EyePoint Pharmaceuticals Inc (EYPT) 2015 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to pSivida Corporation's Q2 2015 earnings conference call. (Operator Instructions) As a reminder, this conference is being recorded.

Now I would like to introduce your host for today's program, Lori Freedman. You have the floor.

Thank you, Andrew. Good afternoon, everyone, and thank you for joining us. After the market closed today, we released our second-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, 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 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2014. 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 would like to turn the call over to Paul.

Great. Thank you, Lori. Welcome, everyone, as we discuss the results of our fiscal 2015 second quarter.

This was another good quarter for us. Our ILUVIEN product moved towards commercialization in the US and we expect it to be launched in early March. The enrollment of our Uveitis Phase 3 clinical trial is coming to a close as we expect it to be complete around the end of March. Our preclinical development programs are continuing to advance. Now before I hand over to Len for the financial details, I will give a bit more color on the headlines.

We're really looking forward to the [earth] launch of ILUVIEN in early March. As you know, ILUVIEN was approved by the FDA at the end of September for patients with DME, diabetic macular edema, who have previously undergone a course of corticosteroid treatment without experiencing a clinically significant rise in intraocular pressure. Now this is a broader label then was approved in Europe, where ILUVIEN now has marketing authorization in 15 countries and is approved for the treatment of vision impairment associated with chronic DME considered insufficiently responsive to existing therapies.

ILUVIEN is awaiting marketing authorization in two final EU countries and is already sold in Germany and the UK and was launched in Portugal in January.

ILUVIEN is an important treatment alternative for DME patients. Many of these patients are currently treated with the anti-VEGF drugs, Eylea or Lucentis, or with off-label Avastin. These treatments require intraocular injections, sometimes as frequently as every month. These injections are expensive and obviously inconvenient and they subject the patient to the risk of intraocular infection. And for many patients, they don't actually provide optimal management of the disease. Regeneron, in fact, recently revised down its guidance for Eylea, citing slow uptake in DME.

Regular injections of anti-VEGF just don't provide the same pop in vision in DME as they do in wet AMD. Now by contrast, ILUVIEN offers important treatment benefits.

It's administered by injection only once every three years and provides constant sustained treatment over that period. In addition, ILUVIEN's clinical trials showed that ILUVIEN can actually reverse vision loss in many DME patients, even in people who have had the disease and vision loss for a considerable period of time.

ILUVIEN will soon join the anti-VEGFs, Lucentis, Eylea, and Avastin, and [Oseodex] in the US as the key products competing in the billion-dollar DME market. I am optimistic that ILUVIEN will provide us with significant revenues from our net profit split in the future.

Now with ILUVIEN now ready for launch in the US, the strategic importance of this product for us is as a source of funding and know-how for other programs. We received a $25 million milestone payment this quarter which we recognized last quarter. This was due on the approval of ILUVIEN. As a result, we ended this second quarter with $35.7 million in cash, which we believe will fund our current and planned operations into 2017, even without any cash from our net profit participation from ILUVIEN.

So, moving on to the development of our own products, Medidur, our Phase 3 product for posterior uveitis, is proceeding well. As of yesterday, we'd enrolled 104 of the planned 120 patients in our Phase 3 clinical trial. We expect to complete enrollment around the end of March. That's this year. We will do a mass safety analysis when enrollment is complete. That will be (inaudible).

Medidur uses the same injectable sustained-release micro-insert as ILUVIEN. Same drug, same release rate, same [posterior], it's the same thing. So we will be looking for early safety signals, particularly with regards to elevated intraocular pressure.

Thus far, things are looking good and we continue to expect that the side effects of Medidur in posterior uveitis will likely be fewer than and certainly no more than those seen in the ILUVIEN DME trials. The primary endpoint of the Medidur trial is recurrence of disease at 12 months so we will have topline data around the end of Q2 of calendar 2016.

Because Medidur and ILUVIEN use the same micro-insert, we expect to be able to use the ILUVIEN NDA to greatly accelerate Medidur's development. The FDA has agreed that we can reference much of the data, including clinical safety data from the completed ILUVIEN trials, which we are permitted to do under our ILUVIEN agreement. We also plan to seek US approval for Medidur based on our (technical difficulty) [single ongoing] trial while (technical difficulty) trial. Together with supplemental -- sorry, supplementary data on the proprietary inserter that we will use.

We have a meeting with the FDA scheduled for next month to discuss this regulated strategy and hopefully confirm our plans.

