EyePoint Pharmaceuticals Inc (EYPT) 2016 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the pSivida Corporation Q1 2016 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 be given 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, Mr. Lori Freedman, VP Corporate Affairs.

Thank you, Sylvie.

Good afternoon, everyone, and thank you for joining us. Earlier today we released our first quarter financial results for fiscal 2016. A copy of the release is available in the investors 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 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 condition, I refer you to our filings with the SEC, including our annual report on Form 10-K for the year ended June 30, 2015. 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 afternoon, everyone, as we discuss the results of our fiscal 2016 first quarter. This was a very exciting quarter for us. Here are the highlights.

Clinical development continues to progress well for Medidur, our injectable micro-insert designed to provide sustained treatment of posterior uveitis for three years and we expect to report top-line results of our first Phase III trial before the end of the year. In osteoarthritis we're collaborating with Hospital for Special Surgery. Tethadur is continuing to generate good preclinical data, and we're also seeing some promising preclinical data using our Durasert technology to deliver a class of small-molecule anti-cancer drugs to treat age-related macular degeneration.

We ended the quarter with $24 million in cash and no debt, so we're in good financial shape.

So let's get into the details. As you know, pSivida has traditionally out-licensed its products and, in return, receive consideration, including up-front payments, development funding, milestones and royalties. This has been a good model for us. We have pulled in approximately $85 million in the last eight years and this (inaudible) funding has largely funded our company. Now our strategy is to transition to a specialty pharma company by developing our own products while continuing to enter into collaborations where appropriate.

Medidur is our first owned product. So the recent regulatory developments and clinical trial developments are extremely important to us. We're currently conducting two Phase III trials in patients with posterior uveitis, which is one of the leading causes of blindness and affects approximately 175,000 people in the US alone. In both trials the worst affected eyes of patients have been randomized on a two-to-one basis to receive either a Medidur device or a sham procedure and this is (inaudible), of course, to both the patient and the physician.

The primary endpoint for efficacy for both trails is the percentage of patients who have a recurrence of disease within the first six months. We also look at visual acuity changes and safety measures, such as changes in intraocular pressure and cataract formation and things of that type.

The first trial has completed enrollment in March 2015 with the last six-month follow up visit in September. We expect to have top-line efficacy and safety data by the end of 2015. Enrollment for the second study is progressing as planned with an expected completion in mid-calendar 2016. With favorable results we expect to file for approval in the US in the first half of 2017. We've had multiple meetings with the FDA, so we have a good idea of what they want to see for an approval.

We're also working on securing approval in the EU. We recently had a very productive meeting with MHRA regarding requirements for European approval and we look forward to sharing this information when we get the official minutes.

Our Medidur delivers a drug that we know works for this disease. It's the same drug that's in a product we developed earlier for uveitis, the FDA-approved Retisert. However, Medidur, which is much easier to use than Retisert because it's injected rather than surgically implanted, Medidur delivers a lower and more consistent dose of the drug.

Top-line results for the Phase II study of high- and low-dose Medidur supports our expectations, showing a statistically significant reduction in recurrence in uveitis and a statistically significant improvement in visual acuity in the eye treated with Medidur. We also expect that Medidur will have a far better side effect profile than Retisert, similar to, or perhaps better than, that of a related product, Iluvien, approved by the FDA for diabetic macular edema.

Our analyses of [map] data from the first Phase III trial showed only a 5% difference at three-months' follow-up in the number of eyes with elevated IOP, that's intraocular pressure, over 20 millimeters; 5% difference between study eyes, two-thirds of which received Medidur; and non-study eyes, none of which received Medidur. So this is very encouraging for safety, but we must be sure when the safety results from the first trial are available at the end of the year.

Moving on to our work on osteoarthritis. This is an example of us applying our approved Durasert technology, which can deliver drugs for months to years, to an area outside of ophthalmology. Osteoarthritis is obviously a very common disease. It often affects a single joint. But current treatment options are pretty poor and the disease can progress to require total joint replacement. Last year there were over 700,000 knee replacement surgeries performed in the US. More people had knee replacements in the US last year than developed wet age-related macular degeneration and diabetic macular edema combined, and those are the two most common causes of blindness in the US.

We're collaborating with Hospital for Special Surgery, the leading specialty hospital for orthopedics and rheumatology, to develop an implant for the treatment of pain associated with severe knee osteoarthritis. The product we're developing is comprised of a screw with an embedded Durasert device that's surgically placed into the knee. The implant is designed to deliver a corticosteroid directly into the joint on a sustained basis to provide long-term pain relief, delaying or potentially eliminating the knee replacement surgery. Following promising preclinical data showing maintenance of sustained drug levels in the knew, the principal investigator for HSS filed an investigational new drug application, that's an IND, and is awaiting information from the FDA as to additional requirements it may have for initiating a clinical trial.

