Aerie Pharmaceuticals, Inc.
Q1 2017 Earnings Call Transcript

Published: 2 May 2017

[Operator:]

Good afternoon, ladies and gentlemen. Thank you for standing by and welcome to the Aerie Pharmaceuticals First Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. Today's conference call will be recorded. It is now my pleasure to turn the floor over to Aerie's Chief Financial Officer, Rich Rubino. Please go ahead, Sir.

[Rich Rubino:]

Thank you, Tyrone. Good afternoon and thank you for joining us today. With me today are Vince Anido, Aerie's Chairman and Chief Executive Officer, and Tom Mitro, Aerie's President and Chief Operating Officer. Today's call is also being Webcast live on our Website, investors.aeriepharma.com, and it will be available for replay as indicated in our press release. Now for forward-looking statements and non-GAAP financial measures; on this call, we will make certain forward-looking statements including statements, forecasts and guidance regarding our future financial and operating performance, cash burn, the success, timing and cost of our clinical trials, the timing of and our ability to request, obtain and maintain FDA or other regulatory approval of our product candidates, the clinical effectiveness, commercial launch and potential future sales of our product candidates, timing and cost of our manufacturing activities and the potential of our preclinical research findings, as well as other statements related to future events. 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 our filings with the SEC. We assume no obligation to revise or update forward-looking statements whether as a result of new information, future events or otherwise. Please note that we expect to file our 10-Q later this week. In addition, during this call, we will be discussing certain adjusted or non-GAAP financial measures. For additional disclosures relating to these non-GAAP financial measures, including a reconciliation to the most directly comparable GAAP measures, please see today's press release which is posted on our Website. As a quick financial update our first quarter 2017 GAAP net loss attributable to common stockholders was $25.8 million or $0.76 per share compared to $22.7 million or $0.85 per share for the first quarter 2016. The net loss for the first quarter 2017 includes non-cash charges for stock-based compensation expense $4.8 million. When excluding the non-cash stock-based compensation expense, first quarter 2017 adjusted operating expenses for R&D and SG&A totaled $9.9 million and $10.7 million respectively. Total adjusted net loss for the first quarter of 2017 was $20.9 million. The $20.9 million adjusted net loss was $0.62 per share compared to $19.2 million or $0.72 per share for first quarter 2016. For additional information regarding our first quarter 2017 results, please refer to today's press release and our Form 10-Q filed later this week. We ended the first quarter of 2017 with approximately $208 million of cash, cash equivalents and investments. Our first quarter 2017 cash burn at $25.8 million is aligned with our full-year 2017 guidance of approximately $100 million. We call it the $100 million guidance includes approximately $16 million for the buildout of our Athlone plant, which is being classified as capital expenditures. Beside from the Athlone capital expenditures, our 2017 expenses are expected to be essentially flat compared to 2016. As I mentioned when I provided guidance in March, our clinical expenses are declining in 2017, as we wind down our U.S.-based trials and offsetting this decrease, our planned increases and preparatory commercialization and scale-up expenses in 2017, including the buildup of commercial product supply for Rhopressa, which is not classified on the balance sheet as inventory, but rather as SG&A expense preapproval. In fact, product manufacturing related cost for Rhopressa included an SG&A amounted to over $3 million in the first quarter of 2017. Our $100 million full-year 2017 guidance includes over $10 million for these Rhopressa manufacturing-related expenses, again flowing to SG&A expense. If Rhopressa is approved and commercialized, these costs will flow to inventory and cost of sales going forward. Other initiatives included in our 2017 guidance are Roclatan Mercury 3 trial, which is scheduled to commence in mid-2017 in Europe and the initiation of certain clinical activities as we pursue regulatory approval for Rhopressa in Japan. With that I will turn the call over to Vince.

