Q3 2021 Ocular Therapeutix Inc Earnings Call

Good afternoon, ladies and gentlemen, thank you.

You can see the ocular therapeutics third quarter 2021 earnings conference call.

At this time, all participants are in listen only mode.

That's the question.

And instructions will follow at that time.

It is now my pleasure to turn the call over to Donald <unk>, Chief Finance Officer.

Peter Please.

Go ahead Sir.

Thank you Valerie and good afternoon, everyone and thank you for joining us on our third quarter 2021 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 progress and details of the company's financial results for the quarter ended September 32021 press.

Press release can be accessed on the investors portion of our website at investors <unk>, TX Dot com.

Leading the call today will be Anthony Mato <unk>, our president and Chief Executive Officer, who will provide a summary of our corporate developments and an update on the commercial progress of DEXTENZA also speaking on the call today will be Dr. Michael Goldstein.

Ophthalmology, and Chief Medical Officer, who will give an update on our clinical development pipeline.

Michael's remarks, I will provide an overview of the financial highlights third quarter before turning the call back over to Anthony for summary.

Yes.

For Q&A, we'll be joined by Scott Corning, Our senior Vice President commercial.

Chris White, our Chief business Officer.

As a reminder, on today's call certain statements, we will be making may be considered forward looking for purposes of the private Securities Litigation Reform Act of 1995.

In particular any statements regarding our regulatory and product development plans.

As well as our research activities 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 quarterly report on Form 10-Q filed this afternoon with T C L.

I'll now turn the call over to Anthony.

Thank you Tom and welcome everyone to ocular Therapeutics third quarter 2021 earnings report.

And after that we begin at the end in mind, we focus first on evaluating and dynamism of the disease state in ophthalmology and to determine the key unmet need in that space.

Only then do we consider whether our platform technology enabled us to build a therapeutic satisfy the key unmet need and become a standard of care.

The products in our pipeline are pulled by the market need and enabled by our proprietary technology.

We believe that all of our development program satisfy these requirements the largest opportunity in wet AMD, we believe arc <unk>.

It becomes a therapeutic with the greatest durability on the market.

Comma or ots TICC, you could solve the problems of patient compliance.

Dry eye disease, where our goal is to improve safety and efficacy relative to current therapies.

Finally to the extent that we believe fulfill patient and physician desires to have a more convenient drop free solution for the treatment of post surgical inflammation and pain and now also for itching associated with allergic conjunctivitis.

I won't give the product candidates, we developed our key unmet clinical needs in their respective spaces. We have designed them with product characteristics that we believe will lend themselves to more efficient commercialization.

All of the therapeutic to Ocwen.

Designed to be medical benefit I didn't build products with associated procedure goes.

Products with these characteristics are optimized stone account selling approach whereby the product is not only attractive to physicians and patients, but also to the sites of care that participates in utilization.

Account selling structures can be more targeted and the reach and frequency models.

Companies can sell traditional pharmacy benefit medication.

And that has improved with defensible, whereby we have been able to cover the entire U S targeted commercial field force of less than 50, Ftes have been able to achieve positive product contribution within a very short period of time.

Finally, as highly innovative and novel therapeutic product candidates, we are developing a substantial intellectual property protection and are expected to maintain exclusivity well into the future patents underlying extender are expected to expire in 2030 or later and all of our development product Kennedy have patent applications that are expected to provide protection.

Unknown Executive: Good afternoon, ladies and gentlemen. Thank you for standing by, and welcome to the Oxenor Therapeutics third quarter 2021 earnings conference call. At this time, all participants on the list of known participants are remote.

For Edr.

And all of that industrial portfolio of product candidates that we believe are highly differentiated clinically that lend themselves to efficient commercialization and have the potential for long periods of exclusivity.

Unknown Executive: It is now my pleasure to turn the call over to Dala Notman, Chief Financial Officer of Ocala Therapeutics. Please go ahead, sir.

As we highlight the events of the past quarter and preview the events to come.

Donald Notman: Thank you, Valerie. Good afternoon, everyone. And thank you for joining us on our third quarter of 2021 financial results and business update conference call. This afternoon, after the close, the issue of a press release providing an update on the company's product development programs and details of the company's financial results for the quarter ended September 30th, 2021. The press release can be accessed on the Investors portion of our website at Investors. O-C-

Clearly we are entering a period of significant data and news flow that will shape, our leadership position within ophthalmology.

Let me begin with a few events from the past quarter, starting with DEXTENZA machine.

She is $11 $9 million in net sales for distributors for the quarter, representing an approximately 120% increase over the same quarter last year and approximately 7% improvement over the second quarter of 2021.

Like many other companies that sell into ASD in Ethiopia.

Unknown Executive: Leading the call today will be Anthony Modisich, our president and chief executive officer, who will provide a summary of our corporate developments and an update on the commercial progress of Dextenza. Also speaking on the call today will be Dr. Michael Tolstine, our president of ophthalmology and chief medical officer, who will give an update on our clinical developments and pipeline. Following Michael's remarks, I will provide an overview of the financial highlights for the third quarter before turning the call back over to Anthony for a summary and questions.

Growth of extensive particularly early in the third quarter was impacted by lower than expected elective procedures volumes.

Looking forward, we are happy to see the market returning to a more normal flow of cataract procedures and the most recent month of October we enjoyed our second largest months ever with over 9600 billable inserts hold ASC COPD.

Total result was particularly surprising for the first month of the quarter, we typically see a dip in market sales.

We believe the October numbers by a return to more normal market conditions in certain extent up for a strong fourth quarter.

Unknown Executive: The Q&A will be joined by Scott Corning, our Senior Vice President of Commercial, and Chris White, our chief business officer. As a reminder on today's call, certain statements we will be making may be considered forward-looking for the purposes of the Private Security 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 forecasts, including those risks described in our most recent quarterly report on form 10Q filed this afternoon with the SEC. I will now turn the call over to Antis.

In October we were also pleased to receive an early FDA approval of our NDA expanding the use of DEXTENZA for the treatment of ocular itching associated with allergic conjunctivitis.

This approval represents an important strategic milestone for the future of our pipeline.

Itching associated with allergic conjunctivitis.

Wet AMD glaucoma and VEB.

Almost exclusively treated in the office environment.

As opposed to the ASC and H O P D or the extent of the currently gets the vast majority of acute.

<unk> strategic goal is to expand our presence in ophthalmology after metric offices by providing customers with numerous innovative buy and bill product.

Including those developed internally and potentially those in licensed from other companies.

Antony Mattessich: Thank you, Donald, and welcome everyone to Oculotherapy's third quarter 2021 earnings. At Ocular, we begin with the end in mind. We focus first on evaluating the size and dynamism of a disease state in ophthalmology and then determine the key unmet need in that space. Only then do we consider whether our platform technology has enabled us to build a therapeutic that can satisfy the key unmet need and become the standard of care. The products in our pipeline are pulled by market needs and enabled by our proprietary hydrogen technology. We believe that all of our development programs meet these requirements.

The approval of its F N b it gives us the opportunity to take the first step in doing that.

While the strategic pretense potential the office environment is enormous it represents an almost entirely new space for us with a unique set of challenges and opportunities.

We discovered and the launch of DEXTENZA with the primary barriers of aggregated logistics associated with AMC and <unk> administration.

We believe the product success March art sense, Marc <unk>, which began in the products launched in setting up those accounts. So the physician desire to use the product could be met with available product.

Antony Mattessich: The largest opportunity is in wet AMD, where we believe our OTI could become the therapeutic with the greatest durability on the market, in glaucoma, where OTIC could solve the problem with patient compliance, and in dry eye disease, where our goal is to improve safety and efficacy relative to current therapies. And finally, it extends what we believe fulfills patient and physician desires to have a more convenient drop-free solution for the treatment of post-surgical inflammation and pain, and now also for itching associated with allergic contemptibis.

Site of care.

Setting up accounts in ophthalmology, and optometry offices will be analogous, but with different drivers that required bespoke solutions.

The extent will be the first ever I inbuilt treatment for ocular surface disease for use in the physician's office.

We are used to being in uncharted areas. So we relish the opportunity.

Fortunately, we're not starting from zero base first of all with our current call that youre seeing specialists, who treat the type of patients suffering from AC. We believe are eligible for DEXTENZA reimbursement second.

Antony Mattessich: Not only do the product candidates we develop target key unmet clinical needs in their respective spaces, but we have designed them with product characteristics that we believe will lend themselves to more efficient commercialization. All of the therapies at Octyler are designed to be medical benefits, buy and build products with associated procedure codes. Products with these characteristics are optimized through an account-selling approach, whereby the product is not only attractive to physicians and patients but also to the sites of care that participate in utilization. Account selling structures can be more targeted than the reach and frequency models employed by companies that sell traditional pharmacy benefits medication.

Secondly, the overall market is large with over 10 million patients annually seek treatment from a health care practitioner for relief of symptoms associated with <unk>.

