pSivida's (PSDV) CEO Paul Ashton on Q3 2014 Results - Earnings Call Transcript

May.14.14 | About: pSivida Corp. (PSDV)

pSivida Corp. (NASDAQ:PSDV)

Q3 2014 Earnings Conference Call

May 13, 2014 04:30 PM ET

Executives

Lori Freedman - VP of Corporate Affairs and General Council

Dr. Paul Ashton - President and CEO

Len Ross - VP, Finance

Analysts

Suraj Kalia - Northland Securities

Graig Suvannavejh - MLV

Operator

Good day ladies and gentlemen. And welcome to the pSivida Corporations Third Quarter 2014 Earnings Release Conference Call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Ms. Lori Freedman, Vice President of Corporate Affairs and General Council. Ma'am you may begin.

Lori Freedman

Good afternoon everyone and thank you for joining us. After the market closed today, we released our third quarter financial results for fiscal 2014. A copy of the release is available on the Investor section of our website at www.psivida.com. On the call with me today is Dr. Paul Ashton, President and Chief Executive Officer; and Len Ross, Vice President, Finance.

Before I hand the call over to Paul, I need to remind everyone that some of our prepared remarks are and answers to your questions may be forward-looking in nature. Forward-looking statements are inherently subject to risks and uncertainties. All statements other than statements of historical facts are forward-looking statements and we cannot guarantee that the results and other expectations expressed, anticipated, or implied will be realized. Actual results could differ materially from those anticipated, estimated or projected in the forward-looking statements. For a more detailed discussion of risk factors that could impact our future results and financial condition, I refer you to our filings with the SEC including our Annual Report on Form 10-K for the fiscal year ended June 30, 2013. We undertake no obligation to update any forward-looking statements in order to reflect events or circumstances that may arise after this conference call.

With that, I’d like to turn the call over to Paul.

Paul Ashton

All right. Thank you, Lori. And welcome everyone as we discuss the results of our third quarter of fiscal 2014. This was another very good quarter for us, with good news for Medidur, our lead development product, ILUVIEN for chronic DME lead licensed product and Tethadur, our technology for sustain delivery of biologics.

Now first, as you know we’re conducting a phase III clinical trial for Medidur, our injectable sustained release micro-insert for the treatments of posterior uveitis. This is a serious disease to the back of the eye and the third largest cause of blindness in the U.S.

The micro-insert used on Medidur is the same one used on ILUVIEN for chronic DME with the same drug [Indiscernible]. We’d be able to the data in the ILUVIEN filing to support the filings for the approval of Medidur in posterior uveitis.

We now plan to seek approval of Medidur in the U.S. for safety and efficacy data, file only the current phase III clinical trial rather than a two phase II trials we have previously planned, ILUVIEN has approved. This would save money and more importantly time in the Medidur approval process.

We've modified the Medidur in silicon, to use a small gauge needles in ILUVIEN to make Medidur easy to inject. We also plan to provide additional clinical data about the utilization and safety of the new proprietary in silicon. If ILUVIEN is not approved, we would revert back to our original plan.

We expect to complete the [Indiscernible] of our current phase III trial in late calendar 2014 or early 2015, with a primary end points of progression of uveitis at one year. We’re anticipating having data from the trial in the first half of calendar 2016 and potentially filing for U.S approval later that year. We'll be meeting with the FDA to confirm our regulatory strategy, as well as our pay to become avail.

Now, we have a higher level of confidence by the expected results from our Medidur trial based on early clinical trial results for ILUVIEN and DME and Retisert an FDA approved product for posterior uveitis that we developed and incensed to Bausch & Lomb.

Because ILUVIEN is the same insert delivering the same dose of the same drug as Medidur and Retisert is an implant that delivers a larger dose of the same drug for posterior uveitis. We’re very optimistic on our Phase III trial, which use a Medidur as anti effective as Retisert in treating posterior uveitis or with more favorable risk benefit profile and fewer side effects. Comfortable in fact to ILUVIEN but may be even easy to administer. We’re developing Medidur independently.

So let’s turn to ILUVIEN for chronic DME. We are really pleased with the favorable developments in the regulatory process in the U.S. As you recall, ILUVIEN has yet to win U.S. approval. It has been approved in multiple EU countries and it’s being sold by our licensee Alimera in the U.K and Germany.

In March, Alimera re-filed the NDA with the FDA, before the issues raised in the last complete response letter and providing additional safety data. The FDA has issued a PDUFA date of September 26. That’s the date by which the FDA plans to complete its review. And as indicated, further clinical trials will not be required for this decision.

