Q3 2021 Kala Pharmaceuticals Inc Earnings Call

November 15, 2021

Ladies and gentlemen, please standby your conference call will begin momentarily once again, ladies and gentlemen, please stay on the line.

Okay.

[music].

Okay.

Good morning, and welcome to the California Shingles Conference call to review <unk> third quarter financial results and the acquisition of <unk>.

Please note that the slide presentation that was designed to accompany this conference call is available on <unk> website called the Rx Dot com as well as through the webcast player.

At this time all participants are in a listen only mode. Following management's prepared remarks. The Q&A session will be held as a reminder, this call is being recorded I would now like to turn the call over to Jill Sawyer Executive director of Investor Relations and corporate Communications for Kala Pharmaceuticals. Please proceed.

Thank you operator, and thank you all for participating in today's call earlier today, we issued two press releases, one announcing our third quarter financial results and recent business.

Highlights in the other announcing our acquisition of <unk> and its lead asset CMT, one to which we have renamed K T. I O. One two a novel cell free Shekhar til therapy currently in clinical development for persisting corneal epithelium.

But let's see leases along with the slides we will be reviewing on today's call are available on the investors section of <unk> website at Www Dot Cala Rx Dot com.

We will begin the call with prepared remarks by Mark <unk>, Our chairman President and Chief Executive Officer, Ken <unk>, Our Chief Medical Officer, Todd based Moore, our Chief operating Officer, and Mary We met Chief Finance Officer.

Then we will open the call up for questions. During this call we will be referring to non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is available in our press release issued today, which can also be found on there.

Our web site.

On this call we will make certain comments about <unk> future expectations plans and prospects that are forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995. These statements will include statements regarding the development program and market potential of K P. I O one.

<unk> and the benefits of our acquisition of the <unk> observations associated with our commercialization of <unk> in a downturn.

And the sufficiency of our cash resources.

These and other forward looking statements are based on the beliefs and expectations of management as of this conference call. Our actual results may differ materially from our expectations. The company undertakes no obligation to revise or update any forward looking statements to reflect events or circumstances that occur. After this conference call, except as required by law.

Investors should carefully read the risks and uncertainties described in today's press releases as well as the risk factors, which identify specific factors that may cause actual results or events to differ materially from those described in our forward looking statements, including the company's quarterly report on Form 10-Q and other filings.

We make with the SEC the Form 10-Q will be filed with the SEC later today and will be available on our website.

I will now turn the call over to call as CEO Mark.

Good morning, everyone and thank you for joining us today to review, our third quarter 2021 financial results and recent business highlights.

Our mission at Kala has been to provide patients in eyecare professionals with a portfolio of innovative medicines that can better treat the often debilitating diseases that affect the front and back of the eye.

Today, we are advancing toward that goal with the acquisition of <unk>, a clinical stage company developing a novel bio therapy for severe ocular surface diseases.

With this acquisition, we are very excited to expand our clinical stage pipeline with TPI <unk>, a secret film product being developed to address persistent corneal epithelium defects or PCB and potentially other serious ocular diseases that involve impaired healing.

<unk> is a clinical stage asset initially in development for PCE D. A rare disease associated with vision, threatening morbidity and sequela.

Current treatments for PPD are limited and suboptimal and we believe there is a clear need for new therapies to address the impaired wound healing that underlies PC EDI and similar corneal damage diseases.

<unk> two phase <unk> clinical data in <unk> patients are very promising and we are planning to commence a phase two three clinical trial and the re queue next year.

We are also evaluating additional indications with the goal of initiating clinical evaluation in one or more of these once we have filed the IND.

Importantly, <unk> two as a late stage clinical asset to our pipeline of earlier stage programs, including our TK I that we expect to have initial preclinical PK and efficacy data early next year.

For <unk>, we are well suited to leverage our deep ophthalmic clinical and commercial capabilities to advance <unk> through development, beginning in <unk> and potentially expanding into additional orphan patient populations with significant market potential in the U S and globally.

As part of the acquisition, we are very excited to welcome Darius Karami, President and CEO of can banjo as Carlos New Chief business Officer.

As well as Mark Bloom, and Kranz, an ophthalmologist vitreoretinal surgeon and professor Emeritus and the department of Ophthalmology at Stanford, who will be joining our board.

Before turning the call over to Ken I'd like to comment on our third quarter commercial performance the ramp up I assume this has been slower than expected with a service we are changing the treatment paradigm for dry eye disease, which is a key though time consuming process for long term success.

Historically steroids have been used only as a last line off label therapy for patients with severe disease.

And positioning I assume this is a first line prescription therapy for people with mild or moderate disease requires significant investment and time.

To that end our initial launch strategy focused on education, we sought to drive proactive discussions with eyecare professionals in order to educate on dry eye flares the availability of <unk> as the first FDA approved on label steroid with limited risk of inter ocular pressure elevation.

And the potential for our therapy to effectively fill the gap between over the counter artificial tears.

And chronic prescription therapies.

As we move into the second stage of our launch and as Todd will elaborate on shortly we are now implementing a number of new targeted strategies aimed directly at the patient <unk>.

Including our first digital direct to consumer campaign, which we plan to launch by year end.

With this program, we aim to empower patients providing them with the information and resources necessary to proactively discuss players with their doctors.

We believe in the long term potential of ICU. This and are confident that prescriptions and revenues will grow over time.

We continue to receive encouraging feedback from eye care professionals, who appreciate I services rapid onset of action and comfort of administration and we anticipate that physicians will become even more positive about I see this as we obtain additional payer coverage in the months ahead.

Patients also continue to report positive experiences on therapy, and we believe it is clear that I see this effectively delivers rapid relief of the signs and symptoms of dry eye disease.

I will now turn the call over to Kim and Todd to review, the convey NGL acquisition and greater detail Tim.

Thank you Mark this is a really exciting addition to our pipeline and an important component of our strategy to develop novel therapies for significant unmet needs.

Also an excellent fit with our current R&D expertise and ocular surface disease.

I want to first acknowledge the <unk> team for their excellent work for the significant process. They are made and applying this cutting edge science to the treatment of significant unmet need in ophthalmology.

It's a great accomplishment for them to progress this program to the initial proof of concept in patients with persistent corneal epithelium deepa.

We welcome the combining Joe patent to call I look forward to working with them to move this program toward school development, and ultimately regulatory approval and to market.

Now going to provide an overview of <unk> two so please refer to the slide presentation.

Theres a great deal of information in the deck, so I'll only be touching on the high points in this presentation.

Starting with slide three.

<unk> represents a novel therapeutic approach to the management of diseases, driven by paired corneal healing such as PC E D.

