EyePoint Pharmaceuticals Inc (EYPT) 2016 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the 2016 Quarter Three pSivida 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, Mr. Lori Freedman, Vice President Corporate Affairs. Ms. Freedman, you may begin.

Thank you, Cheri. Good afternoon, everyone, and thank you for joining us. Earlier this afternoon we released our third 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 statements 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 third quarter. This was another good quarter for us. Continued progress of our lead product candidate Medidur for posterior uveitis. Completion of the IND enabling data for our sustained release product for severe knee osteoarthritis, and continuing advances in our preclinical studies for a potential AMD product highlighted our quarter. So let's move onto the details.

We earlier reported that our first Phase 3 clinical trial showed high statistical significance in achieving its primary endpoints of prevention of recurrence of posterior uveitis at six months. Using the intent to treat analysis, so called ITT, only 18% of Medidur treated eyes experienced a recurrence by six months. Compared to 79% of control eyes, resulting in a P-value of less than 0.0000001.

We now have also completed a protocol analysis of the data in that trial. And the trial again met its prime endpoints with high statistical significance. The [protocol] recurrence rates showed only 3% of Medidur treated eyes experience a recurrence by six months versus 50% of control eyes. This was also highly statistically significant with a P-value of less than 0.00001.

Now the difference between the two analysis is in how patients are treated who do not complete the trial within protocol. An intent-to-treat analysis compares all patients originally allocated after analyzation.

If a patient received a treatment that was outside the protocol such as a systemic steroid therapy, for whatever reason, or a treatment for posterior uveitis that didn't reach the level necessary to count as a recurrence, then in an ITT recurrence is imputed.

By contrast, a protocol analysis is a comparison that includes only those patients who completed the treatment within protocol and recurrences are not imputed. While the FDA and the EU regulators focused on the ITT analysis primarily, it was great to see that our protocol analysis results [was also] strong and consistent with the ITT.

We also completed the six-month safety data analysis, and it's very encouraging. Through six months, 19% of Medidur treated eyes had received eye drops for elevation of intraocular pressure compared to 18% of control eyes. We're continuing to monitor these patients and expect to have 12 month follow-up data this summer.

Turning to regulatory matters, we were delighted that the European Commission granted orphan medicinal product designation to Medidur for the treatment of posterior uveitis. Orphan drug designation provides up to 10 years of market exclusivity in Europe following market approval. It also provides access to the centralized marketing authorization procedure and other regulatory and financial incentives.

We expect to file the marketing authorization application in Europe under the centralized procedure on the basis of the results of our first Phase 3 study around the end of this year. Approval under the centralized procedure would provide approval in all countries in the European economic community.

Turning to the U.S., we met with the FDA to confirm the requirements for filing the NDA. Based on that meeting, we continue to plan to file based on data from two Phase 3 clinical trials. Our second Phase 3 trial is enrolling steadily and is now at 60% enrolled. We expect this trial to complete enrollment in time to enable us to file the NDA around mid-2017. We're optimistic for the results of the second trial given the strength of the results from the first trial.

Because the clinical and regulatory progress of Medidur is encouraging, we're beginning the process of assessing how best to maximize the value of Medidur after approval. We're reviewing all of our options including licensing, co-promotions, using a sales force for hire, and setting up our own sales-force, et cetera, et cetera. There are many options. Different options maybe approved for different priorities. And there are pros and cons for each that need to be considered particularly for a small company like ourselves. We're looking at this very carefully.

Now next I'd like to update you on our development work on our osteoarthritis product. As you may recall, we've been working with Hospital for Special Surgery or HSS, to develop an implant to provide sustained treatment for severe osteoarthritis of the knee. This product like Medidur, uses our Durasert technology [where] embedded in a surgical screw that's implanted in the knee.

We previously reported that a principal investigator from HSS planned a six month open label investigator response study of the LA implant. But was advised that the FDA required additional stability data on the implants to be used in the study prior to its initiation. I'm pleased to report that this data has now being generated. The principal investigator plans to submit it to the FDA shortly and expects the study to begin enrollment at this time.

