KOLs, CEOs, and analysts say Ophthotech’s disappointing Fovista trials alter the landscape for companies developing new treatments for wet AMD. And all agree, the biggest losers in all of this are patients suffering from the disease.
Tom Salemi: Hey, everybody, welcome back to the OIS Podcast. This is the final OIS Podcast of 2016. We’ve had a terrific year. We’re very grateful for the time you spent here with u s talking to the leading KOL’s, investors and CEO’s in ophthalmology. And just the opportunity to – I really love my job. I’ve got the opportunity to speak to interesting and motivated and inspirational people every week of my life. So I’m very grateful to you for listening because it gives me an opportunity to do a job I love. So enough of the sentiment; I just wanted to share our regards during this holiday season. Unfortunately, though, we’re ending the year on a down note. On Monday, of course, Ophthotech released its clinical trial data, phase III clinical trials for Fovista. It had two of them, and they were very disappointing. I’ll ask you to refer to the article in the Eye on Innovation Newsletter. My colleague, Rich Kirkner put together a great write-up about the results and about the impacts on Ophthotech and its partners with Fovista. So I direct you to look to the Eye on Innovation Newsletter. If for some reason you don’t get it, you can go to OIS.net and read it there. And while you’re there, you might as well sign up for the Eye on Innovation Newsletter because it’s worth getting in your inbox each week. But obviously this was a devastating blow for Ophthotech and for ophthalmology. I mean there was a great deal of optimism around the Fovista trials, at least hopefulness, I should say. Regeneron obviously reported its negative 12-week results in October, and there was a hope that because Ophthotech was approaching or targeting a different pathway within PDGF that it would be – the results would be different. But they weren’t. So that’s a lot of negative news in one clinical area over a very short period of time. So it has a lot of people asking questions, not only about what this means for Ophthotech, but what this means for the PDGF targeted therapeutics in the space, and somewhat more broadly, what it means for wet AMD, although there’s clearly a lot of other programs in that space, and it’s a dreadful disease, so it’s something that’s going to be focused on for a very long time. But I’ve spent the last two days talking with analysts and CEO’s and KOL’s in ophthalmology about the news, and we’ll have some of their views here. We’ll talk to a few CEO’s who are taking different approaches at wet AMD, and we’ll talk to some analysts both covering Ophthotech and covering others in this space, including Regeneron, which may be the biggest beneficiary of this news, if there is such a thing. But one thing that everyone has spoken to is that this is really devastating news for the patients who have wet AMD. There is a need for more. There are a lot of patients who continue to suffer, and we can talk about clinical trials and investments and things like that, but at the end of the day, those are really the people who are going to feel this the most. And that was the theme brought out by everyone: Wall Street, physicians. It’s a universal feeling. So we’ll take a look at this from many different directions, but we’ll do so without losing sight of the fact that wet AMD are the ones who are really taking the hit here. So let’s get into our first conversation. It makes sense to go right to the source, right to Ophthotech. We’re going to hear from Dr. David Guyer, CEO and Chairman of the company. We didn’t talk with him directly. They’re obviously busy. They received the news on Friday and after the market closed, spent the weekend looking at the results, and held a very short and very somber analyst call on Monday. And we’ll just let David sort of sum up the feelings of Ophthotech’s management.
David Guyer: Thank you for joining us. We saw the unmasked data from both of the phase III trials of Fovista in combination with Lucentis on Friday after the close of markets. To state the obvious, we were simply stunned at looking at the data from both trials.
TS: And that represented the tone of the entire analyst call. It was short, it was somber. You can listen to it yourself if you want to. Go to ophthotech.com. You can get a replay there. But there were no answers on Fovista. Analysts did press a bit to try to get more information about Ophthotech’s other phase III clinical trial with Eylea, and also the phase II trials with Zimura, but company officials, David Guyer and Samir Patel were unable to provide any answers as this exchange sort of represents the tone of the conversation.
