Market Overview

Aerie Pharmaceuticals Reports Second Quarter 2018 Financial Results and Provides Business Update

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Conference Call and Webcast Today, August 8th,
at 5:00 p.m. ET

Aerie Pharmaceuticals, Inc. (NASDAQ:AERI), an ophthalmic pharmaceutical
company focused on the discovery, development and commercialization of
first-in-class therapies for the treatment of patients with open-angle
glaucoma, retina diseases and other diseases of the eye, today reported
financial results for the second quarter ended June 30, 2018, along with
a general business update.

Aerie Highlights

  • The Rhopressa® (netarsudil ophthalmic solution) 0.02% U.S.
    commercial launch commenced on April 30, 2018, and second quarter net
    revenues on a U.S. GAAP (generally accepted accounting principles)
    basis totaled $2.4 million.
  • As of August 1, 2018, Rhopressa® market access has
    increased to approximately 80% (up from 70% as last reported) of
    commercial lives, including 55% in Tier 3 and 25% in preferred brand
    Tier 2. Medicare Part D coverage is now 12% (up from 10% as last
    reported) in Tier 2.
  • The RoclatanTM (netarsudil/latanoprost ophthalmic solution)
    0.02%/0.005% PDUFA (Prescription Drug User Fee Act) date has been set
    for March 14, 2019, and there are no current expectations for an
    advisory committee.
  • International expansion activities are progressing with the ongoing
    RoclatanTM Mercury 3 Phase 3 clinical trial in preparation
    for potential regulatory submission in Europe, and the expected
    expansion into Japan with an additional Rhopressa® Phase 2
    clinical trial in preparation for potential regulatory submission in
    Japan.
  • Pre-IND (Investigational New Drug application) activities are well
    underway for the further advancement of Aerie's retina program
    candidates, including AR-13503 (Rho kinase and Protein kinase C
    inhibitor implant) and AR-1105 (dexamethasone steroid implant), and
    the recently announced expansion of our agreement with DSM opens new
    opportunities for further advancement of Aerie's ophthalmic pipeline.
  • Cash burn for the first half of 2018 totaled approximately $103
    million, with $286.1 million in cash, cash equivalents and investments
    as of June 30, 2018. Shares outstanding at quarter-end totaled
    39,839,373 (or 45,208,820 after giving effect to the recently
    announced issuance of shares to certain entities affiliated with
    Deerfield Management Company L.P. in connection with the conversion of
    the convertible notes).
  • Aerie reiterated that it expects full year 2018 Rhopressa®
    net revenues in the range of $20 million to $30 million, on a U.S.
    GAAP basis, and total 2018 cash burn in the range of $200 million to
    $210 million.

"The physician feedback to date from the Rhopressa® launch
has been quite positive, and we have seen solid uptake in prescription
volumes along with substantial progress in market access. We have
obtained a high degree of access to prescribing physicians, both in
their offices and at educational venues, as they had been anxiously
awaiting the introduction of Rhopressa®, and they are now
experiencing how Rhopressa® performs when taken in
combination with other therapies in a real-world setting. We are also
delighted with the FDA's response on the RoclatanTM review
process, and we are in the process of refining our RoclatanTM
launch plans," said Vicente Anido, Jr., Ph.D., Chairman and Chief
Executive Officer. "We remain very well-financed, including the
flexibility of having our $100 million undrawn credit facility, as we
continue with our preclinical retina program and global expansion
activities."

Second Quarter 2018 Financial Results

As of June 30, 2018, Aerie had cash, cash equivalents and investments of
$286.1 million. For the second quarter ended June 30, 2018, Aerie
reported net product revenues of $2.4 million related to sales of
Rhopressa®, which was launched in the United States on April
30, 2018. The Company reported a GAAP net loss of $55.0 million, or
$1.40 loss per share, for the second quarter of 2018, compared to a net
loss of $28.4 million and $0.82 loss per share for the second quarter of
2017. The weighted average number of shares outstanding utilized in the
calculation of net loss per share was 39,204,762 and 34,783,195 for the
second quarters of 2018 and 2017, respectively. Total shares outstanding
as of June 30, 2018 were 39,839,373.

The $55.0 million net loss for the second quarter of 2018 is primarily
comprised of $58.0 million in total operating expenses, including $18.2
million in research and development expenses and $39.9 million in
selling, general and administrative expenses. Excluding $10.3 million of
stock-based compensation expense, adjusted total operating expenses for
the second quarter of 2018 were $47.7 million, with adjusted research
and development expenses of $15.6 million and adjusted selling, general
and administrative expenses of $32.1 million. Total adjusted net loss
for the second quarter of 2018 was $44.7 million, and adjusted net loss
per share was $1.14.

