Peter Miller - Chief Executive Officer, Board of Directors Keith Goldan - Chief Financial Officer Tom Gibbs - Chief Commercial Officer Jonathan Neely - VP, IR

David Amsellem - Piper Jaffray Gary Nachman - BMO Capital Markets Randall Stanicky - RBC Capital Markets Bill Tanner - Cantor Fitzgerald

Good morning and thank you for joining us today, as we review OptiNose's second quarter 2018 performance and our plans for 2018. I'm joined today by our CEO, Peter Miller; President and Chief Operating Officer, Ramy Mahmoud; our CFO, Keith Goldan; and Chief Commercial Officer, Tom Gibbs.

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 actual results to differ materially from those indicated by such statements.

Additional information regarding these factors is discussed under the cautionary note on forward-looking statements section of the earnings release that we issued this morning, as well as under the risk factors section of OptiNose's Annual Report on 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 statements, 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 over to Peter Miller. Peter?

Thank you, Jonathan, and good morning, everybody. The first four quarter of launch of XHANCE has been an exciting period for our company.

We now have the benefit of a full quarter of real world market data and based on what we've observed and learned, we feel strong as ever that XHANCE in an importantly differentiated product in a large market with high unmet need. And that we have a great opportunity to build a very successful company.

The most important factor driving this confidence is the feedback we have from a large group of real world patients who have used the product. The strong message we received from our patient survey is that the patients are not only getting bet, but they also prefer XHANCE versus their prior treatment.

On the physician side, we now have over 2,600 physicians who have prescribed XHANCE, and our sense based on both anecdote and fresh market research among hundreds of physicians familiar with XHANCE is that our target physicians' population has strong interest in using XHANCE. We know that we are still early in the launch and there are great deal of continued work is necessary in order to get our target audience to truly embrace the product, and make it part of the practice habit.

But we are confident that we are on the path towards achieving that goal. We knew that market access will provide challenges and we remained focused on efforts to create coverage environment to provide reasonable low hassle ways for physician to prescribe, while also setting sub to achieve our long-term profitability goals.

Staring on Slide 3, I'd like to begin by highlighting some of our recent key accomplishments. First, we believe our Xperience program, a program which ran through the end of June and fill all prescription through specialty pharmacy was very successful and facilitating early physician trial and adoption of XHANCE.

Through July 27, more than 12,000 prescriptions were filled for patients. I'll go in more detail on the results later in the presentation and share our view that it is important to make sure we continue to create the right environment to make it for physicians to write XHANCE.

As we know from our clinical trials and from patients' feedback in the market, once patients try the product, the majority feels better and prefers XHANCE. In a symptomatic, we believe this can fuel long-term growth.

We also continue to make progress on the market access front; signing contracts with two of the largest PDMs in the United States, driving our total covered life to 76% with the majority of those lives in the formulary status that is reasonable low hassle for prescribing physicians. Additionally, we made progress towards our goal of getting a follow on indication for XHANCE that would significantly expand our market opportunity.

Earlier this year, we submitted key elements of a trial design for our chronic sinusitis program to FDA is part planned discussion. I am pleased to report the meeting was held and based on this interaction we continue to plan to initiate the clinical program for the end of the year.

In June, we announced that the results of the Phase 3 NAVIGATE II trial and the EXHANCE-12 trial were published in peer-reviewed journals: the Journal of Allergy and Clinical Immunology and the International Forum of Allergy & Rhinology, respectively. We believe the data describing these manuscripts provide important information for physicians and the communication of this data along with the real world experience physicians gain from treating their own patients will continue to increase physician's appreciations for the potential benefit of XHANCE.

And finally, I'd like to take the opportunity to thank the investors that supported our recent $60 million public offering. Turning to Slide 4.

Looking back, we executed key strategies in the first half of 2018 to support the early launch of XHANCE by driving awareness and trial. We believe these initiatives were successful in accomplishing these objectives.

As we previously reported, we feel that the clinical nurse educators program during the post approval but pre-launch period. This program is focused on creating company and product awareness, introducing the novel mechanism of action of the product and creating some pent-up demand for trialing the product.

In second quarter 2018, when product became available for sale, we transition away from the clinical nurse educators program and fielded the sales team of approximately 80 representatives in select territories. Their objective included continued increase awareness and beginning to drive early trial and product adoption with strong messaging that extended beyond the novel mechanism of action to the core reason to believe for the efficacy of the product, a differentiated pattern of drug deposition.

We are very encouraged by fresh market research and our progress with these core messages which I'll discuss in a few slides. The Xperience program was also in place during our first quarter of launch and was intended to lower administrative and financial barriers for both physicians and patients, and accelerates initial trial of XHANCE.

