KALA - JP Morgan has weighed in here, slamming Jefferies' thesis.
With volatile trading this week and Eysuv is pricing emerging as a point of controversy, we wanted to share our latest thoughts on key incoming investor questions and on the Kala story more broadly. Overall, our core thesis for Kala remains unchanged despite the recent selloff and we remain highly confident that Eysuv is’ product pricing will allow for strong payer coverage, relatively fast payer reimbursement decisions, and reasonable copay levels, which support strong uptake for a potential product launch. More broadly, we see the recent KALA share pullback as a significant buying opportunity ahead of an expected Eysuv is approval next month (Oct 30th PDUFA) and product launch immediately post-approval. Reiterate OW.? How are you thinking about pricing for Eysuv is? We see Kala pricing Eysuv is at a discount to current dry eye therapies. Although Eysuv is has not yet finalized pricing, we expect the product to price at a discount to current branded dry eye therapies Restas is and Xiidra (~$700/script gross price) and at a premium to branded post-surgical steroids such as Inveltys, Lotemax, and Durezol (~$300/script gross price). For our modeling estimates, we are assuming $400/$200 per script gross/net price range falling closer the post-surgical market, which could prove conservative in our view.? Could Eysuvis pricing limit the dry eye market opportunity?We do not see meaningful pricing concerns and view the product’s profile facilitating broad payer coverage and reimbursement. While Eysuvis pricing has emerged as a point of controversy, we believe the gross/WAC price level is less relevant data for patients and physicians compared to 1) the availability of drug payer coverage and copay requirements and 2) the cost to patients relative to other branded/generic products. Importantly, we expect broad payer coverage, relatively fast reimbursement decisions, and reasonable copay levels ($20-$50 range for most patients) based on Eysuvis’ product profile (only FDA approved prescription treatment for acute dry eye) and market research (significant physician interest, high unmet patient need). ? Overall, we expect strong uptake and market penetration for Eysuvis if the product achieves strong payer access in-line with our expectations. We see a significant Eysuvis dry eye market opportunity as the key value driver for Kala shares and our forecast >$750mm peak sales underpins significant share upside from here (which could prove conservative).? What are the prospects for Eysuvis relative to existing product alternatives?We highlight significant dry eye market opportunity with high unmet need and under served patient population.We see a significant market opportunity for Eysuvis based on conservative pricing and market penetration assumptions with >17 million diagnosed patients and few treatment alternatives.We see Eysuvis being used in both chronic and episodic patients. For chronic dry eye, we see a role for Eysuvis as patients are initiating therapy (as current chronic treatments have a delayed onset of action) and as flares continue to occur even after chronic therapy has been initiated. In episodic dry eye, we see a large opportunity to address flares that are associated with the condition, which are largely treated with OTC drops or less frequently with off-label steroids. Importantly, we believe a potent, FDA-approved prescription alternative to existing products would address a clear unmet need in the market. We currently forecast peak market share of approximately 8% of the diagnosed dry eye market for Eysuvis over time.
What’s your view of the probability of an Eysuvis FDA approval? We see the Eysuvis refiling as a very high POS (95%+) event. We see a high likelihood of an Eysuvis approval based on very clean efficacy and safety profile for the Phase 3 STRIDE-3 study, which fully addresses the FDA’s request for an additional study demonstrating statistically significant benefit for dry eye symptoms. Further, we have higher confidence on Eysuvis’ CMC and GMP related filing requirements given that the FDA has already approved Inveltys (same molecule and manufacturing sites) and the second pass FDA filing process.
What drove the first pass FDA CRL for Eysuvis and requirement for a third Phase 3 trial? As a reminder, KALA hit on 3 of 4 of its primary endpoints in its previous STRIDE 1 and 2 studies (with a near miss on the 4th endpoint) and received a CRL on its NDA filing with the FDA requiring a second trial to meet the requirement for demonstrated efficacy on the signs and symptoms of dye eye disease in two studies. Kala’s positive STRIDE 3 results earlier this year fulfill this requirement, and the company now has a EysuvisOct 30th PDUFAnext month(6-month second-pass review)setting up an expected late 2020 product launch.
What are the key catalysts ahead for Kala? We highlight the KOL investor and analyst event later this week on Thursday (Sept 17th), followed by the Eysuvis Oct 30th PDUFAnext month and Eysuvis product launch immediately post-approval. We also watching ongoing Inveltys product trends as COVID-19 disruptions recede in the post-surgical ocular pain/inflammation market.