Posterior uveitis affects about 175,000 people in the US and, despite best available therapies, has resulted in blindness in 30,000. We are optimistic that Medidur can be an effective treatment for this terrible disease.

Now our preclinical programs are continuing to advance very well. While we are primarily focused on the back of the eye disease, we are very excited about the potential to treat osteoarthritis. This is another nasty and very common disease that is currently often treated by repeated intra-articular -- into the joint -- steroid injections much like repeated intravitreal injections in ophthalmology. We've been working with New York's Hospital for Special Surgery as the number one ranked orthopedic hospital in the US and we been working with them to develop an implant based on our Durasert technology to provide long-term sustained delivery of a steroid to treat osteoarthritis.

Preliminary animal data could be very encouraging and the lessons learned from our Thalomid products have been helpful for us in our research. The ability to reference the clinical data from the ILUVIEN NDA should also be a benefit as we move this product forward. I hope to provide more specifics on this, on our next call.

We continue to make progress in our research and the development of inserts to treat dry age-related macular degeneration. A quick word about this condition.

The retina market is currently dominated by Lucentis and Eylea, with global sales in over $6 billion between them. Most of the sales of these drugs comes from the treatment of so-called Wet AMD. Dry AMD is eight times more common than Wet AMD and at the moment, there are no drugs approved for the treatment of this disease. The best therapy currently are vitamin supplements. Our recent animal studies are showing that repurposed existing drugs can be highly effective in treating dry AMD. We believe that these drugs can be delivered via our micro-inserts and we plan to initiate a preclinical study shortly.

The programs are outlined -- our potential applications of our Durasert technology platform and that's most suitable for small drug molecules. We are also continuing our preclinical evaluations of our Tethadur platform for peptides, proteins, and antibiotics. We continue to be excited about Tethadur and are making considerable progress. However, the preclinical studies have taken longer than we originally anticipated as we worked to perfect the technology. We expect to announce more data in the first half of this year.

Our focus going forward will continue to be in ophthalmology, predominantly on the retina segment. This is the area of our expertise and we believe has great potential of growth with relatively few entrenched competitors and the potential for blockbuster products. We will continue to look at opportunistic products such as sustained-release steroids for osteoarthritis and we look to partner or outlicense certain opportunities that are outside our scope or strategic focus.

I will now turn the call over to Len to take you through the financials. Len.

Thank you, Paul, and good afternoon, everyone. I will briefly review our second-quarter fiscal 2015 results reported earlier today, starting with our financial position.

As Paul noted at December 31, 2014, we had cash, cash equivalents, and marketable securities of $35.7 million, an increase of $21.4 million from September 30, 2014, primarily reflecting receipt of the $25 million ILUVIEN FDA milestone payment in October 2014.

We continue to believe these capital resources are sufficient to fund our current and planned operations into calendar year 2017 without taking into account any future net profit share that we may earn on sales of ILUVIEN by Alimera. As noted previously, we expect [cashews] from operations to be variable quarter to quarter, particularly with respect to the timing and amount of payments for our Medidur clinical development program.

Turning now to our second-quarter fiscal 2015 results. Revenues totaled $521,000 for the quarter ended December 2014 compared to $592,000 for last year's quarter. The decrease reflected lower revenues from feasibility study agreements, net of a modest increase in Retisert royalty income. Research and development totaled $2.8 million in the current quarter, an increase of $273,000 or 11% compared to $2.5 million in the prior year period. This increase was primarily attributable to higher contract research organization costs for the clinical development of Medidur and also higher personnel-related costs.

General and administrative expense increased by $159,000 or 9% to $1.9 million for the three months ended December 2014 from $1.7 million in the prior year quarter, primarily due to higher professional fees and stock-based compensation. Income tax benefit of $38,000 for the three months ended December 2014, compared to an income tax benefit of $26,000 in the prior year period, both consisting of foreign research and development tax credits.

Our net loss for the quarter ended December 31, 2014 was $4.1 million or $0.14 per share compared to a net loss of $3.5 million or $0.13 per share for the prior year quarter. For the six months ended December 2014, total revenues were $25.8 million compared to $1.2 million for the same period of fiscal 2014 and was predominantly due to the revenue recognition of the previously mentioned ILUVIEN FDA milestone in the first quarter of fiscal 2015.

Research and development increased by $553,000 to $5.6 million for the fiscal 2015 year-to-date period compared to $5 million for the same period in the prior year. The increase was primarily attributable to higher contract research organization costs for the clinical development of Medidur as well as higher Tethadur preclinical research and personnel-related costs. General and administrative increased by $82,000 to $3.6 million for the six months ended December 2014 from $3.5 million in the prior year period primarily attributable to higher stock-based compensation, partially offset by lower professional fees and facilities costs.