Moving on, our progress with the protein delivery via Tethadur technology is continuing. We've optimized the formulations to increase its loading capacity and have achieved up to six months relief in in vitro. Our preclinical safety work also looks good. The studies are underway to confirm this (inaudible).

I'd like to address why this is seemingly taking so long. Developing Tethadur to deliver proteins is a real scientific discovery. We have to keep experimenting to achieve delivery at the appropriate amount of proteins over the appropriate time without problematic side effects and maintaining the integrity of the protein itself. Changes to these different variables [are indeed] changes in the different proteins affect all the other variables, so it's a complicate task. And we're working to get [off-cell] delivery for different proteins.

We're also making good progress applying Durasert technology to age-related macular degeneration. Here we're seeking to apply and extend our proven technology to deliver existing anti-cancer small molecules to the eye for AMD. The currently approved drugs for wet AMD, that is Lucentis and Eylea, they both target the VEGF molecule and there's now growing evidence that another molecule, PDGF, may also be important.

Tyrosine kinase inhibitors are a class of drugs that fight cancer, often by inhibiting PDGF and VEGF, so one would expect they'd be effective in treating AMD. Unfortunately, these drugs have significant side effects when given systemically to cancer and they can't currently be used to treat AMD because of the relatively high dose that would need to be given to get enough drug into the eye. Durasert implants would allow over 10,000 times less drug to be delivered than systemic delivery would require. Because the drug would be delivered directly to the eye, we expect to achieve high concentrations in the eye without any detectible systemic exposure. Now, it's early days, but the early data indicate we can indeed achieve sustained relief for six months and the implants are well tolerated in preclinical models.

Now turning Iluvien. We licensed this three-year injectable micro-insert for the treatment of diabetic macular edema to Alimera Sciences. Iluvien was approved in the US in February of this year and has received approval in all 17 countries in the EU where approval was sought. It's now marketed by Alimera in the US, UK, Germany and Portugal. We believe Iluvien is an important treatment alternative for patients with DME. These patients who are usually treated with laser therapy or repeated intraocular injections of anti-VEGF, Eylea and Lucentis, and off-label Avastin.

The financial impact of Iluvien has been very positive for us as we have received over $55 million to date from Alimera, primarily in license fees, contingent [load] payments and milestones. We're entitled to 20% of the net profits from Alimera sales of Iluvien on a quarter-by-quarter, country-by-country basis and are optimistic that going forward our share of the profits will become significant.

Now I'll ask Len to take us through the financials. Len?

Thank you, Paul, and good afternoon, everyone. I will briefly review our first-quarter fiscal 2016 results reported earlier today, starting with our financial position.

As Paul noted, at September 30, 2015 we had cash, cash equivalents and marketable securities of $24 million, a net decrease of $4.5 million since June 30, 2015.

The major cash outflows during the quarter included $1.8 million of costs related to the ongoing Medidur Phase III clinical trials and $1.7 million of personnel costs which included fiscal 2015 annual incentive compensation. Cash inflows included $353,000 of Retisert royalties and $157,000 representing our contractual share of non-royalty consideration from an Iluvien sublicense agreement. We believe our capital resources at September 30 are sufficient to fund our current and planned operations into early calendar 2017. This estimate includes the expected costs of our Medidur clinical program, but excludes any potential receipts of net profits or sublicense consideration from the commercialize of Iluvien by Alimera.

Turning now to our first-quarter fiscal 2016 results. Revenues totaled $466,000 for the quarter compared to $25.3 million for last year's quarter, which included recognition of a $25 million Iluvien FDA approval milestone.

Research and development totaled $3.5 million in the current quarter, an increase of approximately $700,000 or 25%, compared to $2.8 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 $234,000, or 13%, to $2 million for the three months ended September 30, 2015 from $1.7 million in the prior-year quarter, primarily due to higher professional fees stock-based compensation.

Income tax benefit of $41,000 for the three months ended September 2015 compares to an income tax expense of $226,000 in the prior-year period. The prior-year period included a $260,000 federal alternative minimum tax accrual based on US taxable income for the 2014 tax year as a result of the $25 million milestone. In addition, both periods included foreign resource and development tax credits.

Net loss for the quarter ended September 2015 was $4.9 million, or $0.17 per share, compared to net income of $20.6 million, or $0.67 per diluted share, for the prior-year quarter.

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, one, our Medidur program for posterior uveitis continues to advance with top-line data from our first Phase III just around the corner. The second Phase III trial is on schedule to complete enrollment in mid-2016 and an NDA expected to filed in the first half of 2017. We have also had very productive discussions with the MHLA on requirements for approval in Europe.

Two, in osteoarthritis the principal investigator of our collaboration with Hospital for Special Surgery has filed an IND and is awaiting further input from the FDA.

Three, the Tethadur programs are continuing to progress well.

Four, preclinical work using Durasert to deliver Tyrosine kinase inhibitors, which is a class of anti-cancer drug, to treat AMD is very promising.

