KALA BIO, Inc. Q4 FY2021 earnings call

• EYSUVIS: Saw 21% prescription growth in Q4 2021, with continued momentum into early 2022. Secured coverage on United Healthcare (~13 million lives) in March 2022 and Cigna Medicare (~1.9 million lives) in February 2022, bringing total commercial coverage to ~118 million lives and total Medicare coverage to ~7.1 million lives. Launched direct-to-consumer digital campaign to bridge communication gap between patients and physicians regarding dry eye flares. - KPI-012: Phase 1b clinical trial results to be presented at ARVO Annual Meeting in May. On track to submit an investigational new drug application later in 2022 and initiate Phase 2/3 clinical trial in PCED patients in Q4 2022. Evaluating potential expansion to other rare ocular indications. - Corporate: Targeting a $25 million expense reduction in 2022 to extend cash runway beyond Q2 2023.

For the fourth quarter of 2021, Symphony Health reported 22,460 EYSUVIS prescriptions, representing a 21% increase over the third quarter. Since January 2021 launch, there have been approximately 87,000 EYSUVIS prescriptions including over 14,500 refill prescriptions from more than 7,400 unique prescribers through March 18, 2022. EYSUVIS net sales in the fourth quarter were $1.2 million. INVELTYS had approximately 36,700 prescriptions in the fourth quarter of 2021, down from 37,410 in the third quarter, with net sales of $700,000 in the fourth quarter.

• Expect EYSUVIS revenues to grow meaningfully in 2022 due to expanding payer coverage and increasing prescription volume. - Plan to initiate Phase 2/3 clinical trial of KPI-012 in PCED patients in Q4 2022. - Anticipate providing updates on new indications for KPI-012 later in 2021.

• Market access progress may not meet expectations, leading to lower than expected prescription volumes. - High rate of prescription non-fills due to lack of payer coverage, particularly in commercial and Medicare segments. - Clinical trial results for KPI-012 may not meet expectations, delaying development timelines.

Q: Hi, thanks for taking the question. So just to hit on, sorry, if questions have been touched on. But on the gross to net side, I understand the patient assistance program, but it seems like based on the scripts and the revenues and what you mentioned there in terms of the WAC gross to net discount, what happened in the fourth quarter that maybe made it? I understand that wins on the commercial side and the Medicare side will help. But why – is there a reason that it got worse in the fourth quarter in terms of the gross to net versus the third quarter or second quarter?

A: Todd Bazemore said in fourth quarter, more prescriptions had no insurance benefit, requiring higher buy-down from WAC to acquisition fee, putting pressure on gross to net. Mary Reumuth added it was due to increase in number of units through co-pay card and higher percentage of prescriptions filled that way.

Q: Great. Thanks for taking the questions. First one is on kind of inventory dynamics in gross to net by service in the quarter. So EYSUVIS reported sales of $1.2 million, which were down meaningfully quarter-over-quarter, but you reported prescription growth of roughly 21%. So is there any way you could help us bridge the difference between the two? How much of that was patient assistance or whether any inventory dynamics that you would highlight?

A: Todd Bazemore said both prescription volume and ex-factory volume were up in Q4, but the impact on gross to net was from a larger percentage of prescriptions filled through co-pay assistance program where patients had no insurance benefit, putting pressure on gross to net.

Q: Hi. Good morning. Thanks again for taking all the questions. pretty rich discussion thus far, particularly on the commercial side. I guess just to follow-up on those previous line of questioning with respect to that, can you give us some sense in terms of how long a patient is on the co-pay assistance program? Have you been successful in converting patients, or I guess maybe what is the success rate of converting those patients to paying customers at this point if you can answer that? And then the second question I would have would be for KPI-012. Just curious if you could give us some more information on what those pre-IND activities are in terms of gating procedures, whether it’s with respect to toxicology or CMNC?

A: Todd Bazemore said for EYSUVIS, it's an acute therapy with patients typically having about two prescriptions per year, and once insured, scripts are covered by insurance. Kim Brazzell said for KPI-012, pre-IND activities include optimizing manufacturing process, analytical techniques, initiating GLP toxicology study, and finalizing Phase 2/3 trial protocol.

Q: Thank you for taking my question. Since PCED is driven by multiple ideologies, does the upcoming Phase 2/3 trial need to recruit patients only from a group of patients with similar etiologies?

A: Kim Brazzell said the trial is designed to include PCED patients from any underlying etiology, as KPI-012 has a multi-factorial mechanism to address varying biological issues. Yi Chen also asked about TKI data, to which Kim Brazzell replied studies are ongoing with data expected to be reported throughout the year.

Q: Thanks. Hey Mark. Hey Todd. It seems like you are definitely feeling the effects of like the couponing program and then a lot of these insurance companies clamping down as well as you are waiting for CVS Caremark to add you to the formulary on EYSUVIS. And I am sort of wondering, is there a triggering point in terms of when you think EYSUVIS net sales are actually going to start to rise meaningfully this year? That was my first question. And then I think with this – I had a follow-up question for Kim on KPI-012.

A: Todd Bazemore said meaningful growth in EYSUVIS revenues is expected to begin in first half of 2022 with wins like UnitedHealthcare and anticipation of CVS Caremark win. Kim Brazzell answered on KPI-012 side effects, stating no significant adverse events seen in initial trial with one patient having minor irritation