EyePoint Pharmaceuticals Inc (EYPT) 2011 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the third-quarter 2011 pSivida Corporation earnings conference call.

My name is Ann, and I will be your coordinator for today's call.

As a reminder, this conference is being recorded for replay purposes.

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

(Operator Instructions).

I would now like to turn the presentation over to Lori Freedman, Vice President, Corporate Affairs and General Counsel.

Please proceed.

Thank you, Ann.

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

After the market closed today, we released our fiscal 2011 third-quarter results.

A copy of the release is available in the Investor section of our website at www.psivida.com.

Paul Ashton, our President and Chief Executive Officer and Len Ross, our Vice President of Finance are with me on the call.

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

These forward-looking statements are inherently subject to risks and uncertainties.

All statements other than statements of historical fact are forward-looking statements and we cannot guarantee that the results and other expectations expressed, anticipated, or implied will be realized.

Actual results could differ materially from those anticipated, estimated, or projected in the forward-looking statements.

For a more detailed discussion of the risk factors that could materially affect our financial results and financial condition, and other items expressed or implied in our forward-looking statements, I refer you to our filings with the SEC, including our Form 10-Q for fiscal 2011 second quarter.

The Company undertakes no obligation to update any forward-looking statement in order to reflect events or circumstances that may arise after this conference call.

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

Great.

Thank you, Lori, and welcome, everyone.

This was another solid quarter for us.

And importantly, our cash position is perhaps as good as it has ever been.

We ended the quarter with $23.1 million in cash that includes approximately $10 million of net proceeds from our registered direct offering of stock and warrants to be completed in January.

Our operating expenses for the quarter were approximately $1.6 million, and through the first 3 quarters of fiscal 2011, our burn has averaged about $1.5 million per quarter.

While we expect to increase our operating expenses somewhat as our in-house research accelerates, we believe we have sufficient cash to take us into calendar year 2013.

Len will take you through the rest of the quarterly numbers shortly.

Also, I'd like to advance to the product development side.

As you know, in February, we reported the 36-month data for Iluvien from the completed FAME study, which we believe is promising.

We were very pleased with the most recent 36-month data for chronic DME patients presented just last week at the ARVO conference.

As you recall, our licensee, Alimera Sciences, submitted an NDA for Iluvien for the treatment of diabetic macular edema based on a 2-year primary efficacy endpoint in 2 3-year Phase III clinical trials -- Trial A and Trial B.

In December, Alimera received a complete response letter from the FDA requesting, among other things, 36-month data for these 2 Phase III trials.

This data showed that in both trials, the therapeutic effect seen at month 24 -- that is the percentage of patients showing an improvement in best-corrected visual acuity of 15 or more letters from baseline.

That effect was maintained through to month 36.

While the therapeutic effect was maintained, statistical significance was lost in both trials by month 36 as the results of improvement in the control group.

Interestingly, the rate of development of side effects slowed significantly between month 24 and 36.

We were very encouraged by the data presented at the ARVO conference last week of a subgroup of patients in the study who at baseline had been diagnosed with DME for at least 3 years.

These patients with chronic DME, who were, in fact, the majority of patients in both trials, the therapeutic benefits of Iluvien over the control group at 36 months was twice that previously reported from full group and the chronic DME subgroup across both studies.

Over 20% more patients treated with Iluvien showed an improvement of 15 or more letters from baseline compared to control patients.

This was true at all time points between 2 and 3 years.

[Notably], in both Trial A and Trial B, this improvement in vision for patients treated with Iluvien was statistically significant at all time points between 2 and 3 years.

To provide some details, patients with chronic DME at 36 months in Trial A, 31.8% of those treated with Iluvien gained 15 or more letters from baseline, compared with only 13.6% of those in the control group, with a net benefit of Iluvien to control of 18.2%.

And that was statistically significant with a p-value of 0.01.

In Trial B, 36.4% of chronic DME patients treated with Iluvien gained 15 or more letters, compared to 13.2% of control patients as a net benefit of Iluvien versus control with 23.8%.

Again, statistically significant with a p-value, this time of 0.004.

For people with chronic DME, on a combined basis as for both Trial A and Trial B at 36 months, the net benefit of Iluvien compared to control were 20.6%.

That's more than double the 9.8% seen for the full patient population.

That's the data at 36 months.

The peak efficacy was seen at month 30.

In patients with chronic DME, at peak, 33.6% of Iluvien-treated patients in Trial A gained 15 or more letters compared to 10.2% for control.

