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Kala Pharmaceuticals Reports Second Quarter 2018 Financial Results

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– PDUFA Target Action Date for INVELTYS™ is August 24, 2018 –

– Defined Strategy for KPI-121 0.25% in Dry Eye Disease –

– Strengthened Commercial Team in Preparation for INVELTYS Launch –

Kala Pharmaceuticals, Inc. (NASDAQ:KALA), a biopharmaceutical company
focused on the development and commercialization of therapies using its
proprietary mucus-penetrating particle (MPP) technology with an initial
focus on the treatment of eye diseases, today reported financial results
for the second quarter ended June 30, 2018.

"Since our last update we have made excellent progress," said Mark
Iwicki, Chairman and Chief Executive Officer. "We have defined our
strategy for KPI-121 0.25% in dry eye disease and have initiated the
STRIDE 3 trial incorporating changes to the design that we believe will
improve the probability of success. We have also continued to strengthen
our commercial team in preparation for the potential approval and
commercialization of INVELTYS, our twice-daily corticosteroid candidate
for the treatment of post-operative ocular inflammation and pain."

Recent Highlights

PDUFA Date for INVELTYS of August 24th: The U.S. Food and
Drug Administration (FDA) has given INVELTYS a target action date under
the Prescription Drug User Fee Act (PDUFA) of August 24, 2018. If
approved, INVELTYS could be the first FDA-approved twice-daily ocular
corticosteroid indicated for the treatment of post-operative ocular
inflammation and pain. INVELTYS utilizes Kala's proprietary MPP
technology to enhance penetration into target tissues of the eye,
resulting in a favorable treatment profile with a unique twice-daily
dosing regimen designed to help maximize patient compliance.

Defined Path for KPI-121 0.25% in Dry Eye Disease: Following a
productive meeting with the FDA, Kala announced its strategy for KPI-121
0.25%, which if approved could be the first FDA-approved product for the
short-term treatment of dry eye disease.

  • Kala plans to submit a New Drug Application (NDA) during the second
    half of 2018 including data from one Phase 2 and two Phase 3 efficacy
    and safety trials.
  • In addition, based upon the FDA's recommendation, Kala has initiated
    an additional Phase 3 clinical trial, STRIDE 3 (STRIDE - Short Term
    Relief In Dry Eye), evaluating KPI-121 0.25% for the temporary relief
    of the signs and symptoms of dry eye disease. Kala believes that the
    changes made to the design of STRIDE 3 will improve the probability of
    success. The Company expects to report top-line results for STRIDE 3
    in the fourth quarter of 2019.

Strengthened Commercial Organization: Kala continues to
strengthen its commercial team in anticipation of the potential launch
of INVELTYS. During the second quarter, Kala hired five seasoned
industry leaders for key roles. Kala plans to continue growing its
commercial organization in preparation for the potential launch of
INVELTYS, including beginning to hire its own specialty ophthalmology
sales force.

Second Quarter 2018 Financial Results

  • Cash Position: As of June 30, 2018, Kala had cash of $91.2 million
    compared to $114.6 million as of December 31, 2017. Kala anticipates
    that its existing cash on hand will enable it to fund operations
    through at least the next twelve months.
  • R&D Expenses: For the quarter ended June 30, 2018, research and
    development expenses were $7.4 million compared to $8.1 million for
    the same period in 2017. The decrease in research and development
    expenses is primarily due to a $1.9 million decrease in external costs
    associated with the completion of our Phase 3 clinical trials of
    INVELTYS for the treatment of inflammation and pain following cataract
    surgery and KPI-121 0.25% for the short-term treatment of dry eye
    disease. This decrease was offset by a $1.4 million increase in
    employee-related costs due to the additional hiring of clinical and
    regulatory personnel, overall merit increases and an increase in stock
    compensation expense related to stock option grants.
  • G&A Expenses: For the quarter ended June 30, 2018, general and
    administrative expenses were $7.2 million compared to $1.6 million for
    the same period in 2017. The increase in general and administrative
    expenses is attributable to a $2.5 million increase in
    employee-related costs, consisting of a $1.3 million increase in
    general and administrative employee headcount expense and merit
    increases and a $1.2 million increase in stock compensation expenses
    related to stock options granted during 2018. In addition, the Company
    incurred a $1.2 million increase in costs associated with legal,
    accounting and finance activities, primarily as a result of operating
    as a public company, and a $1.9 million increase in commercial-related
    costs as the Company advances its product candidates toward regulatory
    approval.
  • Operating Loss: Loss from operations for the quarter ended June 30,
    2018 was $14.5 million compared to $9.6 million for the same period in
    2017.
  • Net Loss: Net loss was $14.6 million, or $0.60 per share, for the
    quarter ended June 30, 2018, compared to a net loss of $11.0 million,
    or $9.30 per share, for the same period in 2017.

