InSite Vision Inc. (OTCQB:INSV) Q1 2014 Earnings Conference Call May 14, 2014 4:30 PM ET
Louis Drapeau – VP and CFO
Tim Ruane – CEO
Good day, ladies and gentlemen, and welcome to the Q1 2014 InSite Vision Incorporated Earnings Conference Call. My name is Sue, and I’ll be your operator for today. At this time, all participants are in listen-only mode. [Operator Instructions] As a reminder, this call is being recorded for replay purposes.
I would like to turn the call over to Mr. Louis Drapeau, InSite’s Chief Financial Officer. Please proceed sir.
Thank you, Sue, and good afternoon, everyone. Welcome to InSite Vision’s conference call to discuss our first quarter 2014 results and current operations. As the operator said, my name is Lou Drapeau, InSite Vision’s Chief Financial Officer. Also with me today is Tim Ruane, our Chief Executive Officer.
Before beginning our prepared remarks, I’d like to remind you that the comments made during this conference call may contain forward-looking statements that involve risks and uncertainties regarding InSite Vision’s operations and future results. I encourage you to review the company’s filings with the Securities and Exchange Commission including without limitation the company’s Form 10-K and Form 10-Qs, which identify specific factors that may cause actual results or events to differ materially from those described in forward-looking statements.
The content of this conference call contains time-sensitive information that may be accurate only as of the date of this broadcast, May 14, 2014. The company undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.
Now, I’ll discuss the financial results. Total revenues for the first quarter of 2014 were $1.2 million compared to $5.3 million for the same quarter of 2013. AzaSite royalties based on net sales were $1.2 million for the first quarter of 2014 from Akorn versus $1.4 million for the first quarter of 2013 from Merck.
Akorn was unable to obtain either side for Merck’s contract manufacture for about four months following Akorn’s purchase of AzaSite. AzaSite was finally available in mid-February 2014. We estimate that Akorn’s recorded sales for AzaSite for Q1 2014 were about half due to patient demand and half due to restocking of AzaSite into Akorn’s distribution system.
No AzaSite inventory was transferred to Akorn at the time AzaSite was purchased from Merck in November of 2013. We don’t expect that the restocking benefit will occur going forward included in the first quarter of 2013 was an additional $3.4 million from a minimum royalty true-up payment from Merck. The minimum AzaSite royalties ended on September 30, 2013. Going forward AzaSite royalties will be based entirely on net sales from Akorn.
Now turning to expenses, research and development expenses for Q1 2014 were $2.5 million compared to $3.4 million for the same quarter of 2013. The first quarter 2014, our program expenses were largely related to the wrap up of our confirmatory BromSite Phase 3 clinical study, which achieved its clinical end points in Q4 2013, and the preparation for the filing of our new drug application or NDA for BromSite with the FDA, which we expect will happen in the second half of 2014.
For the first quarter of 2013, program expenses were primarily related to the double AzaSite Plus, DexaSite Phase 3 study and the first BromSite Phase 3 study.
General and administrative expenses were $1.9 million for the first quarter of 2014 compared to $1.5 million in the same quarter of 2013. G&A expenses in Q1 2014 were higher due to legal expenses from our ongoing partnering efforts.
Interest expense was $1.8 million in the first quarter of 2014 compared to $2.1 million in the same quarter of 2013. The reduction in interest expense is due to principal payments on our non-recourse note during 2013.
Our net loss for the first quarter of 2014 was $4.7 million or $0.04 per share compared to a net loss of $1.9 million or $0.01 per share in the same quarter of 2013. Our net loss was more than the first quarter of – it was more in the first quarter of 2014 due to the end of the minimum AzaSite royalty payments as discussed earlier.
At March 31, 2014, AzaSite Vision had cash, cash equivalents and short-term investments of $5.4 million. Our usage of cash in the first quarter of 2014 was $2.9 million essentially all of which was used in operations.
Lastly, I would like to give you an update on our non-recourse AzaSite notes, which are solely serviced by the New York – North American AzaSite royalties from Akorn and are non-secured by other asset of InSite Vision. The notes accrued interest is 16% payable quarterly and have a minimum balance of $1.3 million at March 31, 2014 with accrued interest of a further $2.5 million.
The Q1 2014 AzaSite royalty of $1.2 million was not enough to pay the deferred note interest from Q4 2013, which amounts to an event of default on the notes. We have no plans to use – to bring the notes current using shareholder funds and we couldn’t lose the rights to receive the AzaSite royalty if the noteholders foreclose on their notes.
Importantly, the situation impacting our noteholders has no effect on our operations or on our ability to advance our late stage product candidates in their development.
