EyePoint Pharmaceuticals Inc (EYPT) 2016 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the pSivida second-quarter 2016 earnings conference call.

(Operator Instructions)

As a reminder this conference is being recorded.

I would now like to introduce your host for today's conference, Miss Lori Freedman, Vice President of Corporate Affairs.

Miss Freedman, you may begin.

Earlier this afternoon we released our second quarter financial results for FY16.

A copy of this release is available in the investor section of our website at www.pSivida.com.

On the call with me today are 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 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 those anticipated, estimated or projected in the forward-looking statements.

For more details, discussion of risk factors that could impact our future results and financial conditions, I refer you to our filings to 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.

Thank you, Lori.

And good afternoon, everyone, as we discuss the results of our FY16 second quarter.

This was a really great quarter for us.

The principle highlight was, of course, the truly extraordinary top line results from our first Phase III clinical trial for Medidur for posterior uveitis.

These great results have paved the way for an expected acceleration of our application for EU marketing approval to later in 2016 by using the results from only the one Phase III clinical trial.

And finally, coming off of these favorable results, we completed an underwritten stock-offering in the first week of January increasing our expected cash run rate into the fourth quarter of calendar 2017, and enhancing our investor base with well-regarded institutional investors.

Now, let's get into the details.

The top line results for our first Phase III trial for Medidur for posterior uveitis were truly spectacular.

This trial was 129 patients, multi-center, randomized, double-mass study in which 87 eyes were treated with Medidur and 42 control eyes received a sham injection.

The trial met it's primary end point for efficacy, which was the prevention of recurrence of disease at six months with extraordinarily high statistical significance, a p-value of less than 0.00000001.

Yes, that is seven zeros after the decimal point.

Only 18.4% of Medidur treated eyes had a recurrence of disease in the first six months, compared to 70.6% control eyes.

In exploratory analyses of the data, we also saw very favorable effects on visual acuity through six months follow-up.

All Medidur-treated eyes showed improved visual acuity by gaining 15 or more letters, from base-line at month six compared to controls.

That was statistically significant, and fewer Medidur-treated eyes experienced a loss of 15 or more letters from base-line at any time through six months.

That was also statistically significant.

In another exploratory analysis, we also saw favorable effects of Medidur treatments on cessation of systemic therapy.

Of the 65 patients receiving systemic therapy at baseline, fewer of the Medidur treated patients were still receiving it at six months compared to control patients.

That was also statistically significant.

The safety results of the trial were also very positive.

In terms of side effects, we saw a smaller increased risk of elevation of intraocular pressure, that's IOP, than we'd anticipated, and less than that which was seen in the Phase III trials of our licensed product ILUVIEN in DME.

Through six months, 10.9% more Medidur-treated eyes had an increase in eye pressure above 21 millimeters of mercury compared to controls.

The actual numbers were 27.6 versus 16.7.

Now in addition, of the 64 study eyes with a natural lens at baseline, 9.5% of the Medidur-treated eyes compared to 4.8% of controls required surgery through six months.

Now, because elevated IP is a side effect of steroid treatment, we'd expected to see the incidents of IOP elevation in Medidur-treated eyes relative to controls, we'd expected to see that increase at [time].

However, elevation of IOP can also be a natural consequence of posterior uveitis.

So interestingly, through the last follow-up visit, and some of those patients have been followed for as long as 24 months, the difference in elevated IOP levels above 21 between Medidur-treated and control eyes has actually narrowed.

So through the last follow-up, only 6.6% Medidur -- sorry -- I shall say that again.

Through the last follow-up, only 6.6% more Medidur-treated eyes than control eyes, had experienced significantly increased IOP compared to the 10.9% difference seen through six months.

This same narrowing was observed for incisional surgery.

Only 1% more of the Medidur-treated eyes than control eyes required incisional surgery through the last follow-up visit, compared to a 2% difference at six months.

We'll keep a close watch on this as more data comes in, but the converging trend is extremely encouraging.

As a result of these very favorable results, we plan on acceleration of our regulatory approval strategy in Europe.

We've met with the UK Medicine Healthcare Products Regulatory Authority, or MHRA, in late October to discuss requirements for approval in the EU.

