Ocular Therapeutix, Inc.

Good afternoon, ladies and gentlemen. Thank you for standing by, and welcome to the Ocular Therapeutics second quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will 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, Operator. Good afternoon, everyone, and thank you for joining us on our second quarter 2021 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 ended June 30, 2021. 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 President and Chief Executive Officer, who will provide a summary of our corporate developments and an update on the commercial progress of Dextenta. 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 second quarter before turning the call back over to Anthony for a summary and questions. For Q&A, we'll be joined by Scott Corning, our Senior Vice President, Commercial, and Chris White, our Senior Vice President, Business and Corporate Development. 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 quarterly report on Form 10Q, filed this afternoon with the SEC. I will now turn the call over to Anthony.

Thank you, Donald, and welcome everyone to Ocular Therapeutics' second quarter 2021 earnings reports. It's been a good first half of the year, and I'm proud of the team's efforts as we continue our efforts to build a leading ophthalmology company with therapeutics that have the potential to transform the way common eye diseases are treated. At Ocular, we begin with the end in mind. We first think about the size and dynamism of the disease state in ophthalmology and then consider the key unmet need in that space. It is only then that we apply our technology to the opportunity and determine whether we may be able to build a therapeutic that can meet that key unmet need and become the standard of care. We believe that all of our development programs satisfy these requirements. From the largest opportunity in wet AMD, where we believe our OTX TKI could become the most durable product on the market, to glaucoma, where OTX TIC could solve the problem of patient compliance, to dry eye disease, where OTX CSI and OTX DED could improve the patient experience relative to current therapies. And finally, to Dextenza, that we believe fulfills the patient and physician desires to have a more convenient drop-free solution for the treatment of post-surgical inflammation and pain. Not only do the product candidates we develop target key unmet clinical needs in their respective spaces, but we have designed them with product characteristics that we believe will lend themselves to more efficient commercialization. All of the therapeutics at Ocular are designed to be medical benefit buy-and-bill products with associated procedure codes. Products with these characteristics are optimized through an account selling approach. Account selling structures can be more targeted than reach and frequency models employed by companies that sell traditional prescription benefit medications. Xtensa has been proof of principle whereby we've been able to cover the entire U.S. with a targeted commercial team of less than 50 FTEs and have been able to achieve a positive product contribution within a very short period of time. As highly innovative and novel dosage forms, the product candidates we are developing have substantial intellectual property protection that are expected to maintain exclusivity well into the future. Xtensa is patent protected at least until 2030, and all of our development product candidates have patent applications that are expected to provide protection until 2040 and beyond. It all adds up to a portfolio of product candidates that we believe are highly differentiated clinically that lend themselves to efficient commercialization and that have long periods of exclusivity. In keeping with the way we add programs to our portfolio, we see dry, age-related macular degeneration as the next great area of opportunity in ophthalmology. Like wet AMD, we also believe that durability will be the key unmet need of the future. In June, we announced an exciting collaboration with Mosaic Biosciences that marks an important step forward for our company in how we approach the discovery and development of therapeutics. Working with Mosaic, we hope to incorporate the discovery of new chemical entities with established mechanisms of action to identify novel therapeutics with superior durability. All innovations developed through our collaboration with Mosaic will be wholly owned by Ocular. As we enter a new collaboration with Mosaic, we are also saying goodbye to our longstanding collaboration with Regeneron. While this collaboration was never a central driver of growth for Ocular, we learned a great deal about how to formulate our proprietary hydrogel with monoclonal antibodies and also about formulating medicines for administration to the supercoroidal space. Both of these are valuable learnings that will further benefit the key drivers of value in our business, our wholly owned pipeline. With the termination of this collaboration, we are no longer restricted from independently developing anti-VEGF agents for treatment of various retinal