EyePoint Pharmaceuticals Inc (EYPT) 2015 Q1 法說會逐字稿

(Operator Instructions) As a reminder, today's conference is being recorded. I would now like to introduce your host for today's conference, Lori Freedman, Vice President of Corporate Affairs. You may begin.

Thank you, Nicole. Good morning, everyone, and thank you for joining us. After the market close today, we released our first quarter financial results for fiscal 2015. 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, Vice President of Finance.

Before I hand the call over to Paul, I need to remind everyone that some of our prepared remarks 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 risk factors that could impact our future results and financial conditions, I refer you to our filings with the SEC, including our annual report on form 10K for the fiscal year ended June 30, 2013. 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 our fiscal 2015 first quarter.

This is a great quarter for us. Our ILUVIEN product was finally approved by the FDA for the treatments of diabetic macular edemas. We're in $25 million milestone payment resulting from the approval and we continue to make good progress on the development of Medidur and posterior uveitis and our preclinical development program.

So I'll go into some of the details behind the headlines before handing the call over to Len who will take you through the financial.

First, I'd like to talk about ILUVIEN. On September 26, ILUVIEN was approved by the FDA for patients with DME, diabetic macular edema, who have undergone a cost of treatment with corticosteroids without experiencing an increase in intraocular pressure. This is a broad label that was approved in Europe.

Now typically not more than 30% of patients experience significantly elevated IFP [celluar] treatments. This indicated around 70% of patient with clinically significant DME would be candidates for ILUVIEN.

We're very optimistic that doctors who use ILUVIEN to treat the substantial group of the DME population as ILUVIEN has a number of advantages in comparison to the standard of care the anti-VEGF treatments.

First the treatment of a majority of DME patients is not optimized with anti-VEGFs so ILUVIEN offers a valuable alternative and secondly ILUVIEN provides three years of prescription of single injection. This compares to regular intravitreal injections which are often done monthly of anti-VEGFs will be attending issues of non-compliance and infection.

Our non-compliance is particularly at risk for patients who had diabetes for a while because of the high rates of core morbidities that can make travels very difficult. So we're optimistic that this product will do well in the US and provide us with significantly revenues from our net profits in the future.

Beyond the expectation of future revenues, the median cash we received is very significant to us. With the $25 million milestone payment we now have cash in hand from the planned operations more than two years that without any future cash from ILUVIEN are registered. This puts us in a very solid position to continue to pursue our ongoing product development programs. I would like to turn to those development programs. Medidur, our lead development product is in a Phase III clinical trial. We believe the US approval of ILUVIEN should help in reducing the time and risk associated with seeking US approval for Medidur which uses the same micro-insert that's used in ILUVIEN. That is the same drug, the same polymers, the same dose, and the same design.

We have the reference sites to the data of the ILUVIEN Phase III trials and the FDA has previously confirmed we can reference this data in support of the NDA we planned for Medidur for posterior uveitis. That is a big saving of time and money. As a result, we expect to see FDA approval on the basis of a single Phase III trial. The FDA has submitted a similar strategy for another uveitis product in the past.

Because we redesign and first to use to inject Medidur so it could use a smaller 27 gauge needle, more commonly used standard intravitreal injections. We will also need to study to provide data on the new insert data. We have requested a meeting with the FDA to confirm our strategy. Obviously, if we're able to get approval in the US with only one Phase III trial and the insert study it will reduce our development cost and the time needed for approval.

We remain optimistic that Medidur will be efficacious and safe. It delivers fluocinolone acetonide to same off patent corticosteroid delivered by Retisert which is our FDA approved implant for posterior uveitis. So we know that the drug is effective in the treatment of posterior uveitis. Although Medidur delivers a low dose we expect to see a similar efficacy for Medidur as for Retisert. However due to the lower dose and based on the clinical trial results for ILUVIEN and DME we expect a better side effect profile for Medidur than we saw for Retisert. In fact we expect side effects of Medidur and Uveitis will be comparable too as potentially of few of that dosing in the ILUVIEN trial. Early in from data from an investigative responsive study, a Phase I-II study reported last year we're consistent with this hypothesis. Those data show that none of the eyes receiving Medidur had a recurrence of disease and increases in IFP were limited.

