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Operator
Greetings and welcome to the INovia fourth quarter and full year 2022 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Eric Webner, with investor relations. Thank you, Eric. You may begin.
Eric Webner
Thank you, and good afternoon, everyone, and welcome to Inovia's fourth quarter and full year 2022 earnings conference call and audio webcast. With me today are Inovia's Chief Executive Officer, Michael Rowe, Chief Financial Officer, John Gandolfo, and Chief Operating Officer, Bren Kern. This afternoon, INOVIA issued a press release announcing financial results for the three and 12 months ended December 31st, 2022. We encourage everyone to read today's press release as well as INOVIA's annual report on Form 10-K for the year ended December 31st, 2022, which will be filed with the SEC on March 31st, 2023 tomorrow, and our most recently filed 10-Q. The company's press release and annual report are also available on INOVIA's website at www.inovia.com. In addition, this conference call is being webcast through the company's website and will be archived there for future reference. Please note that on today's call, we will be discussing investigational product candidates which have yet to receive FDA approval. Please also note that certain information discussed on the call today is covered under the safe harbor provisions of the Private Securities Litigation Reform Act. We caution listeners that during the call, Inovia's management will be making forward-looking statements. Actual results could differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company's business. These forward-looking statements are subject to a number of risks, which are described in more detail in our annual report on Form 10-K. This conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, March 30, 2023. INOVIA undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call, except as may be required by applicable securities law. With that said, I'd like to turn the call over to Michael Rowe, Inovia's Chief Executive Officer. Michael?
Michael Rowe
Thank you, Eric, and welcome, everyone, to our fourth quarter and full year 2022 financial results conference call. I will start with an update on our overall strategy and our current development programs, and then Bren Kern, our Chief Operating Officer, will provide an update on our manufacturing and commercial readiness progress. We will then turn things over to John Gandolfo, our CFO, who will review the financials, as well as our partnerships with Bausch & Lomb and Arctic Vision. We will then open a call for your questions. The fourth quarter caps the successful year for Inovia, as we delivered on all of our key milestones. We resubmitted our Mitkambi New Drug Application, or NDA, and its review by FDA is well underway. In fact, earlier this week, I was at our Reno manufacturing facility while the FDA inspection was taking place. We completed the Vision 2 study for our Microline presbyopia program and recently received very encouraging feedback from the FDA, providing a clear path forward for the program. Our timeline for Microline is as we had planned, and we look forward to providing more granularity in the coming weeks. Regarding our manufacturing, we made substantial progress building out our in-house capabilities, which will be key to our longer-term growth initiatives. Subsequent to the end of the quarter, we also participated in the Consumer Electronics Show in Las Vegas with a very innovative booth highlighting our work in digital health that we believe significantly raised awareness of the optogen. And we announced a co-development agreement with Formosa Pharmaceuticals that will open the door to the development of new therapeutics that leverage our technology. But before we talk about our current programs, I'd like to spend a few moments discussing our longer term strategy. As you probably noticed, we recently have been focusing more on the OptiJet technology and its applicability in areas like digital health, glaucoma, and dry eye. We believe that incorporating the OptiJet technology with late stage drugs and chronic disease areas like glaucoma could result in new therapies that can address many of the major challenges with today's conventional eye drop options. The horizontal delivery of the OptiJet, for example, can make it easier for patients to reliably use their medication. Digital technology could help prescribers and healthcare systems understand how drugs are being used and drive prescribing decisions from a position of knowledge rather than guesswork. And the lower dose volumes and ease of use of the OptiJet can help address tolerability issues that can also impact long-term outcomes of drug therapy. With that in mind, we are focusing our future efforts on partnerships with drug developers such as Formosa to bring together the best available combination of drugs in the OptiJet for the benefit of patients, prescribers, and payers. And speaking of combinations, let's talk now about MidCombi. MidCombi is our proprietary combination microdose formulation of tropicamide and phenylephrine for in-office and presurgical pupil dilation. In December, we announced the FDA had accepted our NDA for MidCombie and assigned a Bidufa action date of May 8, 2023. This was a significant achievement for our company, given the additional testing of the OptiJet device requested by FDA, following its reclassification of MidCombie to a drug-device combination product in October 2021. As I previously mentioned, we are now in the midst of the review process, including an inspection of one of our manufacturing facilities, and we remain in close contact with the agency. I would like to take a moment to thank all of the INOVIA employees, as well as the many technical experts who have helped to get us this far, and we are counting the 39 days until May 8th. It is also worth noting that much of the device validation testing that we conducted for the MidCombie NDA may be referenceable in filings for future programs, potentially streamlining those regulatory review processes. Midconvy, if approved, represents