As a premium priced product will likely be step edited in the syndication is important to start the large cohort in order to select those patients for whom the benefits of DEXTENZA can be supported by payers.

On the DEXTENZA reimbursement front, we believe that some of the uncertainty around pass through payment status of co Jason 96 slated.

To expire on December 31, 2022.

May have been.

On November 2nd CMS announced its final rule, making for 2022 and has indicated that extends our will become eligible for separate payment and the ASC under the ASC payment system as a non opioid pain management supply provision for calendar year 2023.

Antony Mattessich: Extenza has been proof of this principle whereby we've been able to cover the entire U.S. with a targeted commercial field force of less than 50 FTEs and have been able to achieve positive product contribution within a very short period of time. Finally, as highly innovative and novel therapeutics, the product candidates we are developing have substantial intellectual property protection that is expected to maintain exclusivity well into the future. Patents underlying that agenda are expected to expire in 2030 or later, and all of our development product candidates have patent applications that are expected to provide protection until 2014 and beyond.

We believe this is a significantly positive development as it is the first indication from CMS.

And that May continue to get reimbursed separately once pass through has expired effectively extending the reimbursement horizon.

Product and service.

This product in the surgical setting.

At a time when we embark on a new dawn in the office environment. The treatment of itching associated was recognized by US. It is encouraging that we can look to simultaneously evergreen our heartland business in surgical setting.

Antony Mattessich: It all comes down to a portfolio of product candidates that we believe are highly differentiated clinically and that lend themselves to efficient commercialization and have the potential for long periods of excessivity. As we highlight the events of the past quarter and preview the events to come, it is clear that we are entering a period of significant data and news flow that will shape our leadership position within ophthalmology. Let me begin with a few events from the past quarter, starting with Dickpins. Dickpins achieved $11.9 million in net sales to our distributors for the quarter, representing an approximately 120% increase over the same quarter last year and approximately 7% improvement over the second quarter of 2021.

With regard to the physician fee for the procedure of inserting DEXTENZA CMS also announced with the former category III CPT 0356 feet will be replaced by a new category. One code CPT 688, <unk> hundred one effective January one 2022.

Payments under the new Covid will be approximately $31 <unk>.

$37 in the office setting.

We are excited that the procedure code has been elevated to a category one status will be better recognizing the reimbursed across all payer types. We also will continue researching additional coating strategies and working with interested bodies in order to improve these payment amounts in future.

Antony Mattessich: Like many other companies that sell into ASDs and HOPDs, growth of extensive, particularly early in the third quarter, was impacted by the lower than expected elective procedures volume. Looking forward, we are happy to see the market returning to a more normal flow of cataract surgeries. In the most recent month of October, we enjoyed our second largest month ever with over 9,600 billable inserts sold into ASCs and ECOPPDs. The October result is particularly surprising for the first month of the quarter, when you typically see a dip in in-market sales.

Clearly.

And auxiliary is in our DNA to do things that never been done before the benefit of blazing new trails that we can create new medicines that have the potential to make real differences.

The downside is the reality that not everything is going to work first time to try it.

The results of our phase II trial for <unk> CSI in October.

<unk>.

Antony Mattessich: We believe the October numbers below are returned to more normal market conditions and set a precedent for a strong portfolio. In October, we were also pleased to receive early FDA approval of our SNDA expanding the use of Xenza for the treatment of ocular itching associated with the original conduct device. This approval represents an important strategic milestone for the future of our pipeline. Itching associated with large conjunctivitis like wet AMD, glaucoma, and VED, almost exclusively treated in the office environment, as opposed to the ASC and HOBD, where the expenses currently get the vast majority. Ocular's strategic goal is to expand its presence in ophthalmology and optometric offices by providing customers with numerous innovative buy and build products, including those developed internally and potentially those in license from other companies.

We are not aware of any company attempting to deliver a constant Joseph cycles forms the aqua surplus pulp wood paneling.

The need is clear.

Data suggest drop therapies are painful irritating to eyes that are already in pain and they take months to work delivering.

Delivering a constant doses cyclosporin from a hydrogel depot concentrations low enough to avoid irritation, but hyena cyclosporin did sort of sampling inflammatory challenge.

Excluding the Pumpkin, then enter kind of like dealer insert immediately slowed loss of tear film. So the patients should begin to see release promptly.

The <unk> CSI has potential to be the perfect combination for the millions of people suffering from dry eye disease.

While the contract is clear.

Our phase III trial CSI are cycles market changes, you're kind of like dollars per se on the separate from our hydrogel placebo on the primary endpoint increased your production at 12 weeks as measured by Schirmer test.

Antony Mattessich: The approval of this S&A gives us the opportunity to take the first step in doing that. While the strategic potential of the office environment is enormous, it represents an almost entirely new space for us, with a unique set of challenges and opportunities.

Well this is disappointing, particularly for the patients who could have benefited from this product. It is important to keep this upcoming content.

And so what we do has never been done before we can't rely on the failures than successes of others to mitigate all of our risk.

Antony Mattessich: We discovered at the launch of Dixenza that the primary barriers to entry were just associated with ASC and HOPD administration. We believe the product success, in large part, stems from our activities, which began when the products were launched and setting up those accounts, so the physician's desire to use the product could be met with available products at the site of. Setting up accounts in ophthalmology and automatic opposites will be analogous, but with different drivers that require a standardized solution. Exempt will be the first ever buy and build treatment for an ocular surface disease for use in the physician's office. We are used to being in uncharted areas, so we relish the company of the public.

Why do it yourself.

We don't yet know for sure.

What is important is a highly innovative company is that we learned from our setback.

Because we received and then sort through the patient level data over the next couple of months, we hope to finalize the cost.

They're all potential causes that we can fix which is the improvement of insert retention our delivery of a higher dose of cyclosporin to document circuit.

There are also potential causes that might lie in the basic concept of delivering cyclosporin and steady state from an included pumpkin can actually be efficacious.

Antony Mattessich: Fortunately, we're not starting from zero big. First of all, with our current call this, you're seeing specialists who treat the type of patients suffering from AC who we believe are eligible for the expenses reverse. Secondly, the overall market is large, with over 10 million patients annually seeking treatment from a healthcare practitioner for the relief of symptoms associated with AIDS. As a premium price drug that will likely be step added to its indication, it is important to start a large cohort in order to select those patients for whom the benefits of Exenza can be supported by payers.

Our decision on whether or not to move forward with Nokia CSI will be based upon data from this effort.

Regardless, it's important to note that every therapeutic we create is unique and that the read through from results from one program to another is very limited.

Thanks Lloyd.

We're not only innovative but also probably extend as a brand new indication is brand new indications treatment of itching associated with allergic conjunctivitis, the phase II readout for <unk> coming soon.

Phase II clinical trial for OTT GIC should initiate before year end.

Last but not least ots PKI has begun a phase one trial in the U S that is growing on schedule and of course, we have many pilot projects, leading further opportunity to make a difference.

Antony Mattessich: On the Dixends a reimbursement front, we believe that some of the uncertainty around pastured payments beds of Co. J1096, which is later to expire on December 31, 2022, may have been lit. On November 2nd, CMS announced final rulemaking for 2022 and has indicated that the extensa will become eligible for separate payments in the ASC under the ASC payment as a non-copiate pain management supply provision for calendar year 2023 We believe this is a significantly positive development, as it is the first indication from CMS that Exfenza may continue to get reimbursed separately once Pats' room has expired, effectively extending the reimbursement horizons for this product in the circuital setting. At a time when we embark on a new dawn in the office environment, the treatment of itching associated with the logic conduct by us.

I can't thank the team enough for their innovation and execution on Yokeag CSI program.

We sought to improve the lives of patients suffering from truly debilitating disease, and we're not going to stop.

Before turning to Mike speak more in depth about our pipeline.

I'd like to welcome two new members of the ocular team.

In September we announced the appointment of narrowly range Smart board merely as an experienced board member who will bring to author a wealth of operational financial and business experience.

We also broadened our technical operations team with the addition of our new senior Vice President of technical operations and quality currently.

Currently has over 20 years of experience with Blue Chip companies building and implementing high performance Global enterprise wide technical operations and lifecycle management strategy.

Antony Mattessich: It is encouraging that we can look to simultaneously bring our hard-run business into the surgical setting. With regard to the physician's fee for the procedure of inserting Dixenza, CMS also announced that the former Category 3 code, CpT 0356p, will be replaced by a new Category 1 code, CpT 6884841, effective January 1, 2022. Payments under the new code will be approximately $31 in the ASC and HOPD and $37 in the office. We are excited that the procedure code has been elevated to a category one status that will be better recognized to be inverse across all payer types. We also will continue researching additional coding strategies and working with interested bodies in order to improve these payment amounts.

Her added presence will further support our ambitious growth strategy.

Also in the quarter, Chris WAC was promoted into the role of Chief business Officer.

