Ocular Therapeutix, Inc.

Q4 2022 Earnings Conference Call


spk02: Ladies and gentlemen, thank you for standing by, and welcome to the Ocular Therapeutics fourth quarter and year-end 2022 earnings conference call. At this time, all participants are in a listen-only mode. 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.
spk07: Thank you, operator. Good afternoon, everyone, and thank you for joining us on our fourth quarter and year-end 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 fourth quarter and year-ended December 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 our pipeline developments and the commercial progress of Extenza. Also speaking on the call today will be Steve Myers, our Senior Vice President Commercial, and Dr. Rabia Ozden, our Chief Medical Officer. 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 be joined by Chris White, our Chief Business Officer, and Dr. Peter Kaiser, our Chief Medical Advisor, Retina. 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 annual report on Form 10-K, filed this afternoon with the SEC. I will now turn the call over to Anthony.
spk08: Thanks, Al. The fourth quarter of 2022 was a tremendous success for oculotherapeutics, and has set the stage for a very strong start to the year in 2023. First, on the sales side, we finished the quarter with extended net product revenue sales of $13.9 million compared to the same quarter of previous year sales of $12.2 million and sales over prior quarter of $11.9 million. That represents growth of approximately 14% and 17% respectively. Total extended net product revenue was $50.5 million, representing growth over prior year of approximately 20%. Most importantly, in the fourth quarter, we regained in-market sales momentum, and I'm pleased to report that this momentum has continued in the first couple of months of this quarter. I will introduce you to our new Senior Vice President of Commercial in a few moments, who will go over the reasons for the return to growth and our go-to-market strategy. While we were very pleased to regain momentum with Xtensa, we are really seeing the potential value of our pipeline continue to emerge. Following the recent data we shared on OTX TKI, our accitinib-containing hydrogel implant for the treatment of wet AMD and other VEGF-mediated retinal diseases. On February 11th, Dr. Andrew Muschbege presented the interim 10-month results from our Phase 1 study in the U.S., where we compared a single dose of OTX TKI to ilea given every eight weeks in patients with wet AMD. The results were spectacular, as we saw no additional rescues up to month 10 of the 73% of patients who were rescue-free up to month 7. demonstrating potential best-in-class durability. We believe the $15 billion global market for wet AMD and diabetic retinopathy is driven by durability. While these results mean a great deal to ocular therapeutics and its shareholders, more importantly, they suggest a better future for patients suffering from VEGF-mediated retinal diseases, such as wet AMD, diabetic retinopathy, and diabetic macular edema. In the case of wet AMD, it is well known that the vision gain seen when starting anti-VEGF treatment are not maintained over time in the real world. The primary reason for this is the lack of compliance caused by the injection burden of current antibody therapies like Lucentis and ILEA. In the real world, patients tend to miss necessary injections for a variety of reasons. Wet AMD patients are elderly and can find it difficult to get to retina offices on a four to eight weekly basis, so appointments are missed or delayed, and permanent vision loss occurs because of the damage caused when the medication wears off and the disease process returns. In the case of diabetic retinopathy, where patients are generally of working age, a lack of urgency given that disease may not have yet manifested, and finding time to get treated on a frequent basis create real compliance challenges. In this population, the current standard of care is watchful waiting, and many patients frequently progress to more severe vision-destroying disease before seeking treatment, making the resulting diabetic macular edema a leading cause of blindness among the working age population. In short, we believe the promise of a drug like OTX TKI is not only about convenience, but also about saving vision. We can move durability from the current frequency of injections to at least nine months and beyond. We believe we can keep people on treatment and maintain vision. Lastly, it is important to understand that OTX TKI is a different paradigm than typical antibody treatment. Existing treatments, like lisentis and ilea, are bolus injections where a large amount of antibodies, well above the amount needed for immediate