The MHRA advised us that, consistent with published points for consideration of the European Agency for Evaluation of Medicinal Products, an application for a product treating a condition like posterior uveitis could be based on one trial if the results are, and I quote, statistically compelling and clinically relevant.

We believe the data from our first trial should meet that standard.

As a result, we're now planing to submit for EU approval towards the end of 2016, using the existing 6-month and 12-month data from the first Phase III trial.

Data from a short duration study of our proprietary, redesigned inserter, which is starting shortly, and safety data from the Phase III study, which is currently enrolling patients, of course, with reference from the ILUVIEN Phase III trials.

We've requested a meeting with the FDA to confirm its requirements for an NDA submission in light of our recent Phase III data.

Assuming the FDA will continue to require data from two Phase III trials, we'd expect to file an NDA in 2017.

Now, next I'd like to update you on development work for osteoarthritis.

As you may recall, we have been working with Hospital For Special Surgery, or HSS, to develop an implant to provide sustained treatment for severe osteoarthritis of the knee.

Last year there were over 700,000 total knee replacements in the US alone due to osteoarthritis, and our goal is to provide treatment that would significantly delay or forestall the need for total joint replacement.

Our proposed product is a specially manufactured screw that houses an embedded Durasert device, surgically inplanted into the knee in an outpatient procedure.

The implant delivers the corticosteroid dexamethasone, and that is a known osteoarthritis treatment.

It delivers it directly into the joint on a sustained basis.

While a prototype has an expected six-month duration, we plan to adjust the design to provide sustained treatment for years from a single implant.

As previously reported, a six-month, open-label, investigative, sponsored study of osteoarthritis implant is planned.

The principal investigator has been advised by the FDA that it will require stability data on the implants to be used in the study prior to its initiation.

Although this type of data is routine and not difficult to produce, it will take time.

As a result, we expect the study to begin enrollment this summer.

We continue to advance our other development programs, although we have no new news to report at this point.

Our Tethadur research is continuing to progress well.

Our pre-clinical work using Durasert to deliver tyrosine kinase inhibitors, a class of anti-cancer drugs, to treat AMD remains promising.

Now turning to ILUVIEN, using a licensed, micro-insert that provides three years of sustained treatments for diabetic macular edema from a single injection.

We believe ILUVIEN is an important treatment alternative of patients with DMA who are typically treated with either laser therapy or repeated intraocular injections of the anti-VEGF drugs Eylea, Lucentis and the off-label Avastin.

Licensed to Alimera Sciences, ILUVIEN launched in the United Kingdom and Germany in the second quarter of 2013 and then in Portugal and in the US in the first quarter of 2015.

We're entitled to 20% of net profits from Alimera's sales of ILUVIEN on a quarter-by-quarter, country-by-country basis.

While we've received over $55 million to date from Alimera, primarily in license fees, contingent note repayments and milestones, we have not seen any material net profit payments to date and cannot predict when we will do so.

Because of the effectiveness and convenience of ILUVIEN for DME, we remain optimistic that going forward our share of the profits will become significant.

Moving to our financial picture, we're in a strong financial position.

We ended the second quarter with $21.1 million in cash and enhanced that balance with another $16.4 million in net proceeds from a $17.8 million underwritten common stock offering.

The financing significantly improved our financial condition and enhanced the executions of holdings in our Company, including (background noise) biotech and healthcare.

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

Len?

Thank you, Paul, good afternoon, everyone.

I will briefly review our second-quarter FY16 results reported earlier today, starting with our financial position.

As Paul noted, at December 31, 2015, we had cash, cash equivalents and marketable securities of $21.1 million, compared to $24 million at the end of the previous quarter.

Together with the estimated net proceeds of $16.4 million from our January 2016 share offering, we believe our capital resources are sufficient to fund our current and planned operations into the fourth quarter of calendar 2017 without taking into account any potential future amounts that we might receive under our ILUVIEN collaboration agreement.