This therapy is an application of the novel technology involving the utilization of secret tones, which for <unk> two are harvested from human bone marrow derived metric Congress.

The secret problem is utilized to produce the cell free therapy comprise.

New numerous central bio molecules that are secreted by the bone marrow cells and have the potential to correct. The impaired healing underlying etiology of diseases such as <unk>.

Big in cell free the controllable approach provides many of the benefits of cell therapy without the need for the administration of intact cells, which can often have unexpected and I'm toward effects.

<unk> is a clinical stage asset, which has demonstrated encouraging results in our phase <unk> clinical trial.

Improvement in PCB exceeded seven of the eight patients treated and complete healing and six of the eight patients in most cases within one to two weeks of the Mysia Asian of Donaldson.

I will further discuss these results and our plans for development for abroad PCB indication later in this presentation.

We believe there is significant potential for <unk> beyond P. C D for a number of rare diseases.

<unk> was granted orphan drug.

Designation to <unk> for the treatment of PCE.

We anticipate that many of the additional indications we are evaluating what else will be considered for ultra orphan drug designation.

Moving to slide four.

<unk> the first indication we plan to pursue is a serious and potentially blinding disease and there is a significant unmet need for safe and effective treatments.

<unk> is defined as the persistent non healing corneal defect womb theyre just refractory to conventional treatments.

<unk> treated these pace. These persistent defect can lead to significant morbidity, including Corio perforation infection scarring and ultimately vision loss.

<unk> is a rare disease with an estimated incidence of approximately 100000 patients per year in the U S and 202 hundred 38000 U S EU and Japan Goodbye.

The only approved prescription product in the <unk> space with Oxford.

Which is indicated for neurotrophic keratitis based on our analysis neurotrophic keratitis is the underlying etiology for about a third of all P. C E D cases.

Oxford rates only active component is human nerve growth factor and thus as benefit primarily in those patients whose underlying etiologies neurotrophic disease toward knowledge. Dr. Reddy, there has not been shown to be effective but gets PCE of other etiologies.

<unk> on the other hand contains multiple growth factors, some other bio molecules, including neurotrophic factors and we anticipate broader wounds heating activity across multiple etiologies, including neurotrophic keratitis.

Turning to slide five.

Normal core corneal healing is a highly regulated multifactorial process.

Numerous by logic pathways.

Parrot Healy is most often the result of an imbalance at multiple stages of the process.

Such addressing the impaired healing is believed to require a multifactorial therapeutic approach to correct. These imbalances and return the healing process to its normal state.

As shown on slide six <unk> to deliver a number of bioactive molecules. It's part of it's multifactorial mechanism of action, which we feel is important to address the compared healing associated with P. C E D.

There are serious ocular surface diseases.

On this slide these include protease inhibitors matrix protein growth factors add neurotrophic factors.

As illustrated on slide seven.

<unk> has demonstrated broad would healing activity in several established preclinical models of corneal healing, which supports the pair of potential benefit and PCE D and other ocular diseases involving a parrot helix.

Slide eight provides more detail on the phase <unk> clinical trial conducted bucket NGL the.

The trial will involve 12 subjects overall within the initial safety cohort of three subjects, who did not have PCB or active corneal disease and they were dosed twice daily for one week. This portion of the trial showed <unk> to be well tolerated with no significant safety issues observed.

Following evaluation of the safety cohort the efficacy component of the trial was initiated with nine patients with active P. C E D being treated with topical <unk> twice daily for up to eight weeks one patient in the TCE the coral words.

Withdrawn from the trial early for reasons unrelated to <unk>, two leaving eight patients evaluable efficacy cohort.

In this cohort one patient was dosed for one week three patients for two weeks three for four weeks in one, particularly severe patient stopes for eight weeks.

As you can see from the right hand portion of this slide many of these patients had large corneal defects.

Many of significant duration, which are typically difficult to heal.

Topline efficacy results of these eight patients showed improvement at seven.

With complete healing of the PCE.

Six of the eight patients as measured by quarter, forcing stating photograph.

Four of these patients had complete healing with one within one week of treatment and the other two that completely heal did so within two to four weeks.

<unk> was <unk> was also shown to be well tolerated with no treatment related safety issues in this portion of the trial.

Slide nine shows the results from the eight patients and the broader efficacy cohort and demonstrates the rapid and sustained helix was observed during the study.

As I said earlier six of eight patients in the <unk> cohort achieved complete healing of the lesion. After four weeks of treatment with four of the eight patients completely healing after only one week of treatment.

All six of the healed patients remained healed throughout the follow up period with trades from 819 weeks.

One of the two patients did not show complete healing did have an improvement in their PC EBIT, but did not achieve complete resolution of the defect.

The other patient had a PCE.

It existed for 871 days before treatment and it is rare for a P. C E D.

Duration to show a significant healing.

Of note the patience that heald had a variety of under out fly etiologies, ranging from neurotrophic disease to infectious keratitis to Stevens Johnson syndrome evidence of the broad mechanism of action of <unk>.

The pre treatment duration in the <unk> patients also rates from 50 to 213 days.

These results suggest that <unk> could be effective against a broad range of PC D etiologies and durations.

As.

Shown on slide 10.

Treatment with <unk> resulted in a significant reduction of paid a common symptom P. C. E D. All six of the patients that reported pain at baseline had an improvement after only one week of treatment with two thirds of the patients have a complete resolution of their paid at one week.

100% after three weeks of dosing.

Slide 11 provides an overview of our current thoughts on the next stages of development.

<unk> held a productive pre IND meeting with FDA last year.

While successfully achieving formulary coverage with ESI and often within the first two quarters of launch we are still working to grow our service coverage with additional large commercial and Medicare part D plans as.

As we've previously stated commercial and Medicare part D health plans collectively represent about 90% of all dry eye prescriptions.

Specifically within commercial we're working to pull through the express scripts and optum contracts with their custom clients in order to grow the number of health plans that add a service to formulary at both of these pbms.

In the third quarter, we made meaningful progress, adding an additional $4 5 million covered lives through new health plans under the existing contracts with express scripts and ophthalmology Rx, bringing.

Bringing us to approximately 60% commercial coverage.

Looking ahead, we are focused on adding a serious to formulary other large commercial plans, such as Cvs caremark and United Healthcare.

<unk> these wins would expand our total commercial access to greater than 80%, which would be in line with the leading prescription dry eye therapies.

With regard to Medicare we have secured preferred coverage at express scripts and prime therapeutics, bringing our total access to 10% of all Medicare part D lives.

We are now focused on the remaining largest Medicare part D plans, such as silver script, United AARP, and Humana, which along with ESI collectively represent more than 70% of all covered Medicare part D lives.

