Q3 2020 Ocular Therapeutix Inc Earnings Call

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Obsolete.

The benefits to the patient of being able to treat diseases a V I with a truly hands free solution are clear as as the efficacy of delivering therapeutics the ocular surface from an inter canalicular concert.

Unknown Executive: The benefits to the patient of being able to treat diseases of the eye with a truly hands-free solution are clear, as is the efficacy of delivering therapeutics to the ocular surface from an intracanalicular insert. The recognition by the American Medical Association that physicians should be separately compensated for the placement of these inserts completes the win-win proposition for this novel route of administration. Clearly, Category 1 status for the procedure of inserting a drug-eluting insert into the nasolacrimal canaliculus delivers immediate benefits for Dextenza, but also for our two dry eye problems. Furthermore, Dextenza is wholly developed and manufactured in-house here in Bedford, Massachusetts, with no significant royalties, resulting in a high gross margin.

The recognition by the American Medical Association that physicians should be separately compensated for the placement of these inserts completes the win win proposition for this novel Route of administration.

Clearly category one status for the procedure of inserting a drug eluting insert into the natural that can <unk> delivers immediate benefits for DEXTENZA, but also for our too dry I programs.

Furthermore, DEXTENZA is wholly developed and manufactured in house here in Bedford, Massachusetts, but no significant royalties, resulting in a high gross margin.

Our goal and watching it extends ourselves was to demonstrate the commercial potential of our platform and a rapid return on investment for products like DEXTENZA.

Unknown Executive: Our goal in launching Dextenso ourselves was to demonstrate the commercial potential of our platform and a rapid return on investment for products like Dextenso. With the recent developments and assuming the environment for elective surgeries remains stable, we are well on our way to doing that. The second major difference in Ocular, in this earnings report, is that we believe we now have the means to fully fund our four clinical stage pipeline assets through their planned Phase II clinical trials. Shortly after the third quarter ended, we executed an oversubscribed public offering that raised more than $75 million in net proceeds for the company.

With the recent developments in assuming the environment for elective surgeries remains stable, we're well on our way to doing that.

The second major difference an ocular at this earnings report is that we believe we now have the means to fully fund our for clinical stage pipeline assets through their plans phase two clinical trials.

Shortly after the third quarter ended we executed and oversubscribed public offering that raised more than $75 million in net proceeds for the company significantly extending our cash runway and positioning us to fund are are for plan phase two trials.

Unknown Executive: Significantly extending our cash runway and positioning us to fund our four planned Phase II trials. We also entered into a licensing agreement in late October with Affymet Therapeutix for rights to Dextenza and OTX-TIC in China and other key Asian markets that is expected to net another $12 million in upfront payments and offers the potential for up to $91 million in future aggregate milestones and payments and tiered double-digit royalties on future sales. Affymet is focused on commercialization in emerging Asia-Pacific markets and was founded by Seabridge Capital and Sam Strong Bioethics.

We also have entered into a licensing agreement in late October with estimate therapeutics right. So DEXTENZA and O T. S. T I C in China and other key Asian markets. It is anticipated to knit another $12 million, an upfront payments and offers the potential for up to $91 million in future aggregate milestones in payments and <unk>.

Your double digit royalties on future sales.

<unk> is focused on commercialization in emerging Asia Pacific markets and was founded by Sebring capital with Samsung Bioethics.

With the recent public offering in this business development deal in place, we had never been in a better financial position.

Unknown Executive: With the recent public offering and this business development deal in place, we have never been in a better financial position. Our four clinical stage programs, OTX-TKI for the treatment of wet, age-related macular degeneration and other retinal diseases, OTX-TIC for the reduction of interocular pressure in patients with primary open-angle glaucoma or ocular hypertension, OTX-CSI for the chronic treatment of dry eye disease, and OTX-DED for the short-term treatment of the signs and symptoms of dry eye disease They are all highly differentiated ophthalmology specialty product candidates that address the key unmet need in their respective disease states. They are also designed to become buy-and-bill medical benefit products with CPT codes associated with their administration. Finally, they are all fully developed in-house without the burden of significant royalty obligations.

Or for clinical stage programs O T X T K I for the treatment of wet age related macaroni generation and other retinal diseases O T X T. I C for the reduction of enter ocular pressure in patients with primary open angle glaucoma or ocular hypertension O.

O T F C S I for the chronic treatment, a dry eye disease and O T X D E D for the short term treatment of the signs and symptoms of dry eye disease.

Share much in common with extends up.

They're all highly differentiated ophthalmology specialty product candidates that address the key unmet need in their respective to these days.

They're also designed to become buying bill medical benefit products with C. P. T codes associated with their administration.

Finally, they are all fully developed in house without the burden of significant royalty obligations.

Spelled extends it competes as a surgical product and a large 1 billion dollar market are for pipeline assets potentially address much larger global markets estimated over $20 billion in annual sales.

Unknown Executive: While Dextensa competes as a surgical product in a large $1 billion market, our four pipeline assets potentially address much larger global markets estimated at over $20 billion in annual sales. Clearly, we are excited to have more control of our own destiny and to get to work on advancing our pipeline product candidates into and through Phase 2, where we believe significant value inflection typically occurs. With an update on where we are with these product candidates, I will hand it over to our Chief Medical Officer, Dr. Michael Goldstein. Thanks, Antony.

Clearly, we're excited to have more control of our own destiny and to get to work on advancing our pipeline product candidates into and through face to where we believe significant value inflection typically occurs.

With an update on where we are with these product candidates I will hand, it over to our Chief Medical Officer Doctor Michael Goldstein.

Thanks Anthony.

Let me begin with an update on our back of the eye program <unk> T. K I buy irresolvable hydrogel implant containing except the thing developed as a product cabinet to extend the durability of treatment for web M D.

