Hyperion DeFi, Inc. (HYPD) Earnings Call Transcript & Summary

Greetings and welcome to Eyenovia Corporate Update Conference Call. [Operator Instructions] Please note, this conference is being recorded. I would now like to turn the conference over to your host, Eric Ribner, Investor Relations. Thank you. You may begin.

Good afternoon and welcome to Eyenovia's conference call to discuss the company's exclusive license agreement with Bausch + Lomb, and both companies -- that both companies announced yesterday, along with Eyenovia's other recent business development activities. With me today are Dr. Sean Ianchulev, Eyenovia's Chief Executive Officer and Chief Medical Officer; Michael Rowe, Eyenovia's Vice President of Commercial; and John Gandolfo, Eyenovia's Chief Financial Officer. Except for historical information, all of the statements, expectations and assumptions contained in this conference call are forward-looking statements. Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statement relating to our future activity or other future events or conditions, including estimated market opportunities for our product candidates and any potential revenue from licensing transactions. These statements are based on current expectations, estimates and projections about our businesses -- our business based in part on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may and are likely to differ material from what is expressed or forecast in the forward-looking statements due to numerous factors discussed from time to time in documents, which we file with the SEC. In addition, such statements could be affected by risks and uncertainties related to, among other things, our estimates regarding the potential market opportunity for our product candidates and potential revenue from licensing transactions; reliance on third parties to develop and commercialize our product candidates; impacts of and uncertainty related to COVID-19; the ability of us and our partners to timely develop, implement and maintain manufacturing, commercialization and marketing capabilities and strategies for our product candidates; risks of our clinical trials, including, but not limited to, the cost, design, initiation and enrollment, which could still be adversely impacted by COVID-19 and resulting social distancing; timing, progress and results of such trials; the timing of our ability to submit applications for, obtain and maintain regular approvals -- regulatory approvals for our product candidates; the potential impacts of COVID-19 on our supply chain; the potential advantages of our product candidates; the rate and degree of market acceptance and clinical utility of our product candidates; fluctuations in our financial results, particularly given market conditions and the potential economic impact of COVID-19; our need to raise additional capital; intellectual property risks; our ability to attract and retain key personnel; changes in legal, regulatory and legislation environment in the markets in which we operate; and the impact of these changes on our ability to obtain regulatory approval for our products and our competitive position. Any forward-looking statements speak only as of the date on which they are made. And except as may be required under applicable security laws, Eyenovia does not undertake any obligation to update any forward-looking statements. With all that said, I'd like to turn the call over to Dr. Sean Ianchulev.

Thank you, Eric. Again, welcome, everyone, to our conference call. With me on today's call and available for questions are Michael Rowe, our Vice President of Commercial; and John Gandolfo, our Chief Financial Officer. Yesterday, we shared some exciting news that we signed an agreement for an exclusive license in the United States and Canada for the development and commercialization of our investigational product for MicroPine. This follows by just about 60 days our signing of an agreement with Arctic Vision for the rights of MicroPine as well as MicroLine in Greater China and Korea. Together, these 2 agreements represent potential upfront payment, nonsales-related milestones and clinical cost savings of approximately $100 million. In addition to the potential $100 million precommercial economics to our bottom line over the near-term horizon, I would like to emphasize what this really could mean strategically for our company. First, we believe that these 2 agreements unlock large market opportunities in our field. The U.S. progressive myopia market with approximately 3 million high-risk potential patients is of a scale similar to that of the other largest chronic treatment ophthalmic markets. It is estimated that the number of children who could benefit from our technology in China and Korea could be as much as approximately 8x that amount. Needless to say, approaching and developing these tremendous market opportunities could strongly benefit from the most experienced ophthalmic strategic partners. In the U.S., we believe that Bausch can prepare this opportunity better than anyone else. We believe the same is true for Arctic Vision in China and Korea. Additionally, what has not escaped the attention of many investors, who called us to congratulate us on this transaction, is the sense of validation of our technology, which has garnered the attention of several leaders in the ophthalmic space. I also want to emphasize that in my opinion, this transaction are a tremendous value-add to our company and accretive to Eyenovia's already milestone-rich, near-term outlook. We reaffirm our commitment to our upcoming milestones with the planned NDA submission for Mydcombi and the launch of the Phase III program for MicroLine in presbyopia for which we could see Phase III results in Q1 of 2021. Presbyopia is one of the leading therapeutic opportunities in ophthalmology in our opinion, with at least 8 companies that we know of pursuing a pharmacologic treatment for a condition that affects more than 100 million people in the U.S. alone. And we could potentially be one of the only companies to deliver Phase III results in the time frame we anticipate. These business development transactions and our recent capital raise in August 2020 have resulted in us having 2 -- having pro forma cash on hand of approximately $32 million as of today. We expect this cash to provide us with sufficient capital to bring our Mydcombi mydriasis product through the NDA process and commercial launch, to complete our presbyopia clinical program for MicroLine and to prepare our pilot manufacturing capabilities for our advanced dispenser technology, Optejet. Now to talk more about specific aspects of the 2 deals is our CFO, John Gandolfo. John.

