IVERIC bio, Inc.
Q1 2015 Earnings Call Transcript

Published: 12 May 2015

[Operator:]

Please stand by. Good day and welcome to the Ophthotech Corporation First Quarter 2015 Earnings Results Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Kathy Galante, Head of Investor Relations. Please go ahead.

[Kathy Galante:]

Good afternoon and welcome to our first quarter 2015 earnings call. Joining me today, I have Dr. David Guyer, Chief Executive Officer and Chairman of Ophthotech; Dr. Samir Patel, President and Vice Chairman; Mr. Michael Atieh, Executive Vice President and Chief Financial and Business Officer; and Mr. Todd Smith, Senior Vice President and Chief Commercial Officer. Before we begin, I would like to remind you that today we will be making forward-looking statements relating to Ophthotech’s future expectations regarding its financial results, potential receipt of milestone payments, clinical and regulatory developments, and commercialization plans. These statements constitute forward-looking statements for purposes of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. These statements cover 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. I refer you to our SEC filing and in particular to the Risk Factors section in our quarterly report on Form 10-Q filed earlier today, for a detailed description of the risk factors affecting our business. In addition, any forward-looking statements represent our view only as of today and should not be relied upon as representing our views as of any subsequent date. We may elect to update these forward-looking statements at some point in the future, we disclaim any obligations to do so, even if our views change. I would now like to turn the call over to David.

[David Guyer:]

Thanks, Kathy, and thank you to everyone for joining us on the call this afternoon. The first quarter of this year has resulted in solid progress for Ophthotech. Today, I am very pleased to share our excitement in reaching the completion of patient recruitment of the first Phase 3 trial of Fovista in combination with Lucentis. We expect patient recruitment in the second Phase 3 trial, investigating Fovista in combination with Lucentis, to be completed approximately by the end of the third quarter of 2015. The third Phase 3 trial which is investigating Fovista in combination with Eylea or Avastin is recruiting patients as expected and we anticipate the duration of recruitment for this third trial to be roughly similar to that of the first two trials. Our timing projections for the trials that continue to enroll patients as soon as there is no impact on recruitment related to the summer season or the initiation or activation of competing trials. We would like to thank all of the participating investigators for their commitment to and enthusiasm for our Phase 3 program. We expect the initial top-line data from both Phase 3 trials of Fovista in combination with Lucentis to available in 2016 approximately one year after the enrollment of the last patient in the second Phase 3 trial, plus the time needed for database closure and analysis of the initial top line data. In addition to being identical with respect to the trial design in the first year, both of these Phase 3 trials are investigating the superiority of Fovista in combination with Lucentis, compared to Lucentis monotherapy alone. Therefore, the database from both trials of the Fovista in combination with Lucentis will be locked and analyzed together, which will allow for the analysis of multiple relevant endpoints in accordance with the statistical analysis plan. As we remain anti-VEGF agnostic, let us now turn to our third Phase 3 trial. As you may recall, in this trial either Eylea or Avastin is used as the anti-VEGF agent in combination with Fovista versus administration of either Eylea or Avastin alone in the control arm. As you also know our Fovista Phase 2b trial utilize Lucentis as the only anti-VEGF agent, because Eylea was not yet approved for marketing, and Avastin’s non-inferiority status compared to Lucentis was not yet established when the Phase 2b clinical trial commenced. Therefore, in order to gain more experience with Fovista when combined with Avastin or Eylea prior to starting a pivotal trial, our phase 3 trial of Fovista in combination with Avastin or Eylea started later than the Phase 3 trials utilizing Lucentis as the anti-VEGF agent. This time period of approximately nine months, allowed us to complete the assessment of initial preclinical and clinical studies and ensure compatibility of Eylea or Avastin when administered in combination with Fovista. Some of the data from these studies were presented at the Angiogenesis Meeting in Miami in February and at the ARVO meeting last week in Denver and will be discussed shortly. Again as I mentioned at the onset, this pivotal Phase 3 trial investigating Fovista administered in combination with either Eylea or Avastin as the anti-VEGF agent continues to enroll at the expected rate. Our key objectives and plan is to make for Fovista commercially available to physicians for their patients with wet AMD as quickly as possible, assuming a positive data outcome from the Phase 3 program. As we continue to explore various regulatory filing options, we believe that the most likely scenario is to initially submit a new drug application to the U.S. Food and Drug Administration for Fovista in combination with Lucentis, based on data from the first two Phase 3 trials of Fovista in combination with Lucentis and subsequently submit an amendment to the NDA with data from the Phase 3 trial of Fovista in combination with Eylea or Avastin. Alternatively, we may elect to file a supplemental NDA for Fovista in combination with Eylea or Avastin following the FDA review of the NDA for Fovista in combination with Lucentis. We are excited with the progress of the Fovista Phase 3 pivotal program and reaching our first major equipment milestone today. We have focused our resources on obtaining our initial top-line data in 2016. Given the fast-track status granted by the FDA for Fovista for the treatment of wet AMD, we believe that Fovista administered in combination with anti-VEGF therapy is well-positioned to potential be first-to-market in this class of novel therapy for wet AMD. I will now turn the call over to Samir.

