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Operator
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.
Donald Notman
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.
Anthony Modisich
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.
Donald
Let me begin with an update on our back of the eye program, OTX TKI. As Anthony noted, we are pleased to have recently dosed our first subject in the U.S.-based multicenter prospective randomized control trial that is evaluating a single OTX TKI implant containing exitinib compared to a flibrocept administered every eight weeks in subjects previously treated with anti-VEGF therapy. The U.S.-based phase one clinical trial of OTX TKI is being conducted under an exploratory IND application at five sites with a total of 20 randomized subjects 15 subjects being treated with a single OTX TKI implant containing 600-microgram dose of exitinib with an anti-VEGF induction injection, and five subjects being treated at eight-week intervals with a flibrocept. The trial is designed to assess the safety, durability, and tolerability of OTX TKI, as well as to assess preliminary biological activity in subjects by measuring anatomical and functional changes. Based on the early data that we have shared to date from the ongoing phase one trial of OTX TKI in Australia, we continue to see signals of biological activity, including decreases in retinal fluid in some subjects as early as two months following implant administration. Additionally, we are seeing encouraging durability of six months or longer across cohorts and durability beyond one year in some subjects. OTX TKI has thus far been well tolerated and has been observed to have a favorable safety profile. No serious ocular adverse events have been observed or reported to date. While the drug product profile is still emerging, we are pleased with the interim data and OTX TKI's potential to reduce intraretinal and or subretinal fluid. Moving to our glaucoma program, OTX TIC, we have completed a US-based phase one clinical trial, evaluating the safety, biological activity, durability, and tolerability of OTX TIC and subjects with primary open angle glaucoma or ocular hypertension. We presented interim data in May at ARVO and in July at ASCRS that showed a mean reduction in intraocular pressure from baseline of approximately 7 to 11 millimeters that is comparable to the current standard of care topical travel frost. We observed onset of action as early as two days after implant administration and a durability of response with decreases in eye pressure for six to nine months in many subjects in cohorts one and two, and four to six months for subjects in cohorts three and four. OTX TIC has been generally well tolerated for the favorable safety profile to date. We are targeting initiation of the phase two clinical trial in the fourth quarter of this year. We are also making significant progress with our ocular surface disease programs, which include product candidates for dry eye disease and allergic conjunctivitis. In dry eye, we have two programs, OTX-CSI for the chronic treatment of patients with dry eye disease, and OTX-DED for the short-term treatment of the signs and symptoms of dry eye disease. OTX-CSI is an intracanalicular insert which offers local, programmed release of cyclosporine for approximately three to four months to the ocular surface along with punctal occlusion. By releasing low doses of preservative-free cyclosporine over an extended duration of time, OTX CSI has the potential to minimize some of the biggest patient complaints about commercially available products for the chronic treatment of dry eye disease, namely ocular surface irritation, sting, and burning. We are very excited about the potential for this physician-administered, hands-free, and preservative-free option in helping dry eye patients receive the benefits of cyclosporine, but with potentially greater tolerability and more rapid onset of action compared with therapies currently available on the market. We have completed enrollment of our US-based randomized mask phase two multicenter clinical trial, evaluating two different formulations of OTX-CSI compared with two different hydrogel vehicle inserts in approximately 140 subjects will be followed for a period of 16 weeks. Endpoints in this study include increased tear production as measured by the Shermer's test, other signs of dry disease as measured by corneal fluorescein staining, and symptoms of dry eye disease as measured by the visual analog scale for VAS, eye dryness severity score, and dry eye frequency score. Consistent with our update last quarter, we expect top-line data in the fourth quarter of 2021. Our second product candidate in dry eye OTX-DED is a low-dose intercanalicular insert of preservative-free dexamethasone. While it incorporates the same active drug as Dextenza, This is a new product candidate with a lower dose of dexamethasone and smaller insert size. Many dry eye patients experience episodic flares of their signs and symptoms, which we believe are likely related to inflammation. Topical steroids have long been used off-label for dry eye flares. All commercially available topical steroid eye drops in the United States have preservatives which can result in ocular surface toxicity. Chronic misuse of steroids may also lead to adverse events such as elevated eye pressure or cataracts. OTX-DED potentially offers these patients the opportunity to be treated with a physician-administered, preservative-free, and hands-free steroid option that can't be overused by patients. We are currently enrolling patients in a U.S.-based, randomized, double-mask, vehicle-controlled, Phase II multicenter clinical trial evaluating two different doses of OTX-DED compared with a hydrogel vehicle insert in approximately 150 subjects with dry eye disease. This trial is designed to assess the safety and efficacy of OTX-DED for the short-term treatment of signs and symptoms of dry eye disease by evaluating bulbar conjunctival hyperemia, the vast eye dryness frequency and severity spores, and total corneal fluorescein staining, among other endpoints. Enrollment has been faster than initially anticipated, and we are tightening our guidance as we now expect top-line data in the first quarter of 2022 versus our prior guidance of the first half of 2022. Lastly, for Dixenza, for the treatment of ocular itching associated with allergic conjunctivitis, we submitted an SNDA at the end of 2020 and have received a PDUFA target action date of October 18, 2021. Overall, we believe the data package highlights a compelling product profile targeting an unmet need that could potentially change the current standard of care with a physician-administered, preservative-free, hands-free therapy for these patients which can't be abused by patients. As Anthony mentioned, if approved, this SMDA would represent our first in-office indication for Dick Stenza. I would now like to turn the call back over to Donald to review our second quarter financial results.