efficacy, are injected into the vitreous that, over time, are eliminated from the vitreous until they drop below therapeutic levels, allowing the disease process to restart. You extend injection intervals by making the antibody larger and slower to eliminate, or just by jamming more antibodies into the eye with each injection. Either way, you're still treating a chronic disease with pulsatile dosing. OTX TKI is different. OTX TKI is designed to deliver a continuous dose of exitinib, a potent inhibitor of VEGF, keeping drug concentrations above therapeutic levels for extended periods without the drug peaks and troughs of pulsatile dosing. We believe the results we recently shared bear this out and demonstrate that our hydrogel technology could allow us to maintain therapeutic levels of exitinib at continuous levels in the for durations of at least 10 months. This new paradigm would allow physicians and patients the comfort of knowing the drug is always on board and can hopefully demonstrate that there is less variability in the retina over time, and more importantly, that vision gains from anti-VEGF therapy are maintained in the real world. So what's next? We believe we have our proof of concept for OTX TKI and wet AMD, and by extension, have gone a long way toward proof of concept in other VEGF-mediated retinal disease. Importantly, we also have a working formulation. We believe we'll be ready to enter the first pivotal trial in wet AMD as soon as the third quarter of this year. We are in ongoing discussions with the FDA regarding pivotal study designs and are very encouraged by the potential path forward, both in wet AMD and diabetic retinopathy. We have also mentioned that commencing this trial is subject to financing, and we are considering a range of non-dilutive or minimally dilutive funding options, but we have strong preference and are seeking to go forward with a potential strategic alliance. We have also stated our intention to begin a Phase 3 program for diabetic retinopathy in the first quarter of 2024, assuming positive top-line data results from our ongoing Phase 1 clinical trial in diabetic retinopathy. The diabetic retinopathy program is a separate program with much more modest resource requirements than WET-AMD, and consequently, we believe we could secure funding on our own without necessarily having a strategic alliance in place for our WET-AMD program. We do, however, recognize that a potential strategic interested in our wet AMD program would also likely be interested in our diabetic retinopathy program. Our current plan is to commence the first pivotal trial in diabetic retinopathy in Q1 2024. Net-net, we believe we have a very valuable asset in OTX TKI with a strong plan moving forward. With that, let me turn the call over to Steve Myers, our new Senior Vice President Commercial, to discuss more on Dextenza and our 2023 guidance.
spk06: Thank you, Anthony. I joined Ocular Therapeutics one year ago in March 2022. Prior to that, I served as Vice President Sales at Flexion Therapeutics. During my tenure at Flexion, I led a team of approximately 100 sales representatives. During that time, we launched a product with a very similar business model. Like Dextenza, it is cold chain, buy and bill, a similar price point, and with many of the same clinical characteristics. As many of you know, Ocula Therapeutics is poised to become a leader in the ophthalmology space, and I'm excited about the opportunities in front of us. Over this past year, we established a rigorous hiring process to assemble an experienced sales team that has deep buy and build ophthalmology and surgical experience. We also adjusted our discounting strategy to meet the demands of the market. Finally, we've secured exceptional market access coverage for Dextenza, including 100% coverage on Medicare Part B, over 90% coverage in Medicare Advantage, and we'll be launching a new innovative program to accelerate the commercial book of business. Overall, we expect our market access coverage should allow more surgeons to treat more patients with the goal of supporting Dextenza to become a standard practice in ASCs and fuel growth of DeXtensa product sales in 2023. As we begin 2023, we're seeing continued momentum in January and February with in-market billable units running more than 20% ahead of 2022 levels for the same period. We anticipate that with a full sales team and our strong market access, DeXtensa sales will continue to grow in 2023. Based on these dynamics, the company is guiding an initial that extends the net product revenue for the full year 2023 to be between 55 and 60 million, representing potential growth of approximately 10 to 20% over 2022. With that, let me turn the call over to Rabia to discuss our pipeline in more depth.
