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Eleven Biotherapeutics, Inc. (NASDAQ:EBIO)

Q2 2014 Earnings Conference Call

August 13, 2014, 08:30 AM ET

Executives

Abbie C. Celniker - President and CEO

Gregory D. Perry - Chief Business Officer and CFO

Michael H. Goldstein - Medical Research

Leah Monteiro - Corporate Communications Manager

Analysts

Liav Abraham - Citigroup

Jason Gerberry - Leerink Partners

Tyler Van Buren - Cowen & Company

Operator

Welcome to Eleven Biotherapeutics Second Quarter 2014 Financial Results Conference Call. At this time, all participants are in a listen-only mode. This call is being webcast live on the Investors & Media section of Eleven’s website at ir.elevenbio.com. This call is the property of Eleven Biotherapeutics and recordings, reproduction and transmission of the call without the express written consent of Eleven Biotherapeutics is strictly prohibited. As a reminder, today’s call is being recorded.

I would now like to introduce Leah Monteiro, Corporate Communications Manager of Eleven Biotherapeutics. You may begin.

Leah Monteiro

Thank you. Good morning. The press release with the company’s second quarter 2014 financial results became available at 7:30 AM Eastern Time today. It can be found on the Investors & Media section of the company’s website at ir.elevenbio.com.

Before we begin, I will read Eleven Biotherapeutics Safe Harbor notice regarding forward-looking statements. During today’s call, we may make forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. It may include statements about our future expectations, plans and prospects, clinical development and regulatory timelines of potential success with our product candidates, financial projections, projections for 2014, 2015 and 2016 milestones and upcoming events and presentations.

Actual results may differ materially from those indicated by these statements as a result of various important factors, including those discussed in the Risk Factors section in our quarterly report on Form 10-Q for the period ended March 31, 2014 and other reports filed with the Securities and Exchange Commission. Any forward-looking statements represent our views as of today only and should not be relied upon as representing our views of any subsequent date. While we may elect to update these forward-looking statements some point in the future, we specifically disclaim any obligation to do so even if our views change. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to today.

Joining me on the call today is Abbie Celniker, Ph.D., President and Chief Executive Officer of Eleven Biotherapeutics who will discuss recent company highlights and review our product pipeline development progress. Following Abbie, Gregory Perry, Eleven Biotherapeutics’ Chief Business Officer and Chief Financial Officer will review the company’s financial results for the second quarter of 2014 after which we will open the call for Q&A. For Q&A, Michael Goldstein, MD, Eleven Biotherapeutics’ VP of Clinical Research will be joining us.

I would now like to turn the call over to Abbie Celniker.

Abbie C. Celniker

Thank you, Leah, and good morning, everyone. We continue to make steady progress this quarter advancing our pipeline of novel protein therapeutics that are based around our expertise in cytokine biology and have come out of our proprietary AMP-Rx platform. As a biology-driven company, we select our targets, engineer our drug and design our clinical trials based on our understanding of the biology of ophthalmic diseases. We feel that our ability to design and engineer unique proprietary drugs targeting multiple key biological pathways in ocular diseases differentiates Eleven and provides us with the opportunity for global commercialization and expanded intellectual property rights.

We continue to execute against our stated goals, as we advance our product pipeline including EBI-005, our lead molecule, which is in clinical development for dry eye disease and allergic conjunctivitis as well as EBI-029, the second program to emerge from our AMP-Rx platform, which is moving towards clinical development for back of the eye diseases such as diabetic macular edema. Additionally, we continue to engineer novel molecules in support of our discovery collaboration with ThromboGenics as well as our own pipeline.

I’ll start with EBI-005, which is our lead late-stage program. As a reminder, EBI-005 is a novel interleukin-1 or IL-1 receptor blocker that is configured as an eye drop for topical administration and it’s currently in Phase 3 development for the treatment of dry eye disease and in Phase 2 development for the treatment of allergic conjunctivitis. EBI-005 was designed to be well tolerated and have a rapid onset of actions by virtue of this tight binding and blocking of the IL-1 receptor on the surface of the eyes which prevents transmission of the biological signal responsible for many of the signs and symptoms of ocular surface diseases.

