EyePoint Pharmaceuticals Inc (EYPT) 2015 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the pSivida third quarter 2015 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, this conference call is being recorded.

I would now like to turn the conference over to your host, Ms. Lori Freedman, Vice President of Corporate Affairs. Ma'am, please go ahead.

Thank you, Amanda. Good morning, everyone, and thank you for joining us. Before the market opened today, we released our third-quarter financial results for FY15. 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 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 facts 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 condition, I refer you to our filings with the SEC including our quarterly report on form 10Q for the quarter ended September 30th, 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'd like to turn the call over to Paul.

Great. Thank you, Lori, and good morning, everyone, as we discuss the results of our FY15 third quarter.

This was another really good quarter for us. ILUVIEN, which we licensed to Alimera Sciences, was launched in the U.S. And very importantly, we reached agreement with the FDA on a clear regulatory path for our own product, Medidur, for posterior uveitis.

So let's get into the details. We believe ILUVIEN is an important treatment alternative for patients with DME who are typically managed with either laser therapy or repeated intraocular injections of the anti-VEGF drugs Eylea, Lucentis, and off-label Avastin. These injections often as treatments as every month and laser therapy only staves off the progression of the disease for short periods.

By contrast, ILUVIEN provides three years of sustained treatment with a single injection. We're optimistic that ILUVIEN will be a significant alternative for DME patients.

As you know, Alimera obtained FDA approval for ILUVIEN at the end of the September 2014, so patients with DME who have previously undergone a course of corticosteroid treatment without experiencing a clinically significant rise in intraocular pressure. Now, this is a broader label than was approved in Europe, where ILUVIEN now has marketing authorization in 17 EU countries for the treatment of vision impairment associated with chronic DME considered insufficiently responsive to existing therapies.

ILUVIEN was launched in Portugal in January and is already sold in Germany and the UK. In the UK where (inaudible) reimbursements by the National Health Service have been in place for awhile, we're beginning to see a nice uptick in sales.

ILUVIEN was launched by Alimera in the U.S. in early March and is -- actually in February, and is now widely available to an estimated over 500,000 patients with clinically significant DME.

So ILUVIEN is now launched in the U.S. and is joining the other anti-VEGFs and Ozurdex competing in the billion dollar DME market, and we're very optimistic that it will provide us with significant revenues in the future.

For pSivida, now the importance of ILUVIEN is twofold. Firstly, of course, financial. To date, we've received over $55 million in license fees and milestones, et cetera, with a promise of significantly more to come from our [next] profit split.

Secondly, and perhaps more importantly is strategic. There's now an approved product space in our platform technology that we know can deliver drugs to the retina for years after single injection.

The many other serious diseases of the back of the eye, such as posterior uveitis, wet age-related macular degeneration, and, of course, the even larger dry age-related macular degeneration, for which sustained delivery could be extremely valuable.

There are many potential drugs for these diseases, but delivery's a problem. Getting the drugs in the right concentration to their target in the eye on a sustained basis without causing damage elsewhere, that's the key. We now have an FDA-approved technology that might solve this problem.

Posterior uveitis is one of these big diseases. It's often treated with systemic steroids which have serious side effects. It affects about 175,000 people in the U.S., and despite best-available therapies, results in blindness in about 30,000. It's the third-leading cause of blindness in the developed countries.

We're very optimistic that Medidur, our phase III product for posterior uveitis can be an effective treatment for this terrible disease.

Medidur uses the same micro insert that comprises ILUVIEN for DME - same design, drug, polymer, and release rate.

Over the past few months, we've had a series of discussions with the FDA to nail down its requirements for NDA submission of Medidur. And I'm pleased to be able to tell you we have an agreed, clear, regulatory path that could enable us to file the NDA in the first half of 2017, depending, of course, on the data. The FDA agreed that a 12-month primary endpoint from the ongoing trial, together with only a 6-month primary endpoint from a second trial and reference to the completed ILUVIEN phase III data in DME, that will be sufficient to support filing the NDA.

So it's great to have clarity and it's wonderful to have a shorter duration second trial. But what does this do to our timeline and budget? As you know, we planned on a single phase III trial, and, on that basis, we expected to file in later calendar Q4 2016 or Q1 2017.

Well, with the new trial requirements, we now expect to file just a little bit later, but in the first half of CY17.

As part of our contingency planning, this second trial of up to 150 patients in India had already been set up, ready to go, pending the outcome of the discussions with the FDA, and this has now been initiated.

