Kala Pharmaceuticals, Inc. (KALA) Q4 2017 Earnings Conference Call Transcript

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Kala Pharmaceuticals, Inc. (NASDAQ: KALA) Q4 2017 Earnings Conference CallMarch 26, 2018 8:00 a.m. ET

Contents:

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  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to Kala Pharmaceuticals' Clinical Update Conference Call. [Operator instructions] And as a reminder, this call is being recorded. I would now like to turn the call over to Mary Reumuth, chief financial officer for Kala Pharmaceuticals. Please proceed.

Mary Reumuth -- Chief Financial Officer

Thank you, operator, and thank you all for participating in today's call. Joining me from the company are Mark Iwicki, chief executive officer; Dr. Kim Brazzell, chief medical officer; Todd Bazemore, chief operating officer; and Dr. Hongming Chen, chief scientific officer.

Today's call is being recorded and an archived recording will be available on our website as indicated by our press release. We'll be showing slides to accompany today's discussions. And these slides have also been updated to our website. Before we begin, I would like to caution that comments made during this conference call about Kala's future expectations, plans and prospects by management are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

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I encourage you to the review the company's filings with the Securities and Exchange Commission, including, without limitation, the company's most recent quarterly report on Form 10-Q, which identifies specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements. Factors that may affect the company's actual results include, but are not limited to, the results and timing of clinical trials of our lead product candidates, our ability to obtain regulatory approval of our product candidates on the timelines expected, if at all, the sufficiency of the company's cash resources, broad enforcement of intellectual property, legal compliance and new regulatory requirements, and other economic and competitive factors. The content of this conference call contains time-sensitive information that is accurate only as of the date of the live call today, Monday, March 26, 2018. The company undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.

I will now turn the call over to Mark Iwicki. Mark?

Mark Iwicki -- Chief Executive Officer

Thank you, Mary. Good morning, everyone. Earlier this morning, Kala issued our financial results for the quarter and year ended December 31, 2017. This also included results of some of the additional analyses of the data from our STRIDE 1 and STRIDE 2 Phase III trials and of our Phase II data as well as for KPI-121 0.25%.

These analyses were done to better understand the results and to prepare for discussions with the FDA, which we expect to be happening in the second quarter. These analyses will be the focus of today's call. In the last year, we've made significant progress that included a successful IPO of 6.9 million shares of common stock at $15 per share. Additionally, an NDA for INVELTYS, that's KPI-121 1%, our topical twice-a-day product candidate for the treatment of inflammation and pain in patients who have undergone ocular surgery, was accepted for review by the FDA with a PDUFA target action date of August 24, 2018.

We also announced top-line results for our two Phase III clinical trials evaluating the safety and efficacy of KPI-121 0.25% versus placebo in patients with dry eye disease. Before going on to the new dry eye data analyses, I'll turn the call back to Mary Reumuth, our CFO, who will briefly discuss our financial results. Mary?

Mary Reumuth -- Chief Financial Officer

Thank you, Mark. Our cash position as of December 31, 2017, was $114.6 million, compared to $45.5 million as of December 31, 2016. We anticipate that our existing cash will enable us to fund operations for at least the next 12 months. Total research and development expenses for the fourth quarter of 2017 were $5.9 million, compared to $6.9 million for the same period in 2016.

The decrease in R&D expenses is primarily due to the completion of our Phase III clinical trial of INVELTYS in the first half of 2017 and STRIDE 1 and 2, which completed during the fourth quarter of 2017. Total research and development expenses for the full year 2017 were $29 million, compared to $25 million for the full year 2016. The increase is primarily the result of increased personnel costs as well as increased costs associated with the filing of our NDA for INVELTYS. Total general and administrative expenses for the fourth quarter of 2017 were $5.3 million, compared to $1.3 million for the fourth quarter of 2016.

Total general and administrative expenses for the full year 2017 were $10.9 million, compared to $7.6 million for the same period in 2016. The increase in G&A expenses is primarily attributable to an increase in personnel costs and professional fees associated with operating as a public company and costs incurred in preparing to establish a commercial review. Our operating loss for the quarter ended December 31, 2017, was $11.1 million, compared to $8.2 million for the quarter ended December 31, 2016. The operating loss for the full year 2017 was $39.9 million, compared to $32.7 million for the full year 2016.

Our net loss was $11.3 million, or $0.46 per share for the quarter December 31, 2017, compared to a net loss of $8.4 million, or $7.11 for the same period in 2016. Our net loss for the full year ended December 31, 2017, was $42.2 million, or $6.11 per share, compared to $33.2 million, or $28.07 per share for the same period in 2016. The decrease in our net loss on a per-share basis from the periods discussed in 2016 compared to those same periods in 2017 is due to an increase in our weighted average number of shares outstanding resulting from a conversion of our preferred stock into shares of common stock as well as common stock issued in connection with our initial public offering in July of 2017. I will now turn the call over to our chief medical officer, Dr.