Our goal here is to provide treatment that would significantly delay or forestall the need for a total knee replacement, of which there were over 700,000 in U.S. alone last year. If this product is successful, we believe the product could be adapted to other osteoarthritis applications, which is shoulders, hips, elbows.

So we think this has a lot of potential.

We continue to advance our other development programs. The use of tyrosine kinase inhibitors, or TKIs, for the treatments of age-related macular degeneration, or AMD, has been attempted many times. Because it's known that these drugs inhibit both VEGF and PDGF, the two molecular targets of current antibody therapies.

Unfortunately thus far, late-stage clinical trials of the TKIs have been unsuccessful. One of the major difficulties has been delivering a therapeutic amount of the drug that is not too much and not too little to the retina for a clinically relevant period of time.

Now we believe our Durasert technology could be uniquely positioned to resolve this difficulty. Our preclinical work thus far has been encouraging, and we're conducting confirmatory studies. Our Tethadur research is also continued to progress.

Turning to ILUVIEN, we were pleased to see that our licensee Alimera obtained J Code in the beginning of this year. And we're hopeful that the impact of this will become apparent during 2016. We believe ILUVIEN is an important treatment alternative of patients with DME. Who are typically treated with laser therapy or repeated intraocular injections of the anti-VEGF drugs Eylea, Lucentis, and the off-label Avastin.

Moving onto our financial picture, we are in a solid financial position ending the third quarter with $33 million in cash.

With that, I'll hand the call over to Len, to take us through the financials. Len?

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

As Paul noted at March 31, 2016, we had cash, cash equivalents, and marketable securities of $33.3 million, compared to $21.1 million at the end of the prior quarter. The current quarter increase reflected $16.5 million of net proceeds from our January 2016 underwritten public offering. Offset by approximately $4.3 million of cash used from operations during the quarter.

We believe our capital resources at quarter-end together with the cash we expect to receive under our collaboration agreements are sufficient to fund our current and planned operations into the fourth quarter of calendar year 2017, without taking into account any potential future amounts that we may receive under our ILUVIEN collaboration agreement.

We currently expect net cash used in operating activities during the fourth quarter of fiscal 2016 to be in the range of $5 million to $5.5 million, up from the $4.3 million in the third quarter. As a result, cash used from operations should average approximately $5 million per quarter for the second half of fiscal 2016 as referenced in last quarter's call. We continue to expect cash used from operations to be variable quarter to quarter in fiscal 2017, particularly, with respect to the timing and amounts of CRO payments for the Medidur Phase 3 trial.

Turning now to our third quarter fiscal 2016 results, revenues totaled $324,000 for the quarter ended March 2016, compared to $328,000 for last year's quarter. A $56,000 increase in Retisert royalty income was offset by lower collaborative and research revenue.

Research and development expense totaled $3.1 million in the fiscal 2016 third quarter. A decrease of $265,000 or 8% compared to $3.3 million in the prior year period. This decrease was primarily attributable to the $486,000 decrease in the CRO costs, partially offset by an increase of approximately $90,000 in personnel costs, all in connection with the Medidur clinical development program.

General and administrative expense increased by $305,000 or 15% to $2.3 million for the three months ended March 2016. From $2 million in the prior year quarter primarily due to a $165,000 increase in professional fees and the $132,000 increase in personnel and related costs including stock-based compensation.

Net loss for the quarter ended March 2016 was $5 million or $0.15 per share, compared to a net loss of $5 million or $0.17 per share for the prior year quarter. For the first nine months of fiscal 2016, total revenues were $1.3 million compared to $26.2 million for the same period in fiscal 2015.

The difference was predominantly due to revenue recognition of the $25 million ILUVIEN FDA approval milestone that was earned in the first quarter of fiscal 2015. Partially offset by $143,000 increase in Retisert royalty income.

Research and development expense increased by $1.4 million or 16% to $10.3 million for the nine months ended March 2016, from $8.9 million for the same period of the prior year. This consisted primarily of an increase of approximately $1.3 million for the Medidur clinical development program, including $780,000 of CRO costs, $215,000 of other third-party research costs, $175,000 of personnel costs, and $100,000 of professional fees.