[Vicente Anido:]

Thanks Rich and hi everybody. Good afternoon and thanks for joining us today. Since we provided an update just a few weeks ago with the successful Rocket 46 613 date and I am going to keep my comments relatively brief around the quarter. Let's start with Rhopressa, as you know submitted the NDA at the end of February and we do expect to hear back from the FDA sometime soon regarding the acceptance of our NDA for review. The expected PDUFA date and whether or not to expect an advisory committee meeting all of this will be part of that day 74 letter that everybody talks about and when the time comes and we actually get the letter, we do expect to issue a press release at that time regarding those matters. Our prep for the potential commercialization of Rhopressa are all on track and you'll recall that I mentioned some of our key hires in this area on our last call. If Rhopressa is approved in Q1 of 2018 we do expect to have our 100% sales force -- our U.S. sales force fully revival in place and train by the end of the second quarter of 2018. Remember, we don't hire a salesperson until we actually get an approval letter. Also, we started to reach out to the key payers to discuss formulary coverage for Rhopressa. In fact, Rich and I had an opportunity to visit both with our medical affairs folks and our Head of Managed Care today and very, very pleased with the progress that they're making in reaching out to the major players in the space and the good news is that a lot of the information that they're gathering is very consistent with everything we've said for the last three or four years, they came out of our market research related to the managed-care acceptance of our products on their formularies. For Roclatan, our Mercury 2 study remains on track for its topline readout later this quarter. Again, as a reminder, Mercury 2 is identical to Mercury 1. Both are superiority studies as a combination of our each individual component up to the 90-day mark, although for Mercury 2, it doesn't include the safety detail that Mercury 1 included. The 12-month safety data for Mercury 1 is still expected later on this summer sometime in Q3. Now assuming that both Mercury 1 and 2 are successful, we do expect to file our Roclatan NDA either late in 2017 or early in 2018. Now similar to Rhopressa we do expect a 12-month FDA review for Roclatan and since we expect to have our full sales force in place, if Rhopressa is approved, the potential launch for Roclatan should take place very quickly after we obtain the approval, resulting in less than a year or so between the two product launches. As we've said before, we've done quite a bit of research out on a payer front over the last few years and we remain very focused on obtaining the best possible positioning of both of our products should they obtain approval and be commercialized. Further, we do continue to receive very favorable perspectives from the ophthalmology community regarding the intraocular pressure reduction achieved by both Rhopressa and Roclatan and there is a high level of excitement as you can imagine about being able to target the trabecular meshwork, which is diseased tissue and its potential for disease modification. We have a couple major meetings coming up ASCRS, which is American Society of Cataract and Refractive Surgery. That meeting is being held in LA later on this week and then ARVO, which is The Association for Research in Vision and Ophthalmology to be held in Baltimore the beginning of next week. We have a number of scheduled presentations including for the first human aqueous humor, dynamic study for Rhopressa, which importantly confirm the trabecular outflow story as well as the mechanism of action for episcleral venous pressure reduction. There is also presentations on the 24-hour efficacy of Rhopressa and in patients where we saw a consistent level of efficacy around the clock in terms of IOP lowering and which I discussed in our year-end earnings call. Additionally, preclinical studies we've presented to further explore Rhopressa's unique mechanism of action and we'll report progress on new rock inhibitors for the treatment of both AMD and diabetic retinopathy. The Mercury 1 study results for Roclatan will also be presented. These presentations will be made available on our website. Now looking to our expansion beyond the U.S., our Mercury 3 trial for Roclatan is expected to commence in Europe in mid-2017. Mercury 3 is not needed for the U.S. NDA filing for Roclatan. That study Mercury 3 will be a noninferiority trial comparing Roclatan to Ganfort, which is widely prescribed fixed dose combination of Bimatoprost, which is a prostaglandin and timolol, which is a beta blocker and is marketed primarily in Europe. After assuming we achieved noninferiority net trial, we will also test for superiority. The ultimate objective of this trial is to further enhance our commercialization prospects in Europe. As we've discussed, Europe is far more oriented towards fixed dose combinations than in the U.S. We've also received additional information recently on the market in a number of different areas around the world including Europe and what we can tell you is there is about four times more units of subscriptions actually written in Europe than they are in the United States although the market is only about half the size and so it's a very, very important market for us from a unit perspective, but certainly we need to make sure that we get good prices for our products over there. Now regarding in Japan, we're on plan to commence our clinical program for Japan later on this year. We do plan to initiate both Phase 1 and 2 enrollment in Japanese patients in the United States this year and would hope to commence Phase 3 trials in Japan sometimes towards the end of 2018. We also I remain very, very excited about the prospects of our Molecule AR-13154 for the treatment of wet AMD, which reduces lesion size in AMD models through inhibition of rho kinase as well as protein kinase C. We also continue to make good progress evaluating a few different technologies to deliver our product candidates both to the front and to the back of the eye and hope to make decisions about which technologies to use later on this year. And lastly on the manufacturing plant, we made an awful lot of progress. As you know, obviously we had to do that in order to get our NDA filed for Rhopressa. We have begun preparations to bring a second contract manufacturer online sometime through in the 2018. And lastly, our manufacturing plant in Athlone, Ireland is progressing on schedule. So again, we're very pleased that we'll have multiple different sources of our product to ensure the product launches. Now that pretty much sums up our progress and strategies and with that I'll turn the call back over the operator for Q&A.

