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spk08: Good morning and welcome to the COLA Pharmaceuticals conference call to review its third quarter financial results in the acquisition of Combangio. Please note that this live presentation that was designed to accompany this conference call is available on COLA's website, colarx.com, as well as through the webcast player. At this time, all participants are in a listen-only mode. Following management's prepared remarks, a Q&A session will be held. As a reminder, this call is being recorded. I would now like to turn the call over to Jill Steyer, Executive Director, Investor Relations and Corporate Communications for Cala Pharmaceuticals. Please proceed.
spk02: Jill Steyer Thank you, Operator, and thank you all for participating in today's call. Earlier today, we issued two press releases, one announcing our third quarter financial results and recent business highlights, and the other announcing our acquisition of Cambagio and its lead asset, CNB 012, which we have renamed KPI 012. a novel cell-free secretome therapy currently in clinical development for persistent cornelial epithelial defect. Both releases, along with the slides we will be reviewing on today's call, are available on the investor section of Collar's website at www.collarrx.com. We will begin the call with prepared remarks by Mark Iwiki, our Chairman, President, and Chief Executive Officer, Kim Brazel, our Chief Medical Officer, Todd Bazemore, our Chief Operating Officer, and Mary Remus, Chief Financial Officer. Then we will open the call up for questions. During this call, we will be referring to non-GAAP financial measures which are not prepared in accordance with generally accepted accounting principles. A reconciliation of the non-GAAP financial measures to the most directly Comparable gap measures is available in our press release issued today, which can also be found on our website. On this call, we will make certain comments about CALA's future expectations, plans, and prospects that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements will include statements regarding the development program and market potential of KPI 012 and the benefits of our acquisition of Cambogio, observations associated with our commercialization of ISUBIS and INVELTUS, and the sufficiency of our cash resources. These and other forward-looking statements are based on the beliefs and expectations of management as of this conference call. Our actual results may differ materially from our expectations. The company undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances that occur after this conference call, except as required by law. Investors should carefully read the risk and uncertainties described in today's press releases, as well as the risk factors, which identify specific factors that may cause actual results or events to differ materially from those described in our forward-looking statements. including the company's quarterly report on Form 10-Q and other filings we made for the SEC. The Form 10-Q will be filed with the SEC later today and will be available on our website. I will now turn the call over to CalA's CEO, Mark Iwitin.
spk03: Mark Iwitin Good morning, everyone, and thank you for joining us today to review our third quarter 2021 financial results and recent business highlights Our mission at Kala has been to provide patients and eye care professionals with a portfolio of innovative medicines that can better treat the often debilitating diseases that affect the front and back of the eye. Today, we are advancing toward that goal with the acquisition of Combangio, a clinical stage company developing a novel biotherapy for severe ocular surface diseases. With this acquisition, we are very excited to expand our clinical stage pipeline with KPI-012, a secretome product being developed to address persistent corneal epithelial defects, or PCED, and potentially other serious ocular diseases that involve impaired healing. KPI-012 is a clinical stage asset initially in development for PCED, a rare disease associated with vision-threatening morbidity and sequelae. Current treatments for PCED are limited and suboptimal, and we believe there's a clear need for new therapies to address the impaired wound healing that underlies PCED and similar corneal damage diseases. The KPI-012 Phase 1B clinical data in PCED patients are very promising, and we are planning to commence a Phase 2-3 clinical trial in 3Q next year. We are also evaluating additional indications with the goal of initiating clinical evaluation in one or more of these once we have filed the IND. Importantly, KPI-012 adds a late stage clinical asset to our pipeline of earlier stage programs, including our TKI that we expect to have initial preclinical PK and efficacy data early next year. For KPI-012, we are well suited to leverage our deep ophthalmic clinical and commercial capabilities to advance KPI-012 through development, beginning in PCED and potentially expanding into additional orphan patient populations with significant market potential in the U.S. and globally. As part of the acquisition, we are very excited to welcome Darius Karabi, President and CEO of Combangio, as COLA's new Chief Business Officer, as well as Mark Blumenkranz, an ophthalmologist, vitreo-retinal surgeon, and Professor Emeritus in the Department of Ophthalmology at Stanford, who will be joining our board. Before turning the call over to Kim, I'd like to comment on our third quarter commercial performance. The ramp of ISUVIS has been slower than expected. With ISUVIS, we are changing the treatment paradigm for dry eye disease which is a key, though time-consuming process for long-term success. Historically, steroids have been used only as a last-line, off-label therapy for patients with severe disease, and positioning Isovus as a first-line prescription therapy for people with mild or moderate disease requires significant investment and time. To that end, our initial launch strategy focused on education. We sought to drive proactive discussions with eye care professionals in order to educate on dry eye flares, the availability of Isovus as the first FDA-approved on-label steroid with limited risk of intraocular pressure elevation, and the potential for our therapy to effectively fill the gap between over-the-counter artificial tears and chronic prescription therapies. As we move into the second stage of our launch, and as Todd will elaborate on shortly, we are now implementing a number of new targeted strategies aimed directly at the patient, including our first digital direct-to-consumer campaign, which we plan to launch by year end. With this program, we aim to empower patients, providing them with the information and resources necessary to proactively discuss flares with their doctors. We believe in the long-term potential of ISUVIS and are confident that prescriptions and revenues will grow over time. We continue to receive encouraging feedback from eye care professionals who appreciate ISUVIS's rapid onset of action and comfort of administration. And we anticipate that physicians will become even more positive about ISUVIS as we obtain additional payer coverage in the months ahead. Patients also continue to report positive experiences on therapy, and we believe it is clear that ISUVIS effectively delivers rapid relief of the signs and symptoms of dry eye disease. I will now turn the call over to Kim and Todd to review the Combangio acquisition in greater detail. Kim?