Alimera has engaged in labeling discussions with the FDA. An FDA approval will trigger a $25 million milestone payment just from Alimera. Alimera recently entered into a loan agreement that provides $25 million advance, if the FDA approves ILUVIEN on or before October 31, 2014, and certain all the conditions are met and that’s to sum our milestone payment. We've also been entitled to share the profits on sales of ILUVIEN by Alimera in the U.S. In Europe, we were pleased to see a quarter-over-quarter increase in ILUVIEN sales. We don’t yet know when FB sales translate into net profit segment for us. We are also pleased to see the agreement with Specialized Therapeutics Australia for potential distribution of ILUVIEN in Australia and New Zealand.

Our ILUVIEN agreement has provided with considerable cash cost fall and we are optimistic that future revenue from this collaboration will continue help fund our pipeline. Finally, last quarter, we continue to present Tethadur, our proprietary technology designed to provide sustained delivery of peptide, proteins and antibody using injectable, fully erodible nano-porous silicon. We‘re able to demonstrate sustained release of Avastin with Tethadur. This is although we think we presented the first peer reviewed; in-vitro data which included a long-term sustainability of antibody such as Avastin is achievable with Tethadur. And the antibody is controllable over a wide range by adjusting the pore size and surface area of Tethadur.

Diseases such as age-related macular degeneration and DME are currently treated with frequent intraocular injections of Anti-VEGF antibody such as Avastin. We plan to report the results of additional preclinical studies of Tethadur late in calendar 2014 potentially positioning us to file an IND by the end of the year. The authority to achieve sustained release of biologics has been something in the fully grail in the pharmaceutical sciences for many years. It should have tremendous value both for the patients as a means to generate better clinical outcomes for new and existing modules and to the pharmaceutical companies and the lifecycle management tool. Sustained release of pharmaceuticals can significantly improve therapeutic outcomes for many applications due to improved effectiveness, reduced adverse events, better patient compliance and improved convenience.

In addition, the use of sustained delivery technology is to create new patented formulations of existing drugs as extended patent coverage saved of to competition. Now while there are many technologies that can provide sustained delivery for small drug molecules, there is really nothing available for protein antibodies of other large molecules. This is where we think Tethadur comes in. Currently, many biologics must be delivered by frequent injections to the biological family products for example by intraocular injections often as frequently as once a month. In addition, patents for biologic products with annual sales totaling over $50 billion but expiring over the next five to ten years. If we are able to successfully develop Tethadur, it could play an extremely important role in creating the next wave of some of these products.

As we have said previously, we are working with a leading global biopharmaceutical company to evaluate Tethadur in ophthalmology. Our strategy is to move to a specialty pharma model by using our platform technologies Durasert and Tethadur to independently develop own drug delivery products for already approved drugs and biologics to better treat diseases in the ophthalmic area and beyond. At the same time, we are continuing to pursue collaborations and partnerships that leverage our technology platforms well appropriate. Medidur, ILUVIEN and Tethadur illustrate the plans of our development strategy. Medidur is an example of a product that we think as a result of our expertise and cost and risk of development is appropriate for us to develop on our own. Other products particularly some of the, which is Tethadur, are better candidates for partnering alliance of patent protection, developments and regulatory costs and the expertise and existing networks of others.

All would also provide us with leverage to go after applications; we otherwise wouldn’t have the resources or bandwidth to pursue. We expect to continue to evolve our technology platforms through collaborations and by what we learned from our own products and of course partnering can provide critical financing for our own development work. Now, moving onto finances which Len will cover in more detail in a moment, I want to highlight that we have augmented our cash position with a $7 million sales stock through an institutional investment. We ended the quarter with $21.3 million in cash, of them $15.7 last quarter.

Now as I said before, we expect our quarterly cash balance for the near future to be more valuable than in the past depending on the timing of receipts and payments. Now, I will turn the call over to Len, to take us through the financing.

Len Ross

Thank you, Tom and good afternoon everyone. I will briefly review our third quarter fiscal year 2014 results we reported earlier today starting with our financial position. As Paul noted in March 31, 2014 we had cash, cash equivalents and marketable securities of $21.3 million. A net increase of $5.6 million from December 2013, primarily reflected approximately $6.8 million of net proceeds received from the sale of 1.7 million common shares in March 2014 registered direct offering through an institutional investor.