Income tax expense totaled $188,000 for the six months ended December 2014 which compared to an income tax benefit of $57,000 for the fiscal 2014 year to date period, primarily due to the $260,000 federal alternative minimum tax that was expensed in the fiscal 2015 first quarter. In addition, tax benefit amounts in both periods included foreign research and development tax credits. Our net income for the six months ended December 2014 was $16.5 million or $0.54 per diluted share compared to a net loss of $7.2 million or $0.27 per share for the prior year period. I will now turn the call back over to Paul.

Great. Thanks, Len. So to sum up, it was a really good quarter. Key points are number one, ILUVIEN all set to launch in the US in March with a broad label. Two, we're nearing completion of enrollment of our Phase 3 trial in posterior uveitis and anticipate full enrollments around the end of March. Three, with our partner, Hospital for Special Surgery, we've made significant progress in an additional product for osteoarthritis that's a steroid implant. Four, we continue to make progress in our preclinical development programs using Durasert and Tethadur. Five, cash. We have enough cash to fund planned operations into 2017 without any cash coming in from ILUVIEN net profits.

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

(Operator Instructions) Suraj Kalia, Northland Securities.

So Paul, my apologies, I jumped a few minutes late on the call. Did you give some color on the outlook for ILUVIEN in DME from a commercial perspective?

Well, obviously it's one of four products are approved for DME. That's Eylea, Lucentis, Osteodex and Iluvien. Alimera, who is the partner -- or licensee here who will be actually selling the product estimated that there is around 270,000 odd potential cases that they would be targeting, so we will see what penetration rate they get. I believe the price Alimera has announced is around $8,500.

So relatively small penetration into that pool patients will be a pretty significant sales number.

Right. And Paul, do you have any rough numbers in terms of how many are either nonresponsive or insufficiently responsive? If you are just trying to have a first cut at low hanging fruit, how would you characterize those numbers for Eylea, for Lucentis, the whole gamut right now for patients if we use insufficiently responsive as a bogey?

Well, I would point out that the approval isn't for insufficient response.

Correct, correct.

If you're going to use that, you would have to look at the clinical trials and you see that 50% of patients who were receiving monthly injections of Lucentis did not have a great response, so it's probably 50% of the total. And that's -- when I said that there's about 270,000 patients, that is that 50% odd number.

Fair enough, great. Paul, correct me if I'm wrong, this is the first time you all have mentioned anything about osteoarthritis of the knee. Is that -- did I miss it in the past or this is the first time you all have talked about it?

This the first time we talked about it.

Perfect. So Paul, I can see the appeal for localized non-systemic drug delivery. I think it's a very intriguing opportunity you all are pursuing. I guess the question I have is can you frame the regulatory pathway, the opportunity you see whether you are going to go it alone or partner with Stryker or Zimmer because all of these, depending on how you answer, this is a much, much, much bigger opportunity at least we see, and to a certain extent I can see the appeal of where you are going and why you are trying this. Any color will be great.

Yes, so when the technical retail is clear, obviously we can make very small implants that can release steroids for a very long period of time. Osteoarthritis of the knee is a common disease that is frequently treated with localized injections of steroids that really don't last very long and consequently are somewhat less than effective.

So it was a pretty straight -- on the face, at least it would be a very straightforward thing to combine our drug delivery implant. We have a steroid that's already being used and off we go.

So this product would likely be approved as a drug and go through that channel of the FDA. With respect to how we've progressed, I would like to see some efficacy data in humans and based on what we see there, then we can make a decision as to how to move forward.

Now obviously, this is outside our area of clinical expertise, which would tend to suggest that we would be looking to a licensing deal potentially. At this point, all of those thoughts are bit premature.

So -- and forgive me for harping on this, Paul, let me ask the question a little differently. So there was a problem for which a solution was sought. I presume that the Hospital for Special Surgery -- there were some discussions that were initiated, and I'm curious, are you just looking at the steroids or are you also looking at other agents like hydronic acid and whatnot? Because they are pretty -- six-month injections are being used.

I'm just curious, are you looking for sort of a carpet indication with multiple agents or it will be on a case-by-case basis?

Well to be sure, I think that problems with orthopedics, there are many potential applications for sustained delivery product there. Osteoarthritis is obviously a huge one and steroids are the proverbial low hanging fruit. But there are truly many others. Bone infections are just awful and they are inordinately difficult to treat with antibiotics. You have to -- the pharmacokinetics of getting an antibiotic into the infection site -- in the bone, and keeping it there long enough to have any efficacy is just really difficult.