This has 30 years of experience large pharma consulting and biotech could make him an ideal candidate to contribute more broadly across the business.

With that I would now like to hand, the call over to our president of Ophthalmology and Chief Medical Officer, Dr. Michael Goldstein, who will provide an in depth look at our pipeline.

Thanks, Anthony let me begin with an update on our back of the eye program.

We continue to enroll subjects.

It's a multicenter prospective randomized controlled trial.

Bingo.

Exiting this compared to a <unk> administered every week and subjects previously treated with anti VEGF therapy.

Antony Mattessich: At Octylor, it is in our DNA to do things that have never been done before. The benefit of blazing new trails is that we can create new medicines that have the potential to make real differences to patients. The downside is the reality that not everything is going to work the first time we try it. The results of our phase-through trial for OTSBSI are a case in point. We are not aware of any company attempting to deliver a constant dose of cycles forms the aqua surface while including the canalic.

This U S based phase one clinical trial of <unk>.

It's being conducted under an exploratory R&D application at five sites targeting a total of 28 randomized subjects 15 subjects being treated with a single input containing 600 microgram dose effects.

And five subjects being treated at eight week intervals with standard of care for their pets.

The trial is designed to assess the safety durability and Tolerability of <unk>.

Antony Mattessich: The need is clear. Data suggests drop therapies are painful and irritating to eyes that are already in pain, and they take months to work. Delivering a constant dose of cyclosporin from a hydrogeal depot, the concentration is low enough to avoid irritation, but high enough for cyclosporin to exert its anti-inflammatory effect of the challenge, including the punctum with an intercanolite insert immediately slows the loss of tear fill so the patients should begin to see really well

D var as well as to assess preliminary biological activity in subjects biometric anatomical and functional changes right now.

Data from the Australian Phase one trial that has demonstrated objective DTI a generally favorable safety profile to date has been well tolerated and showed evidence of biological activity, including decreases in pulpwood at some subjects as early as two months following administration.

Antony Mattessich: We believe that OTXDSI has the potential to be the perfect combination for the millions of people suffering from dry eye. While the concept is clear, our phase-to-trial trial with Otex DSI, our psychosorm-contained inter-pan Lakeillary insert, failed to separate from our hydrogen transceboes on the primary endpoint, increased tier production at 12 weeks as measured by Shermerston. This is disappointing, It is important to keep this outcome in context because what we do has never been done before. We can't rely on the failures and successes of others to mitigate all of our risk. Why did you fail? You don't get a no for certain.

Additionally, we are seeing encouraging durability of six months or longer across cohorts and durability beyond one year in some subjects.

We plan on presenting incremental data from the Australian based trial at the upcoming Army being held next week.

Moving to our glaucoma program <unk> CIC, we've completed a U S based phase one clinical trial.

Evaluating safety biological activity durability and Tolerability of.

<unk> CIC and subjects with primary open angle glaucoma or ocular hypertension.

We will be presenting summary data on this study at the upcoming AUO Conference next week.

Antony Mattessich: What is important as a highly innovative company is that we learn from our setback. As we receive and then sort through the patient level data over the next couple of months, we hope to find the likely cause. There are potential causes that we can fix, such as the improvement of insert retention or delivery of a higher dose of psychosport to the doctrine surface. There are also potential causes that might lie in the basic concept that delivering cyclosporin and steady faith from an included pungum can actually be efficacious.

Built on the interim data presented at <unk> in May at ARVO in July.

If the RF.

Earlier data highlighting <unk> ability to reduce intraocular pressure from baseline.

The clinical trials primary efficacy measure by approximately seven to 11 millimeters of Mercury, a result, which is comparable to current standard of care topical travoprost.

The data also highlighted the productivity onset of action as early as two days after complete administration and a durability of response with decreases in high pressure for six to nine months and many subjects in cohorts, one and two at four to six months for subjects in cohorts three and four.

Antony Mattessich: Our decision on whether or not to move forward with OTSI will be based upon data from the. Regardless, it's important to note that every therapeutic we create is unique, and that the read-through from results from one program to another is very limited. Thanks, Lee. We're not only innovative but also proliferous.

<unk> has been generally well tolerated with a favorable safety profile to date.

Antony Mattessich: It extends as a brand new indication, and has a brand new indication for the treatment of itching associated with ductivitis. A phase two redout for OTS is coming soon. A phase two clinical trial for OTS TIC should initiate before year-end. Last but not least, OTX TKI has been in a phase one trial in the US that is rolling on schedule. And, of course, we have many pilot projects waiting for their opportunity to make a difference. I can't thank the team enough for their innovation and execution on the OTSI program.

We look to build upon that data at <unk>.

We remain on track to initiate a phase II clinical trial in the near future.

Regarding our ocular surface disease programs, we're thrilled with the recent approval of DEXTENZA for the treatment of allergic conjunctivitis and believe this program offers a unique physician administered preservative free drop III product for patients with allergic conjunctivitis.

Regarding <unk> CSI, we are clearly disappointed with the outcome of our phase III clinical trial of Oti's CSI for the chronic treatment of patients with dry eye disease.

Antony Mattessich: We sought to improve the lives of patients suffering from truly debilitating diseases, and we're not going to stop. Before turning to Mike, I want to speak more in depth about our pipeline. I'd like to welcome you, members of the AGOO, In September, we announced the appointment of Marely Rains to the board. Marely is an experienced board member who will bring to Ocler a wealth of operational, financial, and business experience. We also brought in our technical operations team with the addition of our new Senior Vice President, Technical Operations and Quality, Karen Layette.

While the study did show an improvement compared to baseline at both science, especially by California of course extending.

Sometimes especially by the way the visual analog scale.

Not observe a separation between drug and vehicle as measured by the Schirmer test part that we expected.

As Anthony noted, we will continue to analyze the data including in certain retention to better understand the results and path forward and we will provide an update at a later date.

Our second product candidate for dry eye.

Antony Mattessich: Karen Lay has over 20 years of experience in blue chip companies building and implementing high-performance, global, enterprise-wide, technical operations, and lifecycle management strategies. Her added presence will further support our ambitious girls. Also, in Florida, Chris White was promoted into the role of chief business officer.

As a low dose and you are kind of like whether it's a preservative free of episodes.

Appropriate sustained active drug at fixed asset.

This is a new product candidate with a lower dose effects of episode smaller size.

Let me try patients experienced episodic flares of this license, which we believe are likely related to inflammation.

Unknown Attendee: Chris has 30 years of experience in large pharma consulting and biotech that makes him an ideal candidate to contribute more broadly across. With that, I would now like to hand the call over to our President of Ophthalmology and Chief Medical Officer, Dr. Michael Goldstein, who will provide an in-depth look at our pipeline. Thanks, Anthony. Let me begin with an update on our Back of the I program, OTSPKI. We continue to enroll subjects in the United States-based multi-center prospective randomized controlled trial that is evaluating a single OTX TKI implant containing ex-citinib compared to flibyceph administered every eight weeks in subjects previously treated with anpego jet therapy.

But both areas have long been used off label for dry eye flares.

However product misuse of steroids may also lead to adverse events such as elevated pressure for cataracts. In addition, all commercially available steroid all commercially available topical steroid eye drops in United States.

Unknown Attendee: This U.S.-based Phase 1 clinical trial of OTX TKI is being conducted under an exploratory I&D application at five sites targeting a total of 20 randomized subjects, 15 subjects being treated with a single OTX TKI implant containing a 600 microgram dose of Exitinib and five subjects being treated at peaks, leak intervals with standard of care of Plo-Rceps. The trial is designed to assess EPAI as well as to assess its preliminary biological activity and subjects by measuring anatomical and functional changes of the retina.

Preservative, which can result in ocular surface.

<unk> actually offers these patients the opportunity to be treated with a physician administered preservative free and free steroid therapy that can be.

For use by patients.

We have completed enrollment of our U S based randomized double masked vehicle controlled phase II multicenter clinical trial.

And with two different doses of <unk> compared with the hydrogel vehicle et cetera.

150 subjects the diagnosis.

The trial is designed to assess the safety and efficacy of <unk> for the short term treatment of dry eye disease.

Evaluating ballpark project type of hyperemia, divest hydride as frequency and severity scores and both marketplace and pay.

Among other endpoints.

We expect topline data from this study in the first quarter.

Two.

I would now like to turn the call back over to Donald to review.

Our third quarter financial results.

Unknown Attendee: Data from the Australian Phase 1 trial has demonstrated OTCX-P-I has a generally favorable safety profile to date, has been well tolerated, and has shown evidence of biological activity, including decreases in retinal fluid in some subjects as early as two months following implant administration. Additionally, we are seeing encouraging durability of six months or longer across cohorts and durability beyond one year in some subjects. We plan on presenting incremental data from the Australian-based trial at the upcoming AEO meeting being held next week.

Thanks, Mike gross product revenue net of discounts rebates and returns, which the company refers to as total net product revenue was $12 $2 million in the quarter and represented 107% increase over the same period in 2020, and a 4% sequential increase over Q2 2021.

