EyePoint Pharmaceuticals Inc (EYPT) 2017 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the pSivida fiscal second-quarter earnings call. (Operator Instructions) As a reminder, this conference call is being recorded. I would like now to turn the conference over to Doug Sherk. You may begin.

Thank you, operator, and good afternoon, everyone. Thank you for joining us today to review pSivida's fiscal 2017 second-quarter and first-half results, which ended on December 31, 2016, as well as recent corporate developments.

Making prepared remarks on today's call are Nancy Lurker, pSivida's President and Chief Executive Officer, and Len Ross, Vice President of Finance. In addition, Dr. Dario Paggiarino, Vice President and Chief Medical Officer, is with us this afternoon, and all three are available for questions during the Q&A session.

Before we begin, I'd like to remind you that all the 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, we refer you to pSivida's filings with the SEC, including its annual report on Form 10-K for the year ended June 30, 2016. The Company undertakes no obligation to update any forward-looking statement in order to reflect recent events or circumstances that may arise after this conference call.

Now I'd like to turn the call over to pSivida's President and Chief Executive Officer, Nancy Lurker.

Thank you, Doug, and good afternoon, everyone. I appreciate everyone taking the time to join us this afternoon.

This was my first full quarter with pSivida, and with each passing month I become more impressed with the team and the opportunities afforded by our proven and well-validated science. At the same time, I continue to believe that our technology is an undervalued asset despite having developed three of only four FDA-approved sustained-release treatments for back-of-the-eye diseases. We are working very hard to change this situation, and have made solid progress since we last talked in early November.

Over the next several quarters we have three overarching objectives for our Company. First, we expect to complete European Union and US FDA registration filings during 2017 for our Durasert three-year uveitis product. Second, we expect to continue the recent progress of several programs using our unique Durasert sustained-release technology. And third, we are striving to add at least one additional collaboration partnership with a drug manufacturer utilizing Durasert.

Achieving these objectives in a cost-efficient manner is paramount to our team. One of my first acts as CEO was to pre-prioritize pSivida's development program profile from one that was higher-risk, longer-term in its focus, to one that is now moderate-risk and achieves results nearer-term. We have several significant data and regulatory milestones this year, and I believe achieving these milestones should benefit our shareholders.

Our Durasert three-year treatment for posterior segment uveitis is our most advanced clinical program. Posterior segment uveitis impacts approximately 80,000 to 100,000 patients in the United States, and another 80,000 to 100,000 patients in Europe, who have few options to treat this chronic inflammatory disease, which is the third leading cause of blindness. The Durasert uveitis second Phase 3 study met its enrollment target and the timing for the readout is planned by the end of the second quarter.

If you recall, the FDA required two Phase 3 studies for filing, and the first Phase 3 study met its primary efficacy p-value of less than 0.001 and yielded safety data that is consistent with the known effect of ocular corticosteroid use. We are very pleased with the primary efficacy and safety results at six months, and the safety and durable efficacy results at 12 months. We remain optimistic the second Phase 3 study readout will be positive due to the robustness of the first Phase 3 trial data and the fact the trial designs are similar.

As we discussed during the fiscal first-quarter conference call, the European regulators required us to submit a pediatric protocol prior to the EU submission. We submitted the protocol, we received their comments, and we expect to have final follow-up discussions during the next coming weeks. The end result is that we continue to expect to file the EU application during the second quarter of calendar 2017. In the US, we expect to file the NDA during the second half of calendar 2017.

We have a number of Durasert technology product development opportunities, including our next-generation Durasert bio-erodible, shorter-duration treatment for posterior segment uveitis, and for use in collaborations with other drug manufacturers with their small molecules.

We recently conducted market research for both our three-year Durasert for uveitis and six-month bio-erodible for uveitis. Physicians were very positive about Durasert's proven ability to deliver a consistent daily micro-dose of a corticosteroid. The consistent daily micro-dose is believed to be one of the reasons behind the efficacy results we are seeing from the clinical studies. In addition, the physicians were impressed with the product's ability to prevent recurrent flares that often lead to blindness. Further, our market research also covered physicians' level of interest in the six-month bio-erodible for uveitis. That feedback was also very positive for the need for such a shorter-acting product.

