KALA BIO, Inc. (KALA) Earnings Call Transcript & Summary

Chris Neyor from the U.S. pharma team at JPMorgan, and I'm glad to introduce Kala Pharmaceuticals and CEO, Mark Iwicki, here with us today. Kala has 2 exciting products in the dry eye space on its AMPPLIFY platform or rather in the ophthalmology space. That's INVELTYS for postsurgical pain and inflammation launched in 2019 and EYSUVIS for acute dry eye with the pivotal Phase III reading out in 1Q 2020. We're going to have a presentation from Mark, and then we'll be following up with a breakout session in Elizabethan C next door. With that, I'll hand it over to Mark.

Thanks, Chris. Morning, everyone. Thanks for taking the time to be with us this morning. And as Chris said, I'm Mark Iwicki. I'm the CEO of the company. I've been at Kala for almost 5 years. We'll make some forward-looking statements this morning. So here's our appropriate disclaimer and notice about that. We have a very exciting company that we're building. It started about 10 years ago. Some of you may know, a researcher from MIT named Dr. Bob Langer, and this came out of Dr. Langer's lab. It was pushed forward by one of his students, Justin Hanes, who is at Johns Hopkins and our current CSO, who's Hongming Chen, and Justin and Hongming were in Dr. Langer's lab together and turned out what has been a terrific technology for us. It was originally called mucus-penetrating particles, that's not a particularly sexy name, so we changed it to the AMPPLIFY technology, and you'll see why in just a few moments. That has enabled 2 products for us, one that's already on the market, and that is INVELTYS. We launched it about a year ago. It is a steroid that is the first twice-a-day steroid for the use of postsurgery ocular inflammation and pain. And then we have what we believe is a very exciting product that hopefully is nearing the finish line, and that is called EYSUVIS, and that is our product for dry eye disease. We are well capitalized with around $85 million worth of cash, and that's over a year's worth of cash at this time. So just a quick overview on the AMPPLIFY technology. What we do is we selectively size nanoparticles and then we coat those particles so that we make them charge neutral, and that lets the product get itself through the mucous membrane and the tier films, and what we're able to do is deliver almost 4x as much drug to the target tissue. That's a really important thing because the molecule that we've started with loteprednol is known to be a very safe steroid, but has always thought to not penetrate through those mucous layers very well and penetrate the target tissue very well. And so we've been able to deliver 4x as much drug while maintaining the safety of loteprednol. It's a steroid that very quickly metabolizes to inactive agents and because those inactive agents are then flushing out of the eye, they're not constricting the trabecular meshwork, and it's thought to have a much less of an effect on intraocular pressure versus other steroids. So we've been able to take a product that has always known to be very safe and maintain that safety even though we are delivering significantly more steroid to the target tissue. And so what has that done for Kala? Well, it's enabled our first product, which is called INVELTYS. We launched that about a year ago. It is the first ocular steroid that was able to demonstrate safety and efficacy with twice-a-day dosing. You'll see in a moment that typically steroids are dosed 4 times a day. So we're very excited and proud to have launched the product over the last year. We have our own small ophthalmology specialty sales organization. We have delivered a product that we believe fits a need that's in the marketplace. There are some very potent steroids that have good efficacy, but they also carry significant liability around intraocular pressure increases. So doctors think of those as kind of big guns but with some liability. And then there has been Lotemax and other products that are not thought to be as efficacious but much safer. And what we believe we've done has been able to deliver excellent kind of class-leading efficacy, but also maintain that safety profile. And again, be the only one that's done it in a twice-a-day preparation for doctors. And when you think about the twice a day, and is that just convenience or could it really be important. It is important for both physicians and for patients because imagine you're 70, 75 years old, you've just had your eye operated on, you're a little bit nervous. You're not seeing well out of it. And now you have 3 little white bottles at home, and you've got to put drops in your eyes a couple of times a day. And you don't really know which one is the most important, but physicians will tell you the steroid is by far the most important product that they want to make sure that you get in to control that inflammation, and hopefully lead to a great outcome postsurgery. And so to be