EyePoint Pharmaceuticals Inc (EYPT) 2012 Q4 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by. And welcome to the pSivida Corporation's fourth-quarter 2012 earnings conference call. At this time, all participants are in a listen only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions).

As a reminder, today's conference may be recorded. It's now my pleasure to turn the floor over to Lori Freedman. Please go ahead.

Thank you, Huey. Good afternoon, everyone, and thank you for joining us. After the market closed today, we released our fourth-quarter and full-year financial results for fiscal 2012. A copy of the release is available in the investor section of our website at www.pSivida.com.

On the call with me today is Dr. Paul Ashton, President and Chief Executive Officer, and Len Ross, our Vice President, Finance. Before I hand the call over to Paul, I need to remind everyone that some of our prepared remarks are and answers to your questions may be forward-looking in nature. 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 impact our future results and financial condition, I refer you to our filings with the SEC, including our Quarterly Report on Form 10-Q for the quarter ended March 31, 2012.

We undertake 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, as we discuss the results of the fourth quarter of fiscal 2012. This was another excellent quarter for us. Here are some of the headlines.

First, the FDA cleared our IND for the product we are independently developing for the treatment of uveitis affecting the posterior segment, permitting us to move directly into phase 3 clinical trials. Second, our [major] scientists have continued to make progress on the commercialization of ILUVIEN for DME in the EU. Marketing authorizations have now been received in five EU countries and the commercial launch is planned for Germany, France, and the UK in 2013.

Alimera has also reported its plans to resubmit the NDA in the US.

Third, we have made good progress on Tethadur, our peptide protein delivery system. We have the execution of a funded technology evaluation agreement with a large biopharmaceutical company, our first for this technology.

Number four is, of course, cash. We ended the quarter with over $14 million in cash, and subsequently raised an additional $4.7 million in the registered direct offering.

Okay. So let's get into some of the details.

Uveitis affecting the posterior segment -- that's the back of the eye -- is a nasty disease. It affects just under 200,000 people in the US, and is one of the leading causes of vision loss, about third or fourth in the US. It's estimated there are about 30,000 cases of blindness in the US due to posterior uveitis.

Uveitis is an inflammatory autoimmune disease that can have many triggers. One can develop it in association with diseases like lupus or MS, or a variety of other conditions. Sometimes there can be a genetic component, as is the case in Behcet's disease. And in many cases, it's idiopathic.

Currently, the disease is normally treated with off label use of systemic drugs. There are two FDA-approved products to treat the disease, Retisert, filled by Bausch & Lomb under a license from us, and OZURDEX, sold by Allergan.

Unfortunately, for various reasons, neither of these products have succeeded in significantly changing the management of the disease for most patients. Uveitis continues to be managed largely by systemic steroids, and when the side effects of this treatment become too problematic, by immune modulating drugs such as methotrexate, cyclophosphamide or Humira. These of course have their own systemic problems.

Our injectable micro-inserts of posterior uveitis is the same one that's used in ILUVIEN, approved now in several European countries for DME. So, why are we confident about the use of this product in uveitis? While this micro-insert delivers fluocinolone acetonide, which is the same drug delivered by the Retisert device, which is FDA-approved for uveitis, Retisert is extremely effective, but A, must be surgically inserted and, B, has some significant side effects including increased intra-ocular pressure or IOP.

In clinical trials, over [50%] of patients developed an IOP of about 30 millimeters of mercury [and sulfites]. And over 30% of patients needed a second operation to control this IOP. This is why we believe the ILUVIEN type micro-insert will be attractive for uveitis.

It's injected during an office visit, so no need for surgery. And so far, far fewer have IOP-related side effects. In the DME phase 3 studies conducted by Alimera, fewer than 20% of patients developed an IOP of over 30 millimeters, compared with [50%] for Retisert.

And most of these (inaudible) eye drops, only 5% requiring a surgery to lower pressure compared to 30% for Retisert.

Now, one could reasonably ask, if ILUVIEN and DME got a complete response letter from the FDA, why do you think you'll do any better in uveitis? With the caveat that ILUVIEN for DME in the US is not yet over, and I'll get into that shortly, it's important to point out the drugs that are approved on the basis of the relative risk versus benefit. What may be an acceptable risk in the treatment of one disease may be unacceptable in another.

For example, the well-known side effects in many cancer drugs are acceptable for cancer, but may not be acceptable for a less serious condition. The approval of Retisert suggests to us that the FDA is willing to accept some side effects as an acceptable trade-off for an effective therapy in the treatment of this serious disease. And we're hopeful that our micro-insert will further improve the risk benefit ratio.

The FDA has cleared our IND for the micro-insert to go straight into phase 3 clinical trials in posterior uveitis. The FDA has agreed that the primary endpoints for these studies can be the recurrence of the disease at 12 months, and the FDA has agreed that we can reference much of the preclinical and clinical data, including the human safety data already supplied under the NDA for DME.