But.

Net product revenue of extended in the third quarter was $11 9 million versus $5 $4 million in the comparable quarter of 2020.

Unknown Attendee: Moving to our glaucoma program, OTCC, we have completed a U.S.-based phase one clinical trial evaluating the safety, biological activity, durability, and tolerability of OTXTIC and subjects with primary open-angle glaucoma for OXXXEA, will be presenting summary data on this study at the upcoming AEO conference next week that builds on the interim data presented in May at Arvo in July at ASDRS. Earlier data highlighted OTXTIC's ability to reduce mean interactive pressure from base lines, The clinical trial's primary efficacy measure by approximately 7 to 11 millimeters of mercury, a result which is comparable to current standard of care topical travel process, The data also highlighted the product candidate's onset of action as early as two days after complaint administration and a durability of response with decreases in eye pressure for six to nine months in many subjects in coerce one and two and four to six months for subjects in coerce three and four.

Reflecting an approximately 120% increase.

Total net product revenue for the third quarter. In 2021 also includes net product revenue of $3 million from.

<unk> sealant.

Research and development expenses for the third quarter were $12 $7 million versus.

Versus $7 million for the comparable period in 2020, driven primarily by increased headcount as well as increased clinical trial costs associated with the initiation of our U S. Based phase one trial, TX PKI as well as the ongoing phase III clinical trials for <unk>, CSI and MTX CEB.

The ongoing phase one clinical trial of <unk> in Australia.

And the post approval pediatric trial.

Selling and marketing expenses in the quarter were $9 6 million as compared to $6 $5 million for the same quarter in 2020.

It reflects increased personnel costs associated with the expansion of our field force and an increase in the facility related and other costs.

Unknown Attendee: OTS-DIC has been generally well-tolerated with a favorable safety profile to date. We look to build upon that data at AEO, and we remain on track to initiate a phase two clinical trial in the near future. Regarding our ocular surface disease programs, we are thrilled with the recent approval of Xenza for the treatment of allergic congenitalitis and believe this program offers a unique physician-administered preservative-free, drop-free product for patients with allergic connectivitis. Regarding OTSBSI, we are clearly disappointed with the outcome of our phase two clinical trial of OTSBSI for the chronic treatment of patients with dry disease

Finally general and administrative expenses were $8 1 million for the third quarter versus $6 million.

Comparable quarter of 2020.

The increase in expenses, primarily from increased personnel expenses professional fees.

With respect to the financial results for the third quarter. The company reported net income of $2 7 million or.

Or income of <unk> <unk> per share basic and.

A loss of 23% per share on a diluted basis.

This compares to a net loss of $11 9 million or a loss of <unk> 19 per share on a basic and a loss of $21 per share on a diluted basis for the same period in 2020.

Unknown Attendee: While the study did show an improvement compared to baseline in both signs as measured by total coronary of fluorescing staining and symptoms as measured by the visual analog scale, we did not observe as many separations between drug and vehicle as measured by the Shermer's test scores that we expected.

Net income was primarily due to a $23 $8 million noncash net change in the fair value of the derivative liability associated with our convertible notes driven.

Unknown Attendee: As Anthony noted, we'll continue to analyze the data, including insert retention, to better understand the results and pass forward, and will provide an update at a later date. Our second product candidate in Dry, OTSDE, is a low-dose intracinellicular insert of preservative-free methamethism. While it incorporates the same active drug in fixed genza, this is a new product campaign with a lower dose of Nex Many dry eye patients experience episodic players for their signs and symptoms, which we believe are likely related to inflammation. Topical steroids have long been used off-label for dry-eyed flares. However, chronic misuse of steroids may also lead to adverse events, such as elevated eye pressure or cataracts.

Driven by a decrease in price of our common stock during the quarter.

Non cash charges for stock based compensation and depreciation.

Live nation.

This $4 4 million.

Third quarter versus $2 6 million for the same quarter in 2012.

As of November <unk> 2021, the company had $76 6 million shares outstanding.

As of September 30 of 2021, the company had $179 $3 million in cash cash equivalents versus $191 9 million at March 31, 2021 based.

Donald Notman: In addition, all commercially available topical steroid eyegrops in the United States have preservatives, which can result in ocler surface toxicity. OTSD actually offers these patients the opportunity to be treated with a physician-administered, preservative-free, and hands-free steroid therapy that can't be overused by patients. We have completed enrollment in our U.S.-based, randomized, double-mas, vehicle control, phase two multi-centered clinical trial, evaluating two different doses of OTS-D-D compared with a hydrogen vehicle insert in approximately 150 subjects with dry eye. The trial is designed to assess the safety and efficacy of OTSD for the short-term treatment of signs and symptoms of dry and disease by evaluating Bobar Contemporal Hyperw I would now like to turn the call back over to Donald to review our third quarter financial results. Thanks, Mike.

Based on our current plans and related estimates any cash inflows from DEXTENZA and would share product sales and cash outflows from operating expenses.

Company believes that existing cash and cash equivalents at.

The September 32021 will enable the company to fund planned operating expenses debt service obligations and capital expenditure requirements through 2023.

This cash guidance is subject to a number of assumptions.

Including those related to the severity and duration of the COVID-19 pandemic.

The revenues expenses and reimbursement associated with DEXTENZA and.

And the pace of research and clinical development programs among other aspects of the business.

That concludes my comments on our third quarter financial results.

I'd like to turn the call back to Anthony for some final thoughts.

Thanks, Tom.

For opening the call up for questions real quick summary.

Extensive demonstrated solid performance with $11 $9 million in the third quarter net sales growing 7% over the prior quarter and 120% over same quarter prior year.

Donald Notman: Gross product revenue net of discounts, rebates, and returns, which the company refers to as total net product revenue, was $122 million in the quarter and represented a 107% increase over the same period in 2020 and a 4% sequential increase over Q2 2021. Net product revenue to the extent it in the third quarter was $11.9 million versus $5.4 million in a comparable quarter of 2020, reflecting an approximately 120% increase. Total net product revenue for the third quarter of 2021 also includes net product revenue of $. $.3 million from the Russure sealant.

We have expanded and extended the label with inclusion of an indication for ocular itching associated with allergic conjunctivitis approval of our NDA in October and look forward to a formal product launch in the first half of 2022.

With the recent op Etfs final rule CMS has laid out a path for the continued separate payment for DEXTENZA.

ASC environment after pass through exploration.

This could allow for us to evergreen our surgical business as we build a new source of growth environment.

The U S based trial of Otas PKI Evaluable <unk> single 600 microgram implant.

Plus anti VEGF injections versus standard of care every eight week Eylea continues to enroll well.

Donald Notman: Research and development expenses for the third quarter were $12.7 million versus $7 million for the comparable period in 2020, driven primarily by increased headcount, as well as increased clinical trial costs associated with the initiation of our US-based phase one trial of OTX TKI, as well as the ongoing phase two clinical trials for OTXSI and OTXD, the ongoing phase one clinical trial, OTSTPI in Australia, and the extensive post-approval Selling and marketing expenses in the quarter were $9.6 million as compared to $6.5 million for the same quarter of 2020, reflecting increased personnel costs associated with the expansion of our field force and an increase in facility-related and other costs.

We are on track to initiate a phase II clinical trial of <unk>.

<unk> for the treatment of glaucoma before the end of the year.

In dry eye disease, we will continue to analyze the data from the recent topline readout Ots CSI and look forward to reporting topline data from the <unk> phase II trial in the first quarter of 2022.

Finally, the company ended the quarter with $179 $3 million in cash on the balance sheet as of September 30.

And an expected cash runway through 2023.

We look forward to a strong finish in 2021 and with that I'll turn the call over for questions.

Thank you, ladies and gentlemen, if you'd like to ask a question. Please press Star then one when you touched on California again, if you'd like to ask a question. Please press Star then one.

Donald Notman: Finally, general administrative expenses were $8.1 million for the third quarter versus $6 million in the comparable quarter of 2020. The increase in expenses stems primarily from increased personnel expenses and professional fees. With respect to the financial results for the third quarter, the company reported net income of $2.7 million, or income of three cents per share on a basic and a loss of 23% per share on a diluted basis. This compares to a net loss of $11.9 million, or a loss of 19 cents per share on a basic and a loss of 21 cents per share on a diluted basis for the same period in 2020.

One on the corporate question.

Our first question comes from John Walden.

Your line is open.

Thank you and thanks for taking the questions.

A few from me, maybe if I could start with allergic conjunctivitis, you talked a little bit about the market and when we hear in such large numbers of patients.

It can be hard to figure out how youre thinking about this opportunity in general, which step editing, but with 10 million patients.

How should we think about the opportunity for DEXTENZA in AC and then also your additional investment in SG&A, if not right away when.

That might happen and what would trigger that additional investment.

Okay.