That's highly statistically significant with a p-value of less than 0.001.

Trial B was very similar at 30 months, with 42.4% of Iluvien-treated patients gaining 15 or more letters, compared to 13.3% for control.

Again, this was highly statistically significant with a p-value of less than 0.001.

Consistent with the full patient population in the same study, approximately 75% of patients in the chronic DME subgroup treated with Iluvien received only 1 insert over the 36-month study.

Safety data from the subgroup analysis was also reported.

And generally, patients with chronic DME who received Iluvien experienced fewer intraocular pressure-related side effects compared to the control than was reported for the full patient population.

For example, the increased risk of developing an increase of IOP during the trial that required medication, which was generally eyedrops, the increased risk in patients receiving Iluvien compared to control was 20.7% in patients who have had DME for more than 3 years at entry into the study.

However, for people who have had DME for less than 3 years to entry, the increased risk was 29.3%.

That's almost 10% different.

Some of the differences we've seen -- an increased risk of developing IOP of 30 or more millimeters of mercury at some point during the study.

In chronic DME patients, IOP increase of 30 or more were seen in 14.8% of those receiving Iluvien compared to 5.4% to control.

So that's a 9.4% increased risk of Iluvien compared to control.

In contrast, the increased risk of developing an IOP of 30 or more in people with DME for less than 3 years was 20.2%.

So that's more than double.

And that's calculated based on the 23% of Iluvien who developed the elevated IOP, compared to 2.5% for the control.

So to summarize all of these numbers, in patients with chronic DME, over 20% more patients treated with Iluvien showed an improvement of 15 or more letters from baseline compared to control at all time points between 2 and 3 years.

This improvement in visual acuity for chronic DME patients treated with Iluvien compared to control was statistically significant in both trials at all time points between 2 and 3 years.

Now that's the difference between Iluvien and control.

In terms of absolute improvement across both trials, efficacy peaked at month 30, where over 38% of chronic DME patients gained 15 or more letters from baseline compared with just under 11% for control.

Chronic DME patients treated with Iluvien also experienced fewer intraocular-related side effects compared to the control.

Fewer of them was reported for the full patient population.

Alimera has announced their plans to submit a response to the FDA's complete response letter by the end of this week, including an analysis through month 36 or the full data set.

That's all patients in the study and this most recent subgroup analysis.

Alimera also reported that the third-party manufacturing deficiencies identified in the complete response letter had been resolved, and this information will also be included in the response.

Decisions from the FDA on approval is expected within 6 months.

If approved, we would be entitled to receive a $25 million milestone payment from Alimera.

We would also be entitled to 20% of the net profits as defined from sales of Iluvien by Alimera.

So, obviously, we're looking forward to the FDA's response to that NDA.

Now pSivida developed Iluvien a little over 5 years ago.

As we're an innovative company, in the intervening 5 years, we've been working on our next generation of new products.

We are continuing to advance developments of fully injectable, bioerodible systems for both small molecules and proteins.

We continue to focus on the major eye diseases -- wet and dry age-related macular degeneration, macular edema, and glaucoma.

As we've planned to enhance these products into early-stage clinical trials before determining if and when to seek partnering arrangements, we expect our cash burn will increase somewhat.

But we'll continue to keep a sharp eye on resources and our cash burn.

With that start, I'm going to hand you over to Len.

Thank you, Paul, and good afternoon, everyone.

I'll briefly review with you the results for the third quarter of fiscal 2011, which we reported earlier today.

For the quarter ended March 31, 2011, we reported revenues of $360,000, compared to $515,000 in the third quarter of last year.

Revenues for this year's third quarter consisted primarily of royalties earned on sales of our Retisert product by Bausch & Lomb.

Revenues in the prior-year's third quarter consisted primarily of a conditional note payment and reimbursed development costs pursuant to our collaboration agreement with Alimera.

Research and development expense totaled approximately $1.7 million in each of the 3-month periods ended March 2011 and 2010.

Increased personnel and pre-clinical studies costs were largely offset by the absence in the current year period of third-party costs of the BrachySil clinical program incurred in the prior year.

General and administrative expense totaled $1.8 million in the third quarter this year, compared to $1.7 million last year and primarily reflected higher stock-based compensation expense partially offset by lower professional fees.

Non-operating income was $341,000 for the quarter ended March 2011, compared to $230,000 in the prior-year quarter.

