EyePoint Pharmaceuticals, Inc. (EYPT) Q4 2017 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. And welcome to the pSivida Fourth Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we’ll conduct the question-and-answer-session and instructions will follow at that time [Operator Instructions]. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Mr. Doug Sherk. Sir, you may begin.

Thank you, Skyler, and good afternoon everyone. Thank you for joining us today to review pSivida's fiscal 2017 fourth quarter and full results, which ended June 30, 2017, as well as recent corporate developments. Making prepared remarks on today's call are Nancy Lurker, pSivida's President as well as Len Ross, Vice President of Finance and Chief Accounting Officer. In addition, Dr. Dario Paggiarino, Vice President, Chief Medical Officer, is with us this afternoon 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 could impact our future results and financial conditions, 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. 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 2017 fiscal fourth quarter and full year results. Our recent developments and our initial thoughts for our fiscal 2018 anticipated milestones. In addition to Len and Dario, I'd also like to introduce this afternoon Gregg Beloff, who has recently joined the pSivida team as Chief Financial Advisor. Gregg brings more than 25-years of experience in a range of capital market, strategic and operating roles within the biotechnology sector, including serving as CFO of multiple publicly-traded companies. I, along with the Board of Directors, felt it was important to add Gregg with his proven track record of driving shareholder returns during this pivotal time as we move pSivida towards our goal of being a fully integrated pharmaceutical company. Len Ross is continuing in his role as the Company's Principle Financial and Accounting Officer. So, welcome Gregg. It's been a year since I was appointed CEO of pSivida. When I accepted the appointment, the Board gave me two key directives; first, was to lead the organization into being a fully integrated commercial-stage pharmaceutical enterprise; and the second, was to increase of productivity of our proprietary technology. To achieve these objectives, shortly after I started, we laid out a series of regulatory, clinical, collaboration and operating goals for the fiscal year 2017. Today as in reports, that we met or exceeded every one of the objectives that we put forward last fall. We set a high bar and I'm especially proud of the pSivida team for their deep commitment and tireless efforts as we achieved all of our desired fiscal year 2017 milestones, and on time. I'll begin with our Durasert three-year for posterior segment uveitis candidate and then move on to the other programs. This is our most advanced clinical program and in June we shared the successful outcome of our second Phase 3 trial of Durasert three-year treatment for posterior segment uveitis. The study, which involves 153 patients, successfully achieved the primary efficacy endpoint with the p-value of less than 0.001 for the prevention of recurrence of posterior uveitis at six months. These results confirm the efficacy demonstrated in our first Phase 3 study. Since the release of the results in June, we've begun the process to file the Durasert NDA submission. During our current fiscal quarter, we've been in communication with the FDA and have received positive written responses to questions we presented to the agency regarding the submission. Based on these positive written responses, a face-to-face meeting with the FDA was unnecessary and we accepted the FDA comments as official meeting minutes. Given this feedback and the success of our second Phase 3 trial, we are moving forward with executing our submission plan. We are aiming to file by the end of December, but we want to put our best efforts forward so we have built a couple of extra weeks into our plans, which could possibly take us into early January. In addition, I'd like to note that we believe pSivida will qualify as the first time small company filer, so we have filed the necessary waiver documents. If we meet all of the criteria and are approved, we would eliminate the NDA filing fee of savings of approximately $2 million. 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, all of whom have few options to treat this chronic inflammatory disease, which as a reminder, is the third leading cause of blindness. The market research that we conducted with U.S. based retina and uveitis specialists, which only referred to the first Phase 3 data, we’re overwhelmingly positive with substantially high levels of [intent] to use. These specialists view the Durasert three-year insert as an important addition to their armamentarium, given its ability to provide consistent long-term control of chronic posterior uveitis versus current treatment options. Less recurrences or flares were perceived as important for preserving vision over the long term. During the fourth quarter and the past few weeks, we were also honored to have leading specialist within Durasert data at leading industry conferences, including the Association for Research in Vision and Ophthalmology, the American Society of Retinal Specialists Annual Meeting in August, which is held in Boston and just last week at the EURETINA Congress held in Barcelona, Spain. Also, an abstract title through fluocinolone acetonide intravitreal insert in non-infectious posterior segment uveitis, 12-month safety results, will be presented in November at the American Academy of Ophthalmology Annual Meeting being held in New Orleans. The data will be presented by Dr. Careen Yen Lowder who is currently with the Cleveland Clinic Cole Eye Institute. Dr. Lowder, who along with the others that have presented data is one of the many highly respected key opinion leaders raising the awareness of Durasert through uveitis. In other recent developments, we amended the existing collaboration agreement for ILUVIEN. And as a result, we changed the payment terms to a royalty on sale pay to pSivida we don't significantly improve financial terms for the Company, beginning in this first quarter of fiscal 2018, as compared to the previous agreement. And we also granted regulatory and commercial rights to Durasert in Europe to Middle East and Africa to foster a potential expedited launch pending approval. Critical to our long-term growth prospects, we retained the commercial rights for posterior segment uveitis in all other countries, including the biggest market opportunity, the U.S. Remember this is an orphan disease so I do not expect that we will meet a sizable contract sales force. And let me reiterate, we do plan to launch this ourselves. But we expect eight to 10 reps at launch and then perhaps 15 to 20 reps over the longer term to cover the uveitis specialist in the U.S. I believe that this expected small field force, couples with a favorable gross margin, will improve the product’s profitability. We are in the process of developing a go-to-market plan and we will share this in greater detail as we near the expected launch. If you recall, a key goal of mine when we joined pSivida is to leverage our proven technology and enter into collaboration agreement with leading pharmaceutical companies. We signed one such agreement so far in calendar 2017, and we are working on others diligently. We're confident that we’ll be able to announce others by the end of the calendar year. We’ve also made significant strides with our next generation Durasert shorter duration product for uveitis. We've mentioned before that having a shorter duration product in addition to our three-year product has significant value for dispositions as they treat their patients. This project remains on track and we expect to advance the product through submission enabling pre-clinical studies during the current fiscal year. We also saw progress with our Durasert implant for severe osteoarthritis of the knee. As we reported the Hospital for Special Sugary, or HSS in New York and pSivida, announced the opening of an IND in support of an investigator-sponsored clinical study of Durasert to treat severe OA of the knee. The Durasert implant is designed to provide long-term pain relief for server knee OA. This can potentially benefit a percentage of the patients that need to delay a total knee replacement, especially for those who need to improve their health or lose weight prior to meet surgery. And let me remind you that there are approximately 4 million patients in the U.S. who receive knee injections each year for pain and around 600,000 total knee replacements performed each year in the U.S. alone. The final patient was enrolled in April, and currently we expect HSS to report the initial 24-week data no later than December. We are continuing to have discussions with HSS about a Phase 2 study. Of note, our shorter duration for uveitis product, as well as our collaboration outreach efforts, weren’t even being contemplated a year ago and illustrates the change and progress implemented by our team to better leverage the investments made over the years. With that, I'll turn the call over to Len for a review of our financial performance. Len?

