EyePoint Pharmaceuticals Inc (EYPT) 2018 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Second Quarter Fiscal 2018 pSivida Earnings Conference Call.

(Operator Instructions) As a reminder, this conference call is being recorded.

I'd now like to introduce your host for today's conference, Mr. Doug Sherk.

Sir, you may begin.

Thank you, Timmy, and good afternoon, everyone.

Thank you for joining us today to review pSivida's fiscal 2018 second quarter results for the quarterly period that ended December 31, 2017, as well as recent corporate developments.

Making prepared remarks on today's call are Nancy Lurker, pSivida's President and Chief Executive Officer; Len Ross, Vice President of Finance and Principal Accounting Officer; Dr. Dario Paggiarino, Vice President and Chief Medical Officer; and Deb Jorn, Executive Vice President.

In addition, Gregg Beloff, Chief Financial Advisor is with us during -- and will be available during the Q&A session.

Before we begin, I'd like to remind you that 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 can 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.

The company undertakes no obligation to update any forward-looking statement in order to reflect events or circumstances that may arise after this conference call.

And 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 to review our 2018 fiscal second quarter results, our recent operating and clinical achievements as well as an outline of our anticipated milestones.

We've got a lot of exciting events ahead of us in 2018.

Since we last spoke in November, we filed our new drug application or NDA with the U.S. Food and Drug Administration for Durasert 3-year treatment for posterior segment uveitis.

This is the most significant achievement since I joined as CEO in September 2016.

This filing represents a major milestone towards achieving our new business model of transforming pSivida into a fully integrated commercial-stage pharmaceutical enterprise.

Launching Durasert, our lead product candidate in the U.S., allows us to maximize our assets.

We anticipate to hear back from the FDA early next month that our NDA is complete and accepted for review.

If the normal FDA timeline is maintained and pending approval, we expect to launch Durasert in the United States this time next year.

We look forward to working with the regulatory approval authorities on our submission.

Earlier today, we also announced that our second Phase III study maintained a positive efficacy and safety profile through 12 months.

These continued positive data clearly strengthens our approach with retinal specialists.

Now at this point, I would like to ask Dr. Dario Paggiarino, our Chief Medical Officer, to provide a summary of the key efficacy and safety results from this study as well as an update on the numerous presentations of data at industry conferences during the past few months.

Dario?

Thank you, Nancy, and good afternoon, everyone.

The second Phase III study involved 153 patients with posterior segment uveitis and the primary endpoint was prevention of recurrence of posterior uveitis of 6 months, with patients continuing to be followed for 36 months.

Through the 12-month time point, Durasert 3-year insert confirmed a significant reduction in the recurrence of uveitis.

36.6% of Durasert-treated patients had a recurrence compared to 71.2% of patients in the sham group, with a p-value of less than 0.001.

Our results have continued to demonstrate the positive efficacy with Durasert in treating this devastating disease.

We are pleased that as our first pivotal study of 12 months showing continued positive efficacy over sham, our second pivotal study also shows positive efficacy over sham at 12 months.

Moving now on to the safety data.

At 12 months, the mean intraocular pressure, IOP, increase was small, 2.0 millimeters and 0 millimeters of mercury over a baseline of -- IOP of 13.3 millimeters and 13.1 millimeters for Durasert and sham, respectively.

Patients requiring IOP-lowering therapy at any time during the first 12 months follow-up were 50.5% for Durasert and 51.9% for sham.

Only 1 subject assigned to Durasert required IOP surgery during the first 12 months of follow-up.

In phakic patients, those with the natural lens of baseline, 18% in the Durasert group required cataract surgery through 12 months compared to 8.6% in the sham group.

I would like to add that this data continues to show safety data in line with the expected side effects of corticosteroids.

This is now confirmed in our 12-month data for our second pivotal study.

As Nancy mentioned, over the past several months, leading retina specialists presented other Durasert data prestigious medical conferences.

Dr. Careen Yen Lowder from the Cleveland Clinic Cole Eye Institute presented data at the American Academy of Ophthalmology or AAO Conference.