IL-1 is a unique target in that it plays a potential role in ocular surface inflammation and on the sensation of pain and has been demonstrated to be elevated in the tears and tissues of patients with dry eye disease. We announced last quarter that we had completed patient enrollment in the Phase 2 proof of concept allergic conjunctivitis trial. Since that time, the last patient visit has occurred and data analysis is ongoing. We are on target to report top line clinical data in the fourth quarter of 2014 as planned.

The primary endpoint for this 159-patient study is a reduction in subject reported ocular itching. Additional endpoints include reduction in ocular redness, swelling and other signs of ocular allergy. The safety and tolerability of EBI-005 compared to the vehicle-control was also evaluated. This proof of concept trial was designed to elucidate a number of factors that will be helpful in planning a Phase 3 study, providing better understand of the course of the disease, patient response and timing of treatment. We are looking at two clinical models for allergic conjunctivitis and evaluating EBI-005’s potential in both the treatment and prevention setting.

Allergic conjunctivitis is an inflammatory disease of the ocular surface involving the cornea and the conjunctiva or lining of the eyelids and front part of the eye. Allergic conjunctivitis affects 15% to 40% of the United States population and ranges in severity with the most severe chronic forms potentially resulting in impaired vision and even in some cases blindness. We believe the prolonged moderate-to-severe cases of allergic conjunctivitis are characterized by an IL-1 mediated inflammatory process stimulating the maturation and improvement of the inflammatory cells that exacerbate the allergic response.

These patients are often treated with corticosteroids which while being efficacious are associated with serious side effects requiring frequent patient monitoring to follow the risk of the development of glaucoma or cataract or infection, thereby creating an area of significant unmet need. Our goal with EBI-005 is to create a treatment with the disease-modifying efficacy of steroids without the risk of steroid-associated side effects for the millions of patients who are suffering with the more severe forms of allergic conjunctivitis.

If the results of our proof of concept Phase 2 data readout are positive, the next steps with EBI-005 and allergic conjunctivitis would be to conduct inflammatory pivotal efficacy and safety studies necessary for regulatory approvals. We also remain on track with the EBI-005 dry eye disease program. We continue to enroll patients in our multicenter pivotal Phase 3 trial with over 40 sites up and running with a high level of investigator engagement. In addition, we’re on track to initiate the 12-month safety study of EBI-005 later this year.

While these studies of EBI-005 are ongoing, Eleven continues to engage the broader ophthalmology community including physicians, patients and payors to confirm and understand their needs, the marketplace and payor expectations with regard to EBI-005 and our earlier stage product candidates. In parallel, the EBI-005 commercial product manufacturing and validation campaign is making good progress.

We’re pleased the EBI-005 development program is moving along as planned in both indications. Interestingly, dry eye disease and allergic conjunctivitis patients are most often treated by the same practitioners. This presents an intriguing synergy and commercial opportunity as we could address both markets with one specialty sales force.

Turning now to EBI-029, our novel IL-6 inhibitor. IL-6 is a cytokine that has previously been shown to be up-regulated and back of the eye diseases such as diabetic macular edema and uveitis contributing to the angiogenic and inflammatory components of these diseases. By inhibiting IL-6, EBI-029 could offer an alternative to Crohn's standard of care. Because the biological mechanisms that drive DME and uveitis are inflammatory, corticosteroids are part of the current standard care in these disease settings by leveraging our unique understanding of the biology of interleukin-6 and the inflammatory pathway we have designed a module EBI-029 to modulate our IL-6 thereby inhibiting the inflammation without the steroid-associated safety issues. This common pathway enables us to acquire our differentiated approach to target IL-6 and investigate both of these diseases as potential clinical indications for EBI-029.

In DME, the anti-VEGFs are being used more widely but are not efficacious in all patients with DME and require more frequent administration than when they are used with DME. Interestingly, IL-6 is known to be upstream and regulates the expression of VEGF and as such, a more central regulator of the biology of dry eye and DME, and we believe that EBI-029 by blocking IL-6 could be effective in treating the patients who respond to the VEGFs as well.

EBI-029 has already demonstrated the ability to potently inhibit all forms of IL-6 signaling in vitro opening its potential for the treatment of both diabetic macular edema and uveitis. We continue to perform the preclinical studies and market analysis where it’s necessary to make next step development decisions with the goal of moving this product candidate towards clinical development in 2015.

