EyePoint Pharmaceuticals, Inc. (NASDAQ:EYPT) Q3 2023 Earnings Call Transcript

EyePoint Pharmaceuticals, Inc. (NASDAQ:EYPT) Q3 2023 Earnings Call Transcript November 1, 2023

EyePoint Pharmaceuticals, Inc. beats earnings expectations. Reported EPS is $-0.33, expectations were $-0.62.

Operator: Good morning. My name is Leeway and I will be your conference operator today. At this time, I would like to welcome everyone to the EyePoint Pharmaceuticals Third Quarter 2023 Financial Results and Recent Corporate Development Conference Call. There will be a question-and-answer session to follow at the completion of the prepared remarks. Please be advised that this call is being recorded at the company’s request. I would now like to turn the call over to George Elston, Executive Vice President and Chief Financial Officer of EyePoint Pharmaceuticals. Please go ahead.

George Elston: Thank you, and thank you all for joining us on today’s conference call to discuss EyePoint Pharmaceuticals’ third quarter 2023 financial results and recent corporate developments. With me today is Dr. Jay Duker, President and Chief Executive Officer. Jay will begin with a review of recent corporate updates and discuss the ongoing Phase 2 clinical trials for EYP-1901. I will close with commentary on our second quarter 2023 financial results and we will then open the call for your questions. Earlier this morning, we issued a press release detailing our financial results and recent operational developments. A copy of the release can be found in the Investor Relations tab on the corporate website, www.eyepointpharma.com.

A medical scientist holding up a test tube, illustrating biopharmaceutical research.

Before we begin our formal comments, I’ll remind you that various remarks we will make today constitute forward-looking statements for the purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. These include statements about our future expectations, clinical developments and regulatory matters and timelines, the potential success of our products and product candidates, financial projections, and our plans and prospects. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of our most recent annual report on Form 10-K, which is on file with the SEC and in other filings that we may make with the SEC in the future.

Any forward-looking statements represent our views as of today only. While we may elect to update those forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views change. Therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to today. I’ll now turn the call over to Dr. Jay Duker, President, and Chief Executive Officer of EyePoint Pharmaceuticals.

Jay Duker: Thank you, George. Good morning, everyone. And thank you for joining us to discuss EyePoint’s continued execution toward our milestones as we work to bring first-in-class therapeutics and delivery technologies to patients suffering from serious retinal diseases. In the third quarter, we both advanced and expanded our product pipeline with the announcement of positive masked safety data in our ongoing DAVIO 2 and PAVIA Phase 2 clinical trials for our lead product candidate EYP-1901, which is the small molecule of vorolanib and our proprietary bio-erodible Durasert E technology, as well as the unveiling of a new preclinical program, EYP-2301. EYP-2301 delivers a promising TIE-2 activator razuprotafib, formerly known as AKB 9778 formulated into Durasert E to potentially improve outcomes in wet age related macular degeneration, or wet AMD and diabetic eye disease.

It’s an exciting time that EyePoint, as our EYP-1901. Clinical trials approach key data events with top-line Phase 2 DAVIO 2 trial results anticipated in early December, and PAVIA results in Q2 of next year. And as we plan to initiate a third Phase 2 trial and diabetic macular edema or DME in Q1 of 2024. I’ll now review our recent program and corporate updates and give an overview of upcoming catalysts. Turning to our lead program, EYP-1901 is being advanced as a potentially paradigm shifting treatment for patients suffering from VEGF-mediated retinal diseases. EYP-1901 is delivered with a single intravitreal injection in the physician’s office, similar to the current FDA-approved anti-VEGF biologic treatments. EYP-1901 is immediately bioavailable, featuring an initial burst of drug followed by near constant zero order kinetic release for approximately nine months.

EYP-1901 delivers vorolanib, a selective and patent protected tyrosine kinase inhibitor formulated in a solid insert using our proprietary sustained release bio-erodible Durasert E technology. Vorolanib brings a new mechanistic approach to the treatment of VEGF mediated retinal diseases by acting as a pan-VEGF receptor blocker, blocking all VEGF isoforms. We expect EYP-1901, with its new MOA and sustained drug delivery for up to nine months to meaningfully reduce treatment burden in the majority of wet AMD patients, while keeping vision and retinal anatomy stable. Vorolanib features reduced off target binding and a clinically relevant doses does not inhibit Type 2 a critical pathway associated with vascular stability, which may result in improved efficacy.