As a result, this research has enhanced our confidence in the market potential for Durasert three-year uveitis once we receive approval, and in addition it has also reinforced our prioritization of the six-month Durasert bio-erodible for uveitis program; and we are conducting formulation testing now. Our objective is to being preclinical safety and PK studies of this product in the second quarter of calendar 2017.

We are also initiating efforts to form collaborations with other drug manufacturers for combining their small molecule drugs with this shorter-duration form of Durasert to address patient needs in other indications.

Another clinical program underway is the Durasert implant for severe osteoarthritis of the knee. As we have reported, the Hospital for Special Surgery in New York and pSivida announced the opening of an investigator-sponsored IND of Durasert to treat severe OA of the knee. The Durasert implant is designed to provide long-term pain relief for severe knee OA which, if [effected], could potentially result in the delay of knee replacement surgery.

To date, five patients have received the implant, and the Hospital for Special Surgery expects to have the final patient implanted during the next month; while a safety and tolerability study, change from baseline, and weekly mean of pain intensity scored at rest, during activity and at night, will be assessed weekly through 24 weeks. We are currently in discussion with HSS about the next steps for this program.

Turning to our TKI program for wet AMD, the evaluation of additional TKIs are underway and we have identified multiple suitable TKI candidates for further formulation work. We have determined that, pending the evaluation of TKI candidates, we intend to advance this program only through the development of a corporate partnership.

Finally, there is our Tethadur preclinical program that applies proprietary technology to achieve the sustained release of large molecules such as biologics through a silica-based technology. Preclinical activities on this program are continuing and we are implementing a strategy to pursue partnerships to advance the program's development.

In addition to our ongoing programs, we have also taken steps during the past few weeks to expedite potential collaborations based on approving Durasert technology with other drug candidates. Deb Jorn, who joined pSivida in November, is heading up this effort, and she and the team are focused on establishing additional new collaborations, an EU out-licensing partnership, and preparing for the US launch of our Durasert three-year uveitis program. Once again, our objective is to enter into at least one new additional collaboration agreement prior to the end of the current calendar year.

Before I turn the call over to Len, let me summarize why we're excited. First, on the regulatory front, we plan on submitting the EU marketing approval application for our Durasert three-year treatment for posterior segment uveitis in the second quarter of the current calendar year; and in the US, we continue to expect to submit the NDA in the second half of the calendar year.

Second, we will be announcing the results of our second Phase 3 clinical trial in posterior segment uveitis by the end of the first half of calendar 2017. Again, we feel very good about the prospects for a positive outcome of this study due to the positive results of the first Phase 3 study.

Third, we are also looking forward to the implantation of the sixth patient for OA at HSS, the data evaluation, and then working with HSS to determine the next steps.

And lastly, Deb and her team continue to foster relationships with potential collaboration and out-license partners. Our goal is to enter into at least one additional collaboration agreement with drug developers for our Durasert technology, and an EU out-license for our three-year uveitis product. We are also making very solid progress on both those fronts.

I will now turn the call over to Len Ross for a brief review of our first-quarter financials. Len.

Thank you, Nancy, and good afternoon, everyone. I will briefly review our fiscal second-quarter and first-half results that we reported following today's close.

Revenue for the second fiscal quarter ended December 2016 was $6 million compared to $526,000 for the prior-year quarter. The year-over-year increase was primarily attributable to the recognition of deferred collaborative research and development revenue, totaling $5.6 million, resulting from the terminated collaboration agreement with Pfizer disclosed in late December.

Second-quarter operating expenses were $6.1 million compared to $5.8 million a year earlier. The general and administrative expenses were higher in this year's quarter compared to the prior year, primarily due to severance-related costs. Our research and development costs were lower in this year's second quarter, primarily due to the higher expense accruals associated with the Durasert Phase 3 clinical trials in the year-ago quarter.

The net loss for the quarter ended December 31, 2016 was $67,000, or a breakeven on a per-share basis, compared to a net loss of $5.2 million, or $0.18 per share, for the prior-year quarter.

