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spk00: Good afternoon ladies and gentlemen. Thank you for standing by and welcome to the Ocular Therapeutics second quarter 2022 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.
spk04: Thank you, operator. Good afternoon, everyone, and thank you for joining us on our second 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 June 30, 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 Dextenda and a summary of our corporate developments. Also speaking on the line today will be Dr. Rabia Ozden, our Chief Medical Officer, who will give an update on our clinical developments and pipeline. Following Rabia'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 will 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 Anthony.
spk05: Thanks, Tom. The second quarter of 2022 was another quarter of great progress for Dr. Therapeutics. Most notably, the development of our pipeline. For those of you following the October story, you'll know that by far the most anticipated development for the company and for the hope of a more durable treatment for patients with wet AMD is our U.S.-based Phase I clinical trial for OTX TKI, our accitinib-containing hydrogel implant for treatment of wet AMD and other retinal diseases. We are developing OTX TKI to reset the standard of care for durability of a single injection in the treatment of wet AMD from two to three months to six months and beyond. To assess this, we have embarked upon a very important study in the U.S. comparing a single injection of OTX TKI against that Librecept dose every eight weeks. I am delighted to announce that all 21 patients in this study have now been on study for 24 weeks or more, and we plan to perform an analysis after 28 weeks. The trial plan dovetails nicely with the American Academy of Ophthalmology meeting in Chicago, where we have already been granted a late-breaker slot on Friday, September 30th. While OTX TKI is our lead program in retinal disease, we also have R&D efforts seeking to develop more durable treatments for geographic atrophy and gene therapy delivery platforms that minimize inflammatory risk and maximize transaction potential. To help us pull all of our retina assets together, we are delighted to announce the addition of Dr. Peter Kaiser to the Ocular team as our Chief Medical Advisor Retina. With Peter added to the considerable retina expertise already at Ocular, we believe we are in a position to plan the optimal path forward for OTX TKI, as well as other in-house programs or any potential collaborations in the retina space. On the glaucoma front, OTXT-IC, our trial approach containing intracameral implants being developed for the treatment of open-angle glaucoma or ocular hypertension to improve patient compliance, continues to enroll its first Phase II trial. We have designed this trial to assess the safety, tolerability, and efficacy of OTXT-IC. In our completed phase one clinical trial, we observed that OTX-TIC did not harm endothelial cells, so we were developing OTX-TIC for chronic or repeat dosing. While this program seldom gets the attention of its sibling, OTX-TKI, we are equally enthusiastic about its prospects. In the treatment of dry eye disease, we have two programs, OTF-CSI, our cyclosporine-containing intracanalicular insert for the chronic treatment of dry eye disease, and OTF-DED, our dexamethasone-containing intracanalicular insert for the short-term treatment of signs and symptoms of dry eye disease. While we'd like to advance both programs, We are acutely aware of the need to preserve cash in the current challenging financial environment and the need to find ways to improve our chances for success in the very difficult regulatory environment of dry eye disease. As a way to continue momentum on these programs while satisfying both objectives, we plan to embark upon a small trial with OTX-DED that will pioneer a trial design that tests OTX-DED against a more appropriate placebo comparator. Simultaneously, we are developing new formulations for OTX-CSI designed to be retained longer in the channel itself. Finally, helping to pay for the development of our exciting pipeline is our commercial business with Dextensa. For the second quarter, Dextensa recorded net product revenue of $12.1 million, a 9% improvement over the same quarter of prior year and down slightly compared to the prior quarter. We were seeing both in the market and also with our own field force. is that staffing levels continue to be a drag on potential growth. Despite the sluggishness of the current market, we are optimistic about the final two quarters of the year and continue our guidance of between 55 million and 60 million of net product revenue for the full year. Beyond this, we are also very happy that the recent Outpatient Prospective Payment System, or OPPS, proposed rule stated that the expenses should remain separately payable in the ASC through 2023. As a result, we are optimistic that we can continue to grow our surgical business as we add to the future potential of the office environment. In summary, we're making great progress at Ocular and are gearing up for a significant moment in our history with presentation of the results of our U.S.-based OTX TKI Phase I trial in late September. To go into more detail on the pipeline, I'll hand over to our newly promoted Chief Medical Officer, Dr. Rabia Osman, our very own Dr. Oz.