Continue those subjects and a multicenter open label dose escalation phase one clinical trial being conducted Australia.

Is designed to assess the safety and Tolerability of O T X T K I as well as to assess preliminary biological activity I measuring anatomical and functional changes.

Unknown Executive: Let me begin with an update on our Back of the Eye program. OTX-TKI is a bioresorbable hydrogel implant containing Exit-Nib being developed as a product candidate to extend the durability of treatment for wet AMD. We are enrolling those subjects in a multi-center, open-label, dose-escalation phase one clinical trial being conducted in Australia that is designed to assess the safety and tolerability of OTX-TKI, as well as to assess preliminary biological activity by measuring anatomical and functional changes. To date, we have enrolled the first two cohorts and have a third cohort that is currently enrolling patients. The data from the first two cohorts demonstrate that OTX-TKI in both cohorts has been generally well tolerated with a favorable safety profile, with no serious ocular adverse events reported to date.

Today, we have enrolled the first two cohorts and have a third cohort that is currently enrolling patients.

The data for the first two cohorts demonstrate that Oh checks T. I in both cohorts is but generally well tolerated with a favorable safety profile with no serious ocular adverse events reported today.

I'll still early interim data suggests that there was a dose response as evidenced by a greater clinical response, and the second higher dose cohort compared with the first lower dose cohort Adele.

Additionally, we are seeing good durability with one patient previously treated with monthly empty bedroom congestion.

Now out to nine months after O T E O T X P K I treatment without needing rescue.

Well the drug product profile is still emerging we were pleased with the interim data that shows inter vitriol injection of a T. K I can potentially reduce inter retinol <unk> separate no fluid.

I'd be glad to provide additional data on safety biological activity and durability of the upcoming American Academy of Ophthalmology Conference next week.

<unk>, we're on track to submit an exploratory I N D to the F. D. A by the end of the year to allow us to start dosing subjects in the U S with web M D and expect to initiate a phase two trial in Australia in the middle of 2021.

Moving to our glaucoma program, Oh T X T I T as a long acting travelled crossed enter cameral implant.

Unknown Executive: While still early, interim data suggest that there is a dose response, as evidenced by a greater clinical response in the second higher-dose cohort compared with the first lower-dose cohort. Additionally, we are seeing good durability with one patient previously treated with monthly anti-VEGF injections now out to nine months after OTX TKI treatment without needing rescue. While the drug product profile is still emerging, we are pleased with the interim data that show intravitreal injection of a TKI can potentially reduce intraretinal and subretinal fluid. We plan to provide additional data on safety, biological activity, and durability at the upcoming American Academy of Ophthalmology conference next week. Beyond this date announcement, we are on track to submit an exploratory IMD to the FDA by the end of the year to allow us to start dosing subjects in the U.S. with wet AMD and expect to initiate a Phase II trial in Australia in the middle of 2021. Moving to our glaucoma program, OTX-TIC is a long-acting Trabefrost intercameral implant for the treatment of patients with Primary Open Angle Glaucoma or Ocular Hypertension with a Target Duration of Drug Delivery of 4-6 Months.

For the treatment of patients with primary open April glaucoma, or ocular hypertension with a target duration of drug delivery of four to six months.

We continue to enroll subjects in the phase one prospective multicenter open label dose escalation clinical trial in the U S to evaluate the safety biological activity durability, and Tolerability of O T. S. T I C.

Data from the first two fully enrolled cohorts shows decrease IOP and patients receiving O T X T. I see that was comparable to current standard of care topical travoprost placed in the non study I.

The data showed that the I O T remain consistently decrease for an extended duration of six to nine months and money subjects with a single implant and one subject have I hope you controlled forever 21 months with a single input.

In terms of next steps, we have fully enrolled cohort three a faster degrading implant same doses cohort, one and Ah completing enrollment of covered for smaller implant lower dose.

They are targeting initiating a phase two clinical trial for Oh checks T I see in the middle of 2021.

We're also making progress with her off the surface of these programs, which include products for dry eye and allergic conjunctivitis.

And dry I, we have two programs O T. C. S. I, which is designed to increase to your production for the chronic treatment of patients. So dry disease N O T X D E D, which is a new program announced last quarter targeting the short term treatment of the signs and symptoms I've tried to do.

O T S T F I as in <unk>, which combines tomb without modality to treat try patients.

Local programs relief Ah cyclosporin for approximately three months to the opera surface, along with punctual occlusion over the same time period.

By releasing low doses, a preservative free cyclosporin over an extended duration of time O T. C. F. I has the potential to minimize what we believe is one of the biggest patient complaints about topical cyclosporin staying in burning.

As an inter canalicular insert O T. F. C. S. I may provide more rapid onset of symptomatic relief or patients then cyclosporin drops alone.

Unknown Executive: We continue to enroll subjects in a Phase I prospective multi-center open-label dose escalation clinical trial in the U.S. to evaluate the safety, biological activity, durability, and tolerability of OTX-TIC. Data from the first two fully enrolled cohorts show decreased IOP in patients receiving OTX-TIC that was comparable to the current standard of care, topical travel process placed in the non-study eye. The data showed that the IOP remained consistently decreased for an extended duration of 6-9 months in many subjects with a single implant, and one subject had IOP controlled for over 21 months with a single implant.

In October we announce data from the U S H.

Unknown Executive: In terms of next steps, we have fully enrolled Cohort 3, a faster degrading implant, the same dose as Cohort 1, and are completing enrollment of Cohort 4, a smaller implant, lower dose. We are targeting initiating a Phase 2 clinical trial for OGX-TIC in the middle of 2021. We're also making progress with our ocular surface disease programs, which include products for dry eye and allergic conjunctivitis. For dry eye, we have two programs, OTX-CFI, which is designed to increase cure production for the chronic treatment of patients with dry eye disease, and OTX-DED, which is a new program announced last quarter, targeting the short-term treatment of the signs and symptoms of dry eye disease. OTX-CFI is an intracanalicular insert that combines two modalities to treat dry eye patients, the local program's release of cyclosporine for approximately three months to the ocular surface along with punctal occlusion over the same time period.

