Q3 2022 Ocular Therapeutix Inc Earnings Call

November 7, 2022

Good day and thank you for standing by welcome to the ocular Therapeutics third quarter 2022 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one one on your telephone.

You will then hear an automated message advising you that your hand up rates due to the time you only get one question and a follow up please be advised that today's conference is being recorded.

Like I said I would now like to hand, it over our conference to your speaker today are not meant as a CFO .

Go ahead Tom.

Thank you operator, good afternoon, everyone and thank you for joining us on our third quarter 2022 financial results and business update conference call.

Afternoon. After the close we issued a press release, providing an update on the company's product development programs.

Details of the company's financial results for the third quarter ended September 32022.

Press release can be accessed on the investors portion of our website at investors that Ocu, TX dot com.

Leading the call today will be Anthony Mato <unk>, our president and Chief Executive Officer, who will provide an update on our pipeline development and the commercial progress of DEXTENZA.

Also speaking on the call today will be Dr. Robert <unk>.

Our Chief Medical Officer, and Dr. Peter Kaiser, our Chief Medical advisor retina.

Following their remarks, I will provide an overview of the financial highlights for the quarter.

Turning the call back over to Anthony for a summary and questions.

For Q&A, we will also be joined by Chris White, our Chief business Officer.

Corning, our senior Vice President commercial.

As a reminder, today's call certain statements, we will be making may be considered forward looking for purposes of the private Securities Litigation Reform Act of $19 95.

In particular any statements regarding our regulatory and product development plans as well as our research activities and our financial projections 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.

<unk> recent quarterly report filed this afternoon with the SEC and our annual report on Form 10-K filed on February 28, with the SEC.

I will now turn the call over to Anthony.

Thanks, Paul.

The highlight in the quarter for ocular was the release of the seven month interim results from our U S. Based phase one trial for OTI PKI presented in a late breaker at the <unk> annual meeting in September .

With the release of the topline data and our intent to pursue this in both wet AMD and diabetic retinopathy I believe we are establishing ourselves as a future leader in the back of the eye.

Added to our established expertise in the front of the eye I'm pleased to say that we continue to make significant strides building ocular therapeutics is a comprehensive strategic player in the ophthalmology space.

As a reminder, the context for the U S based phase one trial of OTI PKI. We've previously demonstrated in our Australia based phase one trial that we were able to deliver bespoke depot formulations of our proprietary hydrogel capable of resolving sub retinal <unk> fluid.

To do this we treated uncontrolled patients with <unk> as monotherapy.

Without the benefit of concomitant medication or induction therapy, and then observed ots OCC scan and noted clinically meaningful reductions in fluid and even complete resolution in some patients.

We don't believe this has been shown previously with any other teekay is delivered individually nor.

Nor has it been attempted.

In addition to demonstrating that exit and have delivered through our hydrogel depots was potent enough to resolve fluid as monotherapy in some patients. We also observed a dose response.

We continue to believe the potency of accident and its uptake in the retinal pigment epithelium or RPE cells are responsible for these observations.

The next step was to take <unk>, PKI and test its durability and maintaining retinal segment and be CVA and controlled wet AMD patients and then a setting with an active control group or.

Our recently reported interim results from our U S based phase one trial did just that with resounding success.

I'll, let Ravi and Peter go over the particulars of the trial, but the takeaway is that we were able to demonstrate that 80% of patients reached the six month time point without the need for rescue and 73% were able to go through seven months.

Most importantly.

Best corrected visual acuity as measured by E. T D Rs charts, and retinal thickness as measured by OTT and CK I related patients were comparable to the control arm of the $1 eight weekly eylea.

It should also be noted that none of the rescue patients in the trial met the rescue criteria set forth in the clinical trial protocol.

In addition to moving <unk> into a phase III trial for wet AMD in quarter three of 2023.

Also plan to initiate a phase one trial in diabetic retinopathy in the first quarter of 2023.

I will let Peter elaborate on the opportunity in diabetic retinopathy, and our new clinical development plans I want to highlight that with the current data and depending on the outcome of the phase one diabetic retinopathy trial and a follow up meeting with the FDA. We believe that we may be in a position to enter a phase III pivotal in diabetic retinopathy in the first quarter of 2024.

Finally, let me provide a few comments on our commercial business in the third quarter, we reported net sales of <unk> of $11 $9 million, essentially flat year over year and down approximately 2% sequentially quarter over quarter realm.

Relative to the potential of the opportunity and our own expectations, which represents a disappointing result in is clearly unacceptable.

We believe that there are three main reasons for an extensive performance. The first is that our customers <unk> and <unk> remain in a difficult situation.

Since the pandemic the majority of our customers have been chronically short of staff or recently re staffed with generally less experienced people than they had before the pandemic.

Buy and build products like DEXTENZA, but a huge advantage for the ASE and <unk> PD, one administered appropriately do required experienced back office staff and surgical staff to properly implement and administer.

Understandably in the current environment Asc's nature of these are reluctant to add extra work and complexity.

The second reason is that we are in a similar position as our customers and our own ability to maintain an experienced field based team with minimal vacancies, which we have which have been higher than we would have liked over the past few quarters.

The final reason behind extend this performance has to do with changes in the reimbursement landscape for the procedure codes CPT 68841, and it's and it is clear that volume has been impacted due to the reduction in physician payment for the insertion of DEXTENZA when our procedure or CPT code was converted from a category III code into a category one code.

Effective January one 2022.

Most important going forward, though is not about what has caused the slowdown, but how we plan to reignite growth.

I am happy to report the variable over which we believe we have the most control is the closest to being resolved.

We are now nearly at full capacity in our field force with the team trained in the field.

Clearly, it's not just about having vacancies filled but also about focusing on our strategy of deepening involvement with our customers and helping them get the on patients with Medicare part b into advantaged Pan and commercial Payors.

<unk> had tremendous improvements in coverage and reimbursement of late and we need to get our customers comfortable giving more patients access to the benefits of DEXTENZA.

The next two elements over which we believe we can have the most control or the value proposition for DEXTENZA.

The procedure code 608, <unk> hundred one associated with insertion.

Last quarter, we began issuing an off invoice discount it was well received by our customer base as it removes the most common objection voiced by our accounts.

We also have implemented a number of strategies working with CMS in an effort to appropriately rebalance the value proposition for DEXTENZA and CPT 684, one in the future.

While early in the implementation, we started the fourth quarter well, but October recording the strongest monthly end market sale ever nearing 11, 500, billable units and eclipsing our previous record by more than 900 inserts.

Do you expect this growth to continue for the remainder of the fourth quarter and accelerate going forward. We do not believe that we will have a fourth quarter is strong enough to reach our original guidance of $55 million $60 million in net revenue.

Consequently, we are adjusting guidance for full year net revenues to between $48 million and $52 million, which represents a growth over prior year of between 10% and 20%.

With that as a summary, let me turn the call over to our Chief Medical Officer, Dr. Robert <unk> to take you through the pipeline.

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

During the annual meeting in September .

Multiple presentations, providing updates on OTH PKI being developed for the treatment of wet AMD and other indications.

By far and away the highlights from the meeting was the presentation of month six months seven interim data from our U S based sales.

One trial.

This was a multi centered prospective randomized controlled trial into any one subject.

600, microgram or T X T J I dose in a single implant containing our assistant.

The diverse set administered eight eight.

Eight weeks in controlled with AMD subjects.

<unk> treated with anti VEGF therapy.

While it is designed to assess the safety durability and Tolerability of <unk> T K.

And to assist <unk> biological activity in subjects by measuring anatomical and functional changes.

Overall, we could not have been more pleased with digital.

<unk> was generally well tolerated there were no drug related ocular or systemic series adverse events.