In addition to the significant progress made this quarter with our clinical pipeline, our researchers presented at several key medical and scientific meetings this quarter including the Contact Lens Association of Ophthalmologists annual meeting in Toronto at which our medical director, Michael Goldstein, gave an oral presentation on new drugs and development for dry eye and ocular surface disease and the International Society of Ophthalmologists in Iceland at which Dr. Goldstein discussed the pitfalls in the design of dry eye clinical trials and our CSO, Eric Furfine, presented on the use of targeted biologics in posterior chamber ocular disorders such as DME and uveitis.

I’ll now turn the call over to Greg Perry to provide a review of the financial results for the second quarter of 2014.

Gregory D. Perry

Thanks, Abbie. Early this morning, we issued a press release detailing our financial results for the second quarter of 2014. I’ll review the financial highlights and then speak to our cash position in our financial guidance.

For the second quarter of 2014, we reported a net loss of approximately 8.1 million compared to a net loss of 3.6 million for the same quarter in 2013. The year-over-year increase in net loss is due to the increase in clinical trial activity in further development of our pipeline candidates, offset by increased revenue from our collaboration with ThromboGenics.

Total revenue for the second quarter of 2014 was approximately 800,000 compared to 200,000 for the same period last year and consistent with ThromboGenics collaboration revenues, which began in May 2013. As you may recall, at that time, ThromboGenics licensed our proprietary AMP-Rx protein design technology to create a novel therapeutic that will optimized for improved pharmaceutical characteristics and therapeutic benefits.

Research and development expenses for the second quarter of 2014 were 6.8 million compared to 2.7 million for the same period in 2013, an increase primarily driven by the initiation of our pivotal Phase 3 trial of EBI-005 in dry eye disease and our Phase 2 clinical study of EBI-005 in allergic conjunctivitis.

G&A expenses for the second quarter of 2014 were 2.1 million compared to 900,000 for the same period in 2013, an increase totaling about 1.2 million. This increase was driven primarily by higher expenses related to operating as a public company and increased stock-based compensation expense.

We ended the quarter with 45 million in cash and cash equivalents. Based on current operating plans, the company expects to have sufficient cash and cash equivalents to fund current operations into the first quarter of 2016.

With that, we can open up the call for questions. Operator?

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). Our first question comes from the line of Liav Abraham of Citi. Your line is now open.

Liav Abraham - Citigroup

Good morning. A couple of questions. First, Abbie, I’d be interested in your thoughts on the commentary made by Shire on an investor call a couple of months ago that the FDA is willing to accept Shire’s (indiscernible) filing based on the totality of the data. What do you think the potential implications of this are for the development of novel agent for dry disease in general and more specifically for the development of EBI-005 for dry eye? And then my second question is on EBI-005 for allergic conjunctivitis. Can you just talk a little bit about your potential timeline going forward for pivotal trials and trial design assuming that we get positive data in the current Phase 2 trial before the end of the year? Thank you.

Abbie C. Celniker

Thanks, Liav. So first addressing the question about Shire’s comment, what we read into this and what I think has been communicated pretty clearly in their press release is that Shire has been working very closely with the FDA going through all of the data from all of the trials that they have conducted. So, they’ve conducted their OPUS-1 and their OPUS-2 efficacy studies as well as SONATA which was their long-term safety study which had quite a few patients enrolled. And when they say the totality of the data, we anticipate is that when they look at all of the data that’s been generated in all of those studies that they feel that there’s an appropriate trend in achieving the sign data that they were looking for. As I think folks recognize, they hit their symptom endpoints in their first two studies. The first study, it was a secondary endpoint of the sensation of eye dryness that was moved to be a primary endpoint in their second study and they did hit it which is really a great thing for patients.