We anticipate additional coverage under Medicare part D to start.

To begin growing in 2022.

As we work to continue to increase market access coverage for our service. We are also continuing our commercial co pay assistance program to help to frame out of pocket cost for patients.

The second challenge is done the COVID-19 pandemic.

As you know the pandemic has wreaked havoc on the medical system, particularly for non emergent diseases, where patients may be less compelled to visit their doctors in person with the decision to seek treatment can be more easily delayed.

When looking at ophthalmology, specifically it has been one of the most impacted specialties by depend dunnock with regards to both patient office visits and prescription volume.

Again this is not a challenge unique to column, but we believe it means that fewer dry eye patients have visited their doctors limiting the number of newly diagnosed patients who are in the market for therapeutic intervention.

Relatedly the in person restrictions, resulting from Covid have also limited the ability of sales representatives to access health care professionals and educate them on newly launched products such as a service.

While this has made it difficult for the vast majority of products launched during the pandemic. We do not expect these dynamics to persist indefinitely, particularly particularly in vaccines are now becoming commonplace in communities across the country are returning to pre pandemic conditions.

Finally, the third challenge as Mark alluded to earlier is the fact that we are working to fundamentally alter the treatment paradigm for China, China disease.

Historically steroids, it's generally been used off label in a limited capacity for patients with more severe dry eye disease, typically as induction therapy, when initiating treatment with a chronic medication like restasis resides.

As we stated before we estimate that only about 3% of diagnosed dry eye patients were prescribed off label steroids in the past.

We are working to reverse that paradigm and position a service as the preferred first line prescription option for patients with mild to moderate disease to treat their dry eye flares.

What we know is while approximately 80% of dry eye patients report that they suffer from players.

Care professionals believe that only about 38% of their patients experienced players.

Therefore, we need to drive more proactive discussions between patients and ecp's to help identify which patients are actually experiencing players.

As we educate ecp's on the benefits of prescribing a service of this patient population, we are fundamentally altering the way they think about treating the disease from a chronic maintenance therapy to a condition that can manifest with episodic worsening of symptoms and be treated on an as needed basis for a much shorter timeframe.

Since our launch we've taken a number of actions to educate eyecare professionals and began shifting this treatment paradigm.

As you know we increased our sales force earlier this year from 91% to 105 Representatives in order to increase both the reach and frequency of our interactions with key dry eye prescribers and we participate in all of the major medical Congresses in order to help drive education around Gi players and the need to treat them.

Now we are starting to also focus on patient education.

We know that many patients are suffering from dry eye disease players and we believe from the experience of other dry eye therapies and that this is an audience that's receptive to direct to consumer advertising.

We also know that many of our target patients are searching online relying on tools like social media and top health care websites to identify resources of therapies to better manage their disease.

As such we will be launching a targeted digital direct to consumer campaign by year's end, which will incorporate and office education digital media and social media education to encourage proactive discussions between patients and ecp's around dry eye flares and the availability of <unk> as the only FTE.

<unk> approved rapid acting short term treatment option.

We believe this will help increase awareness of those experiencing dry eye flares and helped drive more patients to therapy.

We look forward to providing additional details as our campaign gets underway.

Turning now to <unk> as we have said over the past 18 months. The pandemic has negatively impacted the ocular surgery market, resulting in fewer surgical procedures and surgical volume has been recovering at a slow rate in.

In addition, during the third quarter Cvs moved to a predominantly generic formulary in the ophthalmic surgical steroid category and in Delta was removed from coverage.

While this affected in both the sales we have access programs in place to help mitigate the impact and cover those Cvs patients.

In the third quarter of 2021, there were approximately 37410 prescriptions of <unk> reported by Symphony health compared to $41 103 prescriptions in the second quarter of 2021.

Despite the uncertainties of the pandemic continues to present, we believe in <unk> prescriptions and revenues will grow over time.

However, we remain unable to project a specific timing or quantify the potential impact on future revenues due to the potential disruptions of these continued uncertainties on elective ocular procedures and gaining increased market access coverage.

As we've previously stated our commercial office rent deltas are completely synergistic with ICU. This is 100% of the in Delta's targets are also dry eye targets for which <unk> is the primary focus in <unk> is in a second position sales call.

In closing, while we recognize the prescription growth slowed over the summer months. We are encouraged by recent key leading indicators for as soon as we believe these trends coupled with the new initiatives. We are undertaking should accelerate prescription growth and ultimately position I served as the preferred first line prescription therapy for the short term.

<unk> treatment of dry eye disease, our team is working hard to execute against our commercial strategy and I look forward to providing you further updates on future calls.

I would now like to turn the call over to Mary to review our financial results.

Thanks, Todd during this discussion of our financial results. However, can you certain highlights from our quarterly performance.

For our full financial results. Please refer today's press release, which is available on our website.

For the third quarter of 2021, we reported net product revenues of $3 $1 million, which is consistent with the second quarter of 2021.

Broken down by product is $3 1 million in net revenue is made up of $1 $83 million from sales of ICU beds, which represented 10% increase over the second quarter up $1, six 6 million and $1 2 million from sales and then Delta, which represents a decrease of 11% over the second quarter.

With respect to ICD Symphony reported that prescriptions increased by 19% over the previous quarter and shipments to our distributors on which we recognize revenue have also increased our net revenues were partially impacted by a significant percentage of business coming from our patient assistance program.

Expected to be less reliant on new patient assistance programs as we gain additional market access coverage.

With respect to and Delta the decrease in net revenue was driven by a decrease in total units have been sold.

I want to distributors during the third quarter of 2021 as compared to the second quarter, which is also consistent with the decrease in prescriptions for the same period.

Total operating expenses decreased by $3 million to $29 1 million from the second quarter, primarily due to lower spending and SG&A I certain launch related expenses for HD vest were incurred during the first half of the year.

Our cash and cash equivalents as of September 32021, with $124 5 million compared to $149 6 million as of June 32021.

Cash and cash equivalents as of September 30th does not reflect the $5 million upfront cost to acquire command yet.

Including the cost of the acquisition as well as the development of <unk>, We believe our cash resources together with anticipated revenue from Actavis and <unk> and certain cost containment measures will enable us to fund operations until the second quarter of 2023.

With respect to the cost containment measures I, just mentioned and because we've been so pleased with the efficiency of our team as we have been in a primarily remote work environment for over a year and a half now we have decided to downsize our corporate office, we have entered into a termination agreement for our company headquarters that will be effective on December.

31, 2021 subject to certain terms and conditions.

Savings from terminating this lease will be approximately $6 million per year through October 2026, and.

