Otonomy, Inc.

Good day and thank you for standing by. Welcome to the Autonomy First Quarter 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question, you'll need to press star 1 on your telephone keypad. If you require any further assistance, please press star 0. I would now like to hand the conference over to your first speaker for today, Mr. Robert Wu with ICR West Creek. Please go ahead, sir.

Thank you, operator. Good afternoon and welcome to Autonomy's first quarter 2022 financial results and business update conference call. Joining me on the call from Autonomy are Dr. David Weber, President and Chief Executive Officer, and Paul Kare, 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 first quarter. Our key update is the positive OTO 413 Phase 2A results we announced several weeks ago. These results are important because they provide a second independent placebo-controlled trial demonstrating the treatment benefit of OTO 413 in a broad hearing loss patient population. With this corroboration of the clinical benefit of OTO 413, we are excited to move forward with a phase two dose ranging efficacy trial expected to start by end of year. I'll recap the top line results from this trial and then highlight the status of our other programs, which include multiple clinical readouts coming in the second half of this year. Importantly, Our OTO 313 phase two trial in tentative is on track with top line results expected in August. I'll keep my prepared remarks brief, including a summary of our first quarter financials, and then we can open up for any questions. Beginning with the OTO 413 Phase IIa results, this trial demonstrated that a single intratempanic injection of 0.3 milligram of OTO 413 provided clinically meaningful treatment benefit versus placebo across multiple speech and noise hearing tests, as well as the patient global impression of change at consecutive time points of day 57 and day 85. The randomized, double-blind, placebo-controlled trial enrolled a total of 33 patients with self-reported hearing difficulty in a noisy environment that was confirmed by speech and noise testing. Thirty of these patients were considered valuable by a blinded reviewer, including 20 patients treated with OTO413 and 10 who received placebo. Overall, OTO 413 demonstrated a treatment benefit across all of the efficacy metrics and time points evaluated, consistent with the positive results from the prior Phase 1-2 trial cohort. To this point, 40% of OTO 413 treated subjects demonstrated a clinically meaningful improvement on at least one of the three speech and noise tests at both Day 57 and Day 85 versus 20% for placebo. We were especially pleased to again see a clear signal for the words and noise test, which is well established and validated in hearing loss patients. 40% of OTO 413 subjects with the valuable WIM test demonstrated a clinically meaningful improvement at both day 57 and day 85 versus 0% for placebo. One important advantage of the WIN test compared to the digit and phrase test is the ability to generate a speech intelligibility curve for each patient at each time point. We included these curves for the OTO 413 responders in the results slide deck posted on our corporate website so you can see the extent of the speech intelligibility improvement from baseline to day 85 across a range of word loudness levels. Based on our review of the data with KOLs, these improvements are both clinically significant and meaningful for a patient's hearing function in everyday situations. We were also very encouraged to see the treatment benefit of OTO413 reflected in the patient global impression of change, or PGIC. In this trial, the patient was asked the following PGIC question during each visit. Since the beginning of the clinical study, how would you rate your ability to hear in a noisy environment? 50% of OTO413 subjects reported an improvement from baseline at both day 57 and at day 85, compared to only 10% for placebo. Taken together with the speech and noise data, we believe these results demonstrate a clear clinical signal for OTO413 versus placebo when evaluated and presented in the same way as a successful Phase I-II trial, a finding further strengthened by repeated observation across two independent study populations. Based on these positive results, we intend to initiate a full dose-ranging Phase II trial in hearing loss patients by the end of 2022. This trial will also incorporate learnings from the ongoing higher-dose evaluations that are assessing the tolerability and treatment activity of two higher doses of OTO413, 0.75 mg and 1.5 mg, which equate to 2.5 and 5 times the dose used in the Phase IIa trials. Results from these higher doses will include all of the same time points used in the Fave2A study and are expected in the second half of 2022. We're very excited about the clinical results for OTO413 and are actively working on next steps for the program that targets tens of millions of hearing loss patients in the U.S. alone. Turning now to the OTO 313 program for tinnitus, the Phase II trial is on schedule with top-line results expected in August. As a reminder, we randomized 153 patients with persistent unilateral tinnitus of at least moderate severity. This was slightly above our target enrollment of 140 patients. Patients were randomized one-to-one to a single intertympanic injection of 0.32 milligram Oto313 or placebo and are being followed for four months. The primary endpoint is the same as reported for the successful phase 1-2 trial, a responder analysis based on the proportion of patients who report a clinically meaningful improvement in the Tentative Functional Index, or TFI, from baseline to months one and two following treatment. To assess durability of the OTO 313 treatment effect, we extended the follow-up period out to four months. We are continuing to see high compliance for completion of the TFI and daily symptom diary, which is important for our analysis of the results. We also believe this indicates the high level of commitment that patients have in supporting the trial and finding a treatment for tinnitus. In parallel with completing the phase two trial, we are enrolling tinnitus patients in several study cohorts to evaluate the safety of bilateral as well as higher dosing for OTO 313. This effort is important for the program since bilateral patients comprise approximately 50% of the tinnitus population. Furthermore, the higher dose we're evaluating is 0.64 milligrams, twice the dose used in the successful Phase I-II and ongoing Phase II trial. We expect results from the one-month safety evaluations in the second half of 2022. This data, together with the Phase II results, are expected to support an end-of-Phase II meeting with the FDA and inform the design of the Phase III clinical program planned to start in the first half of 2023. Our third development program is OTO825, a gene therapy targeting GJB2, 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. Preclinical proof of concept results for OTO825 demonstrate that a single administration of OTO825 rescues hearing loss and cochlear damage in two preclinical models representing a range of hearing loss severity caused by GJB2 deficiency. We have completed a pre-IND meeting with the FDA that provided guidance regarding nonclinical study design, manufacturing requirements, and clinical trial considerations, and have incorporated this feedback into our IND-enabling program. These activities are ongoing, and we expect to file an IND in the first half of 2023. Our remaining two programs are OTO 510, an otoprotective for patients at risk for cisplatin-induced hearing loss, and OTO 6XX, a potential treatment for patients with severe hearing loss. Preclinical development continues on both programs. In summary, we are making good progress in advancing our multiple clinical programs for treating hearing loss and tinnitus, which represent large untapped markets with significant unmet medical need. The attractive potential of these target indications was highlighted by multiple KOLs during our investor R&D event in March. If you are not able to participate, then I would encourage you to access the webcast and associated slide deck via the investor section of our website. The presentations are informative, and there's even an abbreviated words and noise test so you can hear for yourself how that test works. Switching briefly to our financials, we are on track with our guidance for 2022. we reported GAAP operating expenses totaling $13.2 million in the first quarter and non-GAAP operating expenses of $11.3 million. The adjustment for non-GAAP expenses is the exclusion of stock-based compensation as outlined in today's earnings release. From a cash perspective, we finished the first quarter with a cash balance including cash, cash equivalents, and short-term investments of $62.9 million. and we continue to expect that this cash balance will fund the company into the second half of 2023. Going forward, we expect non-GAAP expenses for 2022 to total $42 to $44 million, and GAAP expenses to be in the range of $52 to $54 million. Operator, we are now ready for questions.