As an aside, we'll also be able to use the data from these two studies to support filings in countries beyond the U.S.

Let's move on to money. With respect to budget being conservative, we've budgeted for the second phase III trial anyway, pending confirmation of the regulatory strategy. And as a result, the second trial does not change our liquidity projections.

Our cash resources taken into 2017 without any future profit share on sales of ILUVIEN.

Now, as you may recall, we've also developed a new inserter for Medidur, which uses a smaller gauge needle. We'll be conducting a small utilization study for this inserter, and we'll also file data from this study as part of the NDA. This utilization study is very small and has a very short endpoint. We're only looking at the efficacy of the inserter itself, so this will be in no way [great] limiting to the NDA filing.

So bottom line, we have a clear regulatory strategy and are targeting a submission in the first half of 2017. And, we have the most important thing, clarity. We've talked to the FDA a lot.

This quarter, we completed enrollment of a first, longer follow-up phase III trial and we expect top-line data in the second quarter 2016. With our first trial fully enrolled, we expect shortly to report the results of a preliminary masked safety assessment comparing at three months the incidents of elevated intraocular pressure in study eye, two-thirds of which received the Medidur, with fellow eye, none of which received Medidur.

Moderate elevation of IOP in the first three months of steroid use can be an early indication for more serious, subsequent increases. So we'll be monitoring how study eyes develop increased IOP compared with fellow eyes. This will be an important analysis.

Moving on, our pre-clinical programs are continuing to advance with a focus on back-of-the-eye diseases. We're screening [through] candidates for wet age-related macular degeneration and dry age-related macular degeneration. Most of these are re-purposed cancer drugs that either are now or will shortly be coming off patent.

We'd love to develop these products independently using the technology used in Medidur and ILUVIEN.

We continue to work on programs in glaucoma, which we will plan to partner, since it's outside of our immediate focus of back-of-the-eye disease, and we're working on the delivery of proteins for retinal disease and systemic application using our Tethadur technology.

Tethadur continues to show enormous promise, but it's taking time to perfect. We're continuing to work out what I hope will be the last of the bugs and to complete some of the pre-clinical work necessary to take this into the clinic. Now, I'll have more details on all of these programs later this year.

Our work with Hospital for Special Surgery for a slow-release product for osteoarthritis is continuing to progress. We're working with them on preparing an IND for this produce and anticipate this being filed with the FDA over the summer.

Going forward, we plan to continue to build out pSivida as a retinal drug delivery company developing our own products in this rapidly growing segment. At the same time, we look to partner and out-license technologies in other areas where we can benefit from the experience and resources of others and broaden our reach.

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

Thank you, Paul, and good morning, everyone. I will briefly review our third-quarter FY15 results reported earlier today, starting with our financial position.

As Paul noted, at March 31st, 2015, we had cash, cash equivalents and marketable securities of $31.7 million, which represented net cash usage of $4 million during the third quarter.

We continue to believe these capital resources are sufficient to fund our current and planned operations into CY17, including our two Medidur trials, without taking into account any potential future net profit share amounts that we may earn on sales of ILUVIEN by Alimera.

As Paul also noted earlier, previous liquidity projections had already contemplated conducting two clinical trials for Medidur so that our current projections were not changed by the recent FDA guidance.

Turning now to our third quarter FY15 results. Revenues totaled $328,000 for the quarter ended March 31st, 2015, compared to $2 million for last-year's quarter. The decrease was primarily attributable to the prior-year recognition of $1.5 million of contingent consideration under a completed feasibility study agreement and an approximately $100,000 decrease in Retisert royalty income.

Research and development expense totaled $3.3 million in this year's third quarter, an increase of $1.1 million or 47%, compared to $2.3 million in the prior-year period. This increase was primarily attributable to higher CRO costs for the clinical development of Medidur.

General and administrative expense increased by $95,000 or 5%, to $2 million for the three months ended March 31, 2015, from $1.9 million in the prior-year quarter, primarily due to higher stock-based compensation expense.

Income tax benefit was $44,000 for the three months ended March 31st, 2015, compared to $31,000 in the prior-year period, and consisted of foreign research and development tax credits in both periods.

Net loss for the quarter ended March 31st, 2015, was $5 million or $0.17 per share, compared to a net loss of $2.2 million or $0.08 per share for the prior-year quarter.

