Q3 2020 Kala Pharmaceuticals Inc Earnings Call
Good morning, and welcome to the call of Pharmaceuticals third quarter 2020 financial results Conference call. At this time, all participants are in a listen only mode.
Following management's prepared remarks acuity session will be held.
As reminder, this call is being recorded.
I'd now like to turn the call over 10, one Gen Kinda sworn senior Vice President of strategy for Collin Pharmaceuticals. Please proceed.
Thank you operator, and thank you all for participating in today's call.
Joining me from the company are marked by wiki, Chairman, President and Chief Executive Officer, Todd days, more Chief operating Officer, Mary Remit, Chief Financial Officer, Tim Brasil, Chief Medical Officer, and on Min Chen Chief Scientific Officer.
Today's call is being webcast live.
Cast link can be found in the investors and media section of our website at Www Dot call Rx dotcom.
During this call we will be referring to non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is available in our press release issued today, which can also be found on our web site.
On this call we will make certain comments about college future expectations plans and prospects that are forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995. These statements will include statements regarding the potential market and commercial launch plans for I see this observations associated with arc commercialization of it.
Chris the sufficiency of our cash resources and anticipated revenue.
These statements are based on the beliefs and expectations of management as of this conference call.
Actual results may differ materially from our expectations. The company undertakes no obligation to revise or update any forward looking statements to reflect events or circumstances that occur. After this conference call, except as required by law.
Investors should carefully read the risks and uncertainties described in today's press release as well as the risk factors, which identify specific factors that may cause actual results or events to differ materially from those described in the forward looking statement included in the company's quarterly report on form 10-Q, and other filings, we make with the FCC before.
The form 10-Q will be filed with the FCC later today and will be available on our website I will now.
I will turn the call over to call as CEO, Mark I would.
Thank you Roger and good morning, everyone.
We are entering the fourth quarter at a transformative time for Carla since our founding we've worked hard to advance our pipeline of medicines to improve the treatment of eye conditions and to foster our vision of becoming a leader in eye care.
We successfully introduced in deltas to the market two years ago, and just last week secured after FDA approval for our second product. They service for the short term treatment of the signs and symptoms of dry eye disease.
We believe we are well positioned for growth as we will soon be promoting two products, which are common backbone or amplify technology, and which will be prescribed by many of the same eye care professionals.
We're also in a strong position financially and confident in our strategy successfully launch I assume this.
We are excited to deliver on the promise of this new medicine for millions of people living with dry eye disease, who would benefit from a short term treatment option.
Before turning the call over to Todd to discuss our commercial updates in greater depth, Let me take a few minutes to review last week's approval and the opportunity before us.
I assumed this was approved by the FDA for the short term two week treatment of the signs and symptoms of dry eye disease efficacy and safety data generated from over 2800 patients across four clinical trial showed that I assume is can provide rapid and effective relief of both the signs and symptoms of dry eye disease well.
So we're being very well tolerated.
Dry eye disease affects over 38 million people in the United States of which over 17 million have already been diagnosed and are under the care of an eye care professional.
Our research suggests that approximately 80% of these people suffer from episodic flares and have a median of 5.5 multi day flare episodes per year.
They're flares are not adequately addressed by other treatment options and this creates a very compelling opportunity for our service to become first line prescription therapy for the majority of patients.
With last week's approval I see this became the first prescription therapy, specifically intended to address patient short term treatment needs and the first ocular corticosteroid indicated for dry eye disease. We believe these two attributes are highly differentiating and will support broad uptake of I assume this.
As we heard from Dr., Kelly Nichols and Holland at our K well symposium in September eye care professionals and patients are looking for first line short term prescription therapy that can effectively address their breakthrough flares.
And approximately 99% of eye care professionals are interested in the availability of a steroid with a dry indication.
Our team continues to work hard preparing to launch a service in the United States with a goal of shipping I assume is to wholesalers in the U.S. by the end of this year and beginning full promotional activities in January.