Donald Notman: Net income was primarily due to a $23.8 million non-cash net change in the fair value of the derivative liability associated with our convertible note, driven by a decrease in the price of our common stock during a quarter. Non-cash charges for stock-based compensation and depreciation and advertising were $4.4 million in the third quarter versus $2.6 million for the same quarter in 2020. As of November 3, 2021, the company had 76.6 million outstanding shares.

Yes.

You Wouldnt shouldnt affect any increase in investment initially we clearly we're going to as we mentioned in the discussion we are seeing.

A high overlap of targets for AC in the surgical setting.

We're seeing the right doctors to be able to go after the types of patients that we believe are going to be are going to be reimbursable.

But what we need to do over the short period of time is to be able to work in the office environment and understand.

The requirements in order to set up accounts.

Ophthalmology office environment.

Donald Notman: As of September 30th, 2021, the company had $179.3 million in cash and cash equivalence versus $191.9 million at March 31, 2021, based on our current plans and related estimates of anticipated cash inflows from Dextenda and resure product sales and cash outflows from operating expenses. The company believes that existing cash and cash equivalents as of September 30, 2021 will enable the company to fund planned operating expenses, debt service obligations, and capital expenditure requirements through 2023.

So as we establish that we'll be doing some experimentation over the next quarter or so.

Beginning of next year, when our category one.

Insertion code becomes becomes viable.

We will then establish a plan on how we're going to launch in the office environment.

And based on your market research how are you thinking about the opportunity for DEXTENZA in ACO do you have your hands around a range there.

The market research is exceedingly positive doctors are exceptionally excited about having this new treatment modality.

Payers and the discussion groups that we've had no issues with the.

Donald Notman: Cash guidance is subject to a number of assumptions, including those related to the severity and duration of the COVID-19 pandemic, the revenue, expenses, and reimbursement associated with Dextenda, and the pace of research and clinical development programs, among other aspects. This concludes my commentary on the third quarter financial results, and I would like to turn the call back to Anthony for his final thoughts. Thanks, Tom.

The price of the product provided it's not used in every patient.

Been around this business for a long time, I know not to get overly excited by what if market research, but the market research is extremely positive.

Okay, and then maybe one on <unk> CSI, you mentioned, the retention data showing lower than anticipated.

And Sir shouldn't retention rate in the active arm. So I was wondering if you could provide a little more color.

Antony Mattessich: So before opening the call up for questions, I'll read a quick summary. Continues to demonstrate a solid performance with $11.9 million in the third quarter net stale, growing 7% over the prior quarter and 120% over the same quarter of the previous year. We have expanded and extended the label with the inclusion of an indication for ocular itching associated with allergic conjunctivitis with the approval of our S&A in October and look forward to a formal product launch in the first half of 2022. With the recent OPP's final rules, CMS has laid out a path with a continued separate payment for the extender in the ASC environment after pass-through expiration.

And then when you might think you have there.

The amount of information to make a decision on the <unk> side.

Yeah. Thanks, John This is Mike.

So.

I think as you know cyclosporin needs to be on the ocular surface for a fair amount of.

Fair concentration.

In order to see a clinical effect.

We had anticipated.

The spectrum CSI concerts with lasts three to four months.

And they do.

But you know.

7% of the patients.

Antony Mattessich: This could allow for us to evergreen our surgical business as we build a new source and growth in the office environment. The US-based trial of OTII evaluated a single 600 microgram implant plus anti-vegev injection versus standard of care every eight weeks. ILEA continues to enroll well. We are on track to initiate a phase two clinical trial of OTIC for the treatment of glaucoma before the end of the year. In addition, we will continue to analyze the data from the recent top-line readout of OTX DSI and look forward to reporting top-line data from the OTX DED phase two trial in the first quarter of 2022. According to the filing, the company ended the quarter with $179.3 million in cash on the balance sheet as of September 30, and an expected cash runway through 2023.

The Midwest the full length of time, we believe that that could be one reason among many that we're looking at that as to why we didn't see a separation between the drug group and the vehicle group.

As you know.

We've seen from the data for patients did generally improve in this trial. So from baseline we did see improvement.

All metrics here, we're testing different things.

Right.

Yes.

But what we didn't see as the big separation.

We think that.

One possibility amongst others.

The protection was lower than expected.

The good news, if SBA issued us a fixable problem.

We're looking through our data sets now and looking at the full dataset.

And hopefully in the next couple of months, we'll be able to give this order can decide whether three formulations.

Unknown Executive: We look forward to a strong foundation in 2021, and with that, I'll turn the call to request. Thank you. Ladies and Donna, if you would like to ask a question, please press star and then one on your Touchstone telephone. Again, if you would like to ask a question, please press star and then one. One moment for our first question. Our first question comes from John Wallivan from JAMP Security in Toronto. Thank you, and thanks for taking the questions. A few from me, maybe if I could start with allergic conjunctivitis.

Viable option.

That's helpful. Thanks, again for taking the questions.

Thank you.

Our next question comes from Liana.

Raymond James Your line is open.

Alright, Thank you for taking the questions and congrats on the quarterly sales and DEXTENZA.

Two for me if I could firstly.

Could you maybe.

Maybe help with one of the.

Antony Mattessich: He talked a little bit about the market, and when we hear such large numbers of patients, it can be hard to figure out how you're thinking about this opportunity in general with step editing. So with 10 million patients, how should we think about the opportunity for Dextenza and AC and then also your additional investment in SG&A? If not right away, when might that happen, and what would trigger that additional investment? Yeah, the, uh, you shouldn't expect any increase in investment initially.

Most common inbounds, we've gotten to the readout of the Ots CSI data.

As you think about some of the other programs.

Is there can you compare and contrast, the difficulty in that formulation.

Perhaps versus how.

The formulations performed for <unk> T E D.

With the concern being that if the formulation was stable necessarily for OTI CSI. It was more of a drug delivery problem.

How are we not going to maybe end up in that same issue with the <unk> study.

Antony Mattessich: Clearly, we're going to, as we mentioned in the discussion, we are seeing a high overlap of targets for AC in the surgical setting, seeing the right doctors to be able to go after the types of patients they believe are going to be in a, are going to be reimbursable. But what we need to do over a short period of time is to be able to work in the office environment and understand the requirements in order to set up accounts in the ophthalmology office environment.

So any color in terms of how those products might be similar or different formulation would be helpful.

And then secondly for me.

Could you update just when we might see that data.

And what the scale and scope of the data would be.

From the U S study of Otf's Teekay I next year. Thank you.

Yeah. Thanks, David So your first question was.

About boutique CSI in the.

Antony Mattessich: So as we establish that, we'll be doing some adaptive experimentation over the next quarter or so. At the beginning of next year, when our category one, insertion code becomes viable, we will then establish a plan on how we're going to launch in the office environment. And based on your market research, how are you thinking about the opportunity for Dixenza and ACDO? Do you have your hands around a range there?

The same or different with <unk>.

So first of all what I would say is all of our products use of different compositions of hydrogel.

And we haven't seen any safety issues or across any of the programs including with.

They are all different in terms of the active ingredient and they're all different in terms of duration.

So with CSI were using cyclosporine and we are targeting three to four months.

With <unk>, we're using dexamethasone and we're targeting a primary endpoint at two to three weeks.

Antony Mattessich: The market research is exceedingly positive. Doctors are exceptionally excited about having this new treatment modality. Payers in the discussion groups that we've had, I have seen no issues with the price of the product provided it's not used in every. Been around this business for a long time. I know not to get overly excited by what if market research.

So the CSI readout I don't think reads through to BD in fact, the D D D.

Dataset, it's much more analogous to DEXTENZA.

So the same active ingredients to extend.

The only difference being that with.

D D. We have less steroids.

The slightly smaller in surplus with a very similar.

Antony Mattessich: Okay, and then maybe one on OTSI. You mentioned the retention data showing lower than anticipated insertion retention rates in the active arms. I was wondering if you could provide a little more color, and then when you might think you have enough information to make a decision on next steps for OTXSI. Yeah, John, this is Mike.

To DEXTENZA, we expect retention to be very similar to the extent that which is in the high nineties.

And we expect durability to be.

Non issue.

Thank the read through with CSI is more into <unk>, TP, which with the Travoprost.

Sure so when we put the.

Target longer duration therapies in the Canaliculus.

Unknown Attendee: As you know, Speckless-Borne, be on the aquac surface for a fair amount of time in order for there to be a clinical effect, and we had anticipated that the Sexus Front CSI would last three to four months, and it did. But, you know, in some percentage of the patients, it didn't last the full length of time, that could be one reason amongst many why we didn't. As you know, or as you've seen from the data, the patients did generally improve in this trial.

That's more of a challenge.

There's still a lot of nuance there, but we've learned a lot and I think we can.

If you think about the big picture.

CSI readout was a phase II readout, not a phase III readout. The phase II readout is designed and phase III studies are designed to actually learn things about your formulation and make adjustments. So I think that's where we're at I think we showed a strong safety signal.