That was one the CEO of artists and Ophthalmitis in the Ot, both TX PKI arm Mitchell goes for living and Monday, just after the reset injection at Mont Blanc.

Using the data cutoff date of August 24, 202, antitumor data show subjects treated with a single <unk> PKI implant demonstrated stable and sustained this corrected visual acuity <unk> mean change from baseline of negative one.

Three letters and central subfield.

Thickness, CFT mean change from baseline of.

Positive nine to micrometer in the Ots PKI arm.

Seven months, which was comparable with the offer diverse set time dosed every eight weeks.

The mean change from the CVA baseline of minus one <unk>.

The mean change from CA safety baseline positive.

Micrometer.

Importantly, the data also showed that aimed at first on those subjects in the <unk> arm the rescue free after six months and 73% of subjects in the <unk>.

Thank you.

Three up to seven months.

We believe the data highlights the potential of <unk> to become a differentiated product capable of providing a durable anti VEGF response that improves upon today's standards of care in the management of wet AMD.

Plan to share this data along with the encouraging data from our Australia based phase one trial with the FDA.

Subject to discussions with DSD plan to initiate a phase two three clinical trial in the third quarter of two anti <unk> two antibody.

We plan to provide a second data update.

U S based phase one <unk> trial at the <unk>.

Angiogenesis exudation and degeneration, two and two two anti <unk> annual meeting in February that will include safety and efficacy data.

In addition to wet AMD, we plan to initiate a phase one trial.

Operating <unk> for the treatment of diabetic retinopathy in the first quarter of two anti <unk> anti cheat and Peter will give more information on this trial.

Moving to our glaucoma program RPX TICC.

We continue to actively enrolling subjects in the U S based phase II clinical trial.

This trial is a prospective multi center randomized control trial.

Getting the safety Tolerability and efficacy of <unk> for the reduction of intraocular pressure.

In patients with primary open angle glaucoma or ocular hypertension.

We plan to enroll approximately 105 subjects in three different arms randomize, one to one to one in which the subjects received a single <unk> implant containing five microgram or 206 microgram dose of 12.

Us comp.

With an implantable due respect.

Five microgram arm.

Utilizing fifth degrading implants.

The $2 six microgram arm is utilizing a standout degrading impact.

The trial is designed to offset the changes in diurnal intraocular pressure IOP from baseline.

10 am and four pm.

Two six and two last weeks and Paulo duration of IOP response over time.

We plan to provide the top line data entities for this phase II clinical trial in the fourth quarter of two anti <unk>.

Regarding our ocular surface disease program.

Main committed to the development of our dry eye program in a measured manner.

Otf's DB and low dose <unk> insert containing dexamethasone for the short term treatment of the signs and symptoms of dry eye disease, and <unk> CSI is psycho, scoring in chicken and insert for the chronic treatment.

Patients with dry eye disease.

With regards to <unk>, we remain on track to begin a collaborative trials in the first half of two anti <unk> two antibody to evaluate the performance of Ot HDD versus placebo in search now.

AMD task dissolving colajanni blocks.

And not in search.

We have designed this trial to explain the magnitude of the placebo effect seen in both.

<unk> and <unk>, TX CSI phase II trials in which did vehicle hydrogel placebo insert or placebo comparator.

And the kind of ridiculous longer than anticipated performing more like an active comparator placebo compared English.

Our plan to use the results of this trial to inform the selection of a more appropriate placebo consolidated for both deal with DXP D. <unk> CSI programs moving forward.

I would now like to turn the call over to Peter to discuss more specifics specifics around our development plans for <unk> PKI in both wet AMD and diabetic retinopathy.

Thanks, Rob.

We announced plans to advance <unk> into a phase III trial in wet age related macular degeneration as well as initiate a new trial and a new indication evaluating <unk> T chaos for treatment of diabetic retinopathy.

And wet macular degeneration, we have been doing a tremendous amount of work since the U S. Based phase one interim results were first made available to find ways to expedite trials powered statistically demonstrate the profile that we see emerging.

As we pursue this importantly, we have the benefit of a deep base of experience with the product that may be underappreciated.

For example in the <unk> program, we dosed our first patient in early 2019 and have now had over 45 patients who have received <unk> therapy with over 850 patient visits.

<unk> has been studied as both a monotherapy and in combination with anti VEGF.

Been tested in a randomized study and a well controlled and actively leaking patient study as well as in patients who are treatment naive both as a monotherapy and combination therapy.

The cross at all <unk> has demonstrated a remarkable consistency of effect.

We believe this gives ocular the largest data set relative to any other company evaluating a teekay <unk> and <unk>.

Macular degeneration, which we of course plan to share with the FDA at our type C meeting at which we will discuss our phase III three strategy.

In addition to wet AMD, we plan to initiate a phase one trial to evaluate <unk> in diabetic retinopathy in the first quarter of 2023.

Diabetic retinopathy is a leading cause of blindness affecting an estimated $8 4 million patients to the U S and $140 9 million globally. According to market scope.

Typically diabetic patients will develop diabetic retinopathy.

<unk> had diabetes for between three and five years.

In the early stages diabetic retinopathy will not affect site, but if it is not treated and progressive eventually this site will be affected in <unk>.

Fact that is the number one cause of legal blindness in the working age population.

Given the slow onset and the fact that diabetes affects a younger working age population the required frequency of current anti VEGF therapies makes effective treatment, especially challenging.

And this is where we believe <unk> with its designed to durability of up to nine months or longer may be especially effective.

We believe the same attributes that make <unk>, a compelling product in wet Mac lead generation the ease of use of our office space injection and long term durability could establish this as the first standard of care in the treatment of diabetic retinopathy.

We also believe that the regulatory path is more straightforward given that the comparator in our registration trial would likely be placebo. Since there is no established standard of care.

Finally, we see the diabetic retinopathy space given its requirement for extended durability is inherently less competitive.

Wet AMD market.

We plan to conduct a U S based phase one trial under an IND across approximately 10 sites and will include approximately 20 patients randomized either 600 microgram.

<unk> single implant containing a sentiment or sham control.

Based on the positive interim results in our U S based phase one trial in wet age related macular degeneration, we believe that <unk> should perform well in the phase one diabetic retinopathy trial.

With the current data and depending on the outcome of the phase one <unk> study and a follow up meeting with the FDA. We believe that we may be in a position to move aggressively and to initiate our first phase III pivotal trial <unk> for the treatment of diabetic retinopathy in the first quarter of 2024.

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

Thanks, Peter net revenue, which includes both gross product revenue net of discounts rebates and returns, which the company refers to as total net product revenue and.

And collaboration revenue was $12 million for the third quarter of 2022 and represented an approximately 2% decrease over the same period in 2021.

Net product revenue was $11 $9 million flat the.

<unk> quarter of 2021 and down approximately 2% on a sequential quarterly basis.

Net revenue in the third quarter of 2022 also included $1 million in collaboration revenue associated with the company's work with after that.

And net product revenue in the third quarter of 2021 included $3 million attributable to the sales of <unk> sealant.

Research and development expenses for the third quarter were $13 7 million versus $12 $7 million for the comparable period in 2021.

Driven primarily by an increase in personnel and a higher level of preclinical development activity.

Selling and marketing expenses in the third quarter were $10 2 million.

As compared to $9 6 million for the comparable period of 2021.

Reflecting primarily an increase in field force personnel.

General and administrative expenses were $8 5 million for the third quarter versus $8 $1 million in the comparable quarter of 2021, primarily due to an increase in personnel related costs, including stock based compensation.

The company recorded a net loss for the third quarter of $24 2 million.

Or a loss of 31 per share on a basic and diluted basis.

Compared to net income of $2 6 million.

Net income.

<unk> per share on a basic basis and a loss of <unk> 23 per share on a diluted basis for the same period in 2021.

