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Kala Pharmaceuticals Reports First Quarter 2019 Financial Results

–Conference Call and Webcast Today at 8:00 a.m. ET–

WATERTOWN, Mass.–(BUSINESS WIRE)–Kala Pharmaceuticals, Inc. (Kala) (NASDAQ:KALA), a biopharmaceutical
company focused on the development and commercialization of therapeutics
using its proprietary AMPPLIFY™ mucus-penetrating particle (MPP) Drug
Delivery Technology, today reported financial results for the first
quarter ended March 31, 2019.

We are pleased with our results during the first quarter of 2019,
particularly as it relates to the launch of INVELTYS,” said Mark Iwicki,
Chairman, President and Chief Executive Officer of Kala Pharmaceuticals.
We have received feedback from physicians that INVELTYS has been a
meaningful addition to their treatment protocols for inflammation and
pain following ocular surgery. Our team has made significant progress in
securing market access for INVELTYS, and initial prescription uptake has
been strong. We also continue to advance KPI-121 0.25% for dry eye
disease, with an August 15 Prescription Drug User Fee Act (PDUFA) target
action date and topline data from STRIDE 3 expected in the fourth
quarter of 2019.”

First Quarter and Recent Highlights:

INVELTYS® Launch: INVELTYS was launched in January 2019 as the
first and only twice-daily ocular corticosteroid indicated for the
treatment of post-operative inflammation and pain following ocular
surgery. The unique combination of safety, efficacy and twice-daily
dosing of INVELTYS was developed to address a significant unmet need in
this setting, and Kala believes these attributes are being viewed
favorably by physicians. Since the launch of INVELTYS:

  • Nearly 20,000 INVELTYS prescriptions have been filled as of April 26,
    2019.
  • INVELTYS has achieved approximately 5% branded new prescription market
    share and is now the third-most prescribed branded ocular steroid
  • INVELTYS has achieved unrestricted market access in approximately 41%
    of all lives covered by commercial payers, for a total of
    approximately 70 million commercial lives.
  • Medicare Part D contract negotiations are ongoing with most coverage
    decisions anticipated in early 2020.

KPI-121 0.25% Dry Eye Program: The U.S. Food and Drug
Administration (FDA) has set a PDUFA target action date of August 15,
2019 for KPI-121 0.25%, which if approved could be the first
FDA-approved product for the temporary relief of the signs and symptoms
of dry eye disease. Kala’s New Drug Application (NDA) filing includes
data from one Phase 2 and two Phase 3 efficacy and safety trials
studying over 2,000 patients with dry eye disease. Based upon the FDA’s
recommendation, Kala is conducting an additional Phase 3 clinical trial
of KPI-121 0.25%, STRIDE 3 (STRIDE – Short Term Relief In Dry Eye). Kala
believes that it has identified key factors that contributed to the
differences observed in the results from STRIDE 2 compared to those of
STRIDE 1 and the Phase 2 trials, and that changes made to the
inclusion/exclusion criteria of STRIDE 3 based on these analyses will
improve the probability of success of STRIDE 3. Enrollment continues to
progress as planned, and the Company expects to receive top-line results
for STRIDE 3 in the fourth quarter of 2019.

First Quarter 2019 Financial Results

The financial results below contain both GAAP and non-GAAP financial
measures. The non-GAAP financial measures exclude stock compensation,
depreciation and non-cash interest expense. See “Non-GAAP Financial
Measures” below; for a full reconciliation of our GAAP to non-GAAP
financial measures please refer to the tables at the end of this release.

  • Cash Position: As of March 31, 2019, Kala had cash of $138.9
    million compared to $170.9 million as of December 31, 2018. Kala
    anticipates that its existing cash on hand will enable it to fund
    operations through at least mid-2020, with additional cash runway
    expected when including INVELTYS revenue.
  • Net Product Revenue: For the first quarter of 2019, Kala
    reported net product revenue of $1.4 million relating to sales of
    INVELTYS, which was launched in January 2019. Kala recognizes revenue
    when products are delivered to distributors. Kala did not generate any
    revenue from product sales prior to the first quarter of 2019.
  • Cost of Product Revenues: Cost of product revenues for the
    first quarter of 2019 were $0.2 million compared to $0 for the same
    period in 2018. Cost of product revenues for the first quarter of 2019
    were favorably impacted by certain INVELTYS manufacturing costs which
    were expensed as R&D prior to FDA approval in August 2018.
  • SG&A Expenses: For the quarter ended March 31, 2019,
    selling, general and administrative (SG&A) expenses were $18.2 million
    compared to $5.5 million for the same period in 2018. The increases in
    SG&A expenses for the quarter ended March 31, 2019 were primarily due
    to costs associated with hiring additional personnel, building our
    commercial organization, external costs associated with the launch of
    INVELTYS in January 2019, and an increase in our facility costs due to
    the lease of our new corporate headquarters which commenced in late
    2018.