Net cash usage of $2.9 million in the FY16 second-quarter was lower than the $4.5 million in the previous quarter, primarily due to the timing of CRO payments for the Medidur clinical development, proceeds from exercise of stock options and refundable foreign research and development tax credits, and the absence of incentive compensation awards that were paid in the prior quarter.

We currently expect net cash used in operating activities during the remainder of FY16 to average close to $5 million per quarter, primarily reflecting expected higher CRO payments and costs associated with our planned future regulatory filings for Medidur.

As noted previously, we expect cash used from operations to be variable quarter-to-quarter, particularly with respect to the timing and amounts of the CRO payments.

Turning now to our second quarter of FY16 results, revenues totaled $526,000 for the quarter ended December 2015, compared to $521,000 for last year's quarter.

Research and development expense totalled $3.7 million in the FY16 second quarter, an increase of $954,000, or 34%, compared to $2.8 million in the prior year period.

This increase was primarily attributable to higher CRO expense accruals for the clinical development of Medidur.

General and administrative expense increased by $173,000, or 9%, to $2 million for the three months ended December 31, 2015, from $1.9 million in the prior-year quarter, primarily due to higher professional fees and stock-based compensation.

Net loss for the quarter ended December 2015 was $5.2 million, or $0.18 per share, compared to a net loss of $4.1 million, or $0.14 per share, for the prior year quarter.

For the first six months of FY16, total revenues were $992,000, compared to $25.8 million for the same period of FY15.

This difference was predominantly due to revenue recognition of the $25 million ILUVIEN FDA approval milestone in the first quarter of FY15.

Research and development expense increased by approximately $1.7 million, to $7.2 million for the FY16 year-to-date period, compared to $5.6 million for the same period in the prior year.

The increase was primarily attributable to higher CRO costs related to Medidur, as well as increased pre-clinical study and other third-party costs.

General and administrative expense increased by $407,000, or 11%, to $4 million for the six months ended December 2015, from $3.6 million in the prior year period, primarily attributable to higher professional fees and stock-based compensation.

Income tax benefit was $83,000 for the six months ended December 2015, compared to income tax expense of $188,000 for the prior year period, primarily due to $260,000 of federal alternative minimum tax expensed in the prior year period in connection with the $25 million ILUVIEN FDA approval milestone.

In addition, tax benefit amounts in both periods consisted of foreign research and development tax credits.

Net loss for the six months ended December 2015 was $10.1 million, or $0.34 per share, compared to net income of $16.5 million, or $0.54 per diluted 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.

Key points are, one, our Medidur program for posterior uveitis is looking extremely good, with first trial hitting its primary efficacy endpoints with high statistical significance and positive safety data.

In light of the outstanding top line results, we plan to file for EU approval based on only one Phase III trial with a plan of filing in Europe by the end of 2016.

We also plan to meet with the FDA to confirm its requirements for an NDA, with a filing based on the results of two trials expected in the first half of 2017.

With respect to severe osteoarthritis of the knee, we expect the investigator-sponsored study to begin enrollment this summer following submission by the investigator of the requested stability data for the implants.

Three, work with both our Tethadur and Durasert development programs continues on pace.

And, four, with $21 million in cash at the end of December and $16.4 million from our recent financing, our cash position is strong.

At this point, we would be happy to take your questions.

Operator, would you please initiate the Q&A portion of the call?

(Operator Instructions)

And our first question comes from the line of Suraj Kalia with Northland Securities.

Your line is open.

Good afternoon, everyone.

So, Paul, a few questions on Medidur's posterior uveitis trial and one question on the osteoarthritis product.

You know, you mentioned in your prepared remarks, you know, that you would be talking to the FDA, you know, about filing for an NDA.

I guess the question I have, Paul, is can you give us some directional color or confidence levels you'll see for the FDA, you know, sort of reverting their stance and saying this study, the results were so compelling we can move ahead?

Or they would still need the second Phase III study?

That's a great question and it is a question that we shall be asking.

I wouldn't want to speculate as to what they might say at this point.

Fair enough.

And, Paul, you know, obviously from an Alimera perspective, we have seen how ILUVIEN, you know, over the years, you and I have talked many times about this in the past.