General and administrative expense increased by $712,000 or 13% to $6.4 million for the nine months ended March 2016, from $5.6 million in the prior year period. And this was primarily attributable to increases of approximately $305,000 for professional fees, $180,000 for stock-based compensation, $145,000 for personnel and related costs, and $50,000 for director fees.

Income tax benefit was $117,000 for the nine months ended March 2016, compared to income tax expense of $144,000 for the prior year period. Federal alternative minimum tax expense totaled $4,000 and $263,000 for the nine months ended March 2016 and 2015 respectively. Which was attributable to calendar 2014 taxable income derived from the receipt of $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 nine months ended March 2016 was $15.2 million or $0.49 per share. Compared to net income of $11.5 million or $0.38 per diluted 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 good quarter. Key points are the protocol analysis of our first Phase 3 study of Medidur for posterior uveitis, like the ITT analysis, showed the trial achieved its primary efficacy endpoints with high statistical significance.

Safety data continued to be positive. Medidur received orphan designation in Europe, and as a result we now intend to file for European approval under the centralized procedure around the end of 2016. The second trial is approximately 60% enrolled. And we anticipate being able to file an NDA based on the results of the two trials around mid-2017.

We expect the investigator-sponsored study of our Durasert implant for severe knee osteoarthritis to begin enrolling this summer following submission to the FDA by the investigator of the requested stability data for the implants. [Working] both Tethadur and Durasert programs continued on pace. And with $33 million in cash at the end of March, our cash position is solid.

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

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

Thank you. [Operator Instructions] Our first question comes from Matt Kaplan of Ladenburg Thalmann.

Hi, Paul. Congrats on the progress.

Thanks, Matt.

Can you give us a little bit of an update in terms of you gave us some update with the Phase 3 data for the first trial. Can you give us a little bit more sense in terms of the 12 month endpoint when we could see data from the first Phase 3 analyzed at this --

That'll be this summer.

This summer?

Yes. It would be about six months after the six months data.

Very good. And then in terms of the second Phase 3, you mentioned that you're about 60% enrolled. When do you think you could complete enrollment in that study and could we see I guess six months after that see the completion of study and data.

Yes. So that should be enrolled some time in Q3. If we do well it will be at the beginning (inaudible). If we do well it will be at the beginning, and if we are a little bit slower it will be towards the end. But we're expecting it sometime in that three month window.

Very good. No, that's helpful. And what other work do you need to complete besides the second Phase 3 to put yourself in position to file the NDA?

There's also an inserter study ongoing. Where we're looking at the new 27-gauge inserter. Now that's a 30-patient study, and it's about half enrolled. This has enrolled in pretty quick. So we haven't really been talking a lot about this because it's not going to be very limiting in anyway.

Okay. And what do you have to show on that study?

We have to show that the 27-gauge -- it's an ease-of-use study. So we have to show them 27-gauge is as easy or easier to use than the larger 25-gauge. Yes, it's an adequacy of the instructions and all of those kinds of things.

Yes. So it's a user study kind of?

Absolutely.

Great, and then in terms of your interaction with the FDA, I guess the conclusion was that the second study would be necessary for filing. Can you give us any detail around that discussion?

Well, we had our meeting with the FDA just under a month ago, and when we get the final minutes of the meeting I will be able to more adequately know what we've decided. But based on it I see no reason to move from the original plan of providing them with two Phase 3 trials.

Okay, very good. And then last question before I jump into the queue. In terms of your pipeline, can you give us some milestones to expect for the remainder of 2016, with respect to I guess the preclinical and the OA and the knee?

The OA should begin enrolling sometime in this summer. [Great]. I will hedge on how long it will take to enroll. The other program that we are very excited about is the program in wet AMD. Initial studies in a preclinical model indicated that this is a long-term bioerodible implant. Initial data indicated that we are showing similar efficacy of Eylea in this particular preclinical model. We are repeating a similar study now in a different animal model. And then we'd be looking to start the IND-enabling tox studies later this year.

Great. And then the Tethadur?