Donald Notman
Thanks, Mike. Gross product revenue net of discounts, rebates, and returns, which the company refers to as total net product revenue, was $11.7 million and represented a 631% increase over the same period in 2020. Net product revenue of Dextenza in the second quarter was $11.1 million versus $1.4 million in the comparable quarter of 2020, reflecting a nearly seven times increase. Total net product revenue for the second quarter in 2021 also included net product revenue of $0.6 million from mature sealant. Research and development expenses for the second quarter were $13.9 million versus $8 million for the comparable period in 2020, driven primarily by increased headcount as well as increased clinical trial costs associated with the initiation of the U.S.-based Phase I trial of OTX TKI as well as the ongoing Phase II clinical trials for OTX CSI and OTX DED, the ongoing phase one clinical trial of OTX TKI in Australia, and the extended post-approval pediatric trial. Selling and market expenses in the quarter were $8.4 million as compared to $6.2 million for the same quarter in 2020, reflecting increased personnel costs associated with expansion of our field force. Finally, general and administrative expenses were $8.6 million, for the second quarter versus $5.1 million in the comparable quarter of 2020. The increase in expenses stem primarily from increased personnel expenses and professional fees. With respect to the financial results for the second quarter, the company reported a net loss of $8.5 million or a loss of 11 cents per share on a basic and a loss of 25 cents per share on a diluted basis. This compares to a net loss of $36.6 million or a loss of 64 cents per share on a basic and diluted basis for the same period in 2020. The decreased loss was due primarily to a $30.4 million net change in the fair value of the derivative liability associated with our convertible note, driven by a decrease in the price of our common stock during the quarter. Non-cash charges for stock-based compensation and depreciation and amortization was $4.9 million in the second quarter versus $2.5 million for the same quarter in 2020. As of August 6, 2021, the company had 76.7 million shares outstanding. As of June 30, 2021, the company had $191.9 million in cash and cash equivalents versus $209.4 million at March 31, 2021. Based on our current plans and related estimates of anticipated cash inflows from Dextenza and Reshirt product sales and cash outflows from operating expenses, the company believes that existing cash and cash equivalents as of June 30, 2021, will enable the company to fund planned operating expenses, debt service obligations, and capital expenditure requirements through 2023. This cash guidance is subject to a number of assumptions including those related to the severity and duration of the COVID-19 pandemic, the revenues, expenses, and reimbursement associated with Dextenda, and the pace of research and clinical development programs, among other aspects of the business. This concludes my comments on our second quarter financial results, and I would like to turn the call back to Anthony for some final thoughts.
Anthony Modisich
Thanks, Donald. So before opening the call up for questions, let me do a quick summary. Xtendz enjoyed fantastic performance in the quarter with 11.1 million in net sales, growing nearly 65% over the previous quarter. We are pleased with continued progress on our pipeline and our growing presence at key medical meetings like ASCRS that allow us to share our progress. In wet AMD, we dosed the first patient with OTX TKI in our US-based clinical trial using a single 600-microgram insert. In glaucoma, Data from our phase one trial of OTX TIC continues to support a durable, rapid-onset product profile that could potentially set the standard of care for patient compliance. We remain in a position to advance that program into a phase two clinical trial in the fourth quarter of 2021. In dry eye disease, we are conducting two phase two clinical trials, one for OTX CSI and one for OTX DED. We plan to announce clinical data from OTX CSI in the fourth quarter of this year and in the first quarter of 2022 for OTX-DED. Beyond dry eye disease, we submitted our SNDA for dextenza and allergic conjunctivitis in December 2020 and have a PDUFA target action date of October 18th, 2021. Finally, we announced an exciting collaboration with Mosaic Biosciences. This marks an important step forward for our company in how we approach the discovery and development of ophthalmic products and serves to enhance our current strategy, which includes a pipeline that we believe to be one of the most comprehensive ophthalmology pipelines in the industry today. We look forward to a busy and productive 2021. And with that, I will turn the call over for questions.
