Ocular Therapeutix, Inc.

Good afternoon, ladies and gentlemen. Thank you for standing by, and welcome to the Ocular Therapeutics fourth quarter and year-end 2020 earnings conference call. At this time, all participants are on a listen-only mode. Later, we'll conduct a question-and-answer session, and instructions will follow at that time. It is now my pleasure to turn the call over to Donald Notman, Chief Financial Officer of Ocular Therapeutics. Please go ahead, sir.

Thank you, Valerie. Good afternoon, everyone, and thank you for joining us on our fourth quarter and year-end 2020 financial results and business update conference call. This afternoon after the close, we issued a press release providing an update on the company's product development programs and details of the company's financial results for the quarter and year-ended December 31, 2020. The press release can be accessed on the investors portion of our website at investors.ocutx.com. Leading the call today will be Anthony Modisich, our Chief Executive Officer, who will provide a summary of our corporate developments and an update on the commercial progress of Dextenza. Also speaking on the call today will be Dr. Michael Goldstein, our President Ophthalmology and Chief Medical Officer, who will give an update on our clinical developments and pipeline. Following Michael's remarks, I will provide an overview of the financial highlights for the fourth quarter before turning the call back over to Anthony for a summary and questions. For Q&A, we will also be joined by Patricia Kitchen, our Chief Operating Officer, and Scott Corning, our Senior Vice President, Commercial. As a reminder, on today's call, certain statements we will be making may be considered forward-looking for the purposes of the Private Securities Litigation Reform Act of 1995. In particular, any statements regarding our regulatory and product development plans, as well as our research activities, are forward-looking statements. These statements are subject to a variety of risks and uncertainties that may cause actual results to differ from those forecasted, including those risks described in our most recent annual report on Form 10-K filed this afternoon with the SEC. I will now turn the call over to Anthony.

Thank you, Donald. And welcome, everyone, to Ocular Therapeutics' fourth quarter and year-end earnings report. On all accounts, it was a great quarter, capping a notable year for Ocular. Despite the challenges due to the global pandemic, Ocular made tremendous progress with the commercial uptake of Dextenza, as well as advancing our pipeline of product candidates being developed to target several of the largest market opportunities in ophthalmology. For all of our success this past year, I would like to thank our dedicated employees, our patients and clinical investigators, the hundreds of individuals involved in our clinical trials, and our investors. Thank you all. Beginning with Dextenza, this past quarter we have seen Dextenza net sales rise to $6.9 million for the fourth quarter 2020, which represents more than 25% growth over the previous quarter and a more than 330% increase year-over-year comparison. Going forward, we expect Dextenza to be an increasingly significant net contributor to the company's cash position. While we have no hard data to determine cataract volumes in the U.S., we are aware of a number of closures and slowdowns in key ASCs, in particular HOPDs, in response to the recent spike in COVID cases. The bulk of these actions took place in January and February of this year. Fortunately, it extends to in-market sales. That is, sales from distributors to ASCs and HOPDs were brisk. Billable units neared 9,500 for the first two months of the year, representing a greater than 10% increase over the first two months of the fourth quarter, and nearly a 230% increase over prior year. Clearly, despite the pandemic, Dextenza's increasing share of cataract volume continues to drive impressive growth. In the final three quarters of the year, we expect what was a headwind in cataract volumes to become a tailwind as the backlog of delayed procedures gets scheduled into the market in addition to the normal flow of procedures. Contributing to the growth of Dextenza are two key factors. First and most importantly, Dextenza is a highly differentiated specialty ophthalmology product that relieves the daily steroid drop burden in the treatment of inflammation and pain following ophthalmic surgery. The awareness and appreciation of the product's benefits continues to grow both within the physician and patient communities. The product is simply performing as we had hoped. Secondly, Dextenza is also becoming easier to use for ASCs and HOPDs. We have had tremendous success partnering with administrators and working through issues related to reimbursement of both the product, Dextenza, and the associated procedure code, 0356T. In particular, we've been able to work with the MACs in standardizing payment for 0356T, and I'm now pleased to let you know that we now have coverage in all seven MACs representing 100% of the country. Additionally, in November, we announced the receipt of a permanent Category 1 CPT code for the placement of drug-eluting inserts in the nasolacrimal canaliculus that is scheduled to become effective in January of 2022. This new code is expected to replace the existing code, 0356D, and facilitate the coding and payment across all sites of service. Longer term, the Category 1 status for the procedure of inserting a drug-eluting insert into the nasolacrimal canaliculus delivers immediate potential benefits for Dextenza, but also for our two dry eye programs, if approved, which use the same route of administration and any other programs that we may develop which use an intercatalicular route of delivery. I should also note here that beginning in the second quarter this year, we plan to continue reporting our quarterly net sales to distributors for Dextenza, but expect to no longer report on our monthly in-market sales in billable units to ASCs and HOPDs. We realized during the launch period that that we needed to provide an extraordinary level of detail to our investors, so included this monthly in-market figure in billable units to give a better sense of performance while distributors adjusted inventories to ensure product availability. Now that our sales volume has reached its current level, sales from Ocular to its specialty distributors and sales from specialty distributors to the end customer closely parallel each other. To avoid confusion and protect our competitively sensitive data, we plan to return to the industry standard of reporting only on net sales to our specialty distributors. Beyond Xtensa, we continue to make excellent progress advancing our pipeline. At the start of the year, we presented angiogenesis and glaucoma 360, reporting promising interim Phase I data for both OTX-TKI for the treatment of wet age-related macular degeneration and other retinal diseases, and OTX-TIC, for the reduction of intraocular pressure in patients with primary open angle glaucoma or ocular hypertension. On the dry eye front, we announced phase one results in OTX-CSI for the treatment of dry eye disease in September, and we subsequently dosed the first patient in a phase two trial in September. For OTX-DED, we designed for short-term treatment of signs and symptoms of dry eye disease. We successfully filed a phase two enabling IND at the end of December and have just announced dosing of the first patient at the end of February. Each of our four clinical programs represent highly differentiated ophthalmology specialty product candidates that address key unmet needs in their respective disease states that address the key segments of global markets that in aggregate are estimated at over $20 billion in annual sales. Financially, the company is in a strong financial position. We have completed an oversubscribed public offering in December, that raised approximately $86 million in net proceeds. More recently, we received the initial upfront payment of $12 million related to the collaboration we entered into with AFMED in the fourth quarter 2020. Beyond the $12 million in upfront payments, we also have the potential to receive $91 million in future aggregate milestones and payments, as well as tiered double-digit royalties on future sales. All of this strengthens our balance sheet, Our cash and cash equivalents, along with our forecasted revenues from net sales of Dextenza and Reshore Sealant, are projected to provide sufficient cash to fund our planned operations, debt service, and capital expenditures through 2023. Most importantly, we believe our balance sheet is now sufficient to fund each of our four clinical programs to and through key Phase II clinical trials, which we believe could mark an inflection point for us. Clearly, we are thrilled with our progress on all fronts, and we look forward to another productive year. With an update on where we are on these product candidates, I will hand it over to our President of Ophthalmology and Chief Medical Officer, Dr. Michael Goldstein.