spk01: Thanks, Steve. Let me begin with an update on our back-of-the-eye program, OTX TKI. As many of you saw a few weeks ago at the angiogenesis, exudation, and degeneration 2023 virtual meeting, we presented positive interim 10-month data from our U.S.-based phase 1 trial of OTX TKI being developed for the treatment of BET-AMD and other retinal indications. This trial is a multi-center, prospective, masked, randomized, controlled trial in 21 subjects evaluating a 600-microgram OTX TKI dose in a single implant containing oxytocin F compared to adenovircept administered every eight weeks in controlled VED-AMD subjects previously treated with anti-VEGF 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 with no drug-related ocular or systemic series adverse events. Importantly, all OTX TKI-treated subjects who were rescue-free at the month 7 interim analysis remained rescue-free, extending this 73% rescue-free rate up to month 10 and highlighting what we believe is best in class durability. Furthermore, we saw in the trial a 92% reduction in treatment burden for up to 10 months while demonstrating stable and sustained best-corrected visual acuity and central subfield foveal thickness, comparable with the off-liver stepped arm dosed every eight weeks. We believe the data highlights the potential of OTX TKI to become a differentiated product capable of providing a durable anti-VEG response that improves upon today's standards of care in the management of wet AMD. As Anthony noted, we are in active discussions with the FDA and believe that we will be in a position to initiate the pivotal trials in Q3 of 2023 for wet AMD and Q1 of 2024 for diabetic retinopathy. We were pleased to have initiated a phase one trial of OTX TKI in diabetic retinopathy in Q4 of 2022. This US-based trial will have approximately 10 sites and will include 21 subjects randomized two to one in a mask session to either a 600-microgram OTX TKI single implant containing oxytocin or sham control. We believe the same attributes that make OTX TKI a compelling product candidate for the treatment of beta-AMD, the ease of use of an office-based injection, and long-term durability could establish this as the first standard of care in the treatment of diabetic retinopathy. Moving to our glaucoma program, OTX-TIC. We continue to actively enroll subjects in a US-based phase two clinical trial. This trial is a prospective multi-center mass randomized control trial, evaluating the safety tolerability, and efficacy of OTX-TIC for the reduction of intraocular pressure in subjects with primary open-angle glaucoma or ocular hypertension. In late 2022, due to observed elevations in intraocular pressure in the OTX-TIC 5-microgram treatment arm, we decided to terminate the enrollment in the 5-microgram treatment arm and continue forward with the OTX-TIC 26 microgram and Durista treatment arms. The company expects that the Phase II clinical trial will now consist of approximately 86 subjects, approximately 35 subjects in the OTX-TIC 26 microgram treatment arm, 35 subjects in the Durista arm, and 16 subjects that were previously enrolled in the OTX TIC 5-microgram treatment arm. The trial is designed to observe the changes in diurnal intraocular pressure from baseline at 2, 6, and 12 weeks and follow duration of intraocular pressure response over time. We plan to release top-line data for this phase 2 clinical trial in Q4 of 2023. Regarding our ocular surface disease programs, we remain committed to the development of our two dry eye programs, OTX-DED, 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. We intend to commence a small trial in the first half of 2023 to evaluate the performance of OTX-TED versus placebo inserts, namely fast-dissolving collagen blocks, and no inserts at all. We plan to use the results of this trial to inform the selections of a more appropriate placebo comparator for both the OTX-DD and the OTX-CSI programs moving forward. I would now like to turn the call back over to Donald to review our fourth quarter and year-end financial results.
spk07: Thank you, Rabia. Total net revenue, which includes both gross extends of product revenue, net of discounts, rebates, and returns, which the company refers to as total net product revenue, and collaboration revenue was $14.1 million for the fourth quarter of 2022 and represents 18% growth over the prior quarter and 15% growth over the same period in 2021. To extend the net product revenue was $13.9 million for the fourth quarter of 2022, an increase of approximately 17% sequentially over the prior quarter and up 14% over the comparable quarter of 2021. Net product revenue in the fourth quarter of 2021 included 0.1 million attributable to the sales of brochure sealant. Total net revenue for the full year 2022 was $51.5 million versus $43.5 million, an 18% increase. Research and development expenses for the fourth quarter of 2022 worth $13.5 million versus $12.6 million for the comparable period in 2021, driven primarily by an increase in personnel offset by both a reduction in overall clinical trial expenses and a delay in the time of clinical trials. Overall, R&D expenses for the full year increased $3.4 million to $53.5 million from $50.1 million in 2021. reflecting the trends identified previously. Selling and marketing expenses in the fourth quarter of 2022 were $10.5 million as compared to $9.1 