[Operator:]

Thank you. [Operator instructions] Our first question is from Tyler Van Buren of Cowen and Company. Your line is open.

[Tyler Van Buren:]

Thanks. Good afternoon, everyone and thanks for taking my questions. I guess with the Mercury 2 results here being imminent, as we think about the data, obviously the difference in IOP lowering relative to the components will be what people will look at first, but relative to other potentially clinically relevant measures, what comes to mind in terms of being the next most clinically relevant especially as the FDA considers the eventual potential review of the product?

[Vicente Anido:]

Hey Tyler. Good afternoon. Just like we did with Mercury 1, we think that the next item up which will be a very, very important and certainly for the clinicians, perhaps even more important than just simply achieving superiority of the combo over each individual component will be what we called our responder analysis where we took a look at how low we got the pressures with Roclatan versus latanoprost by itself. And you may remember that we've always in our investor presentations, always had a chart there that shows how well -- how low the pressures get and that was the big deal in a lot of the physician meetings that we had were especially when you look at that we got about a third of the patients down below 14 millimeters in Mercury with Roclatan versus only about half that with latanoprost and Rhopressa. And so, we think it's going to be either the next big driver and certainly as I said, for the ophthalmology community, that is the big driver achieving superiority of the combo is mainly an approval issue, but it's the responder analysis that's capture their imagination.

[Tyler Van Buren:]

Okay. Great. That's helpful and with respect to timing of the study, I've clearly not learned not to ask when it's coming within the quarter, but as some people may be getting a little bit anxious here, if you look at the timing of enrollment completion of Mercury 1 to data, in may have placed the data coming out a week or two ago. So just wanted to get your thoughts if there was any difference on the two studies that could be causing a little bit of difference in the timing here or if this is well within the realm of just typical variability between studies of this magnitude?

[Vicente Anido:]

Yeah please think the swing of few weeks is no big deal because again a lot of it depends on the variability of the investigators to respond to our queries relative to the data and so the fact that there has been an awful lot of meetings and then these guys are travelling all the time, they have to be there to sign those queries. And so, we can't them into the office, we can't close the data. So again, we just don't see this. We've always signaled it to be in the quarter and so far, we've always set our timelines.

[Tyler Van Buren:]

Great. That's very helpful. Thanks so much.

[Operator:]

Our next question is from Annabel Samimy of Stifel. Your line is open.

[Annabel Samimy:]

Hi guys. Thanks for taking my question and since we're on the topic of Mercury 2, we all recognize they're identical files as the 90-day efficacy is concerned. The only variable was those 35 sites that didn't overlap with Mercury 1. So, I guess, can you at least tell us whether those sites have already taken part in any of your trials with Rhopressa and what measures you might have taken so that you don't introduce any new variability between the different sites. And also question regarding Rhopressa, now that you've had some time to go through the data in more depth, can you tell us whether you saw any kind of similar patterns of AE resolution as you did and other long-term analysis for Rocket 2? There was an increase I guess in incidence, but have that in terms of severity, can you share any more details from market with us or are we waiting for medical conference, thanks?