Dr. Lowder's abstract titled Fluocinolone Acetonide Intravitreal Insert in Noninfectious Posterior Segment Uveitis 12-month Safety Results concluded that Durasert 3-year treatment for posterior segment uveitis could provide long-term inflammation control with an -- in office-based injection procedure and an acceptable safety profile.

More recently, Dr. Glenn Jaffe, Chief, Division of Retinal Ophthalmology at Duke University presented at the American Uveitis Society winter meeting.

In his presentation titled Phase III Study of an Injectable Fluocinolone Implant to treat intermediate posterior and panuveitis, he concluded that the Durasert insert provided continuous inflammation control with no unanticipated side effects that were manageable using standard therapies.

We look forward to other presentations by retina specialists as calendar 2018 unfolds.

And now I'll turn the call back to Nancy.

Thank you, Dario.

As we've demonstrated, our technology is proven and pSivida has already received FDA approval for 3 of the 4 sustained release drugs approved for back-of-the-eye diseases.

Currently, patients with posterior segment uveitis have limited treatment options and the standard of care is frequent injections of steroids or an implant that lasts only 2 to 3 months with a list price of $1400 per device.

Over a 3-year period, this approach would cost nearly $17,000.

And uveitis is the third leading cause of blindness and a disease that impacts approximately 80,000 to 100,000 patients in the U.S.

I want to just stress again, how serious this disease is and the limited treatment options that exist today.

And that is why we are very excited about bringing our Durasert uveitis product to the market.

And our data continues to demonstrate very good results.

As I noted earlier, we submitted our NDA in January and the FDA also granted our request for a small business waiver of the Prescription Drug User Fee Act or the PDUFA fee.

This waiver frees up approximately $2.4 million in resources that can be refocused on the initial preparations for our anticipated launch.

I'd like to now turn the call over to Deb Jorn, who is our Executive VP of Corporate and Commercial Development, to outline some of the commercial strategies we are preparing to deploy.

Going forward, you'll begin to hear more from Deb and our commercial team as we begin our launch preparations.

Deb?

Okay.

Thank you, Nancy.

Good afternoon to all the listeners on today's call and webcast.

With the submission of our NDA, the team is now solidifying our go-to-market plan in the U.S. for the Durasert 3-year product for posterior segment uveitis.

We continue to receive a very high level of interest in the product from retina and uveitis specialists.

During recent medical society meetings, including the American Academy of Ophthalmology, the American Uveitis Society and Hawaiian Eye, specialists have provided positive feedback based on the study results presented to date.

As previously mentioned, the product profile was tested with other clinicians as well based on the 6 and 12 months' data from the first Phase III study.

The level of interest in using the product range from an 8 to a 10 on a scale of 1 to 10, 10 representing high intent to use the product.

We remain very excited about those results.

During the fiscal first quarter, we opened our commercial offices in New Jersey, a strategic location necessary to recruit a sales team, since this is where major pharma companies have their global headquarters.

Our plan is to hire the internal sales and marketing management teams in the coming months.

Once these teams are in place, we will finalize selection of a contract sales organization referred to as a CSO.

It's important to note that our internal sales management team will lead the efforts, along with the CSO, to build a dedicated pSivida sales force.

This will include screening and interviewing of all potential candidates to ensure strong hires.

Initially, the CSO will hire 8 to 10 representatives.

Given the limited size of the target audience, the maximum number of representatives we foresee being needed will be in the 15 to 20 range.

We have also begun our pricing and reimbursement assessments and feel confident the product will likely be covered by a broad range of payers following approval by the FDA.

There is high unmet need in the posterior uveitis area and steroids are still considered mainstays of therapy.

We are excited to have the potential to bring this new product to patients who need it and provide doctors with a potential new treatment choice.

Our launch in the U.S. will also allow us to reach our goal of transforming pSivida into a fully integrated commercial ophthalmology company.

Thank you.

And now I'll turn the call back over to Nancy.

Thank you, Deb.