You'll have obviously seen, admittedly it's in a different indication for ILUVIEN, when you think about going direct with Medidur, what do you think are things that you all can improvise, put in place right now, so that when you'll get an NDA you'll hit the ground running and some of the past mistakes, that is my opinion, mistakes are avoided?

Well, we're beginning the presses now of engaging a whole team of advisors to help us with those decisions as to what needs to be in place when.

So this is not rocket science.

People launch products all the time.

Our job will to talk to as many people as possible, or as many good people as we possibly can, and to simply listen to the advice that we get.

How many feet on the ground would you need?

Let's assume first half calendar 2017 is when you'll get NDA approval, how many feet on the ground?

Can you give us some directional color of your thought process?

Well, I am assured by various people that it's, sort of an off-the-cuff estimate is around 25 to 30 sales reps.

Now, that's a good off-the-cuff estimate no doubt, but I am much more interested in understanding when people have had a chance to dig into the market more carefully to come up with exactly how many that needs to be, and perhaps, at least as importantly, ensuring the product is reimbursed as quickly as possible.

Because I think getting reimbursement is quite crucial.

Fair enough.

Two other questions, Paul, and I'll hop back in queue.

Just continuing on Medidur, for my edification, Paul, obviously the results was spectacular on the first Phase III.

We don't see any reason why the second Phase III should be any different.

Just from a science perspective, Paul, how do you, you know, when you have loss of visual acuity, you know, in the treatment arm, how do you reconcile that with the recurrence of posterior uveitis.

The reason I ask is only 4.6% of the Medidur eyes lost visual acuity but 18.4% had recurrence.

Is it just the math, that is the way it works?

Or is this a more underlying thing that we should keep an eye out for?

That is 4.6% losing at least 15 letters.

It doesn't mean to say that some didn't lose, basically just didn't raise to the 15-letter mark.

And the FDA typically regards 15 letters as being something of the line in the sand.

So by protocol, it is certainly possible for someone to have a recurrence of uveitis but not having, without having lost 15 letters.

Okay.

Okay.

So it is primarily math.

Okay.

Got it.

Finally, Paul, you know, just going on to osteoarthritis, I mean, you guys know about Carbylan, and Flexion and Anika There is a lot of interest in the space.

You know, I think it is about fair to say six months, a year ago, together these companies were trading probably more than $1 billion in market cap on the promise of products relieving pain in osteoarthritis.

So I can understand the enthusiasm that, you know, and you guys probably have some idea about how the Durasert-type of product would work in osteoarthritis.

Paul, at least from my perspective, what are the things that you're seeing, to the extent that you can share, you know, that could help us get some comfort level on, you know, because some of these competing studies, there is either a question of placebo effect.

There is either a question of efficacy.

Or the duration of efficacy.

One of the things that specifically comes to mind is, you're putting an insert right in the knee, how do you segregate any intermittent pain or acute pain, or whatever, simply by the process of having a physical object in there?

Any color on this would be great.

Thank you for taking my questions.

Hey, great.

So the implant itself is -- it's a screw, so it is inserted away from any load-bearing joints so it should be painless.

It -- there should be no foreign object sensation when the patient has one of these things put in.

Another thing to emphasize here is that we're targeting patients who have severe disease.

These are people who are potentially, in fact certainly, in the queue for a total joint replacement.

So it's not a moderate thing.

So a minor tweak or relatively small discomfort in the knee, those are not the patients we're going after.

We're going after people with severe disease.

Unfortunately, there is a lot of them.

At least 700,000.

So I think the combination -- I should also add that regarding the technology, we know, in inverted commas, that the technology will release drugs for a very, very long time.

We also know, in inverted commas, that the drug we're choosing to release, dexamethasone, does work.

So a lot of the variables, shall I say, that you perhaps have with some other technologies really aren't there in this case.

So I hope that answers the question.

Thank you.

Matt Kaplan, Ladenburg Thalmann.

Hey, Paul, thanks for taking my question.

Quickly, can you give us a sense in terms of where you are with the second Phase III in India and how that trial is enrolling.

Yes, that is enrolling.

It is one of those things we'll know when it is fully enrolled, when it's fully enrolled.