DG: So in your reference to the third Fovista trial, the 1004 of Fovista in combination with Lucentis and Eylea, as you know, that trial is fully enrolled and ongoing. We haven’t made any decision as of now while we’re in the process of further understanding the results of 1002 and 1003, but it is presently continuing to be ongoing. And we have previously said that those results would be in the second half of ’17. We plan to update the investor community when we have more information to report. As far as the phase II Zimura program for dry AMD, the phase II wet AMD Zimura program, those obviously remain on track and unaffected. We are continuing to assess the impact of the phase III results on operational, financial and development matters, and we plan to update the investment community when we have more information to report.
TS: And that was the general message of the call, that Ophthotech executives needed more time, needed time to review the data before they were going to make any commitments to the program going forward. I did reach out to a few Ophthotech analysts. I wasn’t able to get anyone on the Podcast, but I had a quick call with Yigal Nochomovitz of Citigroup. And he expressed obviously disappointment in the results. He and others had anticipated better news. And I asked sort of what’s next for Ophthotech, and he just said, “Beyond today, there’s not a whole lot to say.” And he noted that the company is now trading for cash. In fact, this is me speaking, that this morning, on Wednesday morning, it’s trading, its market cap is about $170 million. Ophthotech executives said they had $321 million in cash and no debt, so Yigal Nochomovitz said that basically investors aren’t really placing much value in the rest of Ophthotech’s pipeline. Ophthotech’s stock dip certainly took its impact on the OIS index that we released at OIS@AAO in October. We’ll have a chart in the Eye on Innovation Newsletter, so you should definitely take a look at that. And we’ll also be sending out more expanding reports in our new OIS monthly publication that’s coming out in January. But if you look at the results at the end of close of business day yesterday, Ophthotech’s stock had dropped 85.9%, and the impact on the index was a drop of 5.8%. So there are some other negative movers in there, and we’ll have them in the newsletter. But just clearly shows the broader impact that this news not only had on patients and physicians in ophthalmology, but also on the market itself. But what does this mean for the rest of ophthalmology, not the publicly traded issues, but the companies themselves? We talked to a couple of great analysts, friends of OIS, Ronnie Gall of Sanford Bernstein and Adnan Bot of RBC Capital Markets. And just talked to them about what the impact would be on the field, and specifically on the companies they cover. We’ll first talk to Ronnie Gall and he’ll talk a bit about what this means for Regeneron and Novartis and another company he covers, Allergan.
Ronnie Gall: From the corporate perspective, what I would say is it’s a little bit of a relief for Regeneron, which some people expected there would be an attempt to bundle Lucentis with Fovista by Novartis. So there’s a bit of a risk reduction for that. It also positions their second generation drug, Ang2 as a target there, as the potential only complimentary drugs to VEGF, which obviously puts them in a better marketing position. Although I would still argue people pick the VEGF of their choice first, and then if needed, add a second complimentary drug to it, just like practicing conservative medicine. So to some extent, it’s a benefit for them strategically from that perspective. Although I would argue the biggest issue facing us right now in terms of drug selection is whether RTH258 from Novartis and the Darpin from Allergan will be successful. And we’ll know that answers probably in mid ’17 and mid ’18 respectively. Those drugs are longer acting than the current one we have, notably they will probably have interesting market share. And then behind those two stands the biosimilar to Lucentis, which is currently slotted to enter the market somewhere between mid ’19 and the end of 2019. So we could be in a position where we will have a market with several improved options on the VEGF side plus the low cost option, approved low cost option by the end of this decade.
TS: And next we’ll visit with Adnan. We talked to Adnan at OIS@ASRS. He appeared on one of our panels there, talking about combination therapy. So it was a timely interview, both at ASRS in San Francisco, but also of course in regard to this call. And Adnan also covers Regeneron. And in this conversation, Adnan sort of hits upon something that a few others have tapped on, as to whether or not the existing products we have for wet AMD, whether they have established just a really high bar for new therapeutics to clear. Let’s have a listen.
Adnan Butt: A couple of things to keep in mind. First, the goal remains to improve vision in patients, and that’s something that both companies and doctors will keep trying to find in different ways. So I’ll remind you, I’ll remind people listening that Regeneron had two programs. First was the combination with anti-PDGF, and they also have two phase II studies ongoing combining Eylea with anti-Ang2, which is something that at the August event, the panel of physicians that we were on with showed a lot of excitement about. So combination therapy should still be of interest, and then we’ll get more on how well combinations work or don’t work sometime next year when those studies read out. As for Eylea, I think it just shows that it’s a pretty high bar for given how well these anti-VEGFs on the market work for combinations to get over. Eylea presumably is even more potent than Lucentis; hence, comparing something to Eylea would be an even more difficult bar. But near term commercially at least, what’s bad for patients but what’s good for Eylea commercially is that their marketing and commercial efforts at least should not be disrupted because there’s no new competitor coming on and shifting market dynamics in any way.