Donald
Thank you. As a reminder, if you have a question at this time, please press star, then 1 on your touchtone telephone. Our first question comes from the line of John Wilbin with JMC. JMP Securities, your line is open. Please go ahead.
John Wilbin
Hey, good afternoon, and congrats on the progress. I appreciate you taking the questions. Just one on Dextenza to start. Can you discuss the gross to net in 2Q and then how that dynamic is shifting, and then what you think the potential outcomes are for the proposed pricing and when we might get an update on what that final pricing looks like?
Anthony Modisich
Yeah, I'll just hand it over to Donald in a second. But as I mentioned last quarter, where we had a growth that was somewhat slower than the in-market growth, and I said I wouldn't take too much credit for the somewhat over-market, in-market growth for this quarter, there is definitely an element of stocking that helped us have a higher growth rate for the quarter than we had in an in-market. So we were growing in-market 50%. We grew to market 65%, but there were some adjustments within the growth to net that I'll let Donald speak to you about.
Donald Notman
Hey, John. Thanks for the question. Yeah, so the gross net did improve for us over the course of the quarter. There are two primary drivers of that. One is in the first quarter, for the first time, actually, we took an accrual for the anticipated rebate that is in the pipeline. So that was kind of a bit of a one-time hit and it's begun to normalize. So that was a smaller number. And the... The other aspect of the rebate that, or not of the rebate, of the gross to net that improved was product returns. We have been now, I think we've had Dextensa in the market for over a year and now have the data to have a better understanding of what the returns will look like, and they're coming in much lower than originally anticipated, so we've begun to reduce that deduction in the gross to net. You know, where this will sort out over the next several quarters, You know, we've probably finished basically in the mid-20% kind of discount range. And, you know, I would anticipate that we'd be more or less in that range moving forward. But, you know, that will depend in terms of rebate levels, et cetera, as we go forward.
Anthony Modisich
Sorry, John, you had a second question?
John Wilbin
Yes, I was hoping you could walk us through the process of the proposed reimbursement pricing and what those different outcomes might look like for Dexvenza and the long-term growth.
Anthony Modisich
Well, that's a very complicated series. You're talking about the continued separate payment in the ASCs and hospitals?
John Wilbin
Correct.
Anthony Modisich
I mean, there's a number of different avenues through which that can happen. There's changes in the status indicator that would allow for permanent separate payment. Clearly, there is a, at least for the proposed rule, there's the potential of continuing the opiate exclusion, or the non-opiate exclusion, where you are a product used in surgery, you have an indication in pain, it's important, obviously you have an indication in pain, and you are used, and you're a non-opiate product, that that has an exception in the system that allows for continued separate payment. We were happy to see in the proposed rule that that was extended, not only from the ASC, but also in the HOPD setting, so there'd be the complete set of surgical settings that would give us access under that non-opiate exclusion. There are also potentials for the price of the drug to be paid out of a facility payment, depending on what APC class we eventually wind up in in the post-pass-through period. So, there's a number of different avenues that could be taken that would allow for continued separate payment.
John Wilbin
Male Speaker 1 Okay. And if I could squeeze in a couple on OTX-CSI, I'm looking forward to that data in the fourth quarter. Can you remind us the difference in the two formulations you're looking at? And I know you're still blinded to data, but was wondering if you could comment on the dropout rate you're seeing so far in the study. Thanks.
Mike
Male Speaker 1 Yeah, thanks, John. This is Mike. So there are two different formulations of OTX-CSI being looked at and two vehicle formulations. So the two CSI formulations have the same amount of drug but have slightly different hydrogel compositions, which lead to slightly different release and dissolution rates. And the two different vehicle formulations, one matches, you know, very similar to the two CSI formulations, and one is a rapidly degrading hydrogel. So anyway, so we'll see what the results of those. And the second part of your question was? Oh, drop vibration. Yeah, exceedingly loud. So we don't have the whole exact number, but it's exceedingly loud at this point.