We feel very good about the results of these programs and believe they were important factors in driving a significant number of physicians to prescribe XHANCE earlier than they otherwise might have done. As planned, we close the XHANCE Xperience program to new enrollments at the end of June.

In addition to driving early adoption, we learned a great deal from data captured during the Xperience program and quickly learned that some of the elements of the program should be included and how we support physicians and patients moving forward. I will describe these features later in the presentation.

Turning to Slide 5. As planned, the great majority of all prescriptions in the second quarter of 2018 went through the Xperience program.

This not only provided us a unique opportunity to capture and analyze a wealth of market data; it also provided a special opportunity to ask a very large number of patients for feedback after their first month of XHANCE. At the end of the day, the success of this product largely depends on whether is making the target patient population, most of whom are dissatisfied with the status quo, feel better and want to ask for and use the product.

The results from the 2,733 patients that have completed the survey are very encouraging. 89% of patients say they are satisfied with XHANCE, 80% reported improved symptoms after just a few weeks; 77% said they prefer XHANCE over their prior therapy; 92% were promoters said they would recommend XHANCE to a friend and 95% state they could use this product without difficulty.

When we look further into the data and understand patient feedback in the context of the products that used previously, the information is also very encouraging. Not surprisingly XHANCE has favorable results among patients who were previously on Flonase or Nasonex or their generic equivalents, which are the most commonly, used intranasal steroid products.

But interestingly, the results were also strong among prior users or budesonide rinses. We believe this is important because steroid nasal rinses usually with budesonide are favorably perceived by some specialty physicians who use them as an improvised approach to achieve better efficacy versus traditional inhaled nasal sprays via higher and deeper drug deposition.

While it's very encouraging to see the survey results of patients, there is nothing more gratifying than hearing directly for patients about how XHANCE is changing their life. We're now receiving a significant number of patient testimonials.

Encouragingly, one of our highest prescribing physicians recently told us that he's beginning to have patients coming into his practice asking for XHANCE because people they know had told them how well the product was working for them. As more and more of these patients we are targeting or treated, we believe based on both clinical data and patient surveys and an increasingly number will be very satisfied with their treatment and we'll talk to their family and friends about XHANCE.

Feedback like this could be a powerful catalyst to drive significant product adoption in the future. Turning to Slide 6.

In addition to great feedback from patients, we also need doctors to have positive experiences, and we have encouraging feedback from physicians as well. Over 2,600 physicians have already prescribed XHANCE representing approximately 40% of our called on universe.

We believe the early surge and product trials during the second quarter of this year was in part, a benefit of the pent up demand created by our nurse educator program prior to launch, and the rapid uptick was also the result of strong physician interest. While many of these physicians have prescribed the product in a limited number of patients, many of them are telling our sales team that the main reason they are not prescribing more broadly as of yet is that they want to get personal experience of their own practices with the product.

The opportunity physicians to gain personal experience by trial of the product accompanied by follow-up patient visits after the first few months of treatment will naturally grow as the launch progresses, and as doctors have more time to hear from patients about how they're doing on the product. In order to more fully assess progress with our target physicians' audience, we completed fresh market research in July after the first quarter of launch.

The data suggests that our stepwise efforts are succeeding in moving physician perception from a high degree of product awareness from an understanding of how the product works to achieving the crucial perception that XHANCE produces a differentiated drug deposition pattern. This progression is happening exactly as we planned.

Therefore, we are now transitioning our communication emphasis to the key next task achieving a perception of differentiated clinical outcomes, which we believe will require sustained promotional focus, bolstered by good clinical research data, physician experienced using the product on their patients and increasing awareness and discussion by peers in the specialist community. Against this subjective, in late June we achieve peer review publication of two of our key registration child trials.

Communication of these publications which we believe positively differentiate the XHANCE efficacy profile will enhance our promotional efforts as we shift a focus more heavily on product efficacy. Later in the presentation, I will describe some additional initiatives we will be feeling.

Turning to Slide 7. We are pleased that some physicians are already impressed enough with the treatment results that are motivated to share their experiences with prescribing XHANCE.

On this slide, you can see before and after scans of a patient with nasal polyposis sent to us by a physician who treated the patient with XHANCE for six weeks. In these images, great colored regions with the nasal passages and surrounding tissue are located indicate inflammation nasal polyps and soft tissue filling the space.

Dark areas indicate clear air filling the nasal or sinus spaces. Obviously, for these patients the more dark areas the better.

The difference between the scan on the left of the patient prior to treatment versus the scan on the right after the patient had been treated for six weeks is clear to see, but the impact on the patient was even more profound. This is a patient that was told for years that he needed surgery and after treatment with XHANCE, his ENT told them he no longer needed surgery.