About INVELTYS™

INVELTYS™ (KPI-121 1%) is a twice-a-day corticosteroid for the treatment
of inflammation and pain following ocular surgery. INVELTYS utilizes
Kala's proprietary mucus-penetrating particle (MPP) technology to
enhance penetration into target tissues of the eye. In preclinical
studies, MPP increased delivery of the active ingredient, loteprednol
etabonate (LE), into ocular tissues more than three-fold by facilitating
penetration through the tear film mucus. Two Phase 3 clinical trials
have been successfully completed for INVELTYS and statistical
significance was achieved for both primary efficacy endpoints in both
trials. In each of these trials, INVELTYS was well tolerated with no
treatment-related serious adverse events observed. Kala believes
INVELTYS has a favorable profile for the treatment of inflammation and
pain following ocular surgery. The NDA for INVELTYS was accepted for
review by the FDA in January 2018 and given a target action date under
the Prescription Drug User Fee Act (PDUFA) of August 24, 2018. The brand
name for KPI-121 1%, INVELTYS, has been conditionally approved by the
FDA.

About KPI-121 0.25%

Kala is developing KPI-121 0.25% for the temporary relief of the signs
and symptoms of dry eye disease utilizing a two-week course of therapy
administered four times a day. Dry eye disease is a chronic, episodic,
multifactorial disease affecting the tears and ocular surface and can
involve tear film instability, inflammation, discomfort, visual
disturbance and ocular surface damage. KPI-121 0.25% utilizes Kala's
mucus-penetrating particle (MPP) technology to enhance penetration of
the active ingredient, loteprednol etabonate (LE), into target tissue of
the eye. In preclinical studies, MPP technology increased delivery of LE
into ocular tissues more than three-fold compared to current LE products
by facilitating penetration through the tear film mucus. Kala has
completed one Phase 2 and two Phase 3 clinical trials of KPI-121 0.25%.
Kala believes that KPI-121 0.25%'s broad mechanism of action, rapid
onset of relief of both signs and symptoms, favorable tolerability and
safety profile and the potential to complement existing therapies, could
result in a favorable profile for the management of dry eye flares and
other dry eye associated conditions.

About Kala

Kala is a biopharmaceutical company focused on the development and
commercialization of therapeutics using its proprietary
mucus-penetrating particle (MPP) technology, with an initial focus on
the treatment of eye diseases. Kala has applied the MPP technology to a
corticosteroid designed for ocular applications, resulting in two lead
product candidates. Kala's product candidates are INVELTYS™ (KPI-121 1%)
for the treatment of inflammation and pain following ocular surgery, for
which an NDA has been accepted for review by the FDA with a target PDUFA
date of August 24, 2018, and KPI-121 0.25% for the temporary relief of
the signs and symptoms of dry eye disease.