We are now completing the planning stage for these clinical trials, which will, between them, involve a total of approximately 300 patients.

The product we are developing for uveitis will be virtually the exact same product Alimera is to commercialize in Europe, with one exception. We have modified the inserter itself to allow the micro-insert to be administered via a 27-gauge needle rather than the 25-gauge used for ILUVIEN. This should make it still easier to use.

The posterior uveitis insert is our own product and isn't licensed to Alimera or anyone else.

Now, let's move to the progress Alimera is making in Europe towards commercializing ILUVIEN for DME. ILUVIEN has now received marketing authorization in Austria, France, Germany, Portugal, and the UK, and has been recommended for marketing authorization in Italy and Spain. Alimera has reported its plans to launch in Germany, UK, and France in 2013, and furthermore has announced agreement on $40 million equity financing, subject to stockholder approval and the usual closing conditions, to provide it with the necessary capital to launch in Europe.

Our agreement with Alimera entitles us to receive 20% of net profits as defined on a country by country basis.

You may ask what is the size of the potential patient population in the seven European countries where ILUVIEN has either received marketing authorization or where authorization has been recommended. Well, the International Diabetes Federation estimates there are approximately 19 million people with the disease in those countries, of whom over 1 million have DME. So it's about the same size as the US in terms of people.

So, what about the financial numbers? Alimera recently reviewed the size of the market, and its views and its revenue expectations going out to 2017 are posted on their website.

With respect to ILUVIEN in the US, Alimera reported that it met with the FDA in this last quarter in an effort to better understand the regulatory path for ILUVIEN in DME. Based on that meeting, Alimera has said it plans to file a response, the complete response letter using analyses of data from the already completed FAME studies, and focusing on the population of patients for its approval has now been granted in countries in the EU.

As a reminder, approval in the US will entitle us to a $25 million milestone payment and 20% of net profits, as I described earlier.

The products for DME and posterior uveitis both utilize our Durasert technology, as there are two FDA-approved products, Retisert and Vitrasert. We have another application of this technology, a bioerodible micro-insert for the delivery of latanoprost for the treatment of glaucoma and increased intraocular pressure.

In glaucoma -- sorry, in glaucoma treatment, one of the biggest problems is patient compliance. People simply don't take the eye drops properly, if at all. The idea behind this product is that a glaucoma patient could receive an injection of this micro-insert on a regularly scheduled office visit.

This is currently in an investigator-sponsored study and is being developed under our agreement with Pfizer. Upon successful completion of this study, our plan would be to move to a phase 2 trial. And at the end of that Pfizer has an option to pay us $20 million and assume all the development activities. There would be up to $145 million in addition milestones, obviously then triggered, and a double-digit royalty if Pfizer were to exercise.

If Pfizer doesn't exercise this option, we could take the product forward ourselves with no payments to Pfizer. I should point out Pfizer has previously paid us approximately $10 million in license fees and R&D support.

Now, aside from Durasert, we are continuing to work on the delivery of peptides and proteins, including antibodies, using Tethadur, an application of our BioSilicon technology.

I'm pleased to be able to tell you that we believe our work here continues to progress well and we've generated some data we've found very interesting in a variety of peptides and proteins. As I mentioned earlier, we've entered into a technology evaluation agreement with a large global biopharmaceutical company with respect to the possible development of a sustained release system for proteins in ophthalmology.

Proteins are very interesting in ophthalmology. Genentech Roche's Lucentis is a protein, an antibody fragment, that's injected into the eye approximately every 4 to 6 weeks for the treatment of wet, age-related macular edema -- sorry, macular degeneration, AMD. It had one of the most successful commercial launches ever, with approximately $800 million in sales in its first year.

More recently, Regeneron's EYLEA, a fusion protein, which has similar efficacy to Lucentis, achieved a similar feat in the same market. It is injected every 6 to 8 weeks. So, a longer term sustained delivery system requiring an injection every, perhaps, 4 to 6 months, should offer a very attractive treatment profile.

So, all told, we had a very good quarter. We ended the quarter with $14.6 million in cash with no debt. And we subsequently raised an additional $4.7 million via a registered direct offering of shares and warrants.

With the expiration of an exercised warrant, we now have a relatively small warrant overhang at this point -- 1.2 million warrants on a base of 23.1 million shares. This compares to 7.8 million warrants on 20.7 million shares at the start of the year.

So with that, I'll turn the call over to Len to take us through the financials. Len?

Thank you, Paul, and good afternoon, everyone. I will briefly review our fourth quarter and fiscal year 2012 results reported earlier today, starting with our financial position.