In a rodent model of retinal detachment, vorolanib demonstrated neuro-protection and because it blocks PDGF may also have anti-fibrotic benefits. We were pleased to present preclinical and clinical data and multiple medical meetings that underscore the promising profile of EYP-1901. One highlight was at last month’s Retina Society meeting, where a comparison of the anti-angiogenic profile of three TKIs, vorolanib, axitinib and sunitinib validated vorolanib as a pan-VEGF receptor inhibitor that effectively blocks the critical pathways of pathologic angiogenesis. Importantly, the data show that for vorolanib is differentiated from the other TKIs tested in retinal disease. Unlike sunitinib, vorolanib does not bind the melanin, and unlike axitinib, varolanib is not expected to have a physiologic impact on normal TIE-2 function.

As a reminder, the fully enrolled DAVIO 2 trial was evaluating EYP-1901 in 160 subjects with previously treated wet AMD as a maintenance therapy with a goal to maintain stable vision and retinal anatomy for the majority of wet AMD patients for six months or longer following a single injection of EYP-1901 This could represent a significant improvement compared to the current anti-VEGF treatments that are dosed on average every two months in the United States under a treatment extend protocol. This lifetime or frequent treatment represents a tremendous burden for patients, physicians, and the healthcare system in general. EYP-1901 has the potential to change this treatment paradigm into a treat to maintain model by providing sustained delivery of vorolanib for approximately nine months following induction treatment with a large molecule anti VEGF ligand walker.

This may allow patients and practitioners the flexibility to reduce the number of visits without sacrificing visual outcomes. The subjects in the DAVIO 2 trial were randomized to two treatment arms, approximately 2 milligrams or approximately 3 milligrams of EYP-1901 or on label aflibercept as a control. All subjects as a trial received three loading doses of aflibercept on day one, month one and month two, followed by dosing and EYP-1901 or a sham injection 30 minutes after the last loading dose. The FDA approval pathway for this program, and the primary endpoint for DAVIO 2 is non-inferiority in the change of best corrected visual acuity, or BCVA for each of the 1901 arms versus the aflibercept control arm. The lower limit of non-inferiority margin is defined as minus 4.5 letter loss by the FDA.

For perspective, patients do not generally notice a change in vision until they lose five or more letters, which is the equivalent of one line on an eye chart. I’d like to share our perspective in terms of targeted outcomes for the non-inferiority BCVA as they are both numerical and statistical considerations for this outcome. First, a very successful outcome in DAVIO 2 would be to mirror the Phase 2 DAVIO BCVA results that showed an average at 2.5 letter loss six months after EVP-1901 was injected. Recall that DAVIO was an all-comers open-label non-randomized Phase 1 trial. Based on learnings from that Phase 1 trial we modified inclusion and exclusion criteria for the DAVIO 2 trial in an effort to exclude eyes that were not responding to standard of care therapy.

We presented masked patient demographic data last quarter that reflects the fact that we enrolled a more controlled patient population in DAVIO 2 than in the Phase 1 trial. Generally, an outcome of minus three letters or better would be a very strong numerical outcome and possibly statistically non-inferior, even in this relatively small trial. If the EYP-1901 arms match or better, the minus 1.4 letters difference versus the 2 milligram aflibercept control, which was what was seen in the 16-week 8 milligram EYLEA arm in the PULSAR trial. This would represent an outstanding outcome from a single injection of EYP-1901. In addition to stable BCVA, it is critical that the EYP-1901 continues to show a favorable safety profile, consistent with the interim masked safety update through October 1, 2023, across all of the EYP-1901 clinical trials.

As of October 1, approximately 170 patients have received EYP-1901 with a minimum of four months follow up post injection from the ongoing Phase 2 PAVIA and DAVIO 2 clinical trials and the completed DAVIO Phase 1 trial with no reported drug related-ocular SAEs and no record of drug related systemic SAEs. This continues to give us confidence in the results of this crucial endpoint. Although change in best corrected visual acuity as the primary endpoint reduction and treatment burden will also be a critical secondary outcome to consider giving the unmet need in this patient population for more durable therapies. For a clinically meaningful outcome, we believe that one or both EYP-1901 arms need to result in a reduction in treatment burden of a minimum of 50% or better for the six months following EYP-1901 injection at we get.

In addition, we also believe that 50% or greater of the EYP-1901 treatment advise [ph] should be supplement free up to the week 32 visit along with a relatively stable anatomy as measured by OCT. Based on our market research and KOL interactions these endpoints will be meaningful to retina specialists who treat wet AMD patients. We plan to host a virtual call with renowned retinal specialists Dr. David Boyer and Dr. David Lally on November 9 at 8 a.m. Eastern time to discuss their perspectives on the current treatment landscape and the DAVIO 2 outcome considerations that I just reviewed. We hope that you will all join us for this informative presentation and Q&A. And you can and find the link to that call in the investor tab of our website.

