Otonomy, Inc.

conference call. Joining me on the call from Autonomy are Dr. David Weber, President and Chief Executive Officer, and Paul Kerr, Chief Financial and Business Officer. Before I turn the call over to Dr. Weber, I would like to remind you that today's call will include forward-looking statements based on current expectations. Such statements represent management's judgment as of today and may involve risks and uncertainties that could cause actual results to differ materially from expected results. Please refer to Autonomy's filings with the SEC, which are available from the SEC or on the Autonomy website, for information concerning the risk factors that could affect the company. Autonomy specifically disclaims any obligation to update any forward-looking statements, except as required by law. I will now turn the call over to Dave Weber, President and CEO of Autonomy.

Thank you, Robert. Good afternoon, everyone, and thank you for joining us on this call to discuss Autonomy's recent business updates, as well as our financial results for the second quarter of 2021. We are making solid progress across our multiple programs for tinnitus and hearing loss, and the key takeaways from this update include the following. Enrollment for the OTO 313 Phase II trial in tinnitus. and the OTO 413 Phase I-II Extension Study in Hearing Loss are off to good starts, with both studies on track for top-line results in mid-2022. We have achieved several important milestones for our OTO 825 Gene Therapy Program, including demonstration of preclinical proof-of-concept in two independent models of congenital hearing loss and completion of a pre-IND meeting with the FDA. We have initiated IND-enabling activities for this program and expect to file an IND in the first half of 2023. We're also continuing to progress our two other preclinical programs, OTO 510 for OTO protection and OTO 6XX for severe hearing loss. Finally, we significantly strengthened our financial position during the second quarter by completing a financing in April and modifying our debt facility to extend the interest-only period. These actions provide us with a cash runway into the second half of 2023. During this call, I'll provide a brief update on our programs, and then Paul will recap our financial results. We can then open up the line for any questions. Beginning with OTO 313, enrollment in the Phase II trial is going well. The design of this trial is based on the successful Phase I-II trial that demonstrated a higher proportion of responders in the OTO 313 group versus placebo based on the Tinnitus Functional Index, or TFI. The Phase II will enroll approximately 140 patients with persistent unilateral tinnitus of at least moderate severity based on the TFI. As in the prior trial, where we observed a high correlation between the various metrics and responders, we are also tracking tinnitus loudness, annoyance, and patient global impression of change. To enrich the study population, we are excluding patients with severe hearing loss, who we believe may be less likely to respond to treatment. And we have increased the minimum severity of tinnitus required for entry. We have also expanded the patient population eligible for enrollment by increasing the time from tinnitus onset from six months to one year. Finally, while we will continue to use response at both months one and two following a single treatment for primary efficacy, we are extending the total observation period out to four months to assess durability of the treatment effect. This is because patients who responded to OTO 313 in the Phase I-II trial were still improving at the end of the study. We are encouraged by the level of investigator and patient interest in this trial. Multiple centers are enrolling in the U.S., and we are making good progress with our site initiation activities in Europe in order to have top-line results in mid-2022. Our next clinical stage program is OTO413, a sustained exposure formulation of brain-derived neurotrophic factor, or BDNF, which is an endogenous nerve growth factor. This therapeutic approach is highly relevant for the treatment of a broad hearing loss population based on the growing body of evidence indicating that damage to neuronal connections in the cochlea due to aging or noise occurs earlier than hair cell loss. Delivery of BDNF to the inner ear can induce neurite sprouting and promote the reconnection of auditory nerve fibers to hair cells. And by repairing these cochlear synapses, OTO413 can improve functional hearing, which is demonstrated using speech and noise hearing tests. During the second quarter, we initiated an expansion of the positive Phase I-II trial reported in December. This Phase II-like expansion cohort will randomize approximately 30 hearing loss patients, 20 will be treated with a single intratympanic injection of OTO413, and 10 will receive placebo. Patients will be followed for three months and assessed using the same three clinically validated speech and noise hearing tests used in the prior cohorts, that is, the American English Matrix Phrase Test, the Words and Noise Test, and the Digits and Noise Test. In these tests, the subject is presented with a set of phrases, words, or numbers at varying loudness with a constant background noise level that is typically set to the loudness of a normal conversation. A significant advantage of speech and noise tests over conventional testing in quiet is that they test overall speech intelligibility, mimicking the real-world setting for patients who complain that they can't hear in a noisy setting. This is especially important because it has been well established that neither audiometry nor word recognition in quiet predict hearing in a noisy setting. The enrollment criteria of the expansion study will continue to target a broad hearing loss patient population to support the design of a Phase II trial. We expect results to be available in mid-2022. Our third development program is OTO825, a gene therapy targeting GJB2 or gap junction beta 2, which is the most common cause of congenital hearing loss. Patients born with this mutation can have severe to profound deafness in both ears that is identified in screening tests now performed routinely in newborns. Together with our partner, AGTC, we have presented preclinical data demonstrating that OTO825 provides excellent expression of connection 26, the gene product of GJB2, in the non-sensory cells of the cochlea. In May, we achieved an important milestone for this program by presenting preclinical proof-of-concept results for OTO825 at the American Society for Gene and Cell Therapy meetings. These results demonstrate the successful recovery of hearing and cochlear morphology in two independent mouse models of GJB2 deficiency. In these models, connection 26 expression is knocked out, which results in hearing loss and structural changes of the cochlea that mimic the human condition. A single intraocular Administration of OTO825 rescues connection 26 expression in both models. Furthermore, OTO825 induces significant improvement in hearing across multiple frequencies and normalizes cochlear morphology in both of these models. A summary of these impressive results is provided in the corporate slide deck available on our website. We're very excited about these results because they validate the therapeutic potential of OTO825 across a range of hearing loss levels observed in patients and support its advancement into clinical development. To this end, we have also completed a productive pre-IND meeting with the FDA. This meeting provided guidance for the design of IND-enabling non-clinical studies, requirements for the manufacturing and testing of clinical drug product, and helpful considerations for our design of the clinical trial program. Based on this feedback, we have initiated IND-enabling activities and anticipate filing an IND in the first half of 2023. Our remaining two programs are OTO 510, an OTO protectant for patients at risk for cisplatin-induced hearing loss, and OTO 6XX, which targets hair cell repair or regeneration for patients with severe hearing loss. Preclinical development continues on both of these programs. In summary, we are focused on advancing our multiple programs for treating hearing loss and tinnitus, which represent large, untapped markets with significant unmet medical need. Patient enrollment in the OTO 313 and OTO 413 clinical trials is going well. And our ongoing review of results from the prior studies with key opinion leaders is very encouraging. They support the endpoints we have chosen and view the results from these trials as demonstrating a clinically meaningful improvement for patients. We believe that both of these programs are well positioned to address blockbuster market opportunities. Additionally, we are the first and only company to present preclinical proof-of-concept results for gene therapy targeting GJB2 deficiency, the largest congenital hearing loss patient population. We have clear evidence from the FDA on what is required to move this program into clinical development and are excited to have initiated our IND-enabling activities. With that, I'll turn the call over to Paul Kerr, our Chief Financial and Business Officer, who will provide a summary of our financial results and plans.