And in many ways, it's analogous to ophthalmology where the problem is being not so much coming out with new drugs, similar to finding a way to get those drugs to the target site, and keeping them there long enough. So the technology that we've developed in ophthalmology, I think, lends itself very well to a host of other indications.

Interesting. And Paul, finally, just in terms of your capital expenditure for the uveitis trial should be coming down -- correct me if I'm wrong, it should almost come down to nil, but then you are going to step it up on Dry AMD and potentially on osteoarthritic (technical difficulty) agent, fair enough?

Not quite. The clinical trial costs for uveitis will run through a considerable period of time. You are correct in that you pay most of the upfront when you enroll patients, but these patients will -- while we have a 12-month primary endpoint, we will continue to monitor the patients for three years, provide additional data, etc.

Okay.

So we would love to be able to file with one-year efficacy data but it's a three-year implant, so we will need to collect the additional data on the uveitis patients.

Does it still hold that the FDA will look at the one-year data and potentially to give you all the green light assuming everything holds up in conjunction with the same study data?

That is my expectation. If I -- if we go back to our second product that we had approved which was the Retisert device, that was also a three-year implant. It was actually approved with a label for 30 months as I recall.

There, the primary endpoint was recurrence of disease at 34 weeks and we provided the FDA with that primary endpoint and additional follow-up data. And eventually got the label of 13 months. So patients were followed after their primary endpoint.

Okay.

(multiple speakers) that point if I may, Suraj. So there is certainly precedent at the agency and we have precedence for having a long-term implant approved with a relatively short term primary endpoint as long as you have additional data to support safety out in the longer term, in this case for Medidur. We will, of course, be using the three-year DME date for ILUVIEN to help support it.

Well, also at this time you all are trying to control your own destiny with all the docket submissions. I'm sure that is also a significant factor playing in this, got it. Paul, I guess those are all my questions for now. Thank you very much.

Thank you, Suraj.

Matt Kaplan, Ladenburg Thalmann.

Just a follow-up on Medidur. With the -- with you nearing completion of enrollment in the study in the safety look on a blinded basis there, what should we expect to see or look for in that safety look and how will you be announcing it?

We will do the analysis of the percentage of patients who had an increase in intraocular pressure, and the study arm versus the [fellow line]. Two thirds of the patients in the study arm will have received an implant, so if the implant is causing a big increase in IP, you would see an imbalance between those two groups.

And in your prepared remarks, you said that you expected to see something less than or not more than what you've seen with Iluvien in --? Okay.

(multiple speakers) the same analysis for the Iluvien and DME study and do a comparison.

And what was the percentage that you saw?

I would have to get back to you on that.

Great. And when -- so you will complete enrollment at the end of the quarter, end of March, or sometime around them. When should we expect you to be able to announce the results there?

I would anticipate within a month of the enrollment completion.

Okay. Very good. And with -- just shifting gears a little bit to your preclinical programs with -- in dry AMD, can you give us a little bit of some more color in terms of the timing potentially to announce some preclinical data in that area?

With regard to timing, it's a little difficult to do that when you are at very early preclinical stages simply because if I put out a day like three months from now and it's four months, everyone will be upset and think something horrible has gone wrong. So I would rather not put out-of-date to be honest.

Sure, okay, fair enough. And then with the --

I will say, however, that I really optimistic about the Dry AMD program for what it's worth.

And maybe a broader question in terms of timing -- a little bit more in terms of timing of potential movement into the clinic rather than preclinical data?

That's 2016. That's currently 2016 in that.

All right. And with respect to the Tethadur program, can you give us a little bit of an update in terms of the timing and how that's moving forward with (multiple speakers) you looking at?

Yes, we are doing additional safety studies. I expect to get information on those within the next three months.

Okay. Very good. And then, osteoarthritis, congratulations on the -- working with Hospitals for Special Surgery. What could be a potential timeline for that program as well?

Well, we've done some very encouraging preclinical work. I would hope that, within the next three months, we should be able to file for an IND for a Phase 1-2 clinical trial.

And would Hospital for Special Surgery be helping you to fund that or --?

Yes, we will get -- that's getting into some level of detail that we would rather not get into on this call.

Fair enough. Well, thank you for the questions and congrats on the progress.

Arlinda Lee, MLV.

Hi. It's Dan Schenk calling in for Arlinda. How are you, Paul?