The $28.4 million net loss for the second quarter of 2017 is primarily
comprised of $27.8 million in total operating expenses, including $10.6
million in research and development expenses and $17.2 million in
selling, general and administrative expenses. Excluding $6.7 million of
stock-based compensation expense, adjusted total operating expenses for
the second quarter of 2017 were $21.1 million, with adjusted research
and development expenses of $9.2 million and adjusted selling, general
and administrative expenses of $11.9 million. Total adjusted net loss
for the second quarter of 2017 was $21.8 million, and adjusted net loss
per share was $0.63.

The higher operating expenses in the second quarter of 2018 as compared
to the second quarter 2017 primarily reflect increased activities
associated with the expansion of our employee base to support the growth
of our operations, and activities associated with our Rhopressa®
commercialization efforts.

Conference Call / Webcast Information

Aerie management will host a live conference call and webcast at 5:00
p.m. Eastern Time today to discuss Aerie's financial results and provide
a general business update.

The live webcast and a replay may be accessed by visiting the Company's
website at http://investors.aeriepharma.com.
Please connect to the Company's website at least 15 minutes prior to the
live webcast to ensure adequate time for any software download that may
be needed to access the webcast. Alternatively, please call (888)
734-0328 (U.S.) or (678) 894-3054 (international) to listen to the live
conference call. The conference ID number for the live call is 1773437.
Please dial in approximately 10 minutes prior to the call. Telephone
replay will be available approximately two hours after the call. To
access the replay, please call (855) 859-2056 (U.S.) or (404) 537-3406
(international). The conference ID number for the replay is 1773437. The
telephone replay will be available until August 15, 2018.

About Aerie Pharmaceuticals, Inc.

Aerie is an ophthalmic pharmaceutical company focused on the discovery,
development and commercialization of first-in-class therapies for the
treatment of patients with open-angle glaucoma, retina diseases and
other diseases of the eye. Aerie's first product, Rhopressa® (netarsudil
ophthalmic solution) 0.02%, a once-daily eyedrop approved by the U.S.
Food and Drug Administration (FDA) for the reduction of elevated
intraocular pressure (IOP) in patients with open-angle glaucoma or
ocular hypertension, was launched in the United States in April 2018. In
clinical trials of Rhopressa®, the most common adverse
reactions were conjunctival hyperemia, cornea verticillata, instillation
site pain, and conjunctival hemorrhage. More information about Rhopressa®,
including the product label, is available at www.rhopressa.com.
Aerie's advanced-stage product candidate, RoclatanTM (netarsudil/latanoprost
ophthalmic solution) 0.02%/0.005%, a fixed-dose combination of Rhopressa® and
the widely-prescribed PGA (prostaglandin analog) latanoprost, achieved
its 3-month primary efficacy endpoint in two Phase 3 registration
trials, Mercury 1 and Mercury 2, and also showed safety and efficacy
throughout 12 months in Mercury 1. Aerie submitted the RoclatanTM
New Drug Application (NDA) in May 2018 and, in July 2018, the FDA set
the PDUFA (Prescription Drug User Fee Act) goal date for the completion
of the FDA's review of the RoclatanTM NDA for March 14, 2019.
Aerie continues to focus on global expansion and the development of
additional product candidates and technologies in ophthalmology,
including for wet age-related macular degeneration and diabetic macular
edema. More information is available at www.aeriepharma.com.