Based on the current rate of enrollment, we expect the Phase II trial for Medidur to be complete sometime in the first half of calendar 2015. As the trial is at primary endpoint to recurring disease in 12 months we expect topline data in 2016. As you should also note that we have recently had another US patent issue which extends patents coverage on ILUVIEN in the US out to August 2027 so we're in no promise with patent conflicts on that front.

A quick word about posterior uveitis. It's a very unpleasant disease characterized by chronic inflammation of the uvea, which is one of the inner layers of the back of the eye, and it affects about 175,000 people in the US, blinding about 30,000.

Moving to our preclinical programs, these are doing well, we're studying applications of both our platform technologies Tethadur and Durasert. All three of our approved products as well as Medidur is instant generations of our proprietary Durasert technology. This is a proven system for long term delivery of drugs. We're also working on Tethadur our platform technology designed to develop peptides and proteins including antibody. And we're also looking at using Durasert and Tethadur in combination to deliver biologics on a more extended basis.

Preclinical work is continuing we're making significant progress with several anti-product candidate. Our focus is on additional diseases including wet and dry AMD and glaucoma and also osteoarthritis. I look forward to updating you as we progress on these areas. We're also continuing to work with a global biopharmaceutical company using Tethadur and ophthalmology which was progressing well.

Finally, we turn to our financial results. We ended the quarter with $14.3 million in cash with no debt and as of the end of the quarter we received an additional $25 million funding of planned operations for the next two years or over the next two years.

I'll now turn the call over to Len to take you through the financials. Len?

Thank you, Paul and good morning, everyone. I will briefly review our first quarter and fiscal 2015 results reported earlier today starting with our financial position. As Paul noted, at September 30, 2014, we had cash, cash equivalents and marketable securities of $14.3 million, which was further enhanced in October by the receipt of the $25 million ILUVIEN FDA approval milestone, a great source of nondilutive financing for pSivida. We believe these capital resources are sufficient to fund our current and planned operations into calendar year 2017. This does not include any net profits that we may earn on sales of ILUVIEN. The timing and amounts of which we are unable to predict or other cash receipts under existing collaboration agreements, including Retisert loyalty.

Cash used in operating activities for the quarter was $4 million, an increase of 200,000 over the prior year quarter. We expect our cash use from operations to be variable quarter to quarter, particularly with respect to the timing and amount of payments under our Medidur clinical development program, as well as the impact of payments received from collaboration partners, such as the $25 million FDA milestone this we received in October.

Turning now to our first quarter fiscal 2015 results. Revenues totaled $25.3 million for the quarter ended September 30, 2014, compared to $597,000 for last year's quarter. This increase predominantly reflects revenue recognition up to $25 million ILUVIEN FDA approval milestone net of an approximate $200,000 decrease in Retisert loyalty income.

Research and development total $2.8 million in the current quarter, an increase of $280,000 or 11% compared to $2.5 million in the prior year period. This increase was primarily attributable to higher contract research organization costs for clinical development of Medidur, as well as Tethadur preclinical research.

General and administrative expense decreased by $77,000 or 4% to $1.7 million for the three months ended September 2014 from $1.8 million in the prior year quarter primarily due to lower professional fees.

Income tax expense of $226,000 for the three months ended September 30, 2014, compares to a income tax benefit of $30,000 in the prior year period.

The current period expense primarily resulted from a $260,000 federal alternative minimum tax accrual based on projected US taxable income for our tax year ending December 31, 2014, which includes the $25 million-milestone. In addition, tax benefit amounts in both periods consistented of foreign research and development tax credits. Net income for the quarter ended September 2014 was $20.6 million or $0.67 per diluted share, compared to a net loss of $3.7 million or $0.14 per share for the prior year quarter.

I will now turn the call back over to Paul.

Thanks, Len. So to sum up, it was an excellent quarter for us. Key points are, one, ILUVIEN for DME was approved by the FDA with a broad label positioning us well to the US launch.

Two, $25 million-mile stone payment we received and has on tax position funding our plan operations into calendar 2017.

Three, enrollment of our Phase III trial for Medidur for the treatment of posterior uveitis continued on pace and we plan to complete it in the first half of 2015.

Four, we believe ILUVIEN's approval improves the prospect of our regulatory strategy for seeking FDA approval for Medidur based on a single Phase III trial with additional data on the new inserter.

Five, patent protection for Medidur and ILUVIEN now extends to August 2027 and six continued progress in our preclinical development program using Durasert and Tethadur and the work with the global biopharmaceutical company.

