IVERIC bio Inc (ISEE) 2016 Q4 法說會逐字稿

Good day and welcome to the Ophthotech Corporation fourth-quarter 2016 and year-end conference. Today's conference is being recorded.

At this time, I would like to turn the conference over to Ms. Kathy Galante. Please go ahead, ma'am.

Good morning and welcome to our fourth-quarter year-end 2016 earnings call. Joining me today, I have Dr. David Guyer, Chief Executive Officer and Chairman of Ophthotech; Mr. Glenn Sblendorio, President and Chief Financial Officer.

Before we begin, I would like to remind you that today we will be making statements relating to Ophthotech's future expectations regarding operational, financial, and development matters, including statements regarding our projected use of cash and cash balances; the timing, progress, and results of the Fovista Phase 3 clinical program; and the implementation of our new strategic plan.

These statements constitute forward-looking statements for the purpose of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. These statements cover many events and matters that are subject to various risks that could cause actual results to differ materially from those expressed in any forward-looking statement, including risks related to the wind-down of various clinical trials and manufacturing commitments; the negotiation and consummation of in-licensed and/or acquisition transactions; and availability of data from the clinical trials.

I refer you to our SEC filings and, in particular, to the risk factors section in our quarterly report on Form 10-Q filed on November 8, 2016, for a detailed description of the risk factors affecting our business. In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we disclaim any obligation to do so even if our views do change.

I would now like to turn the call over to David.

Thanks, Kathy. And thank you to everyone for joining us on the call this morning. Earlier this month, we announced that the Company initiated a plan to review strategic alternatives in order to maximize shareholder value.

Without limiting any option, the principal focus of the plan, based on the Company's deep expertise and experience in ophthalmology, is to actively explore opportunities to obtain rights to additional products, product candidates, and technologies to treat ophthalmic diseases, particularly those of the back of the eye. We are particularly interested in obtaining rights to product candidates for ocular indications with a high unmet medical need.

We believe that with our expertise and experience in ophthalmology, we are well positioned to explore and critically evaluate a variety of opportunities. We also believe that our focus on diseases of the eye and our experienced management team will make us an attractive collaborator or acquirer for companies seeking to out-license or sell rights to products, product candidates, or technologies. We have also previously announced that we engaged Leerink Partners as a financial advisor to assist management and the Board in evaluating the Company's strategic alternatives.

As part of our updated business plan, we are also reviewing whether there is any scientific rationale for potentially developing our current product candidates Fovista and Zimura in one or more new ophthalmic indications where there is a high unmet need. Our goal as part of this overall plan is to align our corporate resources relative to pursuing development of a potentially broader product pipeline. In the meantime, we are also continuing to develop Zimura in wet AMD and geographic atrophy, a form of dry AMD.

Our future development pipeline could include additional product candidates for technologies that we may acquire or in-license and/or further develop into Fovista or Zimura. As part of our strategic review, we may also consider other alternatives, including acquisition of products, product candidates, or technologies or other assets outside of ophthalmology; mergers or other transactions involving our Company as a whole; collaboration transactions; or the license, sale or divestiture of some viruses. We cannot be sure when or if this strategic review process will result in any type of transaction.

Top-line data from our remaining Phase 3 trial for Fovista, also known as OPH1004 investigating Fovista in combination with Eylea or Avastin, is expected in the second half of 2017. We plan to reassess our existing Fovista and Zimura development programs throughout 2017 as the implementation of our updated business plan progresses and evolves.

We expect that our reassessment of our Fovista development program for the treatment of wet AMD will be primarily determined by the initial top-line data from the OPH1004 trial. And that our reassessment of our Zimura development program may be particularly affected by the results of a competitor's Phase 3 clinical trial of a complement inhibitor being studied for the treatment of geographic atrophy.

As a result of this reassessment, we may modify, expand, or terminate some or all of these development programs for clinical trials at any time. Data from both our OPH1004 trial and our competitor's Phase 3 trial for the treatment of geographic atrophy are expected during the second half of 2017.

As part of implementing the strategic plan, we are pleased that Glenn Sblendorio recently assumed the role of President. We were also glad to announce the promotion of Keith Westby to Senior Vice President and Chief Operating Officer. In a moment, Glenn will review the steps that we have taken to date to streamline our operations, to leverage our capabilities and expertise, and identify value-creating opportunities for shareholders.