TS: Why don’t we take this conversation off the Wall Street and out of the board room, and put it in the doctor’s office, where it probably belongs? I had the chance to speak with Dr. Pravin Dugel of Retinal Consultants of Arizona. He’s of course a regular at OIS. He’s a regular at clinical meetings, working with companies like Ophthotech, like Opthea, which is coming up with a new combination therapy for wet AMD. And I basically asked him what his takeaway was from Monday morning’s news. You’ll have to excuse the audio quality. The only chance we had to talk was when he was in a car. But I think you can make out his larger points. And despite the shock and disappointment that he shares, he does manage to walk away with a kind of holistic positive about the results. Let’s have a listen.
Pravin Dugel: The first reaction that I had was probably similar to a majority of my colleagues, which was shock and disappointment. Shock in the sense that we all, I think, thought that this was going to be the very first combination therapy to prove successful. In fact, all the entire history of this product has suggested that. So that’s the shock. The disappointment really is for our patients because it would be ultimately our patients who wouldn’t get to benefit. And we really thought, I think, that we had something that could go the next step beyond anti-VEGFA monotherapy in our hands. So I think that was my first reaction. But I gotta tell you, after that I kind of took pause, stepped back and there are two immediate thoughts that came to mind. The first thought, and maybe the most important thought is that our scientific system works, and that’s the more important thing. There’s – as frustrated as we get at the FDA sometimes, there is a very, very good reason that the FDA requires two prospective, multi-center, parallel trials for registration. It’s exactly the reason that we want – it’s exactly what we want them to do, which is to be able to allow us data-driven paradigms. And at the end of the day, we go where the data leads us. And if it wasn’t for something like that, meaning a rigorous scientific trial, think of all the other things that we thought would have worked in phase I and phase II that would we would have done now if it wasn’t for the phase III rigor that we all have to undergo. So that’s the first – that’s the second thought that I had after my pause, which is that the system actually works exactly the way it’s supposed to, and that we should all be driven by scientific data, and the system forces that. Which is exactly what we want.
TS: Another point Pravin Dugel made, and others made as well, has to deal with the actual effectiveness of VEGF or anti-VEGF treatments for wet AMD. They have been effective. They have done a great deal of good. And they’ve raised the bar fairly high, high enough that it’s been difficult for new players in this space to clear it. Let’s hear again from Pravin Dugel.
PD: But we all believed, we all believed, maybe painfully so, that we’ve reached a ceiling effect of anti-VEGFA monotherapy. It made me realize just how high that ceiling is. It is actually very difficult to get an incremental benefit to anti-VEGFA monotherapy. Yes, it’s reached a ceiling. We all understand that. But again, that ceiling is pretty darn high.
TS: And Pravin Dugel finally raises a point that many are asking. It’s basically what’s the future of this target, and what’s next for PDGF. Ronnie Gall from Sanford suggests that basically that two strikes and you’re out. We’ve had two disappointing trials from Ophthotech, we’ve had the negative 12 week results that Regeneron introduced in October. And it’s tough to make an argument that PDGF is a viable target to treat wet AMD. Let’s hear what Pravin Dugel has to say on this.
PD: The next question then becomes, well, what happens to this target. And when you look back at what was done, there’s good scientific evidence for doing what was done. I don’t know how things could have been differently. All three clinical studies were very encouraging and driven by previous scientific work which pointed in that direction. The phase I studies were encouraging, the phase IIb study was the largest ever done with 449 patients. And no matter how you slice it, the directionality was maintained. And so it absolutely gave us rationale for doing the phase III studies. So in retrospect, I don’t think anything different would have been done, and it was all scientifically driven. But now we’ve got two very good companies, Regeneron and Ophthotech, that have missed on the same target. So what does that say about the target? Well, the biology hasn’t changed. All the decades of work haven’t changed. And I don’t know. Does that mean that that target is no longer valid? Well, science would say that’s not the case because that science hasn’t changed. But yet again, we’ve got two very, very good, very reputable companies with excellent trials that have failed. I think that’s something that will take time for us to re-evaluate.