We you know.

Shown we can deliver the drugs, but we think we need more drugs. So that those are all fixable thing.

All appropriate someone would do in a phase III development program.

We just have to decide once we've seen all the data given all the other opportunities we have where that falls within our priority list, but it's certainly doable.

Unknown Attendee: So from baseline, we did see improved signs of dry eyes as well as What we didn't see is the fix. One possibility amongst others is that their retention was lowered. So the good news is that that's the issue, that's a fixable problem. We are looking through our data sets now, full data set. And hopefully, in the next couple months, we'll be able to be in a position where we can decide whether re-formulation is viable. That's helpful. Thanks again for taking the question.

It's certainly appropriate for a phase II study with a phase III study readout I would understand people's concern, but as the phase III readout, we're supposed to learn how the different formulations work for different diseases.

Yeah.

As far as your second question about the Ots PKI, we have a.

<unk> or the Australian study that will be presented at the <unk>.

Our meeting.

I get it kicked off because some of this week earlier in Mexico with Covid little unclear with it actually start but.

Soon.

<unk> in the U S of that trial is enrolling well.

Unknown Executive: Our next question comes from Dane Leon and Raymond James.

We have not announced when we would have the topline data.

Unknown Executive: Thank you for taking the questions, and congrats on the quarterly sales and DexPenza. Two for me, if I could.

But.

Are hoping that by middle of next year, we would have six months data on all patients.

Unknown Attendee: Firstly, could you maybe help with one of the most common in-bounds we've gotten since the readout of the OTS-D-S-I data? As you think about some of the other programs, could you compare and contrast the difficulty in that formulation, perhaps, versus how the formulations perform for OTXD, with the concern being that if the formulation wasn't stable necessarily for OTXTSI, it was more of a drug delivery problem; how are we not going to maybe end up with that same issue with the OTXD study? So any color in terms of.

That might be inappropriate.

Given update although again, we have to commit to that yet.

Thank you very much.

Thank you Dan.

Thank you. Our next question comes from Joe <unk> of Piper Sandler Your line is open.

Hey, guys. Thanks, so much for taking my questions here, Mike I think you used the term incremental but can you provide a little bit more detail on maybe what we should expect to see from the Teekay update at Ao maybe.

Maybe should we primarily expect updates from cohort three and if so is it possible that we get the full six months of follow up.

All patients across cohort three a rebate than I have.

Unknown Attendee: of how those products might be similar or different in formulation would be helpful. And then, secondly for me, could you update just when we might see that data and what the scale and scope of the data would be from the U.S. study of OTSTKI next year? Thank you.

Follow up.

Yes, Thanks, Joe.

And update or.

All the patients are in the Australia trial, all the patients in cohorts one two.

300, <unk> <unk> co.

Cohorts, one I think we've already.

They're all they're all of the studies.

I think you've seen that data, but there'll be updated data on <unk>.

Unknown Attendee: Yeah, thanks, Jane. So your first question was about OTS-C-I and how that's the same or different from O-TX-D. So, you know, first of all, what I would say is all of our products use different compositions of hydrogels, and we haven't seen any safety issues across any of the programs, including with the other. They're all different in terms of the active ingredient, and they're all different in terms of duration. So with CSI, we were using cyclosporan, and we were targeting three to four months.

Follow up on subjects in cohorts, two with both create a pretty big.

And yes, many or most of oil at the six month time point.

Okay got it. Thanks, that's helpful. And then maybe just a couple on DEXTENZA I am wondering if you could elaborate a little bit on the dynamics that influence sort of September performance I think if I heard correctly, you said sales into Asia were particularly.

You're affected early in the quarter and that together with usually you see a benefit in the last month of the quarter from the rebate program. Just wondering if you could provide a little bit more commentary on that in September and then.

Unknown Attendee: With GED, we're using dexomethone, and we're targeting a primary endpoint at two to three weeks. So the CSI readout, I don't think, reads through to DED. In fact, the DED data set is much more analogous to Dextenza, so the same active ingredient, Dixenza. The only difference is that with DED, we have less steroids and it's a slightly smaller insert, but the width is very similar to Dexenza.

What's your view on the category one physician payment coming in below 40 Bucks I think thats below where you had hoped it to be is at the level you think will still incentivize physicians. Thanks.

Yes, I mean July sales.

First question July sales were very light relative to what we would have expected before.

For that month.

They did recover as the quarter went on we.

We did not yet.

Big jump in sales at the end of the quarter that we normally expect in September.

Unknown Attendee: So we expect retention to be very similar to Dexenza, which is in the high 90s, and we expect her ability to be a non-issue. I think the read-through with CSI is more akin to OTX-TP, which was a trial across the intercalculents there. So when we put the, we target longer duration therapies in the cantaliculus, that's more of a challenge. And, you know, there's a lot of nuance there, but we've learned a lot, and I think we can, you know, as, you know, if you think about the big picture, the CSI readout was a phase two readout, not a phase three readout. The phase two readout is designed, and phase two studies are designed to actually learn things about your formulation and make adjustments. And I think that's where we are. I think we have shown a strong safety signal.

As we mentioned in the discussion.

October Hot 9600.

With more than 100 units in market sold.

Which which gives us a nice start into the fourth quarter.

We believe this is because of this.

Just underlying level of care.

Interact procedures that are out there that are really returning back to sort of a normal level.

I'm sorry, what was the second question you had the pump.

The category second one was just.

The pain.

Payment fee coming in below 40, Bucks and whether you would think that would still incentivized position.

Well certainly the cataract environment that is still a significant incentive when youre doing 20 counteract some of the day, if you're getting an extra.

Unknown Attendee: I think we've, you know, shown that we can deliver the drugs, but we think we need more drugs. So those are all fixable things and all appropriate things that someone would do in a phase two development program. You know, we just have to decide once we've seen all the data, given all the other opportunities we have, where that falls on our priority list. But it's certainly doable, and again, certainly appropriate for a phase two study.

$31 four for doing that that becomes a still significant.

A significant factor given you're only getting $550.

Prior surgery.

In the office environment.

Again this is for unilateral assertion on the option prior to getting paid $37 per eye typical any officer would be bilateral insertion, so youre really closer to $75 per for the bilateral assertion.

We believe that that is enough to incentivize, particularly the optometric environment.

Unknown Attendee: You know, if it was a phase three study readout, I would understand people's concern, but this is a phase two readout. We're supposed to learn how the different formulations work for the different, Farrge. Your second question about OTXTKI, we have an update for the Australian study that will be presented at the AEO meeting, which is, like, a kickoff either end of this week or early next week. So with COVID, it's a little unclear when the dates actually start, but soon. OTXTKI in the US, that trial is enrolling well. We have not announced when we will have the top line data, but, you know, we are hoping that sort of by the middle of next year.

But there are a lot of opportunities for us going forward to look at coatings strategies that may be.

Synergistic or looking at working with.

For example, the <unk> and other interested bodies to find ways to perhaps just the wording or adjust the calculation of the.

<unk>.

Procedure in order to be able to increase that moving forward.

But even if it stays at that is we remain every bit as bullish about the opportunity.

Both in the surgical ended the office environment with its codes being it is very much of a board approved COVID-19 going forward and that has gone through the rock and that it is.

It will be durable heading off into the future.

Okay got it that's helpful. Thanks for taking my question.

Okay. Our next question comes from David Steinberg of Jefferies. Your line is open.

Good afternoon. Thank you two questions first one on <unk>.

Unknown Executive: Thank you. Our next question, Conce-Joe, Cancer Zero, a part of the family, Yelam Zosa. Hey guys, thanks.

<unk>.

Unknown Executive: Hey guys, thanks so much for taking my questions here. Mike, I think you use the term incremental, but can you provide a little bit more detail on maybe what we should expect to see from the TKI update at AAO? Maybe should we primarily expect updates from cohort 3, and if so, is it possible that we get the full six months of follow-up for all patients across cohort 3A and 3B? Thanks, and I have a question. Yeah, thanks, Joe.

Recent CMS ruling.

So you guys qualified for the non opioid pass through system I think only two drugs currently have that EXPAREL and <unk>.

The mydriatic and so it looks like it slipped at a lot of uncertainty around the loss of pass through.

Can you comment on the impact on reimbursement of DEXTENZA and how durable this might be I mean, how far into the future.

Unknown Attendee: So yeah, this will be an update on all the patients who are in the Australian trial, all the patients in cohorts 1, 2, 3A, and 3B. Coherts 1, I think we've already, you know, that they're all off the studies. I think you've seen that data, but there will be updated data on follow-up for subjects in cohorts two as well as three A and three B. And yes, many or most will hit the six-month mark. Okay, got it, thanks, that's helpful, and then maybe just a couple on Dextenza.

<unk>.

This separation of payments will be.

And maybe imagery as a guide because they know its gone far beyond the initial thoughts.

They would have.