Thank you, Sean. In terms of the financial details of the Bausch agreement, we received an upfront payment of $10 million upon signing, and we are entitled to receive up to $35 million in additional licensing payments based upon product approval and commercial launch-based milestones. In addition, upon commercialization, we are entitled to tiered sales royalties ranging from mid-single-digit to mid-teen-digit percentages of gross profits on sales in the U.S. and Canada. Importantly, as Sean mentioned, Bausch has also assumed oversight over and all costs related to the ongoing Phase III CHAPERONE trial of MicroPine. As you may recall, CHAPERONE is a 36-month, 400-subject trial. And savings that we expect to realize from the transfer of costs relating to the CHAPERONE trial could significantly extend our cash runway and allow us to focus on ongoing development of our MicroStat and MicroLine programs as well as our earlier-stage R&D activities as we work to introduce new indications, leveraging our microdosing technology. In total, if successful, the Arctic Vision and Bausch transactions are expected to yield combined license fees and expense savings of approximately $100 million prior to commercialization, at which time we also expect to begin earning royalties under both agreements. As we look out to 2022, the company's current cash resources, which include the $10 million upfront payment from Bausch as well as the $12 million total and anticipated milestone payments and expense reimbursements or savings from the Arctic Vision and Bausch transactions, are anticipated to be sufficient to file the NDA and commercialize Mydcombi and initiate and complete a Phase III study for MicroLine while also potentially developing a low- to mid-volume manufacturing facility for commercialization. With the addition of this nondilutive capital from highly respected companies, we believe that these transactions are indeed transformative for our company and further validate our microdosing platform. Now I'd like to turn the call over to Michael Rowe to review the status of Mydcombi and MicroLine. Michael?

Thank you, John. With this additional infusion of cash, we can now turn our attention to the potential commercial opportunities that Mydcombi and MicroLine offer. Mydcombi, which is our intended brand name for the MicroStat investigational product, if approved, would be the only fixed combination pharmaceutical mydriasis product in the U.S. More importantly, Mydcombi may serve a very important purpose in the COVID world by offering a touchless way of administering these drugs during an eye exam. Because the Optejet dispenser has no protruding parts, there is less of a chance of cross contamination between patients. It could be seen when a traditional eye drop tip accidentally touches the eye. In addition to this, the microdosing technology has been shown to provide excellent tolerability, with more than 96% of patients in our clinical studies experiencing no stinging upon use, and this was done without an anesthetic. We are making plans now for the successful launch of Mydcombi towards the end of next year with a small sales organization that will focus on the largest population centers where the majority of eye exams are conducted. We estimate the value of this market to be around $250 million and expect that our strong value proposition and potential lack of direct competition should help develop with our early success. MicroLine is our proprietary pilocarpine formulation and candidate for improving near vision on an on-demand basis. Presbyopia, which happens to almost everyone over 40 years old, is the nonpreventable, age-related hardening of the ocular lens, which causes the gradual loss of the eye's ability to focus on nearby objects. Pilocarpine has been demonstrated to constrict the pupil of the eye and create a pinhole effect, which, like a pinhole camera, works to bring near- and medium-distance objects into focus. This pinhole approach has been used with contact lenses and surgical implants to improve near vision in patients with presbyopia. And now with MicroLine, we are working to improve near vision with our microdose formulation. By the end of this year, we plan to initiate the first of 2 Phase III clinical trials of MicroLine and anticipate having top line data potentially by the end of the first quarter next year. And if approved, MicroLine will enter a market that we estimate to be worth about $2.2 billion in the U.S. alone. In addition to these late-stage programs, we view our Optejet technology as a platform from which additional products and indications could emerge. And to that end, our deals with Bausch and Arctic Vision provide important funding that we can deploy towards other late-stage development work, either in partnership with other companies or on our own. And now I'll turn the call back to Sean. Sean?