It is about according to schedule.

Great.

And then -- Go ahead.

And frankly, some of how that proceeds will be a function of any guidance we get from the FDA.

Sure.

And then in terms of the European filing, what do you need to complete to be able to, additional work that you need to complete to facilitate that filing in Europe?

And I guess secondly will that information that you are able to generate, will that help you in US potentially as well?

The answer to the second part of that is absolutely, it is essentially the same data.

We need to complete our CMC, chemistry, manufacturing and control data.

We need to be able to show that we can manufacture these implants to scale under the appropriate conditions.

We obviously can but generating the voluminous amount of paperwork to support your validations and all those things is going to take a time.

And frankly, that is likely to rate determining.

We also need data from our soon-to-be-initiated study of our new inserter that allows the implants to be injected down a 27-gauge needle.

That will not be rate determining.

So basically both, obviously both of those pieces of information are needed to support the NDA as well, so there is not additional data.

It is just for the NDA.

It is just -- that part is the same.

I think the second was the NDA.

Great.

And I guess -- and then just a quick update on your Durasert pre-clinical program, if you could.

When you -- any visibility in terms of getting that into the clinic?

That is the AMD work, I presume.

Exactly.

We are screening compounds now and when we come -- when we determine the dose that we'll need and the agent that's best, we'll go forward.

So that's -- yes.

We're in the middle of screening.

We'll know when we see it.

Perfect.

And then just last question going back to Medidur, in terms of your meeting with the FDA, when should we -- can you give us a sense, in terms of when that could potentially occur?

Probably we will be able to announce something in May.

It rather depends on, one, when you have the meeting, and, two, perhaps most importantly, when you get the minutes back from the meeting.

I'm expecting May will be appropriate.

Perfect.

Well congrats on the terrific data and the progress.

Great.

Thank you.

Vernon Bernardino, FBR & Company.

Hey, good afternoon, everyone.

This is actually Thomas Yip asking a couple of questions for Vernon.

He's out-of-pocket today.

Just want to make sure that the NDA submission in the first half of 2017, just wondering if that assumes the FDA will require data from only one Phase III trial?

No, that's assuming the FDA will want data two Phase III trials.

Oh, okay.

So in that case, would there be any additional CMC studies or any other small studies that will be required if they -- if the FDA mandates only one Phase III trial data?

No.

Well, we're doing the CMC work anyway.

Oh, okay.

We're doing the -- yes, we're doing the inserter study anyway.

If the FDA wants to see data from a second Phase III, then we will give them that data.

Okay.

So--

That is just another thing we're doing anyway.

I see.

So assuming the best case scenario where the FDA requires only, you know, there is very impressive Phase III data that you already have, is it safe to assume that the NDA will proceed shortly after your talks complete with the FDA?

As I alluded to earlier, it will take until Q4 to generate the CMC-section.

So the data that the Europeans want, which is CMC inserter data, et cetera, that is essentially the same package of information that the FDA will need.

Oh, okay.

I got it.

The FDA will need that, and they may, and currently to be clear, our last communication with them was they would require data from the second Phase III trial, as well.

Understood.

I will see if that is still the case.

Just one final question regarding Durasert.

Can you tell us a little bit about the nature of the data that will be required to file an NDA on osteoarthritis?

It is a standard stability data, you know.

Okay.

Accelerated storage and that kind of good stuff.

Sure.

For the ophthalmics group, they've often, almost always, have accepted stability data from non-clinical batches.

The folks reviewing the osteoarthritis want to see stability data from the actual batch that is going to be used in the clinical trial.

So it's not a big thing, it slows things down a little.

So really nothing out of the ordinary, which is good.

Okay.

That's the only questions I have.

Thanks so much again for taking my questions and I hope you have another great quarter.

Great.

Thank you.

This does conclude today's Q&A session.

I would like to turn the call back over to Mr. Paul Ashton for closing remarks.

Great.

Thank you.

Well again I'd like to thank you all for joining us today and I look forward to speaking with you again on the next quarter.

In the meantime, of course, if you have any additional questions, please feel free to contact us.

Thank you.

Bye-bye.

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.