Of key importance to pSivida's long-term success are collaboration agreements and we continue to be active in this area.

As many of you already know, we entered into agreements with 2 pharmaceutical companies in September and October for front-of-the-eye diseases, namely glaucoma.

These are proof-of-concept collaborations that, if successful, will provide us with the potential to expand into larger and more lucrative arrangements as well as to bolster our development pipeline.

Our goal is to continue to enter into additional collaboration agreements as they extend our proven technology and provide incremental, nondilutive funding.

Something I want to highlight as to the -- is the progress of our next-generation Durasert shorter-duration product for uveitis.

We've mentioned before that having the ability to deliver a 9-month shorter-duration product, in addition to our 3-year product, has significant value for physicians because it would provide greater flexibility to adjust treatment options to individual clinical needs.

This project remains on track and we expect to complete the GLP safety and pharmacokinetics study in the fourth quarter of calendar 2018.

Now in addition, we are making solid progress on a bio-erodible Durasert, which we are using with our collaboration partners and in our TKI program for major indications, such as glaucoma and wet AMD.

The combination of these various delivery devices gives us a unique product family.

With regard to our Durasert implant for severe osteoarthritis of the knee, together with the Hospital for Special Surgery, we presented Phase I data in December.

Based on the study findings, the implant was well tolerated and showed potential analgesic effects through the 6-month study period.

With that, I'll turn the call over to Len for a review of our financial performance.

Len?

Thank you, Nancy, and good afternoon to everyone.

I will briefly review our fiscal second quarter results that we reported following today's close.

Revenue for the second fiscal quarter ended December 2017 was $933,000 compared to $6 million for the prior year quarter.

The year-ago quarter included revenue recognition of $5.6 million resulting from termination of our Pfizer collaboration agreement.

Excluding the effect of the Pfizer termination, revenue from feasibility study agreements and royalty income increased to $933,000 for the 3 months ended December 31, 2017, from $387,000 in the prior year quarter.

Included in the current quarter revenue was $196,000 of sales-based royalty income received from Alimera.

This represents the first quarterly payment under our restructured collaboration agreement that was consummated in July of 2017.

Our second quarter operating expenses were $6.7 million compared to $6.1 million a year earlier and increased primarily due to professional services costs associated with the NDA filing for Durasert 3-year uveitis.

Net loss for the quarter ended December 31, 2017, was $5.8 million or $0.13 per share compared to a net loss of $67,000 or a breakeven per share for the prior year quarter.

During the second quarter, net cash used from operations totaled approximately $5 million compared to $6 million in the first fiscal quarter.

This net decrease was primarily the result of proceeds received in the second quarter from collaboration partners and new feasibility study agreements.

During the fiscal 2018 second quarter, we issued approximately 5.1 million shares of common stock for gross proceeds of approximately $6.2 million through the utilization of our existing at-the-market or ATM program.

At December 31, 2017, cash and cash equivalents totaled $12.9 million.

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

Thank you, Len.

Before we take questions, let's review our significant near and short-term milestones.

These include: the potential FDA acceptance for review of the NDA for Durasert 3-year for posterior segment uveitis; the potential for FDA's approval of Durasert 3-year treatment for posterior segment, and assuming a normal review cycle, positions us to launch Durasert in the first quarter of calendar 2019, pending a positive review; third, we expect to present 12-month efficacy in safety data from our just-announced second Phase III clinical study at leading medical conferences; and we expect to execute one or more new collaboration agreements with biopharmaceutical companies and other third parties; and finally, our shorter-duration product for posterior segment uveitis remains on track and the company expects to complete our GLP safety and pharmacokinetics study.

In summary, we will continue to operate at a high level and achieve our other objectives as they too provide significant value drivers for our company.

Operator, we're now ready to take questions.

(Operator Instructions) Our first question comes from Andrew D'Silva from B. Riley FBR.

And Andrew, are you there?

So operator, why don't we wait?

Maybe there's a mute issue on Andrew's side and go to the next question, if there are any?

I'm sorry, I was muted out.

