IVERIC bio, Inc.
Q4 2016 Earnings Call Transcript

Published: 28 Feb 2017

[Operator:]

Good day and welcome to the Ophthotech Corporation fourth quarter 2016 and year-end conference. Today’s conference is being recorded. At this time, I would like to turn the conference over to Kathy Galante. Please go ahead, ma’am.

[Kathy Galante:]

Good morning and welcome to our fourth quarter, year-end 2016 earnings call. Joining me today are David Guyer, Chief Executive Officer and Chairman of Ophthotech, Mr. Glenn Sblendorio, President and Chief Financial Officer. Before we begin, I would like to remind you that today we’ll be making statements relating to Ophthotech’s future expectations regarding operational, financial and development matters, including statements regarding our projected use of cash and cash balances; the timing, progress and result of the Fovista Phase III clinical program and the implementation of our new strategic plan. These statements constitute forward-looking statements for the purpose of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. These statements cover many events and matters that are subject to many events and matters that are subject to various risks that could cause actual results to differ materially from those expressed in any forward-looking statements, including risks related to the wind down of various clinical trials and manufacturing commitments, the negotiation and confirmation of in-license and/or acquisition transactions and availability of data from clinic trials. I refer you to our SEC filings, and in particular to the Risk Factors section in our quarterly report on Form 10-Q filed on November 8, 2016 for a detailed description of the risk factors affecting our business. In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we disclaim any obligation to do so even if our views do change. I would now like to turn the call over to David.

[David Guyer:]

Thanks, Kathy. And thank you, everyone, for joining us on the call this morning. Earlier this month, we announced that the company initiated a plan to review strategic alternatives in order to maximize shareholder value. Without limiting any option, the principal focus of the plan based on the company's deep expertise and experience in ophthalmology is to actively explore opportunities to obtain rights to additional products, product candidates and technologies to treat ophthalmic diseases, particularly those of the back of the eye. We're particularly interested in obtaining rights to product candidates for ocular indications with a high unmet medical need. We believe that with our expertise and experience in ophthalmology, we are well-positioned to explore and critically evaluate a variety of opportunities. We also believe that our focus on diseases of the eye and our experienced management team will make us an attractive collaborator or acquirer for companies seeking to out-license or sell rights to products, product candidates or technologies. We've also previously announced that we engaged LEERINK Partners as a financial advisor to assist management and the board in evaluating the company’s strategic alternatives. As part of our updated business plan, we are also reviewing whether there is any scientific rationale for potentially developing our current product candidates – Fovista and Zimura – in one or more new ophthalmic indications where there is a high unmet need. Our goal, as part of this overall plan, is to align our corporate resources relative to pursuing development of a potentially broader product type line. In the meantime, we are also continuing to develop Zimura in wet AMD and geographic atrophy [indiscernible]. Our future development pipeline could include additional product candidates for technologies that we may acquire or in-license and our further development of Fovista or Zimura. As part of our strategic review, we may also consider other alternatives, including acquisition of products, product candidates or technologies or other assets outside of ophthalmology, mergers or other transactions involving our company as a whole, collaboration transactions or the license sale or divestiture of some of our assets. We cannot be sure when or if the strategic review process will result in any type of transaction. Top line data from our remaining Phase III trial for Fovista, also known as OPH1004 investigating Fovista in combination with Eylea or Avastin is expected in the second half of 2017. We plan to reassess our existing Fovista and Zimura development programs throughout 2017 as the implementation of our updated business plan progresses and evolves. We expect that our reassessment of our Fovista development program for the treatment of wet AMD will be primarily determined by the initial top line data from the OPH1004 trial and that our reassessment of our Zimura development program may be particularly affected by the results of a competitor’s Phase III clinical trial of a complement inhibitor being studied for the treatment of geographic atrophy. As a result of this reassessment, we may modify, expand or terminate some or all of these development programs or clinical trials at any time. Data from both our OPH1004 trial and our competitor’s Phase III trial for the treatment geographic atrophy are expected during the second half of 2017. As part of implementing the strategic plan, we are pleased that Glenn Sblendorio recently assumed the role of president. We’re also glad to announce the promotion of Keith Westby to senior vice president and chief operating officer. In a moment, Glenn will review the steps that we have taken to date to streamline our operations, to leverage our capabilities and expertise, and identify value-creating opportunities for shareholders. In December 2016, we announced initial top line data from two pivotal Phase III clinical trials, evaluating the safety and efficacy of Fovista administered in combination with monthly Lucentis anti-VEGF therapy compared to monthly Lucentis monotherapy for the treatment of wet AMD. These studies are known also as OPH1002 and OPH1003. The prespecified primary endpoint of mean change in visual acuity at 12 months was not achieved by either trial. Moreover, we did not observe any clinically meaningful visual benefit when Fovista 1.5 mg was added to a monthly regimen of Lucentis therapy or any subgroup of patients that we have analyzed from these two pivotal trials, including subgroups based on baseline visual acuity, baseline lesion size or the amount of cornea neovascularization at baseline. We have stopped treating patients in the OPH1002 and OPH1003 trials. We have also ceased treating patients in the Fovista expansion study. I will turn the call over now to Glenn.