Looking ahead to the potential Phase 3 pivotal trials for EYP-1901 as maintenance therapy and wet AMD, our current plan is to initiate the first trial by the fourth quarter of 2024. This initial trial will be largely in the U.S. and Canada. We hope to initiate a second pivotal trial several months later, the second Phase 3 trial will be largely outside of the U.S. The Phase 2 DAVIO 2 trial with EYP-1901 was designed to mirror the anticipated design of the phase three trials, based on our Type C meeting with the FDA and other interactions with the agency. The key differences are that the Phase 3 trials will feature re-dosing of EYP-1901 every six months, and the primary efficacy endpoint will be non-inferior change in visual acuity to approximately one year instead of eight months as it is in DAVIO 2.

We expect to share more details about this trial in the coming months. Now let me turn to our second Indication NPDR. In June, we reported that enrollment of the Phase 2 of the clinical trial was complete. PAVIA is a randomized controlled Phase 2 trial evaluating EYP-1901 is a potential nine months treatment for moderate to severe NPDR. Similar to the DAVIO 2 trial, our PAVIA trials saw significant investigator and patient interest during enrollment. The trial enrolled 77 patients exceeding the 60 patient target. Patients who were randomly assigned to one of two doses of EYP-1901 approximately 2 milligrams or approximately 3 milligrams or to the control group that received a sham injection. As in the wet AMD trials, EYP-1901 is delivered with a single intravitreal injection in the physician’s office.

As a reminder, NPDR is a very common retinal disease that affects almost one third of diabetic adults over the age of 40 and is projected to impact over 14 million Americans by 2050. In NPDR, vessels are weakened, potentially leading to swelling of the macula, which is called diabetic macular edema or DME, and may eventually result in abnormal blood vessel growth, which is called proliferative diabetic retinopathy, or PDR. Both DME and NPDR could ultimately result in severe visual loss. It’s important to note that there remains a great unmet need for a safe, efficacious and convenient treatment for NPDR that proactively reduces the risk of progressing to a site threatening complication over the long term. Approximately 90% of patients with NPDR currently received no course of therapy, apart from observation by their eye doctor until their disease progresses to DME and or PDR.

EYP-1901 in our Phase 2 PAVIA trial could potentially reduce the risk of progressing to these complications with a less intrusive treatment protocol. Recently, we reported an interim analysis of masked safety data from the Phase 2 PAVIA clinical trial and NPDR which showed that as of October 1, 2023, EYP-1901 was well tolerated with no reported drug related ocular or drug related systemic SAEs demonstrating EYP-1901’s excellent safety profile in NPDR for the first time. Top-line data from the PAVIA trial remains on track for the second quarter of 2024. As mentioned earlier, we plan to initiate a Phase 2 trial evaluating EYP-1901 in DME in the first quarter of 2024, for which we are calling the VERONA trial. We will share details of that trial at a future date.

The goal of the VERONA trial was to gain experience with the EYO-1901 in this potentially large indication. In September, we disclosed the new preclinical program called EYP-2301. EYP-2301 is TIE-2 agonist razuprotafib, formerly known as AKB 9778, which we have formulated to work in Durasert E. This has the potential to provide intravitreal sustained delivery over six months or longer to improve the treatment of wet AMD and diabetic eye disease. Previous preclinical and clinical studies show that razuprotafib delivered subcutaneously demonstrated proof of concept in diabetic eye disease and we believe that if delivering EYP-2301 intravitreally has the potential to offer new site saving treatment for patients with severe retinal disease, either alone or in combination with anti-VEGFs. Finally, we were delighted to announce that EyePoint expanded its board of directors with the appointment of Stuart Duty, a seasoned biopharmaceutical financial executive who brings more than 25 years of experience to the role.

We also strengthen our executive leadership team with a promotion of our CFO, George Elston to the additional role of Executive Vice President. George has wealth of experience, financial acumen and strategic guidance has been a tremendous asset to our EyePoint team. On behalf of the entire leadership team, we welcome Stuart and congratulate George. And we are grateful for their valuable leadership at EyePoint as we continue to build value for our shareholders during this active time in the company’s growth. I’d like to thank the entire EyePoint team for an incredibly productive quarter. And I will now turn the call over to George, to review the financials, George?

