EyePoint Pharmaceuticals Inc (EYPT) 2016 Q4 法說會逐字稿

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

(Operator Instructions)

As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Ms. Lori Freedman. Ma'am, you may begin.

Thank you, Kaylie. Good afternoon, everyone, and thank you for joining us. Earlier this afternoon, we released our financial results for the fourth quarter of full year 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 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.

Thank you, Lori, and welcome everyone to our discussion of our FY16 full-year and fourth-quarter results and Company update. In FY16, we made substantial progress in moving forward our product development agenda, capped by significant progress in the fourth quarter.

Highlights for the quarter included 12-month follow-up that maintains the favorable results from our first Phase 3 trial for Medidur in posterior segment uveitis. Opening an IND for an investigator-sponsored study of a Durasert implant for severe knee osteoarthritis. Good results from pre-clinical testing that have allowed us to identify a product candidate to treat wet age-related macular degeneration as an implant, delivering a tyrosine kinase inhibitor. We also have favorable Tethadur pre-clinical results, and a strengthened research and development program.

So let's move on to the details. We have continued to successfully move through the steps toward approval of Medidur for posterior segment uveitis, our lead development product. Following the very favorable top line results reported in the primary endpoints from our first Phase 3 clinical trial in six months, our 12-month follow-up reported consistent favorable results, specifically, at 12 months we maintained the same high level of statistical significance in preventing recurrence of disease that was achieved in meeting the primary efficacy endpoint at six months. This is very encouraging.

That, and just over a quarter of the Medidur-treated eyes had a recurrence of the disease through 12 months compared to about 85% of control eyes, is clearly very impressive. Safety data also remains favorable through the last follow-up visit, which ranged between 12 and 30 months. The incremental risk of elevated intraocular pressure, or IOP, in Medidur-treated eyes compared to control was small. The risk was actually lower through the last followup than it was through six months.

Generally, elevated IOP was well treated with eye drops in both treatment and control eyes, and the same percentage of Medidur-treated eyes and control eyes required incisional surgery to treat their IOP through the last followup. That was just under 5% for both groups. This is consistent with the fact that elevated IOP occurs as a consequence of both sterile treatment, as well as the disease itself. We're very encouraged that the vast majority of Medidur-treated patients who were on systemic medication at baseline were able to discontinue that therapy through the last followup.

We took another step towards our marketing applications, with a completion of the utilization study of our new smaller-diameter 27-gauge inserter. This study, which is a required for both our EU and US marketing applications, met its primary endpoint of ease of intravitreal administration. Two-thirds of physicians gave the new inserter rating of routine or better in comparison to only 46% of those using the larger 25-gauge inserter. We expect that this new inserter, which are shown to be easier to use, will be more popular with physicians, and we plan to use it in our wet AMD product candidate now being developed.

We're hard at work preparing our European marketing authorization application, or MAA, under the centralized procedure for Medidur. Using our data from the first Phase 3 trial, the inserter study and the Iluvien trials, we now expect to file our MAA in the first quarter of 2017. We're disappointed with the delay for the fourth quarter 2016, since all the necessary studies have been completed, but we're unable to get the necessary data from our third party provider to ensure an earlier filing.

Enrollments in our second Phase 3 trial is almost complete, and we expected to wrap up this October, i.e. next month. Six-month results from both of our two Phase 3 trials are required for a US NDA application. With favorable results, we plan to file our NDA in the third quarter of 2017.

Now, turning to potential new products. An IND opened for a six-month open label investigator-sponsored study of an implant for severe knee osteoarthritis. We've been developing this implant with hospitals for special surgery.

The surgical screw-type implant, with an embedded Durasert device, provides sustained delivery of a corticosteroid directly through to the joint. Our goal is to provide long-term pain relief, and delay the need for a total knee replacement surgery. We look forward to the outcome of this study, and believe this approach could be applied to other types of osteoarthritis.

We're also advancing a new product candidate to treat wet AMD, that's wet age-related macular degeneration. For this, we are using our Durasert technology to repurpose a tyrosine kinase inhibitor. It's an approved drug, used in cancer, that inhibits both VEGF and PDGF, two of the macular targets for current antibody therapies.

We completed two pre-clinical studies that showed comparable efficacy of the PK inserts to intravitreal injections of a commercially available biologic agent against VEGF. We have commenced the first of our IND-enabling studies for these bio-erodable injectable inserts, and we're very enthusiastic about the potential of this insert, given the challenges of approved drugs in the long-term treatment of the disease, and the science of the market.