That's based randomized masked vehicle controlled multicenter clinical trial.

Valuating two different formulations of the TX cfive with vehicle insert in approximately 105 subjects will be followed for a period of 16 weeks.

Endpoints include tier production as measured by the Schirmer test.

Signs of dry eye disease as measured by corneal parsing staining and symptoms of dry eye disease as measured by the visual analog scale eye dryness severity score and the visual analog scale dry eye frequency score.

We anticipate receiving topline data from this phase two clinical trial in the first half of 2022.

Unknown Executive: By releasing low doses of preservative-free cyclosporine over an extended duration of time, OTX-CFI has the potential to minimize what we believe is one of the biggest patient complaints about topical cyclosporine, stinging and burning. Additionally, as an intercanellicular insert, OTX-CSI may provide more rapid onset of symptomatic relief for patients than cyclosporine drops alone. In October, we announced data from a U.S.-based, Phase 1 Open Label Single Center Trial that was designed to evaluate safety, tolerability, durability, and early biological activity in 5 subjects in 10 eyes over approximately 16 weeks. All subjects completed the 16-week study period with no dropouts or serious adverse events reported. The inserts were observed to be well-tolerated, and there were no adverse events of stinging, irritation, blurred vision, or tearing reported or observed.

Our second product in dry OTI DDD is a low dose inter candidate to their insert a preservative free dexamethasone for the short term treatment of patients with dry eye disease while.

While it incorporates the same active drug just extend that this is a new product candidate with a lower dose and smaller insert size.

Many of these dry eye patients experience.

Episodic players are there signs and symptoms, which we believe are likely related to inflammation.

Topical steroids have long been used clinically off label for dry eye players and have preservatives, which can result in October surface toxicity.

Also lead to adverse events, such as elevated intraocular pressure or cataract if used chronically.

TX DGD potentially offers these patients the opportunity to be treated with a non abusable physician administered rapid onset preservative free enhance free stared steroid therapy.

Because OTN DVD has a lower concentration of DEXA methadone, we're able to use the DEXTENZA data safety package to rapidly advance the program into late stage clinical trials, we remain on track to file an indie applications with the U.S.F.

Unknown Executive: Tier production, as measured by the Shermer's test, improved from mean values of 4.2 millimeters at baseline to 8.2 millimeters at Week 12. One of five subjects, or 20% of subjects, had a greater than or equal to 10 millimeter increase from baseline in Shermer's score at Week 12. Subjects treated with OTX-CFI demonstrated an improvement in signs of dry eye disease as measured by corneal total fluorescein staining, a mean value of 6.7 at baseline, improved to a mean value of 2.7 at week 12 on a scale of 0 to 15, and improvement in symptoms of dry eye disease as measured by the visual analog scale, eye dryness severity score, a mean of 51 at baseline, improved to a mean value of 33 at week 12 on a scale of 0 to, The onset of action of OTX-BSI was seen as early as 2 weeks for both signs and symptoms of dry disease and continued over the 16-week study period.

Unknown Executive: We're excited about the potential for this hands-free and preservative-free option in helping dry eye patients receive the benefits of cyclosporine but with potentially greater tolerability and a more rapid onset of action compared to therapies currently available on the market. Based on the results from the Phase 1 trial, we recently announced that the first patient was dosed in a Phase 2 U.S.-based randomized mass vehicle-controlled multicenter clinical trial evaluating two different formulations of OTX-CSI with vehicle insert in approximately 105 subjects will be followed for a period of 16 weeks. Endpoints include tear production as measured by the Shermer's test, signs of dry eye disease as measured by corneal fluorescein staining, and symptoms of dry eye disease as measured by the Visual Analog Scale Eye Dryness Severity Score and the Visual Analog Scale Dry Eye Frequency Score.

The impact of the DEXTENZA rebate program and the more recent physician payment of the procedure CPT code 035 hundred 60 by some of the Medicare administrative contractors are Max.

Net product revenue of Risher sealant in the third quarter was point $5 million versus point $2 million in the second quarter.

Research and development expenses for the third quarter was 7 million versus $10.2 million for the comparable period in 2019, and primarily reflect a decrease in personnel. Another unallocated costs do the organizational restructuring announced in November 2019 sale.

Sales and marketing expenses for the third quarter were six $5 million as compared to six $8 million for the same quarter in 2019.

Primarily from a decrease in travel consulting marketing and conference expenses as a result of Covid related slowdown offset somewhat by increased personnel expenses.

Finally general and administrative expenses were $6 million in the third quarter versus $6.2 million in the same period of 2019.

Selecting a decrease in personnel expenses offset by an increasing professional costs.

With respect to financial results for the third quarter, we reported a net loss of 11 $11.9 million or a loss of 19 per share in a basic basis and 21 per share on a diluted basis. This compares to a net loss of $18 $8 million or a loss of 40 per share on a basic base.

Unknown Executive: We anticipate receiving top-line data from this Phase 2 clinical trial in the first half of 2022. Our second product in dry eye, OTX-DED, is a low-dose intracanalicular insert of preservative-free dexamethasone for the short-term treatment of patients with dry eye disease. While it incorporates the same active drug as Xtenza, this is a new product candidate with a lower dose and smaller insert size. Many of these dry eye patients experience episodic flares of their signs and symptoms, which we believe are likely related to inflammation. Topical steroids have long been used clinically off-label for dry eye flares and have preservatives which can result in ocular surface toxicity. They also lead to adverse events such as elevated intraocular pressure or cataracts if used chronically.