Can you hear me?

I'm sorry, I apologize, I was muted out and I did not realize it.

Congrats on the positive data by the way.

I just wanted to confirm, if everything goes as planned, you should still expect to receive approval in the fourth calendar quarter this year for Durasert, correct?

Well, Andrew, actually -- let me just say this.

We don't know for sure because if you just do the math, we would expect to receive potentially FDA acceptance in the first part of March.

And then it's a 10-month cycle from there, which technically takes us into January.

That's not to rule out that it could potentially come sooner but right now, more feasible is a very early January approval.

Okay.

Got it.

Perfect.

I just wanted to make sure I was articulating that correctly.

And then, just a couple of quick bookkeeping questions.

Could you let me know what your stock-based compensation, depreciation and amortization as well as your cash flow from operations and CapEx was for the period?

And then, while you're pulling that up, was there a reason royalty income was so high if Alimera was only $196,000 for the quarter?

Was there something else in royalty income that was onetime in nature or should we think about another stream of revenue going forward?

Andrew, first on the royalty question.

I mean, as you will recall, we've had royalty income from Retisert product that's licensed to Bausch & Lomb for several years now.

Because of the new restructured Alimera agreement, we're now effectively receiving royalties from them as opposed to the net profit share that we were entitled to previously.

And so as we disclosed in our 10-Q filing last quarter, starting this quarter, which was the first quarter that we received the royalty income, we're classifying that as royalty income.

Where in the past, the monies from Alimera were treated as collaborative research and development revenue.

With regard to the other questions.

On a 6-month year-to-date basis, stock-based compensation was $1.3 million.

Depreciation was less than $100,000.

We did also have, in the 6 months, amortization of intangible assets of about $360,000, although those finite-life intangible assets have now been amortized to 0 at the end of the second quarter.

And as far as cash flow from operations, I think I alluded to that in my prepared remarks.

The cash used in operations for the 6 months year-to-date was $11 million, of which $6 million was in the first quarter, $5 million in the second.

Great.

And essentially, no CapEx for the quarter then?

Very little.

CapEx for the 6 months itself is only around $60,000.

Okay.

Great.

So not material.

And -- this is just more of a question from a strategic standpoint, I guess.

When we're looking at where you stand in the space, are there any restrictions outside of fluocinolone that exist due to Alimera relationship.

It doesn't carry over to all corticosteroids.

You can use other types of corticosteroids in your sustained release technologies and target other eye conditions.

That's an accurate statement, correct?

No.

We licensed to Alimera.

This was done, of course, a number of years ago.

We out-licensed to Alimera all back-of-the-eye diseases utilizing Durasert with a corticosteroid with the exception of uveitis.

Okay.

So all corticosteroids fall into that bucket?

That's correct.

Okay.

Perfect.

And then just last question.

When we start thinking about the shorter-term Durasert, could you maybe let me know what the potential regulatory pathways could be?

I'm assuming, due to how similar the 2 devices are that this is probably an option for a much more expedited approval pathway?

Yes, that is correct, that we are looking at the potential for bioequivalence filing because this is absolutely identical to our 3-year.

There's no differences whatsoever other than less drug.

And the current bioequivalence data is a perfect match so far for the period of time that we've been running the PK studies.

So Dario, would you -- Dr. Dario Paggiarino, would you like to comment on that at all?

Yes.

It's -- again, in order to achieve a short duration, we basically reconfigure minimally the insert.

And the insert is essentially performing in vitro in a way equivalent and expected -- compared to the 3-year insert.

So as we collect the data, we're building confidence that this is an achievable goal.

Our next question comes from Suraj Kalia from Northland Securities.

So a bunch of questions, bear with me on this.

Either -- the first one either for Dr. Dario or for Nancy.

What was the BCVA 12 months in the second uveitis study?

I remember in the first one, you guys had given that number at 22.4% versus sham at 10.3%.

If you all can give the numbers in the second study?

Yes.

We have not -- we just unblinded this.

We have not done a subcut on that yet.