Kim Brazzell, for an update on our dry eye disease program. Kim?

Kim Brazzell -- Chief Medical Officer

Thank you, Mary, and good morning, everyone. In January, we announced the top-line results from our two Phase III clinical trials evaluating the safety and efficacy of our dry eye disease product candidate, KPI-121 0.25%, versus placebo in patients with dry eye disease. We refer to these trials as STRIDE 1 and STRIDE 2. As previously announced, we achieved statistical significance for the prespecified primary sign endpoint of conjunctival hyperemia at Day 15 in both trials.

We achieved statistical significance for the predefined primary symptom endpoint of ocular discomfort severity at Day 15 in STRIDE 1 with the trend toward a treatment effect in STRIDE 2. We also achieved statistical significance for a second prespecified primary endpoint of ocular discomfort severity at Day 15 in patients with a more severe baseline discomfort in STRIDE 1 with a strong trend toward a treatment effect in STRIDE 2 as a prespecified secondary endpoint. Positive treatment effects were also observed for ocular discomfort severity in the ITT population at Day 8, a key prespecified secondary endpoint in both trials with p-values of 0.0011 and 0.0408 in STRIDE 1 and STRIDE 2, respectively. Since then we've been conducting additional analysis on a post hoc basis of these results, some of which we shared this morning in our press release.

One key analysis shown on Slide 6 was evaluation of the Phase II ocular discomfort data using the same statistical analysis as used to test the primary symptom endpoints in the two Phase III trials. Using this analysis, we observed a treatment effect for ocular discomfort at Day 15 with similar magnitude as was observed in STRIDE 1, a 5.27-millimeter treatment difference compared to 5.44 and achieved a p-value of 0.0489. The similar effects of Phase II in STRIDE 1 are also illustrated in the ocular discomfort daily data for the two trials, which shows -- which both show separation between KPI-121 in vehicle within one to two days of initiation of treatment that continued over the remaining days of evaluation. We performed an analysis of the pooled data from the ITT population from STRIDE 1 and STRIDE 2, which resulted in an observed positive treatment effect for ocular discomfort at Day 15 with a p-value of less than 0.0001.

The pooled results in two exploratory analyses in subgroups that were defined by geographic regions of east and west achieved p-value values of 0.0071 and 0.0021, respectively, and north and south, which achieved p-values of 0.0002 and 0.0176, respectively. As previously noted in STRIDE 1 and STRIDE 2, we achieved the p-value of 0.0011 and 0.0408, respectively, for ocular discomfort at Day 8, which was a key prespecified secondary endpoint. We now also examine ocular discomfort results for days 8 through 14 in STRIDE 1 and STRIDE 2. In STRIDE 1, we observed positive treatment effect with p-values less than 0.002 at all time points between Day 8 and 14.

In STRIDE 1 -- in STRIDE 2, we observed p-values of less than 0.0506 of the seven days in that time period. While we are not certain at what weight regulatory agencies will place on our post hoc analysis, we believe that these analyses provide important information regarding KPI-121 0.25%. I will now turn the call over to our CEO, Mark Iwicki.

Mark Iwicki -- Chief Executive Officer

Thanks, Kim. We continue to be really encouraged by the preponderance of results from our Phase II and two Phase III trials of KPI-121 0.25% in dry eye disease. We have achieved statistical significance for the primary sign endpoint in Phase II, STRIDE 1 and STRIDE 2. We achieved statistical significance for the primary symptom endpoint of ocular discomfort in STRIDE 1 with a positive trend observed in STRIDE 2.

As Kim noted, applying the Phase III statistical analysis plan to the Phase II study at Day 15 yields a p-value less than 0.05. Applying the same statistical analysis method to days 8 to 14 yields p-values of less than 0.0002 at all time points in STRIDE 1 and a p-value of less than 0.05 for six of the seven time points in STRIDE 2. And pooling the ITT populations from STRIDE 1 and STRIDE 2 results in an observed robust positive treatment effect for ocular discomfort at Day 15 with a p-value less than 0.0001. When we look at the totality of our dry eye program, which includes promising efficacy and safety results and the opportunity to fill a large unmet need for dry eye patients suffering from episodic flares, we believe we have the potential for a product that can make a significant impact for patients.

And we really look forward to discussing this with the FDA. That concludes our prepared remarks for today. Operator, we're ready to take any questions.

Questions and Answers:

Operator

Thank you. [Operator instructions] And our first question comes from Chris Schott of J.P.Morgan. Your line is now open.

Chris Schott -- J.P.Morgan -- Managing Director

Great. Thanks very much for the for the questions. Maybe first question, just can you remind us here on the differences in the statistical plan that you used in Phase II for discomfort versus Phase III? Just trying to understand, using -- it looks like you've got a better outcome here with using the Phase III statistical plan. Can you just help us bridge between the two, the differences?