[Samir Patel:]

Thank you, David. In addition to the Phase 3 studies which David reviewed our Fovista expansion studies are designed to investigate the potential role of PDGF inhibition to address significant unmet needs in patients receiving anti-VEGF monotherapy. These include vision loss associated with sub-retinal fibrosis, treatment burdens and sub-optimal response with anti-VEGF monotherapy. The enrollment in our anti-fibrosis trials should be completed in the next week or two. I would like to thank all investigators for their support and great enthusiasm. This trial is assessing the optimal regimen of Fovista administration in combination with anti-VEGF therapy for an anti-fibrotic effect in treatment antibodies, and also previously treated wet AMD patients. The trial is 24 months in duration so we hope to have some interim sub-group analysis data towards the end of the year - end of this year. The second Fovista expansion study investigating the role of Fovista in combination with all the currently employed anti-VEGF agents to decrease the treatment burden in wet AMD patients was initiated at the end of 2014 and continues to have good enrollment. The planning for the trial investigating the potential benefit of adding Fovista to patients experiencing poor or sub-optimal visual outcome with monotherapy anti-VEGF regimen is on track to commence in the second-half of this year. We believe the mechanism of action of Fovista in combination with anti-VEGF, coupled with the positive finding from our previously reported controlled Phase 2b study provides strong rationale for this trial. Furthermore, we are encouraged by the findings of an ISP presented at the ARVO poster session last week from the Retina Consultants of Arizona in this sub-group of patients receiving Fovista combination therapy, who are judged to anti-VEGF failures by the investigators. An average of 25 anti-VEGF injections were previously administered in this cohort of 27 patients. The data at the three-month standpoint in this sub-optimal anti-VEGF responders were presented in February at the Bascom-Palmer Eye Institute Angiogenesis, Exudation, and Degeneration Meeting in Miami. In brief, the result showed after three months monthly doses of Fovista administered in combination with anti-VEGF in this 27 patients experienced an average gain of 7.07 letters on the standardized visual acuity chart. Additionally, 10 out of 27 patients receiving pre-treatment with Fovista gained an average of 11.10 letters versus 4.70 letters in those without pretreatment at the three months standpoint, which is consistent with our scientific hypothesis that pretreatment with Fovista may result an enhancement of the anti-angiogenic effect. At the ARVO Meeting last week, further update in this cohort of 27 patients was presented following six monthly doses of Fovista combination therapy. At this standpoint, the average gain in visual acuity increased further to 8.8 letter. 10 out of 27 patients receiving pretreatment with Fovista gained an average of 16.5 letters versus 4.41 letters in those without pretreatment. We believe these findings are consistent without file rationale for planned treatment resistant study employing Fovista combination therapy. Last week, Dr. David Cheresh group at the University of California, San Diego School of Medicine also presented their findings at ARVO Meeting, investigated the effect of combined targeting of PDGF and VEGF with Fovista and Eylea respectively in preclinical ocular and cancer models. Relative to monotherapy, combining Fovista and Eylea not only provided a more robust anti-angiogenic effect, but also reduced fibrosis. I will now turn the call over to Mike.