And then just secondly on your recent approval in allergic Conjunctivitis I know you commented on it I'm just curious.

Do you think you're calling on the offices for the first time, you can need additional sales folks who can move around some of the people you have and then I know you're not launching until the first half of next year, but any initial thoughts on what the first year might look like should we expect sort of modest sales since you're entering a new.

Unknown Attendee: I'm wondering if you could elaborate a little bit on the dynamics that influenced sort of September performance. I think, if I heard correctly, you said sales into ASEs were particularly affected early in the quarter and that, together with, you know, usually you see a benefit in the last month of the quarter from the rebate program. Just wondering if you could provide a little bit more commentary on that in September. And then what's your view on category one physicians?

Environment within a more sharp take off in year, two or year, three just any comments on that and the trajectory. Thanks.

Got it.

Your first question around the durability of the separate payment.

The opiate exception is a yearly designation certainly within to get to CMS to table.

Antony Mattessich: Payment coming in below 40 bucks? I think that's below where you had hoped it to be. Is this a level you think will still incentivize positions? Thanks. Yeah, I mean, July sales, for the first question, July sales were very, like, relative to what we would have expected for that month. But they did recover as the quarter went on. We did not get the big jump in sales at the end of the quarter that we normally expect in September.

Yes.

Doing that going forward.

Hard to imagine that opiate cease to become a problem in the U S environment in the near term so I would think that.

We have a good opportunity for that to remain durable.

We also believe that we can that we can speak with DNS.

And our position with CMS has always been that we are not a supply item and we have we have a number of strategies and incoming data.

Will allow us to support the case that we do not act as a supply item in the surgery and therefore should be paid separately, regardless of the designation of.

Antony Mattessich: As we mentioned in the discussion, we started out October hot with 9600, a little more than 9,600 units in the market sold, which gives us a nice start into the fourth quarter. We believe this is because of the underlying level of cataract procedures that are out there that are really returning back to sort of normal levels. I'm sorry, what was the second question you had, the problem?

We are not open yet.

Treatment of pain.

So we see that more as a fallback position that we have now with the very comfortable being clearly because it does provide us a window to the future, but we certainly have a number of arguments that we can have going forward that will be more permanent in terms of our separate continued separate payment.

Antony Mattessich: The second one was just on the position payment fee coming in at below 40 bucks and whether you would think that would still incentivize physicians. Well, certainly, in a cataract environment, that is still a significant incentive. When you're doing 20 cataracts in a day, if you're getting an extra $31 for doing that, that becomes a still significant factor given you're only getting $550 for the entire surgery. In the office environment, once again, this is for unilateral insertion. So in the office environment, you're getting paid $37 per eye. Typically, in the office, there will be bilateral insertion, so you're really closer to $75 per eye for the bilateral.

Your other question was about the allergic conjunctivitis question.

Yes.

The Big picture is our future lies in the office environment all of our products will be all of our future products will be in the ophthalmology office environment.

And we see that establishing beachhead there.

Extremely important to us from a strategic standpoint.

In terms of the how soon that impact will be.

It's really an open question once we get out into the market.

Getting into ophthalmology offices, and optimize your cost is by the way.

Where we can start to get an understanding of what it will take to get and I realize. The example that we used to have a refrigerator in the office. So that there is.

Antony Mattessich: We believe that that is enough to incentivize, particularly the optometric environment. But there are a lot of opportunities for us going forward to look at coding strategies that may be synergistic or to work with, for example, the AEO and other interested bodies to find ways to, perhaps just the wording or just the calculation, of the procedure in order to be able to increase that moving forward. But even if it's just a day that is, we remain every bit as bullish about the opportunity, both in the surgical and in the office environment, with this code, being that it is very much of a bulletproof code going forward, and that it's gone through the ruck, and that it will be durable heading off. Okay, got it, that's helpful. Thanks for taking my question.

A number of DEXTENZA insert sitting in a refrigerator so that when a physician.

Desires that to use them for allergic conjunctivitis that they are there at the site of care and that they are in.

There can be inserted in order to do that there's a number of things that we need to do from a.

Count standpoint to make sure that people are comfortable with the buy and bill have procedures in place.

That allow for them to make sure that it gets put into the right patient and that there are no bad experiences early on.

So we will let it go as fast as it can but I would think that to get really meaningful sales in the office environment. You really look for the second half of next year before you see something over and above what we're doing in the surgical setting.

Thank you.

Our next question comes from Anita.

Unknown Executive: Our next question comes from David Steinberg of Jeffery. Your line is open.

<unk> capital your line.

Unknown Executive: Good afternoon, thank you. A few questions. First one: Dick Stenzh on the recent CMS ruling. So you guys qualified for the non-opioid pass-through system. I think only two drugs currently have that, Expelle and Amidria.

Hi, good afternoon.

Just one from me here, maybe you could get.

Yeah.

Good luck in Q3, and then based on DEXTENZA filing trend.

What.

We haven't given guidance on expectations for Q4 and 22.

Antony Mattessich: And so it looks like it's lifted a lot of uncertainty around the loss of pass-through. Can you comment on the impact on reimbursement for Exenza and how durable this might be? I mean, how far into the future do you think this separation of payments will be? And maybe Amidria is a guy.

Yes, we're not yet giving guidance for the product and we are giving obviously granular.

And market.

Sales level data that certainly allows for extrapolation into the future of what the what our trend lines are moving toward.

Our gross to net has has hovered around 25%. We believe that's a pretty good number to look at going on in the future.

Unknown Executive: because I know it's gone far beyond the initial thoughts that they would have had. And then, just secondly, on your recent approval for allergic conjunctivitis, I know you commented on it. I was curious.

Okay. Thank you.

Thank you.

Thank you. Our next question comes from Jordan Giordano of Cowen and company. Your line is open.

Antony Mattessich: Do you think, you know, you're calling on offices for the first time, you might need additional sales folks, or you can just move around some of the people you have? And then I know you're not launching it until the first half of next year, but any initial thoughts and what the first year might look like? Should we expect sort of modest sales since you're entering a new environment with a more sharp takeoff in year two or year three? Just any comments on the trajectory thing?

Thank you so much for taking our question.

So I guess first starting with the TK I program <unk> trailing PK study enrollment in cohort three b seems to be somewhat lagging compared to the other cohorts.

Is there any reason behind that.

That you could explain to us. So in addition to kind of like the Covid environment.

And then just to follow up on that as of the April data. It looks like there were two patients enrolled in the pull forward.

Antony Mattessich: Yeah, your first question concerns the durability of the separate payment. The opiate exception is a yearly designation, so I'm certainly within the grace of CMS to be able to stop doing that going forward. It is hard to imagine that opiates will cease to become a problem in the U.S. environment in the near term. So I would think that we have a good opportunity for that to remain during. We also believe that we can speak with CMS. Our position with CMS has always been that we are not a supply item, and we have a number of strategies and incoming data that will allow us to support the case that we do not act as a supply item in the surgery and therefore should be paid separately regardless of the designation of an opiate or a non-opiate for treatment But we certainly have a number of arguments that we can have going forward that will be more permanent in terms of our continued separation. Your other question was about the allergic conjunctivitis issue.

When just in terms of the expectations at all.

<unk> six month data from both of those patients and will there be any additional patients with six months data at that point and then I have a.

Pull up.

So overall enrollment in Australia has been slow.

As you probably know.

Although Australia or Europe over patients from the U S.

The lockdown has been far more severe but movement.

Okay.

And to the office has been challenging.

<unk>, which is the last cohort that we enrolled.

More restrictions are in place. So I don't think it was anymore challenging other than from a timing perspective.

And we haven't said what the members World, we'll see you'll see that next week, but there are more patients that have been enrolled and there'll be additional data.

Before up to six months.

Great and then just more broadly on the <unk>.

<unk> program.

Obviously multiple competitors in the space.

Antony Mattessich: The big picture is that our future lies in the office environment. All of our products will be, all of our future products will be in the ophthalmology office environment, and we see that establishing a beachhead there is extremely important to us from a strategic point of view. In terms of how soon that impact will be, it is really an open question once we get out into the market, getting into ophthalmology offices and optometric offices, by the way, where we can start to get an understanding of what

With both long acting <unk>.

As well.

Other endpoints.

EBIT market eventually bold for shake out and it gets where these debt.

Or <unk>.

<unk> in terms of efficacy and duration for sure.

For it to be successful in taking meaningful share.

Yeah Okay.

All good questions.

The market is very large.

<unk>.

I made a huge difference.

In the lives of many patients.

The issue.

Antony Mattessich: And the example that we use is to have a refrigerator in the office so that there are a number of Dextanza inserts sitting in the refrigerator so that when a nurse desires to use them for allergic-deduptive bias, they are there at the site of care, and that they are ready to be inserted. In order to do that, there are a number of things that we need to do from an account standpoint to make sure that people are comfortable with the buying bill, that they have procedures in place that allow them to make sure that the product gets put into the right patient, and that there are no bad experiences early on.