For the nine months ended March 31st, 2015, total revenues were $26.2 million, compared to $3.2 million for the same period of FY 14. The increase was predominantly due to revenue recognition of the $25 million ILUVIEN FDA approval milestone that we earned in the first quarter of FY15, partially offset by lower research and development revenue from feasibility study agreements and Retisert royalties.

Research and development increased by $1.6 million or 22%, to $8.9 million for the FY15 year-to-date period, compared to $7.3 million for the same period in the prior year. The increase was primarily attributable to a $1.3 million increase in CRO costs for the clinical development of Medidur, as well as modestly higher levels of pre-clinical research and personnel-related costs.

General and administrative increased by $177,000 or 3%, to $5.6 million for the nine months ended March 2015, from $5.5 million in the prior-year period, primarily attributable to higher stock-based compensation, partially offset by lower facility costs.

Income tax expense totaled $144,000 for the nine months ended March 2015, compared to an income tax benefit of $87,000 for the FY14 year-to-date period.

The current-year period reflected $263,000 of federal alternative minimum tax expense attributable to CY14 U.S. taxable income. Both periods included income tax benefits arising from the foreign research and development tax credits.

Net income for the nine months ended March 2015, was $11.5 million or $0.38 per diluted share, compared to a net loss of $9.4 million or $0.35 per share for the prior-year period.

I will now turn the call back over to Paul.

Great. Thanks, Len. To sum up, it was a really good quarter for us. Key points are, number one, ILUVIEN launched in the U.S., and sales beginning to pick up in the UK where reimbursement's been established.

Two, we agreed with the FDA on a clearly regulatory path for Medidur in posterior uveitis, which should allow us to file the NDA in the first half of 2017, pending results. This plan calls for 12-months data from our current phase III trial together with a 6-month data from a second, already budgeted, phase III study.

Number three, we completed enrollment of the first phase III trial, with data [readout] anticipated in Q2 2016, and initiated the second study.

Four, we continue to progress on our pre-clinical programs, focusing particularly on wet and dry AMD. Our Tethadur programs are continuing to progress. And with our partner, Hospital for Special Surgery, we're nearing IND filing for osteoarthritis. That's a development stage product.

Five, we believe we have enough cash to fund our planned operations into 2017, including the Medidur trials, without any cash from ILUVIEN net profit.

So at this point, we would be happy to take your questions. Amanda, could you please initiate the Q&A portion of the call?

Yes, sir. (Operator Instructions) Suraj Kalia from Northland Securities. Please check your mute button. Matt Kaplan of Ladenburg.

Couple questions. Congrats. I guess first, congrats on the progress during the quarter and the clarity from the FDA with respect to next steps needed for Medidur.

With respect to ILUVIEN, can you talk a little bit about pricing and reimbursement status that has been established so far by Alimera?

I really would defer to Alimera for that discussion. But thanks very much for the congratulations on the uveitis clarity (inaudible).

And I guess maybe focusing on Medidur. With respect to the additional, the second phase III study, can you give us some more detail on what the endpoint, primary endpoint of that study will be and your taking on the timing?

Yes. So the primary endpoint will be recurrence of uveitis at six months after enrollment in the study.

Okay.

After the first study, it was a 12-month primary endpoint. So the primary endpoint in both studies is the same, i.e., recurrence of disease. But the first one is 12-months and the second one is only 6 months, which, obviously, shortens the whole thing.

Right. And is that study going to be randomized, placebo-controlled, et cetera?

Yes, all the things. It's a randomized, controlled study. Yes.

Great. And is it only going to be carried out in India or other countries as well?

Just India.

Okay, great. Good. And with respect to the guidance from the FDA, anything -- the components of what you need to complete, obviously, the first phase III study, the second phase III study, is there anything else that they gave you guidance on in terms of that's necessary for filing?

Well, it's important that we're able to reference the ILUVIEN phase III study, because that takes out a lot of additional work we would otherwise have to do.

We also plan to do the utilization study with our new inserter, because it's going to be very important to have a new inserter here. And going down to 27 gauge is a significant clinical advantage. So we had discussions with them about that inserter study.

Nice thing about that one is we're only looking at the efficacy of the inserter itself as opposed to a long-term follow-up where we would have to look at the efficacy of the implant. So that's a very short study.

Great. And I guess shifting a little bit to your pipeline. Can you give us a little bit more detail in terms of your plans for wet and dry AMD and potential timing on those programs in terms of moving into the clinic?