[Michael Atieh:]

Thank you, Samir. Here’s an update on our results of operations. Collaboration revenue, which we recognized under the Novartis agreement was $41.7 million for the quarter ended March 31, 2015. This revenue was primarily related to the second $50 million Fovista enrollment milestone, which was earned during the quarter. This enrollment milestone, which we received from Novartis in April is accounted for using a relative selling price method, which costs for the immediate recognition of revenue for a large portion of the milestone with the remaining portion being recognized as collaboration revenue in future periods. We have one remaining enrollment-based milestone of $30 million from Novartis, which will be earned by us at the completion of enrollment in the final Phase 3 trial. Finally, with respect to collaboration revenue, we are responsible for supplying Fovista drug substance to Novartis under our agreement with them. When this occurs later this year, we will record collaboration revenue related to this activity. Turning to expenses. Research and development expenses were $24.6 million for the ended March 31, 2015, compared to $14.4 million for the same period last year. Over half of the increase in R&D expense in a quarter relates to our Fovista Phase 3 clinical program, where enrollment continues to increase and the Fovista expansion study that Samir discussed. Costs related to Fovista include clinical trial cost and cost to manufacture Fovista for the clinical studies. Increase compensation expenses, including share-based comp associated with additional research and development staffing along with an increase in manufacturing spending related to the Zimura clinical program accounted for the remaining changes in expenses. As we continue into 2015, our R&D expenses will increase significantly and may fluctuate from quarter to quarter. As you’ve heard earlier, the Fovista in combination with Lucentis trials are reaching full enrollment and Fovista in combination with Eylea or Avastin trial continues to enroll patients, which means our costs related to these trials will increase as more and more patients are treated. The Fovista expansion studies are rapidly enrolling as we explore potential new benefits from Fovista therapy. In addition, we continue to make significant investments in the CMC area, as our contract manufacturers begin to scale the Fovista drug substance and drug product manufacturing processes, and we continue our focus on the rigorous requirements for FDA approval of the manufacturing into QA/QC process related to Fovista. This manufacturing scaling process will take place during the remaining part of 2015 and into 2016 and may create some uneven levels of expenses quarter-to-quarter since the manufacturing costs relating to unapproved drugs our expense when incurred. In addition, as previously mentioned, we will be manufacturing Fovista drug substance for Novartis under our agreement with them and all related costs that produce this material will be charged to R&D with the respective payments from Novartis recorded as collaboration revenue. Finally, manufacturing related expenses will also increase, as we prepare for the start of the Zimura dry AMD study that was discussed by Samir. In total, we expect to incur increasing levels of R&D costs over the remaining part of 2015 and into 2016. General and administrative expenses were $9.6 million for the quarter ended March 31, 2015, compared to $6.3 million for the same period in 2014. Sequentially, expense levels in this quarter were generally in line with expense levels in Q4 2014. By the increased G&A expense versus the first quarter of 2014, relates primarily to increases in cost to support the expansion of the company’s operations, including the company’s public company infrastructure and the hiring of additional management and corporate staffing, including the early stages of a commercial organization, increased professional services and consulting fees, and increased share-based compensation. For the remaining quarter 2015, you should expect a steady, but slower rate of growth in G&A expenses compared to the growth in R&D expenses. The company reported net income for the quarter ended March 31, 2015 of $7.6 million, or $.22 per diluted share compared to a net loss of $20.7 million, or $0.64 per share for the same period in 2014. Fully diluted weighted average common shares outstanding at March 31, 2015 were $35.2 million. The reporting of net income in the quarter was driven by the recognition of revenue related to the Novartis enrollment milestone that was earned. We did not record a tax provision on income since we expect that there will be an annual loss in 2015, and therefore no interim tax provision is required. Turning to the balance sheet

[David Guyer:]

Thank you, Mike. Thank you for your time this afternoon and for your continued support. I will now turn the call over to the operator, so we can open up the lines for any questions.

[Operator:]

Thank you. [Operator Instructions] Our first question will come from Joseph Schwartz with Leerink Partners.

[Joseph Schwartz:]

Great. Thanks very much and congratulations on the progress. I was wondering first of all, how are you selecting patients for inclusion into these Phase 3 trials on top of Lucentis? Is it just classic features of AMD, or AMD or is it the presence of shrimp or both, which is believed to correlate strongly with anti-PDGF activity?