At December 31, 2016, cash, cash equivalents and marketable securities totaled $17.5 million. During the second quarter we used approximately $5 million for operations, and we anticipate a somewhat higher rate of cash usage from operations in the third fiscal quarter due to the timing of annual insurance policy renewals and clinical milestone payments.

As we have noted on previous calls, the timing and amounts of our CRO clinical milestone payments have continuously fluctuated from quarter to quarter. The Board and management are consistently evaluating strategies to provide the Company with the resources required to achieve our objectives, and are keenly focused on those strategies that would minimize shareholder dilution.

I will now turn the call back over to Nancy for her closing comments.

Thank you, Len. Our focus on moderate-risk, nearer-term potential product development programs should yield promising results. The feedback we received from our recently-conducted market research validates that our Durasert three-year uveitis product meets an unmet need in the marketplace, as well as the initial physician interest in a six-month program for uveitis. In summary, we have a number of solid catalysts this year, and I look forward to providing updates as we continue to make progress.

Operator, we're ready now to take questions.

(Operator Instructions) Matt Kaplan, Ladenburg Thalmann.

Can you hear me?

We can hear you.

Thanks for taking the questions. I guess, starting off, just focusing on the European filing for the three-year Durasert, can you give us a sense in terms of where you are in finalizing the pediatric study protocol with European regulatory authorities?

Yes. We are very close, and we're actually quite pleased with the progress that we've made. They've been very responsive. And as a result, as I said, we remain very confident that we will be able to close it out and file in the second quarter of calendar year 2017.

Okay. Very good. And then drilling down a little bit with respect to your plans in Europe, where are you in your European partnering discussions, as you get closer to filing? When can we expect a potential partnership?

Well, let me just say this, that we've been -- first of all, Deb Jorn, who is our Executive Vice President of Corporate Development, has done a fantastic job leading that effort, and we have been in contact with tens of multiples of companies around the potential out-license. And we are on track. Obviously I'm not going to go into specifics in terms of timing, but we have a very thorough process for that auction, and so far we've had good responses.

So, I would expect that, certainly before the second half of the year is out, that we may be able to answer that question, if not in the third quarter, would be the goal -- by the third quarter calendar 2017. As you know, though, Matt, I just want to caution that obviously, as you get into due diligence and then final negotiations, sometimes things can take a little longer than anticipated.

Fair enough. Do you expect to have multiple regional or country-specific partnerships, or would it be one for the entire region of Europe?

Yes. You know what, I'm not going to predict at this time. Let me just say again, it could be either one of those.

Okay.

And we'll see what the level of interest is. Obviously, if you're going with someone who's got global reach, they're a much, much larger company. If you're going to a more regional approach, then you're going to be dealing with, obviously, more midsize to smaller players.

Great. And then, with your osteoarthritis of the knee program -- congrats on the progress there -- can you give us a sense in terms of how the first five patients that you've treated so far -- how do they look, and what are the results there?

I'm going to actually turn that over to Dr. Paggiarino, who is our Chief Medical Officer, to discuss the HSS program.

Yes, Matt. So, first of all, this was, as you recall, a safety study primarily in a small number of patients. So, the first objective was to evaluate safety; but also to have the opportunity to have a preliminary assessment of the effect on pain and function. And overall, to date, the data seem to suggest that the treatment is well-tolerated, and there may be some indication of -- that these patients are doing well. So, we look forward for the sixth patient to be enrolled in the study.

And how should we think about, in terms of the presentation or announcement of the data, once the sixth patient is evaluable? Will that be in a press release, or we'll have to wait till it is presented at a medical meeting, or how will that work?

Yes. We're -- first of all, we're in a collaboration with HSS. So, we will have to work with them on that. And right now, we're looking at, it'll be summertime before anything gets released, just because of the timing of the enrollment of the patients. And I'm not going to speculate at this time how we would release those data.

And when you said in your prepared remarks you're looking at the next steps for the program, what are you contemplating in terms of next steps at this point?

Yes. So, the next steps with HSS is going to be finalizing how we are going to work together going forward. Any number of types of arrangements are currently being considered with HSS.

Okay. And that includes doing a larger type of Phase 2 study, or --?