Forward-Looking Statements

This press release contains forward-looking statements for purposes of
the safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. We may, in some cases, use terms such as "predicts,"
"believes," "potential," "proposed," "continue," "estimates,"
"anticipates," "expects," "plans," "intends," "may," "could," "might,"
"will," "should," "exploring," "pursuing" or other words that convey
uncertainty of future events or outcomes to identify these
forward-looking statements. Forward-looking statements include
statements regarding our intentions, beliefs, projections, outlook,
analyses or current expectations concerning, among other things: our
expectations regarding the commercialization and manufacturing of
Rhopressa® and RoclatanTM or any future product
candidates, including the timing, cost or other aspects of the
commercial launch of Rhopressa® and RoclatanTM or
any future product candidates; our commercialization, marketing,
manufacturing and supply management capabilities and strategies; the
success, timing and cost of our ongoing and anticipated preclinical
studies and clinical trials for Rhopressa®, with respect to
regulatory approval outside of the United States or additional
indications, and RoclatanTM or any future product candidates,
including statements regarding the timing of initiation and completion
of the studies and trials; our guidance for full year 2018; our
estimates regarding expected net revenues, expected cash burn,
anticipated capital requirements and our needs for additional financing;
our expectations related to the use of proceeds from our equity and debt
financings and credit facility; our expectations regarding the
effectiveness of Rhopressa®, RoclatanTM or any
future product candidates and results of our clinical trials; the timing
of and our ability to request, obtain and maintain FDA or other
regulatory authority approval of, or other action with respect to, as
applicable, Rhopressa® and RoclatanTM or any
future product candidates, including the expected timing of, and timing
of regulatory and/or other review of, filings for, as applicable,
Rhopressa® and RoclatanTM or any future product
candidates; the potential advantages of Rhopressa® and
RoclatanTM or any future product candidates; our plans to
pursue development of additional product candidates and technologies
within and beyond ophthalmology, including development of Rhopressa®
and RoclatanTM for additional indications and other
therapeutic opportunities; our plans to explore possible uses of our
existing proprietary compounds beyond glaucoma, including development of
our retina program; our ability to protect our proprietary technology
and enforce our intellectual property rights; and our expectations
regarding strategic operations, including our ability to in-license or
acquire additional ophthalmic products, product candidates or
technologies. By their nature, forward-looking statements involve risks
and uncertainties because they relate to events, competitive dynamics,
industry change and other factors beyond our control, and depend on
regulatory approvals and economic and other environmental circumstances
that may or may not occur in the future or may occur on longer or
shorter timelines than anticipated. We discuss many of these risks in
greater detail under the heading "Risk Factors" in the quarterly and
annual reports that we file with the Securities and Exchange Commission
(SEC). In particular, FDA approval of Rhopressa® does not
constitute FDA approval of RoclatanTM, and there can be no
assurance that we will receive FDA approval for RoclatanTM or
any future product candidates. FDA approval of Rhopressa®
also does not constitute regulatory approval of Rhopressa® in
jurisdictions outside the United States and there can be no assurance
that we will receive regulatory approval for Rhopressa® in
jurisdictions outside the United States. Our receipt of a Prescription
Drug User Fee Act (PDUFA) goal date notification for RoclatanTM
does not constitute FDA approval of the RoclatanTM New Drug
Application (NDA), and there can be no assurance that the FDA will
complete its review by the PDUFA goal date of March 14, 2019, that the
FDA will not require changes or additional data that must be made or
received before it will approve the NDA, if ever, or that the FDA will
approve the NDA. In addition, the preclinical research discussed in this
press release is preliminary and the outcome of such preclinical studies
may not be predictive of the outcome of later clinical trials. Any
future clinical trials may not demonstrate safety and efficacy
sufficient to obtain regulatory approval related to the preclinical
research findings discussed in this press release, and we may suspend or
discontinue research programs at any time for any reason.
Forward-looking statements are not guarantees of future performance and
our actual results of operations, financial condition and liquidity, and
the development of the industry in which we operate may differ
materially from the forward-looking statements contained in this press
release. Any forward-looking statements that we make in this press
release speak only as of the date of this press release. We assume no
obligation to update our forward-looking statements whether as a result
of new information, future events or otherwise, after the date of this
press release.

Non-GAAP Financial Measures

To supplement our financial statements, which are prepared and presented
in accordance with GAAP, we use the following non-GAAP financial
measures, some of which are discussed above: adjusted net loss, adjusted
total operating expenses, adjusted research and development expenses,
adjusted selling, general and administrative expenses, and adjusted net
loss per share. For reconciliations of non-GAAP measures to the most
directly comparable GAAP measures, please see the "Reconciliation of
GAAP to Non-GAAP Financial Measures" and "Reconciliation of GAAP Net
Loss Per Share to Adjusted Net Loss Per Share" tables in this press
release.

We believe these non-GAAP financial measures provide investors with
useful supplemental information about the financial performance of our
business, enable comparison of financial results between periods where
certain items may vary independent of business performance, and allow
for greater transparency with respect to key metrics used by management
in operating our business.

The presentation of these financial measures is not intended to be
considered in isolation from, or as a substitute for, financial
information prepared and presented in accordance with GAAP. Investors
are cautioned that there are material limitations associated with the
use of non-GAAP financial measures as an analytical tool. In particular,
the adjustments to our GAAP financial measures reflect the exclusion of
stock-based compensation expense, which is recurring and will be
reflected in our financial results for the foreseeable future. In
addition, these measures may be different from non-GAAP financial
measures used by other companies, limiting their usefulness for
comparison purposes. We compensate for these limitations by providing
specific information regarding the GAAP amounts excluded from these
non-GAAP financial measures.