[Samir Patel:]

Hi, Joe, it’s Samir Patel. So I just want to make sure your question of process probably, you’re talking about the Phase 3 trial Fovista plus Lucentis with respect to the inclusion criteria, correct?

[Joseph Schwartz:]

Yes, I guess, it would imply to all the Phase 3 on top of the various VEGF. I just wasn’t clear is it classic presentation, or is it shrimp or both, what kinds of patient inclusion criteria you have employed.

[Samir Patel:]

So, it’s shrimp by OCC and just a background, when we commence the Phase 1 trial - and that was roughly the 2008 period. We utilized fluorescein angiogram, because the OCT that was used to assess the cross-sectional anatomical component of the retina was a time domain and very, very noisy OCT. And the same inclusion criteria were continued in the Phase 2 trial, where I forgot the breakdown, but some other sites had the current spectral domain OCT with high resolutions and the balance didn’t. And for purpose of this call, we can say roughly a half had time domain. So, obviously, when we started the Phase 3, the use fluorescein angiography, as you know is there, it’s quite unusual and rare nowadays and virtually everybody uses OCT, and OCT is a very high resolution and it’s sensitivity and specificity to determine the location of the choroidal neovascularization with respect to the RPE, which is what you’re really trying to do when you look at classic is better and more accurate. So it is for that reason, we’ve switched over to using strong. So in essence, the definition for the use of the term classic refer to fluorescein angiogram, it’s equivalent component on OCT is called cultural [ph].

[Joseph Schwartz:]

Okay. That’s very helpful. Thanks for the explanation. And maybe one on Zimura before I pass it on, what should we expect as far as trial design goes for this Phase 2/3 study in terms of numbers of patients, types of patients to be enrolled and primary endpoint?

[David Guyer:]

Yes. So on the Zimura Phase 2/3 geographic atrophy, dry AMD program, you said that that would start sometime in the second-half of this year, and we’re still finalizing the trial design, emphasize et cetera, in the near future, give you all that when we’re ready, but we’re still in final discussions for all of those points.

[Joseph Schwartz:]

Okay. Thanks very much.

[Operator:]

Our next question comes from Anupam Rama with JPMorgan.

[Anupam Rama:]

Hey, guys. Thanks so much for taking the question. Now that you’ve kind of provided a better sense of enrollment timeline for Fovista. Can you talk about the depth of analysis that you’ll be conducting for the combined Fovista, Lucentis dataset, and at what point you be ready for moving forward with the regulatory filing. And just a quick follow-up question, if you could give us an update on the ocular formulation of tivozanib, when a go-forward discussion for that program will be made? Thanks.

[Samir Patel:]

Yes. This is Samir. So with respect to the analysis, I mean, I think at this point it’s suffice to say that in addition to the primary endpoint, we’d be looking at typically - typical clinically meaningful endpoints that one would look at. And I think it’s fair to say that those endpoints that typically are valid for the patients whether it’s on the visual gain side or visual loss side, those with an endpoints would be the ones that we’ll be looking at in a combined analysis. Now, most of those tend to be binary, meaning, you’re looking at proportion of patients, so there is lots of data, so combining them is very important, you have the adequate power. And with respect to the subsequent filing, it’s just kind of depends on the duration of lock and analysis to say, so I don’t think I can’t comment anymore than what David has already stated. In connection to the tivozanib and the formulation those continues - studies continue and we’re encouraged by them. And when we have a little more data and granularity, we’ll certainly go ahead and give you some feedback.

[Anupam Rama:]

All right. Thanks so much for taking the question, guys.

[Operator:]

Our next question comes from Terence Flynn with Goldman Sachs.

[Irene Lau:]

Hi, this is Irene in for Terence. Thanks for taking the question. Could you provide us an update on your latest thought regarding your formulation strategy of the Avista with another anti-VEGF? Thank you.

