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spk04: Good day, and thank you for standing by. Welcome to the Ocular Therapeutics third quarter 2022 earnings conference call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising you that your hand is raised. Due to time, you will only get one question and a follow-up. Please be advised that today's conference is being recorded. I would now like to hand it over our conference to your speaker today, Donald Notman, the CFO. Go ahead, Donald.
spk05: Thank you, operator. Good afternoon, everyone, and thank you for joining us on our third 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 third quarter ended September 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 our pipeline developments and the commercial progress of Dextenza. Also speaking on the call today will be Dr. Rabia Austin, our Chief Medical Officer, and Dr. Peter Kaiser, our Chief Medical Advisor, Retina. Following their 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 also 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 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 the 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.
spk06: Thanks, Donald. The highlight in the quarter for Ocular was the release of the seven-month interim results from our U.S.-based phase one trial for OTX TKI presented in the late breaker at the AAO annual meeting in September. With the release of the top line data and our intent to pursue this in both wet AMD and diabetic retinopathy, I believe we are establishing ourselves as a future leader in the back of the eye. Added to our established expertise in the front of the eye, I'm pleased to say that we continue to make significant strides building ocular therapeutics as a comprehensive strategic player in the ophthalmology space. As a reminder of the context for the US-based phase one trial of OTX-DKI, We had previously demonstrated in our Australia-based Phase I trial that we were able to deliver bespoke depot formulations of our proprietary hydrogel capable of resolving subretinal and or interretinal fluid. To do this, we treated uncontrolled patients with OTX TKI as monotherapy, meaning without the benefit of concomitant medication or induction therapy, and then observed OCT scans and noted clinically meaningful reductions in fluid and even complete resolution in some patients. We don't believe this has been shown previously with any other TKIs delivered individually, nor has it been attempted since. In addition to demonstrating that excitinib delivered through our hydrogel depots was potent enough to resolve fluid as monotherapy in some patients, we also observed a dose response. We continue to believe the potency of excitinib and its uptake in the retinal pigment epithelium, or RPE cells, are responsible for these observations. The next step was to take OTX TKI and test its durability in maintaining retinal thickness and BCVA in controlled wet AMD patients and in a setting with an active control group. Our recently reported interim results from our US-based phase one trial did just that with resounding success. I will let Robbie and Peter go over the particulars of the trial, but the takeaway is that we were able to demonstrate that 80% of patients reached the six-month time point without the need for rescue and 73% were able to go through seven months. Most importantly, both best corrected visual acuity as measured by EPDRS charts and retinal thickness as measured by OCT and TKI-related patients were comparable to the control arm of the once eight-weekly ILEA. It should also be noted that none of the rescue patients in the trial met the rescue criteria set forth in the clinical trial protocol. In addition to moving OTX TKI into a phase 2-3 trial for wet AMD in quarter three of 2023, We also plan to initiate a phase one trial in diabetic retinopathy in the first quarter of 2023. While I will let Peter elaborate on the opportunity in diabetic retinopathy and our new clinical development plans, I want to highlight that with the current data and depending on the outcome of phase one diabetic retinopathy trial and the follow-up meeting with the FDA, we believe that we may be in a position to enter a phase three pivotal in diabetic retinopathy in the first quarter of 2024. Finally, let me provide a few comments on our commercial business. In the third quarter, we reported next sales of DeXtensa of $11.9 million, essentially flat year over year and down approximately 2% sequentially quarter over quarter. Relative to the potential of the opportunity and our own expectations, this represents a disappointing result and is clearly unacceptable. We believe that there are three main reasons for DeXtensa's performance. The first is that our customers, ASCs and HOPDs, remain in a difficult situation. Since the pandemic, the majority of our customers have been chronically short of staff or recently restaffed with generally less experienced people than they had before the pandemic. Buy and build products like Dexvenza, while a huge advantage for the ASC and HOPD when administered appropriately, do require experienced back office staff and surgical staff to properly implement and administer. Understandably, in the current environment, ASCs and HOPDs are reluctant to add extra work and complexities. The second reason is that we are in a similar position as our customers in our own ability to maintain an experienced field-based team with minimal vacancies, which have been higher than we would have liked over the past few quarters. The final reason behind Xtensa's