Ocular Therapeutix, Inc.

Good afternoon, ladies and gentlemen. Thank you for standing by, and welcome to the Ocular Therapeutics First Quarter 2022 Earnings Conference Call. At this time, all participants are in 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 introduce 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 first quarter 2022 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 March 31, 2022. 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 an update on the commercial progress of Dextenza and a summary of our corporate developments. 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 quarter before turning the call back over to Anthony for a summary and questions. For Q&A, we'll be joined by Chris White, our Chief Business 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 and our financial projections 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 filed this afternoon with the SEC and our annual report on Form 10-K filed on February 28th with the SEC. I will now turn the call over to Antony.

Thank you, Donald, and welcome everyone to the Ocular Therapeutics First Quarter 2022 Earnings Report. It has been a quick turnaround following our year-end call held a little more than two months ago. We continue to make good progress executing on our commercial efforts and with the development of our leading ophthalmology pipeline. Beginning with Xtensa, we achieved $12.5 million in net product revenues and 87% growth over the comparable quarter in 2021. The extensive performance was impacted in the quarter by the surge in COVID Omicron variant and its sub-variant, AB.2, that slowed cataract procedures and challenged ASC and HOPD staffing, primarily in the month of January. Sales of in-market billable units rebounded starting in February, and in March we recorded approximately 10,500 inserts sold to ASCs and HOPDs in the calendar month. easily surpassing the old record of 9,976 set last November. Despite the ongoing staffing challenges, we are expecting a generally improving environment for the growth of Dextenza in 2022. First, we are anticipating a tailwind from increased cataract surgery volumes as the backlog of delayed surgeries begins to enter the market. We think about it this way. There were approximately 4.2 million cataract procedures in 2019 forecasted to grow at a rate of between 3% to 5% annually, according to MarketScope research. This number dropped to approximately 3.6 million in 2020 at the height of COVID. While MarketScope estimated that volumes did bounce back in 2021 to an estimated 4.4 million cataract procedures, we believe the data still suggests the potential goals of at least 800,000 backlogged procedures. We anticipate that this volume will work its way back into ASCs and HOPDs over the coming few quarters and contribute to Dextenza's growth. Second, we are entering 2022 with greater clarity on Dextenza's reimbursement with pass-through payment status through 2022 and then, very importantly, eligibility for separate payments beginning in 2023 and potentially beyond in ASCs through the non-opioid pain management supply provisions. In addition, physician reimbursement for the insertion of Dextenza is now available under our Category 1 code, which became effective January 1, 2022, ensuring more reliable payment to physicians for Dextenza placement across all payer types and in all settings of care. We believe the easier we can make it for physicians to provide Dextenza to their patients, the better we will do in growing the Dextenza franchise. Simplifying and ensuring reimbursement is key to accomplishing this, And having this clarity is a huge advantage for Ocula today. Third, in 2022, we are expanding our commercialization of Dextenza into the office setting. I've long stated that a key strategic goal of the company is to expand our presence into ophthalmology and optometric offices by providing customers with numerous innovative buy and build products, including those developed internally and potentially those licensed from other companies in the future. The FDA's approval of Dextenza for the treatment of ocular itching associated with allergic conjunctivitis, an indication that is treated in the ophthalmology and optometric office environments, gives us the opportunity to take the first step in doing that. While the strategic potential of the office environment is exciting, it represents a new space for ocular therapeutics with a unique set of challenges and opportunities. We've been able to learn a lot from the launch of Dextenza in the surgical setting, and found that the primary barriers of entry were the logistics associated with AFC and HOPD administration. We believe launching into the ophthalmology and optometric offices will be analogous but with different drivers that require bespoke solutions. We recently hired a VP of sales with over 20 years' experience successfully selling buy and build products to office-based physicians to lead this initiative. We have established a separate office-based business unit consisting initially of four new key account managers, supported by the field reimbursement team, who will be tasked exclusively with selling into the office setting. We anticipate these efforts will have some impact in 2022, but more materially in 2023 and beyond. Shifting to our pipeline, we have four clinical