spk01: Thanks, Anthony. Let me begin with an update on our back of the eye program, OTX TKI. In February, we presented an update from the ongoing Australia-based phase one trial of OTX TKI for the treatment of wet AMD at the angiogenesis, exudation, and degeneration 2022 meeting. As background, this study was designed to assess the safety and tolerability of OTX TKI and preliminary biological activity. Our goal for the study was to answer the question, can a tyrosine kinase inhibitor administered intravitrally as a monotherapy show biological activity in wet AMD? We believe the best way to show this is to start with patients with active subretinal and or intraretinal fluids and follow them to see if or TKI can eliminate that fluid. This is the patient population that was enrolled in this Australian study. The data we shared at angiogenesis was very encouraging, and we found a clinically meaningful decrease in intraretinal and or subretinal fluid in many subjects, and in some subjects, fluid was eliminated entirely. In addition, Extended duration of activity of six months or more was observed in over 60% of subjects across all cohorts and over 80% of subjects in cohort 3A, 600 micrograms, which we believe could represent a compelling drug product profile. We are also currently running a U.S.-based Phase I clinical trial that is now fully enrolled. This is a multicenter prospective randomized control trial that is evaluating a 600-microgram OTX TKI dose in a single implant containing azitinib compared to afilaberset administered every eight weeks in subjects previously treated with anti-vegetarian therapy and without any intraretinal or subretinal fluid. In other words, with already dry retinas. This clinical trial is being conducted under an exploratory IND application at six sites, targeting a total of 20 randomized subjects with three-to-one randomization rated toward OTX TKI-treated subjects. The trial is designed to assess the safety, durability, and tolerability of OTX TKI and and to assess preliminary biological activity in subjects by measuring anatomical and functional changes of the retina. Our goal in this trial is to answer the question of how long a single 600-microgram OTX TKI implant containing oxycenes keeps subjects dry without the need for re-treatment. We look forward to reporting 28-week data at the upcoming AO meeting at the end of September. We believe achieving a similar response rate and durability to that seen in the Australia-based study would represent a compelling drug product profile. Moving to our glaucoma program, OTX-PIC. We recently presented data from the completed U.S.-based Phase I clinical trials evaluating the safety, biological activity, durability, and tolerability of OTX TIC in subjects with primary open-angle glaucoma or ocular hypertension at the Glaucoma 360 meeting held on February 11th. We believe the Phase I data show that OTX TIC caused a clinically meaningful decrease in intraocular pressure, or IOP, comparable to Travoprost, as early as two days following administration, and for as long as six or more months with a single implant while preserving corneal health, representing its potential for a novel and differentiated drug product profile. With this data in hand, we have initiated and are actively dosing subjects in a U.S.-based Phase II clinical trial. This trial is a prospective multi-center randomized controlled trial evaluating the safety, tolerability, and efficacy of OTX-TIC for the treatment of patients with primary open angle glaucoma or ocular hypertension. The trial will enroll approximately 105 subjects in three different arms, about 35 subjects per arm, randomized one-to-one-to-one in which the subjects will receive a single OTS-TRC implant containing a 5-microgram or 26-microgram dose of teroprost compared with an implant of Durista. The 5-microgram arm is utilizing a FAST degrading implant, while the 26-microgram arm is utilizing a standard degrading implant. The trial will observe the changes in diurnal IOP from baseline at 8 a.m., 10 a.m., 4 p.m., at 2, 6, and 12 weeks, and follow duration of IOP response over time. Regarding our ocular surface disease programs, we remain committed to the development of our two dry eye programs, OTX-DED a low-dose intra-canalicular insert containing dexamethasone for the short-term treatment of the signs and symptoms of dry eye disease, and OTX-TSI, a cyclosporine intra-canalicular insert for the chronic treatment of patients with dry eye disease. With regard to OTX-DED, we intend to conduct a small trial to evaluate the performance of OTX-DED versus short-duration biodegradable collagen plaques. Specifically, the intent for this trial to explain the magnitude of the placebo effects seen in both the OTX-DD and the OTX-CSI Phase II trial in which the vehicle hydrogel placebo insert or placebo comparator remain in the canaliculars longer than anticipated, performing more like an active comparator than a placebo. We believe that the data from this small trial may inform the selection of a more appropriate placebo comparator for both the OTX-DD and the OTX-CSI programs moving forward. We currently expect this trial to begin in the first half of 2023. Also, we continue with the formulation work to extend the durability of the OTX CSI insert. Our goal is to select the most appropriate formulation for the OTX CSI program going forward. I would now like to turn the call back over to Donald to review our second quarter financial results.