[Vicente Anido:]

So, regarding the Mercury 2 execution, we did see quite a few sites that had done other clinical trials for quite a few of them that actually had been involved with Mercury 1 and so we saw and we do have quite a few sites and certainly we now had the same team, both internal CRAs as well as external CRO that has been working on quite a few trials and so we think that we've tried to limit the variability as much as possible. We don't do queries of the data upfront even in on a blinded fashion, but we feel very confident given that we actually explored the Mercury 1 data in depth again looking at below the primary or the middle of the range where there is any variability at the upper end versus lower end etcetera and really just found very little to hang on. And so that's why we feel very confident about their results that are coming on Mercury 2 and tried to do everything possible to limit the variability. Regarding Rocket 4, we continue looking at the data other than some general ideas that we've already talked about in terms of most of the AEs we're -- like we've seen before. They were sporadic. They were self-resolving etcetera. We haven't done any further -- we continue to do deep dives, but haven't gotten to the point where we can report on any of those.

[Annabel Samimy:]

Okay. Fair. I guess we'll have to be patient.

[Vicente Anido:]

I know it's hard.

[Annabel Samimy:]

Thank you.

[Vicente Anido:]

Yes ma'am.

[Operator:]

Thank you. [Operator instructions] Our next question is from Serge Belanger of Needham & Company. Your line is open.

[Serge Belanger:]

Hey. Good afternoon. Just a couple quick questions. First on Rhopressa, I guess we're expecting the 74-day letter in a week or so. Just wanted to know if there is a 60-day event that also gives you some visibility on whether the plan was accepted and then also wanted to know what are you thinking in terms of potential for an Ad com review? It doesn’t look like latanoprostene bunod is getting one. So just wanted your thoughts on that and what you see as pros and cons of getting one?

[Vicente Anido:]

So, the day 74 letter is driven by their 60-day review and so it just formalizes everything that they've seen through the first 60 days. Now just so that you know, the importance of the 60-day review is that if there is a refusal to file coming your way, it typically will come first as a phone call based on historical precedence as well as some of their preferred methodologies within the FDA. So, it comes as a phone call, much like it did for us when we had to pull the file on Rhopressa the first time where they called us before they got to their day 60 and basically said this is what's coming, this is the major deficiency we see, which was that our contract manufacturer was not ready to be inspected and the requirement was that everybody there was -- that we were including in our file be ready for inspection. And so, they did give us that heads up and they gave us the opportunity to withdraw the file instead of drawing a refusal to file a letter. And so again we think it's just going to summarize what they found within the first 60 days. Typically, what you get is your file is completed for review, you do get a PDUFA date. You may get a one-liner that says that we are planning or right now we're not planning an Ad com, but by way we may change our minds later. If you take a look at the photographs day 74 letter, they basically said, right now we're not thinking about at Ad com, but by way we can change our minds and we may. So, there's no -- it's not all that definitive although it's one of those where you just have to play that by year and keep talking to the FDA, which we do almost on a daily basis. Relative to an Ad com, as we've said before, we do expect one. It is a new chemical entity. It's a new class of drugs and so we haven't seen too many examples within the agency although lithographs is one where for new class of drug, they didn't have one, but then also when you take a look at the lithographs, history of letters, that it was pretty clear that in their first part of the review cycle, they were not going to get approved because none of their studies had panned out. So, the FDA chose to wait until they got the first TRL responded to and then decided not to have a panel. So, with latanoprostene it could very well be that the reason that they're not going to panel it because they consider it another prostaglandin. And so again it's not a new chemical entity or a new class and so that could be the rationale there. We don't see it see as a -- it is costly, it is something we have to prepare for and we do. We've been to about three or four of these over the last five years with another company. So, we know how to do this and so we just don't see it as a humongous issue. It's just one where we just have to do our thing and present the product and its data.

[Serge Belanger:]

Okay. Thanks for the clarity. And then looking forward to the next data readout, not Mercury 2 with the 12-month Mercury 1 much that's expected in the summer, I know the focus here is on safety, but just curious if theirs is any efficacy readout and if you did a full diurnal measurements or just that it's endpoint?

[Vicente Anido:]

We went all out and so we do have all of them all the way out. Again, given all the factors because it's not a primary endpoint, it's kind of hard to keep power all the way out to 12 months for efficacy and so that's the big issue. It's sometimes you just don't have enough patients to last that long to maintain your power. So, we always have to be wary of that before we start reporting out diurnals. So, we do plan on providing efficacy data out to 12 months.