spk06: Thank you, Mark. This is a really exciting addition to our pipeline and an important component of our strategy. to develop novel therapies for significant unmet needs. It's also an excellent fit with our current R&D expertise in ocular surface disease. I want to first acknowledge the Compangio team for their excellent work and for the significant process they have made in applying this cutting-edge science to the treatment of significant unmet need in ophthalmology. It's a great accomplishment for them to have progressed this program to an initial proof of concept in patients with persistent corneal epithelial defects. We welcome the Cabangio team to COLA and look forward to working with them to move this program towards full development and ultimately to regulatory approval into market. I'm now going to provide an overview of KPI 012, so please refer to the slide presentation. There's a great deal of information in the deck, so I will only be touching on the high points in this presentation. Starting with slide three, KPI represents a novel therapeutic approach to the management of diseases driven by impaired corneal healing, such as PCED. This therapy is an application of the novel technology involving the utilization of secretomes, which for KPI-012 are harvested from human bone marrow-derived mesenchymal stem cells. This secretome is utilized to produce a cell-free therapy comprised of numerous essential biomolecules that are secreted by the bone marrow cells and have the potential to correct the impaired healing that is an underlying etiology of diseases such as PCED. Being cell-free, the synchrotraum approach provides many of the benefits of cell therapy without the need for the administration of intact cells, which can often have unexpected and untoward effects. KPI-012 is a clinical stage asset which has demonstrated encouraging results in a Phase 1B clinical trial with improvement in PCD seen in seven of the eight patients treated and complete healing in six of the eight patients, in most cases within one to two weeks of initiation of the BID dosing. I will further discuss these results and our plans for development for a broad PCD indication later in this presentation. We believe there's significant potential for KPI-012 beyond PCD for a number of rare diseases. FDA has granted orphan drug designation to KPI-012 for the treatment of PCED, and we anticipate that many of the additional indications we are evaluating would also be considered for orphan drug designation. Moving to slide four, PCED, the first indication we plan to pursue, is a serious and potentially blinding disease, and there is a significant unmet need for safe and effective treatments. PCED is defined as a persistent non-healing corneal defect or wound that is refractory to conventional treatments. If untreated, these persistent defects can lead to significant morbidity, including corneal perforation, infection, scarring, and ultimately vision loss. PCED is a rare disease with an estimated incidence of approximately 100,000 patients per year in the U.S. and 238,000 in U.S., EU, and Japan combined. The only approved prescription product in the PCED space is Oxirvate, which is indicated for neurotrophic keratitis. Based on our analysis, neurotrophic keratitis is the underlying etiology for about a third of all PCED cases. Oxirvate's only active component is human nerve growth factor and thus has benefit primarily in those patients whose underlying etiology is neurotrophic disease. To our knowledge, Oxirvate has not been shown to be effective against PCED of other etiologies. KPI012, on the other hand, contains multiple growth factors and other biomolecules, including neurotrophic factors, and we anticipate broader wound-heating activity across multiple etiologies, including neurotrophic keratitis. Turning to slide five, normal corneal healing is a highly regulated multifactorial process that involves numerous biologic pathways. Impaired healing is most often the result of an imbalance at multiple stages of the process. As such, addressing the impaired healing is believed to require a multifactorial therapeutic approach to correct these imbalances and return the healing process to its normal state. As shown on slide six, KPI-012 delivers a number of bioactive molecules as part of its multifactorial mechanism of action. which we feel is important to address the impaired healing associated with PCED and other serious ocular surface diseases. As shown on this slide, these include protease inhibitors, matrix proteins, growth factors, and neurotrophic factors. As illustrated on slide seven, KPI-012 has demonstrated broad wound healing activity in several established preclinical models of corneal healing. which supports the potential benefit in PCED and other ocular diseases involving impaired healing. Slide 8 provides more detail on the Phase 1B clinical trial conducted by Cabangio. The trial involved 12 subjects overall with an initial safety cohort of three subjects who did not have PCED or active corneal disease and who were dosed twice daily for one week. This portion of the trial showed KPI 012 to be well tolerated with no significant safety issues observed. Following evaluation of the safety cohort, the efficacy component of the trial was initiated with nine patients with active PCED being treated with topical KPI 012 twice daily for up to eight weeks. One patient in the PCED cohort was withdrawn from the trial early for reasons unrelated to KPI 012, leaving eight patients in the evaluable efficacy cohort. In this cohort, one patient was dosed for one week, three patients for two weeks, three for four weeks, and one particularly severe patient was dosed for eight weeks. As you can see from the right-hand portion of this slide, many of these patients had large corneal defects, many of significant duration, which are typically difficult to heal. Top line efficacy results in these eight patients showed improvement in seven with complete healing of the PCE in six of the eight patients as measured by corneal fluorescein staining photographs. Four of these patients had complete