Finally, we advanced our preclinical research on Tethadur. In pre-clinical testing, we were able to deliver the biologic of Avastin on a prolonged, sustained basis. We plan to continue our Tethadur pre-clinical research, seeking to provided sustained delivery of biologics for opthalmic and systemic treatment.

In the first quarter of FY17, we have taken significant steps to improve our Product Research and Development. We are delighted to welcome Dr. Dario Paggiarino, our new Chief Medical Officer. He is responsible for supervising our research and development programs.

Bringing us the benefit of his over 25 years of experience in the pharmaceutical industry, Dario has gotten quickly up to speed, and is already deeply involved in our various programs. We also completed the consolidation of our research and development into our US facility in Watertown, Massachusetts closing our facility in Malvern, the UK. We believe this consolidation will facilitate research and product development in both our Tethadur and Durasert programs, with the additional benefit of reducing operating overhead.

Turning to Iluvien for diabetic macular edema, and that's a product that we license to Alimera Sciences, we were pleased to see our licensee, Alimera, reported higher sales in its 2016 second quarter. We believe Iluvien, which provides treatment for three years from a single injection, is an important treatment alternative for patients with DME, who typically face injections of biologics as frequently as monthly.

With respect to our liquidity, we are in a good position as the end of the fiscal year, with $29 million in cash, following on offering of common stock earlier this year. With that, I will turn Len to take you through the financials. Len?

Thank you Paul, and good afternoon, everyone. I will briefly review our fourth quarter and FY16 results reported earlier today, starting with our financial position.

As Paul noted, at June 30, 2016, we had cash, cash equivalents and marketable securities of $29 million, a slight increase compared to $28.5 million at June 30 of last year. During FY16, cash used from operations of $16.3 million was substantially offset by $17 million of cash provided by financing activities, primarily the January 2016 underwritten public offering of our common shares.

Our net cash usage was $4.3 million for the fourth quarter of 2016, the same as the prior quarter. We expect that net cash usage will approximate $6.5 million in the first quarter of FY17, primarily due to FY16 incentive compensation payments paid in the quarter, higher CRO payments, and the previously-announced costs of the UK consolidation.

We currently expect net operating cash usage in the subsequent quarters of FY17 to average in the range of $5 million to $5.5 million per quarter. On that basis, we anticipate that capital resources at June 30, 2016, and expected cash inflows under existing collaboration agreements, will enable us to fund our current and planned operations into the second quarter of FY18. This estimate includes costs of our ongoing Medidur clinical and regulatory program, but excludes any potential receipts from the commercialization of Iluvien under the Alimera collaboration agreement.

Turning now to our full-year FY16 results. Revenues decreased by $24.9 million to $1.6 million for the year ended June 30, 2016, compared to $26.6 million for the same period last year. This decrease reflected the $25 million Iluvien FDA milestone that was earned in the first quarter of FY15. Retisert royalty income was slightly more than $1.2 million in FY16, an increase of $68,000, or 6% from FY15.

Research and development totaled $14.4 million for FY16, an increase of $2.3 million or 19%, compared to $12.1 million in the prior fiscal year. This change was primarily attributable to a $1.4 million increase in costs of the Medidur program, a $475,000 increase in personnel and related costs, including incentive compensation accruals, and contractual UK severance obligations, and $320,000 of pre-clinical studies and other third-party research costs. We currently expect FY17 research and development expense to increase approximately 10% to 15% compared to FY16, primarily due to increased clinical and regulatory costs of the Medidur program, additional preclinical studies, and personnel costs.

General and administrative increased by $957,000 or 12% to $9 million from FY16, from $8.1 million in the prior year, primarily attributable to a $564,000 increase in personnel costs, primarily higher incentive compensation accruals and stock-based compensation, and a $302,000 increase in professional fees. Income tax benefit of $155,000 for FY16, compared to an income tax expense of $96,000 in FY15.

FY15 income tax expense reflected $263,000 of US federal alternative minimum tax, that resulted primarily from the $25 million Iluvien FDA approval milestone. Refundable foreign research and development tax credits totaled $159,000 in FY16, compared to $167,000 in FY15. Net loss for the year ended June 2016 was $21.5 million, or $0.68 per share, compared to net income of $6.3 million or $0.21 per diluted share for the year ended June 2015.