performance has to do with changes in the reimbursement landscape for the procedure code CPT68841. And it is clear that volume has been impacted due to the reduction in physician payment for the insertion of Xtensa when our procedure or CPT code was converted from a category three T code into a category one code effective January 1st, 2022. Most important going forward though is not about what has caused the slowdown, but how we plan to reignite growth. I'm happy to report the variable over which we believe we have the most control is the closest to being resolved. We are now nearly at full capacity in our field force with the team trained and in the field. Clearly it's not just about having vacancies filled, but also about focusing on a strategy of deepening involvement with our customers and helping them get beyond patients with Medicare Part B into Advantage plans and commercial payers. We've had tremendous improvements in coverage and reimbursement of late, and we need to get our customers comfortable giving more patients access to the benefits of Dextenza. The next two elements over which we believe we can have the most control are the value proposition for Dextenza and the procedure code 68841 associated with insertion. Last quarter, we began issuing an off-invoice discount that was well received by our customer base as it removed the most common objection voiced by our accounts. We also have implemented a number of strategies working with CMS in an effort to appropriately rebalance the value proposition for Dextenza and CPT 68841 in the future. While early in the implementation, we started the fourth quarter well, with October recording the strongest monthly in-market sales ever, nearing 11,500 billable units and eclipsing our previous record by more than 900 inserts. While we fully expect this growth to continue for the remainder of the fourth quarter and accelerate going forward, we do not believe that we will have a fourth quarter strong enough to reach our original guidance of $55 million to $60 million in net revenues. Consequently, we are adjusting guidance for full-year net revenues to between $48 million and $52 million, which represents a growth over prior year of between 10% and 20%. But that is a summary. Let me turn the call over to our Chief Medical Officer, Dr. Rabia Osman, to take you through the pipeline.
spk01: Thanks, Anthony. Let me begin with an update on our back-of-the-eye program, OTX TKI. During the AAO meeting in September, we had multiple presentations providing updates on OTX TKI being developed for the treatment of wet AMD and other retinal indications. By far and away, the highlight from the meeting was the presentation of month 6 and month 7 interim data from our U.S.-based phase 1 trial. This was a multi-center prospective randomized controlled trial in 21 subjects, evaluating a 600-microgram OTX TKI dose in a single implant containing azitinib, compared to a filibuster administered every eight weeks in controlled wet AMD subjects previously treated with anti-vegetarian therapy. The trial is designed to assess the safety, durability, and tolerability of OTX TKI and to assess preliminary biological activity in subjects by measuring anatomical and functional changes of the retina. Overall, we could not have been more pleased with the results. OTX TKI was generally well tolerated. There were no drug-related ocular or systemic series adverse events, SAEs. There was one SAE of acute endophthalmitis in the OTX TKI arm, which occurred following a mandated afib receptor injection at month one. Using a data cutoff date of August 24, 2022, The data showed subjects treated with a single OTX TKI implant demonstrated stable and sustained best corrected visual acuity, BCBA, mean change from baseline of negative 1.3 letters, and central subfield foveal thickness, CSFT, mean change from baseline of positive 9.2 micrometer in the OTX TKI arm, at 7 months, which was comparable with the other receptor arm, dosed every 8 weeks. Mean change from BCVA baseline of minus 1 letter, mean change from CSFT baseline positive 0.4 micrometer. Importantly, the data also showed that 80% of the subjects in the OTX TKI arm were rescue-free up to 6 months and 73% of subjects in the OTX TKI arm were rescue-free up to seven months. We believe the data highlights the potential of OTX TKI to become a differentiated product capable of providing a durable anti-VEGF response that improves upon today's standards of care in the management of VET-AMD. We plan to share this data along with the encouraging data from our Australia-based Phase 1 trials with the FDA, and subject to discussions with the FDA, plan to initiate a Phase 2-3 clinical trial in the third quarter of 2023. We plan to provide a second data update of the US-based Phase 1 OTX TKI trial at the angiogenesis, exudation, and degeneration 2023 annual meeting in February that will include month 10 safety and efficacy data. In addition to wet AMD, we plan to initiate a phase 1 trial evaluating OTX TKI for the treatment of diabetic retinopathy in the first quarter of 2023, and Peter will give more information on this trial. Moving to our glaucoma program, OTX TIC. We continue to actively enroll subjects in the U.S.