George Elston: Thank you, Jay. As the financial results for the three months ended September 30 2023, were included in the press release issued this morning, my comments today will be focused on a high level review for the quarter. For the third quarter ended September 30, 2023, total net revenue was $15.2 million, compared to $10 million for the quarter ended September 30, 2022. Net product revenue for the third quarter was $0.8 million, compared to net product revenues for the third quarter ended September 30, 2022 of $9.7 million. Consistent with the exit from the commercial business, the decline in revenue resulted from the sale of the YUTIQ franchise in May 2023, along with the discontinuation of marketing activity for the DEXYCU franchise this year, due to the loss of pass through reimbursement by CMS effective 1/1/23.

Net revenue from royalties and collaborations for the third quarter ended September 30, 2023, totaled $14.4 million compared $0.3 million in the corresponding period in 2022. The increase was primarily due to a recognition of deferred revenue from the sale of YUTIQ, which will be recognized over a two year period, which began in Q2 of this year. Operating expenses for the third quarter ended September 30, 2023, totaled $29.6 million versus $28.4 million in the prior year period. This increase was primarily driven by higher R&D spending on EYP-1901 clinical trials, partially offset by lower sales and marketing expense. Non-operating expense net total of $1.8 million and net loss was $12.6 million or $0.33 per share, compared to a net loss of $18.4 million or $0.49 per share in the prior year period.

Cash and investments at September 30, 2023 totaled $136 million, compared to $144.6 million at December 31, 2022. We expect the cash cash equivalents and investments on September 30, 2023 will enable us to fund our current and planned operations into 2025. In conclusion, we are pleased with EyePoint’s progress in the third quarter and year-to-date and are well capitalized to advance our product pipeline to key value inflection points. I will now turn the call back over to Jay for closing remarks.

Jay Duker: Thank you, George. We believe EYP-1901 is a potentially paradigm shifting treatment for patients suffering from serious retinal diseases, providing unique benefits that may include delivery of a vorolanib consistently over approximately nine months, a new mechanism of action to treat retinal disease beyond anti-VEGF ligand blockade the potential for neuro-protection and anti-fibrosis and a proven delivery technology with a positive safety profile. I will close by recapping key upcoming catalysts including the top-line data from our Phase 2 DAVIO 2 clinical trial anticipated in early December, the dosing of the first patient and the Phase 2 vorolanib clinical trial of EYP-1901 and DME in the first quarter of next year, and top-line data released from our Phase 2 PAVIA clinical trial in the second quarter of 2024.

This remains an incredibly exciting time for EyePoint as we are well positioned to execute on our upcoming milestones and continue to transform the treatment landscape with innovative long-term solutions to improve both the vision and the lives of patients with serious retinal diseases. Thank you all very much for listening this morning. I will now turn it over to the operator for questions.

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Q&A Session

Operator: Thank you so much. Presenters, our first question comes from the line of Tyler Van Buren of TD Cowen. Your line is now open.

Tyler Van Buren : Good morning. Congrats on the progress thanks very much for the call. I have a couple of questions for you. First one is, I appreciate how transparent you guys have been with respect to your BCVA outcome scenario ranges for the DAVIO 2 trial ahead of the data. But were these constructed in accordance with KOLs? And can you elaborate on what the KOL feedback have been regarding what they need to see from the trial, perhaps a preview of sorts of the upcoming KOL event? And then the second question is, upon positive data, can you talk about how quickly you would be able to start the Phase 3 program? And is it possible to get the top-line data in accelerated fashion? Or should we think of it being a more traditional wet MD Phase 3 program timeline?

Jay Duker: Thanks, Tyler. Appreciate the questions and your interest. First of all, with respect to the BCVA ranges, so there’s really kind of three ways to look at this. And the first way is what is the FDA want, and that’s pretty clear. Not the non-inferiority margin, it’s got to be minus 4.5 letters, you can’t cross it with your competence intervals. And depending on your — and your study and your standard deviation, you could come pretty close to 4.5, and get a result. But the second part of what you asked is, what the KOLs want. And interestingly, when you ask them that I’m sure you have, they’re generally fine with a good efficacy profile, a good safety profile, as long as the numerical change is in the range of three to four letters.

