KALA BIO Inc (KALA) 2018 Q4 法說會逐字稿

Good day, and welcome to Kala Pharmaceuticals Fourth Quarter 2018 Earnings Conference Call.

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

I would now like to turn the call over to Mary Reumuth, Chief Financial Officer for Kala Pharmaceuticals.

Please proceed.

Thank you, operator, and thank you all for participating in today's call.

Joining me from the company are Mark Iwicki, Chairman, President and Chief Executive Officer; Kim Brazzell, Chief Medical Officer; Todd Bazemore, Chief Operating Officer; and Hongming Chen, Chief Scientific Officer.

Today's call is being webcast live, and the webcast link can be found in the Investors & Media section on the Kala corporate website.

Today's call is also being recorded, and an archived recording will be available on our website, as indicated by our press release.

During this call, we will be referring to non-GAAP financial measures.

These non-GAAP measures are not prepared in accordance with generally accepted accounting principles.

A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is available in our year-end press release issued today, which can be found in the Investor Relations section of our website, www.kalarx.com.

On this call, we will make certain comments about Kala's future expectations, plans and prospects that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These statements will include observations associated with our commercial launch of INVELTYS in the U.S.; statements regarding our ongoing STRIDE 3 clinical trial; and the sufficiency of our cash resources.

These statements are based on the beliefs and expectations of management as of today.

Our actual results may differ materially from our expectations.

Investors should read carefully the risks and uncertainties described in today's press release as well as the risk factors included in the company's filings with the Securities and Exchange Commission, including, without limitation, the company's annual report on Form 10-K, which will be filed with the SEC before the market opens tomorrow and will be available on our corporate website, which identifies specific factors that may cause actual results or events to differ materially from those described in the forward-looking statement.

The content of this conference call contains time-sensitive information that is accurate only as of the date of the live call today, Monday, March 11, 2019.

The company undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.

I will now turn the call over to Kala's CEO, Mark Iwicki.

Mark?

Thank you, Mary.

Good afternoon, everyone, and thank you for joining us today.

Earlier today, Kala issued our financial results for the quarter and year ended December 31, 2018.

2018 was a landmark year for Kala.

In August, we received FDA approval for INVELTYS, the first and only twice-daily corticosteroid indicated for the treatment of postoperative inflammation and pain following any ocular surgery.

Following the approval, we completed the build-out of our commercial infrastructure for INVELTYS, including the on-boarding of a highly experienced ophthalmology specialty sales organization and payer account team.

INVELTYS was launched in the U.S. in January of this year, and the physician feedback in the first few weeks of launch has been positive.

And we are really pleased with the uptake in prescription volume, along with the progress made in gaining market access.

Todd Bazemore, Kala's Chief Operating Officer, will provide further details later in the call.

We've also made significant progress with KPI-121 0.25%, our product candidate for the temporary relief of the signs and symptoms of dry eye disease.

Based on the results from our 2 completed Phase III clinical trials, STRIDE 1 and STRIDE 2, and our Phase II clinical trial, we filed an NDA for KPI-121 0.25%.

The NDA was accepted for review by the FDA in December of 2018 and given a PDUFA target action date of August 15, 2019.

Enrollment also continues to progress as planned in our STRIDE 3 trial in dry eye disease, and we look forward to receiving top line data from STRIDE 3 anticipated in the fourth quarter of 2019.

In the fourth quarter of 2018, we strengthened our balance sheet with successful debt and equity financings that resulted in aggregate net proceeds of $123.6 million.

I will now turn the call over to Todd Bazemore, Kala's Chief Operating Officer, to discuss the INVELTYS launch.

Thank you, Mark, and good afternoon, everyone.

I'm pleased with the early days of the INVELTYS launch.

As many of you have seen from prescription data, the launch appears to be off to a good start.

Our goal during this early phase of launch is to ensure that physicians are gaining clinical experience with INVELTYS and that patients are able to fill their INVELTYS prescriptions at the pharmacy without restrictions.