Office, and 45 cents per share on a diluted basis for the same period in 2019.

The net loss for the third quarter included $2.6 million in non-cash charges restock based compensation and depreciation compared to $3.8 million for the same quarter in 2019.

In addition, the net loss for the quarter included in non-cash game of three $8 million related to the change in the fair value of the derivative liability associated with our convertible notes.

As of November one 2020, the company had approximately 71.4 million shares outstanding.

As of September 30th 2020, the company had $76 million in cash and cash equivalents versus $84 $3 million at the end of Q2 2020, the cash at the end of the quarter does not include incremental cash is $75 $2 million that are offering discounts commissions an estimated.

Expenses.

That was raised in a secondary public offerings stock that was completed October of 2020, and the anticipated proceeds of $12 million upfront payments from the recently announced licensing arena with estimate therapeutics.

Unknown Executive: OTX-DED potentially offers these patients the opportunity to be treated with a non-abusable, physician-administered, rapid onset, preservative-free, and hands-free steroid therapy. Because OTX-DED has a lower concentration of dexamethasone, we're able to use the Dextenza data safety package to rapidly advance the program into late-stage clinical trials. We remain on track to file an IND application with the U.S. FDA evaluating OTX-DED in dry disease by the end of 2020, with a plan to move directly into phase two clinical trials in patients with dry disease in the first quarter of 2021. For Allergic Conjunctivitis, we remain on track to submit an SNDA by the end of 2020 for Dextenza for the treatment of ocular itching associated with Overall, we believe the data package highlights a compelling product-product profile and targets an unmet need that could potentially change the current standard of care with a one-time, long-acting, hands-free therapy for these patients. This SNDA, if approved, would represent our first in-office indication.

Based on current plans and including related to estimates of anticipated cash inflows from DEXTENZA and reassure sealant product sales and cash outflows from operating expenses. The company believes that existing cash and cash equivalents as of September 32020 in combination with the net proceeds from the recent equity.

Offering will enable accompany to fund planned operating expenses that service obligations and capital expenditure requirements into 2023.

This cash guidance is subject to various assumptions, including those related to the severity and duration of the COVID-19 pandemic and other assumptions related to the revenues and expenses associated with the commercialization of DEXTENZA and the pace and expense of our research and clinical development programs as well as other aspects of the companies bid.

Yes.

This concludes my comments and I would like to turn the call back to Anthony for some summary thoughts.

Thanks Donald.

So before opening the call up for questions. Let me do a quick summary.

With a successful capital raised a new licensing agreement and momentum and DEXTENZA.

We believe we have the resources to fully fund our for clinical stage pipeline assets through completion of their plan phase II programs and disease states within large ophthalmology markets estimated to account for over $20 billion in annual global sales.

And wet AMD the performance of <unk> T. K I in the clinic continues to support a product profile that could potentially set a new standard of care for durability weed.

We look forward to providing further clinical updates at the a O conference next week and entering the face to program in the middle of 2021.

And glaucoma O T X T. I C continues to support a product profile that could potentially set the standard of care for patient compliance.

You find the advent that program into a phase two clinical trial in the middle of 2021.

And dry eye disease, Otf's CSI recorded results in a phase one study that are consistent with a product profile that could potentially demonstrate comparable advocacy to standard of care, but with faster onset of activity and less ocular irritation.

Unknown Executive: Lastly, I would like to add that there continues to be significant interest and excitement in evaluating Dixtenza in many areas of unmet need, with over 80 investigator-initiated trial requests submitted. We currently have over 20 investigator-initiated trials that are active in enrolling subjects, including two that are fully enrolled. I would now like to turn the call back over to Donald, who will review our third quarter financial results. Thanks, Mike. Gross product revenue net of discounts, rebates, and returns, which the company refers to as total net product revenue, was $5.9 million for the three months ended September 30, 2020, as compared to $1.6 million in the second quarter. Net product revenue of Dextensa was $5.4 million in the quarter, versus $1.4 million in the second quarter.

We look forward to having results from our recently initiated phase two clinical trial and the first half of 2022.

And a short term treatment of dry disease, we intend to advanced Oh checks D. E D with the filing of an I N D. Bye bye year, and 2020 and initiate a phase two study in the first quarter of 2021.

Beyond dry eye disease remain on track to submit R. S. N da predict stanza, an allergic conduct device by the end of the year and then would expect to produce the date by October of 2021.

With that I'll turn the call of questions.

Ladies and gentlemen, the feel of a question or a communist. This time. Please press the one key on your Touchtone telephone. If your question has been answered you wish to move yourself from the queue. Please press the pound key.

First question comes from Daily awkward Raymond James.

Hi, How's it going around congrats on all the progress and thanks for taking my questions. So just to for me Firstly Anthony.

Clearly, there's been an inflection point with the commercial rampart DEXTENZA.

From an access perspective.

With.

The ophthalmologist that you're working with.

And while I get the product into commercially.

Unknown Executive: We believe the significant increase of over 280% quarter over quarter was driven by the continued reopening of ASCs and HOPDs, as well as the impact of the Dextensa rebate program and the more recent physician payment of the procedure CPT code 0356T by some of the Medicare Administrative Contractors, or MACs. Net product revenue for Assure Sealant in the third quarter was $0.5 million versus $0.2 million in the second quarter.

What are the blocking and tackling steps that you think will be the key milestones that you had into 2021 to make sure that you open up access on the reimbursement side as much as possible and then the second question I guess it would be for Michael.

In terms of setting the table for a L and the presentation on cohorts wanted to what do you think are the most sensible things to focus on when you do update the data in terms of interpretation for the study and what you want to see an O T. S. T K I. Thank you.

Thanks for the questions and you're quite right I'll I'll I'll handle the first one and Mike will handle the second Uhm I think the short answer about the access is that we really don't have an issue with that.