Yes. We'd hop to get into the clinic sometime in CY16.

Okay.

As you know, there's really been a surge in interest in wet and dry AMD. And we're beginning to see some, shall I say unfortunately results, where people have tried topical drops to deliver drugs to the back of the eye.

As you know, my personal view is topical drops really don't work for back-of-the-eye diseases. It's very clear that you need a means to get the drug into the back of the eye, which is why, of course, people are injecting it there right now with Lucentis and Eylea. The trick is to keep it there so you don't have to have injections every month. And we've got the only technology that is proven to be able to do that.

Very good. And any other detail you can give us on your Tethadur and where that is in (multiple speakers).

Yes. So we're continuing to move that in pre-clinical models. It's a new technology. So there's some bugs that appear as you move through things. We are continuing to iron those out. I think we're pretty much where we need to be. We need to do a couple of pre-clinical tests to make sure that that is indeed the case and the bugs have finally been worked out.

Okay. So these are pre-clinical studies that are going to allow an IND filing?

That's the hope, yes.

And is that potentially a 2016 timeline for an IND filing or --?

Yes, 2016 is a reasonable guess. I'd liked to have it in 2015, but I don't think that's going to work.

All right. Well, thank you very much for taking the questions.

Thank you. (Operator Instructions) Ben Shim from MLV.

Congrats on the ILUVIEN launch. I got a question for you regarding osteoarthritis. Is the phase I program based into your guidance, your liquidity guidance for 2017 as well?

It will not affect the liquidity guidance, so yes.

Okay, great. With respect to Medidur, will there be any clinical expense following the completion of the phase III trials?

Well, there's always the additional follow-ups that are necessary and the regulatory folks will give you whatever, all the guidance they need for post-approval surveillance and all this kind of thing.

Okay. So monitoring of patients, okay.

Yes.

I know it's a little bit early. But are you at a point where you'll be able to true-up the joint commercialization costs for ILUVIEN with your partner?

Sorry, I don't understand the question.

Have the joint commercialization costs that I guess will be coming out of your profit share, has that final number been settled on or reviewed or included?

Oh, you're talking about the pre-commercialization --

Yes.

-- [profitability] cost?

Yes. Sorry.

Well, those are, obviously, ongoing. I believe -- I would presume, because we haven't gone over the numbers yet from Alimera, I'd say with respect to Q1, I would presume, that given the launch (inaudible) of the product in this quarter in the U.S., that the U.S. will not be a profitable quarter this time around.

Okay. Thank you very much.

Thank you. Jesse Greenfield from Greenfield Investments.

Can you give us a little more color on this arthritis program with the Hospital for Special Surgery?

Yes.

And what do you think is the potential size of the market?

Well, the basic premise is this, the steroids are often injected into joints these days in patients with osteoarthritis and they left a period of time, and then people frequently get re-injections. And the amount of drugs that's injected is pretty high because in order to have the thing last for a while, you get way more than is therapeutically necessary because it gets cleared out of the joint very quickly. So you try to keep in a therapeutic amount for longer by putting in a super-therapeutic amount to begin with.

Now, this is very analogous to what has been going on in the eye for years also. People inject [transfilanetheranide] into the eye for macular edema, and it lasts for -- you inject four milligrams and it lasts for three or four months.

Now with the ILUVIEN device, we can -- or rather with the insert that comprises the ILUVIEN, [they're] injecting 0.2 of a milligram, approximately, and it lasts for three years. So you can have a far lower dose and have it last far longer.

So that's the basic approach of the Hospital for Special Surgery folks is that with that technology to provide a lower overall dose of steroid, but have it last a very long time, indeed.

So that's the approach. I think it's one of those things that theoretically you know will work, then it's just a case of showing that it works.

In terms of how many people would be potentially treated and what the market size is, to be honest, it's a little bit early for that, because until you have the efficacy and any side effects that we don't anticipate, but we need to look for, until you know the efficacy and side effects, it's kind of difficult to do your market research because you wouldn't know how to describe the product to a potential patient or, indeed, physician.

So it's obviously potentially a very large market.

Okay. Thank you very much.

Thank you. And at this time, I would like to turn the call back to management for any closing remarks.

Okay. Well, thank you all for joining us today, and I'll look forward to speaking with you again next quarter. In the meantime, call us if you have any additional questions. Please feel free to contact us. Thanks again.

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