able to get that down to twice-a-day dosing, and again, deliver great efficacy while maintaining the safety has been something that physicians have been really responsive to for us, and we'll show you some data in a few moments. The market is really large, almost 9 million surgeries. It's growing at 3.5% per year. It's reimbursed about 50% or so. Commercially, there's a big piece of Medicare Part D business here. But the nice thing is, this is done with around 6,500 ophthalmologists that do these surgeries. So our sales force of 57 professionals are able to cover these physicians and have been at it for the last year launching the product. We've shown really nice quarter-over-quarter growth in the 30% range. Of course, the fourth quarter has a lot of holidays in it. We were kind of on track for another 30% growth, but those holidays do get in the way of the prescription. So we're really pleased. The market actually declined a bit in the fourth quarter, and we continue to grow at about 16%. We have a branded market share of almost 9% now. And when you step back and think about the targets we call on, we have a market share that's actually over 15% with those targets, so that we know when we have the effort and apply that to the appropriate physicians, we can actually drive really good use of the product. And there's been a really good reception by doctors to the product. We've done actually, as of today, over 130,000 prescriptions cumulatively. We continue to grow very nicely. We have unrestricted commercial access in over 75% of lives now, about 23% in Medicare Part D. We've got around 3,100 physicians that have been prescribing our product. And we've been using a co-pay card to help patients with the burden of their co-pay, both on the commercial side as well as on the Medicare Part D side. So that's what we've been up to for the last year. We're very pleased with the volume growth we have on INVELTYS. We're very excited about the feedback we get from physicians and patients on that product. But even more so, if you've followed Kala at all, what's really exciting is the product that we are developing for dry eye disease. And that brand name is EYSUVIS, it's a 0.25% of concentration for loteprednol in our amplified technology. So just to start for a moment, dry eye disease is often thought of as a chronic condition. But there's much more to it than that. It is very much a chronic episodic condition, like many other inflammatory conditions that you can think of. And so yes, well, when patients typically get it, they're going to likely have it for the rest of their life. It often starts out in a mild phase, moves to a moderate, can get more severe in a few patients. But the huge bulk of patients are experiencing 2 or 3, what they and their physicians call, flares each year. And those flares are pretty easy to understand. So you've damaged your cornea over the course of your life. Maybe you used your contacts a little bit too liberally like I did when I was young and slept in them for weeks at a time. And you get to be 45 years old and you're working in a building with HVAC and other things and your eyes just start to bother you more frequently. And so you have a flare because you get a trigger, it could be allergy season, it could be cold dry winter, maybe you went skiing. And you exacerbate that inflammation around your eye and you get a significant period of symptomatology. It can be a couple of days. We find it typically lasts around a week eventually. It might resolve on its own. It could lead to a more significant flare. But this is the pattern of the disease for the vast majority of people. And even when you get more severe in the spectrum, you continue to have flares. It's typically not just a stable, consistent symptom pattern, you're kind of going up and down during the year. You might be way up here. If you're severe, getting those flares, you might be kind of moderate in getting those flares. But what we know is that virtually every patient gets these flares, and they get them whether they're on OTCs. They get them whether they're on Restasis and Xiidra. For some patients, those products can be helpful, but they don't eliminate symptoms. And if you have triggers, you're still going to have periods where you have these flares. And you can see on the right-hand side of the slide that in our market research, we've shown that patients have, on average, about 6 flares per year, and it might be counterintuitive. But the more severe patients that are actually on these products like Restasis and Xiidra have even more flares than the more mild-to-moderate patient because of the severity of their disease. So they're all these 2 products that have been in the marketplace so far, and there are really drugs that are reserved for the most severe patients, kind of the last line type agents. They are chronic meds. They take somewhere between weeks and months to work, and they have got significant side-effect