TS: So what does this mean for companies, younger companies, startup companies that aren’t pursuing PDGF but have some alternative approaches to treating wet AMD? There’s clearly an opening. We looked at a report issued by an analyst from Wilsons on Opthea, which is publicly traded in Australia. And the report starts, the headline is Retaining buy as another major rival falls in the clinic. And it’s a buy on Opthea. And the report opens with “Opthea’s most important rival in the space to develop combination therapies for wet advanced macular degeneration has failed in phase III clinical trials. The pathway to commercial partnering and development for Opthea’s OPT302 product is thus much clearer. Although Fovista’s failure is a blow for the wet AMD field to absorb, we do not see the major wet AMD companies stepping away from pursuing the combination approach.” So that clearly – that makes a lot of sense. But I asked Ronnie Gall the question if this sort of opens the door for startups in the space, if larger companies are going to be looking more aggressively for new solutions. And his response was interesting. Let’s have a listen.
RG: Well, I would argue the large companies will basically buy or are already set to buy anything that looks promising in wet AMD, and I think will continue to do so. I think the rate limiting step is not really consideration of what other therapies might be approved, but much more on the issue of do you actually have a quality lead. And I think that will continue to be the limiting question Is the failure of Fovista somehow enhancing their positioning? Probably, but only a little bit. I think the quality of the data is the determining factor. If anything, I would argue that it might be the other way around, which is the failure of Fovista after what people describe as a very promising phase II kind of suggests that we need to actually test the drugs in the full-blown large or large trial before we can get any confidence that those mechanism of action are successful. And that’s – it’s a double edged sword, right? On one side you reduce the number of competitors that you’re facing; on the other hand, we know to be a bit more skeptical of early stage trials.
TS: So the bar will be higher for startups developing new treatments for wet AMD. But there’s another approach as well, one we’re seeing. It’s the development of new ways of delivering existing drugs to the back of the eye. We’ve seen a number of deals of late. Ocular Therapeutix, of course, probably has the largest one. It signed a 300 million plus deal with Regeneron. They would collaborate on development of sustained release formulation of Regeneron’s VEGF trap, aflibercept. And we’re seeing Aerie of course is moving into the back of the eye. It’s got AR-13154, and it’s going to be looking for ways to deliver that to the back of the eye. Also Graybug. It’s a company that is taking an oncology drug and is trying to enroll – well, it’s enrolling it in phase I/II trials, and testing it as a potential treatment for wet AMD. We talked with Jeff Cleland. He’s the President and CEO of Graybug. Just a little bit about the Ophthotech news and the impact it has on other clinical programs that – or other companies with clinical programs that are trying to treat wet AMD. So let’s have this visit with Jeff Cleland, President and CEO of Graybug Vision.
TS: Hi, Jeff. We’re tracking the news from Ophthotech yesterday now, the phase III results. Clearly, a lot of disappointment in the sector from physicians, obviously from investors. And getting input from others in the space. I don’t want to say competitors, but others who are sort of targeting the wet AMD space. What was your takeaway from the results? Is it a positive for Graybug? A negative? A neutral? How do you see it?
Jeff Cleland: No, great question. I think the one thing that we’ve been focused on from the very beginning with our program has always been about the duration of exposure. And if you look at the current market research that was done even recently by AAO, the number one demand by physicians and patients alike is trying to deliver something for a longer period of time so that you can reduce the treatment burden. And we really feel that is the key advantage of our product that we’re leading with for our extended release formulation. And so I think whether or not it hits PDGF is less critical. I mean it would be great to have potentially better efficacy, but we think we can at least match anti-VEGF activity and have to do it only twice a year, which we think is the key.
TS: So whether or not the PDGF target is borne out, the jury is still out. Even though you’ve got two strikes against it –
TS: – you’re confident that with the VEGF contact and the way you’re delivering it, you’ve got a potential winner there.