It has been durability.

Patients do not want to come in every month or every two months.

And so a number of different approaches have been developed to try to get longer durability.

Not an easy problem to solve and there may not be one size fits all.

You could see a world where the market is big enough and lots of different approaches.

Play a different role.

On the peso.

I would say broadly we would say with anti VEGF drugs.

You could see durability extending to maybe every three to four months the advantage of the peak.

Antony Mattessich: So we will let it go as fast as it can, but I would think that to get really meaningful sales in the office environment, you really look for the second half of the next year, or you see something over and above what we're doing in the surgical setting. Thank you. Our next question is from Council Miner DeShance of Beringberg Capital Alliance.

Got it.

Potentially a broader spectrum of activity there too.

Anti VEGF drugs, so it's possible that some of the patients.

But.

Well treated with anti VEGF drugs may work, well with the two guys.

In addition, because they are potent small molecule system.

Potentially get greater durability with it because then you can with the.

You bet or put another way you can load more drug into the eye they got to get the benefit with the big guys.

Unknown Executive: Hi, good afternoon. Just one for me here. Maybe you could talk about the growth in Q3 and then, based on those selling trends, what will you be able to give guidance on expectations for Q4 and 22? Yeah, we're not.

So we think theres a lot of potential opportunity for the peak hours, but I would say the fact that there are a number of other companies.

Interested in peak guys would show you that.

There's a big opportunity here.

Our target is really what we believe the target is if we can show that.

Unknown Executive: Yeah, we're not yet giving guidance for the product, but we are giving obviously granular, in-market sales level data that certainly allows for the extrapolation into the future of what our trend lines are moving towards. Our growth to net has covered around 25%. We believe that's a pretty good number to look at going on in the future.

50% of patients or more with six months of durability or more with our.

We think that would be a home run.

Meaningful benefits.

Sure.

And if others can do that as well I think there's plenty of opportunity for lots of companies whose.

Successful right.

Thank you so much.

Helpful.

Okay.

Our next question comes from <unk> Chen of HC Wainwright. Your line is open.

Unknown Executive: Thank you. Our next question comes from Georgia, Jordana, from Taiwan, and Common and Company.

Alright, Thank you for taking my questions.

Unknown Executive: of Cowan and Comedy, a lot of open. Thank you so much for taking our questions. So I guess, first starting with the TKI program in the Australian TKI study, enrollment in cohort 3B seems to be somewhat lagging compared to the other cohorts. Is there any reason behind that that you could explain to her, in addition to kind of like the COVID environment?

My first question is.

Is it going to be any.

So kind of a soft launch for DEXTENZA for AC just to gather.

Physician interest.

Please.

Yeah.

Yes, even though I hate the term soft launch.

Prefer sort of adapt experimentation, but yes, we are.

We realized when we launched that extends into the surgical environment that there were there was a lot of nuance in how the.

Unknown Attendee: And then just to follow up on that, as of the April data cut, it looked like there were two patients enrolled in the cohort. When, just in terms of the expectations at AOL, will we see six-month data from both of those patients, and will there be any additional patients with six-month data at that point? And then I have a follow-up. So overall, enrollment in Australia has been slow, and as you probably know, although Australia has had far fewer COVID patients than the U.S. The lockdown has been far more severe, so movement has been tough, and life in the office has been challenging.

Ambulatory surgery centers and hospital outpatient departments administered.

Administered.

They are buying bill medications and their initial reluctance in many cases.

They go into buying the product.

We expect every bit the same.

For the front of the ice products for the.

In the office environment.

So what we're going to do is we're going to go into the office environments, where we know the doctors well we know the types of patients that they're seeing.

We're going to be able to.

To look and see what the opportunities are in segments outflows offices, where we think we will have a greater opportunity.

Okay. So next year will you.

Do you plan to report our billable units separately for ocular surgeries versus AC.

Unknown Attendee: And 3B was just the last cohort that we enrolled when more restrictions were in place. So I don't think it was any more challenging other than from a timing perspective. And, you know, we haven't said how many patients will be enrolled, but you'll see that next week, but there are more patients that have been enrolled, and there'll be additional data, as I said before. Great.

That's a very good question I think.

We haven't decided yet whether we where it wouldn't but we certainly.

<unk> committed to transparency and.

I don't see why we would be any less transparent with the launch of the office environment either.

Unknown Attendee: And then just more broadly on the TKI program, there are obviously multiple competitors in this case that include both long-acting by Jeffs as well as other TKI implants. How do you see this market eventually being involved in shakeout? And I guess where is the bar for OTX TKI in terms of efficacy and duration for it to be successful and take a meaningful share? Yeah, I mean, all good questions.

Okay.

And do you believe by the end of this year or early next year.

Surgical volume in AUC would be back.

Pre COVID-19 levels.

That's a very good question.

Nobody has a crystal ball and we certainly are seeing a higher level of activity of late.

But the key determining factor really seems to be the <unk>.

Staffing of the facilities themselves.

Anybody running the business ourselves included.

Unknown Attendee: The market is very large, and anti-bedbed drugs have made a huge difference in the lives of many patients. The issue has been durability, and that patients do not want to come in every month or every week. So a number of different approaches have been developed to try to get longer durability. This is not an easy problem to solve, and there may not be one size that fits all. So you could see a world where the market is big enough and lots of different approaches play a different role depending on the page. I would say broadly we would say, you know, with anti-vegebuck drugs, fee durability extending to maybe every three to four months.

Being able to maintain an organization thats fully staffed as an increasing challenge and.

And given the level of a lot of people within these ASC environments and the generally low levels of the salaries with a level of support personnel.

It's very hard to produce.

These prices do remain fully staffed.

And that really that really is the key determinant.

More of a macroeconomic question than it is from what we've seen in the market.

Okay. Thank you.

Thank you.

Thank you.

Ladies and gentlemen that concludes today's conference. Thank you all participating you May August correct.

Great.

[music].

Unknown Attendee: The advantage of the TTIs is that they potentially have a broader spectrum of activity anti-bedge-up drugs, so it's possible that some of the patients that have not been the, Well, TREA with Antipat death drugs may work well with the TTIs. In addition, because they're put in small molecules, they potentially get greater durability with the PTIs than you can with the empty vet chapter. But another way you can load more drugs into the eye to get the benefit with the PTIs.

Unknown Attendee: So we think there's a lot of potential opportunity for the TKIs, and I would say the fact that there are a number of other companies now interested in TKIs would show you that, you know, there's a big opportunity here. Our target is really, you know, and what we believe the target is. If we can show that 50% of patients or more get six months of durability or more with RPCI, that would be a home run and be a meaningful benefit for patients. And if others can do that as well, if there are plenty of opportunities for lots of companies to be successful, Thank you so much. It's just super helpful. Thank you.

Antony Mattessich: Our next question comes from Yi-Chryan of A.C. Wingright, your line is open. Thank you for taking my questions. My first question is, Is there going to be any kind of soft launch for Dextenza for AC just to gather physician's interest using it for a Yeah, even though I hate the term soft launch, I prefer sort of adapt experimentation, but yes, we realized when we launched that extends into the surgical environment that there were, there was a lot of nuance in how the, Hemetory Surgery Centers and Hospital Outpatient Departments administered their buying bill medications and their initial reluctance in many cases to take on a buying bill product.

Antony Mattessich: We expect every bit the same with the front of the eye products for the office environment. So what we're going to do is we're going to go into office environments where we know the doctors well, and you know the types of patients that they see, and we're going to be able to look and see what the opportunities are and segment out those offices where we think we will have greater opportunities.

Antony Mattessich: Okay, so next year, do you plan to report billable units separately for ocular surgeries versus ACE? That's a great question, I think. We haven't decided whether we will or won't, but we certainly have committed to transparency, and I don't see why we would be any less transparent with the launch in the office environment either. And do you believe by the end of this year or early next year, the surgical volume at ASC will be back at pre-COV levels?

Antony Mattessich: That's a very good question, and nobody has a crystal ball. We certainly are seeing a higher level of activity on the lake. But the key determining factor really seems to be the staffing of the facilities themselves. Anybody running a business, ourselves included, Being able to maintain an organization that's fully staffed is an increasing challenge, given the level of a lot of people within these AIC environments and the generally low levels of salaries with a lot of the support personnel. Very hard to find places to remain fully staffed. And that really is the key determinant. So it's more of a macroeconomic question than it is in the market.

Unknown Executive: Thank you. Ladies and gentlemen, that's just the agenda for today's conference. Thank you all for this.

Unknown Executive: Thank you all for participating. You may all disconnect. Have a great day. Thank you.

[music].

Unknown Executive: and and and and and and and and. Thank You Thank you Thee and and and and You Thank Thank you, Thank you, and and Thank you, and so on. Thank you. Thank you. Thank you. Thank you. Thank you, and Thank you. Thank you. Thank you. Thank you, and and and You know, Thank you.

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