[Glenn Sblendorio:]

Thank you, David. And good morning, everybody. First of all, I’m going to cover a brief update on the financial results of operations. Collaboration revenues for the quarter ended December 31, 2016, which we recognized under the Novartis agreement, was $5.3 million, an increase of $0.5 million versus the same period in 2015. The increase in the quarter related primarily to an increase in drug shipment to Novartis. Collaboration revenue for the year ended December 31, 2016 was $50.9 million, a decrease of $0.6 million versus 2015. Research and development expenses were $59.4 million for the quarter ended December 31, 2016. This compared to $33.9 million for the same period in 2015. Research and development expenses were $196.3 million for the year ended December 31, 2016 compared to $131 million for 2015. The increase in research and development expenses in both the quarter and the year ended December 31, 2016 related to increased costs associated with our Fovista program, which includes manufacturing activities, our Phase III clinical program and the Fovista expansion study, as well as increased compensation expenses associated with additional research and development staffing. General and administrative expenses were $13 million for the quarter ended December 31, 2016 compared to $12.1 million for the same period in 2015. General and administrative expenses were $50.2 million for the year ended December 31, 2016 compared to $44 million for 2015. The increase in general and administrative expenses in both the quarter and the year ended December 31, 2016 related primarily to increased costs to support the expansion of the company's operation, additional staffing and increased share-based compensation. The company reported net loss for the quarter December 31, 2016 of $66.3 million or $1.86 per diluted share. This compared to a net loss of $35.6 million or $1.02 per diluted share for 2015. The company reported a net loss for the year, December 31 2016, of $193.4 million or $5.45 per diluted share. This compared to a net loss of $105.7 million for $3.06 per diluted share for 2015. As a note, the fully diluted weighted average shares outstanding for the quarter ended December 31, 2016 were 35.7 million. Now, turning to the balance sheet, cash, cash equivalents and available-for-sale securities totaled $289.3 million at December 31, 2016. Of the $289.3 million cash resources at the end of 2016, approximately $100 million to $115 million is committed. I will now provide additional details around the company's financial commitments and decisions. Beginning at the end of the fourth quarter and continuing into 2017, we have aggressively begun a process to reduce our expenses and any ongoing commitments related to our Fovista OPH1002 and OPH1003 trial as well as the Fovista expansion study. We also terminated our manufacturing commitments for future supply of Fovista. These efforts included the following actions. A planned reduction of the workforce by approximately 80%; terminating our facility leases; immediately terminating and winding down our Fovista OPH1002 and OPH1003 clinical trial; immediately terminating our Fovista expansion study and canceling our Fovista manufacturing commitment. These decisions were promptly taken and will be largely completed by the second quarter of this year. We expect that these decisions will commit between $85 million and $95 million of our year-end cash, with Fovista-related spending accounting for approximately 65% of the total. In addition, other efforts during 2017 will focus on the completion of Fovista OPH1004 with data expected to be available in the second half of 2017. This, on an anticipated cost of approximately $15 million to $20 million. When you add both numbers that I just spoke about, that ties back into the total commitment of $100 to $115 million that I mentioned earlier. As David mentioned in his commentary, we’re also reviewing whether there is any scientific rationale for potentially developing our current product candidates – Fovista and Zimura – in one or new ophthalmic indications where there is high unmet need. He also mentioned that our future development pipeline could include additional product candidates or technologies that we may acquire and/or in-license. This is in addition to any further development of Fovista or Zimura. Consequently, we are not providing any financial estimate of these initiatives until we have further information and data. The organization that remains will consist of approximately 30 people who we believe have the expertise and experience in ophthalmology to explore and critically evaluate a variety of opportunities. We estimate the cost of these people at approximately $1 million cash per month. The infrastructure to support the ongoing efforts is also estimated at $1 million per month. I’d like to thank you and turn the call back over to David.