burden. You can see on the right-hand side of the slide that they have very high discontinuation rates. Within about 4 months, they've lost 80% of the patients. And within 6 months, they lost 90% of the patients. And again, they're reserved for the most severe patients because, typically, your patients don't have that significant continuous symptomatology, they're just experiencing these flares. I'm a great example, I have 4 or 5 flares per year. I've been in this building now for 3 days. My eyes have started to bother me. I'm going to get on a plane again. I'm definitely going to be having a flare. And that's the typical patient profile. So a few years ago, we said what if you could treat dry eye disease, the same way you treat many other chronic but episodic inflammatory conditions. And we often use asthma as an analogy. Everybody gets their albuterol inhaler when they're first diagnosed but they keep that albuterol inhaler throughout the course of their disease because patients still have exacerbations. And that's very much what we're hoping to be able to do with EYSUVIS. And that's be -- really the first, first-line drug for dry eye disease. Today, there really are only OTCs that are used first line, no prescription product is typically used in that stage of the disease. But we think that EYSUVIS will be a product that patients will keep with them for the whole course of their disorder because, again, patients continue to have these flares over time. Even if you're on a more chronic med, you're going to experience flares. And just like an asthma patient picks up their albuterol inhaler and uses that for a couple of days if they're experiencing an exacerbation, we believe that our product EYSUVIS will be used that way. So what we can transition to now is a review of our clinical data. We've already completed 3 clinical trials. Those trials were the basis of our NDA that we submitted over a year ago. Our Phase II study, STRIDE 1, which was our first Phase III trial and STRIDE 2. What you're looking at here is the conjunctival hyperemia data. For dry eye disease, the FDA asks that you hit a sign and a symptom. So an object measure of efficacy -- objective measure of efficacy and a subject measure -- subjective measure of efficacy, conjunctival hyperemia being our sign, and you'll see in a moment, ocular discomfort being our symptom. So we have hit the sign with strong statistical significance in all 3 trials and believe that we've demonstrated what we need to for hopefully the ultimate approval of the product on the sign side. On the symptom side, which is our ocular discomfort data. In Phase II, we had a very good set of data, a nominal p-value of a little bit less than 0.05. In our first Phase III STRIDE 1, we had very strong statistical significance on the symptom. You can see though in STRIDE 2 that we had a good trend, but it did not quite reach statistical significance. So the NDA was filed with the basis of STRIDE 1 being very strong, a supportive data from Phase II that you can see on the left-hand side as well as the STRIDE 2 data. We did receive a CRL in August indicating that additional symptom data would be required. The reason we feel great about what we're still doing around the program and the third Phase III trial that we have running right now is that we know that we've consistently shown these benefits. And even though STRIDE 2 did not quite reach statistical significance, we had very good data in that trial as well. If you're developing a product that is going to be used in these acute treatment or the treatment of flares and to resolve symptoms quickly, then you want something that works fast. You can see here on day 1 or 2, patients are starting to get benefit, and that benefit typically is maintained throughout the 2 weeks of treatment in our trials. Here's the last week of the ocular discomfort data in both trials. We show this because you can see that there continues to be a benefit. The endpoint in these trials was the average over the last 3 days. And in STRIDE 2, you can see that final day caused us some issues on the statistical significance and that's what caused the near-miss. But still, you're seeing that benefit over the course of the 2 weeks. An important thing is, we designed our Phase III program, including our STRIDE 3 trial to have 2 independent symptom primary endpoints. So ocular discomfort in the ITT population as well as ocular discomfort in a more severe subgroup of patients that have on our visual analog scale, 0 to 100, greater than 68 in their symptomatology. In STRIDE 1, you can see that, that was also hit with high statistical significance. So in STRIDE 1, we hit, in a prespecified primary endpoint way, both the ITT population as well as this prespecified subgroup. And so we've hit it twice in STRIDE 1. You can also see that in STRIDE 2, we had an even bigger effect size in this subgroup than in the ITT population. We've maintained this in STRIDE 