Now, I would like to turn the call over to Tim Ruane, our CEO.
Thank you, Lou. And I’m pleased to speak with you today. We continued our busy pace here at InSite Vision during the first quarter as we continued our pursuits to advance our product pipeline and our business development efforts in pursuit of non-dilutive capital to continue to fund our operations.
Let me first address our ongoing late stage pipeline pursuits and give you some key regulatory updates. First, we are continuing our ongoing efforts towards an NDA filing for BromSite in the second half of this year for the prevention of pain and inflammation in the post-cataract surgery setting, a differentiated label in clinical indication.
As a routine part of this process during the first quarter, we submitted to the FDA, a fairly standard package of questions and/or proposed solutions in order to clarify CMC or manufacturing related issues as related to the planned NDA filing.
In April, we had scheduled a FDA meeting around the CMC related teleconference to discuss these very issues if needed. And I’m pleased to report that FDA agreed with all of our suggestions and as such we mutually agreed there was indeed no need for the teleconference.
Importantly, based up on patient utilization data we collected during both of our Phase 3 studies, FDA agreed with our suggestions that BromSite would have a 5 ml fill volume in its commercial format, which subject to approval would make it the highest volume Bromfenac product in the marketplace. Other Bromfenac formulations whether they are branded or generic are limited to 1.6 or 3 ml fill volumes.
We are also continuing to advance our efforts towards European MAA filing to support BromSite for the same prevention labeled in clinical indication. We recently submitted our post-Phase 3 pre-NDA recon package to a key European health authority and our formal meeting is scheduled on May 26.
Our goal identical to working with the FDA is to gain agreement, we have completed all three clinical and CMC related work to support MAA filing and approval as well as support for the differentiated label and indication and a 5 ml fill volume to support global commercialization.
In filing on BromSite last week’s annual Association for Research in Vision on Ophthalmology or ARVO it’s often referred to that meeting in Orlando I’m happy we presented the clinical efficacy and safety results of our first BromSite Phase 3 study, which I’m told was very well-attended and well-received by those who were at the poster. This abstract and poster presentation will soon be placed on our Web site for easy access for your viewing.
On our next point, we have finalized all of the analysis of our landmark double study that evaluated AzaSite Plus DexaSite and AzaSite in moderate to severe blepharitis and we are now fully prepared for our ongoing dialog to determine if there is indeed a clinical development pathway forward specifically if an endpoint achieved in our first Phase 3 trial data is acceptable for use in a Phase 3 confirmatory study.
As I have described before, this continues to be an ongoing and iterative process and we look forward to presenting and fully discussing our analyzes the meeting scheduled with FDA on June 16.
As disclosed previously, our plans to spend no further money on the blepharitis program other than supporting this ongoing end point dialog will remain optimistic that a platform with the FDA can be reached given the depth and breadth of our landmark Phase 3 data package and our analyzes. Our plan is to follow a similar path of follow-up with European health authorities as priorities allow and as such we will be taking a similar briefing package to Europe at the end of May just in case and as we hope our BromSite matters will proceed quickly and there will be time available to initiate a blepharitis discussion.
At this time, we have no further blepharitis updates to provide other than at this time no final decision has been made to terminate or advance AzaSite Plus and/or DexaSite with regard to the blepharitis program at this time and we hope to have more report following the June 16th meeting.
I can also be happy to report that at last week’s annual Association for Research and Vision Ophthalmology, ARVO meeting in Orlando, we presented the clinical efficacy and safety results of the DexaSite versus DuraSite portion from our landmark Phase 3 double study, which I’m told was also very well-attended. This abstract to poster presentation will also soon be placed on our Web site for easy access for your viewing.
And as Lou discussed Akorn successfully reestablished AzaSite supply in mid-February and essential a relaunch to the product to prescribers. I think we will also accurately explain the difference between Akorn’s reporting a factory shipments during the first quarter versus Merck prior reporting on sales using IMS TRx dollars.
Regardless of the real demand levels of AzaSite in the first quarter. It’s clear that the first quarter royalty will not extinguish the deferred interest and as such we fully expect in an event of default to occur on these notes on May 15th, which is tomorrow, when the next payment to the noteholders is made.
We are obviously deep into our business development activities. We are obviously – these are direct efforts and support of securing additional non-dilutive capital to support our operations. At this time, we have no further updates to provide and as such we will not be taking any questions today.
In the interim, we are continuing to aggressively manage our cash position and continue our focused approach towards our regulatory and clinical pursuits as we continue to move forward.
I appreciate your patience and your support of InSite Vision. And thank you for your time.
[No Q&A Session for this event]
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