We anticipate that our existing capital resources and expected cash inflows under existing collaboration agreements will enable us to fund our current and planned operations through the third quarter of calendar year 2015. This estimate includes expected cost of clinical development of Medidur but excludes any potential milestone or net profits receipts under our Alimera collaboration agreement.

We expect funding of our operations beyond that including completion of clinical development of Medidur, will depend upon the timing and amount of cash receipts under the Alimera collaboration agreement most notably the potential $25 million milestone if ILUVIEN is approved by the FDA, as well as proceeds from any future collaborations or other agreements and our financing transactions. With respect to sales of ILUVIEN for chronic DME which Alimera commenced in Germany and UK in 2013. Alimera has not yet achieved quarterly net profits as defined in either country and don’t know when or if Alimera will do so entitling us to our contractual share.

Turning now to our third quarter fiscal 2014 results. Revenues totaled $2 million for the fiscal 2014 third quarter compared to $513,000 for the same period last year. The increase reflects $1.5 million of collaborative research and development revenue re recognized in this year’s third quarter. Certain cash payments received under the terms of a feasibility study and previously classified as deferred revenue were recognized as revenue at the end of the study when the revenue was no longer contingent. Research and development totaled $2.3 million for the quarter ended March 2014 compared to $1.6 million in the prior year quarter.

The increase was primarily attributable to approximately $810,000 of outsourced contract research organization costs for the ongoing Medidur Phase 3 clinical trial partially offset by lower personnel cost. General and administrative expense totaled $1.9 million for the third quarter of fiscal 2014 compared to $1.7 million for the third quarter of last year with the increase primarily due to higher levels of professional fees and stock based compensation. Net loss for the quarter ended March 2014 was $2.2 million or $0.08 per share compared to a net loss of $2.8 million or $0.12 per share for the prior year quarter. On a year-to-date basis total revenues were $3.2 million for the nine months ended March 2014 compared to $1.7 million for the same period of fiscal 2013, with the increase attributable to the collaborative research and development revenue recognized in the third quarter.

Research and development increased by $2.6 million and $7.3 million for the fiscal 2014 year-to-date period compared to $4.7 million in the prior year. The $3 million net increase in clinical and preclinical development cost predominantly CRO cost for the Medidur Phase 3 clinical trial was partially offset by lower personnel costs. General and administrative expense increased by $452,000 to $5.5 million for the nine months ended March 31, primarily attributable to higher professional fees and stock based compensation.

Net loss for the nine months ended March 31, 2014 was $9.4 million or $0.35 per share compared to a loss of $8 million or $0.35 per share for the prior year period.

I will now turn the call back over to Paul.

Paul Ashton

Thanks Len. Thank To sum up; we now plan to accelerate our development program for Medidur for posterior uveitis our lead development product by seeking FDA approval based on our current ongoing Phase 3 trials augmented with additional clinical data on safety and usability of our proprietary inserter rather than the two clinical trials if the FDA approves ILUVIEN. We’re optimistic about FDA approval of ILUVIEN which has a PDUFA date of September 26. In addition, sales of ILUVIEN in Germany and UK continued to climb last quarter. We advanced our development of Tethadur technology and reported preclinical in future results ability to deliver Avastin.

Finally, we improved our position adding to our cash resources to the sales. I am very optimistic as fiscal 2014 continue to shape up to be a very good year for us. We have a lot of potential catalogs going forward, this include advancing Medidur with posterior uveitis. We’re approaching additional pre-clinical day from Tethadur with the goal of filing an IND discount year, potentially receiving FDA approval for the ILUVIEN for Chronic DME by the end of September and roughly seeing stronger increases in ILUVIEN sales in Europe. At this point we would be happy to take questions. Sid (ph) will you please initiate the Q&A portion of the call.

Question-and-Answer Session

Operator

Thank you sir. (Operator Instructions) And our first question comes from Suraj Kalia from Northland Securities. Your line is open sir, please go ahead.

Suraj Kalia - Northland Securities

Good afternoon, everyone. So Paul, maybe I miss this, did you talk about patient enrollment in the uveitis trial the current number enrolled?

Paul Ashton

No. We have not disclosed that.

Suraj Kalia - Northland Securities

Okay. I guess, Paul given that Medidur has essentially the same form factor, same drug, same loading as ILUVIEN, but it’s for different indication, is it fair to say that the price points are also going to be approximately the same in the market place assuming -- you’ll get through the regulatory process and uveitis and why would one expect different price points for this two products?