[Serge Belanger:]

Okay. Thanks. Sure, we'll talk again soon.

[Vicente Anido:]

Yes, I am sure, we will.

[Operator:]

Thank you. Our next question is from Dewey Steadman of Canaccord Genuity. Your line is open.

[Dewey Steadman:]

Hi guys. Thanks for taking the question. Like everyone else, we're excited about Mercury 2 data coming soon, but on the Mercury 1 efficacy rate, I understand how to keep power out up to 12 month, but is that data, if you report that data, does FDA request that data as part of the Dossier for Roclatan or is that something that's more optional?

[Vicente Anido:]

We have to submit all the data. So, in addition to the safety, we do have to report all the efficacy data, even though it's not part of the primary endpoint and so -- but again, we'll have two hopefully complementary studies Rocket 1, I am sorry, Mercury 1 at 90 days as well as Mercury 2 at 90 days and that will be the basis for approval for efficacy. The longer-term stuff it's interesting and certainly we think that given all the data that we have on Rhopressa we don't and given what we know about latanoprost efficacy over time, we think that the combination of the two should be efficacious on a continuing basis over time. But again, it's not the primary endpoint for efficacy. It's the 90 days that we're looking at to that.

[Dewey Steadman:]

Okay. And if we have the good fortune of seeing both Rhopressa and Roclatan on the market at the same time, do you expect that physicians may use the two products for different baseline IOPs like if the patient has a higher IOP starting on Roclatan versus Rhopressa or something like that, and can you walk us through the factors that would influence the physician's decision on whether they use the prostaglandin Rhopressa or Roclatan as the first line or second line therapy?

[Vicente Anido:]

Sure, so we fully expect that Rhopressa initially launch is going to be the adjunctive therapy of choice and so I think that's the main positioning. So, they will be going up against the alpha blockers and the beta blockers combined and hydrolase inhibitors etcetera, all of which are dosed two to three times a day, all of them have systemic adverse events etcetera. And so, we think that that's going to be the primary positioning and so because it will be added to a prostaglandin and that means that let's say a patient comes in with an IOP in the 30 range, it'll already be down let's say 20 point or 20%. So, it will be down around 24% maybe 22%, 21% somewhere in there, but a doctor who has deemed that he needs to get it even lower. So, we'll get those kinds of patients. With Roclatan I think that the doctors who will be more apt to use that whenever they have, they want to get the pressure down as low as they possibly can and certainly to get a third of patients down, the pressures -- the doctors have describe it 14 and below, which is what they typically see with surgery is a big deal to have a therapeutic in one eye drop be able to do that. And so again they talk to the synergism between prostaglandins and Rhopressa and so we think that for a lot of patients that will be the primary drug of choice. With think Rhopressa with some doctors and some patients will also be the primary -- it will be used first line. We've shown that the drug works all the way up to 30 millimeters of mercury that we show that in Rocket 4 at the 90-day mark and so -- and we were none inferior to timolol. And so, with the fact that it doesn't have any of the permanent cosmetic changes that are caused by the prostaglandins, there may be some patients out there who just say I don't want those kinds of adverse events. So, doc, what can you give me? And in those kinds of situations, now they have a once-a-day drug that they can bring in that doesn't have any of those permanent cosmetic changes.

[Dewey Steadman:]

Great. Thanks, and we're looking forward to speaking again soon.

[Vicente Anido:]

Yes sir.

[Operator:]

Thank you. There are no further questions at this time. I would like to turn the call over to Vicente Anido, Chairman and CEO for final remarks.

[Vicente Anido:]

Thanks. Again, thank everybody for listening in this afternoon. We're obviously very, very pleased with the way we've gotten off to this year and happy to report the kind of results in both from a critical point of view and a financial point of view that we're reporting and obviously like everybody else, we're looking forward to the continued success in the clinic that we've had and especially with the upcoming Mercury 2 data readout. And more importantly, we do continue to be extremely excited about all the work that we're doing to get ready to launch not only Rhopressa sometime in early 2018, but Roclatan within 12 months of that. So again, thank you for listening this afternoon and good evening.

[Operator:]

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Have a wonderful day.