Thank you, Dave, and good afternoon, everyone. As with our development programs, we also made significant progress with our financing and business activities during the second quarter. I'll review those updates for you, but first let me recap the second quarter financial results, which are more fully reviewed in our 10Q filing today. We reported GAAP operating expenses totaling $12.0 million in the second quarter of 2021 and non-GAAP operating expenses of $10.2 million. Primary adjustment for non-GAAP expenses is the exclusion of stock-based compensation. So this is the financial metric that best approximates our spending level. These results are on track with our financial guidance for the year that include GAAP operating expenses expected to be in the range of $46 to $48 million, with non-GAAP operating expenses of $38 to $40 million. A detailed reconciliation of GAAP to non-GAAP numbers can be found at the end of today's press release posted on the Investor Relations page of our website. From a cash perspective, we finished the second quarter with a cash balance including cash, cash equivalents, and short-term investments of $97.9 million. This reflects an underwritten public offering we completed in April that raised gross proceeds totaling $34.7 million. Following this financing, we were able to modify our term loan with Oxford Finance to extend the interest-only repayment period from the end of this year to June of 2023. The combined effect of these two transactions is to extend our cash runway into the second half of 2023. One other business update to note. In May, we completed the sale of our Atiprio-related assets to our former co-promotion partner, Alcabello. This enables us to fully focus on advancing our multiple development programs for hearing loss and tinnitus and eliminates the remaining cash burn we had related to commercial activities. With that, I'll turn the call back over to Dave.