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

(Operator Instructions) Matt Kaplan, Ladenburg Thalmann.

Hey, Paul. Good morning.

Good morning, Matt. How are you?

Doing well. Thanks. How about yourself?

Very well.

Good good. Couple of questions, just to follow-up on, obviously congrats on the ILUVIEN approval. A follow-up there in terms of the label. Now the label says prior steroid use, is it any particular steroid or is it just a broad?

Just broad.

Just broad?

Yes.

Yes, very good. And then can you give us any details? Obviously, this is more kind of Alimera's front but any details on the commercial plans and status of preparations to the launch and when we should potentially start to see some revenues and royalties following to you guys?

Well I would actually suggest you have a listen Alimera's call yesterday where they gave fairly detailed description of their plan for rolling of the product.

Okay, fair enough. Just to, I guess, shift gears a little bit in terms of something under your control , the Medidur Phase III program. Can you give us a little bit more detail on the Phase III design and particular end points you're looking for and little bit more detail in that design?

Yes sure. It's a very similar trial design, so the design which was used for the Retisert product. Patients in the study would have a history of the current posterior uveitis, they enter the study and the truth about randomization to Medidur versus sham procedure which is opening the eye with a (inaudible). Patients so then followed for three years but the primary endpoint is a number of recurrences of recurrence at or within the first 12 month period of time.

Okay.

So with Retisert not quite the same but with Retisert the recurrence rate in the fellow eye was approximately 50%. And that seems to be consistent with other trials that we've seen published such as -- I don't know if you're familiar with look Biosciences' meta trial with cicloferon and -- or cicloferon product and they are controlled with (inaudible) out of (inaudible).

Over 12 month period?

Yes. So we saw reduction in that.

And you're powering to see what sort of reduction?

Studies will probably show -- that sample size would show approximately a 20% difference --

Okay.

Between treatments in control. Now the Retisert studies were actually quite specular. Treatments eyes had a high percent recurrence rate. So it's 5 versus 50, so they were overwhelmingly statistically significant.

And just curiously in term of the definition of recurrence?

Recurrence is measured by a two-step increase in vitrase.

Okay and no visual acuity changes or -- ?

Those are all secondary endpoints so it's quality endpoints.

That's it that's -- Vitrase drives the endpoint?

Yes, or else the patient have to -- happen to be bailed out in which case the -- if the physician decides of any to -- the uveitis is as such that they need to be treated with something else.

Some sort of rescue.

Yes. So that would be -- you would fail but if you have a recurrent disease or else you're bailed out.

And the secondary as you said you're looking at visual acuity and other endpoints as well?

Yes.

Great. And in terms of getting into the data that you need to supply to the FDA, it appears as though --what you said, it looks like you're likely going to have to just do one Phase III trial and be able to leverage the ILUVIEN safety database. What type of data do you need for the insert?

For the insert itself?

Yes, so you said you also had to provide them with insert data --

Yes.

Or the device -- the application.

So we will plan to have a meeting with the FDA to confirm what they're going to need to that.

Okay.

Typically those studies however would be relatively short term, X number of patients are injected and the physician would report any problems they had with the inserter. So it's not a one or three primary endpoint study it's just did the inserter work and did it deliver the insert into the eye? So those are much shorter term.

And you can incorporate that into your Phase III? It's a separate study altogether?

Well at this time it would be bit tricky because you don't want to do anything that would cloud the data analysis of your Phase III.

Got it. Got it.

So from an abundance of caution, it's better to do as a separate study at this point.

Okay. And obviously the rate [limiting stop] probably for this program is the Phase III data.

Yes. Depending on the follow up. Yes.

So this can work in between?

Yes.

Can you talk a little bit about the IP that you mentioned for the applicators for dose Medidur and ILUVIEN, what is the IP that you were able to get?

We've most recently had a patent issue that is on the Durasert device and that covers both Medidur and ILUVIEN. So when once designing a patent strategy you can have a nest of patents and you start up with some very broad patents that cover pretty much anything that you can think of and then you try to get additional more finely tuned patents that are providing greater coverage for the product you're planning to sell and this is just an example of one of those patents just being issued. We're going to continue to seek additional patent coverage for these products.

And just going back to Medidur, when do you plan to meet with the FDA to consolidate your understanding of what's necessary?