We would expect that we would announce and then obviously present those data at upcoming conferences.

However, Dario, you want to just comment -- I mean, given the performance that we've seen in the second study, we don't expect to see material differences.

Do you want to comment, Dario?

Yes.

These are -- again -- as you remember, these are patients who have relatively quiescent uveitis to begin with and so their baseline visual acuity is fairly good.

And indeed, we really don't expect a dramatic overall.

If you look at the whole population in each study, we don't expect a significant increase in visual acuity.

So that's really what we expect also for the second study.

Yes.

And let me just reiterate that, as Dr. Glenn Jaffe said.

Last year when we presented our 12-month data from the first study, when your baseline data in the majority of these patients is normal, it's pretty hard to improve on normal.

So these patients -- I just want to remind everyone, these studies were not recruited to measure BCVA.

It was recruited for incidents of recurrence of uveitis.

So that was the primary endpoint.

So I just want to caution -- and it's not even a secondary endpoint.

So I want to just caution that, so there is no statistical power given to BCVA.

Nevertheless, the data are interesting.

So we do expect that we'll be disclosing that as we begin to look at the data.

Got it.

Dr. Dario, maybe this is just more of an academic question.

My understanding always, specifically on IOP, in these patients is like -- the IOP can -- the standard deviation could be, whatever, 2 millimeters to 6 millimeters of mercury.

I guess, where I'm headed is, for the first Phase III study and the second Phase III study, I mean, we know what the mean is and we know what the p-values are.

Are the standard deviations of IOPs relatively similar between the 2 cohorts?

I don't recall significant differences in the standard deviation.

No.

The answer is no.

Okay.

And what was -- what is the longest -- what's the word I'm looking for, follow-up you'll have done in the first Phase III study?

And are you all in a position to give us -- I know there are 12-month data between the 2, which is pretty similar.

The longest follow-up from the first Phase I is touching the 2-year mark.

Any color you all can provide there?

Not really in terms of data.

I mean, there are patients that have reached the -- even the 3-year mark actually for the first study.

So -- but in terms of the data, we'll really have to have a complete data set in order to be able to really make a fair assessment of what the IOP trend.

I think that's what you are referring to.

Is the IOP trending in any way past the 12 months?

And I think at this point, it'll be too early to comment on that.

It wouldn't be fair to say after 12 months the curse[curve] start becoming somewhat acanthotic and -- or flattening out for lack of better words.

We are not in a position yet to say that.

Is that fair?

I can -- what I can say though is in talking with investigators, especially Glenn Jaffe recently, when you get to the 9-month time point, you really start to -- you pretty much have seen what patients are actually going to be a risk of developing an IOP increase.

And so my expectation is that after 12 months, we shouldn't really see a significant increase incremental to what we have seen so far.

So that's again based on the experience from investigators and clinicians like Glenn Jaffe.

Got it.

And Nancy, a multipronged question for you.

Help me understand the strategic rationale.

Obviously, you'll have -- I know you'll have done a pretty in-depth market analysis.

To the extent that you can, can you walk us through what are the concerns, if any, you all are hearing about pricing dynamics?

That's one.

The second part is, you all are obviously working on the 9-month implant and then you all are working on a bio-erodible one.

Why take it 3 years, 9 months bio-erodible?

Does it make sense, 3 years is already there and then leapfrog it to the bio-erodible one.

I'm curious on your strategic rationale to go down that route.

Yes.

Let me first clarify something.

For uveitis, the bio-erodible is being used in our collaboration agreements and in our TKI program for our 6 months -- and mostly, people are -- were aiming for 6 months on the bio-erodible.

For uveitis, we are going to market with the exact same device that we have with our 3-year.

So it's not -- remember, the 3-year is nonerodible.

And the good news is, is that with our partner Alimera, even though it's in DME, so let me caution it's different disease states, ILUVIEN continues to show very good safety with the 3-year nonerodible.

That being said, we do believe that there remains a market, as with almost every drug category I've ever been involved with, that doctors want treat -- dosing options.