But it really was that they had to hit their sign data and so we anticipate that the data from all of these studies together is what they have shared with the FDA and the FDA has found acceptable. We anticipate that if they renounce that they are going to go ahead with their filing that they have that level of confidence from the FDA. I think that what impacts that has on dry eye development in general as well as EBI-005, I think that the FDA has been very consistent with their statement of being able to show a clinically significant separation from vehicle in a sign and a symptom in two studies and I don’t think they’re changing their perspective on that. Where I think they might be opening their mind a little bit is on how they look at the data in a sort of cumulative way understanding that there’s a lot of variability in this patient population but that when one looks at the data across studies, there is also a way to combine that data to get reasonable and meaningful information.

So I think that the FDA is just recognizing that this is a complex population of patients and that they need to be collaborative with sponsors but I don’t think they’re backing up on their requirement that you show the improvement in both design and a symptom in two studies. So that’s the first question. Your second question about allergic conjunctivitis timeline for our pivotal development is what would our trial design might be? I think that we’re at the early stages of that right now. What we do know is that development in allergic conjunctivitis can move very rapidly based on the use of these allergen challenge models, and as we mentioned in the call we will be looking at what is the most appropriate model to use going forward, what’s the most appropriate treatment timing and also the most appropriate endpoint. So as we get our data from our Phase 2 trial, we’ll be using that data to help design our Phase 3 trials.

Right now we are moving forward with all of the development aspect of the commercial manufacturing for EBI-005 that is sort of on the timeline associated with our dry eye development. This is the same activity that would be required to support allergic conjunctivitis and therefore we see the AC development plan being pretty much in parallel with the dry eye development plan but possibly reading out a bit later than dry eye with a launch time that would be subsequent to the dry eye launch in a success scenario. As I mentioned, with regard to the design in the trial, we really will be focusing on the data that we get from this proof of concept Phase 2 trial to inform how we move forward with the actual design as a clinical trial.

Liav Abraham - Citigroup

Great. Thank you.

Operator

Thank you. Our next question comes from the line of Jason Gerberry of Leerink Partners. Your line is now open.

Jason Gerberry - Leerink Partners

Hi. Good morning. Thanks for taking the questions. Just a couple on the allergic conjunctivitis opportunity. You mentioned last patient in, so just curious if we should be expecting top line data early 4Q or late 4Q? And then just a follow up on the, I guess if the data are positive in the Phase 2 study, as you head into a Phase 2 meeting, is that pretty straightforward or would you look to incorporate any novel aspects into the Phase 3 design relative to like what we’ve seen with the steroids like (indiscernible) novel concepts that you look to incorporate into that study?

Abbie C. Celniker

Great. Thanks, Jason, very much. So before I go to the timing of the AC readout, I’ll talk to you a little bit about what our interactions with the health authorities have been and how we think about the design of the trial. So earlier in – actually both 2013 and in 2014, we’ve had a number of discussions with the health authorities, the FDA as well as European health authorities and we understand that they have a very, very clear established regulatory pathway towards approval for allergic conjunctivitis. So we’re certainly going to stay within the constraints of the well understood regulatory approach for AC approvals.

But what’s interesting is in our conversations with the FDA, they have made it clear that they understand that this maybe a different patient population than what’s traditionally used in the antihistamine and mast cell stabilizer development [fair enough] (ph) that they understand that this might be a slightly different patient population and that they’re sensitive to our desire to add things to our studies to help understand that more and they’ve been I think helpful and informative in that pathway.

So we are considering by virtue of the model that we ran in our Phase 2 study, we are considering ways of doing the trial that might be different than traditionally used for antihistamines and mast cell stabilizers by virtue of using multiple allergen challenges for potentially developing in a chamber where there’s environment or aerosolized exposure versus direct conjunctiva exposure which is what is more frequently used. So there maybe some twists to how we conduct our trial, but in no cases with anything that we do be something that the agency hasn’t already seen. So while we had great interactions leading into the design of our Phase 2 trial, we anticipate that we’ll have a continued dialogue along those lines that we go to our end of Phase 2 meeting.

With regard to the timing for the AC readout, we’re being fairly consistent with our statement of fourth quarter as I think we’ve described in talking about this trial in the past. We really delved a lot into this trial to help us understand the design of our pivotal study and so we want to be careful to go through the assessment of all of those different aspects so that we have the most informed Phase 3 program possible. I think that that’s exactly what we did with our dry eye program as well taking the time to really go through the data and understand it. We’re currently in data analysis, so I think we’re on track for that fourth quarter readout and very comfortable about that.