John Wilbin
That's helpful. Thanks again for taking the questions, guys. Thank you, Jonathan.
Donald
Thank you. And our next question comes from the line of Joe Cantazzaro with Piper Sandler. Your line is open. Please go ahead.
Joe Cantazzaro
Hey, guys. Thanks for taking my questions here. Congrats on all the progress. Maybe actually a similar line of questioning here. Wondering if maybe you could speak to the extended selling trends that you saw in July and whether it reverted back to the sawtooth pattern that you've historically seen in the first month of the quarter. And just maybe more generally, if you could provide just a little bit of guidance around expectations for the rest of the year.
Anthony Modisich
Yeah, July did, the quarter acted exactly as most of the quarters did before since we've had the rebate program where you had a bit of a sort of flat first two months of the quarter and then a very strong final month of the quarter. We would expect that to continue going forward. As we mentioned before, we are considering the possibility of giving guidance for extended sales going forward, but we have not done that yet or made the decision to do that yet.
Joe Cantazzaro
Okay, got it. That's helpful. And then with regards to the Medicare proposed fee schedule for O356T, are there any established fee schedules for perhaps similar procedures that you could reference during the comment period? And I guess I'm thinking about the insertion of just a basic silicone plug and where that falls.
Anthony Modisich
Right.
Joe Cantazzaro
I mean, there are two.
Anthony Modisich
There's dilation, and then there's insertion of a non-drug plug. And dilation is around the $65 just for dilation itself, which is part of the procedure for 0356T. And then insertion of a non-drug plug is closer to $150. So yeah, those as comparative procedures certainly would suggest that there's upward movement Although the process doesn't really relate to similar procedures. You really have to do it within the logic of the way the RUC actually calculated the payments. I think Mike can add a little more color on how that works.
Mike
I was going to say, it's not as simple as you might think in that it's the most, as Andy said, the most analogous procedure. But there are other procedure codes where you can, for example, probe and then irrigate the nasolab So as Anthony mentioned, there's just an opportunity to compare this to a number of different procedures at a number of different levels.
Joe Cantazzaro
Okay, got it. If I could just squeeze maybe one last one in around the termination of the Regeneron collaboration. Could you maybe speak to your view around how the preclinical work was progressing on the program just to maybe help us get a sense of what contributed to Regeneron's decision? Thanks.
Anthony Modisich
Yeah, we were very satisfied with the pace of the work. As we mentioned before, we've actually been very fortunate to have been in this collaboration. Regeneron, the scientists at Regeneron were fantastic to work with. The epilibrosept is a great molecule where we learned a lot about how to formulate that with our hydrogel. We also learned how to get into the suprachoroidal space, certainly in a preclinical model. And that could be a very important space for us going forward. So we're very excited to have been in the collaboration. But I truly believe that there's more opportunity now outside of the collaboration than there was inside of the collaboration. And obviously, we'll sort of have to ask you to stay tuned on exactly what we do going forward with it as we look at a number of different possibilities given the opportunities that we see in the marketplace that are occurring all over.
Joe Cantazzaro
Okay, great. That's it for me. Thanks for taking my questions here. Thank you, Joe.
Donald
Thank you. And our next question comes from the line of Dane Leong with Raymond James. Your line is open. Please go ahead.
Dane Leong
Hey, guys. This is going on for Dane. Thanks for taking our question. On the proposed Medicare physician fee schedule for Dextenza, if reimbursement rates are not revised higher, how could this potentially impact utilization?
Operator
Thanks.
Anthony Modisich
So you're talking about the CPT procedure code? We right now, within the system, within the T-code that we have, we're getting reimbursement rates across the MACs that are ranging between $30 in the lowest MAC and $250 in the highest, averaging out about $100. We have not noticed a difference in penetration of total cataract volume among the MACs. So there's really no basis to suggest that that payment rate would need to be higher in order to get better penetration, although it certainly stands to reason that the higher they are, the more attractive the use of an intercanalicular drug delivery device would be to the doctor. So, you know, we think that from a fairness standpoint that that should be reimbursed at a higher level, and that's really what drives what we're doing, less about the penetration that we would expect our drugs to get.
Donald
Thank you. And our next question comes from the line of George Jordanog with Cowan & Company. Your line is open. Please go ahead.
George Jordanog
Okay, thank you so much for taking our questions. So, yes, the TKI program, congratulations on the initiation of the US-based trial. Could you maybe discuss, and I guess remind us of the decision to include a control group in the study, and how should we be interpreting the results from the trial? And then related to that, do you plan to announce interim data, and when should we expect initial efficacy data from this trial?