Kim Brazzell -- Chief Medical Officer

Sure. In the Phase II trial, the prespecified analysis was based on the study visit, so it was defined as three days prior to the Day 15 visit, which by protocol could be Day 15, plus or minus one day. And in reality, it was often beyond that range. In the Phase III assessment, as we went into Phase III, we defined it as the three-day mean of days 12, 13, 14, strictly in that way.

And so this was the primary difference in the two and led to a slight difference in the p-value, which got us below 0.05.

Chris Schott -- J.P.Morgan -- Managing Director

OK, great. Second question was just on the -- as you've analyzed the data and dug through this a little bit more, any differences at all between the population in STRIDE 1 versus STRIDE 2 that could explain the difference in outcome. It seems like directionally everything is obviously -- it seems you're going in a very positive way. But just -- you did get a different outcome between the two studies.

Is there anything you've learned from digging through the data that gives any more color on that?

Kim Brazzell -- Chief Medical Officer

Yes, Chris. We're continuing to evaluate that and really haven't been prepared to make an update on that at this point. But hopefully, we'll be able to in the future.

Chris Schott -- J.P.Morgan -- Managing Director

Great. And then maybe just a final question here, just in helping just to set expectations. When you look at this additional analyses from STRIDE 1 and 2 and the Phase III data, do you believe you'll need a third study to get approval in dry eye? Or do you think you have enough data here to get approval?

Mark Iwicki -- Chief Executive Officer

Yes, it's a great question, Chris. And I think we are continuing to plan for all of the different options. But we're certainly encouraged that when we ran these additional analyses that we've not only been able to use the Phrase III statistical analysis plan to yield that strong p-value for Phase II in ocular discomfort, but the vast majority of the additional analyses we've run continue to support that the preponderance of data really shows a strong treatment effect for ocular discomfort. And just maybe a quick reminder that we did hit hyperemia in all three of these significant clinical trials, Phase II, STRIDE 1 and STRIDE 2.

So we intend to meet with the FDA. And then at some point after that meeting, we'll be able to come back and provide an update. But we are certainly encouraged that we've been able to run these additional cuts of the data, which are very often done when people are preparing for their NDAs. And we think we have really a strong and compelling set of data to be able to discuss with the FDA.

Chris Schott -- J.P.Morgan -- Managing Director

[Inaudible] Great. Thanks so much.

Mark Iwicki -- Chief Executive Officer

Thank you.

Operator

Thank you. [Operator instructions] And our next question comes from David Maris of Wells Fargo. Your line is now open.

Katie Kerfoot -- Wells Fargo Securities -- Analyst

Hi. This is Katie Kerfoot on for David. Can you share a little more about the timeline to your meeting with the FDA? Is there more analysis that you intend to do? And when do you expect to request that meeting, how long it typically takes to have a meeting actually scheduled? So when we should expect for you to actually have met with the FDA is my first question.

Mark Iwicki -- Chief Executive Officer

Thanks for the question. All that we are commenting on right now is that we do expect the meeting to be in the second quarter. We don't have any additional information to share at this time about that. But we will certainly provide an update to everyone sometime after we're able to have that meeting and potentially get minutes and reflect on our plans moving forward.

Katie Kerfoot -- Wells Fargo Securities -- Analyst

OK, great. And the -- and kind of can you give us any analysis of what the previous cost of the Phase IIIs? Can you remind us how long they took to run and what that cost was for each STRIDE 1 and STRIDE 2 and whether or not to expect, if you did have to run another study, it would be comparable to those? Or what may be a best-case scenario, worst-case scenario would look like for the cost of those trials or a trial?

Mary Reumuth -- Chief Financial Officer

Katie, so I'll just -- this is Mary. I'll just answer about the cost and turn it over to Kim for the rest. So each trial was about $15 million and took about a year.

Kim Brazzell -- Chief Medical Officer

And we expect the cost and the time to be very similar to that for any new trials we might choose to run.

Katie Kerfoot -- Wells Fargo Securities -- Analyst

OK. Thanks very much for taking the question.

Operator

Thank you. I'm showing no further questions in queue. Mr. Iwicki, I'll turn the call back over to you.

Mark Iwicki -- Chief Executive Officer

OK, fantastic. Well, I'd really like to thank everyone for participating and listening to today's conference call. As hopefully you've heard, we believe we have a promising candidate in KPI-121 0.25% for patients with dry eye disease due to its broad mechanism of action, the rapid onset of relief of both signs and symptoms that we see in our clinical program, a favorable tolerability profile, and the potential to be complementary to existing therapies. We also have a strong candidate in INVELTYS and believe that if approved, it will be the first twice-daily ocular corticosteroid indicated for the treatment of postoperative ocular inflammation and pain.

We look forward to providing everyone with another update on our programs in the near future, and thank you for your time this morning.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.

Duration: 20 minutes

Call Participants:

Mary Reumuth -- Chief Financial Officer

Mark Iwicki -- Chief Executive Officer

Kim Brazzell -- Chief Medical Officer

Chris Schott -- J.P.Morgan -- Managing Director

Katie Kerfoot -- Wells Fargo Securities -- Analyst

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