    Non-GAAP SG&A expenses were $16.3 million for the
    quarter ended March 31, 2019 compared to $4.2 million for the same
    period in 2018. For a reconciliation of GAAP to non-GAAP SG&A
    expenses, please see the tables provided below.

  • R&D Expenses: For the quarter ended March 31, 2019,
    research and development (R&D) expenses were $7.0 million compared to
    $5.7 million for the same period in 2018. The increase in R&D expenses
    for the quarter ended March 31, 2019 was primarily due to increased
    clinical expenses associated with STRIDE 3, which were partially
    offset by a decrease in manufacturing costs related to INVELTYS which
    were expensed as R&D prior to FDA approval.

    Non-GAAP
    R&D expenses were $6.3 million for the quarter ended March 31, 2019
    compared to $5.0 million for the same period in 2018. For a
    reconciliation of GAAP to non-GAAP R&D expenses, please see the tables
    provided below.

  • Operating Loss: For the quarter ended March 31, 2019, loss from
    operations was $24.1 million compared to $11.1 million for the same
    period in 2018. Non-GAAP operating loss was $21.4 million for the
    quarter ended March 31, 2019 compared to $9.2 million for the same
    period in 2018. For a reconciliation of GAAP to non-GAAP operating
    loss, please see the tables provided below.
  • Net Loss: Net loss was $25.4 million, or $0.75 per share, for
    the quarter ended March 31, 2019 compared to a net loss of $11.3
    million, or $0.46 per share, for the same period in 2018.

    Non-GAAP
    Net Loss: For the quarter ended March 31, 2019, non-GAAP net
    loss was $22.5 million, compared to $9.4 million for the same quarter
    of 2018. For a reconciliation of GAAP to non-GAAP net loss, please see
    the tables provided below.

    The weighted average number of
    shares outstanding used to calculate net loss per share was 33,878,021
    for the quarter ended March 31, 2019 and 24,542,428 for the quarter
    ended March 31, 2018.

Conference Call Information

Kala will host a live conference call and webcast today, May 9, 2019 at
8:00 a.m. ET to review first quarter 2019 financial results. To access
the conference call, please dial 866-300-4091 (domestic callers) or
703-736-7433 (international callers) five minutes prior to the start of
the call and provide the conference ID: 2881526.

To access a subsequent archived recording of the call, please visit the
“Investors & Media” section on the Kala website at http://kalarx.com.

About Kala Pharmaceuticals, Inc.

Kala is a biopharmaceutical company focused on the development and
commercialization of therapeutics using its proprietary AMPPLIFYTM
mucus-penetrating particle (MPP) Drug Delivery Technology, with an
initial focus on the treatment of eye diseases. Kala has applied the
AMPPLIFY Drug Delivery Technology to a corticosteroid, loteprednol
etabonate (LE), designed for ocular applications, resulting in recently
approved INVELTYS® for the treatment of inflammation and pain following
ocular surgery and its lead product candidate, KPI-121 0.25%, for the
temporary relief of the signs and symptoms of dry eye disease, for which
a target action date under the Prescription Drug User Fee Act (PDUFA)
has been set by the United States Food and Drug Administration (FDA) for
August 15, 2019.

Non-GAAP Financial Measures

In this press release, the financial results of Kala are provided in
accordance with accounting principles generally accepted in the United
States (GAAP) and using certain non-GAAP financial measures. The items
included in GAAP presentations but excluded for purposes of determining
non-GAAP financial measures for the periods presented in the press
release are stock-based compensation expense, non-cash interest and
depreciation. Management believes this non-GAAP information is useful
for investors, taken in conjunction with Kala’s GAAP financial
statements, because it provides greater transparency and
period-over-period comparability with respect to Kala’s operating
performance. These measures are also used by management to assess the
performance of the business. Investors should consider these non-GAAP
measures only as a supplement to, not as a substitute for, or as
superior to, measures of financial performance prepared in accordance
with GAAP. In addition, these non-GAAP financial measures are unlikely
to be comparable with non-GAAP information provided by other companies.
For a reconciliation of these non-GAAP financial measures to the most
comparable GAAP measures, please refer to the table at the end of this
press release.