So -- though the 3-year is very important, there still remains a need to have a shorter duration that's longer than the current generic steroids, which last about a month.

One of the competitors that last 2 to 3 months.

And yet, patients -- what doctors want is, they like it to go out longer.

So ideally, what we've heard consistently is, they would like to have -- they'll only use a generic first line.

Let me be very clear.

That's going to continue to be first-line use in the treatment of this disease.

Then after the patient is stabilized, and uveitis I'm talking now, they want to be able to go -- in some cases, they'll go right to the 3-year, but in some cases they want a stepping stone to be able to go to a 6 or 9 month, in this case, it looks like we're trending more to a 9-month, and then transition to the 3-year.

This is not a typical from any of the other disease state, whether it's hypertension, cardiovascular disease, depression.

I could go on and on.

Anytime you have a chronic disease, dosing options are important.

And we want to provide that flexibility to doctors.

I'm actually going to turn the pricing question over to Deb Jorn, who is in charge, of course, of all of our commercialization strategy.

So Deb?

Suraj, we have gone out and done pair research.

And as you may know, this is going to be under a medical benefit, not a drug benefit.

And speaking to those customers, what we found was that most of them indicated that the product profile, the disease being relatively limited patient population, but the need being highly unmet.

They saw the value of the product.

And at the end of those interviews, the question we would ask is how likely or unlikely are you to see this product being listed as a medical benefit under your coverage?

And in those groups of discussions, every pair we spoke to indicated that this would be something that would highly likely to be placed on their medical benefit formulary.

So with that in hand and the results, we're looking at our options in terms of pricing and coverage in a whole wide range of pair segments.

So pretty positive results.

I've been involved with a lot of products where you're looking at drug benefit and it certainly is a much more difficult negotiation.

Yes.

And I want to reiterate something to add to Deb's comments, which is that -- and I can't stress this enough because having been associated with many, many, many different drug categories and launches, when you're talking about preventing blindness, the payers take that very seriously as well.

So this is not a lifestyle drug, this is not something that is a disease that takes a long time to develop.

It's actually rather -- you can rather rapidly deteriorate the eyesight in uveitis.

So they take it very seriously.

And as a result, we don't expect serious pricing options -- pricing pushback.

Got it.

And finally, Nancy, and I'll hop back in queue.

You and I have talked off-line many times on OZURDEX.

I guess for the audience at large, can you frame your comments -- given everything you've seen from the 2 Phase III studies, help us -- kind of give us a holistic picture on where OZURDEX is, how their ramp rate was and what should people glean for pSivida or rather Durasert based on what OZURDEX is on, for the audience?

That would be great.

Okay.

Well, first, I'm going to ask you turn that one over to Deb as well as -- and -- as again, she is responsible for commercialization.

I just want to make one comment, which is, I can't stress enough, we've never done a head-to-head trial.

And of course, we are very cautious about the fact that -- I don't want to do a head-to-head comparison because it wouldn't be appropriate.

But in terms of commercial expectations and ramp, I'll turn that over to Deb.

Well, I go back to the market research that we conducted with TVG.

And what we saw when we spoke to retina and uveitis specialists was some level of desire to have something that lasted more than 3 months.

And their statement was that they could foresee patients being switched from OZURDEX or started with us perhaps after generic steroids.

So when asked for source of business, it was Retisert and OZURDEX.

Having said that, it's a little harder to tease out the penetration and the uptake because remember, OZURDEX has other indications.

But when you think about the amount of patients that are currently on OZURDEX and looking through the physician for a different option, we think the ramp will be higher than it may have been when OZURDEX first was introduced because the step added, if you will, in the paradigm going from injecting every 3 months to now being able to put something in that holds the line for hopefully 3 years, we've seen the data through 12 months, we believe that the ramp will be pretty strong.

Right now, the sales you probably saw the other day of OZURDEX came in for the full year 2017, out of those $311 million.

So depending upon the percent that you take of that in terms of what is uveitis, it's a pretty sizable business for the product.

Yes.