Five and six together, we look forward to profit sharing from Iluvien. But, we believe we have enough cash to fund our planned operations into 2017, including our Medidur trials, without any cash from Iluvien net profits.

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

Yes, sir. (Operator instructions). Matt Kaplan, Ladenburg Thalmann.

Hey, Paul. Can you hear me?

Yes, I can. Thank you, Matt. How are you?

Doing well, thank you. And so a couple questions. Congrats on getting the buy-in from the FDA on the six-month endpoint for now I guess both Phase III studies for Medidur. What do you think the MHRA will require for Medidur approval in Europe?

Well, I have a very good idea, but I'd rather wait until we get the official minutes of the meeting we've just had just in case my very good idea is based on incorrect recollections.

Okay, fair enough.

And those will be soon.

Okay. Good, good. That was my follow up. And in terms of HSS, I guess they have the IND filed. When do you expect them to be able to initiate a study and what do you think that study could look like?

Well, let's see what the FDA come back with for any additional requirements. The study that they filed was for a Phase I and II study (inaudible)--.

Okay.

And so we're anticipating requiring a knee replacement surgery -- anyway.

Okay. So patients -- this would be prior to a knee replacement and being able to take a look at what they're able to gain from a--.

Yes. For any studies -- and we've had this in ophthalmology always. It's really good to take a group of patients where there's an element of risk/benefit analysis. So an example would be -- the first steroid implant that we did many years ago was a patient population, patients with a rare disease called ocular histoplasmosis, which is characterized by very aggressive blood vessels both in and through the retina. And it was treated by essentially completely detaching the retina surgically and trying to scrap out the blood vessels and then trying to get the retina to stay back on afterwards and it wasn't a very successful procedure. So for us to put a steroid implant into patients with that condition wasn't such an unreasonable thing.

So, yes, generally one would -- for this type of thing it's good to try to pick a fairly severely-affected patient population.

Okay. It makes sense. And then, in terms of the work that you're doing in dry MD, that seems obviously a tremendous unmet need. What are I guess kind of next steps in terms of hopefully getting something to an IND? Would it be sometime next year that--?

Well, we're looking at both wet and dry AMD. Standard issues, which are to generate sufficient preclinical data, to demonstrate efficacy and to show safety with a long-lasting impact you need about six months or more safety data. And again, it's going to be to some degree a function of what kind of patient population you choose to run the first studies in.

Okay, good. And then I guess with Tethadur, has your confidence changed at all with respect to being able to ultimately deliver the antibodies as you had kind of anticipated when you started this program?

No, it hasn't. I'm actually as confident or more because we have I think more data now which is supporting (inaudible). It's just taking a very long time to generate it. As always, with a whole new technology there's always a series of missteps that you go through when you're developing it.

Sure.

And I hope that we are towards the end of those at this point. I mean we'll see what the preclinical data shows.

Great, great. Well, thanks for taking my questions and congrats on the progress.

Okay. Thanks, Matt.

Suraj Kalia, Northland Security.

Good afternoon, everyone.

Hi, Suraj. How are you?

Good, sir. Yourself?

Very good, thank you.

So Paul -- and my apologies if this has already been mentioned. Just struggling between two calls. Paul, remind us again, for the second Phase III study, a baseline (inaudible) characteristics in uveitis. I presume they were the same, right?

Yes.

Okay. Paul, so in terms of the osteoarthritis product with HSS, assuming the IND is filed over the -- I don't know if you gave a timeline. I guess I'm curious. Do we have the contours of what kind of a study or investigation would be needed?

Well, the IND that's being filed is for I believe a six-patient study in patients with existing disease and patients who are anticipating a total joint replacement. So these are fairly severely affected patients.

So would the -- I guess what I'm trying to understand is are you looking at pain reduction? Are you looking at certain other clinical outcomes? Are you looking at alleviation from let's say a total knee replacement.

The primary endpoint for the study will be pain reduction, but at this stage it's very -- extremely appropriate to measure as many other things as you can.

Got it. Okay. And Paul -- and my apologies if this is an unfair question, but just given the trajectory of Iluvien so far, how would you characterize what cylinders -- what valves are firing properly and what are not? Thank you for taking my questions.

I can't really comment on Iluvien because it's being sold by our partner Alimera Sciences. So they would be in a better place to answer those questions, I believe.

I am showing--.

Do we have any more questions?

I am showing no further questions at this time. I would like to turn the conference back to Paul Ashton.

Great, than thank you very much, indeed. Thank you for joining us today and I look forward to speaking with you again next quarter, possibly sooner when we have the results of our Phase III trial in uveitis. In the meantime, if you have any additional questions, please feel free to contact us. Thank you.

Ladies and gentlemen, this concludes today's' conference. Thank you for your participation and have a wonderful day. You may all disconnect.

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