Net loss in the third quarter of 2022 included a $1 $1 million noncash item attributable to an increase in the fair value of the derivative liability associated with the company's convertible notes.

As the price of its common stock increased during the quarter.

Noncash charges for stock based compensation and depreciation and amortization were $4 7 million in the third quarter of 2022 versus $4 4 million for the same quarter in 2021.

As of November 4th 2022, the company had 77 million shares outstanding.

As of September 32022, the company had $121 million in cash and cash equivalents versus $134 5 million at June 32022.

Based on current plans the company believes that its existing cash and cash equivalents are sufficient to fund operations through 2023.

I would now like to turn the call back over to Anthony for some final thoughts.

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

We are excited to be able to share with the world. Our seven month interim results from our U S. Based phase one trial for <unk> in wet AMD building further evidence of a potential product profile that could set the standard of care for durability in the treatment of wet AMD and diabetic retinopathy.

We intend to initiate a phase one trial of <unk> for diabetic retinopathy in the first quarter of 2023.

And believe we may be positioned to commence our first phase III pivotal trial in the first quarter of 2024.

Plan to initiate a phase III trial of <unk> for wet AMD in the third quarter of 2023.

We plan to continue enrollment of the phase II trial of <unk> CIC in glaucoma and should be in a position to release top line data in the fourth quarter of 2023.

We now have a full team in place selling DEXTENZA in the surgical setting with an enhanced value proposition that we believe should reignite our growth trajectory. We have started with a record month of October and we have a $121 million in cash as of September 30, and continues to guide our cash runway through 2023.

We look forward to a strong remaining 2022 and with that I will turn the call over for questions.

Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one one on your telephone and wait for you mean could be announced with limited time, we will only have time for one question and one follow up please standby as we compile the Q&A roster.

Yes.

Our first question comes from the line of Joe Cassaro from Piper Sandler go ahead Joe.

Hey, guys.

Thanks for taking my questions here I'll try and stick.

Two questions maybe first.

On diabetic retinopathy, just wondering why that study is moving forward under an exploratory R&D and not.

Traditional R&D that would maybe allow potentially for a more robust study and whether 20 patients worth of data is of sufficient.

Data set to answer any questions ahead of a potential phase III start in.

<unk> 2024, and then.

With regards to the type C meeting.

And the FDA and PKI in wet AMD I guess, what is the sort of main questions and feedback youre, hoping to get there and how does the re formulation work that you guys are doing factor into those discussions if at all thanks.

Farmer Mac question off to Peter since he is running.

Running point on the diabetic retinopathy, Peter you want to try and tackle that.

Sure. Thanks for the question when it comes to.

Sure.

When it comes to diabetic retinopathy the key the key feature here is.

We're working on we have to decide is it better to use our one by 600 or is it better to use our.

And start forward now or is it better to.

Work later with maybe a reformulated version into us moving forward with the EIA.

Given the number of patients that it allows us to use works perfectly fine.

The second question in terms of the macular degeneration.

You have to look at the.

When we look at the FDA, the FDA will allow us to.

The decision is going to be.

What type of combination therapy, they're going to call. It if you do say three anti VEGF injections.

Versus one versus non should we enroll patients who are treatment naive all comers patients previously treated and what do they considered previously treated it's a discussion that.

Any company looking at in this space is going to have to have with the FDA. We don't want to have that discussion until we have all of the patients.

Basically from from both of our Phase one studies completing this study.

Best chance of deciding what is best to move out.

Did that answer your question, yes, yes, that's all very very helpful. Thanks for taking my questions.

Yeah.

Alright, our next question comes from Christopher Howerton.

From Jefferies hold online today.

Alright. Your line is now open.

Hi, This is <unk> on for Chris Thanks for taking the question team.

For DEXTENZA what is the priority.

Office or <unk>.

Ambulatory surgical centers.

And then.

<unk> what is the best indication to the person a label that potash wet AMD.

Thank you very much.

Yes.

First part on defense I mean, clearly our business runs on the surgical setting now and the focus is getting growth reignited in a surgical setting.

That is priority one two and three at the moment.

Secondarily talking about diabetic retinopathy, and why we think that's such a great opportunity.

Given the profile of the diabetic retinopathy patients as Peter had mentioned they are patients who are primarily working age population. They are have a number of other conditions for which they are receiving active treatment.

Burden of.

<unk>.

A frequent injection is actually too much for them to bear and they would rather risk losing sight then.

Have to go in for either once once monthly or once eight weekly injections with anti VEGF, we think that we have a formulation.

We believe that could last for a year or longer.

We think that changes the goalposts entirely and a once yearly formulation and diabetic retinopathy.

With a favorable safety profile.

Think that would be tolerable.

We wouldn't expect every diabetic retinopathy patient to convert to therapy without the XT Cai.

But given the number of patients with diabetic retinopathy.

Changing that number from 90% of patients being untreated to 80% of patients being untreated.

Create a significant product opportunity.

You marry that with the.

The easier regulatory path that we can go directly against sham rather than against an active comparator.

This is a natural opportunity for us that doesn't mean wet AMD is not an opportunity that we are very excited about and seeking to do.

To develop.

Develop a clinical program in order to get registration there.

But we do understand that the highly competitive environment.

And that that is also expensive far more expensive clinical trials. So we're not doing it either our approach, but we are particularly excited about diabetic retinopathy.

We think our product profile actually creates a new opportunity in that space that doesn't exist presently.

Okay. Thank you very much.

Yeah.

Alright. Our next question comes from the line of E Chen from C.

Th Lane rates.

Thank you.

Hi, Allison.

Go ahead again.

Hello.

Okay.

Yes.

Okay Sir.

My first question is can you elaborate on the cost of staffing shortage and why do you believe it is a transient.

Problem.

Staffing shortages the same staffing shortage you realize when youre flights delayed for hours because they can't find pilots to fly it.

It's a post pandemic issue that's across the board in a number of different industries, but there is nothing.

The difference I think in the ASC and hospital environment.

Particularly on the administrative level, where these are these are fairly low level of employees that seem to have disappeared during the the.

Covid pandemic and not come back into the workforce with the same the same vigor as they left it.

So we are very much at the mercy of the macroeconomic situation when that when that Ameliorates I expect the ASC in hospitals to be back to normal as well.

Okay and.

What kind of sales boost for <unk> do you expect.

2023, considering the fact that to execute we will no longer has pass through status starting January one.

Well, we certainly expect to pick up some of the volume that <unk> been able to achieve.

Somewhere between a third and a half of what our volume is.

So we would expect some of that to move over we would expect some of that would probably go into.

Some of the formulations that exist on the compounding side.

We have certainly internal assumptions of what we think we'll be able to get and we have some certainly some anecdotal data of <unk>.

Who are looking to place orders as they move their business over to a product that we will continue to have separate payment.

But we have not quantified that and we will give some guidance.

As we move past the fourth quarter, we've seen a really nice trend break.

Starting in October we believe Thats real we believe it's real both because of our.

The staffing we have internally because the market is getting better.

But also because I think our strategy is deepening and how we are able to move patients passed or move or.

Our customers past med part B and take advantage of some of the gains we've made in the private payer environment.

But we'll wait to see what that trend line looks like before we look at what 2023 guidance will look like.

Thank you for that question again as a reminder, if you'd like to ask a question to one of our presenters. Please press star one on your telephone and wait for your name to be called.

Our next question.

Comes from the line of Jan <unk> from <unk>.

B Riley your phone line is now open.

Hi, Thank you for taking our question.

Is there any comments on the diabetic.

Wrapping up the patient journey.

10% of patients are non proliferative poor on PCR.

<unk> on this patient will feel the urgency to kind of the current treatments anti right Jeff. Thank you.

So that's a great question.