Importantly, we are moving toward launch with a thoughtful and focused strategy in place, which we believe will enable us to successfully launch I assume this while continuing to expand the reach for and belt is to more eye care professionals.
Karla has never been in a stronger position and we are deeply grateful to our colleagues investigators and patients for all their efforts, which enabled us to develop and bring both I service and belt this to market.
I'll now turn the call over to Todd to go through updates for our two commercial programs.
Thank you Mark.
I would like to begin today with a suit is and the opportunity we have to bring a new treatment option to eye care professionals and patients who may benefit from a prescription short term therapy to treat dry eye disease.
We've been closely tracking the dry eye disease market and are pleased with its performance throughout the cold in 19 pandemic.
As of October 23rd the dry eye disease market is that nearly 99%, which pre coated levels based on symphony prescription data.
We believe that this indicates the strength of the market and the significant need to treat dry eye patients even during these challenging times.
What I said was approved we see an opportunity to disrupt the dry eye disease market.
As Mark mentioned dry eye disease affects approximately 38 million people U.S. alone and more than 17 million of these individuals have been diagnosed and are currently under the care of an ophthalmologist one optometrist.
Based on our research an estimated 75% have never tried to prescription therapy.
And only approximately 10% of patients are currently on a prescription dry eye medication.
Across multiple large quantitative market research studies, approximately 80% of dry eye patients report that they suffer from episodic players, which translates to approximately 14 million of the patients already diagnosed with dry eye disease.
Prior to last week's approval of I assume is there were no prescription treatment options after being approved with a clinical profile target due to treat these episodic symptoms of dry eye disease.
Our research shows that the lack of a rapid acting prescription therapy to treat episodic players has made a challenging for eye care professionals to manage the mild to moderate dry eye disease patients.
Since receiving approval last week, we've made significant progress in preparing for launch.
We have begun expanding our sales force, which we plan to ultimately grow to approximately 125 sales Representatives, who will report up through 14 regional sales leaders to support both my service and didn't Gault us.
We will conduct this expansion in two ways first growing to approximately 90 representatives by the end of this year with the second expansion plan for 2021 pending the status of the COVID-19 pandemic.
We believe this sale structure will allow us to call on the ophthalmologists and optometrists, who treat the majority of dry eye patients who represent more than 85% of all dry eye and steroid prescribing.
We've extended offers to the first wave of new sales reps and we remain on track to have a full team of 90 Representatives Onboarded and trained in November into hosted virtual launch meeting in early December.
We expect to begin shipping they service to wholesale listen you asked by the end of 2020 and begin promotional activity soon after when our experience salesforce will leverage their deep pathologic experience to educate our care professionals on how I service with its proprietary amplify technology can meet the short term treatment needs.
Including players of dry eye disease patients.
The majority of our engagements with eye care professionals are currently taking place in person and.
We anticipate this will continue as ophthalmologists and optometrists have learned how to safely treat patients during the call the 19 pandemic.
However, we will train our sales team for both virtual and person engagement, so they'll be able to flex between these options based on the needs of eye care professionals.
This will allow us to utilize a range of virtual of topics that include Red case, they've detailing brick.
Virtual speaker programs and online sample ordering in shipping.
As I mentioned last week, we are extremely excited to deliver I see this is the first and only FDA approved prescription products specifically intended for the short term treatment of the signs and symptoms of dry eye disease.
We believe there is a tremendous opportunity for us to establish I assume this is the preferred first line prescription therapy for dry eye disease, and we look forward to updating you on our progress as we move through the initial launch.
I'd like to now move onto adult us are twice daily Postsurgical ocular steroid.
We are pleased to announce significant quarter over quarter growth for adults.
This was driven primarily as a result of increased sales effort and you were COVID-19 related restrictions on elective procedures, including ocular surgeries in Q3 compared to Q2.
In the third quarter, there were approximately 38000 prescriptions of adults as reported by Symphony Health, which represents an increase of 84% compared to the second quarter of 2020.
