Kala Pharmaceuticals, Inc.
Q4 2017 Earnings Call Transcript

Published: 26 Mar 2018

[Operator:]

Good morning, and welcome to Kala Pharmaceuticals Clinical Update Conference Call. At this time, all participants are in a listen-only mode. Following managements prepared remarks, a Q&A session will be held. And as a reminder, this call is being recorded. I would now like to turn the call over to Mary Reumuth, Chief Financial Officer for Kala Pharmaceuticals. Please proceed.

[Mary Reumuth:]

Thank you, operator and thank you all for participating in today's call. Joining me from the Company are Mark Iwicki, Chief Executive Officer; Dr. Kim Brazzell, Chief Medical Officer; Todd Bazemore, Chief Operating Officer; and Dr. Hongming Chen, Chief Scientific Officer. Today's call is being recorded and an archived recording will be available on our website as indicated by our press release. We will be showing slides to accompany today's discussions and these slides have also been updated to our website. Before we begin, I would like to caution that comments made during this conference call about Kala's future expectations, plans and prospects by management are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, I encourage you to review the Company's filings with the Securities and Exchange Commission including without limitation to Company's most recent quarterly report on Form 10-Q which identifies specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements. Factors that may affect the Company's actual results include, but are not limited to the results and timing of clinical trials of our lead product candidates, our ability to obtain regulatory approval of our product candidates on the timelines expected, if at all the sufficiency of the Company's cash resources, broader enforcement of intellectual property, legal compliance and new regulatory requirements and other economic and competitive factors. The content of this conference call contains time sensitive information that is accurate only as of the date of the live call today, Monday, March 26, 2018. The Company undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. I will now turn the call over to Mark Iwicki. Mark?

[Mark Iwicki:]

Thank you, Mary. Good afternoon, everyone. Earlier this morning Kala issued our financial results for the quarter and year ended December 31, 2017. This also included results of some of the additional analysis of the data from our STRIDE 1 and STRIDE 2 Phase 3 trials and of our Phase 2 data as well for KPI-121 0.25%. These analyses were being done to better understand the results and to prepare for discussions with the FDA which we expect to be happening in the second quarter. This analysis will be the focus of today's call. In the last year we've made significant progress that included a successful IPO of 6.9 million shares of common stock at $15 per share. Additionally, an NDA for INVELTYS, that's KPI-121 1%, our topical twice a day product candidate for the treatment of inflammation and pain in patients who've undergone ocular surgery was accepted for review by the FDA with a PDUFA target action date of August 24, 2018. We also announced top line results for our two Phase 3 clinical trials evaluating the safety and efficacy of KPI-121 0.25% versus placebo in patients with dry eye disease. Before going on to the new dry eye data analysis, I'll turn the call back to Mary Reumuth, our CFO; who will briefly discuss our financial results. Mary?

[Mary Reumuth:]

Thank you, Mark. Our cash position as of December 31, 2017, was $114.6 million compared to $45.5 million as of December 31, 2016. We anticipate that our existing cash will enable us to fund operations for at least the next 12 months. Total research and development expenses for the quarter of 2017 were $5.9 million compared to $6.9 million for the same period in 2016. The decrease in R&D expenses is primarily due to the completion of our Phase 3 clinical trial of INVELTYS in the first half of 2017, and STRIDE 1 and 2 which completed during the fourth quarter of 2017. Total research and development expenses for the full year 2017 were $29 million compared to $25 million for the full year 2016. The increase is primarily the result of increased personnel costs, as well as increased costs associated with the filing of our NDA for INVELTYS. Total general and administrative expenses for the quarter ended of 2017 were $5.3 million compared to $1.3 million for the fourth quarter of 2016. Total general and administrative expenses for the full year 2017 were $10.9 million compared to $7.6 million for the same period in 2016. The increase in G&A expenses is primarily attributable to an increase in personnel costs and professional fees associated with operating as a public company, and costs incurred in preparation to establish a commercial organization. Our operating loss for the quarter ended December 31, 2017 was $11.1 million compared to $8.2 million for the quarter ended December 31, 2016. The operating loss for the full year 2017 was $39.9 million compared to $32.7 million for the full year 2016. Our net loss was $11.3 million, or $0.46 per share, for the quarter ended December 31, 2017 compared to a net loss of $8.4 million, or $7.11 per share, for the same period in 2016. Our net loss for the full year ended December 31, 2017 was $42.2 million, or $6.11 per share, compared to $33.2 million, or $28.07 per share for the same period in 2016. The decrease in our net loss on a per share basis from the periods discussed in 2016 compared to those same periods is 2017 is due to an increase in our weighted average number of shares outstanding resulting from the conversion of our preferred stock into shares of common stock, as well as common stocks issued in connection with our initial public offering in July of 2017. I will now turn the call over to our Chief Medical Officer, Dr. Kim Brazzell, for an update on our dry eye disease program. Kim?