In addition, we have decided to maintain our sales force at its current size.

As we look ahead to 2022, we continue to focus on reducing our cash burn.

We anticipate that our overall operating expenses will not increase about 2021.

This includes progressing our development programs, including <unk> and implementing a targeted digital DTC campaign price stupid, which Todd discussed earlier.

That concludes our prepared remarks for today I will now pass the call over the operator for questions.

Hello, Ladies and gentlemen, if you have a question or a comment at this time. Please press. The Star then the one key on your Touchtone telephone. If your question has been answered you wished remove yourself from the queue. Please press the pound key.

Our first question comes from Andreas arteries with Wedbush.

Good morning, and thanks for taking our questions I'll try to keep them to a few just quick one on service.

Maybe you can help us make sense a little bit about.

Some of the metrics that you are providing you some scripts are up but still there.

On a relatively flat maybe comments around price discounts and where they spend also refill seem quite low compared to total scripts.

Can you provide some comments there and then if you could provide a breakdown if you have.

Between our scripts.

Prescribed between ophthalmologists and optometrists.

Sure. This is Todd it hits a lot there so I'll try to unpack as if I Miss anything please don't hesitate to jump back on so.

In terms of the recent prescription growth trends, what we referenced as quarter over quarter growth of about 19% in scripts, but even more recently when I look at four week over four week performance. So think of that as the most recent four weeks of the most recent month versus the prior four weeks of prior months and we've seen really nice acceleration for <unk>.

There as well.

10% growth in new to brand prescriptions in about 11% growth in overall <unk>.

Over that period of time I service has been growing faster than any other dry eye products. So again, some some leading indicators here as we're getting into the fall that have us optimistic.

You asked a bit about the growth in scripts off opposite revenue.

One of the things that we sold with an increased utilization of our patient assistance programs within the quarter.

Obviously that has an impact on gross to net.

We have always stated is that as we've continued to grow our market access coverage in fewer prescriptions are filled through the patient assistance program that will have a positive impact on our gross to nets over time and I think the final question that I heard then there was about the split in prescriptions between specialty and that is another item that we continue to see evolve.

<unk> is optometrist more and more are becoming primary drivers of ice service prescriptions I think that split is almost nearly 60% of all prescriptions coming from optometrist and about 40% from ophthalmologist, which is not surprising to US is we've been positioning the product as first line therapy for.

Patients with more mild to moderate disease, and we know that those patients oftentimes are seeing first and treated by an optometrist.

I think I don't know if there was any other questions.

Yeah, I'll have one more on our service and then a question for the combined via acquisition I don't want to take more time, but just comments on results.

And what you're saying.

Yes really good question.

That was part of the driver of revenue being up 10% within the quarter, which is we're also starting to see some refills come back into the market with those were up 94% in Q3 compared to Q2.

As we're starting to see those patients that got their first prescriptions closer to the time of launch in the first quarter that have worked through their first bottle of ICU risks that have treated those initial flares that are now coming back into the.

The market and needing to get refills.

As you head into the fall and winter of FLIR season.

So we're encouraged by those data as well.

Okay, and then just a quick one on the combined acquisition so.

There are quite a few other candidates that are in phase two.

What makes CPI 012.

More compelling and.

Broadly speaking the timing of this acquisition versus let's say developing the internal pipeline.

Pushing ahead more on your internal pipeline. Thanks.

Yes, Thanks, Mike Hey, Brad comment on the call.

Petition.

The only one.

<unk> that we're aware of that's in development for broad <unk> indication there are a few products in development for neurotrophic keratitis.

And as we said before that only represents about a third of.

Etiologies that lead to PC.

Theres other applications of neurotrophic keratitis for less severe disease. So.

As we see there is only one product.

That's in development.

In clinical development for <unk>.

For a broad <unk> indication.

Okay. Thanks, I'll step back in the queue.

Okay.

Our next question comes from Chris <unk> with J P. Morgan.

Great. Thanks for the questions.

The questions. So first one is on payer coverage. So you guys currently stand at about 60% on commercial covered lives and we received some initial Medicare coverage, which stands at about 10%.

So first is there any additional color you can provide on adding coverage the timelines with Cvs and United Health.

And just how we think about.

When that coverage will be added and we could see the benefit in scripts and then second maybe can you just discuss the higher level strategy and expectations for Medicare part D coverage looking at 2022 and beyond.

Hey, Chris its Todd I'm happy to answer your question. So we are in active discussions with both the remaining large commercial plans as well as the Medicare part D plans we.

We have just actually recently resubmitted bids to all the Medicare part D plans and expect most of those conversations to be occurring as we get into early 2022.

We feel like we've got a really good line of sight as to what expectations were or I should say and feel like we've submitted very competitive bids consistent with the feedback we received from those payers and so what we've said is we expect our coverage payer coverage for both commercial and Medicare part D to continue to grow throughout 2022.

I feel like we've got a chance of that commercial coverage to may become a little bit quicker within the first half of the year, but would expect the Medicare part D coverage to continue to evolve throughout the year.

That's helpful Ed.

Kind of related question I think on the Q2 call you mentioned that roughly 60% of scripts were being rejected so where does that level stand right now and.

How do you see that evolving over the coming quarters.

Yeah I think.

We were talking last quarter, we said about <unk>.

60% reject.

<unk> I think we're still sort of in that range right now.

It's arguably the biggest issue facing the brand right. We know demand is really strong.

Ikea professionals are writing lots of scripts, but the majority of those scripts are not getting through and filled at the pharmacy because.

Because of lack of insurance coverage, we have rolled out some adjustments to our patient assistance programs here within the quarter, we think that will help to close the gap a bit but ultimately the most important thing. We can do is add additional health plans that are covering a service on formulary. So that most of these scripts are still right in.

That will have we believe a two pronged effect not only will it result in more of the current demand that exists resulting in filled prescriptions, but that in turn will encourage physicians to perceive I see this as having broad market access coverage and we believe will increase their prescribing across a broader base of patients.

Great.

Maybe just talk a bit about the split between treatment naive patients.

Patients, who are already taking a dry eye therapy, and what youre seeing and how that's progressed Overwatch continues.

Yes, sure that's running at about two thirds treatment naive about one third on prior therapies or may be initiating a chronic therapy and using a service as induction therapy and.

And as we stated before we're really encouraged by that.

Service is taking foothold of disposition as the first line therapy to treat dry eye flares and in particular in more mild to moderate patients that have only been on artificial tears that have been on a chronic medication previously.

We think again the biggest thing we can do to help accelerate that.