In December 2016, we announced initial top-line data from two pivotal Phase 3 clinical trials that evaluated the safety and efficacy of Fovista administered in combination with monthly Lucentis anti-VEGF therapy compared to monthly Lucentis monotherapy for the treatment of wet AMD. These studies are known also as OPH1002 and OPH1003.

The prespecified primary endpoint of mean change in visual acuity at 12 months was not achieved for either trial. Moreover, we did not observe any clinically meaningful visual benefit when Fovista 1.5 milligrams was added to a monthly regimen of Lucentis therapy for any subgroup of patients that we have analyzed from these two pivotal trials, including subgroups based on baseline visual acuity, baseline lesion size, or the amount of the classic component of corneal vascularization at baseline.

We have stopped treating patients in the OPH1002 and OPH1003 trial. We have also ceased treating patients in the Fovista expansion study.

I will turn the call over now to Glenn.

Thank you, David, and good morning, everybody. First, I'm going to cover a brief update on the financial results of operations. Collaboration revenues for the quarter ended December 31, 2016, which we recognized under the Novartis agreement, was $5.3 million, an increase of $0.5 million versus the same period in 2015.

The increase in the quarter related primarily to an increase in drug shipments for Novartis. Collaboration revenue for the year ended December 31, 2016, was $50.9 million, a decrease of $0.6 million versus 2015.

Research and development expenses were $59.4 million for the quarter ended December 31, 2016. This compared to $33.9 million for the same period in 2015. Research and development expenses were $196.3 million for the year ended December 31, 2016, compared to $131 million for 2015.

The increase in research and development expenses in both the quarter and the year ended December 31, 2016, related to increased costs associated with our Fovista program, which includes manufacturing activities, our Phase 3 clinical program, and the Fovista expansion study as well as increased compensation expenses associated with additional research and development staffing.

General and administrative expenses were $13 million for the quarter ended December 31, 2016, compared to $12.1 million for the same period in 2015. General and administrative expenses were $50.2 million for the year ended December 31, 2016, compared to $44 million for 2015.

The increase in general and administrative expenses in both the quarter and the year ended December 31, 2016, related primarily to increased costs to support the expansion of the Company's operation, additional staffing, and increased share-based compensation.

The Company reported a net loss for the quarter December 31, 2016, of $66.3 million or $1.86 per diluted share. This compared to a net loss of $35.6 million or $1.02 per diluted share for 2015.

The Company reported a net loss for the year December 31, 2016, of $193.4 million or $5.45 per diluted share. This compared to a net loss of $105.7 million or $3.06 per diluted share for 2015. As a note, the fully diluted weighted average shares outstanding for the quarter ended December 31, 2016, were 35.7 million.

Now turning to the balance sheet, cash, cash equivalents, and available-for-sale securities totaled $289.3 million at December 31, 2016. Of the $289.3 million cash resources at the end of 2016, approximately $100 million to $115 million is committed.

I will now provide additional details around the Company's financial commitments and decisions. Beginning at the end of the fourth quarter and continuing into 2017, we have aggressively begun a process to reduce our expenses and any ongoing commitments related to our Fovista OPH1002 and OPH1003 trial as well as the Fovista expansion study. We also terminated our manufacturing commitments for future supply of Fovista.

These efforts included the following actions: a planned reduction of the workforce by approximately 80%; terminating our facility leases; immediately terminating and winding down our Fovista OPH1002 and OPH1003 clinical trial; immediately terminating our Fovista expansion study; and canceling our Fovista manufacturing commitments.

These decisions were promptly taken and will be largely completed by the second quarter of this year. We expect that these decisions will commit between $85 million and $95 million of our year-end cash, with Fovista-related spending accounting for approximately 65% of the total.

In addition, other efforts during 2017 will focus on the completion of Fovista OPH1004, with data expected to be available in the second half of 2017. This at an anticipated cost of approximately $15 million to $20 million. When you add both numbers that I just spoke about, that ties back into the total commitment of $100 million to $115 million that I mentioned earlier.