Early clinical experience feedback from eye care professionals has been positive.

Based on the early feedback we've received, we believe clinicians are very receptive to INVELTYS' product profile.

We have heard from a number of our top prescribers that they are impressed with the efficacy of INVELTYS, including its strong results in inflammation.

INVELTYS has been available since early January, and we conducted our national launch meeting the last week of January.

We launched with a list price of $225 per bottle, and this compares to Lotemax suspension which has a list price of $237 per bottle.

We are pleased to report that in just the first 2 months, more than 4,000 prescriptions of INVELTYS have already been filled, according to Symphony data.

This represents a branded NRx share of 2.2% just 8 weeks into launch.

Scripts have been showing strong growth, with an average weekly growth rate of 56% since launch.

As we noted earlier this year, we have hired a very experienced team of 57 sales representatives who have, on average, over 8.5 years of ophthalmology experience in addition to an experienced sales management team that oversees them.

Our representatives have been focusing their efforts on high prescribing targets, with the majority of our sales calls and samples going to decile 5 through 10 eye care professionals, who currently comprise 89% of all INVELTYS prescriptions since launch.

The reps have been working with the offices to help ensure surgical protocol conversion pull-through, and our access team is working diligently to help ensure that the product is available at pharmacies and prescriptions are filled.

As you all are aware, a critical factor for product uptake at launch is payer market access.

We have already made significant progress in securing coverage in the early days of launch.

Now as a reminder, the ocular steroid market is approximately 50% commercial and 38% Medicare Part D coverage.

On the commercial coverage front, we have had several significant early wins and, as of today, have achieved unrestricted market access for approximately 1/3 of all lives covered by commercial payers.

These early wins account for a total of approximately 55 million commercial lives for which INVELTYS has unrestricted access.

The team also believes several additional plans will initiate coverage of INVELTYS in Q2, which would further increase our unrestricted access.

As for Medicare coverage, we were able to submit our bids in the fourth quarter of 2018 for the 2020 Medicare coverage cycle.

We are currently working through those bids with several large Part D health plans, and we plan to update you on future calls as those talks progress.

It is important to note that even as we were working through these bids, approximately 20% of all INVELTYS prescriptions filled since launch have been reimbursed by Medicare Part D plans.

In addition, remember that all patients have immediate access to INVELTYS through the use of our copay card program.

Commercial patients who use the card will pay as little as $35 for their prescription, and Medicare patients can choose to opt out of their Medicare benefit, thereby essentially becoming cash-pay patients and can use the card to pay as little as $55 for their prescription.

For context, the typical Medicare preferred brand copay level is approximately $60.

And to date, more than 3,000 patients have successfully utilized our copay program to fill their INVELTYS prescription.

In summary, I would say there are multiple positive leading indicators that we are off to a strong start.

It is still early in launch, and we have a lot of work ahead of us.

But I'm confident that we have a very competent team of experienced ophthalmology professionals that know this market well and will continue to execute on our key drivers.

I would now turn the call over to our Chief Medical Officer, Dr. Kim Brazzell, for an update on our dry eye disease program.

Thank you, Todd, and good afternoon, everyone.

As a reminder, in January of 2018, we announced top line results from our 2 Phase III clinical trials, STRIDE 1 and STRIDE 2, that evaluate the safety and efficacy of KPI-121 0.25% versus placebo in patients with dry eye disease.

In both trials, we achieved statistical significance for the prespecified primary sign endpoint of conjunctival hyperemia at Day 15.

In addition, we achieved statistical significance for the prespecified primary symptom endpoint of ocular discomfort at Day 15 in STRIDE 1, with a trend toward a treatment effect in STRIDE 2.

We also achieved statistical significance for a second prespecified primary endpoint of ocular discomfort severity at Day 15 in patients with more severe baseline discomfort in STRIDE 1, with a strong trend towards a treatment effect in STRIDE 2, both as a prespecified secondary endpoint.

Positive treatment effects were also observed for ocular discomfort severity at Day 8, a key prespecified secondary endpoint in both trials.