And just to add, that's global sales.

I want to caution that.

That is true.

That is global sales.

U.S. was I think -- I don't remember off the top of my head.

I think the...

(inaudible).

The next question comes from Yi Chen with H.C. Wainwright.

My first question is, so you mentioned that you have received highly positive feedback from specialists regarding the use of Durasert.

Can you tell us how many specialists you have reached out for this survey?

Okay.

For the initial survey, we did approximately 20 doctors.

10 were uveitis and 10 were retina.

However, having set up one-on-one meetings at the 3 recent major meetings, and the most recent being the Uveitis Meeting in January and the Hawaiian Eye Meeting, we've talked to, I don't know, 50 or more in the community.

And we haven't found anyone that had major pushback or concerns.

Some will mention -- they want to see in their own hands the IOP, but the broader community both in the formal research as well as in the informal meetings, weeks where we spent time with specialists at meetings, we have received quite positive feedback.

And Nancy, you want to add anything?

No, that sounds good.

No.

That's accurate.

Do you -- can you give us any rough idea, how many -- I mean, just for the specialists you have met with, how many posterior uveitis patients these doctors see on an annual basis, roughly?

I think it really depends.

The uveitis specialists would see a lot more and the retina guys less, right, because none of those patients might be referred.

But what we do see is the retina physicians tend to handle a larger percent than they're used to.

There's less need to refer.

I mean if we know what the prevalence is in the U.S. I don't know that I can break it down to exactly how many each of those particular specialists I spoke to see because I did unfortunately ask that exact question.

Let me add, Yi, that we anticipate buying the data, which allows us to break that down very specifically so that we can microtarget the physicians that are the high-value doctors.

And that's where, again, we're quite confident.

Again, Deb is truly an expert at this in terms of being able to go after or focus on the physicians that have the high-volume patient load, so that we can very efficiently commercialize this.

And again, I want to reiterate, technically, this is an orphan drug because the incidence is relatively small relative to other diseases and the number of physicians that treat it are relatively small.

So again, we don't expect a big outlay to be able to capture majority of the market -- or target a majority of the market.

Right.

I mean, once we buy the claims data, we've gotten high-level data, we know that the target audience is really tight but the claims data will allow us to see who is exactly coding for uveitis, plus other markers will be reviewed in picking the crème de la crème of writers and then, of course, we'll decile those doctors based on the claims data that we will know they're actually treating it on injections, albeit, of OZURDEX and/or other markers, so that we go to people who really are comfortable with injections, coding for uveitis and really therefore should be the crème de la crème of writers.

Have you heard from doctors -- any pushback from patients with phakic eyes, I mean, considering Durasert is a 3-year treatment that when the doctors tell the patient with phakic eyes that you may end up with cataract surgery pretty soon and then the patient will not adopt this treatment?

Yes.

We'll let Dr. Dario Paggiarino answer that question.

Yes.

Steroids are known whether they are injected intravitreally or they are released in a sustained release fashion.

I mean, they are known to produce cataract.

And I think, the -- obviously, there is a -- there is always a concern to produce cataract.

But the benefit-risk, I think, is something that really is important to highlight here because patients with uveitis, every time they have a relapse, a flare in their inflammation, they are at risk of losing photo receptors permanently.

And so their vision decrease is not recoverable.

So the discussion I understand that physicians -- clinicians have with the patients -- with phakic patients in particular, is really about options and about risk-benefit.

So cataract, obviously, it's a common side effect, as I said, expected, but it's also treatable.

It's also manageable fairly well today, as you know.

So again, in terms of risk-benefit, that's something that patients can understand, especially when they are faced with the prospect of losing sight irreversibly.

Got it.

My next question regarding the royalty revenue.

So in the current quarter, you just reported $196,000 comes from the Alimera sales of ILUVIEN.

And so that leaves the rest $276,000 coming from Retisert from Bausch & Lomb sales.

And so I know you previously mentioned that you expect the Retisert royalty to decline, but it seems that $276,000 is higher than the previous quarter's $245,000.