[David Guyer:]

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

[Operator:]

Thank you. [Operator Instructions] And we will take our first question from Yigal Nochomovitz with Citigroup. Please go ahead.

[Yigal Nochomovitz:]

Hi, guys. Thanks for taking questions. Can you can say, Glenn, how much of the $100 million to $115 million in the sort of [indiscernible] cost is tied Eylea/Avastin wind down? Thanks.

[Glenn Sblendorio:]

Yes, I can. It’s $15 million to $20 million is our estimate. Yigal, what I just broke down were really two pieces. Those costs related to Fovista 1002, 1003 and the FES and the manufacturing around that. That was the – just want to get the right number here. That was the $85 million to $95 million. On top of that, for 1004, we estimate $15 million to $20 million. So, if you add the $85 million and the $15 million at the low end, that comes to $100 million. And then the $95 million and $20 million, that comes to $115 million. But, specifically, for your question, 1004, $15 million to $20 million.

[Yigal Nochomovitz:]

Okay, thanks. And, I guess, David, I just wanted to get some more clarity on Avastin/Eylea wind down. And, obviously, you mentioned the Lucentis study didn’t show any meaningful benefit even in the drill down on all the sub-groups. So, if you could just give us a better understanding why we should expect any possibility of success in that study, given two large failed studies with Lucentis. Thanks.

[David Guyer:]

First, as you said, there have been two failed studies with Lucentis. There’s also the Regeneron failed trial. So, there have been now three that question the target [indiscernible] for wet AMD. So, I think one must say that that evidence suggests that it’s unlikely to see a benefit in the further trial against PDGF as the target. Nevertheless, we have a different anti-VEGF agent as well as regimen. The trial was completely recruited, almost very close to conclusion. There were no safety issues in the Lucentis trials of magnitude. We spoke with many biostatisticians, clinicians. And after extensive discussion, it was felt because we were so close to data that it made [indiscernible] commitment to Novartis, our partner, to continue and see the result.

[Yigal Nochomovitz:]

Okay, thanks. And then, with regard to possible in-license of assets or acquisition of other companies potentially, where do you draw the line there in terms of data collection? Are you going to look for sort of a Phase II data set [indiscernible] what you had with Fovista or is the bar sort of lower in terms of what you might look at?

[David Guyer:]

So, first, as we said in our strategic review, everything in on the table. We’re in the very early stages of review, although we have seen quite a lot of assets, more than one would expect at such an early timeframe. And it's really too early to answer such a question. Obviously, we’d like to see something in the Phase II arena, certainly in the clinical arena. And we’re looking for back of the eye, but we’re also willing to expand the search throughout the eye. And so, we’re really looking at everything. Again, very early and very extensively. Everything is still on the table. As soon as we have anything, [indiscernible].

[Yigal Nochomovitz:]

Okay, thank you very much.

[Operator:]

And we’ll take our next question from Tyler Van Buren with Cowen & Company. Please go ahead.

[Tyler Van Buren:]

Hi. Good morning. And thanks for taking my questions. I guess, my first question is, in your prepared remarks, you seemed to pretty committed to going out and using the remaining cash to finding or in-licensing assets. Just wanted to get your thoughts on potentially returning cash to shareholders. Is that completely off the table? And, I guess, why would you decide against that? You, obviously, I guess must be seeing some really interesting assets out there. And, secondly, with respect to your comments on the scientific rationale on Fovista and Zimura, I get Fovista, but I guess what has changed your thinking on Zimura lately? Is it just more a matter of being capital constrained and, obviously, having a big trial reading out the end of the year that will help inform your decision? And is that clinical trial still full speed ahead? In terms of timing, I believe clinicaltrials.gov said it could complete at the end of 2018? So, curious to get a status on that. Thank you.