Thank you, Michael. In closing, we believe our transactions with Bausch and Artic Vision represent another important validation of our Optejet technology and provide immediate, nondilutive funding while preserving long-term financial upside. We look forward to providing additional update on our regularly scheduled Q3 results conference call next month. We will now open the call for your questions. Operator?

[Operator Instructions] Our first question comes from the line of Matt Kaplan with Ladenburg Thalmann.

Congrats on the deal with Bausch. You mentioned in your -- in the press release in your prepared remarks that the 2 licensing deals with Bausch and Arctic Vision, including the upfront licensing payments and then also development reimbursement costs and savings that it works to about $100 million. Could you give us a little bit more detail in terms of the breakdown of how you get to the $100 million in value that you described for the 2 deals combined?

Yes, Matt. This is John. I could probably do that for you. The -- so if you break it down between licensing transactions and expense -- cost savings and expense reimbursement, it's about -- 75% of it is licensing fees, 25% would be cost savings and expense reimbursement, and this is combined with the 2 transactions. So when you looked at it, we mentioned with the Bausch transaction that we could have up to $45 million in license fees and milestone payments. The Arctic Vision transaction, net of Senju shares, results in about $30 million total. So combined, that's about $75 million. And the balance would represent the cost savings and development expense reimbursements combined that we would have between the 2 programs. So $75 million license fees, $25 million cost savings and expense reimbursement.

Okay. That's very helpful. And then in terms of the pro forma cash balance that you -- that Sean mentioned, $32 million as of today, that includes the $10 million upfront payment from that?

Yes. It includes the $10 million upfront payment from Bausch, correct.

Okay. And can you give us a little bit more detail in terms of how you think -- how we should think about the MicroPine opportunity now that it's partnered with Bausch and how the royalties will work in terms of the tiered royalties? Is it -- on a blended basis, how we should think about that?

So I think in terms of the -- go ahead.

Go ahead, John. Yes, yes. John, why don't you go over the royalty? And I can just give an overarching comment.

Yes. So the royalties are -- they are tiered royalties based upon gross profit levels over an extended period of time going out to 2035. And as we mentioned, it starts in the mid-single digits. And based upon certain tiers, increases up to mid-teens at that point in time. So I'm not sure...

So we should think about it over the life of the product? So for example, once the total revenues reach -- or I'm going to say $100 million or $500 million or $1 billion, then they -- at that point, they move up in tiers and royalty. Do they ever move back down to a single -- do they ever move back down to the single digit on an annual basis? Or once you cross those thresholds, it will remain at the mid-teen level?

I guess, mathematically, they could move down. I've done a lot of licensing deals. I've never seen that. Usually, you continue to go up. But I guess, theoretically, you can. We certainly, I know based upon our models, expected to go up to different levels and expect the return from the transaction to be substantial. But it's something we're very excited about.

Okay. That's helpful. And...