Donald Notman: Research and development expenses for the third quarter were $7 million versus $10.2 million for the comparable period in 2019, and primarily reflect a decrease in personnel and other unallocated costs due to the organizational restructuring announced in November 2019. Sales and marketing expenses for the third quarter were $6.5 million, as compared to $6.8 million for the same quarter in 2019, stemming primarily from a decrease in travel, consulting, marketing, and conference expenses as a result of the COVID-related slowdown, offset somewhat by increased personnel expenses. Finally, general and administrative expenses were $6 million in the third quarter versus $6.2 million in the same period of 2019, reflecting a decrease in personnel expenses offset by an increase in professional costs. With respect to financial results for the third quarter, we reported a net loss of $11.9 million, or a loss of $0.19 per share on a basic basis and $0.21 per share on a diluted basis.

We are getting pretty much ubiquitous coverage with with extend the in the marketplace.

As a as a product I think the question you might be asking us what are the potential issues or obstacles that we face and getting pull through and those come essentially from the AFC administration.

And from the the the issues that that sometimes we face with being able to select out appropriate patients are having the the AFC select that appropriate patient.

Donald Notman: This compares to a net loss of $18.8 million, or a loss of $0.40 per share on a basic basis and $0.45 per share on a diluted basis for the same period in 2019. The net loss for the third quarter included $2.6 million in non-cash charges for stock-based compensation and depreciation, compared to $3.8 million for the same quarter in 2019. In addition, the net loss for the quarter included a non-cash gain of $3.8 million related to the change in the fair value of the derivative liability associated with our convertible note.

Well the patients dosed to date.

The second is.

But you are looking for evidence of biological activity as measured by anatomical improvements. So with these early studies youre not really looking for functional improvements that would be nice to see but the reality is with these early studies, it's really about.

Seeing anatomical improvements as measured by seeing fluid going away.

I know Cts and so we'll give an update on where we are with that.

In the third issue is durability. So it's seeing does it will go away and then how long can continue.

Keep the fluid away for and we'll give an update on where we are with that so I think it will be a nice update I.

Unknown Executive: As of November 1, 2020, the company had approximately 71.4 million shares outstanding. As of September 30, 2020, the company had $70.6 million in cash and cash equivalents versus $84.3 million at the end of Q2. Cash at the end of the quarter does not include incremental cash of $75.2 million dollars that are offering discounts, commissions, and estimated expenses that were raised in a secondary public offering of stock that was completed in October of 2020 and the anticipated proceeds of $12 million in upfront payments from the recently announced licensing agreement with Affymet Therapeutix. Based on current plans and including related estimates of anticipated cash inflows from Dextenda and ReShure sealant product sales and cash outflows from operating expenses, the company believes that existing cash and cash equivalents as of September 30, 2020, in combination with the net proceeds from the recent equity offering, will enable the company to fund planned operating expenses, debt service obligations, and capital expenditure requirements into 2023.

I think you'll like what you see.

And we will continue to.

Give updates as we have meaningful things to say.

Excellent. Thank you so much congrats.

Thanks, Dan.

Next question comes from Joe kind until the Piper Sandler.

Hey, guys. Thanks, so much for taking my questions and congrats on all the nice progress maybe a similarly, one for you Anthony and maybe one for you Mike first on DEXTENZA are there any considerations that we should keep in mind. When we look at the growth and billable and start you saw in September or whether that be a procedure ball.

Just coming out of the summer or impact from the rebate program at the end of the quarter and then with the CPD procedure code and movement to category, one and 2022 is there any additional work that's needed whether it's regards to shifting the payment indicator or is it pretty much all set after this recent decision and then on.

Hi.

You know the update next week appreciate the that your comments prior but should we expect any data from patients treated in cohort three and if so how many should we expect and what would be the mean duration of follow up there.

Thanks.

Yes, great Mike can actually answered questions on commercial and I know a little rock clinical sometime but we will we will stay with Mike answering the second questions and I'll answer the first.

Concerning the uptake in in September.

We certainly don't believe that Thats, a bolus or that of surgeries, we think theres a decent return to somewhat normal levels of cataract surgery.

Unknown Executive: This cash guidance is subject to various assumptions, including those related to the severity and duration of the COVID-19 pandemic and other assumptions related to the revenues and expenses associated with the commercialization of Dextenda and the pace and expense of our research and clinical development programs, as well as other aspects of the company's business. I have concluded my comments, and I would like to turn the call back to Antony for some summary thoughts. Thanks, Donald.

We still believe that they are well below normal nationally there are some areas, where they're they're they're at a 100% other areas, where they are well below.

Certainly you wouldn't see a sales bump like that because of an increase in the number of surgeries for that month.

We hope that's an enduring affected as we get back to normal surgery levels, we will consistently do that through the quarters.

Clearly, it's hard to ascertain what the effect of Covance is going to be going forward.

The jump that we saw in sales.

We believe was a result of two factors. The first was our rebate program and clearly September is the last month of the quarter, So you're going to get some purchases in the last month of the quarter.

In order for people to move into the next rebate tier.

We were a little nervous in October about whether we would see a bit of a dip and we didnt. We didnt reach the level of sales that we saw in September which is about 4800 units.

Unknown Executive: Before opening the call up for questions, let me give you a quick summary. With a successful capital raise, a new licensing agreement, and Momentum Index DENSA, we believe we have the resources to fully fund our four clinical stage pipeline assets through completion of their planned phase two programs in diseased states within large ophthalmology markets estimated to account for over $20 billion in annual global sales. In wet AMD, the performance of OTX-TKI in the clinic continues to support a product profile that could potentially set a new standard of care for durability. We look forward to providing further clinical updates at the AAO conference next week and entering the Phase II program in the middle of 2021. In glaucoma, OTX-TIC continues to support a product profile that could potentially set the standard of care for patient compliance.

