Aerie Pharmaceuticals, Inc.
Q1 2015 Earnings Call Transcript

Published: 10 May 2015

[Operator:]

Good afternoon, ladies and gentlemen. Thank you for standing by. And welcome to the Aerie Pharmaceuticals’ First Quarter 2015 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 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, Laurel. Good afternoon and thank you for joining us today. With me today are Vince Anido, our Chairman and Chief Executive Officer; Tom Mitro, our 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 earnings release. Please note that in a new minutes Vince will be reviewing slides that accompany this call. They were posted on our website shortly after 4 PM Eastern Time today. Now for forward-looking statements and non-GAAP financial measures. On this call, we will be making certain forward-looking statements, including statements and forecasts regarding our future financial and operating performance, including projected cash burn, the success, timing, and cost of our clinical trials, the clinical effectiveness, commercial launch and potential future sales of our product candidates, the potential of our new 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 our earnings 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 filed our 10-K on/or about May 8, 2015. 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 our reconciliation to the most directly comparable GAAP measures, please see today’s earnings release, which is posted on our website. As a quick financial update for the quarter, first quarter 2015 net loss attributable the common stockholders for the three months ended March 31, 2015 was $17.2 million or $0.70 per share. The net loss reflects proceeds of $2.9 million for the first quarter 2015 from the sale of the New Jersey State tax benefit which is recorded as a benefit and other income expense net. The net loss also includes non-cash charges for stock-based compensation expense of $2.7 million when excluding the non-cash stock-based compensation expense adjusted operating expenses for R&D and G&A totaled $11.1 million and $5.8 million respectively for the first quarter 2015. Total adjusted net loss was $14.5 million for the first quarter 2015. The $14.5 million in adjusted net loss were $0.59 per share compares to $4.7 million for the same quarter in 2014. During the first quarter 2015 we raised $35 million from the issuance and sale of common stock under an aftermarket sales agreement pursuant to a shelf registration statement on Form S3 filed on November 3, 2014 and burned $16.7 million of cash. The first quarter 2015 cash and marketable securities ending balance totaled over $179 million. With that I'll turn the call over to this Vince.

[Vince Anido:]

Thanks, Rich and good afternoon everybody. Thanks for joining us today. As you know we recently completed our initial or classified three registration trial which we called Rocket 1 and announce the trial didn’t meet its primary efficacy endpoint. As a reminder this is the first time the triple mechanism of action drug has been study for glaucoma, and certainly the first time the drug has been study that treats the trabecular meshwork. As a result every study provided further inside are uniquely the drug does work. In this study Rocket 1 we have gained far more inside across the spectrum of attributes to this drug and we believe that meaningful potential for both Rhopressa and Roclatan. Some of the findings validate things we known about a drug since Phase II trials and we will talk about that in just a second. And some of them are really findings that are bit surprising and we'll talk about those as well. Since the initial release of Rocket 1 results a few weeks ago the team is that a substantial amount of analysis that we believe starts to add meaningful insight into Rhopressa’s performance in that study. Now I want go through the slide deck is up on our website and then when I try to remember to actually tell you what slide number I'm on so that’s you can follow. I am going to start in Slide 3, just background because there are number folks on the call with perhaps have not story before. Rocket 1 was one of three registration trial so we had in the marketplace over the last year or so it is a 90 day efficacy trial we reported results on April 23 of this year. We also have Rocket 2 and will be talking about that little bit later Rocket 3 is a safety only study that's been done in Canada and its going to be the supplementing some the work that in some of the information that we get out of Rocket 2. As you know we study these drugs for the treatment of ocular hypertension in glaucoma and it was non-inferiority trial of our drug versus timolol over a 90-day period. We also looked at the ocular systemic safety of our product over that 90-day period. On Slide 4, gives you just an overview of the trial design, we actually looked at 411 patient randomized over a 36 different clinical sites and we ended up with 370 patients are subjects for the protocol. The next Slide number 5, we looked at the early terminations and we had little over 10% terminations in the overall trial many of them on Rhopressa and about a third of that on timolol. Most of the protocol violations withdrawal of consent like efficacy, investigator decisions et cetera are pretty balanced between the two drugs on the adverse events. Many of you have asked about that so that the bottom of the slide we have included the adverse events for Rhopressa that ended up leading too early terminations. As you could see there is only three of them were actually we had – each had two patients and by the why some of these actually the same patient had more than one adverse event that accounted for their early termination, but really it’s just a smattering of different things, there is not general pattern here. Many of us currently thought that we would see terminations dealing because of hyperemia which is the major adverse event we had reported in Phase II trials, but as you could see only one patient actually withdrew or early terminated because of the hyperemia. As a reminder on Slide 6 are the study endpoints, we looked at mean IOP at the 08