Forward-Looking Statements

This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, that
involve substantial risks and uncertainties, including statements
regarding INVELTYS for the treatment of inflammation and pain following
ocular surgery, including progress of commercial launch, status of
insurance coverage and the availability of reimbursements under Medicare
Part D, the Company’s lead product candidate, KPI-121 0.25% for the
temporary relief of the signs and symptoms of dry eye disease, including
the Company’s belief that changes made to the inclusion/exclusion
criteria of STRIDE 3 will improve the probability of success and
expectation to report top-line results for STRIDE 3 in the fourth
quarter of 2019, the Company’s expectations regarding its use of cash
and cash runway. All statements, other than statements of historical
facts, contained in this Press Release, including statements regarding
the Company’s strategy, future operations, future financial position,
future revenue, projected costs, prospects, plans and objectives of
management, are forward-looking statements. The words “anticipate,”
“believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,”
“project,” “target,” “potential,” “will,” “would,” “could,” “should,”
“continue” and similar expressions are intended to identify
forward-looking statements, although not all forward-looking statements
contain these identifying words. The Company may not actually achieve
the plans, intentions or expectations disclosed in its forward-looking
statements, and you should not place undue reliance on such
forward-looking statements. Actual results or events could differ
materially from the plans, intentions and expectations disclosed in the
forward-looking statements as a result of various risks and
uncertainties, including but not limited to: whether the Company will be
able to successfully implement its commercialization plans for INVELTYS;
whether the market opportunity for INVELTYS is consistent with the
Company’s expectations and market research; uncertainties inherent in
the availability and timing of data from ongoing clinical trials, and
the results of such trials, including STRIDE 3; whether any additional
clinical trials will be initiated or required for KPI-121 0.25% prior to
approval of the NDA, or at all, and whether the NDA will be approved;
the Company’s ability execute on the commercial launch of INVELTYS on
the timeline expected, or at all; whether the Company’s cash resources
will be sufficient to fund the Company’s foreseeable and unforeseeable
operating expenses and capital expenditure requirements for the
Company’s expected timeline; other matters that could affect the
availability or commercial potential of INVELTYS and the Company’s
product candidates, including KPI-121 0.25%; and other important
factors, any of which could cause the Company’s actual results to differ
from those contained in the forward-looking statements, discussed in the
“Risk Factors” section of the Company’s Annual Report on Form 10-K, most
recently filed Quarterly Report on Form 10-Q and other filings the
Company makes with the Securities and Exchange Commission. These
forward-looking statements represent the Company’s views as of the date
of this release and should not be relied upon as representing the
Company’s views as of any date subsequent to the date hereof. The
Company does not assume any obligation to update any forward-looking
statements, whether as a result of new information, future events or
otherwise, except as required by law.

 
Kala Pharmaceuticals, Inc.
Balance Sheet Data
(in thousands)
(unaudited)
       
March 31, December 31,
2019 2018
Cash $ 138,944 $ 170,898
Total assets 197,016 220,966
Working capital (1) 135,847 160,018
Long-term debt, net of discounts 70,457 70,226
Other long-term liabilities 29,590 28,752
Total Stockholders’ equity 82,367 104,978
 

(1) The Company defines working capital as current assets less current
liabilities. See the Company’s condensed consolidated financial
statements for further information regarding its current assets and
current liabilities.

 
Condensed Consolidated Statement of Operations
(In thousands, except share and per share data)
(Unaudited)
     
Quarter Ended
March 31,
2019 2018
 
Product revenues, net $ 1,386 $
 
Costs and expenses:
Cost of product revenues 241
Selling, general and administrative 18,236 5,482
Research and development   6,959     5,657
Total operating expenses   25,436     11,139
Loss from operations (24,050) (11,139)
Other income (expense):
Interest income 756 209
Interest expense   (2,094)     (367)
Net loss   (25,388)     (11,297)

Net loss per share attributable to common
stockholders—basic
and diluted

$ (0.75)   $ (0.46)

Weighted average shares outstanding—basic
and diluted

  33,878,021     24,542,428
 
     
Kala Pharmaceuticals, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands)
(Unaudited)
 
Quarter Ended
March 31,
2019 2018
       
Net loss (GAAP) $ (25,388) $ (11,297)
Add-back: stock-based compensation expense 2,473 1,861
Add-back: Non-cash interest 231
Add-back: depreciation   170   81
Non-GAAP Net loss $ (22,514) $ (9,355)
       
Cost of product revenues (GAAP) $ 241 $
Less: stock-based compensation expense   2  
Non-GAAP Cost of product revenues $ 239  
       
Selling, general and administrative expenses (GAAP) $ 18,236 $ 5,482
Less: stock-based compensation expense 1,864 1,222
Less: depreciation   94   80
Non-GAAP Selling, general and administrative expenses $ 16,278   4,180
       
Research and development expenses (GAAP) $ 6,959 $ 5,657
Less: stock-based compensation expense 607 639
Less: depreciation   76   1
Non-GAAP research and development expenses $ 6,276   5,017
       
Total operating loss (GAAP) $ (24,050) $ (11,139)
Less: stock-based compensation expense 2,473 1,861
Less: depreciation   170   81
Non-GAAP total operating loss $ (21,407) $ (9,197)

Contacts

Investors:
Michael Schaffzin
[email protected]
212-362-1200

Media:
Kari Watson
[email protected]
781-235-3060

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