We've included this example not only to illustrate the impact we are having on one patient, but more importantly the point that physicians especially ENTs do not rely only on feedback from their patients to assess treatment results. They also use imaging and endoscopic examination to see results for themselves.

And as you can see, we are now hearing from physicians that not only are the patients telling them they're getting better, but the physicians can see for themselves the impact is having on reducing nasal polyps and associated inflammation. Turning to Slide 8 to market access.

Nationally based upon third party syndicated data and internal analysis, we believe that approximately 76% of commercial lives are currently in a plan that covers XHANCE. We have signed contracts with two of the largest national TBMs in the US, and we continue to engage in negotiations that increase coverage in the coming months.

We believe we are engaging in contracts that recognize the value of XHANCE and support healthy, long-term profitability. Our 76% coverage number includes all covered lives inclusive of lives that may be covered with Tier 3 formulary status with unrestricted access or a single step added or lives where coverage requires some form of prior authorizations.

While broad coverage is important, we believe it is also important to understand the relative administrative difficulty or hassle factor the different types of coverage creates for physicians and patients. As a reminder, our definition of limited hassle includes lives that are Tier 3 formulary status with unrestricted access, a single step edit or a simple prior authorization that may require for example only confirmation of prior intranasal steroid use.

For current XHANCE covered lives, the majority remain in plans where XHANCE is a comparatively limited hassle formulary position. Although, we estimate that approximately 60% of all commercial insured lives have preliminary access that involves limited hassle, we continue to target our efforts towards increasing this number towards 75% by year-end.

Turning to Slide 9. As context for the next few slides, I'd like to review some of our observations after the first full quarter of launch for XHANCE.

As previously noted we believe our clinical nurse educator program is effective and may have produced an early bolus of patients. In addition, to the strong start from our CNE program the Xperience program successfully facilitated initial trial of the product, while also providing us with a wealth of important data.

Third, after the end of the Xperience program, we saw a dramatic increase in the demand for our 30-day samples during July. We believe this reflected a sustained high level of physician interest in initiating treatment with no cost to the patient.

And that this large increase in correspond with reduced submission of prescriptions through specialty or retail pharmacies. Our belief supported by customer feedback suggests there's a more effective way to accomplish this objective, which I will describe in a moment.

Next, while we have stated previously that the overall intranasal steroid market was seasonal, we also noted that we did not know if the market for XHANCE would prove to be seasonal largely because we did not believe there were any comparable products focused on the same patient type to provide a precedent. As we have gathered data during the first months of launch, we believe there is evidence that the XHANCE market will turn out to have seasonality and that we are very likely are observing some seasonal market effects during the launch phase of the product.

I will have more on this in a few slides. Our market research in July and early August suggest that we are succeeding moving our target physician audience from achieving a high degree of product awareness through understanding of the new mechanism of action of our device, to the important perception that XHANCE produces a differentiated drug deposition pattern.

This progress is encouraging to us because we believe it establishes a foundation on which our territory managers can build towards a physician appreciation for the efficacy of XHANCE, as demonstrated in clinical trials. With the significant clinical data available, we have strong confidence we will achieve this objective as our communication emphasis shifts in that direction.

While we've achieved 76% market access, we have early post launch market research from July 2018 suggesting that market access barriers perceived or real are important to physicians when considering writing a prescription for XHANCE. In our research, we found that current physicians' perceptions for XHANCE for access expand for access may be actually lower than the actual access we have already achieved.

We have come to believe this is in part due to physicians in these specialties having prior negative market access experience with the category-- with this category of product. In response, we are updating and simplifying our patient copay assistance program with the aim of aggressively addressing these perceptions in the near term.

Concurrently, I want to know we will continue to work with payers to grow our market access, will expand our specialty pharmacy network and are actively evaluating additional strategies to increase patient fill rates at the pharmacy. Similar to some physicians expressing a desire to experience the efficacy and safety of XHANCE in their own patients before prescribing more broadly, we are finding that some physicians want to personally see that we are covering their own patient population rather than adopting the product solely on the basis of external data.

Finally, I am pleased by the choices we have made in building our information systems. We have access to significant data that we result, and that data feeds our strategy of staying nimble or making disciplined database decisions we learn and adapt.

Turning to Slide 10. Now I would like to share some data on the progress of our XHANCE launch to date.

Prescription data through July 27, as planned, most of our volume to date has come through our Xperience program, but we include retail data from Accuvia for a more complete picture. On the left hand part of the slide, we've depicted the seasonality of the total intranasal steroid market of which we believe approximately one-third is quoted for the treatment of chronic rhinosinusitis including nasal polyps, and the balance is primarily for the treatment of rhinitis, especially allergic rhinitis.