[Operator:]

Thank you. [Operator Instructions] And our first question comes from Adnan Butt from RBC Capital Markets. Your question please.

[Adnan Butt:]

Thanks for taking the question and for the details. Let me start with the couple, first in terms of the prostaglandin analysis that you will seen – that seems to happen to need and then kind of – is that is there mechanistic explanation for that and then which ask the publisher had what for prostaglandin what the resolute time and after patients come of with that.

[Vince Anido:]

We don’t think that I can’t remember exact half-life-we don’t take its much more than 24 hours or so. Again we seen the data in fact that are own clinical trials where you know after you quit taking latanoprost as an example after about 36 hours or so the IOP start rising again and I suspect that you see that continue to raise I don't think the effect here that we see in day 15 and sort of trickling in today day 43 is really that there is any latanoprost left in the system. I think that was happening is long-term latanoprost use actually somehow or other activate these outflow mechanisms and that maybe that the ciliary tissues et cetera. And basically provide to setup for another outflow drug like ours. And so again I don't think it's of latanoprost because I know if you take a look at the FDA guidance for washout it is a four weeks the majority of the studies that look at prostaglandins is being in their they do wash them out for four weeks we saw a couple of the wash them out for a six most extremely saw with European publication and recommended eight weeks. But we just don't think that it's the half-life it's keep latanoprost is too short to worry about, but I think it's just simply that the tissue that were talking about in terms of outflow is somehow or other setup for another outflow drug and so we’re obviously going to be spending a lot more time because there perhaps what this indicates is that you know maybe that there are something that we haven't figured out yet relative to may be our ability if the tissue is sort of set up to activate a little bit more of the [UV-Vis] for example. But certainly what we’re really focused on here is that we do have the synergism and that we certainly saw that in the Roclatan Phase II data when we have both of them on board because we got results that we hadn't seen before with any combination with prostaglandins. And so, but again I don't think this is latanoprost or prostaglandin hanging out is just the tissue is set up for.

[Adnan Butt:]

Okay, Vince and I think you said it’s versus the – just for prostaglandin versus non-prostaglandin, not for the individual different process?

[Vince Anido:]

I'm sorry, ask your question because you…

[Adnan Butt:]

Was the comparison just sort of prostaglandin versus non-prostaglandin or you look that data blockers Carbonic Anhydrase Inhibitor 53 as well.

[Vince Anido:]

We lump sum them all in the prostaglandins and then all others plus naïve patients.

[Adnan Butt:]

Okay, and a follow-up on Rocket2 - have you heard a chance to look to see what’s based on IOPs order in for patients in that study at this time and what’s the thinking behind the side in less than 25 or less than 24. And you’d let us know when the FDA gives you final from that design change? That’s it.

[Vince Anido:]

The answer to your last question is yes we will, as soon as we get an agreement with the FDA not only in terms of the final IOP, but also statistics plan et cetera – or at least the statistic guidelines et cetera that we’re going to using, we’ll certainly let you know the idea of using below 24, below 25 is because we think the data is generally the same. The action of our drug relative to timolol was basically the same exact same characteristics there. And so we think that the FDA may want to take a look at it and obviously they will have an opinion about how low we should go or whether we should go up a little bit. So we want to just be flexible and we don't want you and investors to be surprised if instead of 24, below 24 we end up picking below 25.

