EyePoint Pharmaceuticals Inc (EYPT) 2010 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the third quarter 2010 pSivida Corp.

earnings conference call.

My name is Michelle and I will be your operator for today.

At this time, all participants are in a listen-only mode.

We will be conducting a question and answer session towards the end of today's conference.

(Operator Instructions) As a reminder, this call is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today's call, Ms.

Lori Freedman, Vice President of Corporate Affairs and General Counsel.

Please proceed.

Thank you, Michelle.

Good afternoon, everyone, and thank you for joining us.

After the market closed today, we released the third quarter financial results for pSivida.

If you do not have a copy of the release, one may be found in the Investor Section of our website at www.pSivida.com.

On the call today with me are Dr.

Ashton, President and Chief Executive Officer of pSivida, and Len Ross, Vice President of Finance and Principal Financial and Accounting Officer.

Before I hand the call over to Paul, I need to remind everyone that some of our prepared remarks, as well as answers to your questions about our expectations for the future are forward-looking in nature.

These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements.

These risk factors are discussed in more detail in our filings with the SEC, including our fiscal 2009 annual report on Form 10-K filed on September 25, 2009.

We do not undertake any obligation to update any forward-looking statements made in this call.

With that, I would like to turn the call over to Paul.

Thank you, Lori.

And welcome, everyone.

I appreciate all of you taking the time to join us today to discuss the results of our fiscal 2010 third quarter.

On the call today, I'll briefly update you on our most advanced development stage product, Iluvien.

Then I'm going to spend some time reporting on our other development programs.

Finally, I'll give some commentary on our greatly improved financial situation.

We've done a good job, I believe, in advancing our technologies, while conservatively managing our cash and that philosophy will remain going forward.

I'll start by stating we're very pleased with Alimera's recent completion of its IPO.

As you know, our licensee Alimera is completing fully recruited Phase 3 clinical trials for Iluvien.

Iluvien delivers fluocinolone acetonide for the treatment of diabetic macular edema, a condition that affects approximately 1 million people in the US and is one of the leading causes of vision loss.

Currently, there are no FDA approved drugs for this disease.

Alimera reported top line 24 month results in December.

And since those dates were announced, we and Alimera have continued to finalize the data set.

And we previously reported some of that subsequent analysis to you.

Alimera is preparing to submit the NDA for Iluvien this quarter and intends to request a priority review.

Assuming the NDA is submitted before June 30 and the priority review is granted a decision on Iluvien could be received prior to the end of this calendar year.

If the NDA is approved, Alimera will be obligated to pay the $25 million milestone which they reflected as a use of proceeds in their recent IPO.

We will also be entitled to 20% of profits Alimera generates on sales of Iluvien.

In addition to the work on DME, Alimera has taken Iluvien into clinical trials.

This could lead to some of the treatments, of wet and dry AMD and retinal vein occlusion.

These applications could greatly expand the use of the product.

Now, I have to say that we're very optimistic about the market opportunity for Iluvien and of course very excited about its potential approval.

But pSivida is more than just Iluvien.

We continue to move forward with a number of other products with our so-called next generation technology.

These technologies use our Durasert and BioSilicon systems, build on Iluvien and our earlier FDA-approved products, Retisert for the treatments of posterior Uveitis, and Vitrasert for the treatment of AIDS-related CMV retinitis.

Another area where we believe we are making great progress is our collaboration with Pfizer.

I am delighted with the direction of our joint efforts and it is very encouraging to see the synergy between our two companies and to see them working so well together.

To date, Pfizer has provided over $15 million to pSivida through a combination of direct investment in our stock and R&D support.

Pfizer is our largest shareholder.

I'm also pleased to report that since our last call, our financial condition has greatly improved.

After the close of the quarter, and not reflected in the reported financial results for third quarter, we received $15.225 million from Alimera when it repaid its outstanding contingent note, along with accrued interest.

Our financial results announced today are consistent with prior quarters with a cash burn of $1.2 million.

Revenue for this quarter was down $2.6 million compared to last year, reflecting the completion on December 31, 2010, of the amortization period for the upfront payment under our Alimera agreement.

The $15.2 million that we received in April will be included as revenues in the fourth quarter of this year.

Len will go through the detailed financial results shortly, but before handing it over to Len, it's important to emphasize the size of the opportunity we are working to address.

Between eight million and ten million people in the US alone suffer from the three primary back of the eye conditions.

Diabetic retinopathy, age-related macular degeneration, and glaucoma.

Diabetic macular edema, the initial target for Iluvien is actually a subset of diabetic retinopathy and as I said earlier, affects about 1 million people.