We are pleased with the recovery that Inventus has shown it has steadily increased share in the branded market and as of October 23rd has achieved an 11.6% granted and Rx share returning.
Returning to just about where we were prior to cogan.
As of October 23rd total enveloped us prescriptions were up 12.7% in the most recent four weeks versus the four weeks prior compared to the branded market that was up only 4% and the overall market, which was up only 3.3% during this time.
While we are very encouraged by these trends and believe they bode well for adult us over the long term, we recognize that the ongoing surge or future surge is encoded cases may result in some states reinstating restrictions on elective procedures, which could again impacting both the sales.
I will now turn the call over to married to discuss our third quarter financial results.
Thanks Todd.
During the discussion of our financial results I will reference certain non-GAAP financial measures. These non-GAAP financial measures exclude stock based compensation depreciation and non cash interest expense for a full reconciliation of our GAAP to non-GAAP financial measures. Please refer to today's press release, which is available on our website.
As of September Thirtyth, we reported total cash cash equivalents and short term investments of $159.1 million compared to $85.4 million as of December 31st 2019.
This increase reflects proceeds from our underwritten public offering of common stock in March as well as proceeds from sales of common stock under our ATM program. During the first part of this year, partially offset by cash used to fund our operations during the first nine months of Twentytwenty.
We anticipate that our existing cash cash equivalents short term investments and anticipated revenue from involved this will enable us to fund our operations into at least the third quarter of 2022.
We also expect that revenue anticipated to be generated from the sales of I. stupid will provide additional cash runway.
For the third quarter of 2020, we reported in felt this net revenue of $2.2 million compared to $1.5 million in the third quarter of 2019 or an increase of $8.7 million from the same period last year.
Cost of product revenues for the third quarter of 2000 $24.7 million, which is consistent with the same period in 2019.
GAAP cost of product revenues $4.7 million for the third quarter of 2020, compared 2.6 million for the same period in 2019.
SGN expenses for the third quarter of 2020 were $23.9 million compared to $15.3 million for the same period in 2019.
The increase was primarily due to an increase in external sales and marketing costs related to preparation for the launch of my stupid.
Increased stock based compensation costs.
Non-GAAP EPS DNA expenses were $20.5 million for the third quarter 2020 compared to $13.5 million for the same period in 2019.
R&D expenses for the third quarter of $20 million to $23.5 million compared to $7.1 million for the same period in 2019.
The decrease was primarily due to a decrease in external spending on our streets three our phase three clinical trial of ice stupid.
Non-GAAP R&D expenses were $2.4 million for the third quarter of 2020 compared to $6.1 million for the same period in 2018.
Loss from operations for the third quarter of 2020 with $25.8 million compared to 21.6 million for the same period in 2019.
Non-GAAP operating loss was $21.4 million for the third quarter of 2020 compared to $18.8 million for the same period in 2019.
Net loss for the third quarter of 2020 with $27.9 million or 50 cents per share compared to a net loss of $23.2 million or 68 cents per share for the same period in 2019.
Non-GAAP net loss was $23.2 million for the third quarter of 2020 compared to $20.1 million for the same period in 2019. Please.
Please refer to today's press release for the weighted average number of shares used in the calculation of our net loss per share for each of the quarterly periods discussed.
Well, we've been encouraged with the adult is prescription recovery that we've experienced since the end of last quarter. We have continued to see some impact related to Kobe during the third quarter as cases surged in different regions throughout the country.
As a result, we are still unable to projected specific timing or quantify the specific potential impact on future revenues given the continued uncertainty around the impact and duration of the restrictions related to profit 19. However.
However, we expect that net revenues will be negatively impacted for the full year 2020 and could continue to be negatively impacted into 2021.
That concludes our prepared remarks for today I will now pass the call over to the operator for questions.
Thank you, ladies and gentlemen to ask a question you will need to press star one on your telephone to withdraw your question press the pound key again, ladies and gentlemen that Star then one to ask a question. Please stand by while we compile the culinary roster.
Our first question will come from Liana Moussatos with Wedbush Securities.