As Paul mentioned, at June 30, 2012, we had cash, cash equivalents and marketable securities of $14.6 million, a net decrease of $9.5 million compared to $24.1 million at June 30, 2011. We anticipate that these capital resources, together with the $4.7 million net proceeds of our recently completed registered direct offering, and expected royalty income from Bausch & Lomb, should enable us to fund our operations as currently planned through the end of calendar year 2013.

Alimera has indicated its intention to launch sales of ILUVIEN for DME directly in Germany, the UK, and France during calendar 2013. However, the time frame and amounts of the 20% share of net profits as defined, measured quarterly on a country by country basis, to which we would be entitled under the terms of our collaboration agreement, are uncertain.

Our ability to fund planned operations beyond then, including phase 3 trials of the posterior uveitis micro-insert, will depend on the generation and timing of net profits from Alimera's commercialization of ILUVIEN for DME in the EU, and potentially in the US, or our ability to otherwise timely secure additional capital resources.

Turning to our results for the year ended June 30, 2012, we reported total revenues of $3.5 million compared to $5 million for the same period last year. The revenue decrease was primarily due to recognition of $3.3 million of revenue in fiscal 2011 as a result of our amended Pfizer collaboration agreement, compared to $754,000 recognized in the current year. This was partially offset by $1.1 million of collaborative research and development revenue that we recognized in fiscal year 2012, as a result of the July 2011 termination by intrinsic of its field of use license.

Our royalty income from Bausch & Lomb increased slightly on a year-over-year basis.

Research and development expense totaled $7 million for the year ended June 30, 2012, compared to $6.9 million in the prior-year period, primarily attributable to increased personnel costs in the absence in the current year of a federal grant award that we received in the prior year, substantially offset by lower amortization of our intangible assets.

General and administrative expense totaled $6.9 million for the year ended 2012, compared to $8.1 million last year, the decrease primarily attributable to reduced stock-based compensation expense, including reversal of amounts resulting from performance-based option forfeitures, lower professional fees, and the absence in fiscal 2012 of cash incentive compensation, the payment of which is subject to future conditions.

Fiscal 2012 operating expenses also included the $14.8 million intangible asset impairment charge that we recorded in the second quarter.

Non-operating income was $207,000 for the year ended June 2012, compared to $1.2 million in the prior-year period. The decrease was predominantly attributable to the change in fair value of derivatives related to outstanding Australian dollar investor warrants from $170,000 at June 30, 2011, to a derivative liability balance of zero at June 30, 2012. The vast majority of these warrants expired in fiscal 2011 and the remainder have expired in July of 2012.

Net loss for the year ended June 2012, which included the intangible asset impairment write-down of $14.8 million, was $24.8 million or $1.19 per share, compared to a loss of $8.6 million, or $0.44 per share, for the prior fiscal year.

Turning to our results for the fiscal fourth quarter ended June 30, 2012, we reported revenues of $699,000 compared to $3.7 million in the fourth quarter last year. The year-over-year revenue decrease resulted primarily from the initial $3.3 million of revenue that we recognized in the fourth quarter of fiscal 2011 in connection with the amended Pfizer collaboration agreement.

Research and development expense totaled $1.4 million for the three-month period ended June 2012 compared to $1.9 million in the prior-year quarter, primarily attributable to lower amortization of intangible assets, partially offset by increased personnel expense.

General and administrative expense totaled $1.6 million for the three-month period ended June 2012, compared to $2.2 million in the prior year quarter, primarily attributable to reduced levels of stock-based compensation and professional fees, and the absence in fiscal 2012 of cash-based -- cash incentive compensation expense. I will now turn the call back over to Paul.

Great. Thanks, Len. So to sum up, it's been an excellent quarter. The IND for our own micro-insert for posterior uveitis has been cleared by the FDA. ILUVIEN has received marketing authorization in five EU countries, and our licensee, Alimera Sciences, has set plans to launch in France, Germany, and the UK in 2013.

They have reported agreement on a $40 million equity financing, contingent on shareholder approval, that will provide them with the cash to launch. After having met with the FDA, Alimera reported plans to resubmit the NDA for ILUVIEN.

The clinical trial for our bioerodible glaucoma product is ongoing and we are continuing to work on developing Tethadur, our peptide protein delivery system.

And last, but certainly not least, we ended the quarter with $14.6 million in cash, and in August raised an additional $4.7 million to supplement our cash position.

At this point, we'd be happy to take your questions. Operator, would you please initiate the Q&A portion of the call?

(Operator Instructions). Presenters, I am showing no questioners on the phone queue. I'd like to turn the program back over to you for any additional remarks.

Okay. Well, thank you all for listening. I can only presume that we did an excellent job of the update. So, thank you very much for your attention and I look forward to giving you a further update in our next quarter. Thanks very much.

Thank you, presenters. Again, ladies and gentlemen, this does conclude today's conference. Thank you for your participation and have a wonderful day. Attendees may disconnect at this time.