healing within one week of treatment and the other two that completely healed did so within two to four weeks. KP with I012 was also shown to be well tolerated with no treatment-related safety issues in this portion of the trial. Slide nine shows the results from the eight patients in the broader efficacy cohort and demonstrates the rapid and sustained healing that was observed during the study. As I said earlier, six of eight patients in the PCED cohort achieved complete healing of the lesion after four weeks of treatment. with four of the eight patients completely healing after only one week of treatment. All six of the healed patients remain healed throughout the follow-up period, which ranged from eight and 19 weeks. One of the two patients that did not show complete healing did have an improvement in their PCED, but did not achieve complete resolution of the defect. The other patient had a PCED that had existed for 871 days before treatment and is rare for a PCED of this duration to show significant healing. Of note, the patients that healed had a variety of underlying etiologies, ranging from neurotrophic disease to infectious keratitis to Stevens-Johnson syndrome, evidence of the broad mechanism of action of KPI-012. The pre-treatment duration in the six heel patients also ranged from 15 to 213 days. These results suggest that KPI-012 could be effective against a broad range of PCD etiologies and durations. As shown on slide 10, treatment with KPI-012 resulted in a significant reduction of pain, a common symptom in PCED. All six of the patients that reported pain at baseline had an improvement after only one week of treatment, with two-thirds of the patients having complete resolution of their pain at one week and 100% after three weeks of dosing. Slide 11 provides an overview of our current thoughts on the next stages of development. Comangio held a productive pre-IND meeting with FDA last year in which the agency agreed that a broad indication is possible. There were also important guidance on clinical trial design, patient population, and endpoints for clinical trials to support this indication. We plan to file an IND in the third quarter of next year and then initiate the phase two, three clinical trial in PCD patients of various etiologies. The design of the trial is still being finalized, but will likely be a randomized vehicle control trial evaluating the efficacy of at least two dosage regimens of KPI-012. If the results of the Phase 2-3 trial are favorable, it could serve as the first of two required pivotal trials, and we would plan to conduct an initial pivotal Phase 3 trial to support the submission of a BLA to the FDA. I will now turn the presentation over to Todd to discuss the commercial potential of KPI-012.
spk05: Thank you, Kim. Moving on to slide 12, we are excited about the potential of KPI-012 as it targets an orphan indication with a large global unmet need. PCED is a rare disease with substantial clinical burden for which speed of healing, resolution of pain, and prevention of vision loss are all critical treatment outcomes. There are no products FDA approved with a broad label to treat all PCED regardless of the etiology. NKPI 012 has been granted orphan drug designation by the FDA for the treatment of PCED. KPI-012 has the potential to deliver broad efficacy for all PCED patients with only twice a day dosing for a four-week treatment period and provide a product with favorable safety and tolerability. There is an estimated annual incidence of 100,000 PCED patients in the U.S., and an estimated 238,000 patients in the U.S., E.U., and Japan combined. The market is projected to continue to grow annually, and we have full worldwide rights to the asset. There is one product approved to treat neurotrophic keratitis, which is an underlying etiology, and only about one-third of all PCED cases. That product is currently priced at approximately $100,000 per treatment, and the corneal specialist KOLs we have spoken to tell us that patients often require re-treatment with that product. KPI 012, drug substance manufacturing, is scaled and ready for pivotal trials, and an agreement is already in place with a leading contract manufacturing organization with deep experience in the formulation and filling of ophthalmic drug products into unit dose blow fill seal vials. And importantly, as an orphan disease, PCED is primarily treated by a small targeted group of eye care specialists, which will allow for a highly efficient rare disease commercial model if and when approved. Turning to slide 13. KPI-012 is a regenerative cell-free therapy with a multifactorial mechanism of action to address the complexities of the wound healing process. This novel secretome approach has the potential to serve as a pipeline and a product with strong life cycle opportunities and other orphan ophthalmic indications, such as corneal ulcers, corneal burns, Arcula Grapp versus host disease, and Steven Johnson syndrome. As you can see taken together, these additional conditions create a substantial incremental market opportunity for KPI 012. And if successful, our plans are to expand our development efforts to address these additional indications. We are targeting initiation of a human proof of concept study in at least one of these additional indications in the second half of 2022. In addition, there are other wound healing opportunities outside of the eye that may present potential out licensing opportunities. Continuing on to slide 14. Here we have outlined the expected patent and regulatory exclusivity for KPI-012. As a biologic agent, KPI-012 has the potential to be eligible for 12 years of market exclusivity that would prevent biosimilars from being introduced for at least that period. In addition, KPI-012 has the potential to receive seven year orphan drug exclusivity for PCED, which would run concurrently with the 12 years of biologic exclusivity. There is also a significant patent portfolio related to KPI 012, and it's used for the treatment of ocular conditions, such as PCED, with a 20-year patent term ending in 2040, as well as possible patent term