a very meaningful milestone for Inovia for several reasons. One, it is poised to be our first commercial product, ultimately transitioning us to a commercial stage and revenue generating company. But perhaps more importantly, it would represent critical validation of our proprietary OptiJet device technology. potentially changing the paradigm in the way that topical eye drugs are developed and delivered. We are leveraging OptiJet not only with our own development pipeline, but also current and potential future strategic partnerships as well. We currently have partnerships with Arctic Vision for the development of mid-combine, microline, and micropine in greater China and South Korea, and Bausch & Lomb for the development of micropine in the U.S. and Canada. And we are actively working on partnerships for chronic ophthalmic diseases such as glaucoma and dry eye. John will provide an update on our current partnerships during his financial overview. Let's now turn to MicroLine, which is a proprietary topical-on-the-band, tylocarpine-based therapeutic candidate that we are developing for temporary improvement in near vision associated with presbyopia. Presbyopia is the age-related hardening of the eye's lens causing blurred near vision. This is an addressable market representing over 18 million people in the United States alone. between the ages of 40 and 55 who otherwise never wore glasses and have the resources for a cash-paid product. In terms of dollars, our proprietary market research suggests this could be nearly a billion-dollar annual market in the U.S. alone. As I previously mentioned, following completion of our Vision 2 trial, we recently received encouraging feedback from the FDA, which outlines a very clear path forward for the program toward an NDA. We can't share much more at the moment other than to say that our development timeline is unchanged, and we plan to provide further updates in the coming weeks as warranted. Microline would clearly be differentiated from other presbyopia eyedrop options. First of all, it has demonstrated compelling safety and tolerability. In both Vision 1 and 2, Microline was found to be very well tolerated, with fewer than 3% of Microline-treated subjects reporting adverse events, all of which were considered mild and transient. This compares very favorably to other pylo-based presbyopia treatments, where 15% or more of study subjects reported some form of headache or browache. Additionally, as a drug-device combination, it may be that Microlign better fits in the business paradigm of optometrists, many of whom also supply glasses and contact lenses for their patients. We are exploring ways in which the device portion of the product could be stocked and stored by eye care practitioners so that they can provide a full service for their patients that can include eyeglasses as well as microline. In summary, we believe the OptiJet represents a key point of differentiation that can set us apart and will resonate with consumers and their doctors as compared to other recently approved topical presbyopia treatments and those to come in the future. Turning to our partnering activities, we were very excited to announce just a few weeks ago a new development collaboration agreement with Taiwan-based Formosa Pharmaceuticals. This agreement seeks to combine our OptiJet with Formosa's unique APNT nanoparticle formulation platform for the potential development of new topical ophthalmic therapeutics that employ the OptiJet device. Formosa's proprietary and innovative APNT platform reduces an active pharmaceutical ingredient's particle size and improves its solubility, thereby allowing more homogenous formulations that may expand the universe of existing and future drugs that could benefit from delivery using the OptiJet. We intend to work together on testing formulations and engaging in discussions with the FDA with the goal of executing a development and commercialization agreement that will see new molecules develop leveraging Formosa's formulation technology in the OptiJet. We believe this agreement with Formosa can serve as a model for future partnerships Add to that end, we are in active discussions with additional parties that may benefit from the OptiJet within their own development programs. Co-development partnerships such as this, in large ophthalmic indications with unmet needs, are a key part of our long-term growth strategy. We have built a significant body of data demonstrating the benefits of OptiJet over conventional eye drops. In January, we added to this by announcing positive results from a research study conducted in collaboration with Dr. Pedram Hamra, Interim Chairman of Ophthalmology at Tufts Medical Center. This study evaluated the gene and protein expression of cytokines and chemokines after treatment with latanoprost and glaucoma medication preserved with BAK administered via OptiJet versus administered via standard eye drops. It is common to use preservatives to support product sterility and prolonged shelf life. Unfortunately, patients treated with BAK preserved glaucoma medications offers suffer inflammatory side effects and develop subsequent ocular surface disease. In this most recent study, human conjunctival cells were used to evaluate three RNA markers that signal inflammatory response in groups treated with lactanoprost plus VAK via the optogen versus standard eye drops. In two out of three cases, cells treated via the optogen had markers decrease. That was statistically similar to preserving a free latatacross delivered via standard eye drops and the control. In these early findings, the OptiJet technology appears better than latatacross plus BAK administered via standard eye drops in reducing inflammatory processes. This is a very important finding, particularly as we look at using the OptiJet in dry eye or glaucoma, where medication is taken over an extended period of time. For the OptiJet, it appears that these harmful and unwanted side effects can be significantly reduced. At this point, I'd like to turn the call over to our Chief Operating Officer, Bren Kern, for a manufacturing update. Bren?