Thank you, Nancy, and good afternoon everyone. I will briefly review our fiscal fourth quarter and full fiscal year results that we reported following today's close. Revenue for the fourth fiscal quarter ended June 30, 2017 was 701,000 compared to 304,000 for the prior year quarter. Fourth quarter operating expenses were $6.8 million for the three months ended June 30, 2017, as well as for the prior year period. The net loss for the quarter ended June 30, 2017 was $6.1 million or $0.16 per share compared to a net loss of $6.4 million or $0.19 per share for the prior year quarter. During the fourth quarter, net cash used in operations totaled approximately $4.5 million. During the fiscal 2017 fourth quarter, we issued approximately 3.7 million shares of common stock for gross proceeds of $6.4 million through the utilization of our existing at-the-market or ATM program. At June 30, 2017, we had just under 39.4 million common shares outstanding, and our cash and cash equivalents totaled $16.9 million. Revenue for the full year ended June 30, 2017 was $7.5 million compared to $1.6 million for the prior year. The year-over-year increase was primarily attributable to the $5.6 million of revenue recognized in our fiscal second quarter upon the termination of our Pfizer collaboration agreement. The net loss for the full year ended June 30, 2017 was $18.5 million or $0.52 per share compared to a net loss of $21.5 million or $0.68 per share for the prior year. I'll now turn the call back over to Nancy for her closing comments.

Thanks, Len. Before opening the call up to questions, I'd like to highlight several upcoming milestones. As we continue to build long-term value for shareholders, we expect to file the Durasert NDA in the U.S. in late December or early January. We will be announcing the 12-month readout of efficacy and safety results from our second Phase 3 clinical trial of three-year uveitis. Leading uveitis experts will be presenting clinical study data at leading medical conferences. We will advance the development of a shorter duration Durasert for uveitis through submission-enabling pre-clinical studies. We will continue to foster existing collaborations with biopharmaceutical companies, as well as enter into others. And we are looking forward to HSS reporting initial 24-week data of the Phase 1 knee osteoarthritis study. In summary, our trajectory has clearly changed. The reprioritization of pSivida's development program has increased the number of shots on goal. We have a number of catalysts over the next few months, and I look forward to seeing some of you tomorrow during our presentation at the Rodman & Renshaw Global Investment Conference. Operator, we're ready to take questions.