As you can see on this chart, based on prior years, our data suggests that the market for traditional intranasal sprays exhibit a seasonal decline in the summer months. From May to July based on historical data, the average decline of prescription volumes was approximately 23%.

Although the underlying disease that we are treating is chronic and causes symptoms year-round, we are learning that variation in patient flow through the offices of relevant specialist so-called foot traffic in seasonality and disease flare-ups may have an observable impact on the number of patients that present themselves, and we are therefore available for prescribing a new medication. We continue to believe that patients can benefit from consistent treatment and then as the product becomes more mature with refills driving a large proportion of the business, this seasonality effect may be reduced.

However, in the launch phase when new patient starts on the majority of prescriptions we believe it is clear that XHANCE prescribing is influenced by a seasonal effect. On the right hand side of the chart, we illustrate XHANCE monthly TRxs combined with Accuvia data with TRxs dispensed through our specialty pharmacy.

Note that we have previously reported the number of XHANCE units that have been dispensed, but at this point of launch we will return to the more traditional metric of prescriptions filled. As a reminder, prescriptions for the XHANCE Xperience program which constitute the great majority of prescriptions during this reporting period are not currently tracked in the national audit data from vendors including Accuvia and Symphony.

You can see then in total we had over 9,500 TRxs dispensed from March through June. And we had a slowdown in the rate of growth in June; we experienced positive 8% growth in the face of an 18% market decline from May to June.

On the following slide, I will show data illustrating a substantial increase in 30-day sampling with XHANCE that started in the June timeframe, a factor that we believe also influenced prescribing data. Turning to Slide 11.

On the left hand part of the slide, we illustrate the number of samples that have been distributed weekly from May through July 28. You can see that in July after the Xperience program ended, we saw a greatly increased rate of product sample distribution.

In fact, in just three weeks in July our sales teams distributed approximately 2,000 samples more on an incremental basis versus an average three-week period in May and June. We cannot assume that all samples distributed to a physician office are immediately utilized and replace a prescription; we believe these are correlated.

We interpret this as a clear signal of continued physician interest in trial of XHANCE and in the option of trial the product with the first month of treatment at a $0 out-of-pocket cost. Based on their observations and our positive experience with the XHANCE program, in the last week of July, we reduced the number of samples distributed and implemented a $0 copay for our first month's prescription for new patients.

You can already see the sharp reduction in the number of samples distributed in the last data point. We believe this approach will sustain a lower barrier to early trials with the product for both patients and physicians, while allowing better data capture and better revenue potential than traditional heavy sampling during the launch period.

Note that while we did not get the benefit of prescriptions with the significant increase in samples, we expect to see the benefit of this sampling reflected in both refills and new prescriptions in the future because of the high patient satisfaction and preference we observed in our patient survey data. As a reminder, our current sample product contains the same number of sprays as a bottle acquired by prescription.

We are actively developing for future use a seven-day sample. Turning to Slide 12.

Shown in this slide our weekly TRxs reported by Accuvia and our specialty pharmacy for the four-week period ending July 27, we believe we had a reset in physician prescribing data in July as expected after termination of the Xperience program in which the first two prescriptions were available at no out-of-pocket cost to the patient. This did not necessarily reflect any change in underlying physician interest in the product.

We believe these data were influenced by the move from the Xperience program which captured reported prescribing to more traditional heavy sampling with an incremental 2,000, 30-day samples distributed to doctors during the month of July. Once that reset occurred, we continue to see growth in physician prescribing in the month of July with an increase of over 70% across the July timeframe in a period when the market was showing a slight decline.

We saw approximately a 14% decline in average weekly reported TRxs through July 27th compared to June, we believe that with a significant increase in the volume of 30-day samples is considered along with the 11% market decline from June to July; that the actual physician interest in prescribing XHANCE remains strong and the number of patients who were started on XHANCE via either a prescription or sample has continued to grow nicely. Given the evidence of continuous strong physician interest, evidence for good patient outcomes and the influence of our recently implemented copay assistance program to lower perceived market access barriers by offering the first prescription with a $0 copay for all commercially insured eligible patients, and given that the data suggests the seasonality impact will turn positive in the next few months, we believe we will return to positive reported TRxs growth trend in the coming months.

Moving to Slide 13 in our current priorities. We continue to be very confident in the long- term potential of XHANCE and are focused on the areas we believe will fuel growth.

As stated, we believe our market research shows that we have been successful in communicating how our device works and about the resulting deposition profile which target audience physicians now appreciate to be differentiated. We are now turning the focus of our messaging to reinforcing the beneficial treatment outcomes that XHANCE delivers and have some great new tools we will be utilizing.