What our advanced product, Iluvien for DME addresses 10% to 15% of the eight million and ten million patients with these three conditions.

So that leaves a very large commercial opportunity still unaddressed.

As you know, Iluvien is a third generation Durasert technology, following Vitrasert and Retisert.

And we believe we are making great progress on our next generation technologies, our fourth generation bio-erodable Durasert and BioSilicon.

At the recent ARGO conference, there were nine presentations on our technologies, largely the initial results of preclinical studies on our bio-erodable Durasert technology.

We believe these results were an important step in advancing the use of this new technology for the treatment of glaucoma and ocular degenerative conditions, such as dry age-related macular degeneration.

These conditions with long-term delivery of agents to the target site could be a very significant advance in therapy.

I am very proud of our track record in developing FDA approved products, and evolving our technologies, Vitrasert, Retisert and hopefully Iluvien.

I'm looking forward to building on the success with our work on our next generation bio-erodable Durasert and BioSilicon technologies.

Iluvien for DME is very exciting and of course we look forward to the NDA filing, but we believe we have other exciting opportunities outside pSivida beyond Iluvien.

And I look forward to sharing our development progress with you as we move forward.

Our goal remains the same, be a leader in the miniaturized, drug delivery systems.

I'm now going to hand the call over to Len Ross, our VP of Finance, who will take you through the financial results for the quarter.

After Len is finished, I have a few summary remarks and we will then take your questions.

Len?

Thank you, Paul, and good afternoon, everyone.

I am pleased to review with you the third quarter results that we issued this afternoon.

For the third quarter ended March 2010, we reported revenues of $515,000, a decrease of $2.6 million, from $3.2 million reported in the third quarter of last year.

This decrease was predominantly due to the December 31, 2009, end date of the Company's performance obligations under the Alimera collaboration agreement, through which date the Company had amortized to revenue the initial upfront consideration received in March of 2008.

Any cash consideration received from Alimera after December 31, 2009, is being recognized as revenue upon receipt, or if applicable, at such earlier date on which the amount to be received is both fixed and determinable and reasonably assured of collections.

On April 27, 2010, as Paul indicated, following the consummation of the initial public offering by Alimera.

The Company received approximately $15.2 million, representing the prepayment in full of the $15 million conditional note, plus accrued and unpaid interest.

This amount will be recorded as collaborative research and development revenue for the three months ended June 30, 2010.

With respect to our Pfizer collaboration agreement, we continue to receive quarterly research and development funding of $500,000.

Cumulative Pfizer research payments to date of approximately $5.3 million, are classified as non-current deferred revenue on our balance sheet at March 31, 2010.

Because we are unable to define the time period of the Company's overall deliverables and other obligations under the Pfizer agreement, none of these amounts are currently being recognized as revenue in our financial statement.

Net loss for the third quarter was $2.7 million, or $0.15 per share compared to a net loss of $636,000, or $0.03 per share for prior year period.

Research and development expense for the third quarter totaled approximately $1.7 million, a $212,000 decrease from approximately $1.9 million reported in the third quarter of fiscal 2009.

This decrease was primarily due to reduced UK-based operating expenses resulting from completion of our BrachySil dose ranging clinical study and the assumption by Intrinsic of certain BioSilicon manufacturing responsibilities under a February 2009 supply agreement related to its exclusive license of food science and nutraceutical applications of BioSilicon.

General and administrative expense totaled $1.7 million in the third quarter compared to $2.1 million in the prior year period, a decrease of $354,000.

This decrease was largely attributable to the absence in the current quarter period of $380,000 of severance cost obligations accrued in last year's third quarter, partially offset by approximately $120,000 of increased stock-based compensation resulting from June and November 2009 stock-based awards.

As a result of the year-over-year decrease of revenues, partially offset by decreased levels of research and development and general and administrative expenses, our loss from operations increased $781,000 in the prior year period, to $2.9 million in the quarter ended March 2010.

Nonoperating income increased by $190,000 to $230,000, for third quarter 2010.

The net increase was primarily related to the change in the valuation of our outstanding investor warrants that have exercised prices denominated in Australian dollars, which is different than the Company's US dollar functional currency.

As we have discussed in previous quarters, because the potential exercise of these warrants would result in a variable amount of proceeds in US dollars, fair value of these warrants at their respective dates of issuance were recorded as derivative liabilities subject to revaluation at each balance sheet date.

The revaluation of the warrant determined using the Black Scholes model is impacted by several variables.

Most notably, net changes in both the Company's share price, and the US dollar equivalent warrant exercise prices, as well as the expected remaining life of the warrants.