extension in the U.S. beyond 2040. On the regulatory side, we plan to pursue additional designations that could accelerate development in regulatory review timelines and would help to maximize this opportunity. In conclusion, slide 15 summarizes why we are so enthusiastic about the acquisition of Combangio and the potential of KPI-012 to treat a significant unmet need in the rare disease ophthalmic space. This transaction is aligned with our corporate strategy of advancing a pipeline with multiple product candidates that can address serious ophthalmic diseases which have the potential to cause vision loss. And we are very excited to continue moving this development program forward. We look forward to providing you future updates on our progress with KPI 012. I'll now transition to a progress update on the ISUVIS launch. While I'll spend most of my comments today outlining our strategy to address the headwinds we've encountered over the last several months, I want to begin with a recap of our quarterly performance and several key leading indicators which we believe demonstrate positive momentum for ISUVIS. In the third quarter of 2021, Symphony Health and our patient hub reported 18,537 ISUVIS prescriptions, representing an increase of 19% over the second quarter. As of the week ended November 5th, 2021, approximately 50,860 prescriptions for ISUVIS have been filled since the launch in January, including over 6,650 refill prescriptions. More than 5,500 unique eye care professionals have prescribed Isuva since the launch. We are encouraged to report that approximately two-thirds of all Isuva's prescriptions in the third quarter were written for patients entirely new to prescription dry eye therapy, indicating first-line use and continued progress towards our goal of becoming the preferred first-line prescription therapy for the treatment of dry eye flares. Refill prescriptions for ISUVIS were 3,115 in the third quarter, an increase of 94 percent over the second quarter. In addition, weekly script volume is currently 22 percent higher over the last nine weeks compared to average weekly script volumes during the summer months of June and July. While some of this can be expected with the seasonality of July high flares, we are also seeing continued growth in market share which would indicate that recent growth is driven by increasing demand. ISUVIS continues to grow in neuter therapy prescriptions, a measure of the number of patients newly initiating prescription GI therapy, with 10% growth in the most recent four-week over four-week period. We also saw an increase of 11% in the most recent four-week over four-week period for NRXs, achieving an all-time high for ISUVIS share of the new prescription market. Importantly, these figures, while promising, do not reflect the totality of physician-patient demand for ISUVIS. We estimate that only about a half of all prescription ISUVIS prescriptions are currently getting filled at the pharmacy, with the rest being rejected due to lack of insurance coverage. As payer coverage grows, We anticipate that many more of these prescriptions will get filled, resulting in higher script volumes, and in turn, we believe ECP prescribing will increase as doctors become more comfortable that most health plans are covering ISUVIS on their formulary. Finally, we remain very encouraged by feedback from eye care professionals. In July 2021, we conducted a quantitative market research study of 200 ECPs, and within this study, ECPs scored ISUVIS the highest of all dry eye therapies compared to both prescription and OTC options and report an intent to increase prescribing as payer coverage grows. The only significant disadvantage reported was payer coverage. And as I will discuss shortly, we are working hard to grow our market access coverage with both commercial and Medicare Part D plans and anticipate coverage improvement in the coming months. Now, while we are encouraged by these data, We also acknowledge that the launch has been met with some challenges. Today I want to spend a few moments highlighting what we understand to be the primary challenges faced during the launch and outline our strategy to address them. The first challenge is acquiring market access coverage in a timely manner, specifically acquiring a meaningful enough level of market access that will allow the majority of prescriptions written to be filled and covered by the patient's insurance. Of course, this is not an issue unique to COLA. It is arguably the biggest challenge facing all newly launched products. While successful in achieving formulary coverage with ESI and Optum within the first two quarters of launch, we are still working to grow ISUVIS coverage with additional large commercial and Medicare Part D plans. As we've previously stated, commercial and Medicare Part D health plans collectively represent about 90 percent of all dry eye prescriptions. Specifically, within commercial, we are working to pull through the Express Scripts and Optum contracts with their custom clients in order to grow the number of health plans that add ISUVIS to formulary at both of these PBMs. In the third quarter, we made meaningful progress adding an additional 4.5 million covered lives through new health plans under the existing contracts with Express Scripts and OptumRx, bringing us to approximately 60% commercial coverage. Looking ahead, we are focused on adding Isudas to formulary and other large commercial plans such as CVS Caremark and United Healthcare. Collectively, these wins would expand our total commercial access to greater than 80%, which would be in line with the leading prescription GI therapies. With regard to Medicare, We have secured preferred coverage at Express Scripts and Prime Therapeutics, bringing our total access to 10% of all Medicare Part D lives. We are now focused on the remaining largest Medicare Part D plans, such as Silver Script, United AARP, and Humana, which along with ESI collectively represent more than 70% of all covered Medicare Part D lives. We anticipate additional coverage under Medicare Part D to start, to begin growing in 2022. As