As David mentioned his commentary, we are also reviewing whether there is any scientific rationale for potentially developing our current product candidates Fovista and Zimura in one or new ophthalmic indications where there is high unmet need. He also mentioned that our future development pipeline could include additional product candidates or technologies that we may acquire and/or in-license.

This is in addition to any further development of Fovista or Zimura. Consequently, we are not providing any financial estimate of these initiatives until we have further information and data.

The organization that remains will consist of approximately 30 people who we believe have the expertise and experience in ophthalmology to explore and critically evaluate a variety of opportunity. We estimate the cost of these people at approximately $1 million cash per month. The infrastructure to support the ongoing efforts is also estimated at $1 million per month.

I would like to thank you and turn the call back over to David.

Thank you, Glenn. And thank you for your time this morning, everyone. We will now turn the call over to the operator so we can open up the lines for any questions.

(Operator Instructions) Yigal Nochomovitz, Citigroup.

Thanks for taking the questions. Can you say, Glenn, how much of the $100 million to $115 million in this sort of sunk cost is tied to the Eylea-Avastin wind-down?

Yes, I can. It's $15 million to $20 million is our estimate. What I just broke down were really two pieces: those costs related to Fovista 1002, 1003, and the FDS and the manufacturing around that. That was the $85 million to $95 million.

On top of that, for 1004, we estimate $50 million to $20 million. So if you add the $85 million and the $15 million at the low end, that comes to $100 million. And then the $95 million and $20 million, that comes to the $115 million. But specifically for your question, 1004: $15 million to $20 million.

Okay, thanks. And David, I just wanted to get some more clarity on the Avastin-Eylea wind-down. And obviously, you mentioned that the Lucentis studies didn't show any meaningful benefit, even in the drilldown on all the subgroups.

So if you could just give us a bit better understanding of why we should expect any possibility of success in that study, given two large failed studies with Lucentis?

First, as you said, there have been two failed studies with Lucentis. There's also the Regeneron failed trial. So there have been now three that question the target of Eylea for wet AMD. So I think one must say that that evidence suggests that it's unlikely that you see a benefit in a further trial against PDPF as a target.

Nevertheless, we have a different anti-VEGF agent as well as regiment. The trial was completely recruited, almost very close to conclusion. There were no safety issues in the Lucentis trials of magnitude. We spoke with many biostatisticians, clinicians; and after extensive discussion, it was felt, because we were so close to data, that it made sense, in addition to a commitment to Novartis, our partner, to continue and see the results.

Okay, thanks. And then with regard to possible in-licensure of assets or acquisition of other companies, potentially, where do you draw the line there in terms of data suppression? Are you going to look for a Phase 2 data set that has got randomized data similar to what you had in Fovista, or is the bar lower in terms of what you might look at?

First, as we said in our strategic review, everything is on the table. We are in the very early stages of review, although we have seen quite a lot of assets, more than one would expect in such an early time frame.

And it is really too early to answer such a question. Obviously, we would like to see something in the Phase 2 arena, certainly in the clinical arena. And we are looking more back of the eye, but we also will expand the search throughout the eye.

And so we are really looking at everything, again, very early and very extensively. Everything is still on the table. As soon as we have anything, we will obviously let everyone know.

Okay, thank you very much.

Tyler Van Buren, Cowen and Company.

Thanks for taking my questions. My first question is in your prepared remarks, you seemed pretty committed to going out and using the remaining cash to finding or in-licensing assets. Just wanted to get your thoughts on potentially returning cash to shareholders. Is that completely off the table? And why would you decide against that? You obviously, I guess, must be seeing some really interesting assets out there.

And secondly, with respect to your comments on the scientific rationale on Fovista and Zimura, I get Fovista. But what has changed your thinking on Zimura lately? Is it just more a matter of being capital-constrained and obviously having a big trial reading out at the end of the year that will help inform your decision?

And is that clinical trial still full speed ahead? In terms of timing, I believe clinicaltrials.gov said it could complete at the end of 2018. So curious to get a status on that.

So to answer your first question is, and I think we've been very careful to say, that we do not limit any option that makes sense for shareholders. However, the focus is to look at opportunities in ophthalmology. I think that broad statement puts everything on the table that we are looking at.