Changes in the fair values of these warrants are recognized as other income or expense, a noncash item, in our statement of operations with a corresponding decrease or increase respectively in the balance of the derivative liabilities recorded on our balance sheet, which was $2.2 million at March 31, 2010.

Fluctuations in the fair value of these warrants which could be substantial will affect our future reported operating results until the last to expire of these Australian dollar warrants, principally through April 2011.

Moving on to our nine month year-to-date results, revenues for the nine months ended March 2010 totaled $7.3 million, a decrease of $1.6 million compared to $8.9 million in the prior year period, due predominantly to the Alimera collaboration agreement, as I noted earlier.

R&D expense for the nine months ended March 2010 totaled $5.2 million, an approximate $970,000 decrease compared to $6.2 million for the nine months ended March of 2009.

Consistent with the discussion of the third quarter results, this decrease was predominantly related to completion of the two early stage BrachySil clinical studies and the assumption of BioSilicon manufacturing responsibilities by Intrinsic.

And was also impacted by an approximate $50,000 favorable foreign currency impact of the relative strengthening of the US dollar against the Pound Sterling.

D&A expense was $5.2 million for the nine months ended March of 2010, a $2.1 million decrease compared to $7.3 million in the prior year period.

This decrease was primarily due to three factors.

First, the absence in fiscal 2010 of a $1.3 million provision for loss on a note receivable recorded during fiscal 2009.

Second, an approximate $500,000 decrease in professional fees, primarily resulting from the Company having reincorporated into the US in June of 2008.

And third, the absence in fiscal 2010 of approximately $550,000 of salary and related severance agreement compensation of a former employee.

These decrease items were partially offset by an approximate $330,000 increase in stock-based compensation.

As a result of the year-over-year decrease of revenues, which were more than offset by the decreased levels of R&D and G&A expenses, our loss from operations decreased $4.6 million for the nine months ended March of 2010 -- 2009, rather, to $3.1 million for the nine months ended March 2010.

Nonoperating expense of $1.2 million for fiscal 2010 year to date period compares to nonoperating income of approximately $1.7 million for the corresponding fiscal 2009 period.

This net change of $2.9 million, predominantly due to a $2.8 million year-over-year swing in the change of fair value derivatives related to the Australian denominated investor warrants discussed earlier.

The noncash expense of $1.2 million for the nine months ended March 2010 was primarily due to a net increase in the market price of our shares during that period, which increased from $1.79 to $3.94.

Whereas the noncash income of $1.6 million in the prior year period was primarily due to a net decrease in our share price from $2.90 to $1.01 during the nine months ended March 2009.

The net loss for the nine months ended March 2010 was $4.3 million, an approximate $2.3 million increase compared to $2 million for the prior year period.

Moving on to our cash balance, at March 31, 2010, we reported cash and cash equivalents of approximately $4 million.

This represented a net decrease of $1.1 million compared to approximately $5.1 million balance at December 31, 2009.

The net decrease in the current quarter consisted of approximately $1.5 million of cash used in operating activities, partially offset by $318,000 of cash received from the exercise of stock options.

Cash used in operating activities was in line with the average of the most recent four quarters.

As noted earlier, the $15.2 million conditional note payment received from Alimera in April 2010 will be recorded as collaborative research and development revenue in our fiscal fourth quarter.

In addition, we anticipate a resumption of quarterly royalty income from sales of the Retisert product by Bausch & Lomb in the quarter ended June, 30, 2010, following a completion of an advanced royalty agreement back in 2005.

We currently project total revenues of approximately $15.5 million and $22.8 million for the three months and the fiscal year ended June 2010 respectively.

Cash and cash equivalents are estimated to be over $17 million at June 30, 2010, compared to $6.9 million at June 30, 2009.

We will continue to carefully manage our cash resources and expect at least until such time as the FDA approval of Iluvien that our quarterly cash burn will be in a range consistent with the recent quarters, while advancing the Company's strategic plan, as Paul has outlined.

I will now turn the call back over to Paul.

Thank you, Len.

Okay.

Just a few quick comments before we move to the Q&A.

We are at an exciting stage as a Company.

A few weeks ago, very interesting preclinical results for our next generation technologies were reported at ARGO.

An NDA for Iluvien is about to go to the FDA this quarter.

We could expect to have an approval as soon as the end of this year.

Last month, we received important cash payments that bolstered our balance sheet.

Over the past three years, we have received over $50 million from Pfizer in equity proceeds and collaboration payments, and we have received over $30 million from Alimera from our collaboration agreement.

This is, of course, lumpy revenue, being in part event-driven, such as the recent $15 million note payment from Alimera.