million for the comparable quarter of 2021, reflecting primarily an increase in field force personnel. Overall, selling and marketing expenses for the full year increased to $39.9 million from $35.2 million in 2021 driven primarily by increased personnel costs and increased spending on consulting, trade shows, and conferences. General and administrative expenses were $8.3 million for the fourth quarter of 2022 versus $7.5 million in the comparable quarter of 2021, primarily due to an increase in personnel-related costs, including stock-based compensation. Overall, G&A expenses for the full year increased $.3 million to $32.2 million from $31.9 million in 2021, again reflecting the trends identified previously. The company reported a net loss for the fourth quarter of 2022 of $15.5 million, or a loss of 20 cents per share on a basic basis, and a loss of 24 cents per share on a diluted basis, compared to net loss of $3.9 million, or a net loss of 5 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 fourth quarter of 2022 included a $5.2 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 decreased during the quarter. Non-cash charges for stock-based compensation and depreciation and amortization were $4.7 million in the fourth quarter of 2022 versus $4.4 million for the same quarter in 2021. Overall, the company reported a net loss of $71 million, or a loss of $0.92 per share on a basic basis, and a loss of $0.97 per share on a diluted basis for the full year ended December 31, 2022, versus a net loss of $6.6 million, or a loss of $0.09 per share on a basic basis and a loss of 98 cents per share on a diluted basis in 2021. As of March 1, 2023, the company had 77.5 million shares outstanding. This concludes my comments on our fourth quarter 2022 year-end financial results, and I would like to turn the call back to Anthony for some final thoughts.
spk08: Thanks, Donald. So before opening the call for questions, let me do a quick summary. We were excited to be able to share with the world our 10-month interim results from the US-based phase one trial for OTX TKI and 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 have initiated a phase one trial of OTX TKI for diabetic retinopathy and believe we may be positioned to commence our first pivotal trial in Q1 of 2024, subject to obtaining financing and the completion of ongoing discussions with the FDA. We should be positioned to initiate a pivotal trial of OTX TKI for wet AMD in Q3 of 2023, subject to obtaining additional funding for the trial, including potentially a strategic alliance. Enrollment continues in the phase two trial of OTX TIC in glaucoma, and we believe that we will be in a position to release top line data in Q4 of 2023. Dextenza has had a strong start to 2023. The in-market volume is running greater than 20% above prior year for the first two months of the year. And we have $102.3 million in cash as of December 31st and have guided cash runway to the middle of 2024. With that, I will turn the call over to the operator for questions.
spk02: Thank you. To ask a question, you'll need to press star 1-1 on your telephone. To withdraw your question, please press star 1-1 again. Please wait for your name to be announced. Please stand by while we compile the Q&A roster. First question comes from the line of Dane Leon with Raymond James. Your line is now open.
spk03: Hi, thank you for taking the questions and congratulations on all the progress. I'll keep it to one on my end, just obligatory since you brought it up. Where do you feel like you're in the process of evaluating potential partnership situations for OTX TKI? And when do you feel on a time basis you're trying to move forward with a pivotal program? And what could be some options if you were not to find a potential partner for that asset to go into pivotal studies? Thank you.
spk08: Yeah, thanks, Dane. Well, we are in the middle of a process. We're talking to sort of all the people you would expect us to be speaking to. Obviously, it's premature to opine on our likelihood of getting to an agreement with any second partner. So we are happy with where we are in the process. Clearly, we're going to have to make a call at some point moving forward before we lock and load on the first pivotal in WET-AMD. The other option that we talked about, you know, if we are not able to get the financing in place under the terms that we find agreeable or a strategic partnership under terms that we find agreeable, would be to go with diabetic retinopathy in the first quarter of 2024. We mentioned before, we think the resource requirements of that are much less onerous than they are for wet AMD, although wet AMD is still an open question. The guidance and some of the discussions we've had with the FDA really do open up possibilities for wet AMD programs that may not be as expensive as the classic non-inferiority versus standard of care given according to its label. So that is the kind of the alternative proposal or alternative idea that we have is to move forward with DR under essentially our own STEAM. if we're not able to arrange a non-dilutive or minimally dilutive solution to wet AMD in the third quarter of 2023. Excellent. Thank you so much.
spk03: Thank you.
spk02: Thank you. One moment for our next question. Our next question comes from the line of John Wallenberg, then with JMP Securities. Your line is now open.