Eric
Thanks, Michael. In anticipation of FDA approval of MCCOMBIE, Inovia has been focused on our production capabilities. We view the ability to build and fill the OptiJet as a key element of our growth strategy going forward, and we have made significant progress in developing world-class capabilities to this end. Recall that in July, we announced that our manufacturing facility in Redwood City, California, became operational and is currently manufacturing clinical supply. That facility is focused on OptiJet manufacturing finishing operations, including drug loading, labeling, and packaging prior to distribution. Our second facility in Reno, Nevada, is progressing as planned, with construction activities currently in process and manufacturing equipment orders and deliveries being finalized. We anticipate this facility being operational this summer. This facility, when complete, will focus on the production of proprietary OptiJet components and the durable portion of the OptiJet dispenser, the base. We, along with many other companies across a very broad range of industries, did experience supply chain delays and challenges due to COVID and believe these global challenges are beginning to ease. We have increased our capabilities through the addition of new hires whose mandate is to scale and strengthen our supply chains. These changes have resulted in significant improvement in the OptiJet's availability for both our internal development programs as well as for our partners, the benefits of which are already being realized. This is another advantage of having proprietary manufacturing capabilities. It gives us a level of control over the processes so that we can ensure the quality and consistency that our current and future partners expect for us. Collectively, our new state-of-the-art facilities and increased capabilities of our suppliers provide us with the capacity and operational redundancy to reliably produce products, not only for commercial supply, if and when the products are approved, but also for our internal development programs, clinical trials, partnerships, and co-development agreements. To further support our development programs, Inovia is pleased to announce the acceptance of an offer by Enrico Brambilla as Inovia's Vice President of Product Research and Development. Enrico holds a Master's of Science in Mechanical Engineering from the University of Polytechnico in Milan, and will be joining Inovio the second week of April. The majority of Enrico's 20-year career has been focused on the development of medical device products. Prior to joining Inovio, Enrico served as a vice president at Equinox Ophthalmic and held technical leadership roles at Brief Technologies, ResMed, and Electrolux home appliances. In his new role, Enrico will be leading our engineering team, supporting our existing product lines, as well as leading the development of new innovations. I'm excited to have Enrico in this role and look forward to the numerous contributions he will provide to Inovia. I would now like to turn the call over to our Chief Financial Officer, John Gandolfo, to provide a financial update. John?
Michael
Thank you, Brian. With respect to our 2022 E&L results, we recorded no license revenue during the fourth quarter of full year of 2022. By comparison, we recorded license revenue of $10 million and $14 million for the fourth quarter and full year 2021, respectively from our partnerships with Bausch and Arctic Vision. For the fourth quarter of 2022, we reported net loss of approximately $6.1 million for 17 cents per share on approximately 36.7 million weighted average shares outstanding, And this compares to a net income of approximately $3 million or 11 cents per share for the fourth quarter of 2021 on approximately 27.9 million weighted average shares outstanding. For the full year 2022, we reported net loss of approximately $28 million or 83 cents per share on approximately 33.6 million weighted average shares outstanding. And this compares to a net loss of approximately $12.8 million or 49 cents per share for the full year of 2021, on approximately 26.3 million weighted average shares outstanding. Research and development expenses totaled approximately $2.2 million in the fourth quarter of 2022, and this compares to approximately $3.3 million for the same period of 2021, a decrease of 33%. For the full year of 2022, research and development expenses decreased approximately 10% to $13.4 million versus $14.9 million for the full year 2021. The full year decrease was driven primarily by lower direct clinical and non-clinical expenses, as well as deferral of costs related to the future delivery of clinical supply to our licensed partners. For the fourth quarter of 2022, General administrative expenses were approximately $3.2 million compared with approximately $3.7 million for the fourth quarter of 2021, a decrease of 13.3%. For the full year 2022, G&A expenses were $13.5 million, an increase of 28% as compared to $10.6 million for the full year 2021. The full year increase was driven by staff additions, higher professional fees, and an increase in stock-based compensation. Total operating expenses for the fourth quarter of 2022 were approximately $5.4 million, compared to total operating expenses of $6.9 million for the same period in 2021. This represents a decrease of approximately 22.7%. Total operating expenses for the full year 2022 were $26.9 million, representing an increase of 6% versus $25.4 million for the full year 2021. As of December 31st, 2022, the company's cash balance was approximately $22.9 million in all unrestricted cash. We believe our current cash balance as of today is sufficient to fund the company's operations as currently planned, well into the second quarter of 2024. Before we open the call to questions, I will conclude with a brief update on our licensing programs with Bausch & Lomb for micropene in the U.S. and Canada and Arctic Vision for all three of our products in China and South Korea. Micropene is a proprietary atropine formulation for the reduction of pediatric myopia progression. It has been shown in clinical studies to slow myopia progression by 60% or more. There are currently no FDA-approved drug therapies for this indication, and if left untreated, this can result in retinal detachment, myopic retinopathy, as well as vision loss. Bifocal, multifocal glasses, or contact lenses are