Is to get more managed care coverage. So more of those patients can be prescribed by service, but we also do think theres a real significant opportunity to close this gap between the number of patients that report they suffer from flows to the eyecare professionals perception of the number of patients in their practice suffering players and that's why we're launching some targeted.

Direct to consumer digital advertising here by the end of the year to drive patients into the physician's office to bring up their dry eye players proactively and to ask for Ais service by name.

Thanks, and then the last one just on the cash runway I think you provided some helpful comments on the upfront commentary.

Maybe just.

Could you help with the framework for thinking about your confidence in the cash runway through <unk> 2023, and specifically does that include any revenue growth.

And then I think you already addressed it.

Preliminary commentary, but just opex level, how we should think about that relative to current levels.

Yeah. Thanks, Chris So we do feel good about our cash runway into Q2 of 'twenty three.

That does include some uptick in revenue, we launched a DTC campaign that we talked about so we expect that that will be effective.

And as far as the Opex levels.

We said that we expect that our Opex will not increase following 2021 in 2022 over 2021, and we expect that we'll be able to fund our development programs.

As part of that operating expense as well.

Great and then last one.

So how do we think about incremental opex for.

For the combined your acquisition as part of your development program.

Yes, so thats baked into our cash runway.

I think within the important thing to remember is we implemented some cost containment measures that we talked about we talked about.

The lease termination, which when effective in 2020 Q1.

Ill cover the expenses that we expect to incur for the command your asset moving that forward.

Perfect. Thanks for taking my questions.

Sure. Thank you.

Our next question comes from Francois reservoir with Oppenheimer.

Alright, thanks for the question so in terms of the scripts.

You talked about them, making more sense as we track them with the with the net revenues reported.

But can you remind us is it the you know the fact that if you kind of look at it. The net revenue is actually kind of went down again from the last quarter. What why is that it seems like it wasn't big discounts or rebates. It seems like it was people using the patient assistance program more.

Any idea as to why that is was that surprising that the patient assistant program was used more as coverage is kind of progressing.

Thanks, Frank good questions and just to clarify <unk> revenues were up 10% quarter over quarter.

Almost 10% while revenue was up 19% volume was up 19%.

<unk> revenues were down as volume was down largely driven by the removal from.

Cvs formulary for inventors.

But we did see overall revenues as well as volume up for price service. There was not a direct correlation in the increase in revenue to the increase in volume and that was attributable to more scripts getting filled through our co pay program I think part of what's happening in the France is just as you think about those rejections that we've talked about in the Q2 call.

We're now starting to pick up a few more of those rejected prescriptions are getting filled through our co pay assistance program, but obviously that has impact on gross to nets. So it does not correlate into a direct one to one.

Prudent in revenues along with the same level of improvement we saw in prescriptions.

Right, Okay. So no big no big new rebates or discounts from year ago.

No.

Okay and.

On the pricing side for PC EDI, you take that observation.

Dollars per treatment, but it's only a third of the market I guess.

Is it does that how do you correlate what do your share on potential pricing or is this look are both orphan.

Or is it is it is the implication here that if it's a third of the size maybe that's three times the price that you would be interested in.

Really fair questions, Frank I would say first and foremost it's too early to speculate on what the ultimate price would be if we successfully developing and get.

Kpis or 12 to market, who went to the market rather.

That having been said I would expect I would say the PCB is a rare disease incidence of about 100000 a year.

I would expect rare disease pricing and I think we've got a really good analog in the market at $100000.

With Oxidate in what I would just say is keep in mind with Oxidate volatility.

Retrofit keratitis, rather is only about a third of PCE cases, there is an estimated incidence of neurotrophic keratitis of about 60% to 65000 patients.

On a per year in the U S.

So I think it is.

Very good analogue to use for consideration at this point.

Our pricing potential.

Okay, Great and just lastly here on it a lot in this earnings call.

On the PCB PCB front, what what causes PCE is it known.

Is it easy to diagnose what what leads to it.

Kevin do you want to take that.

Sure.

There's a number of.

Underlying diseases, and we pointed that out on the slide and it's really two there are underlying diseases, such as a retrofit keratitis.

<unk> costs.

A degradation of the particular layer.

And you get a natural.

Resulting.

Defect.

There's also a number of surgical.

And other.

Indications for example.

Lot of viral her pet care tied us.

<unk> the efficiency you get in many cases, you get a wound or a scratch on AI you have an underlying.

Healing ability and that scratch or wound.

When it gets bigger and bigger and bigger so there's a number of etiologies that that the outside of NK.

It can lead to a PCE data.

Okay, great. Thank you.

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

Our next question comes from Chris Howerton with Jefferies.

Great. Thank you so much for taking my questions and congratulations on the exciting expansion of your business. So I guess the two questions for me would be.

As you're planning on developing.

Developing kpis 12, how are you going to prioritize that relative to your existing new chemical entity assets.

And then the second question that I would have is that you know.

Could you give us a comparator or some other success story of direct to consumer marketing for the ophthalmology space. Thank you.

Sure This is mark.

I think the.

First part of.

Answering your question is that we will look we're really excited to have a late stage clinical asset.

To be able to start a phase two slash III study with the intent that that could very well be the first pivotal study for the program is really exciting. Our PKI program is also advancing and we expect to have.

The preliminary or initial PK and efficacy data early next year and so what we've done with our.

Cash resources and is reflected in the runway is to be able to advance both those programs. While we're also continuing to work on our <unk> program and hope to have a development candidate in the first half. So we can advance all of that and continue.

To work on the launch of our service and the promotion of of <unk>.

I'm sorry, Chris maybe the second part I think there might have been a second part of your question remind me.

Yes. Thanks, so much Mike. The other question was just if you have a comparator of a success story with direct to consumer marketing campaign in the ophthalmology space.

I think the most obvious restasis right.

Over the years have enjoyed great success.

Made that at its peak I think nearly a $2 billion a year brand.

And a lot of that was on there.

To consumer efforts.

Okay.

Of course, <unk> as well as launched consumer and we saw some return to growth.

It began last year actually resides or around the time that they launched their new consumer campaign.

That we view as having been successful as well.

Got it and I mean, do you have any sense in terms of the.

Return on investment relative to expanding a salesforce or I guess any relative metrics you can provide on that could be helpful. Thank you.

Yes, I think it's too early.

Quoting ROI numbers, but I would say that I think that we feel good where we are right now with 105 Representatives and the next lever for us to pull as the patients.

Digital consumer efforts to start driving patients into the Doctor's office.

We cannot benefit from the synergies of the education work that we've done over the last nine months, increasing awareness of <unk> to now start driving some patient demand.

Okay. That's awesome. Thank you very much thank you.