It’s interesting that I think that they believe in general that that type of change in vision is not noticeable to the patient. On the other hand, we, as a company look at it as a combination of both of those. And so that kind of minus three 3 or better, I think, based on what we anticipate the standard deviation of the trial might be in a pivotal trial would likely be non-inferior, and meet the KOLs expectations. Of course, we don’t know what the results are yet, we’ll know in approximately a month, but there’s reasons to believe that we could do considerably better than that. Second question was on the start of the Phase 3 with good to great data. We believe we can start the first Phase 3 trial in the second half of next year, it may be closer to the fourth quarter, we don’t know we haven’t really zeroed in on that.

Suffice it to say the company has been really focused on Phase 3 prep for basically the last nine months. And there’s a lot to do to get ready. And we continue to be on track for our goal to start in the second half of next year. From an accelerated perspective, I think the trouble with unmasking early is you penalize yourself with a higher end. And, cost and speed is critical here. And if our statistics suggest we can do the Phase 3s with relatively low ends, I think it’s best to get them done right and get them done fast as opposed to, be penalized for an early look. Hope that was sufficient. Anything else?

Tyler Van Buren : Nope, that’s clear. Thank you very much.

Operator: Thank you so much. Your next question comes from the line of Yatin Suneja of Guggenheim. Your line is now open.

Yatin Suneja : Thank you for taking my question. So Jay, you just mentioned that you need to focus on obviously delivering this data but also in the Phase 3. So my question to you is and it also has to do with the competitors, as how does the EYLEA induction relate to the mechanism of TKIs in wet AMD? And then can you maybe just talk about why you think it is necessary for patient to do that induction when your competitors are doing a superiority study with just a single dose aflibercept as a comparison, I’d love to get your thoughts there.

Jay Duker: Thanks, Yatin. Those are two great questions. Let me start with the induction. First of all, from a scientific perspective, it’s unclear if the induction offers anything to the patients treated with the EYP-1901. We have pretty good preclinical data that shows that our drug is bioavailable in a cord of animals [ph] within minutes of injection and reaches therapeutic levels and hours. On the other hand, we’ve set out from the beginning to use EYP-1901 as a maintenance therapy for previously treated wet AMD patients. The decision to do the reinduction is something that came up with our discussions with the FDA around the structure of the Phase 3 pivotal trials. When we had our Type C meeting the FDA was certainly agreeable to us using EYLEA as our control in the Phase 3.

And when we discussed on label EYELA, the FDA’s response was, yes, after you reinduce the patients, you can go to every other month on label EYLEA. And the rationale was to patients you enroll in that trial may be undertreated. And therefore, before you allow them to go to every other month, you’ve got to reinduce them, made sense. And then we had to re-engage the FDA and said, well, if we’re going to make an assumption that some of these sites are undertreated in the real world, which we think is probably true, we’d like to reintroduce all the patients in the study. And they were agreeable to that. What that did, however, is you may be aware, you can have a nine-month efficacy endpoint in a wet AMD study, but our nine months doesn’t start ticking until after the reupload of EYLEA.

So what it was, the trade-off here was we needed to do in our pivotal trial, the efficacy endpoint of approximately one year, we thought that was a fair trade-off, to be able to level the plain field and make sure that we weren’t allowing relatively undertreated patients to flood the EYP-1901 arms. So it really isn’t a scientific reason, I’d say it’s a regulatory reason and a de-risking reason that we’re reinducing. So that I think gets into the second question, why induction. Again, I think I’ve covered that. Our decision to do this, I think more typical non-inferiority, Phase 3 is again — comes out of our discussions with the FDA and a derisking. We think that this is the fastest and least risky pathway to FDA approval.

George Elston: I remind you that remember, we had a Type C meeting with FDA laying out the Phase 2 plans, which would inform Phase 3. And so that’s also a big driver of focus going into the Phase 3s next year.

Yatin Suneja : Got it. Very helpful. Just one more question, if I may. Could you talk about the dose response? There are two doses in this study. So just curious, what would you expect? Should we expect any dose response? And then, if, let’s say, if there is no dose response, just curious, like how you will decide on the dose to take forward? Thank you.

Jay Duker: Yeah, that’s another great question, Yatin. And we really don’t know if there will be a dose response, because it’s certainly possible that our 2-milligram dose will work efficiently to shut down the receptor for up to nine months. And therefore any additional drug may not give you additional benefit. So I would say we’re, as a company a little bit agnostic to that. I mean, it’s nice to show a dose response. And there’s some validation to that, understandably. On the other hand, if both our 2-milligram dose and our 3-milligram dose work great, and they’re essentially the same, we would opt to go with the 2-milligram dose approximately in our pivotal trial against a lower dose, most likely around 1-milligrams. What that will do of course, is enable us if successful, to have fewer inserts in the eye, and lower the COGS.