In addition, we did hire a financial advisor, Leerink Partners, to help us with that. It's early days and I think we are evaluating everything to see what makes sense. I can't specifically comment on any particular strategy until we get a little bit further, but those are the carefully selected words we used in the prepared statement.

As far as your question on Zimura, as we said in the opening statement, both a Phase 2 wet trial that will include a polyploidal vasculopathy arm, which [includes] the complement-mediated form of wet AMD as well as the geographic atrophy dry are ongoing.

We are early, very early, for improvement in both of those trials. But I think in any strategic review, it is important to review not only any potential external assets that we would bring in, but also to look at them in the context of internally. So we will -- that's what we meant by reviewing it.

Now, we have, obviously, some information from a competitor of whether the mechanism of action is successful or not. And that will be one thing that we will look at in determining whether to expand, demand, or terminate any of the ongoing trials throughout this year. In addition to what we might see in a strategic review and how our internal programs stack up when we compare them in that type of an analysis.

Understood, thanks so much.

Anupam Rama, JPMorgan.

Thanks for taking the question. Just on Zimura in geographic atrophy, is there any sense, a way to get earlier data to get a better sense of the activity of Zimura itself? Or is this really based on competitor data to gauge what's going to happen with the program?

So geographic atrophy, dry AMD, it's hard to get a very early gauge, although our trial does have an interim analysis. It's the competitor's trial that will have a readout before we reach that point since, as I said, we are very early in our recruitment in our trial, still.

So it's more about the timing of data. And obviously, they are different compounds, but we will be more bullish if we see positive results from the competitor in a similar mechanism of action. [We can't see it], and we would be much less bullish if we see a failure there because it obviously questions the mechanism. But it's more about the timing, that that data set will be out before our interim.

It's very hard to really get any meaningful data in this disease. It's very early. So I don't think there's anything we can do to get anything earlier internally.

Thanks so much for taking the question.

Yatin Suneja, SunTrust.

This is David Kwon on for Yatin Suneja. Just going along on the Zimura question in dry AMD, could you just help us understand the market opportunity of this geographic atrophy subset? Overall, what proportion of dry AMD patients have GA, and who might be a good candidate for Zimura?

Sure. I'm going to have Kourous answer that one.

Geographic atrophy is the end stage of the dry age-related macular degeneration. Many times, it is bilateral and one of the main reasons for the patient losing vision in dry macular degeneration.

So many patients develop small areas of geographic atrophy that over time -- as you know, this is a chronic condition, and over time, these guys grow. So I think there is a good number of patients with wet macular degeneration that would be requiring treatment if we show that it is clinically effective.

Thank you. Just also maybe at a very high level, maybe the type of product candidate that you might pursue? You mentioned you are exploring any type of opportunities. What that include not just small molecules, but other type of modalities, including gene therapy?

Everything is on the table right now as far as front of the eye, back of the eye. I really think we think we have more of an emphasis on back of the eye. We will look at everything there, all types of molecules that you've just [guessed] it, and various diseases, various [safety cell]. So right now, everything is still on the table. Really too early in the process to give much description right now.

Great. Thank you, David.

Stephen Willey, Stifel.

Just following up on Zimura, just wondering if you can tell us whether or not the inclusion/exclusion criteria of the study that you have ongoing right now is comparable to the competitive trials that are ongoing. I'm just trying to better understand what the readthrough actually means here.

Inclusion criteria could become -- is comparable, us and the competitor trial.

Okay. Then maybe just a financial question for Glenn. There's still quite a bit of Novartis-derived deferred revenue on the balance sheet, and just wondering when you choose to recognize that as revenue. I'm guessing the amortization schedule here is going to end at some point.

Obviously, we would continue to amortize it if the collaboration went on. If the collaboration reached an endpoint, we would probably account for the deferred revenue at that point in time.

But we are not there yet, so we are continuing our current amortization schedule, which stretches out over the life of the product, which is the IP life. So any decision by Novartis obviously will impact how we account for that.

Okay, thanks for taking the questions.

I think that's the end of the questions, so thank you all very much for your attention. Bye now.

And this concludes today's call. Thank you for your participation. You may now disconnect.