-based Phase II clinical trial. This trial is a prospective, multicenter, randomized control trial, evaluating the safety, tolerability, and efficacy of OTX-PIC for the reduction of intraocular pressure in patients with primary open-angle glaucoma or ocular hypertension. We plan to enroll approximately 105 subjects in three different arms, randomized one-to-one-to-one, in which the subjects will receive a single OTX-TIC implant containing a 5-microgram or 26-microgram dose of Trevoprost compared with an implant of Durista. The 5-microgram arm is utilizing a phase-degrading implant while the 26-microgram arm is utilizing a standard degrading implant. The trial is designed to observe the changes in diurnal intraocular pressure, IOP, from baseline at 8 a.m., 10 a.m., and 4 p.m. at 2, 6, and 12 weeks, and follow duration of IOP response over time. We plan to provide a top-line data release for this Phase II clinical trial in the fourth quarter of 2023. Regarding our ocular surface disease program, we remain committed to the development of our two dry eye programs in a measured manner. OTX-TED, a low-dose intracanalicular insert containing dexamethasone for the short-term treatment of the signs and symptoms of dry eye disease, and OTX-CSI, a cyclosporine intracanalicular insert for the chronic treatment of patients with dry eye disease. With regard to OTX-DED, we remain on track to begin a collaborative trial in the first half of 2023 to evaluate the performance of OTX-DED versus placebo inserts namely fast-dissolving collagen plaques and no inserts at all. We have designed this trial to explain the magnitude of the placebo effect seen in both the OTX-DED and the OTX-CSI Phase II trials in which the vehicle hydrogel placebo insert or placebo comparator remain in the canonicals longer than anticipated performing more like an active comparator than a placebo comparator. We plan to use the results of this trial to inform the selection of a more appropriate placebo comparator for both the OTX-DED and the OTX-CSI programs moving forward. I would now like to turn the call over to Peter to discuss more specifics around our development plans for OTX-PKI in both wet AMD and diabetic retinopathy.
spk08: Thanks, Rabia. At AAO, we announced plans to advance OTX TKI into a Phase II-III trial in wet age-related macular degeneration, as well as initiate a new trial in a new indication evaluating OTX TKI for treatment of diabetic retinopathy. In wet macular degeneration, we have been doing a tremendous amount of work since the U.S.-based Phase I interim results were first made available to find ways to expedite trials powered to statistically demonstrate the profile that we see emerging. As we pursue this, importantly, we have the benefit of a deep base of experience with the product that may be underappreciated. For example, in the TKI program, we dosed our first patient in early 2019 and have now had over 45 patients who have received OTX TKI therapy with over 850 patient visits. The drug has been studied as both a monotherapy and in combination with anti-VEGF. It has been tested in a randomized study, in a well-controlled and actively leaking patient study, as well as in patients who are treatment naive, both as a monotherapy and combination therapy. Across it all, OTX TKI has demonstrated a remarkable consistency of effect, We believe this gives Ocular the largest data set relative to any other company evaluating a TKI in wet macular degeneration, which we, of course, plan to share with the FDA at our Type C meeting at which we will discuss our Phase 2-3 strategy. In addition to wet AMD, we plan to initiate a Phase 1 trial to evaluate OTX TKI in diabetic retinopathy in the first quarter of 2023. Diabetic retinopathy is a leading cause of blindness affecting an estimated 8.4 million patients in the U.S. and 140.9 million globally according to market scope. Typically, diabetic patients will develop diabetic retinopathy after they have had diabetes for between three and five years. In the early stages, diabetic retinopathy will not affect sight. but if it is not treated and progresses, eventually the site will be affected. In fact, it is the number one cause of legal blindness in the working age population. Given the slow onset and the fact that diabetes affects a younger working age population, the required frequency of current anti-VEGF therapies makes effective treatment especially challenging. And this is where we believe OTX TKI with its designed durability of up to nine months or longer, may be especially effective. We believe the same attributes that make OTX TKI a compelling product in wet macular degeneration, the ease of use of office-based injection and long-term durability, could establish this as the first standard of care in the treatment of diabetic retinopathy. We also believe that the regulatory path is more straightforward. given that the comparator in a registration trial would likely be placebo, since there is no established standard of care. Finally, we see the diabetic retinopathy space, given its requirement for extended durability, as inherently less competitive than the wet AMD market. We plan to conduct a U.S.-based Phase I trial under an EIND across approximately 10 sites and will include approximately 20 patients randomized to either 600 micrograms OTX TKI single implant containing a sitinib or sham control. Based on the positive interim results in our U.S.-based Phase I trial in wet age-related macular degeneration, we believe that OTX TKI should perform well in the Phase I diabetic retinopathy trial. With the current data and depending on the outcome of the Phase I DR study and a follow-up meeting with the FDA, we believe that we may be in a position to move aggressively and to initiate our first phase three pivotal trial of OTX TKI for the treatment of diabetic retinopathy in the first quarter of 2024. I would now like to turn the call back over to Donald.