And Matt, maybe I can address your question about how we see the MicroPine transaction with Bausch. As you're aware, this is one of the most interesting and most compelling programs and opportunities in ophthalmology, which we estimate will be a several billion-dollar market in the future. One of the issues that has always come up, I think, from investors in general is that currently, it's a white space. There is -- there are no approved therapies for progressive myopia, and I've seen that before with LUCENTIS when there were no anti-VEGF therapies in macular degeneration, and we have now more of a -- almost like a $9 billion to a $10 billion market. And also, one of the other comments has been, well, the horizon is a little long. We're looking at 2025 by the time the development program is done. And also another comment has been, well, how come there are no strategics that are developing therapies in that space. And I think the Bausch transaction really addresses pretty much all of these questions. Except for the horizon, there is nothing we can do about the horizon because the clinical program has a 3-year end point. But apart from providing nondilutive capital, it really provides tremendous validation on our delivery technology. It provides tremendous validation on the space of progressive myopia as an exciting and compelling therapeutic area and the therapeutic approach with atropine that we have. And it's really one of the major strategics entering the space of progressive myopia. So for us, that was really a good external validation of our thinking and our appreciation of that opportunity all along. It also -- even though it doesn't change anything about the actual milestone in terms of the horizon of when we would expect FDA approval, it really accelerates and brings home the economics much closer to the present. And we think -- of course, a lot of our prices not reflected MicroPine because I think most investors look no further than a year or 2, and we understand that. But now I think with the entry of a strategic, with actual economics and significant derisking, which we haven't seen before, I think it's a really exciting opportunity. And it's not only exciting for Eyenovia, I think it's exciting for the space to see a real interest and traction in a completely white space area that we have 3 million population in the U.S. and 8x more of people that are really significantly affected. And particularly now in the COVID epidemic when people spend a lot more time in front of their screens and at home, and we know that every hour they do so, and kids are not spending outside, their risk of progressive myopia is higher. So we're very excited. I think this provides great strategic partnership for Eyenovia, especially in the longer horizon. And the fact that Bausch is really assuming the development costs and the economics. And now we can really focus on another great opportunity that is just on our doorstep, and this is MicroLine for presbyopia. And we're just about to initiate this year the MicroLine Phase III program and then actually get Phase III results very shortly. And it's a very near-term program where we think the economics are really compelling. So Eyenovia has a lot of things going. And we're very excited that we can share them with strategic partners, which we really think on their shoulders, such as Bausch, we can really develop the space -- this white space of progressive myopia with the best possible expertise and sales force and commercial capabilities.

Great. Well, congrats again.

[Operator Instructions] Our next question comes from the line of Len Yaffe with Stoc Doc Partners.

Congratulations on the deal that provides you with great cash to be able to finance operations over the next several years. What I was wondering is at prior optical shows I've gone to, it seems like there were 3 or 4 companies who were working in the progressive pediatric myopia space, and at least 1 or 2 of them may have been a little bit further along than you guys were. And oftentimes, if a company like Bausch is going to get into this market, they would prefer to be first unless there was something that caused them to see something in the drug later on down the line. I was just wondering if you could comment on that set of thinking in terms of what Bausch reflected to you about why they chose to partner with you even though that you're not likely to be the first drug to market.

Yes. And Len, thank you for the question. I'm going to pass that on to Michael, except that I would say you're spot on. All these other potential players I'm sure have been considered in the process because if that was us, we definitely would. And nothing prevents Bausch to really take that direction, but I'll pass the answer to that to Michael.

Thank you, Sean. And let me preface it by saying that we're not privy to whatever due diligence that Bausch or any potential partner has done with anybody else. But what I can tell you in conversations with other people is that you're correct, there may be 1 or 2 companies that time-wise are slightly ahead of us. But what I've been told is that it's the advantages of our Optejet technology, the ability to make it easy, for example, for these kids to take their medication themselves. This is something they'll have to take every night for many years and won't have to bother their parents to help them take it. The ability of the dispenser to help with compliance and adherence, which also helps hopefully in the end with treatment outcomes. And then the fact that we're microdosing, which we hope through the CHAPERONE study will be shown that it provides greater tolerability and potential safety benefits. And that was certainly enough in other conversations we have. And I'm sure and somehow in Bausch's determination and due diligence, those were the things that they were looking at as well.

There seems to be no further questions up in the -- we just received a question from Jonathan Aschoff with ROTH Capital Partners.

I was wondering since your royalty is based on the gross profit, could you help us understand roughly how the gross profit might look for every dollar of net revenue?

Yes. I've spoken to this before with respect to -- on a stand-alone basis, Eyenovia and where we expect gross margins to be for MicroPine, the manufacturing could be done by Bausch, but I can give you -- I'm not sure that they would be much different. But I know when we were speaking about Eyenovia, we expect 90% type of gross margins associated with MicroPine. And when we spoke about it on Eyenovia, we were looking at it as a roughly $200 per cartridge reimbursement with a cost of goods sold of about $15 to $17 per cartridge. That's how we came up with that.

Okay. And if you don't want to talk about exact numbers, can you maybe help us out with how much your market penetration estimates might look now with a partner versus doing this by yourself, U.S. only?