typically prescribed to myopic children. Recall that as part of our agreement with Bausch & Lomb, oversight and costs related to the ongoing Phase III chaperone micropene clinical trial were transferred to our partner. Enrollment is progressing as planned. Our agreement with Arctic Vision covers Greater China and South Korea and covers Micropene, Microline, and MidCombi. So Arctic Vision licenses all three of our current programs. Micropene for pediatric myopia in particular represents a significant opportunity in China. The Ministry of Education there estimates that nearly 53% of all Chinese children suffered from myopia in 2020. Our agreement with Arctic Provision provides for sales royalties in addition to development milestones, so if and when approved, micropene could be a significant source of non-diluted funds for our company over the long term. And finally, Arctic Fission continues to enroll patients in its presbyopia study. This marks the first time that a clinical trial has been approved in China to evaluate pharmacologic treatment for presbyopia, so that program is also progressing nicely. To date, our license agreements have generated approximately $16 million in license fees, and we have the potential to earn an additional $60 million in net license and development milestones, as well as reimbursable expenses over the next four years. As noted upon commercialization, if these products are approved, Inovia can also earn significant sales royalties as well. We are also continuing to assess potential pipeline expansion opportunities such as our Formosa agreement, as we believe we can continue to leverage the OptiJet technology to address unmet needs and additional large ophthalmic indications. Pipeline expansion was a significant consideration as we were building our new manufacturing facilities. In conclusion, we continue to be pleased with our performance to date. To summarize our key highlights today, Our NDA for McCombie has been accepted by the FDA, and we have a PDUFA date of May 8th. We are reviewing the feedback that we recently received from FDA on our microline program, and we believe the agency has outlined a clear path forward for the program, and we plan to provide additional updates in the near future. This program is also progressing according to plan. We announced the co-development agreement with Formosa Pharmaceuticals, Our new stately art manufacturing facility in Redwood City, California is operational, and our second facility in Reno is on track to be operational in the summer time frame. We have recruited a new vice president of product research and development, which should help ensure that our technology remains at the forefront of the industry. And our license agreements with Arctic Vision and Bausch & Lomb are progressing well and continue to offer the opportunity for meaningful development and regulatory milestones. as well as line of sight to potential sales royalties, possibly within the next two years. That now concludes our prepared remarks, and we would now like to open up the call to questions.
Brian
Operator?
spk02
Thank you. We will now be conducting a question and answer session.
Operator
If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. If you press star 2, if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
spk02
One moment please while we pull for questions. Thank you.
Operator
Our first question is from Matt Kaplan with Landenberg Salmon. Please proceed with your question.
Matt Kaplan
This is Raymond from Matt. Thanks for taking our questions and congrats on all the progress. I guess just on the Ask.me Convy, you mentioned that there's an ongoing inspection. I was wondering, could you comment potentially on when you think a labeling discussion might start? And I have another question.
Michael Rowe
Yes, hi. The inspection is going on right now as part of the NDA review in our renal facility. If everything goes as expected, labeling discussions usually don't happen until about 10 days before the PDUFA date, so I don't expect that we would hear anything about the label until the very end of April.
Matt Kaplan
Okay, appreciate that, Colin. I guess, and also, I guess, just to follow up on that, but potentially on the commercial preparations. I was wondering, once you get final approval, how long do you think you'll be able to launch after approval?
Michael Rowe
Well, we are going to provide more information about that in the upcoming weeks, especially as we get more clarity on what the label looks like, for example. But our plans now are that we would like to be out there this summer, very early in the third quarter. So that's the current commercial plan.
Matt Kaplan
Okay, thanks. And just one final question on microline. I know you can't talk too much about it, and you got some good feedback, encouraging feedback, and your timeline's preserved. I was wondering, does that give you confidence on how you can move forward on manufacturing? And thanks for asking your question.
Michael Rowe
Yes. Yes, there was – yes, it does give us – we now have a greater clarity on exactly what we need to do, and so we're putting those plans into place, and I look forward – again in the upcoming weeks once we have been in place in sharing more information on that timeline. But everything is positive from what we received back and as expected.
spk09
Okay, thank you. You're welcome.
spk02
There are no further questions at this time. I would like to turn the floor back over to Michael Rowe for closing comments.
Michael Rowe
Okay, thank you very much and that includes today's call. Our goal was to share with you those key events over the last few months that have led us to the potential approval of Midcombi in May. Midcombi's approval is important not just because it's our first commercial product, but because it demonstrates that our unique OptiJet technology, which underpins all of our products, can meet the high standards of the FDA. We look forward to making significant progress with MicroLine as we validate our manufacturing process for the in-home device. and continue to engage in meaningful discussions with potential partners to leverage that advice for glaucoma and dry eyes. And with that, I thank all of you.
Brian
We will talk again in May for our next quarterly update. Thank you.
spk02
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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