we work to continue to increase market access coverage for ISUVIS, we are also continuing our commercial co-pay assistance program to help defray out-of-pocket costs for patients. The second challenge has been the COVID-19 pandemic. As you know, the pandemic has wreaked havoc on the medical system, particularly for non-emergent diseases where patients may be less compelled to visit their doctors in person or where the decision to seek treatment can be more easily delayed. When looking at ophthalmology specifically, it has been one of the most impacted specialties by the pandemic with regards to both patient office visits and prescription volume. Again, this is not a challenge unique to COLA, but we believe it means that fewer dry eye patients have visited their doctors, limiting the number of newly diagnosed patients who are in the market for therapeutic intervention. Relatedly, The in-person restrictions resulting from COVID have also limited the ability of sales representatives to access healthcare professionals and educate them on newly launched products such as . While this has made it difficult for the vast majority of products launched during the pandemic, we do not expect these dynamics to persist indefinitely, particularly as vaccines are now becoming commonplace and communities across the country are returning to pre-pandemic conditions. Finally, the third challenge, as Mark alluded to earlier, is the fact that we are working to fundamentally alter the treatment paradigm for dry eye disease. Historically, steroids have generally been used off-label in a limited capacity for patients with more severe dry eye disease, typically as induction therapy when initiating treatment with a chronic medication like Restasis or Zydro. As we stated before, we estimate that only about 3% of diagnosed dry eye patients were prescribed off-label steroids in the past. We are working to reverse that paradigm and position Isugas as the preferred first-line prescription option for patients with mild to moderate disease to treat their dry eye flares. What we know is while approximately 80% of dry eye patients report that they suffer from flares, eye care professionals believe that only about 38% of their patients experience flares. Therefore, we need to drive more proactive discussions between patients and ECPs to help identify which patients are actually experiencing flares. As we educate ECPs on the benefits of prescribing Isovis to this patient population, we are fundamentally altering the way they think about treating the disease from a chronic maintenance therapy to a condition that can manifest with episodic worsening of symptoms and be treated on an as-needed basis for a much shorter time frame. Since our launch, we've taken a number of actions to educate eye care professionals and begin shifting this treatment paradigm. As you know, we increased our sales force earlier this year from 91 to 105 representatives in order to increase both the reach and frequency of our interactions with key dry eye prescribers. And we've participated in all the major medical congresses in order to help drive education around dry eye players and the need to treat them. Now we are starting to also focus on patient education. We know that many patients are suffering from dry eye disease flares, and we believe from the experience of other dry eye therapies that this is an audience that's receptive to direct-to-consumer advertising. We also know that many of our target patients are searching online, relying on tools like social media and top healthcare websites to identify resources or therapies to better manage their disease. As such, we will be launching a targeted digital direct-to-consumer campaign by year's end, which will incorporate in-office education, digital media, and social media education to encourage proactive discussions between patients and ECPs around dry eye flares and the availability of Isobis as the only FDA-approved rapid-acting short-term treatment option. We believe this will help increase awareness of those experiencing dry eye flares and help drive more patients to therapy. We look forward to providing additional details as our campaign gets underway. Turning now to Inveltus. As we have said over the past 18 months, the pandemic has negatively impacted the ocular surgery market, resulting in fewer surgical procedures and surgical volume has been recovering at a slow rate. In addition, during the third quarter, CVS moved to a predominantly generic formulary in the ophthalmic surgical steroid category and Inveltis was removed from coverage. While this affected Inveltis sales, we have access programs in place to help mitigate the impact and cover those CDS patients. In the third quarter of 2021, there were approximately 37,410 prescriptions of Inveltis reported by Symphony Health, compared to 41,103 prescriptions in the second quarter of 2021. Despite the uncertainties that the pandemic continues to present, we believe in Invelta's prescriptions and revenues will grow over time. However, we remain unable to project the specific timing or quantify the potential impact on future revenues due to the potential disruptions of these continued uncertainties on elective ocular procedures and gaining increased market access coverage. As we've previously stated, our commercial efforts for Invelta's are completely synergistic with ISUVIS as 100% of the Invelta's targets are also dry eye targets for which Isewis is the primary focus, and Inveltis is in a second-position sales call. In closing, while we recognize that prescription growth slowed over the summer months, we are encouraged by recent key leading indicators for Isewis. We believe these trends, coupled with the new initiatives we're undertaking, should accelerate prescription growth and ultimately position Isewis as the preferred first-line prescription therapy for the short-term treatment of GI disease. Our team is working hard to execute against our commercial strategy, and I look forward to providing you further updates on future calls. I'd now like to turn the call over to Mary to review our financial results.