spk05: Thanks, Peter. Net revenue, which includes both gross product revenue, net of discounts, rebates, and returns, which the company refers to as total net product revenue, and collaboration revenue was $12 million for the third quarter of 2022. and represented an approximately 2% decrease over the same period in 2021. Stenza net product revenue was $11.9 million, flat the comparable quarter of 2021, and down approximately 2% on a sequential quarterly basis. Net revenue in the third quarter of 2022 also included $0.1 million in collaboration revenue associated with the company's work with AFMED, And net product revenue in the third quarter of 2021 included $.3 million attributable to the sales of reserve sealant. Research and development expenses for the third quarter were $13.7 million versus $12.7 million for the comparable period in 2021, driven primarily by an increase in personnel and a higher level of preclinical development activity. Selling and marketing expenses in the third quarter were $10.2 million, as compared to $9.6 million for the comparable period of 2021, reflecting primarily an increase in field force personnel. General and administrative expenses were $8.5 million for the third quarter versus $8.1 million in a comparable quarter of 2021, primarily due to an increase in personnel-related costs, including stock-based compensation. The company recorded a net loss for the third quarter of $24.2 million or a loss of 31 cents per share on a basic and diluted basis compared to net income of $2.6 million or net income of 3 cents per share on a basic basis and a loss of 23 cents per share on a diluted basis for the same period in 2021. Net loss in the third quarter of 2022 included a $1.1 million non-cash item attributable to an increase in the fair value of the derivative liability associated with the company's convertible notes as the price of its common stock increased during the quarter. Non-cash charges for stock-based compensation and depreciation and amortization were $4.7 million in the third quarter of 2022 versus $4.4 million for the same quarter in 2021. As of November 4, 2022, the company had 77 million shares outstanding. As of September 30, 2022, the company had $121 million in cash and cash equivalents versus $134.5 million at June 30, 2022. Based on current plans, the company believes that its existing cash and cash equivalents are sufficient to fund operations through 2023. I would now like to turn the call back over to Anthony for some final thoughts.
spk06: Thanks, Donald. So before opening the call up for questions, let me do a quick summary. We are excited to be able to share with the world our seven-month interim results from our U.S.-based Phase I trial for OTX TKI in wet AMD, building further evidence of a potential product profile that could set the standard of care for durability in the treatment of wet AMD and diabetic retinopathy. We intend to initiate a phase one trial of OTX TKI for diabetic retinopathy in the first quarter of 2023 and believe we may be positioned to commence our first phase three pivotal trial in the first quarter of 2024. We plan to initiate a phase two three trial of OTX TKI for wet AMD in the third quarter of 2023. We plan to continue enrollment of the phase two trial of OTX TIC in glaucoma and should be in a position to release top line data in the fourth quarter of 2023. We now have a full team in place selling that extends in a surgical setting with an enhanced value proposition that we believe should reignite our growth trajectory. We have started with a record month in October. And we have 121 million in cash as of September 30th and continue to guide a cash runway through 2023. We look forward to a strong remaining 2022. And with that, I'll turn the call over to questions.
spk04: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. With limited time, we will only have time for one question and one follow-up. Please stand by as we compile the Q&A roster. All right, our first question comes from the line of Joe Catassaro from Piper Sandler. Go ahead, Joe.
spk11: Hey, guys. Thanks for taking my questions here. I'll try and stick to two questions. Maybe first, on diabetic retinopathy, just wondering why that study is moving forward under an exploratory IND and not a traditional IND that would maybe allow potentially for a more robust study, and whether 20 patients' worth of data is a sufficient data set to answer any questions ahead of a potential phase three start in 2024. And then with regards to the type C meeting and the FDA and TKI and wet AMD, I guess, what are those sort of main questions and feedback you're hoping to get there? And how does the reformulation work that you guys are doing factor into those discussions, if at all? Thanks.