This non-cash income was predominantly attributable to the change in the valuation of our outstanding investor warrants that have exercised prices denominated in Australian dollars.

Between December 2010 and early April 2011, approximately 3.7 million of these warrants expired, leaving 205,000 warrants denominated in Australian dollars with an expiry date of July 2012.

The derivative liabilities balance of $180,000 at March 31, 2011 will continue to be subject to quarterly re-evaluation through that date.

Net loss for the third quarter of fiscal 2011 was $2.7 million, or $0.13 per share, compared to a net loss of $2.7 million, or $0.15 per share for the prior-year quarter.

The lower net loss per share was attributable to the increased number of shares outstanding due to the January 2011 issuance of 2.2 million shares in the registered direct offering.

For the 9 months ended March 2011, total revenues were $1.3 million, compared to $7.3 million for the prior-year period.

This year-over-year decrease reflects the December 2009 end date of the Company's performance period during which consideration received from the March 2008 amended collaboration agreement with Alimera was recognized as revenue, partially offset by the resumption of Retisert royalty income during fiscal 2011.

Research and development expense was $5 million for the 9 months ended March 2011 compared to $5.2 million in the prior-year period.

The combination of a $208,000 federal research grant and the absence in the current year of third-party costs of the BrachySil program in the prior-year period were partially offset by increased personnel and pre-clinical studies costs.

General and administrative expense was $5.9 million for the first 9 months of fiscal 2011, compared to $5.2 million in the comparable period of fiscal 2010, primarily as a result of increased professional fees and stock-based compensation expense.

Non-operating income of $1.1 million for the 9 months ended March 2011 compares to non-operating expense of $1.2 million for the prior-year period, predominately related to the change in fair value of derivatives discussed earlier.

Net loss for the 9 months ended March 31, 2011 was $8.5 million or $0.45 per share, compared to a net loss of $4.3 million or $0.24 per share for the prior-year period.

Moving on to our cash resources.

At March 31, 2011, we reported cash, cash equivalents, and marketable securities of $23.1 million, a net increase of $8.5 million compared to $14.6 million at December 31, 2010.

The net increase was the result of the $10.1 million of net proceeds from the registered direct offering of common shares and warrants partially offset by $1.6 million of net cash used in operating activities during the third quarter.

As Paul mentioned earlier, we continue to carefully manage our cash resources.

Excluding the $25 million milestone payment that would be due us from Alimera upon an FDA approval of Iluvien, we believe that the $23.1 million of capital resources at March 31, 2011 positions us well to continue our current and planned operations into at least calendar year 2013.

I will now turn the call back over to Paul.

Thanks, Len.

So to sum up, our cash position is solid, and we continue to manage our cash resources and our cash burn carefully.

We were very pleased with the recently released 3-year subgroup analysis of patients with chronic DME who made up over 50% of the patients in the study, as the risk-benefit ratio on these patients was more than twice as good as that seen in the full population.

Alimera has reported it plans to file this data together with the full 36 months within days of this call, and we look forward to the FDA's response.

As I've described earlier, FDA approval would trigger a $25 million milestone payment from Alimera, and the profit split.

Our product development continues to advance with new fully bioerodible systems targeting retinal degenerations, diabetic macular edema, and glaucoma.

We believe we can maintain our current and planned operations at least into calendar 2013 with our current cash resources.

So we're in a good financial position, and the rest of the year is going to be very interesting.

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

Would you please initiate the Q&A portion of the call?

Gladly, thank you.

(Operator Instructions).

Suraj Kalia, Rodman & Renshaw.

Hi, guys.

Hi, Suraj.

Regarding the subgroup analysis, my understanding is that while this was pre-planned, the cut-off for duration of DME at baseline was based more on the patients that were enrolled and the median duration [pay] for these patients enrolled.

So I know this would be a hypothetical question, but hopefully you get the gist of it, let's say the median duration was not 3 years, it was 2 years, what are we reading into these results, especially from a clinical and a pathophysiology perspective?

What is really occurring that tells us Iluvien is working in this cohort of patients with the DME for a certain duration?

I'm not sure I fully understood your lead-in to the question, but if your question is why do we think that we're seeing an effect here at 3 years -- (multiple speakers) there are 2 things that appear to be occurring.

One is that the control group who are essentially receiving laser or a large number of whom are receiving laser, the control group did particularly well in patients who have had DME for less than 3 years.