To us when a patient comes in with diabetic retinopathy.

Sort of two different buckets, one is the patient to doesn't realize why they're there and they're endocrinologist or primary care Doctor says you have to get an eye exam.

And the second type of patient is one who's actually losing vision.

From from diabetes, and diabetic retinopathy with him.

Yes can you hear us.

Yeah.

Yes.

So so what I was saying is there is two types of patients with diabetic retinopathy, one doesn't realize they have it.

It doesn't have any visual changes and the other is one who is noticing visual changes and it doesn't really.

Could have this with severe non proliferative disease.

By the time it gets to proliferative disease are usually symptomatic.

Oftentimes those patients who are floaters they'll have decreased vision.

They may even have way worse than that.

From the Neovascular nation that we see in proliferative disease, when it comes to non proliferative disease.

Most of these patients.

That would qualify for treatment, but we currently don't treat those patients with any of the FDA approved products, which would be lucentis or eylea because it requires so frequent injections as Anthony said at the outset, because thats, where we think we offer.

A good choice because these are patients who would improve their diabetic retinopathy with it with a treatment theoretically our treatments with last seven to eight nine maybe even longer months.

So an injection every so often in these working age patients is very palatable.

The benefit is very real and the reason we don't use it in patients don't wanted this because as much as the benefit is real it's just the frequency of injection.

Just not possible to keep up.

I do have patients who do.

Get anti VEGF injections for diabetic retinopathy, but theyre not in the vast minority.

So hopefully that answered your question.

Yes, that's very helpful. Thank you.

Alright, and then just again as a reminder, if you'd like to ask our speakers a question. Please press star one on your telephone keypad.

Just in the queue.

Alright. Our next question comes from the line of.

Jordan off from Cowen.

Your line is open.

Well. Thank you so much for taking our questions and congratulations on all the progress.

The data from <unk>.

So maybe.

To follow up on the previous discussion on the re formulations that Youre planning you mentioned that youre.

Youre looking.

On the previous call that you are looking into a lower drug load in <unk> that has a faster drug release profile.

Maybe can you talk about what made you explore.

This option and what would you be looking for in terms of.

<unk>.

Product profile before you can initiate that trial and.

I guess when when do you think youll have clarity if you've been able.

To successfully achieve year ago, Yes, let me start with that and I think this is one of the elements where I had made a lot of mistakes in my life is probably one of the bigger ones was talking about re formulation with without without <unk>.

Essentially we have a formulation that works and we have a formulation that will work in wet AMD, we have a formulation that works in diabetic retinopathy, and we're very happy with that formulation with what it's been able to demonstrate from a clinical program.

If we need to go forward with that we will go forward with that formulation. So theres nothing formulation related that's causing any delays in what we look at going forward.

Now as formulated Theres, a magical perfect formulation.

Perfect formulation is that from the moment the last particle of drug allude side of the depot the depot spontaneously by a resorbs and disappears.

You will never get a formulation that is that perfect. There's always going to be a situation where either the depot last longer than the drug or the drug lasts longer than the depot.

And what we're doing is what we do with all of our.

Formulations and every time, we move forward, we attempt to improve upon the formulation that we have.

So we have a number of projects going forward that are looking at improved formulations that fit closer to that ideal.

But if those formulations arent ready at the time that we're ready to go into phase III.

We will go with the existing formulation, particularly.

We have the advantage of being.

It would do first and second pivotal where the second pivotal is the is where you need.

Your final marketed formulation.

So there is nothing in the formulation of these products that's delaying us.

But we are searching for perfection and we are starting really much with the end in mind that we think that we need to bring forward products that are not only commercially viable.

But actually will will be the best product that we can develop before we go into the pivotal.

This is super helpful. And then maybe just as my follow up.

Do you have.

Andy I guess point there is their ICU.

What would be the timeline to seeing results from the phase III trial and is it possible to do this trial.

Serves as one of two pivotal <unk>.

Yes, that's that's what's really when we talk about and people were saying why is it taking a while before we get into these later stage clinical trials.

The reason why is because we believe that the phase one programs that were using supply us with ample validation of wet AMD, which we believe we already have and diabetic retinopathy, which of course, we expect to be able to see before we start those later stage clinical trials.

But we don't see doing a classic phase II.

It is a necessary strategy for us. So we're looking very much to going directly into our first pivotal and then running nearly.

On top of that our second pivotal there'll probably be a little bit of a delay between the first and second pivotal.

In order just to.

Get those started and the best possible way, but we are able to look at those programs and then think about the next act being the completion of those trials and then the NDA filing.

So we are very much collapsing these programs and expect to we haven't given guidance on when we actually expect to get those.

Are those data back yet, but we will once we get those program startup.

Thank you. Our next question comes from the line of Caroline Polo Mchugh from Brennan, Bob Go ahead Caroline.

Hi, Thanks for taking my question just thinking about the next 12 to 18 months you have several late stage trials you expect to initiate both the wet AMD and Dr. Just wondering if you can give some guidance as to the increase in R&D spend or the cost of the trial itself.

Thanks.

We have not released the cost of those trials I mean, clearly diabetic retinopathy is far less expensive, mainly because of the comparator that we would be going after which would which would be <unk>.

Wet AMD trials are somewhat longer and more involved we have put as you noticed with wet AMD a phase two three trial.

And our run rate calculations, we have put in enough patients for the phase two trial.

But we are clearly looking at potential partnerships that could help us gross that up into our into our first pivotal it's really about the number of patients.

We've long stated that.

Next trials, we would go into our phase one would be trials.

And then if they had enough patients in them would serve as pivotal clearly we're going to get the advice of the FDA before we settle on exactly what those.

Those protocols look like.

It's hard to exactly priced them up and understand exactly when theyre going to complete before we really know what those profiles look like.

Great that's really helpful.

I appreciate that and just a quick follow up.

Uh huh.

Sure Paul.

Yes.

Okay.

Yes, just a quick follow up on that just wondering you mentioned the partnership just wondering if theres anything or any companies that you already have in mind or are you already in conversations with sort of an ideal partner that you have.

Have in mind.

Yes, certainly forward for TICC and PKI. The ideal partner is somebody who can appropriately globalize the products that we're developing.

We are developing these products for the benefit of patients throughout the world.

We have certainly the ability to commercialize in the U S, where we built a differentiated buy and bill.

Our commercial sales team.

Really in front of the eye and we believe we can do it in the back of the eye as well.

But the ideal partner would be somebody that could give justice to these products and make sure that patients throughout the world can benefit from them.

Perfect. Thank you for your question Alright again, a reminder, just please press star one on your telephone if you'd like to ask our presenters some questions.

Another question from E Chang Ho Donlin, Secondly, put you on the stage.

Go ahead Ian.

Hello, Hey go.

Go ahead hi.

Thank you for taking my follow up just very quickly was there a precedent in the clinical development for Dr. <unk>.

Candidate was.

<unk>.

He was able to be advancing to phase III trial directly from our phase one trial.

Im sorry, Youre asking if there is a precedent in the industry.

Yes precedent in the entire industry for clinical development for Dr.

Sure.

I'm not aware of specifically if I can.

Pass it off to Peter Peter are you there.

When you when you look at how tyrosine kinase inhibitors were they worked to prevent downstream activation of certain tyrosine kinase is depending on.

Basically several factors and in the case of the bid has.

Potency very high potency at the VEGF receptors as well as the potency at the PDGF receptors. When you look at our data from macular degeneration.

It's following the same path that you would expect for an anti VEGF.

To perform at and so because of that we know very well that diabetic retinopathy.

Basically mirrors macular degeneration when it comes to the anti VEGF effect and then when you add the anti PDGF effect, where we know that in diabetes one of it one of the sort of late complications is what something called contractually attachment, which is formed it helped form by EDF.

