KALA — KALA BIO, Inc.

KALA Pharmaceuticals Q2 2022 Earnings Call Summary

1. Key Financial Results and Metrics

• Cash position as of June 30, 2022: $44.6 million, down from $92.1 million at year-end 2021, primarily due to operational cash burn.
• Non-GAAP SG&A expenses for Q2 2022: $20.4 million, a decrease from $24.7 million in Q1 2022.
• R&D expenses remained stable at $4.5 million for Q2 2022.
• Following the Alcon transaction, KALA received $65 million (including $60 million upfront and $5 million for inventory) and is eligible for up to $325 million in milestone payments.
• Cash resources are expected to fund operations into Q2 2024, covering the data readout from the Phase II/III trial of KPI-012.

2. Strategic Updates and Business Highlights

• KALA transitioned from a commercial stage company to an R&D-focused organization, having sold its commercial rights for EYSUVIS and INVELTYS to Alcon.
• The company is now concentrating on its mesenchymal stem cell secretome platform, with plans to initiate a Phase II/III clinical trial for KPI-012 targeting persistent corneal epithelial defect (PCED) in Q4 2022.
• Additional indications for KPI-012 are being explored, including partial limbal stem cell deficiency (LSCD) and Sjogren's disease, which together represent a potential market opportunity of $1.5 billion to $2 billion.

3. Forward Guidance and Outlook

• KALA anticipates initiating the Phase II/III trial for KPI-012 in Q4 2022, with top-line results expected in Q1 2024.
• The company is focused on reducing operating expenses by over 50% for the second half of 2022 and 60-70% for the full year 2023 compared to 2021 levels.
• The ongoing development of KPI-012 and the secretome platform is expected to provide significant opportunities for growth and patient impact.

4. Bad News, Challenges, or Points of Concern

• The decline in cash reserves raises concerns about the company’s operational sustainability without further funding beyond Q2 2024.
• The need for successful outcomes from the Phase II/III trial of KPI-012 is critical, as it will influence the timeline and strategy for subsequent pivotal trials.
• There is inherent risk in transitioning back to an R&D focus, including potential delays in clinical development and regulatory approvals.

5. Notable Q&A Insights

• KALA is still analyzing the development pathways for LSCD and Sjogren's disease and is not yet ready to enter clinical trials for these indications.
• Preparations for the second pivotal Phase III trial of KPI-012 will depend on the results from the initial Phase II/III study.
• Management expressed confidence in their cash runway, which is bolstered by the Alcon transaction, but acknowledged the need for careful financial management moving forward.

Overall, KALA Pharmaceuticals is strategically repositioning itself towards R&D with a focus on innovative treatments for serious eye diseases, while navigating financial challenges and the need for successful clinical outcomes.