spk05: Hey, thanks for taking the questions. I was wondering if you could give us a little more color around the discussions you're having with FDA and what is constituting the back and forth, and if the recent guidance has impacted your discussions or your design plans. Just wondering, I think it's pretty clear, and Dr. Chambers has mentioned this publicly, that durability isn't sufficient to prove efficacy, but how do you demonstrate durability in your pivotal trial in the context of a non-inferiority study? Any comment there would be helpful.
spk01: Thank you, John. This is Rabia. As you mentioned, John, there's this new draft guidance recently issued by the FDA on beta-AMD drug development. And we have been in active and constructive discussions with the FDA and recently had our Type C meeting. Therefore, this draft guidance was not new information, to us, and we have been considering all the efficacy and the safety points made in the guidance. It was already in our plans with our discussions with the FDA. Therefore, we have a few pivotal designs in line with the guidance, and we'll continue our discussions with the FDA to have the best design ready for the initiation of the pivotal. As Anthony mentioned, Q3 for the WETA-AMD. Q1, 2022, and Q4 for diabetic retinopathy.
spk05: Okay. And maybe one on Dextenda. Wondering what swing factors play into either being at the low or high end of the guidance for the year. Thanks.
spk06: Repeat the question?
spk05: With the guidance for 55 to 60 million for the year for Dextenda, just wondering, You know, what factors into your estimates to either be at the low or high end of the guidance? What needs to be done to, you know, be at the top end of that range?
spk06: Sure. Clearly, our hope is to exceed that guidance. And we believe that we have programs and people in place that give us great expectation that we can do just that. Right now, at this point, our customers are still managing staffing issues to return to full capacity. So, we think right now 55 to 60 is prudent guidance. Our hope is that we'll come back to the next earnings call with a run rate that makes us reconsider that. Okay.
spk05: Thanks for taking the questions.
spk02: Thank you. One moment for our next question. And our next question comes from the line of Carolina Polonque with Bamberg. Your line is open.
spk00: Hi. Thanks for taking the question. Just a couple for me. So the first one would be on the EXTENZA revenue. Just wondering if you plan to break those out between the two revenue streams from ocular pain and inflammation and then the allergic conjunctivitis. And then the second question I have is just that if you do decide to go with the alternative financing path, how much financing do you think you would need to progress the program for TKI in both what AMD and DR? Thanks.
spk08: Well, as we mentioned, it would be premature to talk about it. I'll talk about the second part of the question first. It would be premature to speak about the maximum amount that we would need until we actually have an approved protocol. We don't really know how to price up the, particularly the wet AMD. I think it's pretty clear diabetic retinopathy, what that is likely to cost, because I don't think there's too many variations on what the pivotal program might look like. Not the case with wet AMD. I'm sorry, the first part of your question related to Xtensa, what was that again?
spk00: Yeah, I was just wondering if you plan on breaking out revenues between the different therapeutic areas within Nextensa.
spk08: No, we won't plan to do that. What we've done essentially to consolidate around our higher or more reliable ROI was really to double down into the surgical setting to ensure that we have all hands on deck and that we maximize the investment that we have with our field force. We will plan on launching into the office space with the aversion conjunctivitis indication, but not in the very near future. So, we won't be breaking that out because it really wouldn't be instructive.
spk02: Got it. Thanks.
spk08: Thank you.
spk02: Thank you. One moment for our next question. Question comes from the line of Joe Catanzaro with Piper Sandler. Your line is open.
spk04: Hey, guys. Thanks for taking my questions, maybe just following up on some of the earlier questions. I was just wondering how much is the potential strategic partnership for TKI contingent on defining and coming to an agreement with the FDA on what that clinical trial requirements would be for the pivotal wet AMD study? And then, relatedly, appreciate that you're guiding to a potential study initiation in the third quarter of this year, but when do you think you would be in a position to be able to communicate what that study would look like?
spk08: Thanks. We are very close, we believe, to coming to an understanding of what that pivotal program might look like. So we think that they'll dovetail nicely the discussions that we're having with the potential strategics and what the pivotal will look like, but you're absolutely right. that it would really be hard to go into a true alliance unless people understood what that program would look like. But luckily, we're pretty close.
spk04: Okay, got it. That's helpful. That's all for me. Thanks so much.
spk02: Thank you. And this concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.

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