Posted on May 23rd, 2013
by Paul Ashton, Ph.D.
The eye space continues to heat up. $2.5B was wiped off Allergan’s market cap following the announcement of a delay in two programs including their Phase II DARPin program for AMD. This is an anti-body type protein targeting VEGF/PDGF that is rumored to be injected into the eye every 3-6 months. If approved could be really tough competition in the multi-billion ocular anti-VEGF market now dominated by Roche’s Lucentis and Regeneron’s Eylea (which are typically injected every 4 to 8 weeks). So, if Phase II trials had gone well, and if Phase III trials had gone well, and if DARPin injected every 6 months ultimately had similar efficacy as Eylea injected every 2 months, it could have been a great drug for AMD/DME. Interestingly Regeneron’s market cap increased $2.5B following news of the delay. Seems like a lot of “ifs” for $2.5B but maybe not. People are realizing that the AMD/DME market is really big. With such a big market and so few players every development is important. Whoever can come up with a sustained delivery system for anti-body type proteins in the eye may do very well indeed.
Regarding our own product in this space, the last month or so has seen a flurry of good news on ILUVIEN, our sustained release insert approved in Europe for chronic DME. A lot of people are asking some of the same questions so here are some clarifications:
While all the ILUVIEN news is great, we are focused right now on developing our own product for posterior uveitis. We view the economic opportunity here to be in the same size range for us as DME. In the US there are about 175,000 people with posterior uveitis. That’s about 5 times fewer people than those that have DME, but with uveitis we’d have all of the profits from sales whereas in DME we’d get 20% of Alimera’s profits (if it’s approved). And while we are optimistic about the upcoming PDUFA date for ILUVIEN in the US, we are also optimistic in the longer term about our chances of approval in uveitis.
One final thing on ILUVEIN for DME that people keep bringing up is the profit split. Details of our profit split with Alimera are as follows. We are entitled to 20% of the profits on ILUVIEN sales by Alimera on a quarter by quarter country by country basis. Profit is essentially net sales minus cost of goods minus commercialization costs (i.e. sales and marketing). COGS is a known number as is the sales costs (Alimera is using Quintiles as a sales force for hire so we know how much per country per quarter). Marketing costs are budgeted per country per quarter and are transparent. So profit in, say, Q4 in Germany cannot be affected by, say, launch costs in say France in that quarter. Under the agreement Alimera is allowed to recoup 20% of pre-profit commercialization costs in a given country by reducing our percentage of profit from 20% to 16% until they have recouped those costs. For example, if Alimera had incurred a total of $5M in commercialization expenses before the product has a profitable quarter in that country, then Alimera could reduce our profit split in subsequent quarters from 20% to 16% until $1M (i.e. 20% of $5M) has been recouped and thereafter our profit split would go back up to 20%. In Alimera’s 10-K they indicate approximately $5-6M in commercialization expenses that could be off-set against pSivida’s profit split. So one would think that our profit split could be 16% until Alimera recoups approximately $5-6M. However commercialization expenses can only be off-set against profits on a country by country basis. If the whole $5-6M in commercialization expenses were all directed sales in Germany then yes, our profit split in Germany would be 16% until Alimera had recouped $5-6M (i.e. 20% of its commercialization expenses). But in reality most of the commercialization expenses incurred to date have not been in Germany and these expenses can only be recouped against profit in the country in which they were incurred. Thus US commercialization expenses cannot be off-set against profit in Germany, France or wherever. And to answer another question, commercialization expenses in any country cannot be off-set against the $25M we’d be due on US approval.
That’s a lot of detail but hopefully the profit split with Alimera is now clear. We are of course very pleased with the progress in the EU, are working hard to get the uveitis phase III started in the US and also on Tethadur, our protein/peptide sustained delivery system.
More updates to come.
Forward Looking Statements
SAFE HARBOR STATEMENTS UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: Various statements made in this blog are forward-looking, and are inherently subject to risks, uncertainties and potentially inaccurate assumptions. All statements that address activities, events or developments that we intend, expect or believe may occur in the future are forward-looking statements. The following are some of the factors that could cause actual results to differ materially from the anticipated results or other expectations expressed, anticipated or implied in our forward-looking statements: uncertainties with respect to: Alimera's ability to obtain regulatory approval for ILUVIEN for DME in the U.S. through the advisory committee or otherwise, and if approved, to finance, successfully commercialize and achieve market acceptance of, and generate revenues to pSivida from, ILUVIEN for DME in the U.S.; Alimera's ability to finance, achieve additional marketing approvals, successfully complete pricing and reimbursement discussions for, commercialize and achieve market acceptance of, and generate revenues to pSivida from, ILUVIEN for DME in the EU;; the ability to finance, complete and achieve a successful outcome for Phase III trials for, and file and achieve marketing approvals for, Medidur for posterior uveitis, including efficacy, side effects and risk/benefit profile, as well as uncertainty as to the ultimate results of the investigator-sponsored trial for Medidur for posterior uveitis; initiation, financing and success of Latanoprost Product Phase II trials and exercise by Pfizer of its option; ability to utilize Tethadur and BioSilicon to develop product candidates and products and potential related collaborations; initiation and completion of clinical trials and obtaining regulatory approval of product candidates; continued sales of Retisert; adverse side effects; ability to attain profitability; ability to obtain additional capital; further impairment of intangible assets; fluctuations in operating results; decline in royalty income; ability to, and to find partners to, develop and market products; termination of license agreements; competition and other developments affecting sales of products; market acceptance; protection of intellectual property and avoiding intellectual property infringement; retention of key personnel; product liability; consolidation in the pharmaceutical and biotechnology industries; compliance with environmental laws; manufacturing risks; risks and costs of international business operations; credit and financial market conditions; legislative or regulatory changes; volatility of stock price; possible dilution; absence of dividends; and other factors described in our filings with the SEC. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Our forward-looking statements speak only as of the dates on which they are made. We do not undertake any obligation to publicly update or revise our forward-looking statements even if experience or future changes makes it clear that any projected results expressed or implied in such statements will not be realized.