Forward Looking Statements

This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, that
involve substantial risks and uncertainties, including statements
regarding the Company's product candidates including INVELTYS (KPI-121
1%) for the treatment of inflammation and pain following ocular surgery
and KPI-121 0.25% for the temporary relief of the signs and symptoms of
dry eye disease, INVELTYS being well-received by physicians and patients
as a twice-daily ocular corticosteroid, the target action date under the
PDUFA of August 24, 2018 for INVELTYS, the Company's belief that the
changes made to the design of STRIDE 3 will improve the probability of
success for the trial, the Company's existing cash on hand enabling it
to fund operations through at least the next twelve months, the
anticipated reporting of STRIDE 3 topline results in the fourth quarter
of 2019, and the Company's plans to file an NDA for KPI-121 0.25% with
the FDA during the second half of 2018. All statements, other than
statements of historical facts, contained in this press release,
including statements regarding the Company's strategy, future
operations, future financial position, future revenue, projected costs,
prospects, plans and objectives of management, are forward-looking
statements. The words "anticipate," "believe," "estimate," "expect,"
"intend," "may," "plan," "predict," "project," "target," "potential,"
"will," "would," "could," "should," "continue" and similar expressions
are intended to identify forward-looking statements, although not all
forward-looking statements contain these identifying words. The Company
may not actually achieve the plans, intentions or expectations disclosed
in its forward-looking statements, and you should not place undue
reliance on such forward-looking statements. Actual results or events
could differ materially from the plans, intentions and expectations
disclosed in the forward-looking statements as a result of various risks
and uncertainties including, but not limited to: whether the data from
the Company's Phase 3 clinical trials of KPI-121 0.25% will warrant
submission and filing of an NDA on the timeline expected, or at all;
whether any additional clinical trials will be initiated or required for
KPI-121 0.25% prior to submission or filing of an NDA, or at all, and
whether any such NDA will be accepted for filing and/or approved; the
Company's ability to initiate and complete clinical trials on the
timeline expected, or at all; whether the results of clinical trials
will be positive and/or replicate the results from earlier clinical
development and/or preclinical studies; that post-hoc analyses are
normally given less weight by regulatory authorities than pre-specified
analyses; whether the Company's NDA for INVELTYS will be approved by its
PDUFA date, or at all; uncertainties inherent in the availability and
timing of data from ongoing clinical trials; uncertainties related to
the Company's ability to obtain regulatory approvals to conduct trials
or to market products; the Company's ability to build a sales force and
prepare for commercial launch on the timeline expected, or at all;
whether the Company's cash resources will be sufficient to fund the
Company's foreseeable and unforeseeable operating expenses and capital
expenditure requirements for the Company's expected timeline; other
matters that could affect the availability or commercial potential of
the Company's product candidates; and other important factors, any of
which could cause the Company's actual results to differ from those
contained in the forward-looking statements, discussed in the "Risk
Factors" section of the Company's most recently filed Quarterly Report
on Form 10-Q and other filings the Company makes with the Securities and
Exchange Commission. These forward-looking statements represent the
Company's views as of the date of this release and should not be relied
upon as representing the Company's views as of any date subsequent to
the date hereof. The Company does not assume any obligation to update
any forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law.

 
Kala Pharmaceuticals, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
   
June 30, December 31,
2018 2017
Cash $ 91,205 $ 114,565
Working Capital(1) 82,539 100,341
Total Assets 95,590 116,546
Total Stockholders' Equity 68,093 89,679
 

(1)The company defines working capital as current
assets less current liabilities. See the Company's consolidated
financial statements for further details regarding its current
assets and current liabilities.

 
 
Kala Pharmaceuticals, Inc.
Consolidated Statements of Operations
(In thousands, except share and per share data)
(Unaudited)
       
Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
Operating expenses:
Research and development $ 7,368 $ 8,071 $ 13,024 $ 16,110
General and administrative   7,151     1,559     12,633     3,091  
Total operating expenses   14,519     9,630     25,657     19,201  
Loss from operations (14,519 ) (9,630 ) (25,657 ) (19,201 )
Other income (expense):
Interest income 313 37 522 83
Interest expense (414 ) (208 ) (781 ) (406 )
Change in fair value of warrant liability   -     (1,185 )   -     (1,221 )
Total other income (expense)   (101 )   (1,356 )   (259 )   (1,544 )
Net loss $ (14,620 ) $ (10,986 ) $ (25,916 ) $ (20,745 )
Net loss per share—basic and diluted $ (0.60 ) $ (9.30 ) $ (1.06 ) $ (17.56 )
Weighted average shares outstanding—basic and diluted   24,567,103     1,181,429     24,554,834     1,181,429  
 

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