Turning to our fourth-quarter results, we reported revenues of $304,000, compared to $409,000 for the same period last year. This decrease was primarily due to lower Retisert royalty income. Research and development totaled $4.1 million in our fiscal fourth quarter, an increase of $906,000 or 28%, compared to $3.2 million in the fourth quarter last year, primarily due to higher costs of the Medidur program and increased personnel costs, including accruals for incentive compensation and UK contractual severance obligations.

General and administrative expense totaled $2.7 million in the current year fourth quarter, an increase of $245,000 or 10%, compared to $2.4 million for the three months ended June 30, 2015, primarily attributable to increased incentive compensation accruals. Net loss for the fourth quarter of FY16 was $6.4 million or $0.19 per share, compared to a net loss of $5.1 million or $0.17 per share for the prior-year period. I will now turn the call back over to Paul.

Great, thanks, Len. In conclusion, FY16 was a good year for pSivida.

First, we moved forward toward applications for marketing approval of Medidur for posterior segment uveitis. The excellent safety and efficacy results from our first Phase 3 trial for Medidur were maintained through 12 months of followup. We're preparing our MAA under the EU centralized procedure, and plan to file in the first quarter of next year. We expect to complete enrollment of our second Medidur Phase 3 trial next month and file for an NDA in the third quarter of calendar 2017.

Second, the IND for the investigator-sponsored study of an implant for knee osteoarthritis was opened. Third, we're proceeding with IND-enabling preclinical studies of a bio-erodable TKI insert for wet AMD, and we are continuing pre-clinical research on our Tethadur technology system for both opthalmic and systemic applications. Fourth, we ended the fiscal year with a solid cash position.

We are now happy to take your questions. Operator, would you please initiate the Q&A portion of the call?

(Operator Instructions)

Suraj Kalia, Northland Securities.

So Paul, a few questions. And I know you are careful not to give too many details, but I have to still try. On the osteoarthritis trial, on the IND, any sample size? What specifically are you targeting? Follow-up period? Any color you can provide at this stage?

Yes. It's being run, it's an investigator-sponsored study being run in New York, at the Hospital for Special Surgery. This is an initial study, so it's just going to look at six patients, with a six-month primary endpoint. Which will just be -- this is really aimed at controlling pain, rather than disease modification.

The disease modification, I absolutely understand. So it is just looking at the delta pre and post six months after implantation? Is that the right way, there is no -- this is just an initial feasibility analysis?

Yes, exactly. It is primarily a safety study.

Fair enough. In terms of the Medidur EU MAA delay, Paul, was that a specific data that the EU authorities asked, and what kind of data crunching is needed, that is causing this delay? And is there a chance you could move the wheels and pull it up again to Q4?

No. There is no attempt at being able to bringing it forward. It is just the time it takes to crunch the data that we have generated. This isn't a result of any new requirement from the Europeans. It's just, there was apparently an error made in some of the initial data crunching, which didn't alter the top line data at all, but it caused us to have to get the CRO to rerun some of the analyses, which has just delayed everything.

And that error was caught by the EU authorities, or you discovered it?

No. It was caught by us. We haven't submitted anything to the EU authorities.

Okay, but the P values and the percent recurrence and IOP, all those, in the intent to treat, or nothing has changed as a result of this error?

That's correct. It was just one minor error that makes you -- requires you to go back and check everything else. And everything else was fine.

Got it. Paul, Alimera put up a pretty decent quarter, for their numbers reported. What other royalties on Iluvien, if I remember correctly, they had a $9.8 million or $10 million run rate. Have you -- it seems like you have not crossed the minimum threshold yet, where your 20% of net profits royalties start kicking in.

Yes. There hasn't been quite for us yet. It's lumpy. In some quarters, there's a payment due. In others, it is not. But we're obviously optimistic that sales will continue to improve, and we will start to see checks on a more regular basis.

And finally Paul, on Medidur, any color you can provide on your discussions with strategic partners, in terms of distribution, once it gets approved? Thank you for taking my questions.

We're certainly having some of those discussions. And until they reach a conclusion, then they are only discussions.

Fair enough. Thank you.

Vernon, FBR.

Paul, congrats on the progress, and thanks for taking my question. When do you expect when we will know what the TKI that is being used for the wet AMD indication will be revealed?

There is nothing to be gained by reviewing it at the moment, so I don't know that we need to review it. It's a typical small molecule. It's on the market. It's a cancer drug. Well-known mode of action, inhibits VEGF and PDGF. I am not sure what else we will need to know.

Okay. And you had mentioned that the first of two IND-enabling studies. Can you tell what those IND-enabling studies are? What is the second one being pursued?