And I'm not showing any further questions at this time I'd like to turn the call back over to Mark our wiki for closing remarks.

Thank you operator, and thank you all for joining US. This morning, today's a transformative day for Kala as we take a major step towards our vision of delivering a broad portfolio of new medicines to advance the treatment of eye diseases. We're extremely excited about our acquisition of <unk> and the potential of Kpis of one two to chase.

The care of people living with <unk> and potentially other ocular wounds and we believe our existing commercial products will continue to gain market share as we execute on our commercial strategy and move beyond the COVID-19 pandemic, we look forward to updating all of you soon.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.

Thank you.

[music].

Good morning, and welcome to Kala Pharmaceuticals Conference call to review its third quarter financial results and the acquisition of <unk>. Please note that the slide presentation that was designed to accompany this conference call is available on <unk> website called <unk> dot com as well as through the webcast player.

At this time all participants are in a listen only mode. Following management's prepared remarks. The Q&A session will be held as a reminder, this call is being recorded I would now like to turn the call over to Joe <unk> Executive director of Investor Relations and corporate Communications for Kala Pharmaceuticals. Please proceed.

Thank you operator, and thank you all for participating in today's call earlier today, we issued two press releases, one announcing our third quarter financial results.

Highlights in the us.

[noise] announcing our acquisition of <unk> and its lead asset she M. B, a one two which we have renamed K P. I owe one two a novel cell free Shekhar term therapy currently in clinical development for persistent corneal epithelium effects plus releases along with the slides we won't be reviewing on today's call.

All are available on the investors section of colors website at Www Dot Cala Rx Dot com.

We will begin the call with prepared remarks by Mark <unk>, Our chairman President and Chief Executive Officer, Kim Brazzell, Our Chief Medical Officer, Todd Bazemore, Our Chief operating Officer, and Mary <unk>, Chief Financial Officer.

Our web site.

<unk> and the benefits of our acquisition of a couple of hours ago observations associated with our commercialization of our service and about this and the sufficiency of our cash resources eastern or other forward looking statements are based on the beliefs and expectations of management as of this conference call. Our actual results may differ materially.

<unk> from our expectations. The company undertakes no obligation to revise or update any forward looking statements to reflect events or circumstances that occur. After this conference call, except as required by law investors should carefully read the risks and uncertainties described in today's press releases as well as the risk factors, which identify.

Specific factors that may cause actual results or events to differ materially from those described in our forward looking statements, including the company's quarterly report on Form 10-Q, and other filings we make with the SEC. The Form 10-Q will be filed with the SEC later today and will be available on our website.

I will now turn the call over to call as CEO Mark.

Good morning, everyone and thank you for joining us today to review, our third quarter 2021 financial results and recent business highlights.

Today, we are advancing toward that goal with the acquisition of <unk>, a clinical stage company developing a novel biotherapeutics for severe ocular surface diseases.

With this acquisition, we are very excited to expand our clinical stage pipeline with TPI <unk>, a secret selling product being developed to address persistent corneal epithelium defects or PCB and potentially other serious ocular diseases that involve impaired healing.

<unk> is a clinical stage asset initially in development for <unk>, a rare disease associated with vision, threatening morbidity and sequela.

Current treatments for PCB are limited and suboptimal and we believe there is a clear need for new therapies to address the impaired wound healing that underlies PC EDI and similar corneal damage diseases.

<unk> two phase one clinical data in <unk> patients are very promising and we are planning to commence a phase two three clinical trial and the re queue next year.

We are also evaluating additional indications with the goal of initiating clinical evaluation in one or more of these once we have filed the IND.

Importantly, <unk> two at the late stage clinical asset to our pipeline of earlier stage programs, including our TK AI that we expect to have initial preclinical PK and efficacy data early next year for.

As part of the acquisition, we are very excited to welcome Darius Carrabba's, President and CEO of <unk> as <unk>, New Chief business Officer.

As well as Mark Bloom and trends and ophthalmologist Vitreoretinal surgeon and Professor Emeritus and the department of Ophthalmology at Stanford, who will be joining our board.

Historically steroids have been used only as a last line off label therapy for patients with severe disease.

And positioning I assume this is a first line prescription therapy for people with mild or moderate disease requires significant investment and time.

To that end our initial launch strategy focused on education, we sought to drive proactive discussions with eyecare professionals in order to educate on dry eye flares. The availability of I assume this is the first FDA approved on label steroid with limited risk of inter ocular pressure elevation.

And the potential for our therapy to effectively fill the gap between over the counter artificial tears and chronic prescription therapies.

As we move into the second stage of our launch and as Todd will elaborate on shortly we are now implementing a number of new targeted strategies aimed directly at the patient <unk>.

Including our first digital direct to consumer campaign, which we plan to launch by year end.

With this program, we aim to empower patients providing them with the information and resources necessary to proactively discuss flares with their doctors.

We believe in the long term potential of ICU. This and are confident that prescriptions and revenues will grow over time.

We continue to receive encouraging feedback from eye care professionals, who appreciate I services rapid onset of action and comfort of administration and we anticipate that physicians will become even more positive about this as we obtain additional payer coverage in the months ahead.

Patients also continued to report positive experiences on therapy, and we believe it is clear that I assumed this effectively delivers rapid relief of the signs and symptoms of dry eye disease.

I will now turn the call over to Ken and Todd to review, the convey NGL acquisition and greater detail Tim.

Thank you Mark this is a really exciting addition to our pipeline and an important component of our strategy to develop novel therapies for significant unmet needs.

Also an excellent fit with our current R&D expertise and ocular surface disease.

I want to first acknowledge the <unk> team for their excellent work for the significant process. They have made and applying this cutting edge science to the treatment of significant unmet need in ophthalmology.

It's a great accomplishment for them to progress this program to an initial proof of concept in patients with persistent corneal epithelium deepa.

We welcome the companion, Joe paid them to call I look forward to working with them to move this program toward school development, and ultimately to regulatory approval and to market them.

Now going to provide an overview of <unk> two so please refer to the slide presentation.

There's a great deal of information in the deck. So I will only be touching on the high points in this presentation.

Starting with slide three.

<unk> represents a novel therapeutic approach to the management of diseases, driven by impaired corneal healing such as PCB.

This therapy is in the application of the novel technology involving the utilization of secret tubs, which for KPN. One two are harvested from human bone marrow derived mexicana.

No.

The secret problem is utilized to produce a cell free therapy comprise the new new numerous central bio molecules that are so accretive by the bone marrow cells.

And have the potential to correct the impaired healing underlying etiology of diseases, such as <unk>.