spk06: I guess I'll farm that question out to Peter since he's a running point on the diabetic retinopathy. Peter, you want to try and tackle that?
spk08: Sure. Thanks for the question. You know, when it comes to diabetic retinopathy, the key feature here is, you know, we're working on, we have to decide, is it better to use our 1 by 600, or is it better to use our and start forward now, or is it better to you know, work later with maybe a reformulated version. And to us, moving forward with the EIND, given the number of patients that it allows us to use, works perfectly fine. The second question in terms of the macular degeneration You have to look at the, you know, when we look at the FDA, the FDA will allow us to, you know, the decision is going to be what type of combination therapy they're going to call it if you do, say, three anti-VEGF injections. versus one versus none? Should we enroll patients who are treatment naive, all comers, patients previously treated, and what do they consider previously treated? It's a discussion that any company looking at in this space is going to have to have with the FDA. We don't want to have that discussion until we have all the patients basically from both our phase one studies completing the study so we have the best chance of deciding what is best to move out. Did that answer your question?
spk11: Yeah, yeah, that's all very helpful. Thanks for taking my question.
spk04: All right, our next question comes from Christopher Howerton from Jefferies. Hold on one second, Christopher. All right, your line is now open.
spk02: Hi, this is Kambiz on for Chris. Thanks for taking the question, team. For Dixenza, what is the priority in office or ambulatory surgical centers? And then on OTX TKI, what is the best indication to first get a label for that product, whether AMD or diabetic retinopathy? Thank you very much.
spk06: Yeah, for the course first part on Dexenza, I mean, clearly our business runs in the surgical setting now, and the focus is getting growth reignited in the surgical setting. So that is, you know, priorities one, two, and three at the moment. Secondarily, talking about diabetic retinopathy and why we think that's such a great opportunity, given the profile of the diabetic retinopathy patient, as Peter had mentioned, They are patients who are primarily of working age population. They have a number of other conditions for which they're receiving active treatment. The burden of a frequent injection is actually too much for them to bear, and they would rather risk losing sight than have to go in for either once monthly or once a weekly injections with anti-VEGF. We think that we have a formulation that we believe that could last for a year or longer we think that changes the goalposts entirely in a once yearly formulation and diabetic retinopathy with a favorable safety profile we think that would be tolerable we wouldn't expect every diabetic retinopathy patient to convert to uh to therapy with otxtki but given the number of of patients with diabetic retinopathy changing that number from 90% of patients being untreated to 80% of patients being untreated creates a significant product opportunity. You marry that with the easier regulatory path that we can go directly against sham rather than against an active comparator. We think this is a natural opportunity for us. It doesn't mean wet AMD is not an opportunity that we are very excited about and seeking to develop a clinical program in order to get registration there. But we do understand that's a highly competitive environment and that that is a also expensive, far more expensive clinical trial. So we're not doing an either or approach, but we are particularly excited about diabetic retinopathy. We think our product profile actually creates a new opportunity in that space that doesn't exist presently.
spk02: Thank you very much.
spk04: All right. Our next question comes from the line of Yi Chen from C.H. Wainwright. Hold on one second, Yi. All right, your line is now open. So sorry, go ahead again.
spk07: Hello? Can you hear me? Yep. Yes. Oh, okay, sorry. So my first question is, can you elaborate on the cause of staffing shortage and why do you believe it is a transient problem?
spk06: Staffing shortage is the same staffing shortage you realize when your flight's delayed four hours because they can't find pilots to fly it. It's a post-pandemic issue that's across the board in a number of different industries. But there's nothing particularly different, I think, in the ASC and hospital environment, particularly on the administrative level, where these are fairly low-level employees that seem to have disappeared during the COVID pandemic and not come back into the workforce with the same vigor as they left it. So we are very much at the mercy of the macroeconomic situation. When that ameliorates, I expect the ASC and hospitals to be back to normal as well.
spk07: Okay. And what kind of sales boost for Dextenza do you expect in 2023, considering the fact that DexEQ will no longer have its pass-through status starting January 1st?