Oh, yes. So, first of all, Matt, there's the basic structure of the agreement. And then there is the clinical plan going forward. So, both of those items need to still be worked on.

Okay.

We are in the process of both those discussions now.

Okay. Very good. That's helpful. Well, thanks for taking my questions and congrats on the progress across the board.

Suraj Kalia, Northland Securities.

Thank you for taking my question. So, Nancy, let me start out with the Durasert bio-erodible. A couple of sub-questions within this question. Why six months? Is it just because uveitis occurs -- or, at least, most of the recurrence occurs within the first six to nine months? Is that why you all are choosing a six-month? Is it because of the technology? Or is it simply because -- as a way to reduce IOP in glaucoma numbers in -- with a bio-erodible implant?

Yes. So, those are all very good questions, and again, I'm going to answer some of them; I'm going to turn some of it over to Dario again. But let me just say this. In general, with our technology, we can time the release depending on the molecule that's in there from one month, by month, all the way out to 36 months. So, it's not a matter of, that's what the technology will allow. It's because we could literally, with our corticosteroid, we could time it for eight months; we could time it for 12 months. It doesn't matter. We have that level of sophistication around how much we release over what time period.

The reason we've gone for six months is because consistently, when we've gone out and done market research, and there's been prior market research that's been done at pSivida as well as this most recent market research that we did, as well as when we are in discussions with potential collaboration partners with their small molecules, consistently what comes out is that six months is an ideal window where physicians want to be able to say, all right, as you know, most drugs for back-of-the-eye disease are administered with monthly injections. That's typical. So, you're not typically going to get payer response, or the value that you need, unless you can get beyond three months with patients. Because if you end up with just two to three months that they've got to come back in, it's not that much of an improvement over a monthly injection.

And so, then the second thing is, they don't want to go beyond six months because it takes too long before they see the patient again. You run the risk of saying -- and regardless, even with our three-year, they would still expect they're going to see the patient back in the office on a semi-regular basis.

So, six months seems to be that nice window when it is long enough that you are getting a real advantage over monthly injections, but not so long as well that they run the risk of losing the patient to oversight. So, I'm going to turn it over to Dr. Paggiarino, if he wants to add anything to that.

No, I think I don't really have much to add. I think it gives the flexibility to treating physicians to dose patients with a flexible schedule.

But Nancy, would I be too far off in saying that maybe an intended or an unintended effect of this could be reducing high IOP and/or glaucoma incidence in these patients with -- who are treated with a bio-erodible implant? Could that be a direct correlation?

You know, it's hard to speculate on data. We will -- I think the clinical data will have to speak to that. Now, the advantage of -- so, I don't want to speculate on the effect on IOP specifically. Certainly, the advantage of a bio-erodible by itself is that the components of the inserts are absorbed, so they may allow maybe (inaudible) dosing. But in terms of the side effect profile of a bio-erodible (inaudible), I think it's too early to speak to that.

Yes. But let me just add, Suraj, as well, that clearly with the Durasert technology in general we've made enormous progress since Retisert was put on the market. And so, our intraocular serum levels of corticosteroids are much, much lower than when you get with the bolus injections that occur monthly; even some of the competitor who's out there, where, when they are injecting, you get a much higher spike in corticosteroids. And there is a good correlation. Though it's not been, I think, proven positive, it's -- certainly, there is a correlation between that and IOP.

Got it. And how much do you all intend to spend on this program?

We're not going to disclose that. But let me just say this right now -- that, relative to other clinical programs, it's modest in cost, and we are going to be highly conscious to do it in the most cost-efficient manner. You can imagine, because we will be looking at this as potentially a supplemental new NDA to our current NDA, that the cost should be lower than a new NDA.

Got it. In terms of the pediatric indication in Europe, Nancy, help me understand, or at least remind me, why pediatric? Why now? Why go down this -- I mean, is uveitis a big issue in pediatrics? And forgive me if -- I'm just -- end of the day, I'm sort of brain-dead, and maybe it is, but --

You've been on too many calls, Suraj.

It's -- yes, it's earnings season, so forgive me.

