KALA — KALA BIO, Inc.

Summary of KALA Pharmaceuticals Q2 2022 Earnings Call

1. Key Financial Results and Metrics

• Cash Position: As of June 30, 2022, KALA had $44.6 million in cash, down from $92.1 million at the end of 2021, primarily due to operational cash burn. This figure does not include proceeds from the Alcon transaction.
• Operating Expenses: Non-GAAP SG&A expenses were $20.4 million for Q2 2022, down from $24.7 million in Q1 2022. R&D expenses remained steady at $4.5 million.
• Future Cash Runway: The company expects its cash resources, along with net proceeds from Alcon, to fund operations into Q2 2024.

2. Strategic Updates and Business Highlights

• Transition to R&D Focus: KALA is shifting back to its roots as an R&D organization after selling EYSUVIS and INVELTYS to Alcon, which will handle their global commercialization.
• KPI-012 Development: The company is on track to initiate a Phase II/III clinical trial for KPI-012, targeting persistent corneal epithelial defect (PCED), in Q4 2022. They are also exploring additional indications for KPI-012, including partial limbal stem cell deficiency and Sjogren's disease.
• Market Potential: The potential market for PCED is estimated at over $1 billion, with additional opportunities in LSCD and Sjogren's disease, collectively representing a market opportunity of $1.5 billion to $2 billion.

3. Forward Guidance and Outlook

• Clinical Trials: KALA anticipates top-line results from the Phase II/III trial of KPI-012 in early 2024. They plan to leverage existing clinical supplies for additional indications, potentially expediting their entry into the clinic.
• Cost Management: The company aims to reduce non-GAAP operating expenses by over 50% in 2022 and by 60% to 70% in 2023 compared to 2021 levels.

4. Bad News, Challenges, or Points of Concern

• Cash Burn: The significant decrease in cash reserves raises concerns about financial sustainability, although management believes they have sufficient resources until mid-2024.
• Dependence on Clinical Data: The need for positive data from the Phase II/III trial of KPI-012 is critical for advancing further pivotal studies and securing FDA approval.
• Market Competition: There is only one approved therapy for PCED, but it has limitations that KALA aims to address. However, the competitive landscape remains a concern as they navigate the development of new therapies.

5. Notable Q&A Insights

• Pipeline Progress: KALA is still analyzing development pathways for LSCD and Sjogren's disease, with plans to utilize existing resources from the PCED program to streamline the process.
• Cash Runway Clarification: Management confirmed that their current cash position, combined with proceeds from Alcon, should support operations until at least the data readout from the KPI-012 trial, alleviating immediate funding concerns.

Overall, KALA Pharmaceuticals is transitioning to a research-focused strategy post-Alcon transaction, with promising developments in its pipeline but facing challenges related to cash management and reliance on clinical trial outcomes.