[Samir Patel:]

Hi, it’s Samir. So when you say with another anti-VEGF, as you know, I mean, it’s the only one we’ve disclosed so far is that, we’re looking at formulation of tivozanib, but we’ve made a statement in the past that, we would be looking at Fovista if we go down the road of co-formulation. We are, as you can see with the pre-treatment study, for example, in that setting co-formulation wouldn’t be something that one would think would be the right thing to do, if the antifibrotic effect or visual outcome is markedly better than giving both of them together. But I think just as important - more important as we’ve stated before, it is about maintaining the visual outcome if we had gain initially, then the additional anti-VEGF agent studying in a setting where either you don’t have any fluid or even sub-retinal fluid, which has been now shown in harbors to be associated with atrophy, in that study we want to give additional anti-VEGF. So those have a decision really way in on whether to go formulation it or not as far as co-formulating. I mean, we have the opportunity as David stated before with Novartis on a co-formulation if we have to with Lucentis. And the other anti-VEGF agents not only just limited to tivozanib, we’ve disclosed that in the past that we’ve done co-formulation studies and are confident that Fovista and the co-formulated with other anti-VEGF agents. But I think pre-mature to talk about the validity and the requirement of co-formulation when only thing that the really counts is a visual outcome, whether that’s on the gain or in the lost side over the longer period, that’s what going to dictate our co-formulation strategy.

[Operator:]

Our next question will come from Stephen Willey with Stifel.

[Stephen Willey:]

Yes. Thanks for taking the question. Just kind of curious, I guess, if the decision strategically to either supplement the initial NDA filing or to file, I guess, a supplemental NDA separately, does that really just predicted upon timing or there other factors that are going to dictate how that things are playing out?

[David Guyer:]

Yes. Our goal is to make Fovista available to physicians in their patients as quickly as possible. And so we will do whatever strategy accomplishes that and obviously there are whole bunch of potential discussions with regulatory on what gets us there faster. So whatever path we believe we will get. Fovista initially on market as quick as we’ll take, it’s a complicated multi-factorial decision, but we will, as we make progress in formula in way, it looks most likely..

[Stephen Willey:]

Okay. And with respect to the six-month data that was updated at ARVO, should we expect to see another 12 months update to that data, towards the back half of this year, I had another medical conference?

[Samir Patel:]

Hi, Stephen, this is Samir. So I can’t really comment on when or if additional data are going to come forth, hat is not our file, it’s really an ISP, so we don’t really control that. But certainly on the Fovista expansion studies we’ll do our best to have some data towards the end of the year as I said previously.

[Stephen Willey:]

Okay. And then I guess as you think about Zimura trial and drawing the analogy so that you’re still finalizing trial design, but is there a threshold - a level of GA that you want to have in these patients in terms of just kind of a base line entry cards here? Thanks.

[Samir Patel:]

When you think about a dry AMD file, I mean, I think there is the fixation to only think about it from geographic atrophy, because it’s so well-defined and as an anatomic endpoint certainly there is an indication that that’s accessible. But we’re considering various assets, it’s not only - so obviously I think to answer your question directly, I mean, typically the answer is, is it clinically meaningful. And clinically meaningful is looked at, not only just at the rate but looking at other parameters on the safety side and other aspects of visual functions that I’m sure the regulatory agencies would consider. I don’t think it’s a number or rate per se; it’s a relative aspect that will be looked at. That being said, I think it’s also important to realize that from a commercial standpoint when you look at treating monthly on a disease that maybe in some patients five, seven, eight years to treat monthly and you don’t have a biomarker to follow with, such as fluid in wet AMD, is a bit difficult and then challenging. So I think we are taking that into consideration and some of the other visual function data studies that we’ve been in touch with individuals who presented recent findings at various meetings at ARVO as well, to see how we can sign a study that not only looks at geographic atrophy but other aspects that might be clinically meaningful and could determine in health side some treatment, level of treatment.

[Stephen Willey:]

Okay. Thanks. And congrats on completing the first study.

[Operator:]

[Operator Instructions] We’ll take our next question from Gbola Amusa.

[Gbola Amusa:]

Hi, thanks for taking my call, and congrats on the results. Three questions on Fovista, first of all on February 23 or so, you mentioned a Translational Scientific Board that included Dr. Cheresh and Dr. Jain, who seem to have cancer competencies. And then looking at the ARVO posters, one study recommends continued investigation of Fovista in cancers complicated by angiogenesis and fibrosis. So can you comment on whether the formation of your TSP is related to the conclusion of this poster? Secondly, for the Fovista and anti-fibrosis in terms of timing of that data you’ve already got completion of enrollment planned in the next week or two. And can say whether or to what extent the data will be used to inform the filing for Fovista with regulators or the development of the product in cancer? And then the third question, in terms the timing of your headlines for Fovista with Lucentis, you mentioned something that implies third-quarter 2016 plus whatever time it takes for the database to close and be analyzed. So how long do you anticipate it takes to close the database to analyze it, just so you have better visibility on time? Thank you.