[Kim Brazzell:]

Thank you, Mary and good morning everyone. On January we announced topline results from our two Phase 3 clinical trials, the safety and efficacy of our dry eye disease product candidate KPI-121 0.25% versus placebo in patients with dry eye disease. We refer to these trials as STRIDE 1 and STRIDE 2. As previously announced, we achieved statistical significance for the pre-specified primary signed endpoint of conjunctival hyperemia at Day 15 in both trials. We achieved statistical significance for the predefined primary symptom endpoint of ocular discomfort severity at Day 15 in STRIDE 1 with a trend towards a treatment effect in STRIDE 2. We also achieved statistical significance for a second pre-specified primary symptom endpoint of ocular discomfort severity at Day 15 in patients with a more severe baseline discomfort in STRIDE 1 with a strong trend towards a treatment effect in STRIDE 2 as a pre-specified secondary endpoint. Positive treatment effects were also observed for ocular discomfort severity in the ITT population at Day 8, a key pre-specified secondary endpoint in both trials with P-values of 0.0011 and 0.0408 in STRIDE 1 and STRIDE 2 respectively. Since then we've been conducting additional analysis on a post-hoc basis of these results, some of which we shared this morning in our press release. One key analysis shown on Slide 6 was evaluation of the Phase 2 ocular discomfort data using the same statistical analysis as used to test the primary symptom endpoints in the two Phase 3 trials. Using this analysis we observe a treatment effect for ocular discomfort at Day 15 with similar magnitude was observed in STRIDE 1 of 5.27 millimeter treatment difference compared to 5.44, and achieved a P-value of 0.0489. The similar effects of Phase 2 in STRIDE 1 are also illustrated in the ocular discomfort daily data for the two trial which shows -- which both show separation between KPI-121 and vehicle within 1-2 days of initiation of treatment that continues over the remaining days of evaluation. We performed an analysis of the pool data from the ITT population from STRIDE 1 and STRIDE 2 which resulted in an observed positive treatment effect for ocular discomfort at Day 15 with a P-value of less than 0.0001. The pooled results in two exploratory analyses in subgroups that were defined by geographic regions of east and west achieved p-values of 0.0071 and 0.0021 respectively; and north and south which achieved p-values of 0.0002 and 0.0176 respectively. As previously noted in STRIDE 1 and STRIDE 2 we achieved the p-value of 0.0011 and 0.0408 respectively for ocular discomfort at Day 8 which was a key pre-specified secondary endpoint. We now also examined ocular discomfort results for Days 8 through 14 in STRIDE 1 and STRIDE 2. In STRIDE 1 we observed positive treatment effect with p-values less than 0.002 at all-time points between Day 8 and 14. In STRIDE 2, we observed p-values of less than 0.05 on 6 of the 7 days in that time period. While we're not certain at what weight regulatory agencies will place on our post-hoc analysis, we believe that these analyses provide important information regarding KPI-121 plus 0.25%. I will now turn the call over to our CEO, Mark Iwicki.

[Mark Iwicki:]

Thanks, Kim. We continue to be really encouraged by that preponderance of results from our Phase 2 and two Phase 3 trials of KPI-121 0.25% in dry eye disease. We've achieved statistical significance for the primary sign endpoint in Phase 2, STRIDE 1 and STRIDE 2. We achieved statistical significance for the primary symptom endpoint of ocular discomfort in STRIDE 1 with a positive trend observed in STRIDE 2. As Kim noted, applying the Phase 3 statistical analysis plan to the Phase 2 study at Day 15 yielded p-value less than 0.05. Applying the same statistical analysis method, to Days 8 to 14, each yields p-values of less than 0.0002 at all-time points in STRIDE 1 and a p-value of less than 0.05 for 6 of the 7 time points in STRIDE 2; and pulling the ITT populations from STRIDE 1 and STRIDE 2 results in an observed robust positive treatment effect for ocular discomfort at Day 15 with a p-value less than 0.0001. When we look at the totality of our dry eye program which includes promising efficacy and safety results, and the opportunity to fill a large unmet need for dry eye patients suffering from episodic flares, we believe we have the potential for a product that can make a significant impact for patients and we really look forward to discussing this with the FDA. That concludes our prepared remarks for today. Operator, we're ready to take any questions.