First, as I previously noted, we plan to begin distribution during the third quarter of the--NAVIGATE II and XHANCE -12 publications. Second, we noted the July finalization of a relevant new FDA guidance in light of which we plan to enhance our promotional materials to include additional important information from our pivotal trials such as our SNOT- 22 data which we believe is important to both ENTs and allergists.

We believe communication of these data combined with physicians growing experience with the product in their own patients, will greatly expand appreciation of the efficacy of XHANCE. In addition, we are pleased to note that three of our scientific abstracts have been selected for podium presentations at the upcoming American Rhinological Society meeting in October.

We expect these and other scientific communications during the second half of this year to continue to grow familiarity with an interest in the performance of XHANCE. Regarding market access, during our early launch phase we have come to believe that physicians do not come to a XHANCE with a blank slate regarding belief and market access, and instead have negative prior market access experience with the category of product that must be overcome.

We are already acting to address physician perception of insurance barriers possibly as being higher than they really are. We are in the process of implementing a simple-to-communicate copay assistance program that includes not only a first prescription in $0 dollar copay for eligible new patients, but also includes low copay for refills.

We believe this program while impacting profitability in the short term will allow our sales team to clearly communicate with physicians and their staff about comparatively low market access hurdles and during this launch period encourages more physicians to continue to gain experience with the product in their own patients. In conjunction with this patient copay program, we will continue to work to increase total coverage to increase the proportion of covered lives with low hassle formulary physicians to expand our specialty pharmacy network that helps to reduce the burden of prior authorizations and to actively work on strategies to optimize patient fill rates.

Note that while we anticipate in the short term during the launch phase, our profitability will be negatively impacted by these measures; the levers we are using are generally ones that are possible to reduce or eliminate once we achieve broader product adoption and increase market access coverage. Finally, and more on this in a few moments, we are excited to continue preparing for chronic sinusitis trials that we expect to start enrolling patients in fourth quarter of this year.

Before that, I will turn the call over to our CFO Keith Goldan for comments regarding second quarter results and perspectives regarding third quarter and full-year 2018.

Thank you, Peter and thank you everybody for joining today. As we reported earlier, OptiNose recognized $1.3 million of revenue in the second quarter; as planned the Xperience program was the primary source of demand for XHANCE in this most recent quarter.

While there were modest levels of prescriptions and shipments into retail, our mix of business led to an average selling price or ASP in the second quarter that was significantly less than it was in the first quarter. Recalling that in Q1, the majority of revenues recognized were related to shipments to wholesalers to fill their inventory in advance of the retail launch of XHANCE in April.

Turning to Slide 15; earlier today we updated our financial guidance for full year 2018 GAAP operating expenses including SG&A as well as R&D. We now expect those to fall in a range between $117 million and $121 million compared to the prior range of $119 million to $125 million.

The midpoint guidance has improved by $3 million. Looking ahead, while we are not providing formal revenue guidance, I would like to share some perspectives regarding third quarter and full year results for XHANCE.

At the start of the third quarter, a substantial number of patients remained eligible for a second $0 copay prescription through the Xperience program. In addition, we expect our updated patient copay assistance program, which features the opportunity for an eligible patient to receive a first prescription at no out-of-pocket cost to them to be applicable to most new demand for XHANCE in Q3 as well as Q4.

Because of these factors, we expect ASP to continue to be reflective of launch period incentives that are designed to encourage trial and adoption. As an important final note that I believe may help with longer-term models we have gathered a wealth of data from the Xperience program.

One of the important things learned from that data is that even when cost is entirely removed from consideration, many patients who seek a refill take more than one month to use a unit of XHANCE. We have seen an average approaching six weeks of duration for one prescription and believe this is likely due in part to imperfect adherence with twice daily dosing.

I will now turn the call back over to Peter. Peter?

Thanks, Keith. Turning to Slide 16, as you may have heard us describe before in addition to the launch of XHANCE in the medium term, we believe significant additional value could be created by adding a supplemental indication for the treatment of chronic sinusitis or CS.

Against, this objective our development team is continuing to make progress. Because this is a drug indication which has never previously been achieved in the US, we worked extensively with external experts to better understand key research issues as how best to define a study population and how best to measure endpoints.

On our last call we relayed that we submitted our proposed design elements and related questions to FDA in support of a planned meeting. Our update today is that we have now completed an informative meeting with FDA and that following that meeting we've continued to expect to enroll the first patients in our CS pivotal trial program in the fourth quarter of 2018.

As a reminder, the trial for CS indication is expected to require co-primary endpoints including an objective measure of inflammation and a subjective measure of symptom relief. We've already begun the process of selecting our CRO in federal locations.