[Samir Patel:]

Hi, so this is Samir. So, on the first one, where you had talked about the Translational Scientific Advisory Board, in just about everything we’ve learned to a great extent, if you look back to the entry of pharmacotherapy in therapeutic agent subsequent to Lucentis as well. A lot of these cytokines related translational aspect really came from tumor models, including anti-PDGF. I mean, if you think about the dual-antagonism of PDGF and VEGF, a lot of those came from tumor xenograft models and pancreatic islet models. And so it’s only rational to really think about all that findings in that microenvironment by couple of individuals who are really at the forefront of pathologic angiogenesis. So I think it’s best to think about it from a pathologic angiogenesis preclinical model, not that they are not available at present in the eye. The model that we have in the eye is a thermal model and so it’s not as much of a disease model as you’d see in cancer. That being said, the downside of the cancer model is you have up regulation of so many genetically up regulation of so many different proteins that it may be not analogous to what you see in the eye. But having said that it is understanding what happens at preclinical level and that’s why the translational board is of tumors, it’s not necessarily because of entry into any tumor setting. And I hope that kind of answers your question also on anti-fibrosis and it’s relevant for cancer. We are really focused right now on the complication of fibrosis as it relates to the back of the eye. With respect to the timing of following the database, so I will give that to David. David?

[David Guyer:]

Great, yes, so traditionally, I think it’s easier to just speak in general industry standards. Obviously, there is variation depending upon how clean-cut data is and how your independent statisticians and data put together everything. But in general industry standards range from 4 to 6 weeks ballpark to close your database and get your top line result. And we’ll promptly report that after its receipt.

[Gbola Amusa:]

All right. And just a clarification on the anti-fibrosis data, could you mention whether that affects your filing plans, when you - whether receiving that data could affect the timing of your filing plans?

[David Guyer:]

I’d say, again, we will do whatever it takes to get Fovista in market as soon as possible, as quickly as possible. Obviously, a lot of that decision will be with early discussions with FDA as well as what the best path is in the - and what each path would potentially give label-wise. So I think it’s too early really to speculate on that expect that our overall goal is to get Fovista on the market as soon as possible.

[Gbola Amusa:]

Thank you. I’ll head back into the queue.

[Operator:]

[Operator Instructions] Next we’ll take a follow-up question from Gbola Amusa.

[Gbola Amusa:]

Hi, it’s Gbola Amusa. Thanks again. That looks pretty fast. So for Zimura on polypoidal choroidal vasculopathy, on my numbers you got about 7% to 10% prevalence in wet AMD patients, which implies that this could be potentially fewer than 200,000 people in the U.S. Assuming you agree with that prevalence rate in wet AMD, does that mean you hope to achieve an orphan drug designation with that indication? And then a second question, on 23rd April, Reuters reported that your partner Novartis is looking for $2 billion to $5 billion bolt-on acquisitions. To what extent do you have contingencies built around that statement?

[Samir Patel:]

I think on the polypoidal question, the diagnosis of polypoidal really requires the performance of ICD. And in the United States it’s not a routine procedure that’s done with neovascular AMD. So I’m not quite sure or I’m not sure about the prevalence rate. But I would say that our strategy right now is not necessarily to pursue an orphan designation at this time. With respect to the second question, I’ll let David handle that.

[David Guyer:]

At this point, we cannot comment on our partner or any other company’s potential strategy.

[Gbola Amusa:]

Thank you.

[Operator:]

That does conclude the question-and-answer portion of today’s call. At this time, I would like to turn things back over to Mr. David Guyer.

[David Guyer:]

Great. I just like to thank every again for their time and interest. And we look forward to further updates in the near future. Thank you.

[Operator:]

That does conclude today’s conference. Thank you for your participation.