And so that in and of itself.

Show that you would have a benefit.

In terms of clinical precedent. There is there is no previous clinical study in diabetic retinopathy, they've tested tyrosine kinase inhibitor.

Inhibitors, we haven't but it has been tested.

For diabetic macular edema with success.

As well as preclinical models so.

For us there's plenty of data that would support it that's why we're doing a phase one clinical study.

The goal then is with.

<unk>.

That showing what we need to basically.

We need to figure out sort of how quickly does the effect occur.

And what is the magnitude of the effect and from that we can do some power calculations to determine the phase III three the size of the phase III <unk> study and so thats, what we intend to get from the from the Phase One study the nice thing.

About.

The study, we're proposing as the FDA.

It allows us to also have a control group and so this really is important, especially when you talk about diabetic retinopathy severity to have a control group to really be able to compare directly.

As opposed to a traditional phase one where were you only put in your own drug and you have really no idea what the control group would be and you have to use natural history.

So we're pretty excited to get those results and then from that design.

Very large study based on it.

I think it's important background also means these contracts phase II and phase III are not FDA concepts they are actually companies concepts.

And the reason why phase twos are done I have a long background in areas like diabetic retinopathy, where you're able to do first in human studies in actual patients so youre able to get proof of concept.

Youre getting safety data, which is obviously the primary reason for doing the phase one program. When you have proof of concept the FDA, just six pivotal or non pivotal.

And we have the ability because we have proof of concept and so certainly we expect to have proof of concept for diabetic retinopathy.

That we can then jump straight into a pivotal trial. This is done routinely in oncology settings in other settings, where youre able to do a first in human studies.

And rather than in healthy volunteers would do them in patients with active disease.

And we have 45 patients in wet AMD, where we understand how our drug works in a number of different ways and a number of different populations.

Is adequate from our standpoint.

Adequate from the FDA standpoint, we presume once we have a discussion with them to jump directly into a pivotal trial.

Not a hugely when youre working with known mechanisms and you have clinical trial data in populations with active disease. So we certainly expect to have that.

That box ticked with Dr. Not only with our own programs, but looking at other potential programs that may be able to read on to.

What would give us confidence to go directly into a pivotal.

Got it thank you.

Thank you for your question again, if you'd like to ask some.

Some questions. Please press star one on your telephone now anticipate just a couple of seconds here.

Okay.

Alright.

Alright, there appears to be no additional questions at this time, so I'd like to turn it back over to Anthony Martinez for closing remarks.

Thank everyone for their attendance and for the very insightful questions that usually insightful questions from the analysts.

We are very excited about our future very excited about being able to complete our phase II trials for <unk>, which is often forgotten product that we still have them.

Very strong belief and excitement for.

Clearly our nine month data.

We will be releasing at a conference a very soon for for our Ots PKI in that nine months data in wet AMD becomes extremely interesting because that really is the time point.

<unk> looked at as the primary endpoint for wet AMD studies. So I think the performance of the drug at nine months is going to be far more interesting than what it was at seven months.

And what we've been seeing so far in the month of October with.

With DEXTENZA and where we've got 11500 billable inserts in October which is almost 1000 more than we've ever done in the past.

This is particularly interesting because this is the first month of the quarter and we usually do best in our last month of quarter. The previous two records were in final final months of the quarter.

I'm not going to declare victory yet we want to make sure that that continues to roll forward.

But there are a number of factors that we think will play into.

What we hope to be able to achieve with DEXTENZA.

One of which we're very excited about with the Lps final rule, where we were moved into a APC category.

That comes with a $2100 payment and the PD.

We still have the status indicator for that that has not changed to allow payment in the in the ASC setting.

But we believe that we have good data going forward and good arguments to be able to get that status indicator change to the status indicator for all of the other products in that APC.

And look to our facility payment.

Hopefully sometime in 2024.

Which would rebalance some of the economics around the product and something that would create a lot of excitement in the surgical setting going forward as well.

So with that I, thank everyone for being on the phone and four for sticking with US as we continue to advance our pipeline forward. Thank you.

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Good day, and thank you for standing by and welcome to the ocular Therapeutics third quarter 2020 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone.

Then here an automated message advising Ian you handle freight due to time you only get one question and a follow up please be advised that today's conference is being recorded I would like I would now like to hand, it over a conference to your speaker today Donlin not named the CFO .

Go ahead gentlemen.

Thank you operator, good afternoon, everyone and thank you for joining us on our third quarter 2022 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 programs and details of the company's financial.

<unk> for the third quarter ended September 32022 press release can be accessed on the investors portion of our website at investors that Ocu, TX Dot com.

Leading the call today will be Antony modest hedge our president and Chief Executive Officer, who will provide an update on our pipeline development and the commercial progress of DEXTENZA.

Also speaking on the call today will be Dr. Ravi <unk>, our Chief Medical Officer, and Dr. Peter Kaiser our chief Medical advisor wrapped up.

Following their remarks, I will provide an overview of the financial highlights for the quarter before turning the call back over to Anthony for a summary and questions.

For Q&A, we will also be joined by Chris White, Our Chief business Officer, and Scott Corning, Our senior Vice President commercial.

As a reminder, today's call certain statements, we will be making may be considered forward looking for purposes of the private Securities Litigation Reform Act of 1095 in particular any statements regarding our regulatory and product development plans as well as our research activities and our financial projections.

Our 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 the most recent quarterly report filed this afternoon with the SEC and our annual report on Form 10-K filed on February 28, with the SEC.

Yeah.

I will now turn the call over to Anthony.

Thanks Bill.

With the release of the topline data and our intent to pursue this in both wet AMD and diabetic retinopathy I believe we are establishing ourselves as a future leader in the back of the eye.

Added to our established expertise in the front of the eye I am pleased to say that we continue to make significant strides building ocular therapeutics is a comprehensive strategic player in the ophthalmology space.

As a reminder of the context for the U S based phase one trial of OTI PKI. We've previously demonstrated in our Australia based phase one trial that we were able to deliver bespoke depot formulations of our proprietary hydrogel capable of resolving sub retinal <unk> intraregional fluid.

To do this we treated uncontrolled patients with <unk> as monotherapy.

Without the benefit of concomitant medication or induction therapy, and then observed OTT OTT scan and noted clinically meaningful reductions in fluid and you can complete resolution in some patients.

We don't believe this has been shown previously with any other teekay is delivered individually nor.

Nor has it been attempted.

In addition to demonstrating that exit and have delivered through our hydrogel depots was potent enough to resolve fluid as monotherapy in some patients. We also observe a dose response, we continue to believe the potency of exiting it and its uptake in the retinal pigment epithelium or RPE cells are responsible for these observations.

The next step was to take <unk>, PKI and test its durability and maintaining retinal thickness and V CVA and controls wet AMD patients and in a setting with an active control group.

Our recently reported interim results from our U S based phase one trial did just that with resounding success.

I will let Ravi and Peter go over the particulars of the trial, but the takeaway is that we were able to demonstrate that 80% of patients reached the six month time point without the need for rescue and 73% were able to go through seven months.

Importantly, both.

Best corrected visual acuity as measured by EEP, Drs charts, and retinal thickness as measured by OTT and PKI related patients were comparable to the control arm of the 108 weekly IV yet.

It should also be noted that none of the rescue patients in the trial met the rescue criteria set forth in the clinical trial protocol.

In addition to moving <unk> into a phase three trial for wet AMD in quarter three of 2023.

Also plan to initiate a phase one trial in diabetic retinopathy in the first quarter of 2023.

Relative to the potential of the opportunity and our own expectations, which represents a disappointing result in is clearly unacceptable.

We believe that there are three main reasons for the expense performance. The first is that our customers ASE and <unk> remain in a difficult situation.