programs, OTX TKI for wet AMD and other retinal diseases, OTX TIC for glaucoma, and OTX DED and OTX CSI for the treatment of dry eye disease. Each of these programs is being developed to produce a highly differentiated buy-and-bill optimality specialty product with associated procedure code that addresses key unmet needs in their respective disease states. In the quarter, we took major steps forward with OTX TKI, where we completed enrollment in a Phase I study in the U.S., and with OTX TIC, where we began dosing patients in our Phase II programs. We anticipate having interim data for the OTXTKI-US trial in the third quarter of this year. We're also happy to report that our collaboration with Mosaic Biosciences has yielded a lead compound for our complement inhibitor program for the treatment of dry AMD. We believe that this compound has the potential to be best in class in the complement space with targeted dosing every three to four months. Our collaboration with AptoMed Therapeutics has also advanced during the first and second quarters of this year. In January, AFIMED dosed its first patient in a real-world setting study being conducted at the Boao Super Hospital in Hainan Province, China. The trial is designed to evaluate the safety and efficacy of dextenza for the treatment of ocular inflammation and pain following cataract surgery and is intended to support and potentially accelerate efforts to register dextenza in China. More recently, AFIMED announced in April that dextenza was approved in Macau, China. To date, Ocular has earned a total of $3 million in milestone and clinical support payments under the AFMET agreement. In the quarter, we also shared updates on our programs at a number of medical meetings. At this year's American Society of Cataract and Refractive Surgery Annual Meeting held on April 22 through 24, we shared 15 presentations, including seven company-sponsored studies and eight investigator-initiated clinical trials of Dextenza as well as OTX-DED. These presentations included real-world data evaluating the demographics and safety profile of the first 10,000 extensa inserts placed. This was the largest scientific presence we've ever had at a major medical meeting, and I believe it highlights the medical community's significant interest in our October service programs. We also had a large presence at this year's Association for Research in Vision and Ophthalmology annual meeting held May 1st through 4th, 2022. This is one of the major ophthalmic research conferences, and Ocular made multiple presentations highlighting exciting pipeline preclinical and clinical data. Looking ahead into 2022, we plan to provide an important interim update for our U.S.-based clinical trial of OTX TKI for the treatment of wet AMD in the third quarter. Wet AMD represents a potentially large market opportunity for Ocular, and OTX TKI offers a new mechanism of action with compelling durability data. Lastly, before turning the call over to Mike to discuss our pipeline in more detail, I wanted to take the opportunity to share, for the first time, annual revenue guidance for 2022. We have historically not provided guidance due to the unpredictable impact of the COVID pandemic on elective surgery volumes. To remind you, nearly all of our sales to date have come from cataract surgeries, which are considered elective surgeries in the ASC and HOPD settings. We experienced a near total shutdown in those cataract surgeries in the second quarter of 2020 due to the initial surge in COVID cases. And more recently, we experienced a significant disruption in December of last year and January of this year due to the Omicron surge. Going forward, we are assuming that closures of ASCs and HOPDs to elective surgeries would no longer be as significant a risk. However, we expect the indirect effects of COVID will be felt for at least the remainder of 2022 as the labor shortage has left ASCs and HOPDs short-staffed at a time when demand for surgeries is rising. Our challenge in growing Dextenza to its full potential in the surgical setting is to go deeper into established accounts by driving adoptions by more surgeons and moving into new payer types as we also set up new accounts in ASCs and HOPDs where Dextenza is not currently available. All of these growth levers, require ocular personnel to work closely with administrative and surgical support staff to help them institute new policies, procedures, and protocols to allow for the use of Dextenza. With a deep understanding of the market environment and an expectation of gradual resolution to the macroeconomic effects of COVID, we believe we have adequate line of sight to project forward sales of Dextenza in the surgical environment. Accordingly, we are now guiding total annual net product revenue of 55 to 60 million for 2022. This guidance represents anticipated annual growth of between 26% to 38%. Importantly, this guidance assumes growth will be almost entirely driven by sales of Dextenza in the surgical setting and therefore excludes any material contribution from sales of Dextenza in the office setting. We believe the office setting represents a significant source of long-term upside, but given the early stages of this initiative, We have excluded any material contribution in this guidance. With that, I'd now 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.