Turning to Slide 17; In conclusion, we continue to be very optimistic about the potential for XHANCE in the market. We have no doubt we have a product that really does improve patients' lives and believe we are well on our way to driving physician adoption of the product in the market.

We always knew that market access would pose some challenges, but here we have made important adjustments in the near term to lower potential barriers to physician prescribing and have done so in a manner that does not harm the long-term health of the business. Thank you, all.

Now I would like to open it up for Q&A.

Thanks. Helpful color on underlying demands, but did have a couple of questions here.

So, first in terms of the XHANCE Xperience program, I believe, you had said that you're going to continue the program through September. So I just wanted to clarify-- is that when you talk about close to new enrollments, do you mean enrollments of physicians or can patients in practice-- seeing certain physicians in the program continue to access new patients continue to access the program, that's number one.

Number two is can you talk about the underlying bottles per prescription. You said that there are prescriptions have significantly more than one bottle, maybe talk about the number of bottles-- the average number of bottles using per prescription, and how you expect that to normalize or steady state way of thinking about that over time?

Thanks.

Yes, David, thanks. I will first clarify your first-- we had talked previously about extending the Xperience program and you recall that we actually introduced in July $30, so that the program was extended in September with the first prescription being $30 and then it was a limited to patient a pay $99 on the back end for refills.

We've decided, David and it obviously wasn't completely clear in the remarks that we are basically going to a patient copay assistance program. And we've updated the program such as the first prescription is free, $0 and that was key learning for us that-- and our patient willingness to pay research either candidly isn't that big a difference between patient abandonment at $0 or $30, but there obviously is a real desire of physicians to be able to distribute at no cost.

So we think this is a better way to view in XHANCE sampling, because we saw a ton of samples distributed; it's going to be good in the long term, but we just think this is a more effective way to get patients trying and then actually get some revenue added obviously with our current physician and we are also-- David, and this will be announced online next week, we are meeting with our sales team next week and we are revising our back-end refill at the cost of a back-end refill. And I'd like you to think of it not necessarily as a program, but this is our copay assistance-- this is the-- and this is an update to that if you will.

Keith mentioned is one of the reasons we feel really pretty good about this and this was sort of implicit in our remarks. We've been really careful in our contracting strategy then on the rebate side.

We believe once you agree to a rebate level that's you are basically stuck there. However, on the copay assistance side, as Keith mentioned this, we believe these are levers you can sort of-- as we get significantly broader trial we can revisit whether you need to continue to at a zero first script or not.

We can also revisit the back end of the amount that is on the back end for the refill. So hope that answers that question.

On the bottles per Rx it did-- I adequately address that David?

No, yes. So I'm just curious why are you seeing multiple bottles per Rx; how is that going to normalize so what's the - [Multiple Speakers] steady state.

Yes, I just want to make sure I answered the first part of question correctly, but on the bottles per Rx we started about one and half. So during the Xperience program, we were about one and a half; we are trending down right now.

You can do the calculations on the data we have provided, and it's honestly still too early David to know where we're going to land steady-state. In the Xperience program we have a lot of people prescribing at the higher dose.

It's trending down, but where it ultimately lands, we're still trying to evaluate honestly. It's somewhere - if this is going to help you at summer between one and one and a half.

Okay. Yes.

I know that's helpful. And then second-- I just want to sneak in a follow-up just on the sampling and the copay assistance.

So back in July you talked about a $30 copay being appropriate and one that where patients wouldn't necessarily walk away from, so what I am trying to ascertain here is, did something change in your market research between say early July your last corporate presentation where you talked about the program being extended to September, and now where you are transitioning to greater copay subsidization? I wanted to just get a sense of what changed and why?

Nothing has changed honestly, David, in terms of the patient's willingness to pay. And what led us to believe that we could go out with a $30 first-- cost to the patient of $30 on a patient abandonment, all of the work we did, pre-launch and candidly, all the work that we've done during the launch suggests that patient abandonment is not dramatically different between $0 and $30.

What we learned-- candidly we learned it pretty quickly within three weeks -four weeks which we made this adjustment. Physicians want the ability to start patients at no out-of-pocket cost to the patient.

So it's not really patient driven because I really believe all the data we have suggests abandonment could be comparable between 0 and 30 but clearly we had 2,000 incremental samples distributed in just three-week period, doctors want to start patients at sort of a low barrier from their standpoint to give --they want to be able to give it to the patient at a zero out-of-pocket cost to the patient. And candidly that's what we may not have fully anticipated, David.

Hey, David. This is Tom.

Let me just add one piece of information that Peter sort of --what Peter provided. One of the other elements that we received was from our physicians that they actually preferred being able to distribute the first prescription if you will through$0 copay versus a sample.