[Adnan Butt:]

Okay, Vince. And then have you had that chance to look at enrollment in Rocket2.

[Vince Anido:]

We have. And so Rocket2 is still treating patients and so what we don't have, we have some estimates, we have some forecast in terms of things like the dropout rate and things like that we can look at anything by per arm. We can look it only in aggregate, and so we have some idea in terms of sort of how things are coming in, but it’s just aggregate we don't know how it breaks out by any one individual arm. And so we think we’re okay from an IOP point of view as I mentioned. We think we are okay from a powering point of view if the FDA agrees with us and we can use the hierarchical approach versus using a [Bonferroni] corrected one. And so but again it all depends on the final discussions with the FDA and so that's why from our perspective we think the right thing to do is to be prepared to add more patients, we think we can do that in a very, very short period of time, so that you know worst-case we’re delayed in reading out Rocket2 if we have to add more patients the readout will only be delayed by a few months.

[Adnan Butt:]

Okay, thanks.

[Vince Anido:]

Yes, sir.

[Operator:]

Thank you. Our next question comes from Annabel Samimy from Stifel. Your question please.

[Annabel Samimy:]

Hi, so thanks for all the explanations. Just while on the topic of Rocket2 and what you can look at right now. So you mention that you feel that you have enough patients to be appropriately empowered I guess for that 24, 25 population. But you said that you don’t have information on the arms. So how will you know if you have the right powering for the 2D arm? I guess I am a little confused how you get all this information?

[Vince Anido:]

Well you haven’t made some educated guesses about the data right, so for example we know what the general dropout rate is. And so the easy one is you just average out by arm and you sort of figured it that out. So that’s relatively conservative because we think and we’ve said this before. So it's not new news, we think that the Rocket2’s BID arm is going to have more hyperemia so it wouldn’t surprise us. That we have more dropout rates, we already know so but our dropout rate was in Rocket1. So we could assume that any deviation or changes between Rocket1 and Rocket2 are primarily driven by the BID arms. We can make those kinds of inferences but again at the end of the day it's - we can't really look at that data or all we can do is make sure we have enough power to withstand shift in any one of the arm. And enrolling up patients we can withstand those shifts. And so that’s why.

[Annabel Samimy:]

Sorry, go ahead.

[Vince Anido:]

No, that’s right. That’s why we’re looking enrolling more.

[Annabel Samimy:]

Okay. And when did you have a timeline when you are speaking to FDA?

[Vince Anido:]

We do it will be over the next couple of months, it will be a series of discussions, we've already started talking to them. We send them data, we’re going to send them some more data based on what you saw today. And so that will just generate the discussions we have multiple meetings already on the schedule for either Rhopressa or Roclatan with the FDA. We’re just trying to find the best one in order to slide in significant discussion with them about switching the range for the primary endpoint of Rocket2.

[Annabel Samimy:]

Okay.

[Vince Anido:]

So we don’t have a firm day yet and we won’t release anything like that I’ll give you the final answer, but we won’t tell you when that date is.

[Annabel Samimy:]

Okay, so going back to the whole PGA effect that you are talking about, so if you have this benefit initially and then this benefit kind of goes away by three months. So what does this mean clinically for you? All right so you end up with the drug that seems to be generally in line with timolol, so is there some clinical benefit that these patients would have getting that initial PGA response and then seeing a washout over time. So I’m just trying to understand the meaning of this?