spk06: Well, we certainly expect to pick up some of the volume that DexEQ has been able to achieve. They have somewhere between a third and a half of what our volume is. So we would expect some of that to move over. We would expect some of it would probably go into some of the formulations that exist on the compounding side. We have certainly internal assumptions of what we think we'll be able to get, and we have certainly some anecdotal data of people who are looking to place orders as they move their business over to a product that will continue to have separate payments. But we have not quantified that, and we will give some guidance as we move past the fourth quarter. We've seen a really nice trend break starting in October. We believe that's real. We believe it's real both because of the staffing we have internally, because the market's getting better, but also because I think our strategy is deepening in how we are able to move patients past or move our customers past Med Part B and take advantage of some of the gains we've made in the private payer environment. But we'll wait to see what that trend line looks like before we look at what 2023 guidance will look like.
spk04: Wonderful. Thank you for that question. Again, as a reminder, if you'd like to ask a question to one of our presenters, please press star 1 1 on your telephone and wait for your name to be called. Our next question. comes from the line of Yon Zee from B. Reilly. Your phone line is now open.
spk09: Hi. Thank you for taking our questions. Dr. Kaiser, can you comment on the diabetic retinopathy patient journey? What's the percentage of patients are non-proliferative for NTDR? and at which point this patient will feel the urgency to get the current treatment, the antiretinoin.
spk08: Thank you. So that's a great question, Juan. You know, to us, when a patient comes in with diabetic retinopathy, there's sort of two different buckets. One is the patient who doesn't realize why they're there, and their endocrinologist or primary care doctor says you have to get an eye exam. And the second type of patient is one who's actually losing vision from diabetes and diabetic retinopathy.
spk09: Can you hear me?
spk08: Yes. Can you hear us? Yes. So what I was saying is that there's two types of patients with diabetic retinopathy. One doesn't realize they have it and it doesn't have any visual changes. And the other is one who is noticing visual changes. And it doesn't really, you know, you can have this with severe non-proliferative disease. By the time it gets to proliferative disease, you're usually symptomatic. Oftentimes, those patients will have floaters. They'll have decreased vision. They may even have way worse than that from the neovascularization that we see in proliferative disease. When it comes to non-proliferative disease, most of these patients would qualify for treatment, but we currently don't treat those patients directly. with any of the FDA-approved products, which would be Lucentis or Ilea, because it requires so frequent injections. As Anthony said at the outset, that's where we think we offer a good choice, because these are patients who would improve their diabetic retinopathy with a treatment. Theoretically, our treatments would last seven, eight, nine, maybe even longer months. So an injection every so often in these working age patients is very palatable. And the benefit is very real. The reason we don't use it and patients don't want it is because as much as the benefit is real, it's just the frequency of injection is just not possible to keep up. Now, I do have patients who do get anti-VEGF injections for diabetic retinopathy, but they're in the vast minority. So hopefully that answered your question.
spk09: Yes, that's very helpful. Thank you.
spk04: All right. And then just again as a reminder, if you'd like to ask our speakers a question, please press star 11 on your telephone keypad to be placed in the queue. All right. Our next question comes from the line of Yorgi Yordanov from Cohen. Yorgi, your line is open.
spk10: Thank you so much for taking our questions and congratulations on all the progress and the data from. So, maybe to follow up with some of the previous discussion on the reformulations that you're planning, you mentioned that you're, you're looking on the previous code that you're looking into a lower drug. load insert that has a faster drug release profile. So maybe can you talk about what made you explore this option and what would you be looking for in terms of product profile before you can initiate the trial? And I guess when do you think you have clarity if you've been able to successfully achieve your goal?
spk06: Yeah, let me start with that. And I think it's, this is one of the elements where I made a lot of mistakes in my life. Probably one of the bigger ones was talking about reformulation with, uh, without, without TXTKI. Um, essentially we have a formulation that works and we have a formulation that will work in wet AMD. We have a formulation that works in diabetic retinopathy, and we're very happy with that formulation with what it's been able to demonstrate from a clinical program. If we need to go forward with that, we will go forward with that formulation. So there's nothing formulation-related that's causing any delays in what we look at going forward. Now, as formulators, there's a magical perfect formulation. That perfect formulation is that from the moment the last particle of drug eludes out of the depot, the depot spontaneously bioresorbs and disappears. Now, you will never get a formulation that is that perfect. There's always going to be a situation where either the depot lasts longer than the drug or the drug lasts longer than the depot. And what we are doing is what we do with all of our formulations, and every time we move forward, we attempt to improve upon the formulation that we have. So we have a number of projects going forward that are looking at improved formulations that fit closer to that ideal. But if those formulations aren't ready at the time that we're ready to go into phase three, we'll go with the existing formulation. Particularly, we have the advantage of being able to do first and second pivotals where the second pivotal is the it is where you need your final marketed formulation so there's nothing in the formulation of these products that's delaying us but we are searching for perfection and we are starting really much with the end in mind that we we think that that we need to bring forward products that that are not only commercially viable but actually will be the best product that we can develop before we go into that final pivotal.
