SpyGlass Pharma, Inc. (SGP) Earnings Call Transcript & Summary

Okay. Okay. So it could be altogether or slight separation. Okay. So that's very good. Let's talk a little bit about the pharmacoeconomic model because you had some important updates recently, which may seem very in the weeds, but certainly super important, specifically this determination from CMS regarding one of the procedure codes. So there's a lot to unpack there, but can you go through why that was so important?

Yes, you're right. And we appreciate you being in the weeds, by the way, because this is an important topic. For years, we've been asked, will surgeons be paid at a different rate? And will there be an additional professional fee associated with SpyGlass. And we always believe that there should be because there is a bit of additional surgeon work inside of their normal 20-minute case. The surgeon is just busier for longer. And we presented that case to the AMA and explained our procedure, and they agreed, which is what you saw issued July 1, an add-on Category III CPT code. So the fact that we were granted that signals that there is additional work that should be paid to the professional, not to the facility, just for the surgeon themselves, and we think that's important. They answer the key question, is there additional economic incentive for the surgeon to consider SpyGlass? And yes, that's true. This is something that would be priced at launch, and this is something that we'll work with the MACs to price that out appropriately. One thing we're doing to help with that objectively in our Phase III studies, we're quantifying all of this surgeon work at each of the different stages of the procedure. And so we'll be able to go back with 400 patients in your typical standard of care case, "Here's the work," versus SpyGlass. And that difference is incremental workflow and additional time and payment for the surgeon. And so that's a really important piece for us. I think that speaks to the surgeon fee. And then from a facility standpoint, we always wanted to be simple in terms of not adding incremental expenses to the facility for an incremental procedure. SpyGlass is still one single procedure, cataract surgery. And we have very knowable Category I CPT codes on the books that are not debated, they get paid well with very minimal pushback. And so SpyGlass is still cataract surgery. We're going to use the existing codes, we'll have an on-label use to be implanted at the time of cataract surgery. So that simplifies the MAC discussion of, is this an additional procedure code? No. We're trying to be very simple and straight ahead. Yes, a little additional payment for the physician, but pales in comparison to an additional procedure fee. So instantly, we're more efficient. We think Medicare and the MACs will like that. And then from a procedural reimbursement, it's really the drug reimbursement. And so ASP plus 6%. This is a physician-administered drug. So there's additional margin that can be made, 6% on top of list price. That goes back to the facilities, which, as you know, reimbursement continues to get cut. And most of the cataract procedures are performed in ambulatory surgery centers owned by physicians or private equity.

So you mentioned ASP is plus 6%. So that obviously raises the pricing question. Can you discuss your initial thoughts on how you would price this product at this point? Or is it something that pending the Phase III data, you would make that determination?

Yes. No pricing decisions have been made at this point. We get asked a lot about what are our thoughts. And our view is you've got 2 reference products in market today, iDose being one of them and Durysta being another. And if you look at the cost of those products over a 36-month period, there's a well-established price point. So today's value on both of those products, the floor price is $14,000 for 3 years of drug delivery in this space.

So for someone that's, say, doing what you just referenced, the iDose, the Durysta plus a lens replacement, how would you position -- when your salespeople are positioning BIM-IOL, the argument for the switch or to adopt BIM-IOL, just walk us through the logic. It's a time saver. It's a simplicity saver, right? What are the other aspects?

So the average cataract surgeon are not using these minimally invasive glaucoma procedures. They could, and we think that's great if they like to implement those tools. Patients need more options, and we need to service all of the 1 million. Today, about half the market is completely locked. 1/3 of surgeons are doing about 50% of the total volume of opportunity. And so the other 500 million -- excuse me, 500,000 procedures, we think we will unlock, and then surgeons that are using these minimally invasive glaucoma procedures, they will have a choice to make. Does SpyGlass make sense to be put in the bag after cataract surgery or does something else in the angle make sense? And those are good options for patients as well. Our case is very straightforward. This is still cataract surgery. It's one procedure and all cataract surgeons know how to put in a foldable intraocular lens in the capsular bag. They do it every single day. So our workflow is very streamlined and in sync with what they already do. When you start adding additional surgical glaucoma procedures, that's a time out in the OR. There's a shift to the patient. There's a shift to the microphone. It's extra tools, it's extra skill that everyone could learn. But the reality is most surgeons today are not taking those options. They prefer to do fast, efficient and convenient surgery, and they'll just do more cases versus adding on some of these additional tools. This is why SpyGlass is attractive. Patients are already there, solving and addressing 2 problems with 1 procedure they're already doing.

Okay. So let's shift a little bit to some of the pipeline work because you have -- you're thinking ahead as you should, obviously. And so there's another product, which BIM-DRS, which is, sort of, a next generation, I guess, I think of it as, like, a recharger or something like that. But tell us what it is and what the potential there is for even longer duration.