[Operator:]

[Operator Instructions] And our first question comes from Chris Schott of JP Morgan. Your line is now open.

[Christopher Schott:]

Maybe first question; just -- can you remind us here on the differences in the statistical plan used in Phase 2 for discomfort versus Phase 3, just trying to understand using -- looks like you've got a better outcome here with using the Phase 3 fiscal plan. Can you just help us bridge between the two with differences?

[Mark Iwicki:]

In the Phase 2 trial, the pre-specified analysis was based on the study visit, so it was defined as 3 days prior to the Day 15 visit which by protocol could be Day 15, plus or minus 1 day and in reality was often beyond that range. In the Phase 3 assessment as we went to Phase 3, we defined it as the 3-day main of days 12, 13, 14, strictly in that way, and so for this the primary difference in the two and led to a slight difference in the p-value which got us below 0.05.

[Christopher Schott:]

Second question was just on the -- as you've analyzed the data and talk to us a little bit more; any differences at all between the population in STRIDE 1 versus STRIDE 2 that could explain the difference in outcome. It seems like directionally everything is obviously -- things are going in a very positive way but just need to get a different outcome between the two studies. Is there anything you've learned from reading through the data that gives anymore color on that?

[Mark Iwicki:]

Yes Chris, we're continuing to evaluate that and really haven't been prepared to make an update on that at this point but hopefully we'll be able to in the future.

[Christopher Schott:]

And maybe just a final question and helping just to set expectations; when you look at the traditional analysis from STRIDE 1 and 2 and the Phase 3 data; do you believe you will need a third study to get approval in dry eye or do you think you have enough data here to get approval?

[Mark Iwicki:]

I think we are continuing to plan for all of the different options but we are certainly encouraged that when we ran these additional analysis that we've not only been able to use the Phase 3 statistical analysis plan to yield that strong p-value for Phase 2 in ocular discomfort but the vast majority of the additional analysis we've run continue to support that preponderance of data really shows a strong treatment effect for ocular discomfort. And just maybe a quick reminder that we did hit hyperemia in all 3 of these significant clinical trials Phase 2 STRIDE 1 and STRIDE 2. So we intend to meet with the FDA and then at some point after that meeting we'll be able to come back and provide an update. But we are certainly encouraged that we've been able to run these additional cuts of the data which are very often done when people are preparing for their NDAs and we think we have really a strong and compelling set of data to be able to discuss with the FDA.

[Operator:]

[Operator Instructions] And our next question comes from David Maris of Wells Fargo. Your line is now open.

[Unidentified Analyst:]

This is Katie [ph] on for David, thanks for taking the questions. Can you share a little more about the timeline to your meeting with the FDA? Is there more analysis that you intend to do and when do you expect to request that meeting? How long it typically takes to have a meeting actually scheduled? So when we should expect for you to actually have meet with the FDA?

[Mark Iwicki:]

All that we are commenting on right now is that we do expect the meeting to be in the second quarter. We don't have any additional information to share at this time about that but we will certainly provide an update to everyone sometime after we're able to have that meeting and potentially get minutes and reflect on our plans moving forward.

[Unidentified Analyst:]

And can you give us any analysis of what the previous cost of the Phase 3; can you remind us how long they took to run and what the cost was for each STRIDE 1 and STRIDE 2? And whether or not you expect, if you did have to run another study, it would be comparable to those or what maybe a best case scenario, worst case scenario would look like for the cost of those trials?

[Mary Reumuth:]

I'll just answer about the cost and turn it over to Kim for the rest. So each trial was about $15 million, and took about a year.

[Kim Brazzell:]

And we expect the cost and the time to be pretty similar to that. For any new trials, we might just use the run.

[Operator:]

Thank you. And I'm showing no further questions in queue. Mr. Iwicki, I'll turn the call back over to you.

[Mark Iwicki:]

Okay, fantastic. We'd really like to thank everyone for participating and listening to today's conference call. As hopefully, you've heard, we believe we have a promising candidate in KPI-121 0.25% for patients with dry eye disease due to which broad mechanism of action, the rapid onset of relief of both signs and symptoms that we see in our clinical program, a favorable tolerability profile and the potential to be complimentary to existing therapies. We also have a strong candidate in INVELTYS and believe that if approved, it will be the first twice daily ocular corticosteroid indicated for the treatment of post-operative ocular inflammation and pain. We look forward to providing everyone with another update on our programs in the near future. And thank you for your time this morning.

[Operator:]

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, you may all disconnect. Everyone have a great day.