[Vince Anido:]

Okay, that’s fair. So what this indicates is the following almost every patient in the United States today that has glaucoma, Rocket or hypertension has prostaglandin as primary therapy. With this data show is that even when there is no prostaglandin on board that are just remnants of the fact that leads like an imprint that it was there. Our drug is very synergistic, so what that does with the data show is that we can then safely conclude that when a prostaglandin is on board that we do have a synergistic effect so you'll see better efficacy either additive when you have a prostaglandin patient and you add Rhopressa to it and you should see better effect there than what you currently see when you add either alphagan or whether you add timolol or any other additive drug and then also it should be beneficial when you had put them both in one bottle and you have latanoprost plus Rhopressa and Roclatan and then you put that in your eyes to see a fairly dramatic improvement over and above anything that's available today. So that’s the clinical implication.

[Annabel Samimy:]

Okay, so this would bode well nimbly before Roclatan.

[Vince Anido:]

And it does bodes very, very well for Roclatan, but don't discount the fact that what this shows to for the doctors out there is that the incremental benefit they are going to get on the prostaglandin patients if they add rhopressa.

[Annabel Samimy:]

Okay and then just on the theory of the PGA timing on this meshwork are the drainer system. Have you pass this by anyone in your scientific advisory board or any of these physicians that they could validate that there is some kind of mechanistic timing going on?

[Vince Anido:]

Yes, so our CSO has actually talked to a number of trabecular meshwork people and the like and so do we think that there are certainly sort of some scientific rationale for this. The real issue is that there's never been a drug is been able to do this with prostaglandins and so a lot of them are looking at this thing and saying Bob never seen this before. And it's not surprising because again when you look at the data cuts that we saw versus us versus timolol on prostaglandin patient you just didn't see this synergistic effect. And so this is one of those things that I mentioned earlier when we’re talking about a brand-new mechanism. Folks are setting sort of scratching their heads saying that I've never seen that before, but it is real when you cut the data. So I would digging into sort of the hard-core science to really come up with sort of what could be happening here, but the data not only here, but also in our Phase II and it was hidden because we are using latanoprost as our comparator, but it was there.

[Annabel Samimy:]

Okay, and if I can just ask one more question so you gave us some pretty decent explanations about the drifter characteristics. So I guess what I’m wondering is when you enroll a glaucoma trial are these characteristics that you can end up controlling for any and I mean doesn’t everyone sort of conducted trials in the same way and have these other trials had this level of drifters in their population relative to what you’ve seen and how do you control for that in the next trial I guess.

[Vince Anido:]

So there are drifters for both timolol as well as latanoprost and you see timolol in the 5% to 10% range in drifters and sort of you see latanoprost in the 5% to 6% range or so. So you do see them and I think the biggest issue that we face in this trial as was explained to us by our SAB is that this is the first trial anybody can remember were the upper limit of IOP's were kept. Typically they are open-ended or if they are kept they are up to 36 and just not very many patients up there. So the effect that we saw that I showed in the slide of some patients who got into the study with what appeared to be precious about 24, but in prior studies they were up to 26 and 27 you just don't see that if you're upper end is 36 because there is just not that many more patients. And so we think some of the discrepancy that we see here is that, we think that we should be able to figure out whether there is things that we can do for these patients in terms of the compliance because again as we dig into the date on these five sites we can get in pretty quickly and pretty deep and see if there are things that we can do from a compliance point of view. We did not try to in any way control for compliance, we didn't do any patient calls, we didn't do any reminders, we didn’t give them anything that you can, so we can be bad among their cell phones and remind them that it was time to take their meds. And so but I guarantee you and Rocket for we will

[Annabel Samimy:]

Is that done another trial?

[Vince Anido:]

In ophthalmics not so much but certainly everywhere else it's been done.

[Annabel Samimy:]

Okay, thanks, I will get back in the queue.

[Vince Anido:]

Yes, ma’am.

[Operator:]

Thank you. Our next question comes from Serge Belanger from Needham & Company. Your question please.

[Serge Belanger:]

Hey, good afternoon just a couple questions. First on the PGA synergistic effects you saw I guess in Rocket1 from the data you showed that almost half the patients were on prior PG treatments. Do you expect the same amount of patients in Rocket2 to become an half PGA?