3, this structure, and we'll talk about that in just a moment. But that is an important part of our design and what we've always shown, the more severe the patient population, the bigger the effect size. We have what we believe is a very favorable tolerability profile as well as safety profile. On the left-hand side, you can see that from a tolerability standpoint, and this is super important when you have patients whose eyes are already bothering them as to have a comfortable drop that they can put in that does not lead to a lot of additional discomfort. And so we're comparable to vehicle on the tolerability profile. On the right-hand side is also for dry eye disease a really important thing, and that's to have a favorable intraocular pressure, IOP profile. And here, you can also see in these 3 clinical trials that we are comparable to vehicle. In fact, if you look at the INVELTYS product, where we also ran 2 very large studies, that intraocular pressure profile was also comparable to vehicle. So we've got 5 trials already where we demonstrated this very favorable safety profile, and again, the tolerability profile. So we talked to the FDA about what we had. We decided to file our NDA. And the FDA indicated to us that they're going to have to review it to make a final determination. We realized it would be prudent to start another study, we did that in the middle of 2018. We announced this morning that enrollment has completed on this study. We're very excited about that. The study is 4 weeks in length, 2 weeks of running, 2 weeks of treatment, then we will need some number of weeks to clean and lock the database and intend to report the data out in the first quarter. So we're very happy about that, and I think also happy that we might be able to bring a product to market for physicians and patients that really does meet a huge unmet need. Again, there are some products out there that are useful for maintenance treatment for people that have really significant continual symptomatology. But today, no prescription has been approved that has the profile that could be used not only first line to treat these flares, but something that could be their rescue or urgent-need product over the whole course of their disease. I've mentioned a couple of times that the vast majority of patients have this flare pattern to their disorder. About 90% of patients are not on any Rx therapy right now but they are diagnosed. So if you just step back for one second. 17 million diagnosed patients under doctor care, the ophthalmologist or the optometrist, and 90% of them are not on any kind of prescription therapy. So it is just a massive opportunity for us, even very small market shares into this produce, really large product opportunity for us. We've asked physicians how do you feel about this product, you can see down the board, whether it's monotherapy for the earlier stage patient or used on top of something like Restasis for breakthrough flares or even as induction therapy to quiet the eye as they try to get a patient onto a chronic maintenance drug. We have a very good response from physicians that they intend to use the product essentially and in a little over half of all of their dry eye patients. We've also asked patients, is this a product that you would be interested in having, and there's a lot of excitement around it. Today, it can be very frustrating. You go to the doctor a couple of times, you're complaining about your symptoms. They really do bother you when you have a flare and you're often just told to take some more artificial tears, which you've been doing for years. They don't work very well for you. Maybe you're told to take some fish oil or put hot compresses on your eye. I mean all appropriate things to be told to do, but they simply don't work very well. And so you have patients out there that are suffering, and it really is kind of miserable when you're in a flare. And doctors want to treat this. But there's simply has not been an FDA-approved product to be used in this way. So I mentioned these numbers a few minutes ago. But if you just kind of look at the funnel from the top to the bottom, 17.2 million patients already diagnosed. You got 14 million to 15 million experiencing these flares quite frequently. That's just a massive opportunity for us. If you dollarize that, it's an $8 billion market opportunity. And we really could not be more pleased to hopefully be able to bring to market a product that can fulfill those needs. So we expect to get the data from our STRIDE 3 Phase III trial here in the next couple of months, submit the NDA in the first half of this year. That should be a Class II resubmission with a 6-month PDUFA review clock. Hopefully, approved by the end of the year and launch it either at the end of the year or very early next year. I just want to say thank you, again, for your time. It's greatly appreciated, and I believe we'll move over to the Q&A session now. Thank you.