We had about 4200 units in market in October.

And the last two weeks in particular, well over a thousand so we are comfortable that what we're going to have with rebate programs a little bit of a seesaw.

Where we have the last month of the quarter, we expect to have a higher number of sales probably the first month, the following quarter little bit of a dip, but then a build back up as people try and move up those rebate tiers.

Unknown Executive: We plan to advance that program into a Phase II clinical trial in the middle of 2021, and Dry Eye Disease. OTX-CSI recorded results in a Phase I study that are consistent with a product profile that could potentially demonstrate comparable efficacy to standard of care, but with faster onset of activity and less ocular irritation. We look forward to having results from our recently-initiated Phase 2 clinical trial in the first half of 2022 and a short-term treatment for dry eye disease. We intend to advance OTxDED with the filing of an IND by year-end 2020 and initiate a Phase II study in the first quarter of 2021. Beyond dry eye disease, we remain on track to submit our SNDA for Dexbenza and allergic ductivitis by the end of the year, and I would expect a PDUFA date by October of 2021.

Both will bring it forward.

It's for cover three it's still still early.

In order to say something meaningful across the cohort.

That said I think one of the things we're looking for is indications of biological activity.

And to the extent that we can we can demonstrate that we will we will try to show that.

So so so it is that it.

Unknown Executive: With that, I will turn the call over to questions. Ladies and gentlemen, if you have a question or a comment at this time, please press the star and then the one key on your touchtone telephone. If your question has been answered or you wish to move yourself from the queue, please press the town key. Our first question comes from Dane Leone on behalf of Raymond James. Hi, how's it going, everyone?

Dane Vincent Leone: Congratulations on all the progress. And thanks for taking the questions. So just two for me.

Unknown Executive: Firstly, Antony, clearly, there's been an inflection point with the commercial ramp of Dick Stenza. From an access perspective, with the ophthalmologist that you're working with and want to get the product into commercially, what are the blocking and tackling steps that you think will be the key milestones as you head into 2021 to make sure that you open up access on the reimbursement side as much as possible? And then the second question, I guess, would be for Michael.

On your end for development and then with a dry eye program I believe Michael mentioned that there's gonna be of vehicle insert in the trials.

Unknown Executive: In terms of setting the table for AAO in the presentation on cohorts one and two, what do you think are the most sensible things to focus on when you do update the data in terms of interpretation for the study and what you want to see in OTX TKI? Thank you. Thanks for the questions, Dane. You're quite right. I'll handle the first one, and Mike will handle the second.

It seems to be a high hurdle for development can you can you discuss the expectations for that that vehicle insert arm for both C. S. I N D D.

Unknown Executive: I think the short answer about access is that we really don't have an issue with that. We are getting pretty much ubiquitous coverage with Dextensa in the marketplace as a product. I think the question you might be asking is what are the potential issues or obstacles that we face in getting pull-through. Those come essentially from the ASC administration and from the issues that sometimes we face with being able to select out appropriate patients or having the ASC select out appropriate patients. With that, we are working with the ASC owners directly to be able to help them implement. Clearly, we have a rebate program in place that makes them incentivized to bring this product through, which they very much are. The reception we've had with ASC and ASC Consolidators has been very, very strong. But in some cases they are high-control ASC consolidators; in some cases they're low-control.

Unknown Executive: In low-control environments, in particular, we need to help them help themselves in terms of being able to train up their administrative personnel and also train up their clinical personnel in order to be able to understand how the product can be used most effectively. So there really aren't any obstacles that we can't remove. It's really now about just making sure that we get people more and more excited about pulling this product through. Thank you. Was that answering your question? Yeah, that's super helpful. Hi Dane.

And so we're looking at both those competitors and then in the DDD program.

The hydrogel insert is designed to sort of mimic the biorx biodegradability of the ACA.

Unknown Executive: Thanks for your questions. This is Mike. So I think there are three main things that we want to get out of this study and that we hope to give an update on. So the first is that it's a Phase I first in human studies, so it's about safety. And, you know, we'll give a better sense of where we are from a safety perspective with all the patients dosed to date. The second is that you're looking for evidence of biological activity as measured by anatomical improvements.

Unknown Executive: So with these early studies, you're not really looking for functional improvements. That would be nice to see. But the reality is, with these early studies, it's really about seeing anatomical improvements as measured by seeing fluid going away on OCT. And so we'll give an update on where we are with that. And the third issue is durability.

36 years I product can overcome both of these limitations.

Unknown Executive: So it's seeing does the fluid go away, and then how long can you.., https://www.cdc.gov.au, Excellent. Thank you so much. Congratulations. Thanks, fam.

So so we believe that the proper.

Problems with staying in burning are directly related to the peak effect that you get with a drop immediately after putting it ends and the meat and then you've got to Trump effect and so by releasing.

Unknown Executive: Our next question comes from Joe Catanzaro with Piper Sandler. Hey, guys. Thanks so much for taking my questions here and congrats on all the nice progress. Maybe similarly, one for you, Antony, and maybe one for you, Mike.

Joseph Michael Catanzaro: First off, on Dextensa, are there any considerations that we should keep in mind when we look at the growth and billable insert you saw in September, whether that be a procedure, bolus coming out of the summer, or impact from the rebate program at the end of the quarter? Then, with the CPD procedure code and movement to Category 1 in 2022, is there any additional work that's needed, whether it's regarding the shifting the payment indicator, or is it pretty much all set after this recent decision? Then on TKI, the update next week, I appreciate your comments before, but should we expect any data from patients treated in Cohort 3, and if so, how many should we expect, and what would be the mean duration of follow-up there?

Transparent if we could but.