spk04: Thanks, Ravika. Net revenue, which includes both gross product revenue, net of discounts, rebates, and returns, which the company refers to as total net product revenues, and collaboration revenue, was $12.3 million for the second quarter and represented an approximately 5% increase over the same period in 2021. Net product revenues that extends it in the second quarter of 2022 was $12.1 million versus $11.1 million in the comparable quarter of 2021, reflecting a 9% increase. Total net revenue for the second quarter of 2022 also included collaboration revenue of $.1 million from our licensing agreement with AFMET. Research and development expenses for the second quarter were $13.1 million versus $13.9 million for the comparable period in 2021, driven primarily by a reduction in clinical and preclinical spending, offset by an increase in unallocated personnel costs and other expenses. Selling and marketing expenses in the quarter were $10.1 million as compared to $8.4 million for the comparable quarter of 2021 due primarily to an increase in professional fees related to trade shows, conferences, and advertising. General and administrative expenses were $7.8 million for the second quarter versus $8.6 million in the comparable quarter of 2021 primarily reflecting a decrease in professional fees. The company reported a net loss of $18.8 million, or a loss of 24 cents per share on a basic basis, and a loss of 25 cents per share on a diluted basis for the second quarter ended June 30, 2022. This compares to a net loss of $8.5 million, or a loss of 11 cents per share on a basic basis, and a loss of 25 cents per share on a diluted basis for the same period in 2021. Net loss in the second quarter of 2022 was reduced by a $2.8 million non-cash item attributable to a decrease in the fair value of the derivative liability associated with the company's convertible notes as the price of its common stock declined during the quarter. Non-cash charges for stock-based compensation and depreciation and amortization were $4.8 million in the second quarter versus $4.9 million for the same quarter in 2021. As of August 5, 2022, the company had 77 million shares outstanding. As of June 30, 2022, the company had $134.5 million in cash and cash equivalents, versus $145.4 million at March 31, 2022. Based on current plans and related estimates of anticipated cash inflows from Dextenza and anticipated cash outflows from operating expenses, the company believes that existing cash and cash equivalents are sufficient to enable the company to fund planned operating expenses, debt service obligations, and capital expenditure requirements through 2023. This guidance is subject to a number of assumptions, including the impacts from the ongoing COVID-19 pandemic, the revenues, expenses, and reimbursement associated with extenda, and the pace of research and clinical development programs, among other aspects of the business. I would now like to turn the call back over to Anthony for some final thoughts.
spk05: Thanks, Tom. So before opening the call for questions, let me do a quick summary. All patients in the U.S.-based Phase I trial evaluating OTX-TKI in patients versus ilea in wet AMD have now been on the study for at least 24 weeks. We've been granted a late-breaker slot at the AAO, but we plan to present 28-week data. OTX-TKI continues to enroll patients in its Phase II trial for the treatment of open-angle glaucoma or ocular hypertension. On our commercial business, Dictenza remains the source of tremendous opportunity, with proposed OPPS rule providing for separate reimbursement in the ASC through at least 2023. Despite the market still being hampered by staffing issues, we have great confidence in our ability to grow our surgical business and expand the Dictenza franchise even further as we add on the future potential of the office environment. We are reiterating our net product revenue guidance for 2022 of between $55 to $60 million, representing approximately 26% to 38% year-over-year growth, driven predominantly by sales and extensa in surgical setting. Finally, the company ended the quarter with a strong balance sheet and $134.5 million in cash as of June 30th, which we believe is sufficient to fund multiple development milestones and provide cash runway through 2023. We look forward to a strong remaining 2022, and with that, I will turn the call over for questions.
spk00: At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypads. Your first question comes from the line of John Wolben from J&P Securities. Your line is open.
spk06: Hey, good afternoon, and thanks for taking the questions, guys. Maybe starting with the extension, then I got to follow up on TKI. Guessing, you know, what gives you confidence that you'll see the staffing issues at ASC bounce back in the second half of the year? to reiterate your guidance. And then you mentioned you're a little understaffed. Could you provide a little more color on what's going on with your reps as well?
spk05: Yeah, the confidence is just essentially the confidence that you have in the overall economy that things are going to normalize. And we do think there will be a number of factors that will improve as the year goes on. I think it's really important The OBPS ruling that gives us continued visibility in 2023, I think that will give people comfort to be able to continue to stock up in the final quarter and maybe to move some volume over to DexTens as well. But, yeah, it would look like $55 to $60 million was something we were highly, highly, highly confident of at one point. That was going to be a little bit of a stretch, but we still think we can get there, and we think that the market's going to break in positive ways for us moving forward.
spk06: And to TKI, just thinking about the translatability of the 3B cohort in Australia, I'm wondering if you could discuss, you know, the sequence of the anti-VEGF administration and TKI from that study and what you're doing in the U.S. study. And then, you know, any differences in the logistics of the insert between the 600 microgram insert and the 200 microgram inserts as far as besides just, you know, dose of the drug, but any differences in the hydrogel there either we should think about?
