations (GAAP)	FY 2025	Previously expected	Guidance withdrawn pending Q4/2025 outlook reassessment	Withdrawn

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2)	Current Period (Q3)	Trend
Insurance coverage/access	Added to ESI national formularies (>24M lives) to ease PA burden; broader label should ease processes	~70% lives cover XHANCE; ~50% of commercial lives with PA; prescriber tools to pull‑through ESI coverage	Improving access; targeted pull‑through
HUB/pharmacy fulfillment	Transition to HUB; expected near‑term headwind, long‑term scalability	Optimization required more time; added pharmacies in Sept; channel inventory build sub‑$3M	Improving execution; near‑term noise
Sales execution/targeting	35k calls in Q2; focus on efficacy and naïve prescribers; 10–12 calls to change behavior	Re‑engineered to on‑target efficacy calls; narrowed top 75 HCPs per territory; improved call plan attainment	Sharpened targeting; discipline up
New Rx trajectory	Early “green shoots” expected to accelerate post‑launch	Clear inflection Sept–Oct: 4‑wk avg ~2.3k–2.5k; top 5 weeks in recent 6	Accelerating
Financial outlook	FY24 rev $85–$90M; ≥$250/Rx; OpEx $95–$101M; positive FY25 op income expected	FY24 rev cut to $75–$79M; ~$270/Rx; OpEx to $90–$93M; FY25 profitability guide removed	Near‑term reset; focus on mix/cost
Debt/covenants	Confidence on 3Q/4Q TTM revenue covenants; runway through 2025	Probable covenant non‑compliance flagged; 10‑Q to include going concern; all principal/fees classified current	Elevated risk disclosure

Management Commentary

“We believe peak annual net revenue will exceed $300 million with our specialty‑focused efforts... While our revenue in the third quarter was not in line with our expectations, we believe we are now observing a clear inflection in new prescription demand.” – CEO Ramy Mahmoud .
“Estimated XHANCE average net revenue per prescription for the third quarter of 2024 was $320… driven by favorable business mix… and channel inventory build associated in part with onboarding new pharmacies.” – CFO P. Terence (Terry) Kohler .
“In September, we decided to add to the network dispensing pharmacies underneath the hub to improve prescription fulfillment and capacity.” – CCO Paul Spence .
“Most plans have updated their coverage to be inclusive of both approved indications.” – CEO Ramy Mahmoud, on coverage for new indication .

Q&A Highlights

Low‑end Q4 implied revenue: Q3 included sub‑$3M inventory stocking; adjusting for this, management still expects a step‑up in underlying Q4 demand but guided conservatively given refill timing .
Net revenue per Rx cadence: YTD ~$285; full‑year guide $270 implies step‑down in Q4 due to seasonal effects and absence of prior one‑offs (e.g., Change Healthcare) plus Q3 inventory effects .
Coverage status: ~70% of lives in plans covering XHANCE; many have PAs; most plans have updated for both indications, easing coding/paperwork over time .
2025 profitability outlook: Prior guide withdrawn pending Q4 performance and trajectory into 2025 .
Segmentation: Company cannot reliably disaggregate polyp vs non‑polyp prescription contributions; focuses on overall business performance .

Estimates Context

Wall Street (S&P Global) consensus for OPTN could not be retrieved at this time due to a missing Capital IQ mapping for the ticker. As a result, we cannot provide definitive beat/miss vs consensus for Q3 metrics. Values would typically be retrieved from S&P Global; data was unavailable in our tool at the time of analysis.
Given this constraint, no consensus comparisons are presented here. We recommend revisiting once S&P Global mapping is updated for OPTN.

Key Takeaways for Investors

Revenue is stabilizing at ~$20.4–$20.5M per quarter, but the guide reset reflects slower‑than‑hoped demand ramp and refill lag; mix improvement lifted per‑Rx economics even as topline moderated .
The September/October NRx inflection (+20%–40%) is the most constructive near‑term datapoint and, if sustained, should feed future refills and revenue stacking into 2025 .
Expect Q4 optics to reflect a lower net revenue per Rx and unwind of Q3’s inventory build; monitor the degree of sequential revenue growth amidst refills catching up .
Risk elevated: “going concern” disclosure and covenant compliance uncertainty put a premium on execution, coverage pull‑through, and sustained NRx growth; liquidity stands at $82.5M cash as of 9/30/24 .
Positive mix/OpEx control: Raised per‑Rx guidance (~$270) and lowered OpEx ($90–$93M) help preserve runway while demand builds; watch whether these cost disciplines hold as growth investments resume .
Coverage tailwind: ESI formulary access (>24M lives) and targeted prescriber pull‑through should support fulfillment and reduce administrative friction over time .
Catalyst path: Continued NRx momentum, refill conversion, further access wins (PA burden reduction), and clarity on debt covenant mitigation/waivers will likely drive the stock narrative near term .

Appendix: Additional Context

Cash, debt, and equity capitalization disclosure (as of 9/30/24): $82.5M cash; debt $130M; 150.8M common shares o/s; 38.5M options/warrants/RSUs o/s .
CFO appointment (Oct 7): Terry Kohler named CFO, bringing commercial‑stage pharma finance experience; inducement equity grants disclosed .

OptiNose, Inc. (OPTN)·Q3 2024 Earnings Summary