spk01: Thanks, Todd. During this discussion of our financial results, I will review certain highlights from our quarterly performance. For our full financial results, please refer to today's press release, which is available on our website. For the third quarter of 2021, we reported net product revenues of $3.1 million, which is consistent with the second quarter of 2021. Broken down by product, this $3.1 million in net revenue is made up of $1.83 million from sales of ISUBIS, which represents a 10% increase over the second quarter of $1.66 million, and $1.2 million from sales of INVELTIS, which represents a decrease of 11% over the second quarter. With respect to ISUBIS, Symphony reported that prescriptions increased by 19% over the previous quarter and shipments to our distributors, on which we recognize revenue, have also increased. Our net revenues were partially impacted by a significant percentage of business coming from our patient assistance programs. We expect to be less reliant on these patient assistance programs as we gain additional market access coverage. With respect to InVeltis, The decrease in net revenue was driven by a decrease in total units of envelopes sold to distributors during the third quarter of 2021 as compared to the second quarter, which is also consistent with a decrease in prescriptions for the same period. Total operating expenses decreased by $3 million to $29.1 million from the second quarter, primarily due to lower spending within SG&A as certain launch-related expenses for ISUVIS were incurred during the first half of the year. Our cash and cash equivalents as of September 30, 2021 was $124.5 million compared to $149.6 million as of June 30, 2021. Cash and cash equivalents as of September 30 does not reflect the $5 million upfront cost to acquire Combangio. Including the cost of the acquisition as well as the development of KPI-012, We believe our cash resources, together with anticipated revenue from ISUBIS and INBELTIS and certain cost containment measures, will enable us to fund operations until the second quarter of 2023. With respect to the cost containment measures I just mentioned, and because we have been so pleased with the efficiency of our team, as we have been in a primarily remote work environment for over a year and a half now, we have decided to downsize our corporate office. We have entered into a termination agreement for our company headquarters that will be effective on December 31st, 2021, subject to certain terms and conditions. The savings from terminating this lease will be approximately $6 million per year through October 2026. In addition, we have decided to maintain our sales force at its current size. As we look ahead to 2022, we continue to focus on reducing our cash burn and anticipate that our overall operating expenses will not increase above 2021. This includes progressing our development programs, including KPI 012, and implementing the targeted digital DTC campaign for ISUPIS, which Todd discussed earlier. That concludes our prepared remarks for today. I will now pass the call over to the operator for questions.
spk08: Ladies and gentlemen, if you have a question or a comment at this time, please press the star then the one key on your touchtone telephone. If your question has been answered, you wish to move yourself from the queue, please press the pound key. Our first question comes from Andres Aguirrez with Woodbush.
spk07: Good morning, and thanks for taking our questions. I'll try to keep them to a few. Just quickly on ISUVIS, maybe you can help us make sense a little bit about some of the metrics that you're providing. You're saying scripts are up, but, you know, still there. kind of relatively flat, maybe comments around price discounts and where they stand. Also, refills seem quite low compared to total scripts. Can you provide some comments there? And then if you could provide a breakdown if you have between scripts prescribed between ophthalmologists and optometrists. Thanks.
spk05: Sure. This is Todd. There's a lot there, so I'll try to unpack it. If I missed anything, please don't hesitate to jump back on. So, you know, in terms of the recent prescription growth trends, what we referenced is quarter-over-quarter growth of about 19% in Scripps. But even more recently, when I look at four-week over four-week performance, so think of that as the most recent four weeks or the most recent month versus the prior four weeks or prior month. And we've seen really nice acceleration for growth there as well, with 10% growth in new-to-brand prescriptions and about 11% growth in overall NRXs. Over that period of time, eye service has been growing faster than any other dry eye product. Again, some leading indicators here as we're getting into the fall that have us optimistic. You asked a bit about the growth in Scripps opposite revenue. One of the things that we saw was an increased utilization of our patient assistance programs within the quarter. And obviously that has an impact on gross to net. What we have always stated is that as we continue to grow our market access coverage and fewer prescriptions are filled through the patient assistance program, that will have a positive impact on our gross to nets over time. And I think the final question that I heard in there was about the split in prescriptions between specialty. And that is another item that we continue to see evolve as optometrists more and more. are becoming primary drivers of Isevus prescriptions. I think that split is almost nearly at 60% of all prescriptions coming from optometrists and about 40% from ophthalmologists, which is not surprising to us as we've been positioning the product as first-line therapy for patients with more mild to moderate disease. And we know that those patients oftentimes are seen first and treated by an optometrist. I don't know if there was any other questions in there.
spk07: Yeah, I'll have one more on ice tubers and then a question for the Combangio acquisition. I don't want to take more time, but just comments on refills, what you're seeing.
spk05: Yeah, really good question. And obviously that was part of the driver of revenue being up 10% within the quarter, which is we're also starting to see some refills come back into the market. Refills were up 94% in Q3 compared to Q2. As we're starting to see those patients that got their first prescriptions in closer to the time of launch in the first quarter, that have worked through their first bottle of Isogus, that have treated those initial flares, that are now coming back into the market and needing to get refills as they head into the fall and winter flare season. So, we're encouraged by those data as well.
spk07: Okay, and just a quick one on the Kanbanja acquisition. So, there are quite a few other candidates that are in phase two. What makes KPI 012 more compelling? And broadly speaking, the timing of this acquisition versus, let's say, developing the internal pipeline or pushing ahead more on the internal pipeline. Thanks.
spk06: This is Tim Brazzo. I'd comment on the competition. There's actually only one product that we're aware of that's in development for broad PCED indications. There are a few products in development for neurotrophic keratitis. And as we said before, that only represents about a third of etiologies that lead to PCED. There's other applications in neurotrophic keratitis for less severe disease. So as we see, there's only one product that's in development, in clinical development for PCED. for a broad PCED indication.
spk07: Okay, thanks. I'll stop talking to you.
spk08: Our next question comes from Chris Nair with JPMorgan.
spk09: Great. Thanks for the questions or for taking the questions. So first one's on payer coverage. So you guys currently stand at about 60% on commercial covered lives. and you received some initial Medicare coverage, which stands about 10%. So first, is there any additional color you can provide on adding coverage, the timelines for CVS and UnitedHealth, and just how we think about when that coverage will be added and when we could see the benefit in Scripps? And then second, maybe can you just discuss the higher level strategy and expectations for Medicare Part D coverage, looking at 2022 and beyond?