Very well, thanks. How about yourself?

Good, good. Most of my questions have been answered. I just wanted to clarify one thing. Did I hear correctly that the Dry AMD is going to be in calendar year 2016 or is that still going to be a 2015 initiation?

For the human trials, probably 2016.

2016, okay. Great. I know it's a little bit early to get into the scope of this but will it be more or less sort of similar to Medidur in terms of number of patients enrolled, etc.?

Initially, one would do a Phase 1-2 clinical trial.

Okay.

You need to have some -- purpose of the Phase 1-2 trial would be one, primarily safety of course, but also to get some idea of the clinical efficacy so that one would be able to adequately power a Phase 3 study.

Okay, great. Thank you very much.

(Operator Instructions) Guy Dietrich, Dietrich Capital.

Are there any licensing or milestone payments that you expect to receive any time this year?

Well, it's still early in the year, so it's -- we don't expect to receive anymore milestone or licensing payments from Iluvien, but we are in discussions with people on a variety of other things.

Okay. And do you have any color on the Iluvien sales in Europe at all?

No, I do not. Alimera will no doubt be releasing their sales numbers on their next call.

And you just said that you are exceptionally enthusiastic about the Dry AMD work that you're doing. Could you expand on that a little bit?

Well, yes, sure. The preclinical data that is being generated with some of these drugs is extremely encouraging. The drugs in question are relatively old drugs or at least repurposed drugs. So we already know a great deal about the safety profiles and things.

So, to some degree, it's a question of can we get them into an implant and the answer to that is almost certainly yes. And will a sustained delivery version of those agents work in humans as well as the poster child of systemic delivery of some of these drugs has worked in different animal models?

So yes, we are very optimistic. There will be a long path to be sure, but it's such an attractive market -- such an appalling unmet medical need as well. And there is really very little out there.

Okay, thank you.

(Operator Instructions) Larry Smith, Smith on Stocks.

Paul, do you expect to receive any revenues from ILUVIEN in Europe this year and if so, what quarter might that fall in?

We received some revenues from Iluvien -- Len, I ask you to comment a bit.

(multiple speakers) total amount of revenues for one quarter but --

We are not expecting any significant revenues in the order of the milestone payment to be sure.

Can you say whether those revenues came from Germany or the UK or from both?

I would rather not. I apologize.

Okay. In regard to Osteodex, what is your estimate of the time between administrations in clinical practice?

I'm sorry, the time between the administration in clinical practice? I don't --

In clinical practice, how often do you -- how many times a year do you think Osteodex will be --

Yes, that's a difficult one, isn't it? Because the -- I don't know what it is in UVI -- in DME, because the clinical trial data indicated that you certainly get an effect, but it would appear to wear off in DME certainly in about three to four months. In vein occlusion, and again, just saying this from memory, when [Allegan] looked at the time to -- they looked at the improvement in vision of [sham], which was no treatment versus Osteodex, then as I recall, there was simply no difference at six months and statistical significance of being lost at about three to four months. So you certainly see a waning of the fact beyond two to three months.

Okay. You have any kind of read on how well the Osteodex launch is going in DME?

I heard rumors that they are doing about $200 million year in sales but it's kind of a rumor.

$200 million?

That's the rumor and I --

In DME?

That's just in Osteodex. It's all bundled together. It's kind of hard to pry out. I suggest you give Octavius a call and find what the real numbers are.

Yes, okay, I will. Okay. And Regeneron actually lowered their numbers from their original projections for Eylea and DME. Does that have any implications for the launch of Iluvien?

Well, it probably does and in that it's confirmation that the -- clearly third-party confirmation that as we've been saying for quite a while, that the anti-VEGFs simply are not as -- doesn't give you as dramatic and effect as in DME as we do in Wet AMD. When you use those in Wet AMD, you see an effect really quick and DME, it tends to be longer, you've got to give people several injections. Is it three, is it four before you start to see anything.

So it just doesn't seem to be as dramatic a drug which is unfortunate obviously, but I guess the flipside of that is that it's presumably good for Iluvien.

Okay, thank you.

Thank you. That's all the time that we have for questions today so I would like to turn the call back over to the speakers for closing remarks.

Great, well, thank you all very much for joining us today. I look forward to speaking with you again next quarter. As always in the meantime, should you have any additional questions, feel free to give us a call. Thank you.

Ladies and gentlemen, thank you again for your participation in today's conference. This now concludes the program and you may all disconnect your telephone lines. Everyone, have a great day.