spk10: This is super helpful. And then maybe just as my follow-up, do you have any, I guess, pointers or ideas of, like, what would be the timeline to seeing results from the Phase 2-3 trial? And is it possible that this trial serves as one of two pivotals?
spk06: yeah that's that's what's really when we talk about people saying why is it taking a while before we get into these later stage clinical trials um the reason why is because we believe that the phase one programs that we're using supply us with ample validation of wet amd which we believe we already have and and diabetic retinopathy which of course we expect to be able to see before we start those later stage clinical trials but we don't see doing a classic phase two as a necessary strategy for us. So we are looking very much to going directly into a first pivotal and then running nearly on top of that a second pivotal. There will probably be a little bit of a delay between the first and second pivotals in order just to get those started in the best possible way. But we are able to look at those programs and then think about the next act being the completion of those trials and then the NDA filing. So we are very much collapsing these programs and expect to – we haven't given guidance on when we actually expect to get those data back yet, but we will once we get those programs started.
spk04: Thank you. Our next question comes from the line of Caroline Palomaque from Brennenburg. Go ahead, Caroline.
spk03: Hi, thanks for taking the questions. Just thinking about the next 12 to 18 months, you have several late-stage trials you expect to initiate, both the AMD and the DR. Just wondering if you can give some guidance as to the increase in R&D spend or the cost of the trials themselves. Thanks.
spk06: We have not released the cost of those trials. I mean, clearly diabetic retinopathy is far less expensive, mainly because of the comparator that we would be going after, which would be SHAMP. wet AMD trials are somewhat longer and more involved. We have put, as you notice with wet AMD, a phase two, three trial. In our runway calculations, we have put in enough patients for the phase two trial, but we are clearly looking at potential partnerships that could help us gross that up into a first pivotal. It's really about the number of patients. And we've long stated that the next trials we would go into after our phase one would be trials that, if they had enough patients in them, would serve as pivotal. Clearly, we're going to get the advice of the FDA before we settle on exactly what those protocols look like. And it's hard to exactly price them up and understand exactly when they're going to complete before we really know what those protocols look like.
spk03: Great. That's really helpful. I appreciate that. Just a quick follow-up. I'm not sure whose phone that is.
spk00: Okay.
spk03: Yeah, just a quick follow-up on that. Just wondering, you mentioned partnership. Just wondering if there's anything or any companies that you already have in mind or you're already in conversations with. Is there an ideal partner that you don't have in mind?
spk06: Yeah, certainly for TIC and TKI, the ideal partner is somebody who can appropriately globalize the products that we're developing. We are developing these products for the benefit of patients throughout the world. We have certainly the ability to commercialize in the U.S., where we built a differentiated buy-and-build commercial sales team, certainly in the front of the eye, and we believe we can do it in the back of the eye as well. But the ideal partner would be somebody that could give justice to these products and make sure that patients throughout the world can benefit from them.
spk04: Perfect. Thank you for your question. All right. Again, a reminder, just to please press star 1-1 on your telephone if you'd like to ask our presenter some questions. We have another question from Yi Chang. So hold on one second. Let me put you on the stage. Go ahead, Yi.
spk07: Hello? Hi. Go ahead. Hi, thank you for taking my follow-up. Just very quickly, was there a precedent in the clinical development for DR that a candidate was able to be advanced into a phase three trial directly for a phase one trial? I'm sorry, you're asking if there was a precedent in the industry of a... Yeah, precedent in the entire industry for a clinical development for DR.
spk06: I'm not aware specifically of DR. I can pass that off to Peter. Peter, are you aware?