But we want to be good partners with Regeneron, So nothing nothing to update on but I hope that will change in the relatively near future.

Thanks.

Unknown Executive: Thanks. Yeah, great. Mike can actually answer questions on commercial, and I know a little about clinical sometimes, but we'll stay with Mike answering the second questions, and I'll answer the first. Concerning the uptake in September, we certainly don't believe that that's a bolus of surgeries. We think there's a return to somewhat normal levels of cataract surgery. But we still believe that they're well below normal nationally.

Thank you David.

Again, ladies and gentlemen, you have a question or comment at this time. Please press. The Star then one key on your Touchtone telephone.

Our next question comes from declined with H.C. Wainwright.

Unknown Executive: There are some areas where they're at 100%, other areas where they're well below, but certainly you wouldn't see a sales bump like that because of an increase in the number of surgeries for that month. We hope that's an enduring effect, and as we get back to normal surgery levels, we'll consistently do that through the quarters. Clearly, it's hard to ascertain what the effect of COVID is going to be going forward. The jump that we saw in sales... We believe it was the result of two factors. The first was our rebate program, and clearly September is the last month of the quarter, so you're going to get some purchases in that last month of the quarter in order for people to move into the next rebate tier. We were a little nervous in October about whether we would see a bit of a dip, and we didn't reach the level of sales that we saw in September, which was about 4,800 units. We had about 4,200 units in the market in October, and in the last two weeks, in particular, well over 1,000.

Unknown Executive: So we're comfortable that what we're going to have with the rebate program is a little bit of a seesaw where we have the last month of the quarter. We expect to have a higher number of sales probably the first month of the following quarter, a little bit of a dip, but then a build back up as people try and move up those rebate tiers. That tells us the rebate is having an effect, which we're very excited about because, clearly, that was something that we needed in order to be able to make the ASCs less resistant to a buy and build product. The other question you had was about the CPT code. And is there anything else that we need to do?

Got it.

The second question is it true that Oh T X D. D contains less eczema, some them DEXTENZA and therefore, it could be priced at lower price level.

[laughter].

The first part of your question is is correct. So.

So the concept without TXT E b.

The leverage that strong safety signal, we've seen with DEXTENZA, but they haven't release.

Less steroid over a shorter period of time. So worst extends is releasing the steroid over up to 30 days with Otf's Didi, we'd be targeting a profile with steroids released over two to three weeks.

Unknown Executive: Just sort of stepping back for a second, we couldn't be more excited about where we are with how far we've come, how quickly. I remember a couple of years ago trying to convince people, first of all, that we could even get Dextenza through the FDA, much less getting a J-code, and much less getting a Category 1 CPT code. And here we are, so close after the launch, having both of those things in place. There's a couple things left to do that will forevergreen our reimbursement potential in the ASCs and hospitals. The first thing, as you mentioned, is to change the status indicator for the CPT code, which would allow for a facility payment. And that facility payment, then, is what we will get if, indeed, we lose pass-through because there are a number of potentials where pass-through gets extended or we become permanently separately paid. We get bundled into that facility payment.

Unknown Executive: So the second thing we need to do is, of course, make sure that that facility payment is adequate to be able to cover the cost of Dextensa, which we feel confident we'll be able to do. So yeah, there's more work to do, but we couldn't be happier about where we are from a coding and reimbursement standpoint. Do you think that covers your Dextensa questions so we can shift over to Mike? Yeah, yeah, that's super helpful.

Joseph Michael Catanzaro: Thanks, Joe. Thanks for the question. I think we've been pretty consistent in saying when we have something meaningful to say, we'll say it, and we'll bring it forward. For Cohort 3, it's still early in order to say something meaningful across the cohort. That said, you know, I think one of the things we're looking for is indications of biological activity. And to the extent that we can demonstrate that, we will try to show that. So, is that a we shouldn't expect cohort three data next week, or is there still a chance that we may see some early patients? To the extent that we can show you something that's evidence of biological activity, i.e. demonstrates the ability to get rid of fluid.

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Unknown Executive: We would show that patient, but in terms of saying, In terms of showing something, you know, across the cohort, it's still too early. I think we've been very transparent as a company in some cases. We want to make sure that any data we put out there is properly validated, but also, if the data is bad, we'll put it out there.

Unknown Executive: If the data is good, we'll put it out there. As Mike says, if it's meaningful, we will make sure that it gets presented, and the AO is a perfect opportunity to do that. Thank you. Okay.

Joseph Michael Catanzaro: That's, that's helpful. Thanks so much for taking my questions here. Thank you, Joe. Our next question comes from Jonathan Wolleben with JMP Security. Hi, congratulations, and thanks for taking the questions. Just two for me.

Jonathan Patrick Wolleben: With the recent Affymet partnership, can you discuss any obligations on your end for development? And then with the dry eye program, I believe Michael mentioned that there's going to be a vehicle insert in the trials. It seems to be a high hurdle for development. Discuss the expectations for the vehicle insert arm.

Unknown Executive: Sure, actually, Patricia Kitchen, who's here, is our Chief Operating Officer, is going to be the one to discuss most of the issues around AFAMED, so I'll have her talk about the obligations related to AFAMED. Thank you, Antony. Thank you for the question. In regards to AFAMED, our development obligations are, first and foremost, to work with the Chinese authorities to be able to get an IND in China and begin a clinical program within the Chinese population.

Unknown Executive: Then we will begin doing the work as well for the Korean regulatory officials in order to make sure that we have a robust submission for Korea as well. Once we have those completed, we will work with the Southeast Asian countries to be able to meet their regulatory obligations. Should we shift to your second question, or would you like a follow-up on the AFAMED requirement? That's good. Great. Hi John, thanks for the question. There are two different dry eye programs. The OTX-CSI program for the chronic treatment of dry eye patients and OTX-DED for the short-term treatment of dry eye patients.