spk01: Robbie, you want to go ahead and answer that? Sure. Thanks, Anthony. And thank you for the question, John. Maybe I'll just give a background about the Australia trial first. That Australia trial is designed to provide, assess the safety and tolerability of OTX TKI and to show predominated biological activity in patients with the active subretinal and or intraretinal fluid. And that was, that is, a dose escalation trial. And we started with a single implant of 200 microgram. Then with two implants and then three implants, we reached to 600 microgram loading dose for those three implants. 3B cohorts in that trial is 200 microgram implants with an anti-VEGF injection. But again, we should remember that study was done in patients with active retinal fluid. What we have seen was that the some subjects we have seen the fluid was decreased and kept that way for a duration of time at least six months and some pipe subjects the fluid was completely eliminated and we have seen durability of that you know keeping the dry keeping the retina dry for again at least six months the most of the subjects, I should say all subjects, at least 50% and the group three, it was core three was about 82% of the subjects were kept dry. At least six months. That being said, coming to the phase one in US, we have a single implant, which is 600 microgram loading dose, but that study is being done in subjects with already dry retinas. The subjects were enrolled in the trial with dry retinas, and we are actually trying to answer the question, a single implant would keep the retina dry how long it would keep the retina dry, and that's what we are looking. To your question, and the data we're going to present at AAO is going to be the 28-week follow-up data of the U.S. Phase I trial. The question you're asking is that the implant, the dose, of course, is different, and also 200 versus 600 in a single implant. And actually, we had a single implant in the eye. What we had observed in some patients, the patients, if we increase the number of the implants, patients were actually disturbed visually. They were seeing the implant sometimes from time to time in their visual axis. That's the other difference compared to Australia's shrine.
spk06: That's helpful. Thanks for taking the questions. I'm looking forward to the AAO.
spk00: Our next question comes from the line of Dame Liam from Raven James. Your line is open.
spk08: Hi guys. This is Sean on for Dan. Thanks for taking the questions. Uh, kind of just a question on OTX, the DED for us, for the, uh, for the new trial, can you kind of put some bounds around what you mean by short lived, uh, comparator for the collagen, uh, implant and kind of what you're expecting for, you know, the amount of time until degradation, and then maybe give us a little bit of characterization of what you're thinking for in terms of material, whether or not that would be sufficiently similar to what you're looking at for the hydrogel or if you want it to be markedly different in how you're thinking about designing that trial.
spk01: Robert, you want to go ahead and answer that? Sure. Maybe again, you know, like quick information on our phase two trial with DED. That trial was a double mass trial of 0.2 and 0.3 dexamethasone compared to our hydrogel vehicle. We were able to hit the primary endpoint in that trial, primary endpoint of vulvar conjunctival redness. we were able to just show a differentiation compared to hydrogel vehicles. What we had seen, though, the effect of the placebo comparator we used, which is hydrogel vehicle, actually behaved like an active comparator. The placebo effect, the magnitude that the effect was larger than you would expect it from a real, true placebo. That was the exact same thing we have seen also in our CSI phase two trial. What we are now trying to do, the risk our upcoming development program is actually trying to find a more appropriate placebo, a real placebo cooperator. What we are planning to study is the commercially available soft collagen plugs, which is like two to five days, staying in the canaliculus, and then it would just disappear. That would actually provide a true placebo in a way that the patients would, when we insert this during the trial, are active versus this placebo, patient wouldn't feel the difference. And then ultimately, as this collagen plaque is quickly dissolved, will quickly dissolve, would actually provide that true placebo comparator in our trial. That's what we would like to study and see the commercially available collagen plug is going to provide that true placebo for our trials so that we can de-risk our upcoming phase 2, 3 trials.
spk07: Okay, very helpful. Thank you.
spk00: Your next question comes from the line of Stacy Q from Cowan. Your line is open.
spk02: Hey, thanks so much for taking our questions and congratulations on the quarter. We have a few questions all on OTX TKI. So as we await the phase one results, just first, can you remind us the rescue criteria? And maybe you've kind of set the expectations in the past, but Can we discuss the safety considerations, what profile looking for? This is the first question. And then the second question, just also discuss your early thoughts on the potential retreatment trial design, or at the very least, could you discuss what a potential phase two or three might look like in more details? What steps are you taking and considering for the next study? And then our last question is, what are the other potential retinal indications where you think OTX TKI could be competitive. Maybe discuss some potential opportunities you thought about where there might be additional on that need. Thank you so much.
spk05: Thanks, Stacy. That's quite a few questions. Robbie, you want to give a stab at trying to answer them?