JC: Exactly. And I think the other advantage is that unlike the ligand based approaches, you know, Lucentis, Eylea approaches where they’re targeting picking up free-floating VEGF that’s in the circulation or in the eye, we are actually selectively targeting the receptor and at the receptor level. So it’s going to be independent of the amount of ligand that’s present. So we think we have potentially, just on that benefit alone in targeting the VEGF receptors, we potentially have a significant benefit over those other treatments. And addition to the duration story that I mentioned. There’s the longer duration of exposure.
TS: When news of this size comes out, it can lead to some long memories from strategics who are interested in this space.
TS: How does this impact you? On one hand, you could say this is a potential competitor, at least temporarily, possibly longer, out of the picture. So it opens up doors for smaller companies. On the other hand, the bigger companies might say we want a lot more data now before we’re doing any kind of deal with anybody after seeing what we just saw.
TS: What are your feelings?
JC: I think it’s a great point. And I think that the key is always, from what I was taught even in my early days at my career at Genentech is you need to do very rigorous, well designed studies and generate data that’s reproducible in order to be successful in development of drugs. So that’s what our focus is, and our study designs that we have for the phase I and the phase II program, in particular the phase II that we’re planning to do could become a pivotal study. So we think there’s upside potential there, and the study size we’re doing is large enough that we can actually skip a step and go straight to a second phase III. So we’re not taking the short cuts that maybe some – I’m not saying everybody does that, but some people do take short cuts, and I don’t think that’s the right way to do drug development. I think we need to raise the right amount of money and do the right studies, and that’s what we’re doing.
TS: I’d like to end this Podcast once again with the physician perspective, specifically my conversation with Pravin Dugel, which was great. I asked him two questions. Number one, as a clinician who is involved in clinical trials, who knows what’s going on out there, what products have him most excited. And then the second part of my question, and we’ll just run the whole tape, you can hear the question itself, is I really wanted to understand how physicians view the demand for new products. On one hand we’re saying that existing products are very effective. On the other hand, we’re saying there’s a great demand for better products or improved products. And Pravin Dugel reconciles those two positions very well.
PD: To me, I think the most exciting thing right now, which is the closest, perhaps is the Roche-Genentech molecule, which is the bi-specific product, which is the RG product, VA2. Again, I say that because the preliminary studies have been very, very encouraging. I also say that because the molecule is so beautifully designed. You know, you’ve got a bi-specific product, not a co-formulated product, but a bi-specific product, meaning that the clearance rate is the same for both arms, where one arm is an anti-VEGFA and the other arm is an anti-Ang2, held together with an FC portion that has 2 mutations. And one mutation is to decrease the systemic exposure, and the other mutation is to decrease the inflammation or the [effector?] cell function. Again, just beautifully designed for ophthalmology. So I’m very, very encouraged by what that may show. The other one is the small company, Althea, which has an anti-VEGFC and D product allowing for combination treatment with an anti-VEGFA so pan-VEGF inhibition. We know that there are patients who are fairly resistant to anti-VEGFA monotherapy, and the hypothesis is that giving anti-VEGFA may upregulate VEFGC and D. So again, the preliminary studies have been encouraging. It makes sense from a scientific point of view. I think it has had some encouraging results. So for wet AMD in particular, those are the products. I also don’t want to forget the Regeneron co-formulated product, which is an anti-Ang2 with Eylea. It’s a co-formulation. And again, that would also seem to make scientific sense. So I do think that we have things in the pipeline that are quite encouraging. But remember that – and then that doesn’t even include the devices that we have. There’s the Ladder study going on with the long term delivery system that Genentech has. There are other nanotechnologies that are being developed as well. So remember that the bar – I used to say the bar is fairly low, but obviously it is not. The bar is quite high. But there are really two shots on goal. You know, one shot on goal is to develop a product or a device that will increase durability. Alone, you have a product that will be used. The other bar is to increase efficacy. If you increase efficacy, obviously efficacy is king, and that product will be used. If you have something that can do both, you know, you’ve got a home run. So there are lots of opportunities there for improvement.
TS: Terrific. And just – I don’t want to take too much of your time. One more question, thought, just –
PD: Oh, no problem. I got time.