[Operator Instructions] And our first question comes from Suraj Kalia with Northland Securities. Your line is open.

Nancy, lot of stuff going on, let me see if I can compartmentalize this and get my bearings right. On Durasert, still no advisory panel needed. Is that a fair assessment?

No, we've never needed an advisory panel, and there will not be one.

In terms of Type 2 filing status by Alimera, any update on that? Maybe I missed in your prepared commentary.

We generally don't comment on Alimera’s, on their own announcements and projections. But I think it's okay for me to say, they've gone public with the fact they expect to file in several countries in first quarter of 2019, I believe.

And Nancy final question, and I'll hop back…

Suraj, it's filed first quarter of 2018. And then it would be for up to a year review, depending on the country, it could be less.

And Nancy, final question and I'll hop back in the queue. And admittedly, this is a multipronged question and I would completely understand if there are some elements to fit that you might not want to be talked about right now. So the osteoarthritis product, I think, so you know my viewpoint. I consider this as one of the biggest call options on your stock. I heard you say 24-week data presented in December. Can you give us some more clarity? What all data will be presented, the PPA profile, dosing, number of implants for patient, pain as a function of time. Just as going to be giving us some additional granularity? Or what should we plan for in December?

Yes. So let me just say that again this is an IND sponsored study. So we don't have complete control over it. So I want to just put that caveat there. However, the last patient reports out in October, right around mid-October. And so we want to give them obviously a little bit of time to clean the data and crunch the data, that's why we expect that it could be, let's just say, November -- at the latest possibly December before the results are announced. And again, I want to reiterate, we don't control this. This is an IND and investigator-sponsored study. I would expect that we would see data on the regularly scheduled visits where the patients came in. And there is pain-scores that are being taken on a regular basis, as well as safety data related to the movement of the screw, as well as systemic exposure to dexamethasone. Those will be the main things, is efficacy on pain and safety related to the placement of the implant and the screw.

And forgive me Nancy, my memory fails me here. Is it the pain that is going to be -- the data that is going to be presented? Is there going to be some vast coarse that are going to be presented in this initial Phase 1 data?

Well, I can tell you that they use the different pain measures. Again, a well-validated one other than the one that is often used, which is WOMAC. I believe they're using KOOS score and so I would expect that those data would be presented.

And finally, would you all be in a position after this data is presented, let's assume the six patients, the data I don't know whatever the null hypothesis was, right? 50% reduction in pain at 24 weeks and I'm just cooking up numbers. But let's say all of those things fall in line. And we have somewhat of a good understanding of the dosing of the PK profile. Would you all be positioned to start talking about a Phase 2 at that point? Would it be independently handled? Would you all go and seek out some large ortho partner for Phase 2? Any color on that front would be great? Thank you for taking my questions.

So let me just say this. We are in active discussions with HSS about structuring a collaboration arrangement with them. And so the specifics of that I am not prepared to disclose. But certainly that is something that we've got regularly scheduled calls around and meetings around. In terms of the specifics, in terms of how that would work, it's too premature at this point, Suraj. However, let me reiterate, we remain very bullish about this opportunity for us. And as I mentioned, it's a very-very large market opportunity. There's a high -- remains a very high unmet need. And certainly, if you look at what physicians are asking for as well as patients, there is a big gap in the market to come up with alternatives, particularly as I said for those patients who cannot get a total knee replacement. And that's not an insubstantial portion, we estimate that to be somewhere between 10% to 15% of doctor’s practices where patients just aren't candidates for total knee replacement at the current time. So again, we'll see when the results come out and we also remain in discussions with HSS about how to structure an agreement.

At this time, I'm showing no further questions. I would like to turn the call back over to Ms. Nancy Lurker, President and CEO for closing remarks.

Yes. So thank you everyone for participating in our call today. And as you can tell, we have a number again of catalysts going forward into the New Year, for the new fiscal year for us. We remain very optimistic about our trajectory. And I also want to just particularly thank the pSivida team for a lot of the hard work that went into us accomplishing our objectives. I'm quite proud of the progress that we've made. We're very clear about delivering on objectives and making sure that we hit those objectives. And I fully expect that we'll continue on this momentum in the New Year for us as we did last year. Thank you again. And I look forward to updating you on our progress as we go forward.

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.