So if you just focus on the control group -- and this data was indeed presented and it's posted in the 8-K, and just clicking to that now -- the control group I believe at 3 years, you had 27.8% of patients.

And control gained 15 letters, and that's really high, much higher than other studies that we've seen with laser treatment.

Contrast that with patients in whom DME had been diagnosed for more than 3 years, and the control group there only gained 13.4 -- sorry -- 13.4% of the control group gained 15 letters.

So that's a big indication to go fit in with our original hypothesis, which was -- this level is going to be more effective in patients who had already failed laser.

But presumably, if you had had DME for greater duration, you would have more laser treatments, and consequently, the laser was less effective.

So that's one part of the answer.

Part B is, clearly, we saw an increase in efficacy also with the implant group.

The mean efficacy or the mean percentage of patients gaining vision for the full population was, as I recall, 28.9%, I believe.

That's in 36 months.

And if you look at same group of patients who have the condition for more than 3 years, that was 34%.

There was certainly a difference there, too.

Yes.

I guess just -- (multiple speakers)

The problem with this is looking at patients in whom laser is still less likely to work.

That's good color, Paul.

I guess, very simplistically speaking, the 3 year cutoff, it is more by -- and maybe I'm not using the right word -- it is serendipity based on a bell curve of patients enrolled, and the median, and all that.

3 years was just really a mathematical number.

It doesn't really have clinical significance per se.

Correct?

It was a mathematical number in the trial.

I wouldn't go as far as to say it didn't have any clinical significance.

I don't think that that's actually a true statement.

I think we're clearly saying that it does have a little significance.

Okay.

Paul, I'm not sure if I saw in Alimera's presentation or maybe I missed it, the level of off-label treatments especially Lucentis injections for the various subgroups -- (multiple speakers)

Pretty good question.

I haven't seen that data either.

So that hasn't been presented, but one would -- it's not clear.

You don't know from the outset whether patients in the DME for greater than 3 years would have had more or less laser treatments than the other.

One would you imagine that because, at least in the treatment group, many of them did rather better than the whole population.

And you would have expected they would have had fewer lasers.

How the control group fared with respect to laser and/or injections of Lucentis or whatever would be pure total speculation at this point.

So that sounds a bit -- will need to be examined more carefully.

Right.

I mean, especially considering the control group, which is DME greater than equal to 3 years plus off-label treatments to whatever extent, it would be interesting to stratify those and see how those would perform vis-a-vis in Iluvien or --

Yes, absolutely.

The difference in efficacy was quite marked, which would tend to suggest that they could potentially have received more laser treatments.

But against that, if a lot of them had already received a lot of lasers, the clinician could have easily decided that there was just no point.

Right.

If I remember -- last question, Paul.

If I remember correctly, Alimera had said by Friday, they are looking to submit the Type 2 response.

If I fast forward, we are probably looking sometime Novemberish or before that some sort of a response.

Correct?

Yes, if it goes to panel then presumably the panel meeting would occur a little bit before that.

But the formal response would be, theoretically, 6 months.

And what is the expectation of the panel at least from pSivida's perspective?

What would your probabilistic rate?

It would go to the panel?

I wouldn't want to speculate.

To be honest, I have no idea.

I've been involved in a couple of products, 1 went through a panel, the other didn't.

Ozurdex didn't go to a panel, correct?

I'm sorry?

Ozurdex did not go through a panel, correct?

No, it didn't.

And that has passed a little surprising.

Okay.

Based on our product workout.

Okay.

Guys, thanks for taking my questions.

My pleasure, Suraj.

(Operator Instructions).

Juan Sanchez, Ladenburg.

Good evening, guys.

Hi, Juan, how's it going?

Very good.

Most of my questions have been answered but what is the regulatory integration of submitting these data?

Is Alimera just submitting this data to the FDA as something nice to have or are they requesting special treatment on this subgroup of patients or because the idea, in my understanding, they really asked for this analysis.

Right?

I can't really comment on that.

I think that's for Alimera to disclose.

Thank you, Paul.

Okay.

I do apologize.

And there being no further questions, this concludes today's question-and-answer session.

I would now like to turn the call back over to Mr.

Paul Ashton for closing remarks.

Okay.

Well, thank you all for joining us.

And I look forward to an interesting quarter coming up and I'll look forward to speaking to you all in the relatively near future.

Thank you.

Ladies and gentlemen, we thank you for your participation in today's conference.

This concludes the presentation and you may now disconnect.

Have a good day.