Hi, This is exactly and I. Thank you for taking my question and congrats on all the progress then.
When can we anticipate a beats on isolates commercial payer coverage rebates that is.
I should note that it's mark good morning, and thanks for the question I'll, let Todd answer that.
Yes, good morning, I will provide updates on each of our quarterly calls next year with regards to the coverage update on status with a coverage status.
Before I assume it's so each quarter, we announced earnings will allow you. We'll let you know what the coverages with both commercial and Medicare plans.
Got it and just one question on the financial results. There was a significant increase in again April Q3 should we anticipate a similar increase for Q4 given deck you increasing the sales force.
Mary I should Oh, yes, there was a significant increase in SG and eight in Q3 and that's.
That's primarily due to the launch related expenses for I see this.
So we should see Q4 about consistent with Q3.
Got it thank you.
Thank you. Our next question will come from Christopher newer with JP Morgan. Please go ahead.
Great. Thanks for the question a couple one and Opus could you update us on where we stand on formulary in payer coverage and then also how those changes made haste formulary how from a access and coverage may change in 2021, and then a second question as coal expands its sales force.
For how did I see this large.
Should we expect any positive impact on in deltas.
Thanks, so much.
Hey, Chris its a its todd thanks for your questions. This morning are the payer status for adult patients were currently just a little bit above 80% unrestricted access with commercial payers.
And quite happy with that level of access within commercial we are at 23% unrestricted access with Medicare So.
So we've got nearly a quarter of the Medicare lives coverage, but still some more work to do there and we are in the process of re submitting bids to Medicare plans.
Heard discussion consideration throughout 2021, what was the I'm sorry, what was the second part of your credit question Chris.
Yes. It was a good part of the question is on I see the sales force expansion are you expecting any kind of positive impact related to an deltas from just greater coverage of the sales force and then also a more exposure for adult this is a product.
Yes really good question you know just as an update on the sales force expansion is going really well we've already extended offers for the majority of physicians and the majority of the folks that we've extended offers to have accepted so we're on track for the full expansion to be completed here, but as we stated in November we believe in November of this year and we do believe that that additional coverage.
Rich will provide some additional exposure for indulgence right, we're going to be calling on.
More than double the number of eye care professionals that we call on today.
Her group of new eye care professionals that we'll be able to detail and delta two for the first time.
That's super helpful. Thanks.
Thank you. Our next question will come from friends Swamp responses with Oppenheimer. Please go ahead.
Hi, good morning, Thanks for taking the question just a couple here.
In terms of the label.
How many refills in general do would you expect physicians to make there seems to be an absence of language.
Monitoring the I O P. On every potential refill. So I'm just wondering any color on that number per physician that you guys are seeing out there.
Todd you want to take that.
Sure I'm happy to do so and good question Franz Hall, So it's really going to depend on the eye care professionals. Your natural we spent a lot of time talking.
I care professionals to understand what they think based on your patient population. The referrals B I think mark presented earlier at that.
Dry eye patients suffer a media and apply them to have dry eye flares per year and certainly the eye care professionals have told us they are completely comfortable with treating or having their patients treated each of their flavors with I see this once it becomes commercially available.
So the number recalls are going to likely depend on the individual patient and what their history or pattern of flavors of down and and how many of those squares. The eye care professional feels like the patient needs to treat but there are no restrictions with regard to the eye care is a <unk> eye care professionals ability to write refill prescriptions for their patients.
Okay excellent makes lot of sense and then.
On the side and this is just a follow up on the previous question in terms of investment is on the commercial coverage, which wasn't on that not on the commercial actually on the Medicare side with 23%. There's just so much of this population that cataract surgery, that's probably older I.
I was just wondering what are the efforts and how can we feel comfortable comfortable that there will be improvements in that 23% going forward what are the efforts made there.
No.
Good question, we continue to call on each of these Medicare plans, we feel like we've got some significant opportunity coming particularly as some of the current branded products are approaching loss of exclusivity and could be gone generic and that creates the possibility of freeing up some contract contracted positions with some of these Medicare plans.