Paul Ashton

That’s an excellent question. I am not sure in acceleration (ph) or necessarily -- we haven’t given out any our guidance on pricing. We will get to see clinical efficacy first.

Suraj Kalia - Northland Securities

Okay. Paul forgive me if my memory fails here. But the use of the safety data from the same study and that’s been used in the Medidur trial that is not influenced anyway by the FDA’s decision on ILUVIEN right. Irrespectable (ph) what the decision is render in September that you’ll could still use the safety data in the Medidur uveitis trial. Is that correct?

Paul Ashton

Yes, that’s right.

Suraj Kalia - Northland Securities

Fair enough. The $1.5 million royalty income in this -- in the quarter Paul, the complete feasibility study was that from someone other than Pfizer?

Paul Ashton

Yes it was.

Suraj Kalia - Northland Securities

Okay. And would you venture to say is it there are any of the non entities or is this, or your will bound back confidentiality to not to build them at this stage?

Paul Ashton

No we’re focus on the Durasert technology, but it was -- not something was presenting a non entity of not it certainly hasn’t been disclosed.

Suraj Kalia - Northland Securities

Fair enough, fair enough. And finally I presume this quarter the net of sales of ILUVIEN and Europe and the direct marketing cost did not resulted any royalty income for you’ll is that correct?

Paul Ashton

That’s the expectation.

Suraj Kalia - Northland Securities

Fair enough. That should be it from my side. Thanks guys.

Paul Ashton

Great. Thanks, Suraj.

Operator

Thank you. Our next question comes from Graig Suvannavejh from MLV. Your line is open. Please go ahead.

Graig Suvannavejh - MLV

Hi, good afternoon. Thank you for taking my questions. Congrats on the quarter. I had about six but I only ask three or maybe I will ask six. My first question Paul and Lori is given where we are right now with ILUVIEN for DNA and the fact that your licensee Alimera has now resubmitted or made a resubmission. Have you seen that resubmission? And I guess a follow-up to that is what’s your level of comfort or confidence that the resubmission by Alimera is sufficient to be able to satisfy agencies, outstanding issues?

Paul Ashton

Yeah. We’ve seen the resubmission. I think that I am -- I’ll actually say this in English. I think it seems to address the FDA’s issues, I know that there have discussions with Alimera and the agency which Alimera is positive. So unless one was actually present in those discussions when I wasn’t, it’s kind of little bit handicap in [Indiscernible].

Lori Freedman

Its base on what we’ve seen Graig and what we reported that we were optimistic on the central approval holding.

Graig Suvannavejh - MLV

Okay. And can you compare this time around versus the prior go around in terms your comfort with the resubmission?

Paul Ashton

I think that Alimera had some labeling discussions with the agency before this resubmission filed is extremely important.

Graig Suvannavejh - MLV

I appreciate that. I just want to move over to your decision or your announcements that from Medidur that you’re going to now focus on one trial and there are several questions related to that. My first thing, have you had FDA buy into this decision and the strategy to only go with one trial versus two?

Paul Ashton

Well we have discussions with the FDA and the mechanisms to do that. And the strategy isn’t really changed it may sound, as point out that ILUVIEN -- approved with a single Phase 3 clinical trial in uveitis, interestingly enough as [Indiscernible] was approved with two Phase 3 for [Indiscernible].

Graig Suvannavejh - MLV

That’s very helpful thank you. And then can you may be help us quantify how much savings will come about by having to only do one trial versus two or ballpark it at least?

Paul Ashton

It’s a little bit hard but you can -- the trial is largely a function of a number of patients.

Graig Suvannavejh - MLV

But you had at some point in the past mentioned the two trials together were expected to cost x amount and now with there being one trial one -- from a broad prospective cut it in half or is that not the right way to think about it?

Paul Ashton

Well close to half, yes they have half, between 30% and 50% again some [Indiscernible] have to deal with.

Graig Suvannavejh - MLV

Okay, great. And then I just want to touch upon Tethadur, is there work that -- vast in the anti-VEGF drugs seem to be a layup in terms of natural candidates that you might use in Tethadur. Have you done any work outside of the anti-VEGF and is there -- have you received interest in the technology for non anti-VEGF applications?

Paul Ashton

Yeah, we have been looking at sustained delivery of a peptide which could be extremely interesting and that’s also in preclinical testing at the moment and we’re having some early stage discussions with several potential partners for non- ophthalmic applications of that technology.

Graig Suvannavejh - MLV

And this would be within already approved product or this is a novel mechanism of action?