We hope next year will be even more lumpy, as we hope to report receipts of a $25 million milestone payment on FDA approval.

To sum up, Iluvien for DME is very exciting and we are looking forward to the NDA filing.

Behind Iluvien, we believe our Pfizer collaboration is doing well.

And we are optimistic for our next generation technologies under development, truly an exciting time at pSivida as we march towards our goal of becoming the leader in miniaturized, drug delivery systems.

I look forward to speaking with you again next quarter.

At this point, we would be happy to take your questions.

Operator, would you please initiate the Q&A portion of this call.

(Operator Instructions) Your first question comes from the line of Susan Au from Ladenburg Thalmann.

Please proceed.

Hi, Paul.

Hi.

Can you hear me?

I just had a couple of questions on your Pfizer development program.

Can you be a little bit more specific about the number of programs that you have with Pfizer?

No, unfortunately, I can't.

I would really love to, but I'm subject to a confidentiality agreement with Pfizer.

Okay.

Well, when do you think that you'll be in a position to be able to share with us either the clinical status, the development, or any new (inaudible) programs with us?

That's confidential.

However, as soon as it happens, we will make an announcement on clinical trials or anything of that nature.

Okay.

Thank you very much for your time.

And congratulations on the developments with this quarter.

Thank you.

Your next question comes from the line of Ronny Gal of Bernstein.

Please proceed.

Good morning -- good afternoon, Paul.

How are you?

Thank you.

How are you, Ronny?

Doing well.

Paul, could you help us a little bit understand the requirements at the FDA for approval of drug device combination?

This is something that people who cover drugs don't often look at.

Are you going to have to prove the device separately then the drug?

Can you just remind us how the process works?

I can talk about the products with which I've been intimately involved.

Sure.

Vitrasert and Retisert and Iluvien.

They have all been regulated as drugs, so it's like you'd regulate any other control delivery system, be it a sustained release tablet (inaudible) anything else.

So the basic line has been adopted and which we've been following is, if the purpose of your device is to deliver a drug, then essentially it's regulated as a drug.

If the purpose of the drug is to make a device work better, like a coated stent, then essentially you regulate it as a device.

So does that make any sense?

Sure.

Yes, it does.

So, a full-on question is now you get a little bit more money.

And can you tell us a little bit about some of the programs that you can initiate today and would the previous approval of the device help you in subsequent filing of additional compounds?

Yes, we are moving forward with a variety of different programs that I've described.

And I'll get much more comfortable in describing where they are when they enter really the clinical phase.

Obviously the prior approvals of our technology certainly make things a great deal easier going forward.

Okay.

Can you give us generally an idea without naming the compounds about the disease -- the therapy area where you think that you could push your way to?

Well, the target areas, I think that anyone should be looking at in the back of the eye at least would be glaucoma, diabetic retinopathy.

We've been looking at macular edema, but there's many other subtypes of diabetic retinopathy, which obviously represent huge problems for patients.

And therefore, large commercial opportunities.

Of the degenerative conditions, dry AMD is the largest one.

But also there's a whole host of other conditions, geographic atrophy I guess is a subset of dry AMD, of retinitis pigmentosa.

That's about 100,000 to 150,000 people, et cetera.

So there is lots of opportunity (inaudible).

Okay.

And last, but not least, is your device, remind me, capable of delivering micromolecules polypeptide?

As I've said, I look forward to being able to make announcements (inaudible) at the clinical trial.

Okay.

Thank you very much.

(Operator Instructions) Your next question comes from the line of Rick [D'Auteuil].

Please proceed.

Good afternoon, Paul.

I just wanted to follow up.

It seemed like we have some promising results from the delivery system for pancreatic cancer and haven't heard any more about that.

Can you elaborate any more on that?

Yes, we had very promising results in our dose ranging study.

That's essentially a Phase 2 trial and we are now seeking development partners for that program.

Have you had any luck that way?

People often ask me the question for this and these other programs, like are you in early stages or late stages of negotiation?

The answer is I'm really not trying to be glib.

The answer is until you have a signed deal, you don't have a deal.

I understand that.

Seems like with the promising results, it would seem logical to have a lot of folks approaching you.

Until I have a deal, I don't have a deal.

Got you.

Thank you, sir.

If there are no further questions, I would like to turn the call back over to Dr.

Ashton for closing remarks.

Okay.

Then I would like to thank you all for joining us today and I look forward to speaking with you again next quarter.

In the meantime, if you have any additional questions, please feel free to contact us.

With that, thank you again.

Thank you for your participation in today's conference.

This concludes the presentation.

You may now disconnect.

Have a great day.