Unknown Executive: And as you point out, there's a lot of discussion about what the appropriate comparator is. So for these trials, we are doing a design where we go against a hydrogel insert that's got essentially nothing in it. We think this is probably the most appropriate comparator to go against. So in the CSI, there are actually two different hydrogel comparators we're using. So one hydrogel comparator is designed to biodegrade in the same time frame as the active. The other, which is an interesting one, is a rapidly degrading hydrogel that will go away much quicker. And so we're looking at both those comparators. And then, in the DED program... The hydrogel insert is designed to sort of mimic the biodegradability of the active ingredient.

Unknown Executive: Okay, thank you. Thank you. Our next question comes from David Steinberg with Jax. Hi guys, it's actually Ed Chun on for Dave. Just very quickly on the dry eye program, just curious to understand how, I guess, the cyclosporine program mechanistically works differently than Restasis, which historically takes quite a bit longer time for onset of action, and as well as how are you able to get around some of the stinging issues with Restasis.

Unknown Executive: Yeah, so thanks for the question. And you're exactly right. Ristasis is a product, well, I should say it's like the foreign products, but which Ristasis is one of the two approved products in the US, are products that we commonly use clinically for the treatment of dry patients. The two issues that we confront with cyclothorne products are, one, they take a long time to work with, between many weeks and even many months.

Unknown Executive: And the second is that there is a pretty significant tolerability issue with seeing and burning in a number of these patients. So we believe that the OTX-CSI program and the OTX-CSI product can overcome both of these limitations. So, we believe that the problems with stinging and burning are directly related to the peak, Dr. David C. Williams, MD, M.D. Dr. David C. Williams, MD, M.D. By using a lower concentration of the drug over a longer period of time, we can sort of be in that therapeutic sweet spot for a longer period of time. So we believe that to be true. From our phase one trial, the evidence would be, at least in that small set of patients with 10 eyes, we didn't have any tolerability issues. Now obviously, that's a small trial. We have to see how it plays out. But given my clinical experience using cyclosporine, I would say even in a very small trial, you would be likely to see tolerability issues.

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Unknown Executive: It's that widespread. As far as how long it will take in order to see meaningful benefits, you are correct. Typical cyclosporine drugs do take a long time.

Unknown Executive: But we also know that the punctal occlusion component typically happens very quickly, and you'll get some benefits there. And there may be extra benefits of putting the cyclosporine on top of this ocular surface in the setting of punctal occlusion. And so by putting those together, we believe we will see a more rapid onset of action. Again, in the Phase I trial, we did see that. We'll have to see if that plays out in the larger Phase II trial. Unknown Speaker 0, Very helpful, and one last question here is, do you have any updates on the Regeneron partnership and kind of what the latest is in terms of the development program? No updates. I mean, clearly, we need to agree with Regeneron on any external updates.

Unknown Executive: We would love to be more transparent if we could, but we want to be good partners with Regeneron, so there is nothing to update you on, but I hope that will change in the relatively near future. Thank you, David. Again, ladies and gentlemen, if you have a question or a comment at this time, please press the star, the one key on your touchtone telephone. Our next question comes from Yi Chen on behalf of HC Wainwright. Thank you for taking my questions. My first question is, how much of an impact is the AMA Category 1 CPT code going to bring to the adoption of Dex Tensor going forward? Well, it's not just about the adoption of Dextenza. It's really hard to overstate how important that Category 1 code is, not just for Dextenza, but for CSI, DED, and any other development program we might bring into the clinic or onto the market that uses the intercanalicular route of administration.

Unknown Executive: As you know, with a Category 1 code, it's very easy, or much easier, for both public and private payers to support Category 1. They're pretty much paid universally, So in terms of physician payment, it basically clears the slate in terms of the checkerboard of reimbursement we're getting with the local coverage decisions and makes it more uniform across the country. But it also makes the change in the status indicator easier as a separate Category 1 code rather than as a Category 3 code, which is something that is vital to our reimbursement future in the ASDN hospital. The future of our intercanon molecular business and of Dextenza as well is in the ophthalmology office, where the Category 1 code will be a tremendous benefit to both the practice and to the patients because it makes the environment very much a win-win situation for the use of that route of administration. Second question, is it true that OTX-DED contains less dexamethasone than dextenza and therefore could be priced at a lower level?

Unknown Executive: So, the first part of your question is correct. The concept with OTX-DED is to leverage the strong safety signal we've seen with Dextenza but to have it release less steroid over a shorter period of time. So, whereas Dextenza is releasing the steroid over up to 30 days, with OTX-DED, we'd be targeting a profile where the steroid's released over 2 to 3 weeks.

Unknown Executive: As far as pricing goes, that's a whole different ball game... Yeah, as you say, it's a separate NDA, and so the price would be fully independent of Dextensa. So it could be more, it could be less, but we haven't determined the pricing strategy yet. Having that flexibility is nice, so having a separate product in the space works on a lot of different levels. Okay, thank you. Since there are no further questions at this time, this does conclude today's conference call. You may all disconnect and have a wonderful day. Great, you too. Thank you. (inaudible). ..................................................................

Operator: .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ... [inaudible].

Operator: .. .. .. .. .. .. .. .. .. .. ... ?? ?? ?? ?? ?? ?? ?? This is a production of the Center for Autism and Related Disorders, and the Center for Autism and Related Diseases, hosted by the Center for Autism and Related Diseases, in association with the Center for Autism and Related Diseases. Dane Leone, Joseph Catanzaro, Donald Notman, Jonathan Wolleben, Tara Bancroft, Peter Kaiser, Colleen Kusy, Rabia Ozden, Steve Meyers, Antony Mattessich, Chaitanya Gollakota, Ocular Therapeutix Inc [inaudible]

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