Sure. In any of our platforms, we've known that roughly 7 years of payload is possible. As James talked about earlier, our very first-in-human trial with our drug pads with BIM-IOL, we did load that with 7 years of product. We scaled back to 3 years as we came into Phase I/II and Phase III. Doctors wanted 1 year of efficacy. That was their MVP. And the FDA said, "Hey, as long as you've got drug-eluting, you're going to have to study and follow these patients." So the idea of a small private company doing their first trials 7 to 10 years was untenable. And so 3 years as a starting point was a great midpoint where surgeons saw extreme value to the patient. Let's get that to market and then later systems could be explored with longer payloads. So one of the common questions we get today is, hey, 3 years is fantastic. We've never really seen that reliably with such high rates of patients that are medication-free. But what happens after 3 years? And so this is an important question that we will answer, and this will happen soon as we move into our first-in-human trial. It's a clear signal to the market that not only is BIM-IOL going to service this 1 million procedures well, but what about the millions of patients that are post-cataract surgery, whether they had BIM-IOL or not? If there's 1 million incident procedures annually, and we're addressing many of them, but what about the others each year that are being unaddressed from a glaucoma perspective? Doesn't matter what IOL they had implanted at the time of cataract surgery. There's still millions of patients that need help. And so the BIM-DRS, or Bimatoprost Drug Ring System, is not an intraocular lens. It's more of a ring, if you will. It's essentially leveraging our same core technology with our drug core, our release profile and all of our know-how. And that system, we're about to go into humans with our first-in-human trial, and we're going to experiment with both a 3-year drug load and a 7-year drug load. So it's a clear signal to the market that we know we can get to 7 years technically, and we're about to go into humans and prove that in our data.

So that's going to be in patients that have an existing lens or that are also you're going to take new patients that are the first cataract surgery? What's going to go into that study?

We're going to explore both. So phakic patients that are coming in at the time of cataract surgery as well as pseudophakic patients, meaning they had previously had cataract regardless of what lens they have in their eye. So you're going to see us experiment with pseudophakics and phakics as well as a 3- and a 7-year drug load.

But it's -- so the BIM-DRS has -- it can click on to one of the standard lenses from one of the big manufacturers, but it also the geometry can click it on to your proprietary lens or are there differences depending on whether it's an external lens or your lens or...

Yes. So BIM-DRS is not a lens. It doesn't clip on to the prior lens. It's actually implanted anterior to the capsular bag in the existing lens system. It's implanted in the ciliary sulcus.

Okay. Got it. All right.

So this is the same space, STAAR ICL, for example. It's a space that's now usable once you remove your natural lens, which is much thicker and artificial lenses are much thinner. And so there's room essentially anatomically to be able to access the sulcus. And so this is the same space and the skill set that cataract surgeons have today. And so we're going to leverage that know-how with our secondary platform. And this BIM-DRS is designed to be removable and replaceable for the lifetime of the patient.

And this is probably getting further ahead, but, like, the procedure code for that, does that still fall under cataract...

That would be a brand-new stand-alone procedure.

Brand new. Yes.

With different economics. I would think so.

Okay. Makes sense. And then you mentioned some further opportunities going beyond glaucoma. Can you -- I mean, with sustained drug delivery, you could think of wet AMD, you could think of GA, you could think of DME, a lot of things. So where do those opportunities stand? Are those all, sort of, in discovery mode now or what?

Those are of interest to us as well. And yes, they're in discovery pipeline. We've experimented with several different drugs that are relevant in chronic diseases, like you mentioned, AMD, for example. There's a lot of interest in our space, small molecules for AMD or even GA. We know our system can elute these products. We know we can control the elution rate. The big question is, can you get products from, say, anterior segment to the posterior segment for retinal conditions? And so essentially, we've done a lot of work on the bench to prove viability of our elution profile with multiple drugs, both chronic and acute phases. And those are essentially neatly on the shelf. All of our focus is primarily in BIM-IOL and BIM-DRS because we don't want to get too diffused. We believe BIM-IOL alone is a blockbuster by itself. And so getting that product to market as fast as possible. And then once we have more bandwidth and clear lines of sight, we can advance some of our pipeline work and bring additional systems to market that are relevant for patients.

Okay. And maybe we can bring Jean into the conversation. Tell us just a little bit about the P&L management and the cash utilization and what the runway is, obviously, -- and then either for Jean or for you, Patrick, just talk about your -- how you're prepping for launch. I mean it's not that far away, right? It will be there before you know it. So talk us through how you're building a commercial team and the strategy there.

Thank you, Yigal. I'll start with your last question, but I'll let Patrick answer about the commercial team. Clearly, we've started to do some pre-commercial activity. We've got 2 senior executives on board, one doing market research, talking to KOLs, or talking to eventually physicians who will be using our product. So that's already using some of our cash. Today, we -- at the end of June, we had over slightly over $234 million cash position, which will take us through 2028, therefore, into 2029. And that will do 2 principal things: one, complete the BIM-IOL trials of Phase III trials, so enrollment, readout, submission to the FDA, and the second thing is also cover the BIM-DRS first-in-human trial. And lastly, provided that we have positive data, we will continue to ramp our commercial activities right before launch. So in terms of P&L, I think you have to think about it, we'll have expenses increase through 2026. It will level off during 2027. Why? Because all the upfront activities are happening now for the Phase III trial, and they will make room, therefore, for the BIM-DRS first-in-human trial and pre-commercial activities. And then we'll continue to have an increase in expenses until launch in 2029.