Look, it's not a problem at all. We're required to. We submitted a waiver. I believe we disclosed this early. We submitted a waiver. That waiver was denied. So, the European regulatory authorities are basically, as a condition of filing, requiring us to have an approved pediatric protocol. It is extremely rare in children to see this condition, and that is why we requested a waiver. However, the regulatory authorities believe that since the condition still exists, they would like to see that we conduct this study. And again, I want to reiterate the study, we do not -- will not need to be started until after we get the drug [approval].

Got it. And finally, Nancy, maybe I missed this. Any update on your CSO strategy? That would be great. Folks, thank you for taking my questions.

No, no update at this time. It's still too early. We would expect to start that post-filing in the US.

Thank you.

Vernon Bernardino, FBR & Co.

Thanks for taking my question. Most of them were related to the Durasert implant in severe osteoarthritis. But just going back as far as the study's concerned, how do you decide, for example, you've -- those five patients -- how do you decide how and when to proceed to the next patient, in this case the sixth patient?

Okay. That's strictly related to the patient enrollment criteria. And again, this is an investigator-sponsored study, so we're not involved in that, and that is strictly related to making sure that the patients meet the enrollment criteria.

And can you remind us in particular what that is, such that it's met and then they proceed on to the next patient?

Yes. Again, I'll have Dr. Paggiarino answer these questions.

So, the plan was to enroll six patients, and the -- with the objective evaluating, essentially, safety and efficacy -- preliminary efficacy. And so, the criteria of these are patients who are candidate for knee replacement, and they will obviously benefit from improvement in pain and function. And so, the targeted number was six patients on the basis that that would allow, again, a preliminary assessment, but also the ability to work with the insert and really refine the insertion technology, so to speak, from the surgeon.

Okay. And it's an exciting opportunity, obviously. But can you confirm that one of the things you might disclose is data on delay of knee replacement surgery, or no?

No, that's not one of the end criteria. The --

(Inaudible) candidates, yes.

Right. These are candidates. And they -- remember, we expect to disclose the results after the end of six months, and that is -- the endpoints are pain measured on the WOMAC score, which is a very well-validated pain score, as well as overall knee movement and articulation. It's not --

Okay. So --

At -- for the -- this early-stage Phase 1, it's not delay of TKR. Though we would expect as potentially, as we move into Phase 2, that could be one of the endpoints.

Okay. So, we won't see any data as far as TKR.

No.

Okay. All right. Just wanted to confirm that. That's all the questions I have. Thank you.

Guy Dietrich, Dietrich Capital Partners.

I've got a two-part question. Given the FDA has indicated they're potentially embarking on a much more streamlined approval process, I wonder if I could get a little more transparency on your thinking on this subject, and how it could favorably impact pSivida.

And then, secondly, given the strength of your first Phase 3 trial for posterior uveitis, which really had superb results, despite these really compelling results the FDA requested a second Phase 3 trial which may not be concluded until mid-year. So, I wondered, given the dynamics in place right now -- and I realize it's sort of a moving target -- have you considered a more rapid, and perhaps filing an NDA just based on the strength of your first Phase 3 trials while continuing the second one?

Yes. So, actually, good question, Guy. And we did consider that. And in fact, we did go back and show the FDA our first Phase 3 trial results, because they were so robust. And the FDA still wants us to finish and file along with a second study. So, we did attempt to do that.

I will also say that we continue to look at other ways that we could approach this to expedite things. We've retained outside consultant who has got a lot of expertise in this, as well as obviously continue to rely on our internal regulatory expertise. And it continues to fall in line that, right now, we need to continue to file both studies, and we're filing them as quick as possible after we get the results in.

As to whether or not we would anticipate anything to speed up, I think, again, what we've heard from, again, both our internal regulatory as well as external, is that you need to get the new FDA Commissioner in place. It's going to probably take just a little bit of time. So, I would expect that, if anything, it probably wouldn't impact us on the current regulatory filings. Perhaps it could impact when we potentially file for our six-month bio-erodible.

Okay. Thank you.

I'm showing no further questions. At this moment, I'd like to turn the call back to management for any further remarks.

I want to thank everyone for participating in today's call, and I look forward to many positive -- potentially positive events that are going to occur this year. So, thank you for your time, and I look forward to updating you on our next call.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day.

Thank you.