Tethadur is progressing. As people who follow the company are aware it's a long and sometimes painful process. We have good stability data through to a point. We just want to make the stability data last out just a little bit longer. Because where we're looking at this product we're not trying to see can we make something that's significantly better than the six or eight week injection every six or eight weeks maybe that are currently used. We're looking can we make this thing to be significantly better than what is likely going to be out there in five years' time. (inaudible) ahead a little bit here.

Okay. And I guess last question in terms of now that you have orphan drug designation in Europe, what are your plans in terms of the European commercial development after approval there?

Well, we are evaluating as I said on the call, we're evaluating all of the options.

All right.

So until we've completed the analysis it would be premature to say what we are going to do. But the options are fairly standard, right? You can go at your own as some people like to do, or you can look for partners like, companies like Genentech and Regeneron and [stuff].

Sounds good. Well, congrats again.

Thanks, Matt.

Thank you. [Operator Instructions] Our next question comes from Suraj Kalia from Northland Securities.

Good afternoon, everyone.

Hi, Suraj.

Paul, so forgive me, just hopping in between calls, maybe you've already mentioned this. Specifically on the wet AMD, Paul, if I heard your commentary you said you were seeing similar efficacy as Eylea. Am I to interpret that the VEGF trap you are actually using as a agent is pretty much Eylea? Or I guess I'm just trying to understand why Eylea is the key (inaudible) you all are using?

Well, in a animal model you're going to use as a positive control. You're going to use Eylea or Lucentis or Avastin. And we just happened to choose Eylea. I think for the purposes of these models they're somewhat approximate anyway. One could theoretically use Lucentis or Avastin I guess.

So there is, Paul, there is no limitation on the molecular size that is limiting you all anyway correct?

No, no. I just want to make clear. We are looking at a bioerodible implant releasing a small molecule, a small growth molecule. And the positive control that we're using is [not] giving us the same efficacy in this model as say an injection of Eylea.

Okay. And understood, but it is a VEGF trap, the molecule is some sort of a VEGF trap, correct?

Yes. It's a small molecule inhibiting a VEGF. It's a small molecule inhibiting VEGF or a VEGF trap.

Okay. And on the osteoarthritis product, Paul, again you all might have mentioned this, so forgive me if this is a redundant question. Paul, I mean, you guys have followed the recent data releases from Carbylan, Flexion, Anika. And I guess where I'm headed is when you look at the totality of results that are coming out of these studies, various Phase 3, Phase 2 so on and so forth, how is that guiding your strategy on the Durasert OA product? I'd love to get some color there?

Yes, well, I think that the relatively short term implants that you're talking about are suspensions or whatever. There's going to be some pros and cons to these. I think for a relatively early stage disease that may be okay. For those types of products you need to be looking at how do they differentiate from, say, an injection of a suspension of triamcinolone acetonide, which is also is going to have a relatively short duration.

And the other problem is that with an injection of a suspension triamcinolone in a gel or a microsphere releasing dexamethasone or whatever it might be the physics of it are that you're going to achieve some logarithmic results. So you're going to have quite a lot of drug release initially that's going to rapidly taper off.

And there are certain cons to that. And the con is one that you are going to have a shorter duration. And the other con is that you know storage can have very significant effect in a joint. So if you a pretty high dose initially you know repeatedly you need to be careful about just what kind of toxicity you may see on the [turn]. And we'd be anticipating using the same amount that's currently used for a single injection, but having it last for and release of a continuous low level for a much longer period of time.

Got it. And finally, Paul, again you might have mentioned this already, the orphan status in Europe obviously that was a welcome news. Can you walk us through the progression, filing a regulatory approval I believe end of '16. Then the reimbursement, whether NUB or whatever if you can just kind of walk us through how you see this progression. Thank you for taking my questions.

Yes, so we anticipate filing the MAA around the end of '16. One would anticipate a review of approximately one year, and towards the end of that [turn] we'll be starting negotiations with the various payers in the different countries. And obviously orphan drug designation is going to oil that process to some degree. Thank you so much for your question. Do we have any more questions?

I'm showing no further questions at this time. I'll turn the call back over to you, Dr. Ashton.

Great. Well, I'd like to thank you all for joining us today. And I look forward to speaking with you again next quarter. Of course, in the meantime if there are any additional questions feel free to contact us. Thank you very much.

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