So we think thats going to create a significant opportunity for investors going forward.
Sir.
Your line is open if you could please.
Please press Star then one yeah.
Yeah, maybe we can move to the next one and when he comes back on we'll we'll take his question.
I'm showing no further questions.
Okay. Yeah Chen your line is now open if you would like to go ahead.
Yeah me, though.
Yes, Oh sorry.
My first question is is there any improvement in that average selling price up and belts that was and if not do you expect to see an improvement in 2021.
Todd.
Yes, Im sorry, I missed the first part of your question to cut out on me.
Has there been any improvement in the net average selling price of green belts.
Yes. It is.
You know as we've said in the past, we don't provide guidance on expectations for specifics on the gross to net or expectations on the ASP.
But there was still hold consistent with what we already said, which is once we get greater Medicare coverage and become less dependent on the op co pay card, which is how we're currently making sure that Medicare patients post occupancy surgery, Medicare patients have access to and deltas.
But that will result in improvements in gross to nets. So we have the card right now it allows patients to be able to fill the indatus prescriptions for cash acquisition of $60.
As you can imagine that puts pressure on gross to net but we feel it's important to do so that.
And all this can be prescribed in the post acute care surgical setting, particularly for the cataract patients and as our Medicare coverage increases and improves over time.
We will be less dependent on the cards and as a result, the gross to net we expect to improve I think important also when you're asking about that is to know that the market dynamic is very different tries to this because it's not an awkward a surgery situation in which the patients are getting the products that are in the post surgical protocol.
And essentially all patients get everything which means you have to provide these co pay cards for Medicare the dry eye market is much more a traditional retail market, where clinicians often make a prescribing decision.
The individual patient taking into consideration their insurance coverage and where products are covered within formulary. So we do not need to offer a Medicare ARPDAU card.
The launch of I assume just like we did on in Bell test. So we do not expect that level of pressure on the gross to nets for our service that we experienced during the launch of investors.
The next thing yes, yes, it does so.
Second question is is our sales team already reaching out to ophthalmologists and optometrists defined servers and based on their feedback do you see the doctors could prescribe service or.
Those patients to treat flares that those patients who are currently on chronic sir.
For details.
Yes, and we've already begun engaging in our disease state discussions are going very very well our rupture out there talking about dry flares of eyecare professionals in receiving really great feedback.
And getting eye care professionals and start thinking about all the patients within their practice per.
For which a product like I said, we would do well suited.
Soon after we have the launch virtual launch meeting in early December we start shipping wholesalers into senders and we'll be in a position. Soon thereafter, it actually have I service products specific discussions with eyecare professionals at that point.
Like we said all along we think there's an opportunity for broad usage at I. service across.
Mostly dry eye patients. It's certainly not treating players we think will be may be the largest percentage of patients. But we've also received a lot of feedback about more survived severe dry eye patients that could end up going on ice users. We certainly heard a lot of talk about the pre surgical patients patients that are going in for Kara.
Refractive surgery to have dry eye disease, and there is a desire to treat the dry eye before surgery to cleanup the corneal surface in a short term treat recourse with I assume this is well suited to those patients. So we think that there will be broad utilization across a number of patient types.
Dry eye disease.
Got it thank you.
Sure.
And we do have a follow up question from France, Landry's Boys with Oppenheimer. Please go ahead.
Hi, Thanks for taking a quick follow up here just in case you do you expect to begin shipping the wholesalers by the end of the year can you just remind us of when and how you recognize revenues yet.
Sure I can take that.
We recognize revenue when we shipped to the wholesalers.
Okay. Good okay. Thank you thank.
Thank you.
Ladies and gentlemen, thank you for participating in today's question and answer session I would now like to turn the call back over to Mr. Ricky for any further remarks.
Thank you very much operator, and thanks, everyone for joining us. This morning, we're really pleased with the growth we have seen in in deltas and certainly the prescription trends continue to increase and we are.