diseases. This is a multi-billion dollar market opportunity, which we now have the opportunity to pursue on our own or through partnership with others. We believe collaborations will be a central pillar of our strategy to become a leading ophthalmology company. Moving to Dextenza, in the quarter we achieved $11.1 million in net sales to our distributors, for the quarter representing nearly a 700% increase over the same quarter last year and an approximately 65% sequential increase over the first quarter of 2021. For the second quarter, in-market sales set a record of nearly 25,000 billable inserts, and approximately 50% sequential increase over the first quarter of 2021. We believe this growth reflects a strong increase in end-user demand for Xtensa against a backdrop of a return to more normal cataract procedure volumes. In the Outpatient Perspective Payment System, or OPPS, proposed rule issued by CMS in July, it was proposed that Xtensa receive an extension of its pass-through payment status, resulting in separate drug payment to the end of 2022. If this decision becomes final, it allows us to build on our ongoing dialogue with CMS on Dextenza's post-pass-through payment status into the next rulemaking cycle a year from now. We continue to believe there are a number of viable pathways that CMS can employ whereby we can ensure patient access to Dextenza in the ASCs and HOPDs beyond the pass-through period, and we will keep investors updated on any developments in this area. The proposed Medicare physician fee schedule rule was also issued in July. The draft rule proposed that our CPT procedural code 0356T for the insertion of a drug-eluting insert into the nasolacrimal canaliculus will convert to a Category 1 code in January of 2022 with a proposed payment of $31.91 in the facility and $37.61 in the physician's office for unilateral insertion. We are very pleased that the Category 1 code conversion for the procedure appears on track since the Category 1 CPT codes typically benefit from broader coverage and payment among all types of payers. However, the work ahead for Ocular and other interested parties is to use the comment period to make the case of a reimbursement level that is more in line with similar procedures. With regard to allergic conjunctivitis, we currently await October 18th PDUFA target action date for potential approval and expansion of the Dextenza label. It is estimated that up to 10 million people in the US annually seek medical attention for the inflammatory response associated with allergic conjunctivitis caused by both seasonal and perennial allergens, representing a discrete and significant potential market for Dextenza. Most importantly, if approved, the AC indication may signal the opportunity to transition Dextenza administration to the office setting, providing additional opportunities for expansion of the product. Moving to our pipeline, We have four clinical programs, each of which is geared to produce a highly differentiated ophthalmology specialty product candidate that addresses the key unmet needs in its respective disease state. We believe our pipeline remains a source of tremendous value for Ocular, and we anticipate a number of key events over the course of the year. Just recently, we announced the dosing of the first subject in our U.S.-based trial of OTX TKI for the treatment of wet AMD. OTX TKI has the potential to be a new sustained release administration of exitinib with six months or longer durability and a potential new mechanism of action for the treatment of patients with wet AMD and other retinal diseases. A few weeks ago, we announced eight company presentations and data from five investigator-initiated trials at the ASCRS annual meeting held in Las Vegas. The scope of our presence highlights the interest in our clinical programs and the progress we continue to make advancing our pipeline. The company-sponsored presentations and posters are available under the investors section of our website. Before turning the call over to Mike, I want to highlight two compelling programs in dry eye disease. Dry eye represents a large market that we believe continues to be underserved with products that have high rates of patient drop-off due to slow onsets of action and tolerability issues like burning and stinging upon administration. OTX-CSI is our cyclosporine-containing intercanalicular insert to increase tear production in patients suffering from dry eye disease. And OTX-DED is our dexamethasone-containing intercanalicular insert for the short-term treatment of signs and symptoms of dry eye disease. Both programs are being developed to address the specific limitations of current treatment options. To date, we are encouraged by our progress, and both programs have advanced faster than planned. So it has been a very productive start to the year and we anticipate a number of important catalysts that will take place over the next two quarters. With that, I would like to hand the call over to our President of Ophthalmology and Chief Medical Officer, Dr. Michael Goldstein, who will provide an in-depth look at our pipeline. Thanks, Anthony.