So what we're doing is looking at the economics from our standpoint, the visibility that we get through data for distributing a sample if you will through a prescription, and then also listening to what our customers prefer.

And as we said David and I not want to harp on too much but we feel really good about physician interest in the product, and the program and it's really not only what we're hearing anecdotally but a lot of research that we've done among hundreds of physicians to sort of get their view of the product. And I said this earlier, the only thing that is potentially an issue now that we believe we have to address is the perception that we're not --we don't have the access that we frankly have achieved.

And that's part of what is driving our need to feel to revise this copay assistance program.

Hi, good morning. First, Peter what is the conversion been thus far from Xperience to patient support?

It's only been one and a half months but what's the early read on patients that continued on? And then within Xperience how many loyalists did you have the way you described it?

And how are they writing for the product? What's a target for loyalists by the end of the year?

I'll take the first one Gary, and we're not really disclosing our compliance rates if you will. I will say they're better than what you see in typical prescription products.

At this point, we're very encouraged by it. It's still early, so I want to be really careful that we read too much into that but conversion suited to a loyal patient if you will.

I'll get to your question on doctors in a minute. We feel good about-- we feel-- in our models we frankly --we sort of talk about without knowing how it's going to perform.

We looked at analog, what's done historically in terms of a symptomatic disease. What is compliance look at?

But we're feeling very good about compliance rates on the back end. Relative to your question on docs and I sort of said this in the script Gary.

I mean we have --our goal is to get doctors writing 10 or more prescriptions in a period. And we believe that sort of more than just a dabbler or a trial list.

And right now we have an order of magnitude what Tom in terms of our loyal--

400

Yes. So we have --we have substantial number of doctors who are writing, I have heard that 400 or more who or in --it's really become part of the practice habit.

The goal obviously is to get to double that number by the end of the year. We're confident we can achieve that.

Okay and then just a couple of follow-ups. So how long will this new $0 copay for the first RX continues in patient support?

And what is the level of copay for the refill on the back end? And then Keith, what's a net price we should be thinking about now for the rest of the year?

Are you in sort of $200 zone with XHANCE?

So I'll take the first two Gary. And on the zero upfront, for now this is our program.

This copay assistance program and in our financial analysis we think it's a better way to sample. So until we get the seven-day sample.

The challenge we have is because our product is a 30-day sample, we candidly sort of expected that doctors would give a sample and write a prescription and that didn't happen. And I think it's largely because it's a 30-day sample.

They gave --the docs gave the product to the patient and then they're sort of waiting for the patient to come back before they're writing again. So for now our view is that the $0 for the first prescription is a better alternative to sampling.

We've --as you saw by the way we dramatically have sort of cut our sampling back. So this is all sort of part of our belief that this is a better way to sample.

And I think once we have the seven-day sample available, which will be at some point next year we may revisit. Whether we're going to continue the program but for now it's our program.

With the second question--

The second was Peter -this is Keith, Gary. Second question was with respect to ASP for the remainder of the year.

Actually, [Multiple Speakers]

Way before that it was - I'm sorry - the refills on the back end, yes, what type of copay a quarter you going to be giving for that.

Yes. And if it is okay, Gary, I mean we're in this mindset of being nimble but being disciplined.

So we actually fielded again research to really understand the physician perception, and we're going to be announcing that to our sales team next week. And it will be implemented literally next week; we'll be communicating it broadly the doctors.

What I'll tell you at this point in time are it is less than 99 and it's - if it's okay, by next week you'll know what it is. It's going to be reasonably substantially lower than 99 though.

Yes. And Gary to your question about ASP.

We're not given exact guidance. I did comment in my remarks that we expect ASP to continue to be reflective of launch period incentives designed specifically to encourage trial and adoption.

We believe establishing a broad base right now is critical to the long-term success of the business. So I think we drop the breadcrumbs.

You can put together your own analysis of what ASP was for Q2. I made the remark that we expect it to be similar going forward, but it's not at the $200 per bottle mark yet.

Okay but importantly it should be in the same range for 3Q and 4Q in that ballpark.

We expect it to be, yes, that is correct okay.

Great, thanks guys. Peter just on the primary care side, I know you've talked about 2,000 reps in this area.

Can you just talk about what type of traction you're seeing there? And maybe compare and contrast that the scripts written per physician and how you're seeing that ramp?

So that's number one number. Number two are you able to put a timeline around the Phase 3?

What broad --I mean you're starting ahead of yearend which is consistent with what you said last quarter, but how should we think about overall timeline? That's number two.

And then the last one for Keith, spend was closer to $24 million this quarter, down from $30 million last, you dropped overall full year --spend expectations by $2 million to $4 million. How do we think about the second half progression?