spk05: Hey, Chris, it's Todd. I'm happy to answer your question. So, you know, we're in active discussions with both the remaining large commercial plans as well as the Medicare Part D plans. We had just actually recently resubmitted bids to all the Medicare Part D plans and expect most of those conversations to be occurring as we get into early 2022. We feel like we've got a really good line of sight as to what expectations were or are, I should say, and feel like we've submitted very competitive bids consistent with the feedback we've received from those payers. And so, you know, what we've said is we expect our coverage, payer coverage for both commercial and Medicare Part D to continue to grow. throughout 2022. I feel like we've got a chance for that commercial coverage to maybe come a little bit quicker within the first half of the year, but would expect the Medicare Part D coverage to continue to evolve throughout the year.
spk09: That's helpful. And kind of related question, I think on the Q2 call, you mentioned that roughly 60% of scripts were being rejected. So where does that level stand right now and I guess how do you see that evolving over the coming quarters?
spk05: Yeah, I think when we were talking last quarter, we said about 60% rejected. I think we're still sort of in that range right now. It's arguably the biggest issue facing the brand. We know demand is really strong. Eye care professionals are writing lots of scripts, but the majority of those scripts are not getting through and filled at the pharmacy because of lack of insurance coverage. We have rolled out some adjustments to our patient assistance programs here within the quarter. We think that will help to close the gap a bit. But ultimately, the most important thing we can do is add additional health plans that are covering ISUVISM formulary. so that most of these scripts are filled, right? And that will have, we believe, a two-pronged effect. Not only will it result in more of the current demand that exists resulting in filled prescriptions, but that in turn will encourage physicians to perceive ISUVIS as having broad market access coverage, and we believe will increase their prescribing across a broader base of patients.
spk09: Great. Maybe just talk a bit about the split between treatment naive and patients who are already taking a dry eye therapy and what you're seeing and how that's progressed as the launch continues.
spk05: Yeah, sure. That's running at about two-thirds treatment naive, about one-third on prior therapies or maybe initiating a chronic therapy and using Isevus as induction therapy. And as we stated before, we're really encouraged by that, that Isevus is taking foothold of this position as the first-line therapy to treat dry eye flares, and in particular in more mild to moderate patients that have only been on artificial tears that have not been on a chronic medication previously. We think, again, the biggest thing we can do to help accelerate that is to get more managed care coverage so more of those patients can be prescribed by service. But we also do think there's a real significant opportunity to close this gap between the number of patients that report they suffer from flares to the eye care professional's perception of the number of patients in their practice suffering flares. And that's why we're launching some targeted direct-to-consumer digital advertising here by the end of the year to drive patients into the physician's office to bring up their dry eye flares proactively and to ask for eye service by name.
spk09: Thanks. And then the last one's just on the cash runway. I think you provided some helpful comments in the upfront commentary. Maybe just could you help with the framework for thinking about your confidence in the cash runway through 2Q 2023? And specifically, does that include any revenue growth? And then I think you already addressed it in the preliminary commentary, but just OPEX levels, how would you think about that relative to current levels?
spk01: Yeah. Thanks, Chris. So we do feel good about our cash runway into Q2 of 23. that does include some uptick in revenue. You know, we launched a DTC campaign that we talked about, so we expect that that will be effective. And as far as the OPEX levels, we said that we expect that our OPEX will not increase following 2021, in 2022 over 2021, and we expect that we'll be able to fund our development programs as part of that operating expense as well.
spk09: Great. And then last one, how do we think about the incremental optics for the Combaggio acquisition as part of your development program?
spk01: Yeah, so that's baked into our cash runway. I think one of the important things to remember is we've implemented some cost containment measures that we talked about. the lease termination, which, when effective in 2022, will cover the expenses that we expect to incur for the Combangio asset, moving that forward.
spk09: Perfect. Thanks for taking the questions.
spk01: Sure. Thank you.
spk08: Our next question comes from Francois Vrespoir with Oppenheimer.
spk04: Thanks for the questions. Okay, so in terms of the scripts, you know, you talked about them making more sense as we track them with the net revenues reported. But can you remind us, you know, is it the, you know, the fact that if you kind of look at it, the net revenues actually kind of went down again from the last quarter. Why is that? You know, it seems like it wasn't big discounts or rebates. It seems like it was people using the patient's assistance program more. Any ideas as to why that is? Was that surprising that the patient's assistance program was used more as coverage is kind of progressing?
spk05: Thank you, Frank. Good questions. And just to clarify, ISUBA's revenues were up 10 percent quarter over quarter, almost 10 percent, while revenue was up 19 percent. I mean, volume was up 19 percent. In Beltas, revenues were down as volume was down, largely driven by the removal from CVS formulary for in Beltas. But we did see overall revenues as well as volume up for ISURVS. There was not a direct correlation in the increase in revenue to the increase in volume, and that was attributable to more scripts getting filled through our copay program. I think part of what's happening, Frank, is just, you know, as you think about those rejections that we talked about on the Q2 call, we're now starting to pick up a few more of those rejected prescriptions are getting filled through our co-pay assistance program. But obviously that has impact on gross to nets. So it does not correlate into a direct one-to-one improvement in revenues along with the same level of improvement we saw in prescriptions.