Since the pandemic the majority of our customers have been chronically short of staff or recently re staffed with generally less experienced people than they had before the pandemic.

Unbilled products like DEXTENZA are a huge advantage for the ASE and <unk> PD, one administered appropriately do required experience back office staff and surgical staff to properly implement and administer.

Understandably in the current environment Asc's nature of these are reluctant to add extra work and complexity.

The second reason is that we are in a similar position as our customers and our own ability to maintain an experienced field based team with minimal vacancy, which we have which have been higher than we would have liked over the past few quarters.

The final reason behind Extenders performance has to do with changes in the reimbursement landscape for the procedure codes CPT 68841, and it's and it is clear that volume has been impacted due to the reduction in physician payment for the insertion of DEXTENZA when our procedure or CPT code was converted from a category III code into a category one code.

As of January one.

'twenty two.

Most important going forward, though is not about what has caused the slowdown, but how we plan to reignite growth.

I am happy to report the variable over which we believe we have the most control is the closest to being resolved.

We are now nearly at full capacity in our field force with the team trained and in the field.

Clearly it is not just about having vacancies filled but also about focusing on our strategy of deepening involvement with our customers and helping them get the on patients with Medicare part b into advantaged Pan and commercial Payors.

We've had tremendous improvements in coverage and reimbursement of late and we need to get our customers comfortable giving more patients access to the benefits of DEXTENZA.

The next two elements over which we believe we can have the most control or the value proposition for DEXTENZA and a.

A procedure code 608, <unk> hundred one associated with insertion.

Last quarter, we began issuing an off invoice discount it was well received by our customer base as it removes the most common objection voiced by our accounts.

We also have implemented a number of strategies working with CMS in an effort to appropriately rebalance the value proposition for DEXTENZA and CPT $6 eight a four one in the future.

Do you expect this growth to continue for the remainder of the fourth quarter and accelerate going forward.

Do not believe that we will have a fourth quarter strong enough to reach our original guidance of $55 million to $60 million in net revenue.

Consequently, we are adjusting guidance for full year net revenues to between $48 million and $52 million, which represents a growth over prior year of between 10% and 20%.

With that as a summary, let me turn the call over to our Chief Medical Officer, Dr. Robert <unk> to take you through the pipeline.

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

During the annual meeting in September .

Hit multiple presentations, providing updates on our Dx PKI being developed for the treatment of wet AMD and other indications.

By far and away the highlight from the meeting was the presentation of month, six and month seven interim data from our U S based.

One trial.

This was a multi centered prospective randomized controlled trial into any one subject.

600, microgram or T X T J I dose in a single implant containing our assistant compared to all of the diverse set administered eight.

Every eight weeks in control with AMD subjects previously treated with anti VEGF therapy.

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

T J.

And to assess preliminary biological activity in subjects by measuring anatomical and functional changes of their internet.

Overall, we could not have been more pleased with this is that.

<unk> was generally well tolerated there were no drug related ocular or systemic series adverse events.

That was one the CEO of artists and Ophthalmitis in the Ot or TX PKI arm Mitchell goes for living a Monday, just after the reset injection at month one.

Using the data cutoff date of August 24, two anti to antitumor data show subjects treated with a single <unk> PKI implant demonstrated stable and.

Sustained best corrected visual acuity.

CBA mean change from baseline of negative one three letters and central subfield Foveal thickness, CFT mean change from baseline.

Nine to micrometer in the.

<unk> <unk> Teekay high arm, it's seven months, which was comparable with the other diverse set time dosed every eight weeks.

Mean change from CVA baseline of minus one this latest mean change from CSA ft baseline positive.

Micrometer.

Importantly, the data also showed that aimed at first on those subjects in the <unk> the rescue free after six months and 73% of subjects in the <unk>.

Risk risky.

Free up to seven months.

I believe the data highlights the potential of <unk> to become a differentiated product capable of providing a durable anti VEGF response that improves upon today's standard.

As of care in the management of the AMD deep.

We plan to share this data along with the encouraging data from our Australia based phase one trial with <unk>.

D a.

Subject to discussions with FDA plan to initiate a phase two three clinical trial in the third quarter of two anti <unk> two antibody.

We plan to provide a second data update for the U S based phase <unk> trial.

Angiogenesis exudation and degeneration two anti <unk> annual meeting in February that will include.

Safety and efficacy data.

In addition to wet AMD, we plan to initiate a phase one trial evaluating <unk> for the treatment of diabetic retinopathy in the first quarter of two anti advance Chi and Peter will give more information on this trial.

Moving to our glaucoma program or DXP IC.

Continued to actively enrolled subjects in the U S based phase II clinical trial.

This trial is a prospective multi center randomized controlled trial.

Getting the safety Tolerability and efficacy of <unk> for the reduction of intraocular pressure in.

In patients with primary open angle glaucoma or ocular hypertension.

We plan to enroll approximately 105 subjects in three different time randomized one to one to one in which the subjects received a single or TXT EIC implant containing five microgram or 206 microgram dose of <unk>.

For us compared with an implant obdurate that.

The five microgram arm.

Utilizing our fifth.

Degrading in plan.

While the $2 six microgram arm is utilizing a standout degrading implant.

The trial is designed to offset the changes in diurnal intraocular pressure IOP from baseline.

10 am and four PM at two six and 12 weeks and Paulo duration of IOP response over time.

We plan to provide the topline data for this phase II clinical trial in the fourth quarter of two anti <unk>.

Regarding our ocular surface disease program.

Remain committed to the development of our <unk>.

Graham in a measured Manish Ot.

<unk> and low dose <unk> Canadian cooler insert containing dexamethasone for the short term treatment of the signs and symptoms of dry eye disease, and <unk> CSI is cyclosporin <unk> insert for the chronic treatment of.

Patients with dry eye disease.

With regard to DSD, we remain on track to begin a collaborative trial in the first half of two anti <unk> two antibody to evaluate the performance of Ot HDD versus placebo in <unk>, namely task dissolving colajanni blocks.

No in search.

We have designed this trial to explain the magnitude of the blue.

<unk> seen in both.

All TXT.

And the old <unk> CSI phase II trials in which did vehicle hydrogel placebo insert or placebo company to remain in the kind of like Louis longer than anticipated performing more like an active comparator placebo compared eight ish.

Planned to use the results of this trial to inform the selection of a more appropriate placebo compensated for both deal with DXP D. <unk> CSI programs moving forward.

I would now like to turn the call over to Peter to discuss more specifics specifics around the development plans for <unk> PKI in both wet AMD and diabetic retinopathy.

Thanks, Rob.

We announced plans to advance <unk> into a phase III trial in wet age related macular degeneration as well as initiate a new trial and a new indication evaluating <unk> PKI.

For treatment of diabetic retinopathy.

And wet macular generation, we have been doing a tremendous amount of work since the U S. Based phase one interim results were first made available to find ways to expedite trials powered statistically demonstrate the profile that we see emerging.

As we pursue this importantly, we have the benefit of a deep base of experience with the product that may be underappreciated.

For example in the TK I program, we dosed our first patient early 2019 and have now had over 45 patients who have received <unk> therapy with <unk>.

Over 850 patient visits.

<unk> has been studied as both a monotherapy and in combination with anti VEGF.

Been tested in a randomized study and a well controlled and actively leaking patient study as well as in patients who are treatment naive both as a monotherapy and combination therapy.

Across it all <unk> has demonstrated a remarkable consistency of effect.

We believe this gives ocular the largest data set relative to any other company evaluating a PKI and wet macular degeneration, which we of course plan to share with the FDA at our type C meeting at which we will discuss our phase III strategy.

In addition to wet AMD, we plan to initiate a phase one trial to evaluate <unk> in diabetic retinopathy in the first quarter of 2023.