Well, that's difficult because -- yes, this is now their product to make those estimates with. So we can tell you what we had thought was that we were assuming that of those 3 million children who are at the highest risk that penetration actually into the 3 million would be quite high because we're not even counting the other 22 million that are simply myopic. These are the ones who are definitely going to have problems later on. So we were assuming the vast majority of those children would be treated. And then we made the assumption that basically, the treatment could either be an eye drop or it could be with the Optejet dispenser. And we would get about half of that versus the people that would get an eye drop, and those were the numbers that we were working off of.

And we do have a follow-up question from the line of Len Yaffe with Stoc Doc Partners.

I was just wondering if you could discuss the dose of atropine that you'll be using in the clinical studies because there have been articles published that suggest that a lower dose can achieve the same level of efficacy and without any of the potential side effects that might be afforded from the drug.

Yes. Len, let me take this. This is Sean. A really good question. As you know, there is now more than 3 studies, major randomized control studies, that have been done by collaborative study groups such as the ATOM 1, ATOM 2, the LAMP study. These are multiyear, multicenter randomized control studies that have shown very strong effect and efficacy of low-concentration atropine. In fact, the American Academy of Ophthalmology several years ago actually opined that there is now level 1 evidence, which is the highest in our field, for the therapeutic effect and efficacy and risk benefit for low-concentration atropine. Now there are different risk benefits to the 2 main doses, and actually things in between have been studied between 0.1% and 0.01%. So we are exploring the range of those. So we capture in our study -- we have 2 active treatment arms, both the 0.1% and 0.01%, because that allows us to really study the gamut of response. And then also, don't forget that while the higher dose, which traditionally with an eye dropper, has shown very strong efficacy but has had some tolerability issues, that may be very different with microdose where we're giving the same concentration but at 80% less chemical or API exposure for the ocular surface. So we may find out a very different qualified success with microdose that can really surprise us, particularly on the safety and tolerability side, as we have seen in all of our 5 additional Phase I, Phase II studies and clinical trials we've done to date. So we are really doing this problem with 2 active treatments. We are doing a single registration study because the FDA has allowed us to consider all the data from the collaborative study groups as in lieu of the other trial. And we capture the range of concentration in our microdose, microarray print technology.

Great. And then a follow-on question is that the Optejet delivery system seems like an elegant solution to eye drop avoidance that so many people have, especially older Americans. Are there any disease or ophthalmic diseases where you might be able to license the Optejet technology and not compete with a pharmacological agent and be able to gain additional cash in that regard?

Yes. Michael, do you want to address that?

Well, I can say there are some obvious ones. Glaucoma, for example. We are -- the primary issue with glaucoma is that people can't take eye drops, and they can't remember to take their eye drops. So the adherence is not very good. Other areas could be therapeutic dry eye, not artificial tears, but actual therapy is certainly an area we can look at. And Sean, I don't know if there are any more that you were thinking of.

I think that the range of topical treatment is accessible to us because the Optejet is very versatile and can pretty much deliver most liquids that we currently have. So we have a long list of potential applications. And more interestingly, I think one of our current applications is kind of a breakthrough in general because progressive myopia is a back-of-the-eye disease, such as we know from macular degeneration, diabetic retinopathy, and all back-of-the-eye diseases pretty much so far are treated mainly therapeutically with intravitreal injections, with an injection to the eye. This is the first kind using topical treatment we can attempt to address the back-of-the-eye problem. So I think it's very exciting because, in fact, the Optejet technology not only can unlock front-of-the-eye opportunities in topical treatment but also potentially topical treatment for some back-of-the-eye conditions as we currently have with progressive myopia.

And there seems to be no further questions at this time. So I would like to turn it back -- the floor back over to management for any closing remarks that they have.

Well, I would like to thank everybody for attending the conference and for the wonderful questions and for rejoicing with us that there's great opportunities as we continue to deliver. We're looking forward to the next few months when we would hope to report to you on the successful submission for our MicroStat or Mydcombi as the new name is, NDA. I know everybody has been expecting that, and so are we. And we're very happy that the COVID epidemic is not slowing us down as of now, and we're proceeding on schedule. And also the initiation of the Phase III program for presbyopia, as we mentioned, with the potential Phase III results in the first quarter of next year. So we're very busy. And I want to thank everybody for joining us today and look forward to updating you again at our earnings call next month. Thank you.

Thank you.

Thanks, everyone.

This concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation, and have a wonderful day.