Jason Gerberry - Leerink Partners

Okay. And if I can just ask one follow up just on 029 for DME. As you think about moving that into the clinic in 2015, what are the primary barriers between now and then? Is it just accumulating more tox data or still more work to validate the efficacy in animal model, just sort of curious what are the steps between now and filing the IND and getting that into Phase 1 testing?

Abbie C. Celniker

Thanks, Jason, great question. So what I will say and what I’ll start off by saying is that with regard to effects we modeled, one of the things that we do understand is that it’s very difficult for animal model to always translate into clinical development. So we don’t really look at the efficacy models as being rate limiting to our development program based on our understanding of the biology and the data that we have to-date. So with regard to the question about what are the barriers, when you move forward in development paradigm, obviously with a biologic, the two sort of rate limiting steps off of your CMP and your tox. And so we are moving very aggressively to produce the materials such that we can initiate the tox and that tox program would likely be the rate limiting step that we’re on track to complete both our CMP development and our tox studies in a manner that keeps us moving into the clinic the second half of 2015.

Jason Gerberry - Leerink Partners

Great. Thanks, guys.

Operator

Thank you. (Operator Instructions). Our next question comes from the line of Tyler Van Buren of Cowen & Company. Your line is now open.

Tyler Van Buren - Cowen & Company

Hi. Good morning. So I guess I’ll just focus my two questions on the allergic conjunctivitis programs since that’s reading out first. So with respect to the primary endpoint of ocular itching, could you just remind us what the current therapies kind of show in moderate-to-severe patients and kind of how that’s measured, so we can get an understanding of a threshold for the results and kind of what look good when the data reads out? And also with respect to the two direct – with the two allergen challenge clinical models, obviously there’s the chamber and the direct challenge. Is it accurate to say that once you look and analyze all the data and you decide that one model might be more appropriate that you could move forward with that model in Phase 3, or will you still be looking at both models, just like to clarify that? Thank you.

Abbie C. Celniker

Great. Thanks very much, Tyler. For those questions, I’m going to ask Mike Goldstein to sort of chime in. With regard to your last question about which model, in fact what you said is correct. We will be looking at the data and from the data that we generate in our Phase 2 proof of concept study picking the right model to go forward and feel comfortable that either of those models was acceptable. But Mike, I’d ask you to address Tyler’s question about the primary endpoint of ocular itching, how patients prevent, et cetera.

Michael H. Goldstein

Hi, Tyler. So as you are aware, most of the drugs that have been approved in this space have been approved for the treatment of ocular itching. And most of the – all the drugs that are out there actually are really approved for this sort of milder population in general and there are a number of antihistamine, mast cell stabilizers, there’s even one load of steroids. And so what we’re not looking to do is to have a drug that targets specifically that particular population. What we are looking to do is to look for patients that are well treated by the topical antihistamine, mast cell stabilizers or who require steroids in order to control their symptom. And so that’s the target population that we’ve looked at in this study. And so again, looking then at that population and then looking at this primary endpoint of itching is probably where we’re focused. The other indication that you can get in allergic conjunctivitis is you can get an indication for the treatment of ocular redness, so that is a more unusual indication to get but it’s something we’re also looking at in both of these models for allergic conjunctivitis.

Abbie C. Celniker

Mike, do you want to comment on as a physician how you measure ocular itching?

Michael H. Goldstein

So from a clinical perspective, it’s the patient’s projective response. In a trial perspective, we have to be able to – it’s been developed and validated and measured where patients are actually getting scores.

Tyler Van Buren - Cowen & Company

Great. Thanks.

Abbie C. Celniker

Thank you, Tyler.

Operator

Thank you. (Operator Instructions). I’m showing no further questions at this time. I’d like to hand the call back over to Abbie Celniker. Please go ahead.

Abbie C. Celniker

Thanks very much. So thank you everybody. We are really happy that everyone was able to join the call and look forward to our next update. Thanks, again. Have a great day.

Operator

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude today’s program. You may all disconnect. Have a great day, everyone.

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Source: Eleven Biotherapeutics' (EBIO) CEO Abbie Celniker on Q2 2014 Results - Earnings Call Transcript

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