Diabetic retinopathy is a leading cause of blindness affecting an estimated $8 4 million patients in the U S and $149 million globally. According to market scope.

Typically diabetic patients will develop diabetic retinopathy.

<unk> had diabetes for between three and five years.

In the early stages diabetic retinopathy will not affect site, but if it is not treated and progresses. Eventually this site will be affected.

In fact, it is the number one cause of legal blindness in the working age population.

Given the slow onset and the fact that diabetes affects a younger working age population the required frequency of current anti VEGF therapies makes effective treatment, especially challenging and.

And this is where we believe <unk> with its designed to durability of up to nine months or longer may be especially effective.

We believe the same attributes that make <unk>, a compelling product in wet macular degeneration. The ease of use of our office space injection and long term durability could establish this as the first standard of care in the treatment of diabetic retinopathy.

We also believe that the regulatory path is more straightforward given that the comparator in our registration trial would likely be placebo. Since there is no established standard of care.

Finally, we see the diabetic retinopathy space given its requirement for extended durability is inherently less competitive.

Wet AMD market.

We plan to conduct a U S based phase one trial under an IND across approximately 10 sites and will include approximately 20 patients randomized either 600 microgram.

<unk> single implant containing a CIT nib or sham control.

Based on our positive interim results in our U S based phase one trial in wet age related macular degeneration, we believe that <unk> should perform well in the phase one diabetic retinopathy trial.

The current data and depending on the outcome of the phase <unk> study and a follow up meeting with the FDA. We believe that we may be in a position to move aggressively and to initiate our first phase III pivotal trial <unk> for the treatment of diabetic retinopathy in the first quarter of 2024.

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

Thanks, Peter net revenue, which includes both gross product revenue net of discounts rebates and returns, which the company refers to as total net product revenue and.

And collaboration revenue was $12 million for the third quarter of 2022 and represented an approximately 2% decrease over the same period in 2021.

Net product revenue was $11 $9 million flat the comparable quarter of 2021 and down approximately 2% on a sequential quarterly basis.

Net revenue in the third quarter of 2022 also included $1 million in collaboration revenue associated with companies work with Avnet.

And net product revenue in the third quarter of 2021 included $3 million attributable to the sales of <unk> sealant.

Research and development expenses for the third quarter were $13 7 million versus $12 7 million for the comparable period in 2021.

Driven primarily by an increase in personnel and a higher level of preclinical development activity.

Selling and marketing expenses in the third quarter were $10 2 million as compared to $9 6 million for the comparable period of 2021.

Collecting primarily an increase in field personnel.

The company recorded a net loss for the third quarter of $24 2 million.

Or a loss of 31 per share on a basic and diluted basis.

Compared to net income of $2 6 million.

<unk> net income.

<unk> per share on a basic basis and a loss of 23 per share on a diluted basis for the same period in 2021.

Net loss in the third quarter of 2022 included a $1 $1 million noncash item attributable to an increase in the fair value of the derivative liability associated with the company's convertible notes as.

As the price of its common stock increased during the quarter.

Noncash charges for stock based compensation and depreciation and amortization were $4 7 million in the third quarter of 2022 versus $4 4 million for the same quarter in 2021.

As of November four 2022, the company had 77.

<unk> shares outstanding.

As of September 32022, the company had $121 million in cash and cash equivalents versus $134 5 million at June 32022.

Based on current plans the company believes that its existing cash and cash equivalents are sufficient to fund operations through 2023.

I would now like to turn the call back over to Anthony for some final thoughts.

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

We intend to initiate a phase one trial of <unk> for diabetic retinopathy in the first quarter of 2023.

And believe we may be positioned to commence our first phase III pivotal trial in the first quarter of 2024.

We plan to initiate a phase III trial of OTI PKI for wet AMD in the third quarter of 2023.

We plan to continue enrollment of the phase II trial of <unk> CIC in glaucoma and should be in a position to release top line data in the fourth quarter of 2023.

We now have a full team in place selling DEXTENZA in the surgical setting with an enhanced value proposition that we believe should reignite our growth trajectory. We have started with a record month in October and we have $121 million in cash as of September 30, and continues to guide our cash runway through 2023.

Look forward to a strong remaining 2022 and with that I'll turn the call over to questions.

Thank you at this time, we will conduct a question and answer session.

To ask a question you will need to press star one on your telephone and wait for you mean.

With limited time, we will only have time for one question and one follow up please standby as we compile the Q&A roster.

Our first question comes from the line of Joe <unk> from Piper Sandler go ahead Joe.

Hey, guys. Thanks for taking my questions here I'll try and stick.

Two questions maybe first.

Diabetic retinopathy, just wondering why that study is moving forward under an exploratory R&D and not the traditional R&D that would maybe allow potentially for a more robust study and whether 20 patients worth of data is sufficient.

Data set to answer any questions ahead of a potential phase III start in 2024 and then.

With regards to the type C meeting.

The FDA and PKI in wet AMD I guess, what is the sort of main questions and feedback youre, hoping to get there and how does the re formulation work that you guys are doing factor into those discussions if at all thanks.

Farmer Mac's question after Peter since he is.

Running point on the diabetic retinopathy, Peter you want to try and tackle that.

Sure. Thanks for the question when it comes to.

Thanks.

When it comes to diabetic retinopathy the key the key feature here is.

We're working on we have to decide is it better to use our one by 600 or is it better to use our.

And start forward now or is it better to.

No.

Later with.

Maybe a reformulated version into us moving forward with the EIA.

Given the number of patients that it allows us to use works perfectly fine.

The second question in terms of the macular degeneration.

You have to look at the when we look at the FDA the FDA will allow us to do.

Decision is going to be.

What type of combination therapy, they're going to call. It if you do say three anti VEGF injections now versus one versus non shall we enroll patients who are treatment naive all comers patients previously treated and what did they consider previously treated it's a discussion that did at any company.

Looking at in this space is going to have to have with the FDA. We don't want to have that discussion until we have all the patients basically from from both of our phase one studies completing the study.

Best chance of deciding what is best to move out.

Does that answer your question, yes, that's all very very helpful. Thanks for taking my questions.

Yeah.

Alright, our next question comes from Christopher Howerton.

From Jefferies hold on to it today.

Alright. Your line is now open.

Hi, This is <unk> on for Chris Thanks for taking the question team.

For DEXTENZA what is the priority.

Office or amber.

Ambulatory surgical centers.

And then.

On <unk>, what is the best indication first and a label that potash wet AMD.

Thank you very much.

Yes.

First part on the expenses I mean, clearly our business runs on the surgical setting now and the focus is getting growth reignited in the surgical setting.

That is priority one two and three at the moment.

Secondarily talking about diabetic retinopathy, and why we think that's such a great opportunity.

And given the profile of the diabetic retinopathy patients as Peter had mentioned.

Our patients who are primarily working age population. They are have a number of other conditions for which they are receiving active treatment.

The burden of.

<unk>.

A frequent injection is actually too much for them to bear and they would rather risk losing sight then have to go in for either once once monthly or once eight weekly injections with anti VEGF, we think that we have a formulation.

We believe that could last for a year or longer.

We think that changes the goalposts entirely and a once yearly formulation and diabetic retinopathy.

With a favorable safety profile.

We think that would be tolerable.

We wouldn't expect every diabetic retinopathy patients to convert two to therapy without XT Cai.

But given the number of patients with diabetic retinopathy.

<unk> that number from 90% of patients being untreated to 80% of patients being untreated Cree.

Creates a significant product opportunity.

You marry that with the <unk>.

<unk> regulatory path that we can go directly against sham rather than against an active comparator.

We think this is a natural opportunity for us that doesn't mean wet AMD is not an opportunity that we are very excited about and seeking to.

Two.

Develop a clinical program in order to get registration there.