TS: I do tend to think in abstracts and in financing and business deals and clinical trials. But as a physician, how dire is the need for something new? How many patients are you dealing with that are either hitting the wall or hitting the ceiling or frustrated and really need a new product to come in? Can you sort of characterize the situation for me?
PD: Yeah. It sounds almost like a – you know, Tom, it almost sounds like a contradictor statement where on the one had I say we really need something badly, and we have hit the ceiling, and the bar is low, and durability and efficacy and everything else. But on the other hand, I’m saying, Well, wow, that ceiling is really high. It sounds like I’m kind of talking out of both sides of my mouth, and it sounds like these are contradictory statements. But it’s really important to understand that they’re not contradictory statements. They’re not contradictory statements because the delta that we have currently between clinical trials and real life have never been greater. In other words, we are simply unable to do what clinical trials tell us to do in real life. And that is the real danger I see. That delta is the real danger. So let me give you an example. Clinical trials in macular degeneration, wet macular degeneration, for instance, have shown that that ceiling of anti-VEGFA monotherapy is really high. That’s true because clinical trials are done in a very artificial setting, where patients are extraordinarily motivated. They not every month, but every four weeks. And these clinical trials usually last for a year or two years. And that bar or that ceiling indeed is very high. But in real life, that’s simply not the way it works. Patients can’t come in every four weeks, and patients live for 10 to 15 years after the diagnosis of wet macular degeneration. So when you look at what happens in real life, the sustainability of our treatment regimen is simply not possible. The number of injections that patients are getting is half of what they should be getting in real life. The other part of it is there isn’t a single study, and this [grasps?] the most impactful. There isn’t a single study that lasts in real life for more than 4 years that shows anything but decline of vision in patients with wet macular degeneration to beneath baseline. I mean just think about that. These patients live for 10 to 15 to 20 years, but there’s not a single study that shows sustained benefit for more than four years. So just think of that delta between clinical trials and real life, and think of the opportunity that we have in real life for improvement of visual acuity and efficacy early, and sustainability of the treatment strategy, and sustained improvement of that vision over the lifetime of the patient.
TS: Well, that is a wrap. I think this is an excellent way to end our Podcast season for 2016. This is number 115, and I’m really, really grateful to have the opportunity to host this Podcast. There are so many people I would like to thank just quickly: Emmett Cunningham for his guidance, Craig Simak for giving me the opportunity to do this, Mario Escamilla, our producer, who has his work cut out for him with this Podcast. There’s a lot of elements to these Podcasts. You wouldn’t really appreciate how many different interviews and commentaries have to be woven together to make this work. So thank you to the folks on the Healthegy side for giving me the opportunity to do this. And thanks of course, in particular for this Podcast, to our guests. I spoke to many people. Not everyone made it into the Podcast, and that’s just a matter of time for me. I was trying to get this out in a timely manner. But I spoke with Adnan Butt, Jeff Cleland, Pravin Dugel, Ronnie Gall, Casey Kopczynski from Aerie, Yigal Nochomovitz from Citigroup, Amar Sawhney and Jason Slachter of Orr and Amar of course is from Ocular Therapeutix. They’re all great members of the OIS community. And I have to say when I put the call out to talk to people for these Podcasts, I get great responses. So that just tells me that you folks, our listeners are appreciating these Podcasts, and I’m very appreciative of you for listening. Again, this has been a great opportunity. We look forward to bringing you many more of these in the new year, and always willing to bring in new features or new ideas. So you can do many things to reach out to us. The easiest would be to give us a ranking on whatever podcast platform you’re listening to. And give some comments as well. We’d love to hear how we’re doing. Feel free also to shoot me an email. My email is email@example.com. Healthegy is the company that produces OIS and produces our OIS content. So it’s Tom@healthegy, the word health followed by the letters EGY.com. And finally, a great way to help us is just spread the word. If you have a colleague who likes innovation in ophthalmology as much as you do, please tell her or him about the Podcast. We’d love to have more listeners. So this has been a fantastic year. Thank you again. Happy holidays to all of you, and happy new year. We look forward to bringing you moiré OIS Podcasts in January, and of course I very much would love to see you all at one of our OIS’s coming up in 2017. Again, this is Tom Salemi, host of the OIS Podcast, content director for Healthegy, signing off for 2016 and wishing you a very great new year.