KALA BIO, Inc. Q1 FY2022 earnings call

Product Launches and Coverage - EYSUVIS was approved in 2020 and has been advancing the treatment paradigm for dry eye disease. Significant payer coverage expansions have occurred, including CVS Caremark adding EYSUVIS to its commercial formulary (reaching 92% of commercial lives coverage) and Humana including it on Medicare formularies (doubling Medicare coverage to 30% of lives). - INVELTYS prescriptions in Q1 2022 were approximately 34,690, with expectations of growth as Medicare Part D coverage increases. ### Pipeline Progress - KPI-012 Phase 1b data was presented at ARVO Annual Meeting, showing potential for treating persistent corneal epithelial defect (PCED) and other ocular diseases. Plans to advance KPI-012 into Phase 2/3 clinical trial in Q4 2022. - KPI-287 is in development with ongoing preclinical trials, with updates expected in the next quarter.

For the first quarter of 2022, net product revenues totaled $1.4 million. EYSUVIS contributed $1 million to net revenue (down from $1.2 million in the fourth quarter of 2021), and INVELTYS contributed $400,000 (down from $700,000 in the fourth quarter of 2021). EYSUVIS accounted for approximately 71.4% of the total net revenue, while INVELTYS accounted for approximately 28.6%.

Revenue Improvement - Expectation that expanded payer coverage for EYSUVIS will reduce reliance on patient assistance programs, leading to an improvement in average selling price and net revenue. ### Prescription Growth - Anticipation of continued acceleration in EYSUVIS prescription growth due to increased commercial coverage. ### Medicare Coverage - Hopes for further positive coverage decisions in Medicare Part D for INVELTYS and EYSUVIS to drive growth.

Payer Restrictions - Prior restrictions from CVS Caremark led to increased use of patient assistance programs, negatively impacting net revenue. There is a risk of similar issues with other payers if coverage negotiations do not go as planned. ### Clinical Trial Risks - Uncertainties exist regarding the success of KPI-012 Phase 2/3 clinical trial and potential delays or issues with trial execution. ### Cash Dependence - Dependence on cash resources to fund operations, with the need to manage cash runway carefully to ensure funding into 2023.

Q: Just on the gross to net dynamics for EYSUVIS. Sales were down sequentially, but script growth was 18% in Q1. What's the bridge between prescription growth and sales growth, and when can we expect prescription growth to translate into net sales growth?

A: This is Mark. CVS Caremark restrictions made up a big portion of the increase in patient assistance program use. We've already seen an increase in prescriptions going through at CVS Caremark and a reduction in copay assistance programs. Expect improvement to start soon and clearly be an improvement in the second half of this year.

Q: Regarding payer coverage, with 90% commercial covered lives and 30% on Medicare, to what extent does recent coverage expansions resolve commercial headwinds? And strategy for Medicare Part D coverage?

A: This is Todd. On the commercial side, we're at over 90% coverage, which will accelerate prescription growth and reduce reliance on copay assistance programs. On Medicare, we secured Humana, and we have bids pending with United AARP and CVS Caremark SilverScript, expecting positive decisions later in 2022.

Q: Can you tell us for International the percentage of scripts that are being rejected and provide an update on KPI-287?

A: This is Todd. We'll get more granular data in a few weeks, but high level data shows a drop in scripts filled with copay assistance. On KPI-287, we're continuing to evaluate with ongoing preclinical trials, expecting updates in the next quarter.