   
AERIE PHARMACEUTICALS, INC.
Consolidated Balance Sheets
(Unaudited)

(in thousands)

 
JUNE 30, 2018   DECEMBER 31, 2017  
Assets
Current assets
Cash and cash equivalents $ 270,648 $ 197,569
Short-term investments 15,455 52,086
Accounts receivable, net 1,125
Inventory 5,747
Prepaid expenses and other current assets 2,503   4,487  

Total current assets

295,478 254,142
Property, plant and equipment, net 54,879 31,932
Other assets 2,604   4,202  
Total assets $ 352,961   $ 290,276  
 
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 8,757 $ 6,245
Accrued expenses and other current liabilities 20,016   18,939  
Total current liabilities 28,773 25,184
Convertible notes, net 123,999 123,845
Other non-current liabilities 5,309   5,648  
Total liabilities 158,081   154,677  
Stockholders' equity
Common stock 40 37
Additional paid-in capital 754,437 597,318
Accumulated other comprehensive loss (9 ) (28 )
Accumulated deficit (559,588 ) (461,728 )
Total stockholders' equity 194,880   135,599  
Total liabilities and stockholders' equity $ 352,961   $ 290,276  
 
   
AERIE PHARMACEUTICALS, INC.
Consolidated Statements of Operations
(Unaudited)

(in thousands, except share and per share data)

 

THREE MONTHS ENDED
JUNE 30,

SIX MONTHS ENDED
JUNE 30,

2018   2017 2018   2017
Product revenues, net $ 2,423   $   $ 2,423   $
Total revenues, net 2,423     2,423    
Costs and expenses:
Cost of goods sold 59 59
Selling, general and administrative 39,891 17,153 67,714 31,628
Research and development 18,157   10,615   31,129   21,569  
Total costs and expenses 58,107   27,768   98,902   53,197  
Loss from operations (55,684 ) (27,768 ) (96,479 ) (53,197 )
Other income (expense), net 663   (618 ) 759   (930 )
Loss before income taxes (55,021 ) (28,386 ) (95,720 ) (54,127 )
Income tax expense 3   47   3   93  
Net loss $ (55,024 ) $ (28,433 ) $ (95,723 ) $ (54,220 )
Net loss per common share—basic and diluted $ (1.40 ) $ (0.82 ) $ (2.46 ) $ (1.58 )
Weighted average number of common shares outstanding—basic and
diluted
39,204,762   34,783,195   38,903,469   34,283,073  
 
   
AERIE PHARMACEUTICALS, INC.
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)

(in thousands)

 

THREE MONTHS ENDED
JUNE 30,

SIX MONTHS ENDED
JUNE 30,

2018   2017 2018   2017
Net loss (GAAP) $ (55,024 ) $ (28,433 ) $ (95,723 ) $ (54,220 )
Add-back: stock-based compensation expense 10,318   6,665   19,037   11,515  
Adjusted Net loss $ (44,706 ) $ (21,768 ) $ (76,686 ) $ (42,705 )
 
Selling, general and administrative expenses (GAAP) $ 39,891 $ 17,153 $ 67,714 $ 31,628
Less: stock-based compensation expense (7,760 ) (5,251 ) (14,444 ) (9,037 )
Adjusted selling, general and administrative expenses $ 32,131   $ 11,902   $ 53,270   $ 22,591  
 
Research and development expenses (GAAP) $ 18,157 $ 10,615 $ 31,129 $ 21,569
Less: stock-based compensation expense (2,558 ) (1,414 ) (4,593 ) (2,478 )
Adjusted research and development expenses $ 15,599   $ 9,201   $ 26,536   $ 19,091  
 
Total operating expenses (GAAP) $ 58,048 $ 27,768 $ 98,843 $ 53,197
Less: stock-based compensation expense (10,318 ) (6,665 ) (19,037 ) (11,515 )
Adjusted total operating expenses $ 47,730   $ 21,103   $ 79,806   $ 41,682  
 
   
AERIE PHARMACEUTICALS, INC.
Reconciliation of GAAP Net Loss Per Share to Adjusted Net Loss
Per Share

(Unaudited)

 

THREE MONTHS ENDED
JUNE 30,

SIX MONTHS ENDED
JUNE 30,

2018   2017 2018   2017
Net loss per common share—basic and diluted (GAAP) $ (1.40 ) $ (0.82 ) $ (2.46 ) $ (1.58 )
Add-back: stock-based compensation expense   0.26     0.19     0.49     0.34  
Adjusted Net loss per share—basic and diluted $ (1.14 ) $ (0.63 ) $ (1.97 ) $ (1.24 )
Weighted average number of common shares outstanding—basic and
diluted
  39,204,762     34,783,195     38,903,469     34,283,073  
 

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