And I'm just trying to really get more at what are we looking at 4Q run rating as we move into 2019. Thanks.

Keith you handle last one. But relative to the where we're getting traction, Randall, the split we have about 15% of the scripts coming out of primary care right now, and the balance of that the 85% is reasonably split between ENTS and allergists.

And allergist up --some --we have among this loyalist category we actually have another group we define of people who really have made a part of the practice habit writing to 10 to 15 scripts per week. And we have a number of docs that are doing that already.

And that's actually reasonably split between ENTS and Allergist on that front. So we continue to feel very good about penetration of all segments.

Clearly, we're making some good progress on the primary care side. So I think it's a good sign that is we work to get the indication that I think we could have real interest on the side of the primary care side.

It is obviously a lot of chronic rhinosinusitis patients in primary care offices right now. Relative to timelines, nothing's really change Randall, from what have been talking about previously on the-- and Keith can talk to the spend in a minute, but we had a really good meeting with the FDA.

We're feeling really good about the work we did in advance of that meeting. Right now, we're heads down; we're going to get the patient enrolled and the trial in the back half of the year.

We're confident we're going to be able to hit those goals in terms of enrollment. And from there it's just going to be how long it takes to run the trial.

And as I said, there's nothing really new relative to our meeting with FDA that would influence any change in data which we - I think we said previously, Keith, 2020-2021-ish if you will and then we have to file. So the indication is obviously in year 2020 -2022, 2023 in that timeframe.

And then Randall, good morning. With respect to your question on kind of 2H and 3Q, 4Q run rate, we had total OpEx of $54 million in the first six months of the year.

We've given guidance of $117 million to $121 million for the full year. So you can do the math-- there's going to be-- we expect acceleration in OpEx really driven largely with the-- by the initiation of the Phase 3 pivotal program for chronic sinusitis in the back half of the year.

But from a SG&A perspective are we looking at a reasonable run rate as we move into 2019?

Yes.

Thanks for taking the question. I had a couple; First one, Peter, on the upcoming CS trial and I apologize I got interrupted when you were going through I think in the prepared remarks, but wondering about any details to share or when you might have details to share, and I guess specifically, just interested on the inflammation, how that's being measured and any challenges for demonstrating something there versus symptomology and then I have a second question please?

Yes, on CS trial, so we had-- there are co primaries there Bill, I think you know, so there- you have to prove symptom benefit, and it's a composite symptoms. You also have to show benefit on an objective measure of reducing inflammation in the sinuses.

You may recall that we have a small Phase II trial; not a lot of subjects but we had very encouraging data on that front. It's never been proven before and nobody has been able to accomplish it, but we are feeling really good about it Bill.

It's obviously, it's --something that nobody has done. We have a Phase II program.

There's - there's candidly more risk here in this trial; we have said that publicly versus a nasal polyp indication. But we are feeling really very good.

By the way lot of it is based on some of the evidence that we are seeing in scans the doctors are providing us. We are getting a lot of information on the current product and in looking at the scans that some of the doctor sending us based on real world use.

W is feeling pretty good about it, and I'll just leave it there. But yes, I want to really highlight there is certainly risk here on that objective measure because it's-- nobody has ever proven it before.

Got it. And then just back on the seasonality topic, and I guess it's an unfair question to ask as you run through your first season, is this something that the company is really just going to have to deal with?

I guess as we look at it over the years, is the patient base compounds the impact of any single season is going to be less impactful? So something you'll just have to deal with or something that longer-term you're not going to worry about?

And then I guess, part B to that would be-- I am assuming a priority there's no reason to think that that the seasonality would impact the refill rate, it wouldn't seem like it's more than new patient starts? Thanks.

That's exactly where I was going to go Bill-- I think that-- we have sort of looked at it from the patient perspective that the patient use of products, certainly the disease is not very-- is not very seasonal. The patient suffers symptoms all year round; they do have flare episodes that occur to get exacerbated by all kinds of things; in some cases things like allergens, but in other cases things like pollution and other things.

So patients suffer all year round. They use the product all year round, but for a new start to happen you need a patient in a physician office and we just know that because the season, the allergy and sinus seasons drive people into physician offices, that's what's necessary for us to get a new start.

Now as the business matures, we think that the impact will be less and less because all of a sudden you're relying more on your refills to drive your business, but we're still very early Bill-- it's is what I would say.

We appreciate the questions we received. I hope you can-- it sense our enthusiasm we still-- I continue to have an enormous enthusiasm for the product based on, not only anecdotes from doctors, anecdotes from patients but significant research that we've done to really understand how the product is performing in the market for both patients and docs.

And we are just going to stay after it; continue to believe we can build a really terrific business here and appreciate your support. Thank you very much.