Okay.

I'll just add a couple of comments on the commercial prep. You're exactly right, 3 years to launch. This is exactly how we think about it as well. Our team came from big drug launches in big pharma and 3 years is your, kind of, launch readiness timing when you start all of these things. We've already begun that planning. We have a launch readiness cadence with our team, thinking through strategic imperatives, both commercially as well as medically and advancing and putting effort on those things. So you've seen us bring in a couple of folks with big buy-and-bill ophthalmology drug launches that have been successful in the past. And so I would say, at this point, we're early in that process, but we've begun. And we started thinking through carefully the systems of care, the things that we need to build to make sure that we're building reimbursement confidence well in advance of launch, not after launch. These are really important things. We call them sand in the gears. And we need to get those things right well before launch, and that can be done in parallel as we move through our clinical trials. And so you're going to see us bring additional folks to the team that help both with those medical and commercial imperatives.

So in those early conversations with providers, like this -- we talked about this add-on code. Have you, sort of, socialized that concept with some of the practitioners to get a feeling for its -- how receptive they'd be to that? Is that -- does that come later?

We don't bring it up. We don't bring it up yet, but they bring it up to -- they noticed and it matters. And they said, that's great. And so one of the questions we get a lot is, why did you do it now? And our answer is the same because we can.

Yes. Well, I had the same question. Okay. We didn't talk about manufacturing and supply. It's a lot of patients, 1 million patients, you need a lot of product. Can you just comment briefly on where is the product made? How -- yes, just to the extent you can comment on that?

Yes. So we manufacture all of our finished products in the U.S. And one of the things that SpyGlass did really early in our development was bring process development in-house. So even though we don't do any GMP manufacturing in-house ourselves, we own the process. So we can -- we have all the equipment, we have all the engineers. And so that allows us to scale because now we can take it to any contract manufacturer or even eventually build out our own manufacturing and drop the process in place to make drug pads. IOLs on the other hand, IOLs are a very mature industry, right? There's dozens of IOL manufacturers globally that you could use, and we utilize one that manufactures IOLs for global strategics. And so plenty of capacity on both fronts to target our patients.

Okay. And then just to finalize here. So just can you maybe just recap the catalyst path over the next 12 to 24 months? And then we also are asking everyone about AI. How much are you using AI internally at the company to speed analysis or crunch data or begin to prep the BLA filing?

That's great. I'll address the catalysts and James' nickname is Claude, so we'll have him address that one. Lots of catalysts. Honestly, we've guided publicly to -- we've got some pretty important catalysts coming up here just before the end of the year. We've got a 4-year readout from our first-in-human study, as you mentioned. Why that's relevant? It's showing proof of concept. We know we have 7 years of drug in that system. And showing a 4-year readout will be the first time any system has proven reliably that you can get the vast majority of patients still off of medicine. It's also relevant for propping up our second-generation system, which is about to go into humans. And so we are very much on track to deliver both of those catalysts, but moving into humans with BIM-DRS before the end of the year sends a clear signal that we are starting. And our aim is to be able to bring BIM-IOL to market in 2029, continue BIM-DRS development 3 years after BIM-IOL is launched, we want to be ready with our secondary offering, BIM-DRS. And so both of these upcoming catalysts support each other in terms of our aim, our vision as well as the proof of concept to be able to do it reliably. Beyond that, we've got a 2-year readout next year with Phase II. We've got a 5-year readout on FIH. We've got a 12-month readout on BIM-DRS and probably the biggest catalyst next year is announcing that we have completed enrollment because the data will be shortly thereafter in terms of top line readout.

Sounds good, and I'll take the AI question. What's interesting is I'm now over 7 years into the journey with SpyGlass Pharma, and we've always been excited about the potential of the company well before anyone was logging into ChatGPT and getting answers to questions. But at this point, you can't really avoid AI. So I would describe SpyGlass' approach to AI as deliberate and making sure that there is value and security in the application of it, right? So we are using it across on the clinical team. Everyone on the SpyGlass team has access to an AI model if they want it. And just when it comes to specific applications, we would rather be err on the side of safety versus efficiency, right? And so that's just -- that's overall how we've approached it, and we know we could be successful even if we didn't use AI.

So given your nickname, does that mean the SpyGlass only uses Claude or you use some of the other platforms, too?

We have a number of platforms out there. My preferred platform today is Claude. But whenever Patrick asks a question, I don't know the answer. That's when I log in. It's like, well, I won't take credit for it. I'll say Claude says this.

All right. Great. Well, thank you very much. We're going to update our catalyst calendar for the 5-year data. I think we didn't put that in yet. So we'll do that and look forward to a lot of developments over the next few quarters. Thank you.

Thank you.

Thank you.

Thank you, Yigal.