Paul Ashton

Sort of both.

Graig Suvannavejh - MLV

And then my last question will be I probably asked more than six but my last question will be just as it relates to the technology evaluation that’s been done right now on behalf of global pharma. Is there any guidance you can give us in terms of when or what might come out of that?

Paul Ashton

I can tell you it became very well, what might come out of it might be a licensing agreement but when that might occur I really can’t say.

Operator

Thank you. (Operator Instructions). And our next question comes from Michael [indiscernible] from Geneva Group. Your line is open, please go ahead.

Unidentified Analyst

I have more of a clarification question; it’s kind of a standard window of six months when the FDA when we have a PDUFA goal date. Knowing that and with all the previous data that that has been collected by the FDA is there a possibility that the approval could come prior to the 26 due to the fact that there has been previous filings with so much data available to them?

Paul Ashton

As a possibility I think typically when the agency gives a PDUFA date they will be fairly close to it.

Unidentified Analyst

Even with all the data that they have collected, I know that by kind of like it’s generally a six month window that they have to provide but I have been involved in a number of approval situations where previous data had been filed or previous applications and NDA is in good effect that they had a lot more material than for a first filing they fell within the earlier stage of the window. So, it is a possibility. I think a lot of people are confused that that’s the day that they are going to come and I keep trying to tell a lot of people that that’s not the day that’s just a max date that the FDA sheds on their window.

Paul Ashton

Yes, that’s good point. One doesn’t really know where we will be with this particularly with the FDA, I think they have an excellent records of PDUFA date, so your points well taken that I would be extremely surprised if we hear Avastin, I would hope to give before them but how much before I don’t know.

Unidentified Analyst

Right. And I am only asking that in terms of the fact that some people may be confused and say that is the ground zero date and shareholders made me saying well, let me wait closer, so there is a lot of confusion out there and I don’t think a lot of people will understand that that is just set by the FDA as a window. It runs about six months from the announcement of the filing and in my opinion and I am sure others that they filed previously with all the data they have collected, it probably would come in sooner. The other question I have…

Paul Ashton

You are right but we have not, we don’t know the answer to that.

Unidentified Analyst

Of course, I am not asking you for a date of course not but I am just trying to get a concept out here that people are stuck on that, that’s the date that they are going to approve it. So, the 25th is a real exciting night. That’s type of change any situation that’s just the maximum window date and I am just trying to get it out here, there are lot of people may not understand that but maybe on this call or may not be. But so, I understood you can’t give any date but you don’t know and nobody does but it’s just a possibility that it could come month or week or several months earlier due to the fact that they do have collected quite a bit of data on this. So, you have answered my question. The other question I have is really not relating, I am just wondering, you guys said that groans are going to win tomorrow night.

Lori Freedman

Absolutely. I will take that one.

Unidentified Analyst

I would assume that’s the answer.

Paul Ashton

And one of this is indeed from Boston approximately.

Lori Freedman

Okay, ask anything.

Operator

Thank you. Our next question comes from Graig Suvannavejh from MLV. Your line is open. Please go ahead.

Graig Suvannavejh - MLV

Thanks for taking my follow-up. I just had perhaps a modeling question, your R&D came in lower than I have been forecasting and maybe that’s just error in forecast on my part. But how should we think about the fourth quarter relative to the third quarter in terms of R&D and SG&A and maybe it might be too early to talk about fiscal 2015 but any thoughts off of 2014 in terms of trends would be helpful? Thank you.

Paul Ashton

I refer to Len.

Len Ross

Yes, I think the third quarter R&D was a little bit lower than the second quarter really for a couple of reasons. There was a investigator meeting associated with the Phase III Medidur trial and there are always a lot of set-up and start-up cost that really get expensed early on in the trial but I would expect that that will level off as we move forward through the Phase III trial.

Graig Suvannavejh - MLV

So, if I could paraphrase or are we expecting an increase off of the third, fiscal third quarter number for R&D?

Paul Ashton

Not significantly, no.

Graig Suvannavejh - MLV

Okay.

Operator

Thank you. I am showing no further questions. I would like to hand the conference back over for closing remarks.

Paul Ashton

Great then, I would like to thank you all for joining us today and I look forward to speaking with you again next quarter. And of course as always if you have any additional questions please feel free to contact us. Thank you.

Operator

Ladies and gentlemen, thank you for participating in today’s conference. This concludes our program. You may all disconnect and have a wonderful day.

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