In October of 2018, we filed an NDA for KPI-121 0.25%.

The NDA submission was supported by data from STRIDE 1, STRIDE 2 and the Phase II trial.

In December, we announced that the NDA had been accepted for review by the FDA, with a PDUFA target action date of August 15, 2019.

If approved, KPI-121 0.25% is expected to be the first product indicated for the temporary relief of signs and symptoms of dry eye disease, which would also include the treatment of dry eye flares.

Also, based on FDA's recommendation, we have initiated an additional Phase III clinical trial, STRIDE 3. As we previously disclosed, we believe that we have identified key factors that contributed to the differences observed in the results from STRIDE 2 compared to those of STRIDE 1 and the Phase II trial, and we have accordingly made changes to the inclusion/exclusion criteria of STRIDE 3 that we believe will increase the probability of success of that trial.

The STRIDE 3 trial is enrolling on track, and we expect to report top line results in the fourth quarter of 2019.

I will now turn the call back to Mary Reumuth, our Chief Financial Officer, who will briefly discuss our financial results.

Thank you, Kim.

As we are early in the launch of INVELTYS, we will not be providing financial guidance, but I am pleased to provide our key financial highlights.

Our cash position as of December 31, 2018 was $170.9 million compared to $114.6 million as of December 31, 2017.

We anticipate that our existing cash will enable us to fund operations through at least mid-2020, with additional runway when including revenue from INVELTYS.

Our net loss was $25.2 million or $0.76 per share for the quarter ended December 31, 2018 compared to a net loss of $11.3 million or $0.46 per share for the same period in 2017.

Net loss for the full year ended December 31, 2018 was $66.7 million or $2.49 per share compared to a net loss of $42.2 million or $3.71 per share for the same period in 2017.

Please refer to today's press release for the weighted average number of shares used in the calculation of our net loss per share for the quarterly and annual periods discussed.

For the fourth quarter of 2018, our non-GAAP net loss was $22.7 million compared to $9.6 million for the same quarter of 2017.

For the year ended December 31, 2018, non-GAAP net loss was $57.5 million compared to $36.4 million for the same period of 2017.

Non-GAAP net loss excludes the impact of stock-based compensation, depreciation, noncash interest expense and the change in fair value of warrants.

Please see the press release for a full reconciliation of GAAP to non-GAAP financial measures.

Our R&D expenses for the fourth quarter of 2018 were $9.2 million compared to $5.9 million for the same period in 2017.

The increase in R&D expenses for the fourth quarter was primarily due to STRIDE 3 as well as increased headcount and costs in anticipation of the INVELTYS launch.

R&D expenses for the full year ended December 31, 2018 were $29.3 million compared to $29 million for the year ended December 31, 2017.

External costs associated with STRIDE 1 and 2 decreased during 2018 and were offset by costs associated with STRIDE 3 as well as an increase in headcount and costs in anticipation of the INVELTYS launch, stock-based compensation expense and the PDUFA fees paid in connection with our NDA for KPI-121 0.25%.

Non-GAAP R&D expenses were $8.6 million for the fourth quarter of 2018 compared to $5.3 million for the same period in 2017.

For the full year ended December 31, 2018, non-GAAP R&D expenses were $26.3 million compared to $27.5 million for the same period in 2017.

For the fourth quarter of 2018, SG&A expenses were $14.3 million compared to $5.3 million for the same period in 2017.

SG&A expenses for the full year ended December 31, 2018 were $35.4 million compared to $10.9 million for the year ended December 31, 2017.

The increase in SG&A expenses for the quarter ended December 31, 2018 compared to the same period in 2017 was primarily due to costs associated with hiring additional personnel, building our commercial organization, external costs incurred in advance of the launch of INVELTYS in January 2019 and an increase in facility costs due to the commencement of the lease for our new corporate headquarters.