When they tell us. We have requested a meeting, so we will see when we can have that meeting.

Okay, okay. And then I guess for your preclinical pipeline, any color on the timing of potential INDs (multiple speakers) -- ?

Yes for that. We're very excited the progress we're making with several products at this point but research is never over until it's over.

Sure. And when we think about the focus on wet and dry AMD and glaucoma, osteoarthritis, any particular products or compounds that you're contemplating combining with your technology?

It's kind of competitive information at this point I'm afraid.

Okay, fair enough. Well, great. Congrats on the progress and thanks for taking the question.

Great. Thank you.

Suraj Kalia, Northland Securities.

Good morning, everyone.

Good morning, Suraj.

Pardon the background noise while I'm running towards the bus and asking questions at the same time so my apologies.

Hey, first and foremost congrats, it's been a three-year wait so you guys deserve it, it's being a long time coming. Paul, let me start off with what color can you give us about OZURDEX. How do you see it shaping up in the field?

Well you've to realize you're asking an extremely bias person, number one. So for people who are listening who don't know what OZURDEX is. OZURDEX is a biodegradable implant that releases steroid dexamethasone for a relatively short period of time. Opinions are divided on how long that might be. OZURDEX has recently approved for DME. I believe that the side effect profile is somewhat similar to ILUVIEN. It's difficult to compare efficacy because the study populations were quite different. But I believe that it is not as efficacious as ILUVIEN, no doubt I will begin from Allergan disagreeing with that system sincerely but I believe that it seems to be less efficacious than ILUVIEN and has shorter term duration. So you would be looking at more frequent injection.

Now it could be very useful because it's a relatively short time delivery [we're saying]. It could be useful if someone want to try a patient out with an OZURDEX device to see if they have a elevation of IFP and if not then they would be candidates for ILUVIEN. You can probably do the same thing with an injection of (inaudible) although that is probably had a longer duration, again the one we will have to check with our friends at Allergan for relative durations (inaudible) betamethasone.

Okay. Paul, maybe I missed the numbers in your prepared commentary, I know you said enrollment for posterior uveitis Medidur trial would be complete, I believe second half of calendar 2015, have you given the specific enrollment numbers?

Okay. We haven't given the enrollment numbers and also I said the first half of 2015.

Fair enough. Yes. Paul, remind us with your licensee, Alimera, I guess there is a change in control, your 20% of net profit still flows through despite a change in control. I presume there is a stipulation to that effect?

Yes. That's correct.

Yes. I'll hand you over to Lori Freedman, who -- Lori negotiated a lot of that deal.

So, yes Suraj that's correct.

If Lori has negotiated it's got to be rock solid. Okay. So Paul, in terms of the 25 million you obviously received, is it safe for us to assume that could potentially help you all sped up some of the new product development in the pipeline? And I'm very curious on your antibody and your peptide programs, you know are you all thinking about going it alone or [trying] and at the same time, dose this infusion of cash help you -- push on the accelerator?

Yes. And no it's a planned push on the accelerator, we were anticipating in getting the money. So absolutely a lot of things we wouldn't have been able to do without it. So we're looking at programs in wet AMD, dry AMD and glaucoma. Those are the three areas that could be very interesting and it's certainly going to help develop those products.

And Paul, the game plan is still for Medidur to go to market, pSivida itself will take Medidur to market assuming approval everything in uveitis?

Yes at the moment, yes.

Okay, and finally Paul, when can we expect a new partnerships if at all in some of the new programs -- in programs in works (multiple speakers) -- ?

Yes.

If Alimera is the only thing, probably see Pfizer and Bausch and Lomb and all the new programs are going to be direct or we could potentially get something with the likes of Genentech, Regeneron, what might have you.

Yes it's also going to depend on the program, it's always very difficult predict when a new license will come in because as we have discovered over the 20 odd years, one can think on very, very close to getting the licensing build on and then someone quits or gets a new job in the other company and you are back to square one. So I wouldn't want to make any predictions on timing for that.

Okay, okay. Fair enough. Guys, congrats again. Thank you for taking my questions.

Okay. Thank you.

(Operator Instructions). And I'm showing no further questions at this time.

Great. Thank you all very much and I look forward to speaking with you again next quarter. As always in the meantime should anyone have any questions please feel free to contact us. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may now disconnect. Have a great day everyone.