Big in cell free the sneaker trauma approach provides many of the benefits of cell therapy without the need for the administration of intact cells, which can often have unexpected and aimed toward effects.

<unk> is a clinical stage asset, which has demonstrated encouraging results in our phase <unk> clinical trial with improvement in PCB exceeded seven of the eight patients treated and complete healing and six of the eight patients in most cases within one to two weeks of initiation.

Of the Donaldson.

I will further discuss these results and our plans for development for a broad PCB indication later in this presentation.

We believe there is significant potential for <unk> beyond <unk> for a number of rare diseases.

FDA has granted orphan drug.

Designation to <unk> for the treatment of PC EBIT.

We anticipate that many of the additional indications we are evaluating what else will be considered for ultra orphan drug designation.

Moving to slide four.

<unk> the first indication we plan to pursue is a serious and potentially blinding disease and there is a significant unmet need for safe and effective treatments.

<unk> is defined as the persistent non healing corneal defect of wound that is refractory to conventional treatments.

Treated these patients these persistent defect can lead to significant morbidity.

<unk> Corio perforation infection, scarring and ultimately vision loss.

<unk> is a rare disease with an estimated incidence of approximately 100000 patients per year in the U S and 202.

238000, U S EU and Japan combined.

The only approved prescription product in the <unk> space with Oxford.

As indicated for neurotrophic keratitis based on our analysis neurotrophic keratitis is the underlying etiology for about a third of all PCE cases.

Oxford rates only active component is human nerve growth factor and thus as benefit primarily in those patients whose underlying etiologies neurotrophic disease.

Knowledge, Dr. Gray does not been shown to be effective but gets PCE of other etiologies.

Turning to slide five.

Normal core corneal healing is a highly regulated multifactorial process.

<unk> numerous by logic pathways.

Paris Geely is most often the result of an imbalance at multiple stages of the process.

Such addressing the impaired healing is believed to require a multifactorial therapeutic approach to correct. These imbalances and return the healing process to its normal state.

As shown on slide six Kpis <unk> delivers a number of bioactive molecules. It's part of it's multifactorial mechanism of action, which we feel is important to address the compared healing associated with PCB another serious ocular surface diseases.

As shown on this slide these include protease inhibitors matrix protein growth factors add neurotrophic factors.

As illustrated on slide seven K.

<unk> has demonstrated broad would healing activity in several established preclinical models of corneal healing, which supports the pair of potential benefit and PCE.

And other ocular diseases involving a parrot healing.

Slide eight provides more detail on the phase <unk> clinical trial conducted by <unk>.

The trial involved 12 subjects overall within the initial safety cohort of three subjects, who did not have PCB or active corneal disease and they were dosed twice daily for one week. This portion of the trial showed <unk> to be well tolerated with no significant safety issues observed.

Following evaluation of the safety cohort the efficacy component of the trial was initiated with nine patients with active <unk> being treated with topical <unk> twice daily for up to eight weeks, one patient and then the TCE the coral words.

Withdrawn from the trial early for reasons unrelated to <unk>, two leaving eight patients evaluable efficacy cohort.

In this cohort one patient was dosed for one week three patients for two weeks three for four weeks in one, particularly severe patient would stopes for eight weeks.

As you can see from the right hand portion of this slide many of these patients had large corneal defects.

Many of significant duration, which are typically difficult to heal.

Topline efficacy results of these eight patients showed improvement at seven with complete healing of the PCE. It's six of the eight patients as measured by quarter, forcing stating photograph.

Four of these patients had complete healing with one within one week of treatment and the other two that completely healed did so within two to four weeks.

<unk> was also shown to be well tolerated with no treatment related safety issues in this portion of the trial.

Slide nine shows the results from the eight patients and the broader efficacy cohort in <unk>.

Demonstrates the rapid and sustained healing was observed during the study.

As I said earlier six of eight patients in the <unk> cohort achieved complete healing of the lesion. After four weeks of treatment with four of the eight patients completely helix after only one week of treatment.

All six of the healed patients remained healed throughout the follow up period with trades from 819 weeks.

One of the two patients did not show complete healing did have an improvement in their PC EBIT, but did not achieve complete resolution of the defense.

The other patient had a PCE.

It existed four 871 days before treatment and it is rare for PC E D.

Duration to show significant healing.

Of note the patients that heald had a variety of under out why etiologies, ranging from neurotrophic disease to infectious keratitis to Stevens Johnson syndrome evidence of the broad mechanism of action of <unk>.

The pre treatment duration in the <unk> patients also rates from 50 to 213 days.

These results suggest the Kpis <unk> two could be effective against a broad range of PCB etiologies and durations.

As.

As shown on slide 10.

Treatment with <unk> resulted in a significant reduction that paid a common symptom PCE D. All six of the patients that reported pain at baseline had an improvement after only one week of treatment with two thirds of the patients having a complete resolution of their paid at one week.

100% after three weeks of dosing.

Slide 11 provides an overview of our current thoughts on the next stages of development.

<unk> held a productive pre IND meeting with FDA last year in which the agency agreed that a broad indication it's possible.

There were also important guidance on clinical trial design patient population and endpoints for clinical trials to support this is the case.

We plan to file an IND in the third quarter of next year, and then initiate the phase two three clinical trial in <unk> patients are various etiologies.

The design of the trial is still being finalized but will likely be a randomized vehicle control trial evaluating the efficacy of at least two dosing regimens of <unk> two.

If the results of the phase two three trial are favorable it could serve as the first of two required pivotal trials and we would plan to conduct initial pivotal phase III trial to support the submission of a BLA to the FDA.

With that I'll turn the presentation over to Todd to discuss the.

The commercial potential of <unk>.

Yeah.

Thank you again moving on to Slide 12, we are excited about the potential of Kpis 012.

It targets, an orphan indication with a large global unmet need.

<unk> is a rare disease with substantial clinical burden, who which speed of healing resolution of pain and prevention envision loans are all critical treatment outcomes.

There are no product FDA approved for a broad label to treat all PCE, regardless of etiology and Kpis.

<unk> has been granted orphan drug designation by the FDA for the treatment of <unk>.

Yes.

<unk> has the potential to deliver broad efficacy for all <unk> patients with only twice a day dosing for a four week treatment period, and provide a product with favorable safety and tolerability.

There is an estimated annual incidence of 100000 <unk> patients in the U S and an estimated 238000 patients in the U S EU and Japan combined.

Market is projected to continue to grow annually and we have full worldwide rights to the asset.

There is one product approved to treat neurotrophic keratitis, which is an underlying etiology and only about one third of all PCE cases now.

<unk> is currently placed at approximately 100 $100000 per treatment in the cornea specialists Kols, we have spoken to tell us that patients often require re treatment with that product.