[Glenn Sblendorio:]

So, Tyler, good morning. It’s Glenn. So, to answer your first question is, I think we’ve been very careful to say that we do not limit any option that makes sense for shareholders. However, the focus is to look at opportunities in ophthalmology. I think that broad statement puts everything on the table that we’re looking at. In addition, we did hire a financial advisor, LEERINK Partners, to help us with that. It’s early days and I think we’re evaluating everything to see what makes sense. So, I can't specifically comment on any particular strategy until we get a little bit further. But those are the carefully selected words we used in the prepared statement.

[David Guyer:]

As far as your question on Zimura, as we said in the opening statements, both – a Phase II wet trial that will include a polypoidal vasculopathy arm [indiscernible] ongoing. We’re early – very early in our recruitment to both of those trials. But I think in any strategic review, it is important to review not only any potential external assets that we would bring in, but also to look at them in the context of internally. So, we will – that’s what we mean by reviewing it. Now, we have, obviously, some information from a competitor whether the mechanism of action is successful or not and that will be one thing that we will look at in determining whether to expand, amend or terminate any of the ongoing trials throughout this year, in addition to what we might in a strategic review and how our internal programs stack up when we compare them in that type of an analysis.

[Tyler Van Buren:]

Understood. Thanks so much.

[Operator:]

And our next question comes from Anupam Rama with JP Morgan. Please go ahead.

[Anupam Rama:]

Hey, guys. Thanks for taking the question. Just on Zimura in geographic atrophy, is there any sense – way to get earlier data to get better a sense of the activity of Zimura itself or is this really based on competitor data to kind of gauge what’s going to happen with the program. Thanks so much.

[David Guyer:]

So, geographical atrophy, dry AMD, it's hard to get a very early date, although our trial is – it does have an interim analysis. It’s the competitor’s trial that will have a readout before we reach that point. As I said, we’re very early in our recruitment in our trial still. So, it's more about the timing of data. Obviously, they’re different compounds, but it will be more bullish if we see positive results from the competitor in a similar mechanism of action [indiscernible]. And we would be much less bullish if we see a failure there. [indiscernible]. But it’s more about the timing. That data set will be out before our internal. It's very hard to really get any meaningful data in this disease. It’s very early. So, I don’t think there’s anything we can do to get anything earlier internally.

[Anupam Rama:]

Thanks so much for taking the questions.

[David Guyer:]

Thank you.

[Operator:]

And we’ll take our next question from Yatin Suneja from SunTrust.

[David Fang:]

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

[David Guyer:]

Sure. [indiscernible] will answer that one.

[Unidentified Company Representative:]

Geographic atrophy, it’s an end stage of the dry age-related macular degeneration. Many times, it’s bilateral, and one of the main reasons for the patient losing vision in dry macular degeneration. So, many patients develop small areas of geographic atrophy. That’s over time – as you know, it’s a chronic condition. And over time, the size grows. So, I think there is a good number of patients with wet macular degeneration that would be requiring treatment if it shows that it’s clinically effective.

[David Fang:]

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

[David Guyer:]

Yeah. Everything is on the table right now as far as front of the eye, back of the eye [indiscernible]. We have more of an emphasis on back of the eye. We’ll look at everything there. All types of molecules [indiscernible]. So, right now, everything is still on the table. We’re really too early in the process to give much description right now.

[David Fang:]

Great. Thank you, David.

[Operator:]

And we’ll take our next question from Stephen Willey with Stifel. Please go ahead.

[Stephen Willey:]

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

[David Guyer:]

The inclusion criteria [indiscernible] comparable [indiscernible].

[Stephen Willey:]

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

[Glenn Sblendorio:]

Thanks, Stephen. Obviously, we would continue to amortize it if the collaboration went on. If the collaboration reached an endpoint, we would probably account for the deferred revenue at that point in time. But we’re not there yet. So, we’re continuing our current amortization schedule, which stretches out over the life of the product, which is the IP life. So, any decision by Novartis, obviously, would impact how we account for that.

[Stephen Willey:]

Okay. Thanks for taking the questions.

[Glenn Sblendorio:]

Thanks, Stephen.

[David Guyer:]

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

[Operator:]

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