spk08: When you look at how tyrosine kinase inhibitors work, they work to prevent downstream activation of certain tyrosine kinases depending on basically several factors. In the case of Exitinib, it has a potency, very high potency at the VEGF receptors as well as a potency at the PDGF receptors. When you look at our data from macular degeneration, it's following the same path that you would expect for an anti-VEGF to perform at. And so because of that, we know very well that diabetic retinopathy basically mirrors macular degeneration when it comes to the anti-VEGF effect. And then when you add the anti-PDGF effect, where we know that in diabetes, one of the sort of late complications is what's something called traction retinal detachments. which is formed and helped form by PTSDF. And so that in and of itself would show that you would have a benefit. In terms of clinical precedent, there's no previous clinical study in diabetic retinopathy. They've tested tyrosine kinase inhibitors. We haven't, but it has been tested for diabetic macular edema with success. as well as preclinical models. So for us, there's plenty of data that would support it. That's why we're doing a phase one clinical study. And the goal then is with that showing what we need to basically, the thing we need to figure out is sort of how quickly does the effect occur and what is the magnitude of the effect. And from that, we can do some power calculations to determine the phase two, three the size of the phase two, three study. And so that's what we intend to get from the phase one study. The nice thing about the study we're proposing is the FDA allows us to also have a control group. And so this really is important, especially when you're talking about diabetic retinopathy severity, to have a control group to really be able to compare directly as opposed to a traditional phase one where you only put in your own drug and you have really no idea what the control group would be and you have to use natural history. So we're pretty excited to get those results. And then from that design, a very large study based on it.
spk06: I think it's important background also. I mean, these constructs, phase two and phase three are not FDA concepts. They're actually company concepts. And the reason why phase twos are done, I have a long background in areas like diabetic retinopathy where you're able to do first in human studies in actual patients, so you're able to get proof of concept while you're getting safety data, which is obviously the primary reason for doing a phase one program. When you have proof of concept, the FDA just sees pivotal or non-pivotal. And we have the ability, because we have proof of concept, and we certainly expect to have proof of concept for diabetic retinopathy, that we can then jump straight into a pivotal trial. This is done routinely in oncology settings and in other settings where you're able to do first in human studies rather than in healthy volunteers, do them in patients with active disease. And we have 45 patients in wet AMD where we understand how our drug works in a number of different ways in a number of different populations. So that is adequate from our standpoint and adequate from the FDA's standpoint, we presume, once we have the discussion with them. to jump directly into a pivotal trial. It's not a huge leap when you're working with known mechanisms and you have clinical trial data in populations with active disease. So we certainly expect to have that box ticked with DR, not only with our own programs, but looking at other potential programs that may be able to read onto what would give us confidence to go directly into a pivotal. Got it. Thank you.
spk04: Thank you for your questions. Again, if you'd like to ask our speakers some questions, please press star 11 on your telephone now. I'll just wait just a couple of seconds here.
spk00: All right.
spk04: All right, there appears to be no additional questions at this time, so I'd like to turn it back over to Anthony Montanich for closing remarks.
spk06: I just want to thank everyone for their attendance and for the very insightful questions, the usually insightful questions from the analysts. We are very excited about our future, very excited about being able to complete our phase two trials for OTX TIC, which is often the forgotten product that we still have very strong belief and excitement for. Clearly, our nine-month data we will be releasing at a conference very soon for our OTX TKI, and that nine-month data in wet AMD becomes extremely interesting because that really is the time point that the FDA looks at as the primary endpoint for wet AMD studies. So I think the performance of the drug at nine months is going to be far more interesting than what it was at seven months. And what we've been seeing so far in the month of October with Dextenza, where we've We've got 11,500 billable inserts in October, which is almost 1,000 more than we've ever done in the past. This is particularly interesting because this is the first month of a quarter, and we usually do best in our last month of quarter. The previous two records were in final month of quarter. I'm not going to declare victory yet. We want to make sure that that continues to roll forward. But there are a number of factors that we think will play into what we hope to be able to achieve with Dextenza one of which we're very excited about with the OPPS final rule where we were moved into an APC category that comes with a $2,100 payment in the HOPD. We still have the status indicator for that that has not changed to allow payment in the ASC setting, but we believe that we have good data going forward and good arguments to be able to get that status indicator changed to the to the status indicator for all of the other products in that APC and look to a facility payment, hopefully sometime in 2024, which would rebalance some of the economics around the product and something that would create a lot of excitement in the surgical setting going forward as well. So with that, I thank everyone for being on the phone and for sticking with us as we continue to advance our pipeline forward. Thank you.
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