spk04: Right. Okay. So no big new rebates or discounts from your guys' end.
spk05: No.
spk04: Okay. And on the pricing side for PCED, you talked about Oxirvate, $100,000 per treatment, but if it's only a third of the market, I guess, you know, is it, does that, you know, how do you correlate, what do you share on potential pricing, or is this, look, they're both orphan, or is it, is the implication here that if it's a third of the size, maybe that's three times the price that you would be interested in?
spk05: All really fair questions, Frank. I'd say first and foremost it's too early to speculate on what the ultimate price would be if we successfully develop and get KPI 0.112 to market, 0.12 to market rather. That having been said, I would expect, I would say that PCED is a rare disease, incidence of about 100,000 a year. I would expect rare disease pricing, and I think we've got a really good analog in the market at $100,000 with Oxovate. And what I would just say is keep in mind with Oxovate, while it's only, neurotrophic keratitis rather, is only about a third of PCED cases, there is an estimated incidence of neurotrophic keratitis of about 60 to 65,000 patients per year in the U.S. So I think it's a very good analog to use for consideration at this point for our pricing potential.
spk04: Okay, great. And just lastly here on the PCED front, what causes PCED? Is it known? Is it easy to diagnose? What leads to it? Ken, do you want to take that?
spk06: Sure. There's a number of underlying diseases, and we pointed that out on the slide. And it's really, too, there are underlying diseases such as neurotrophic keratitis that themselves cause a degradation of the epithelial layer in the eye, and you get a resulting epithelial defect. There's also a number of surgical and other indications. For example, a lot of viral herpet keratitis, limblestone deficiency. In many cases, you get a wound or a scratch on the eye. You have an underlying healing ability, and that scratch or wound then can't heal, and it gets bigger and bigger and bigger. So there's a number of etiologies outside of NK that can lead to a PCED.
spk04: Okay, great. Thank you.
spk08: Again, ladies and gentlemen, if you have a question or a comment at this time, please press the star, then the one key on your touch-tone telephone. Our next question comes from Chris Howerton with Jefferies.
spk10: Great. Thank you so much for taking the questions, and congratulations on the exciting expansion of your business. So I guess the two questions for me would be, you know, as you're planning on developing KPI 012, you know, how are you going to prioritize that relative to your existing new chemical entity assets? And then the second question that I would have is that, you know, could you give us a comparator or some other success story of direct-to-consumer marketing for the ophthalmology space? Thank you.
spk03: Sure. This is Mark. You know, I think the The very first part of answering your question is that, you know, look, we're really excited to have a late stage clinical asset. To be able to start a phase two slash three study with the intent that that could very well be the first pivotal study for the program is really exciting. Our TKI program is also advancing, and we expect to have the preliminary or initial PK and efficacy data early next year. And so what we've done with our cash resources and as reflected in the runway is to be able to advance both those programs while we're also continuing to work on our SEGRIM program and hope to have a development candidate in the first half. So we can advance all of that and continue to work on the launch of ISUVIS and the promotion of INVELTUS.
spk05: I'm sorry, Chris, could you repeat the second part? I think that might have been a second part of your question. Do you mind with that?
spk10: Oh, yeah. Yes, thanks so much, Mark. The other question was just if you have a comparator of a success story of a direct-to-consumer marketing campaign in the ophthalmology space.
spk05: Yeah, look, I think the most obvious is for Stasis, right? They, over the years, have enjoyed great success. They've made that, at its peak, I think nearly a $2 billion a year brand. And a lot of that was on their direct-to-consumer efforts. Of course, Zyger as well has launched consumer, and we saw some return to growth that began last year, actually, with Zyger around the time that they launched their new consumer campaign that we view as having been successful as well.
spk10: Got it. And, I mean, do you have any sense in terms of the, you know, return on investment relative to expanding a sales force, or I guess any relative metrics you can provide on that could be helpful? Thank you.
spk05: Yeah, you know, I think it's too early to be, you know, quoting ROI numbers. But I would say that I think that we feel good where we are right now with 105 representatives. And the next lever for us to pull is the patient, you know, digital consumer efforts to start driving patients into the DACA's office so that we can benefit from the synergies of the educational work that we've done over the last nine months, increasing awareness of ISUVIS to now start driving some patient demand.
spk10: Okay, that's awesome. Thank you very much.
spk05: Thank you.
spk08: And I'm not showing any further questions at this time. I'll turn the call back over to Mark Arwicki for closing remarks.
spk03: Thank you, Operator, and thank you all for joining us this morning. Today is a transformative day for COLA as we take a major step toward our vision of delivering a broad portfolio of new medicines to advance the treatment of eye diseases. We're extremely excited about our acquisition of Combangio and the potential of KPI-012 to change the care of people living with PCED and potentially other ocular wounds. And we believe our existing commercial products will continue to gain market share as we execute on our commercial strategy and move beyond the COVID-19 pandemic. We look forward to updating all of you soon.
spk08: Ladies and gentlemen, this concludes today's presentation. You may now disconnect and have a wonderful day.
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