So is there any change in the trend of Retisert sales?

I think if you look back over the history, it's pretty variable.

So it's not really easy to predict.

I mean, I think, Retisert is obviously an earlier generation product.

It's been on the market for a long time.

It's a surgical procedure, so logic would suggest, eventually, over time, that it would decrease in terms of its use.

But it certainly in the last couple of years has been relatively steady.

There's also seasonality.

Typically in the third quarter, summer, less procedures.

I used to work at Bausch & Lomb.

So -- I mean, Retisert can be variable based on seasonality as well.

Last question in the queue comes from François Brisebois from Laidlaw.

Sorry, I got dropped off a couple of times.

I'm sorry if I missed this, but just wanted to hit a couple of quick ones, most of them have been asked.

But in terms of the reps, you said 8 to 10 to start.

Is there any expectations on when the hiring would start?

Deb, you want to answer that?

And by the way, let me just add, we still -- we very much anticipate to stay on track with what we've always said will be our launch time frame, which is in the first part of the first quarter of 2019, assuming FDA approval is a normal review process as we've outlined.

So go ahead, Deb.

Yes.

I mean, as Nancy indicated, right now, the go-to-market plan is projecting the launch in the January time frame of '19.

So we would foresee putting the management team up sooner but the reps probably out somewhere in that fourth quarter time frame, getting them trained and then ready for launch, right, because we wouldn't want them out too long without anything initially to promote.

And the great thing about contract sales organizations is they can move quickly.

So we will base it on how things develop as the review progresses because we will be in contract with the FDA and regulatory authorities as that would be -- is underway.

Okay.

Great.

That's helpful.

And then just on the 12 months data, it seems like -- in terms of the recurrence, it seems that it's not -- the reduction in recurrence is not quite what it was at 6 months.

And in the first trial, it seemed kind of steady through 6 months and 12 months.

Is that something that's worrisome at all or is that just have to do with sometimes also the amount of rescue medication that's given to some of these patients?

Certainly, it may have something to do with that.

But in terms of the differential between the active and the sham, it's actually maintained.

If you look at the 001 and -- both 001 and 005 and the difference between the 6 months of recurrence rate between active and sham in each of the studies, you can tell that -- although there are some difference because there are different studies in different populations, you can tell that the differential in terms of percent between the 2 treatment arms is very consistent, actually.

Yes.

And actually, François, just to add to that, remember as you look and actually this is continued to show in the 12 months data, the second study was done all in India.

And it's the sham arm -- actually, the active Durasert arm is remarkably consistent, both at 6 and 12 months and between the 2 studies.

It's the sham arm that is showing the differences.

And we suspect that we don't know.

Again, we're continuing to evaluate this, why the sham is performing better in the second study than the first study.

And I remember the first study was done mostly in the U.S. and Europe with a small portion in India.

The second study is done all in India.

So there's different treatment paradigms as -- and as well as the patients were less ill with -- or healthier eyes than in the first treatment.

So sham seems to be performing better in the second study.

But nevertheless, the p-value remains incredibly robust.

And despite -- one more thing.

Despite the fact that the sham is doing somewhat better if -- in the 005 India study, if you look at, again, the 12 months data, the recurrence rate in the sham now is 71.2%.

So it started to really catch up fairly quickly.

Yes.

No.

That's very helpful.

I appreciate that.

And then just lastly, quickly, in terms of the GLP, safety, PK for the shorter duration, is that pretty straightforward or are there any challenges there that could happen in manufacturing?

No.

It is pretty straightforward.

And I'm showing no further questions in the queue at this time.

I would like to turn the call back over to Nancy Lurker, President and CEO, for any closing remarks.

Thank you, everyone, for your time.

And again, I just want to reiterate how excited we are about our NDA filing as well as the additional data on our second study for 12 months, and we remain enthused about the different milestones and with our path forward in 2018.

So we look forward to keeping you updated, and thank you all for your time.

Ladies and gentlemen, this does conclude your program.

And you may all disconnect.

Everyone, have a great day.