For the IND, you need a non-GLP tox PK study, and two GLP tox studies. So we started the first of those, and we're doing the second. The second one should dosed within about two weeks, I think.

Okay. And it sounds very simple then. When do you think we will see results?

Tox studies, again, it will take longer than we had hoped to get the final report. But these are four-month studies.

They are 12-month studies?

Four months.

Four months. Okay.

We had hoped to be able to file an IND within a year. In fiscal, in the current fiscal year.

Okay. And then, switching to Medidur, can you compare, what are you seeing, can you compare the patient enrollment seen in the second Medidur Phase 3, versus the first Phase 3? Are there any difference in enrollment observed?

It's a bit faster in the second Phase 3. The second Phase 3 is designed as 150 patients study, and we expect it to be all done next month.

Okay. Last question for me and I will get back in the queue. So it says the new drug application, based on both Phase 3 trials, is planned for the third quarter of 2017. Just want to confirm, that is calendar year, or fiscal year?

Calendar year.

Calendar year. Perfect. Thanks for taking my questions.

(Operator Instructions)

Matt Kaplan, Ladenburg.

Congrats on the progress. Very nice.

Thank you.

Couple questions. Wanted to, can you give us a little bit of detail in terms of the new injector, the new device, the new inserter that you have developed? And how it differentiates from the prior inserter, and you mentioned some positive data that you announced recently, I guess, last month, in terms of the user usability study. Can you give us a sense of that as well?

Yes certainly. So oddly enough, injecting things into eyes is actually quite difficult. There has been a variety of different-size inserters developed and approved.

I think the biggest one is probably the Allergan's Ozurdex inserter, which is, I think a 22 gauge I believe, which is big. You have to carefully introduce it in the eye to avoid leaving a hole that would allow the vitreous to prolapse out of. Then there is the 25 gauge, which is the one that we developed and used with Iluvien, which is smaller, but it's still not perfect. You have to push the thing pretty hard to get it in.

Now the 27 gauge, we actually use a size needle to make the hole that is the same size and type of needle that is occasionally used for injections of suspensions of Triamcinolone Acetonide, so it's size that is much more normally used by physicians. It's a simpler procedure. It's easier to get in. And it's interesting that with all the technology that's out there, that one of the -- technically one of the hardest things is to develop and design a dumb needle that is easy to get into an eye, but that is the way it is.

Okay. And what is your IP around the inserter?

Patents have been filed and I believe we have a got of nests of patents covering it, and some are being issued and some are about to issue.

Great. Then in terms of Tethadur, you mentioned some positive pre-clinical data with Avastin that you developed. Can you give us a sense of the timeline going forward to that program, and some milestones as well?

Sorry for which program?

For the Tethadur, the Avastin.

So we're talking to a couple of potential partners for that program. We are interested in partnering that and moving it forward with systemic administration of antibodies, which is perhaps the biggest opportunity, when you think about it. So this technology, for folks who may not be familiar, enables the sustained delivery of big molecules, like antibodies.

The antibody marketplace right now is huge. With a lot of these molecules coming off patent, it's creating this enormous biosimilar industry. And if you follow the space, you will see lots of patents being filed and defenses, and all kinds of legal issues around things like Humira, and Remicade, and all these things, which are administered as performing normally, and the problem that you have for the biologics is that unlike small molecules, where there is a well-established lifecycle management and strategies you can have, tablets that go blue, tablets that say it's this thing, there's really nothing like that at all for the biologics.

And the Tethadur technology is designed to provide sustained release, so for instance, so you could go from an injection of Humira once every two weeks to an injection every month or every two months. Or in the eyes an injection of Eylea or Lucentis every month, to an injection every three months, and every six months, and every year.

So that's the plan there, and we're optimistic we will be able to move that technology forward. It's probably best done in conjunction with a much larger plan. Again, if you take the example of Humira, we have a technology that would potentially deliver that molecule. That would best be done in collaboration with AbbVie, because I don't think a Company our size can realistically believe they can take on AbbVie.

So that was a very long-winded explanation. I hope I answered your question.

That's very good, thank you. And thanks for the detail.

Thank you. I am showing no further questions at this time. I'd like to turn the call back to Dr. Ashton for closing remarks.

Great, thank you. I'd like to thank you all for joining us today. And I look forward to speaking with you again in the next quarter. In the meantime, of course, if you have any additional questions, please feel free to contact us. Thank you.

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