For the year ended December 31, 2018 compared to the same period in 2017, the increase in costs was a result of stock compensation expense associated with stock options granted during the year and external costs associated with operating as a public company for a full year, in addition to the items just discussed, which resulted in an increase in SG&A expenses for the fourth quarter of 2018 compared to the same period in 2017.

Non-GAAP SG&A expenses were $12.7 million for the quarter ended December 31, 2018 compared to $4.3 million for the same period in 2017.

For the full year ended December 31, 2018, non-GAAP SG&A expenses were $29.4 million compared to $8.6 million for the same period in 2017.

Our operating loss for the fourth quarter of 2018 was $23.6 million compared to $11.1 million for the same period in 2017.

Operating loss for the full year ended December 31, 2018 was $64.7 million compared to $39.9 million for the year ended December 31, 2017.

Non-GAAP operating loss was $21.3 million (sic) [$21.2 million] for the fourth quarter of 2018 compared to $9.6 million for the same period in 2017.

For the full year ended December 31, 2018, non-GAAP operating loss was $55.8 million compared to $36 million for the same period in 2017.

I will now turn the call back to Mark.

Thanks, Mary.

We're very pleased with the progress that we've made in 2018 with the approval of INVELTYS, the filing and acceptance of the KPI-121 0.25% NDA and the initiation [of STRIDE] 3 trial.

We've already made tremendous progress in the first few months of the year, with the launch of INVELTYS proceeding really well.

We believe that 2019 will be another exciting year for Kala, with further progress on the INVELTYS launch as well as the KPI-121 0.25% PDUFA in August and STRIDE 3 results by the end of the year.

That concludes our prepared remarks for today.

Operator, we're ready to take questions.

(Operator Instructions) We have a question from David Maris with Wells Fargo.

I just wanted to ask about the recent approval from Bausch and how you view that competitively.

Does that change the dynamics at all?

Or is it pretty much the same as you expected it?

Good question.

I don't think it changes the dynamic.

We've been planning and aware of that potential launch.

We're expecting it to come sometime in the second quarter of this year.

And I think importantly to note, that product was approved with TID dosing.

So it still does not match the label for INVELTYS, which is still the only ocular steroid approved for twice-a-day dosing.

And just as a follow-up to that, I mean, I'm sure -- is there anything that you're aware of that they can counter detail on?

I mean, you have very good efficacy and you have fewer dose -- lower dose burden.

I mean, to me, that would seem, from a payer standpoint, if you can be competitive price-wise, that that would be a no-brainer.

But are you hearing any pushback or perceiving any pushback?

Nothing at this point, David.

Our next question comes from Liana Moussatos with Wedbush.

So with an August 15 PDUFA for dry eye, when do you think STRIDE 3 data in Q4 -- will it be early in Q4, late in Q4?

Do you have any idea yet?

Liana, this is Kim.

Our guidance has been, in Q4, we're looking towards the end of Q4, but it's still early in terms of recruitment.

Recruitment's on track, so we'll monitor that as we go.

But right now, everything is as planned.

(Operator Instructions) Our next question comes from Yi Chen with H.C. Wainwright.

Bausch Health Company expects to have loss of exclusivity on Lotemax in second half of '19 or first half of 2020.

How much impact do you expect coming from generic Lotemax?

Great question.

We expect most impact, as you would imagine, coming from the launch of generic Lotemax to be on Lotemax itself.

We have been very successful early in launch in contracting for really good access for INVELTYS and continue -- expect to continue to improve that access over time.

And so we would not expect an impact on INVELTYS but rather a direct impact on Lotemax.

A quick financial question.

Will the 10-K be filed today?

It will be filed before market tomorrow.

At this time, I'm showing no further questions.

I'd like to turn the call back over for any closing remarks.

Well, I just would like to say thank you to everyone for joining the call and for the questions.

And we really appreciate your following and support of Kala, and we look forward to updating everyone soon.

Thank you, and have a great evening.

Ladies and gentlemen, thank you for your participation in today's conference.

This does conclude the program.

You may now disconnect.

Everyone, have a great day.