spk01: Sure. Thank you so much, Stacy. Those are really great questions. Maybe I'm going to start with the rescue criteria. In both our Australia trial and the Australia trial again the patient population were what we call more difficult because those patients came into trial with active retinal fluids and the and it was our first in human study and we had a rescue criteria it's us we We share those criteria, and I can just comment that those criteria, not only, you know, like safety of the patient was really taught us for those criteria. And what we try to do, just make sure that the disease state is answered when the investigators, the doctors are treating our patients. study patients, the disease state is also considered during that, you know, the trial, and the rescue criteria is designed that way. And I can say they are, the treatment, retreatment criteria has somewhat lower bar compared to the other trials, the TKI trial. When we move into U.S. Phase I trial, the The patients coming in, they had more controlled patients because they came into trial with dry retinas. And we, again, kept our criteria strict. Again, we have a very similar criteria to Australia trial. And we just wanted to make sure the investigators, there's always another criteria, which is investigator discretion. That was also considered when the rescue treatment is done. That's why, you know, like in summary, I can say our criteria at their shares by everyone is more strict. and also including the disease state consideration by the investigators. We are looking at not only in our Australia trial, ultimately that's exactly what we plan to do in our phase one trial, just understanding how the rescue is done to inform our further study. That's for the first question. And I think that also answers the re-treatment question for the Phase 2-3. The re-treatment criteria, rescue criteria that you would see in the plant trials is very similar to what we currently use in our Phase 1 trials. That's how I can say. And we would just further discuss, but I think we would just, in our upcoming studies, include the disease state considerations more in the design of that retreatment criteria. And your third question was other retinal indications. Other retinal indications out there, you know, that's tried by everyone for other drugs that you would use in the treatment of patients. Of course, diabetic retinopathy, DME, all of those are open, you know, in front of us. What we think is that, you know, our studies so far in TKI, not just one, but two phase one trials, we believe that we are in a great position having the data in different populations in that AMD, having opportunities being, you know, like studying different number of the implants with various doses, We do think that, and also, Dr. Peter Kaiser, Peter, working more closely with us, we're going to just do our strategy in other retinal diseases in a more informed session going forward.
spk02: That's very helpful. Thank you.
spk09: Thank you for your questions.
spk00: Again, if you would like to ask a question, press star and the number one on your telephone keypad. Your next question comes from Yai Chen from HC Wainwright. Your line is open.
spk03: Hi, this is Yis. Thank you for taking my questions. First question is, within your net product revenue guidance of $55 to $60 million, how much of those will come from dextenza for allergic conjunctivitis this year?
spk05: We've guided that it's predominantly from the surgical setting. We have not guided for a large number in the allergic conjunctivitis because we are doing a beta test at the moment.
spk03: Okay. Can you comment on the potential cells in AC for 2023 at this point?
spk05: No, we haven't gotten to what those sales will be in 2023 at this point.
spk03: How many people are currently in the team dedicated to AC?
spk05: We have a team of four key account managers. We've staffed up now for about a little over a month. We have a field reimbursement specialist and manager for the team.
spk03: OK. And how large is the entire sales team right now?
spk05: About 40 key account managers, and we have about seven or eight field reimbursement specialists, and then three regional people.
spk03: Got it, got it, got it. And so in the current US TKI trial, what is the average anti-VEGF injections do these patients had before enrollment into the trial?
spk01: Ravi, you want to add that? Sure. We are collecting that data, and that data is going to be shared with everyone in the upcoming AAO meeting.
spk03: Okay. All right. For the TIC Phase II trial, when do you expect to complete enrollment?
spk01: We have not guided the completion date for TIC Phase II trial. Again, just to maybe quick background, that's phase two double mask randomized trial with two formulations of OTX TIC compared to Durista in patients with open angle glaucoma and ocular hypertension. We're going to enroll 105 subjects in these three arms. And the enrollment is currently going well. And again, we just would like to just Continue and then, you know, just sometime later, when we expect the enrollment would be finished.
spk03: Okay. Got it. All right. Thank you. Thank you.
spk00: Your next question comes from the line of Joe Cantazari from Piper Sandler. Your line is open.
spk07: Hi, everyone. This is Albert on for Joe. Thanks for taking my question. Just a quick one from me. I was wondering if we can still expect to see an update from the Australia trial later this year?
spk01: Hi, Joe. Yes. We would like to do an update on Australia trial in the upcoming AU meeting as well.
spk07: Okay. All right. Great. Thanks. Looking forward to the updates.
spk01: Thank you.
spk00: There are no further questions at this time. This concludes today's conference call. You may now disconnect.
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