Kpis <unk> drug substance manufacturing is scaled and ready for pivotal trials and an agreement is already in place with a leading contract manufacturing organization with deep experience in the formulation and filling of ophthalmic drug products into unit dose unit dose blow fill seal vials.

And importantly, as an orphan disease <unk> is primarily treated by a small targeted group of eyecare specialists, which will allow for a highly efficient rare disease commercial model, if and when approved.

Turning to slide 13.

<unk> is a regenerative cell free therapy with a multifactorial mechanism of action to address the complexities of the wound healing process.

This novel Secret home approach has the potential to serve as a pipeline in a product with strong lifecycle opportunities in other orphan ophthalmic indications such as corneal ulcers corneal burns ocular graft versus host disease and Steven Johnson syndrome.

As you can see taken together these additional conditions create a substantial incremental market opportunity for <unk> and a successful our plans are to expand our development efforts to address these additional indications.

We are targeting initiation of a human proof of concept study and at least one of these additional indications in the second half of 2022.

In addition, there are other wound healing opportunities outside of the eye that may present, a potential out licensing opportunities.

Continuing on to slide 14.

Here, we have outlined the expected patent and regulatory exclusivity for Kpis 012.

As a biologic agent <unk> has the potential to be eligible for 12 years of marketing exclusivity that would prevent biosimilars for being introduced or at least that period in.

In addition, <unk> has the potential to receive seven year orphan drug exclusivity for PCE, which would run concurrently with the 12 years of biologic exclusivity.

There is also a significant patent portfolio related to <unk> <unk>, it's used for the treatment of ocular conditions, such as PPE with a 20 year patent term ending in 2014 as well as possible patent term extension in the U S beyond 2014.

On the regulatory side, we plan to pursue additional designations that could accelerate development and regulatory review timelines it would help to maximize this opportunity.

In conclusion slide 15 summarizes why we are so enthusiastic about the acquisition of <unk> and the potential of <unk> to treat a significant unmet need in the rare disease ophthalmic space.

This transaction is aligned with our corporate strategy of advancing our pipeline with multiple product candidates that can address serious ophthalmic diseases, which have the potential to cause vision loss and we are very excited to continue moving this development program forward.

We look forward to providing future updates on our progress with <unk> <unk>.

I'll now transition to a progress update on the ICU This launch.

While I will spend most of my comment most of my comments today outlining our strategy to adjust the headwinds we've encountered over the last several months I want to begin with a recap of our quarterly performance and several key leading indicators, which we believe demonstrate positive momentum from a suit us.

In the third quarter of 2021 Symphony Health and our patient hub reported $18, 537% as soon as prescriptions, representing an increase of 19% over the second quarter.

For the week ended November five 2021, approximately 50 860 prescriptions for <unk>. So this has been built since the launch in January.

Including over 6650 refill prescriptions.

More than 5500 unique eye care professionals have prescribed <unk> since the launch.

We are encouraged to report that approximately two thirds of all <unk> prescriptions in the third quarter were written for patients entirely new to prescription dry eye therapy, indicating first line use and continued progress.

Towards our goal of becoming the preferred first line prescription therapy for the treatment of july's layers.

Refill prescriptions for Ais service with 3115 in the third quarter, an increase of 94% over the second quarter.

In addition weekly script volume is currently 22% higher over the last nine weeks compared to average weekly script volumes during the summer months of June and July.

While some of this can be expected with the seasonality of giant players. We are also seeing continued growth in market share, which would indicate that recent growth is driven by increasing demand.

Our service continues to grow and new to therapy prescriptions, a measure of the number of patients newly initiating prescription dry eye therapy with 10% growth in the most recent four week over a four week period.

We also saw an increase of 11% in the most recent four week over a four week period for <unk>, achieving an all time high for a super share of the new prescription market.

Importantly, these figures while promising do not reflect the totality of physician and patient demand for Ais service.

We estimate that only about half of all prescriptions.

<unk> prescriptions are currently getting filled at the pharmacy with the rest being rejected due to lack of insurance coverage.

As payer coverage grows we anticipate that many more of these prescriptions will get killed resulting in higher script volumes and in turn we believe ECP prescribing will increase as doctors become more comfortable that most health plans covering <unk> on their formulary.

Finally, we remain very encouraged by feedback from eye care professionals in July 2021, we conducted a quantitative market research study of 200 ECP.

And within this study ECP scored I assume is the highest of all dry eye therapy compared to both prescription and OTC options and report an intent to increase prescribing as payer coverage grows.

The only significant disadvantage reported was payer coverage and as I will discuss shortly we are working hard to grow our market access coverage with both commercial and Medicare part D plans and anticipate coverage improvement in the coming months.

Now while we are encouraged by these data. We also acknowledged that the launch has been met with some challenges today I want to spend a few moments highlighting what we understand to be the primary challenges faced during the launch and outline our strategy to adjust them.

The first challenge is acquiring market access coverage in a timely manner.

Specifically acquiring a meaningful enough level of market access that will allow the majority of prescriptions written to be filled and covered by the patient's insurance.

Of course, this is not an issue unique to column.

It is arguably the biggest challenge facing all newly launched products.

As we've previously stated commercial and Medicare part D health plans collectively represent about 90% of all dry eye prescriptions.

In the third quarter, we made meaningful progress, adding an additional $4 5 million covered lives through new health plans under the existing contract with express scripts and ophthalmology Rx, bringing.

Bringing us to approximately 60% commercial coverage.

Looking ahead, we are focused on adding service to formulary other large commercial plans, such as Cvs caremark and United Healthcare.

Collectively these wins would expand our total commercial access to greater than 80%, which would be in line with the leading prescription dry eye therapies.

With regard to Medicare we have secured preferred coverage at express scripts and prime therapeutics, bringing our total access to 10% of all Medicare part D lives.

We anticipate additional coverage under Medicare part D to start.

To begin enrolling in 2022.

As we work to continue to increase market access coverage for our service. We are also continuing our commercial co pay assistance program to help to frame out of pocket cost for patients.

The second challenge is done the COVID-19 pandemic.

When looking at ophthalmology, specifically it has been one of the most impacted specialties by depend dunnock with regards to both patient office visits and prescription volume.

Again this is not a challenge unique column, but we believe it means that fewer dry eye patients have visited their doctors limiting the number of newly diagnosed patients who are in the market for therapeutic intervention.

While this has made it difficult for the vast majority of products launched during the pandemic. We do not expect these dynamics to persist indefinitely, particularly particularly.

Q3 2021 Kala Pharmaceuticals Inc Earnings Call

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