Mike
Yeah, thanks for those questions. So the trial design is different than the Australian trial in that we're looking at a slightly different population. So in the Australian trial, as you know, we're taking patients who have active fluid and we're asking the question, can you get rid of that fluid, whether it's intraretinal fluid or subretinal fluid? And so there what we're seeing is the fluid's there and then it's gone or not. And in the U.S. trial, we're actually looking at a different population. So we're looking at those patients who have wet age-related macular degeneration who have been previously treated with an anti-VEGF drug. So they're starting without fluid, and then we're giving them the TKI, and we're following them out. And the question that you would ask without a control group is, well, if you didn't give them anything, what would they do? So we want to have a control group just to demonstrate, to have a comparison in the trial. And the way it's designed is that it's a three-to-one randomization where for every three patients who get the TKI, we'll have one patient who were maintained on the Aflovercept. We're targeting 20 patients. As noted, enrollment has already started. There is not an interim analysis date currently planned, although we do have the option later, probably early next year if we chose to do that.
George Jordanog
Got it. And then on the glaucoma program, just if you could remind us, once the trial is initiated in Q4, when should we be expecting potential results from this trial, and what would be the plan for registrational studies? Would you need to run two separate pivotal studies, or is this Phase II trial powered sufficiently to serve as one of two pivotal?
Mike
Yeah, so the glaucoma program called OTICS-TIC, as you notice, is initiating in Q4. We're targeting three different dose groups with 135 subjects. We haven't yet given It is not powered for statistical significance. So, you know, presumably we would then need to do two phase three trials after the phase two trial completes.
George Jordanog
Got it. Thank you so much.
Donald
Thank you. And our next question comes from the line of with HC Ringright. Your line is open. Please go ahead.
spk06
Thank you. Thank you for taking my questions. First, can you comment on the potential revenue contribution from Dextenza from the allergic conjunctivitis indication once approved?
Anthony Modisich
We've given no forward guidance on what we expect that indication to be. Clearly, it is a very strategic indication for us as we move into the office environment, but we haven't made public a number. Clearly, we have some internal forecasts that we believe to be reasonably ambitious, and we're very excited about the opportunity that AC gives us, but we haven't put out a number.
spk06
Got it. Regarding the two hydrogel formulations used in the OTX CSI, is that the same two different formulations used for OTX TIC?
Mike
No. In short, no. We have a number of different PEG formulations that we look at. There are different combinations, and every indication, every program, the really between any of the programs.
spk06
So the formulation is also different from the formulation used in DexTensor?
Mike
That's correct. I mean, they're all based on similar tags, but the actual compositions are different.
spk06
Okay. So with these different formulations, do you expect a different, an impact in efficacy or safety or both?
Mike
really about durability. So, you know, in terms of safety, I think we probably put every combination of peg both on the surface as well as in the eye. So we don't expect any safety differences. Efficacy is really about, you know, rate of delivery of the drug over a certain period of time for a particular indication. So we target the – we create each drug independently so that we can match the desired durability with the indication we're looking at.
spk06
Got it. Thank you.
Donald
As a reminder, if you would like to ask a question, please press star then 1. Our next question comes from the line of Anita Duchanan with Berenberg. Your line is open. Please go ahead.
Anita Duchanan
Hi. Good afternoon. Thanks for taking my question. I just wanted to get some clarity on the for the allergic conjunctivitis. So, I mean, considering that the reimbursement will sort of kick in from January, can you sort of give an idea of like what percentage of patients that are in the cataract surgery are also candidates for the allergic conjunctivitis?
Anthony Modisich
It's not so much the cataract patients that are candidates for AC. It's more the doctors that treat cataract and how, in their office environment, how often they see patients who have moved through the step edits or the earlier treatments of antihistamines and the like in order to get into the office and need something additional for allergic conjunctivitis. that overlap is extremely high. So something like 90% of the doctors who we see in the cataract world actually are high potentials also in the allergic conjunctivitis world. The allergic conjunctivitis opportunity is much broader, so it doesn't encompass all of that opportunity. It actually is quite a small percentage of it. But there are 10 million patients a year who present to physicians with a desire for something than what they're getting over the counter for allergic adjunctivitis. So that's a large number. Even to get a slice of a slice, the opportunity can be fairly significant.
Donald
Thank you. And this does conclude today's question and answer session as well as today's conference call. Ladies and gentlemen, thank you for participating, and you may now disconnect. Everyone, have a great day.
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