[Vince Anido:]

That's a great question. Because, the half the patient being on PGA is sort of consistent with what we see on the prescription activity. So yes, we think that that makes all that sense in the world that we would expect to see roughly half of the patients in Rocket2 and then again in Rocket4 we conducted to be former PGA patients

[Serge Belanger:]

Okay, so in Rocket4 you plan on enhancing this synergy and doing all patients come in off PGA?

[Vince Anido:]

No I will be controlling for that because the FDA really wants to see how this works across all patients, but certainly you can imagine that just like we did in this trial we will have a separate pre-specified analysis of that data showing again the PJA versus the all other category.

[Serge Belanger:]

Okay. And then just I guess a follow-up on the prior drifting question, you showed there is a lot of variability in terms of the response some go up, some go down. Is there really a way to do screen for these drifters beyond just the compliance?

[Vince Anido:]

So, some of the data that I showed you would indicate that some of these patients got into the trial well above the 27 millimeters of mercury that we said they had to be, some of them are 28, 29 or so. So when we think about some of those patients quote drifting they could have a 2 to 3 millimeter drop simply because on the one day they came in to get tested or the two days they came in to get tested for our study, they happen to be pretty relaxed and their pressures were lower. And so what we call drift is really to start drug working but of their real baseline not also the baseline that they came into this study's with. So one way to control for that is really the only way we could do it, is we could enter a trial where we have a higher IOP in the upper end say 30. And so we enroll all patients all the way up to 30 we stratify sort of between 30 and 20, so you know we get as many patients about 25 and below 25. But then for the analysis I don’t look at 30 at all I only look at say 28 and below because that way I've eliminated sort of the upper-end problem that it got created here because there are so many patients about 27 - that we just got you know quite a few of them actually came into the trial. Of the 71 patients that I talked about in that one slide that had been in our prior studies before 30 of them were on the Rhopressa of Rocket1 and 13 of them were drifters. So we think it does show that - there's something going on there that we think we can eliminate by just changing the protocol.

[Serge Belanger:]

Okay, thank you.

[Vince Anido:]

Yes, sir.

[Operator:]

Thank you. Our next question comes from Caroline Corner from Cantor Fitzgerald. Question please,

[Caroline Corner:]

Hi, guys thanks for taking my call. Can you hear me okay.

[Vince Anido:]

Yes, ma’am.

[Caroline Corner:]

Yes. So just think about Rocket4 understand why you’re putting that trial in place. My question on Rocket4 is if you’re doing that secondary endpoints with a potential six-month efficacy endpoint and I understand why you want to do that as far as demonstrating how the drug works? Is there a risk there that that’s actually going to make the Rhopressa approval process that much longer at the FDA someone else back say’s we do want that Rocket4 data rolled in for approval

[Vince Anido:]

I think its great question, Caroline. If you think about the timing here look at this way. So we’re starting planning for Rocket4 right now, we’ll start enrolling sometime in Q3 which means by Q3 of next year it will be completed. If Rocket2 we’re able to change the range for the primary to a lower one and it hits, we then can go ahead and file in the first half of 2016 with Rocket2 lower range with the secondary efficacy point that we achieved in Rocket1. And then by the time the FDA's is looking all the stuff we will have completed and reported out Rocket4. So we'll have that available in case they require that that we submit more data.

[Caroline Corner:]

Okay. Very good that’s helpful. And then just looking at these drugs in big picture and it’s definitely really interesting that synergistic effect that you’ve elucidated from the data, so assuming the FDA as you look at Rocket 2 from 20 to 24, 20 to 25 and you are successful with that, Rocket 4 is successful and then you get Rhopressa approved and then you have Roclatan, Roclatan gets approved and say we are now in 2019. Can you just walk me through how these drugs sit in the clinical treatment paradigm, so who is prescribing which drug Vin?

[Vince Anido:]

Well I think it falls right into what we've been saying since day-one, we think that Roclatan for those patients with a broader range of IOPs typically on the higher end, perhaps it had severe damage to the optic nerve and significant loss to vision where the doctor says I'm not messing around I got to get this pressure down as well as I can get it I need the biggest gun that I possibly can get, you are the biggest ball that I can possibly shoot. I think that makes most sense. For Rhopressa we think that we will get a huge chunk especially with this data, we think we will get a huge chunk of the additive market and so if timolol today has something like 30%, 40% of the prescription market for additive therapy and here we can show this tremendous synergistic effect with prostaglandin and the timolol doesn't have. You got to believe we’ll do as well as that, so you're looking at 5, 6 million prescriptions and so we think that additive therapy for Rhopressa especially for those patients who maybe on one of the other prostaglandins, whether it's Lumigan or whether it's Roclatan I think it makes all the sense in the world. And also I still believe that we are going to get fair bit of use for those patients who have light colored eyes or on the lower IRP side that just simply don't want to mess with the potential permanent cosmetic changes to prostaglandin.

[Caroline Corner:]

All right, very good. Well, thank you for walking us through all this data. I really appreciate it.

[Vince Anido:]

Yes ma’am.

[Operator:]

Thank you. And our final question comes from Difei Yang from Brean Capital. Your question please.

[Difei Yang:]

Hi, good afternoon thanks for taking my question. Just a couple with regard to Rocket 2, if we go back to Rocket 2 for a moment and that does imply well I guess is there anything you can do to improve compliance at this point?

[Vince Anido:]

Rocket 2, unfortunately we can’t do much of Rocket 2 because a lot of the patients have already been completed, we do have - we announced I think it was about a month or so ago that we had enrolled our last patient so really we're in our last group of patients that are just trudging through the 90-day period and which by the way we think it will be over by the end of June. And so there is very little we can do for the compliance stuff now. We think that because again if you look at Rocket 1 the way it breaks down for the drifters and the correlation between drifters and non-compliance. We think the fact that if we can lower the pressure, the range of pressures to either 25 or below or 24 and below that we think that will get rid of a lot of the variability because we won’t be dealing with the top end variability and so that's we can do this study too far down the road. Yes, but certainly Roclatan and Rocket 4 we can make changes there.

[Difei Yang:]

Yes, it makes sense. So moving on to I think somewhere in the presentation you mentioned there was three sites, yes I think three sites where you see the most drifters?

[Vince Anido:]

It was actually 5 sites.

[Difei Yang:]

Five sites, okay. Is it possible, is it part of your discussion with FDA that potentially without even looking at the data to excludes these 5 sites?

[Vince Anido:]

We know that not all five sites were participating in both Rocket 1 and Rocket 2. I believe that maybe there was 3 sites were actually common to both Rocket 1 and Rocket 2, but I’m doing that one by memory and so it’s either two or three that were for both, but it's little too late to do that all we could do is again do what I just said which is – if we can move the range down to 25 and below or 24 and below we are starting to get rid of a huge chunk of what we believe to be our problem.

[Difei Yang:]

Yes, thanks. That’s very helpful. End of Q&A

[Operator:]

Thank you. At this time I would like to turn the call back over to Dr. Vince Anido, Chairman and CEO for any final remarks.

[Vince Anido:]

Thank you and hopefully we’ve answered many of your questions regarding the result of Rocket 1 and the path forward whether it's Rocket 2 or Rocket 4 or Roclatan as we continue to analyze the results of Rocket 1 and target some of the milestones we set for ourselves relative to FDA communications and moving forward with a clinical trials that we’ve talked about. We’ll continue to keep you inform. Our next opportunity to provide you with additional updates and perhaps even more data that we are able to generate from the trial. We’ll be participating in the Jefferies Healthcare Conference on June 3. I want to thank all of you for taking the last hour or so to spend it with us and again we are very, very pleased with the findings here especially this great synergistic effect that we have with prostaglandin because I think it bodes very, very well for the future both Rhopressa as well as Roclatan. Thank you and have good evening.

[Operator:]

Thank you. It does conclude today’s program you may now disconnect. Everyone have a wonderful day.