But we do understand that the highly competitive environment.

And that that is a.

So expensive far more expensive clinical trial, so we're not doing it either our approach, but we are particularly excited about diabetic retinopathy.

Our product profile actually creates a new opportunity in that space that doesn't exist presently.

Okay. Thank you very much.

Okay.

Alright. Our next question comes from the line of <unk> Chen.

<unk> CH lane rates.

Thank you.

Thank you Allison.

And so.

So sorry go ahead Robin.

Hello.

Okay.

Yes, yes, okay.

My first question is can you elaborate on the cost of staffing shortage and why do you believe it is a transient problem.

Staffing shortages the same staffing shortage you realize when your flights delayed for hours because they can't find pilots to fly it.

It's a post pandemic issue that's across the board in a number of different industries, but there is nothing.

The difference I think in the ASC and hospital environment.

Particularly on the administrative level, where these are these are fairly low level of employees that.

Seem to have disappeared during the COVID-19.

The COVID-19 pandemic and not come back into the workforce with the same the same vigor as they left it.

So we are very much at the mercy of the macroeconomic situation when that when that Ameliorates I expect the ASC in hospitals to be back to normal as well.

Okay and.

What kind of sales boost for <unk> do you expect.

2023, considering the fact that to execute we will no longer has pass through status starting January one.

Well, we certainly expect to pick up some of the volume that <unk> been able to achieve this.

Somewhere between a third and a half of what our volume is.

So we would expect some of that to move over we would expect some of that would probably go into.

Some of the formulations that exist on the compounding side.

We have certainly internal assumptions of what we think we'll be able to get and we have some certainly some anecdotal data of <unk>.

Who are looking to place orders as they move their business over to a product that will continue to have separate payment.

But we have not quantified that and we will give some guidance.

As we move past the fourth quarter, we've seen a really nice trend break.

Starting in October we believe Thats real we believe it's real both because of our.

The staffing we have internally because the market is getting better.

But also because I think our strategy is deepening and how we are able to move patients passed or move or.

Our customers past med part B and take advantage of some of the gains we've made in the private payer environment.

But we will wait to see what that trend line looks like before we look at what 2023 guidance will look like.

Thank you for that question again as a reminder, if you'd like to ask a question from one of our presenters. Please press star one on your telephone and wait for your name to be cloud.

Our next question.

Comes from the line of Jan Z.

B Riley your phone line is now open.

Hi, Thank you for taking our question.

Can you comment on the diabetic <unk>.

The patient journey.

Tempted all while patients are non proliferative poor on PPR and at which point. These patients we all feel the urgency of the current treatments anti right Jeff. Thank you.

So that's a great question one to us when a patient comes in with diabetic retinopathy.

Sort of two different buckets, one is the patient to doesn't realize why they're there and they're endocrinologist or primary care Doctor says you have to get an eye exam.

And the second type of patient is one who is actually losing vision.

From from diabetes, and diabetic retinopathy, you hear me.

Yes can you hear us.

Sure.

Yes.

So so what I was saying is there is two types of patients with diabetic retinopathy, one doesn't realize they have it.

It doesn't have any visual changes and the other is one who is noticing visual changes and it doesn't really.

Could have this with severe non proliferative disease.

By the time it gets to proliferative disease are usually symptomatic.

Oftentimes those patients who are floaters they'll have decreased vision.

They may even have it way worse than that.

From the Neovasc utilization that we see in proliferative disease when it comes to non proliferative disease.

Most of these patients.

<unk> a good choice because these are patients who would improve their diabetic retinopathy with it with a treatment theoretically our treatments with last seven to eight nine maybe even longer months.

So an injection every so often in these working age patients is very palatable and.

The benefit is very real but the reason we don't use it in patients don't wanted this because as much as the benefit is real it's just the frequency of injection.

It's not possible to keep up.

I do have patients who do.

Get anti VEGF injections for diabetic retinopathy, but theyre in that in the vast minority.

So hopefully that answered your question.

Yes, that's very helpful. Thank you.

And then just again as a reminder, if you'd like to ask our speakers a question. Please press star one on your telephone keypad.

Just in the queue.

Alright. Our next question comes from the line of.

Giordano from Cowen your.

Your line is open.

Well. Thank you so much for taking our questions and congratulations on another progress.

The data from OTI stickier, so maybe to follow up on the previous discussion on the re formulations that Youre planning you mentioned that you are.

You are looking.

On the previous call that you are looking into a lower drug load in <unk> that has a faster drug release profile.

Maybe can you talk about what made you explore.

This option and what would you be looking for in terms of.

<unk>.

Product profile before you can initiate that trial and.

I guess when when do you think youll have clarity if you've been able to.

To successfully achieve year ago.

Yes, let me start with that and I think this is one of the elements, where I had made a lot of mistakes in my life, probably one of the bigger ones was talking about re formulations with without without the XD Cai.

If we if we need to go forward with that we will go forward with that formulation. So theres nothing formulation related thats, causing any delays in what we look at going forward.

Now as formulated Theres, a magical perfect formulation.

Formulation is that from the moment the last particle of drug Aleut side of the depot the depot spontaneously by a resorbs and disappears.

You will never get a formulation that is that perfect. There's always going to be a situation where either the depot last longer than the drug or the drug lasts longer than the depot.

And what we're doing is what we do with all of our.

Formulations and every time, we move forward, we attempt to improve upon the formulation that we have.

So we have a number of projects going forward that are looking at improved formulations that fit closer to that ideal.

But as those formulations arent ready at the time that we're ready to go into phase III.

We will go with the existing formulation, particularly.

We have the advantage of being.

Enable to do first and second pivotal where the second pivotal is the is where you need.

Your final marketed formulation.

So there is nothing in the formulation of these products that's delaying us.

But we are searching for perfection and we are starting really much with the end in mind that we think that we need to bring forward products that are not only commercially viable.

But actually will will be the best product that we can develop before we go into the pivotal.

This is super helpful. And then maybe just as my follow up.

Do you have.

Andy I guess point there is their idea of like what would be the timeline to seeing.

From the phase III trial and is it possible to do this trial.

Serves as one of two pivotal <unk>.

Yes, that's that's what's really when we talk about when people are saying why is it taking a while before we get into these later stage clinical trials.

But we don't see doing a classic phase II.

<unk>.

As a necessary strategy for us. So we are looking very much to going directly into our first pivotal and then running nearly.

On top of that our second pivotal there'll probably be a little bit of a delay between the first and second pivotal.

In order just to get those started and the best possible way, but we are able to look at those programs and then think about the next act being the completion of those trials and then the NDA filing.

So we are very much collapsing these programs and expect to we haven't given guidance on when we actually expect to get those.

Are those data back yet, but we will once we get those programs started.

Thank you. Our next question comes from the line of Caroline Polo Mchugh from Brian Bob Go ahead Caroline.

Hi, Thanks for taking the question just thinking about the next 12 to 18 months you have several late stage trial do you expect to initiate both the wet AMD and Dr. Just wondering if you can give some guidance as to the increase in R&D spend or the cost of the trial.

Thanks.

Wet AMD trials are somewhat longer and more involved we have put as you noticed with wet AMD a phase two three trial.

And our runway calculations, we have put in enough patients for the phase two trial.

But we are clearly looking at potential partnerships that could help us gross that up into our into our first pivotal it's really about the number of patients.

We've long stated that the.

Next trials, we would go into our phase one would be trials.

That if they had enough patients in them would serve as pivotal clearly we're going to get the advice of the FDA before we settle on exactly what those.

Those protocols look like.

It's hard to exactly priced them up and understand exactly when theyre going to complete before we really know what those protocols look like.

Great that's really helpful.

I appreciate that and just a quick follow up.

Oh.

Sure you saw that as well.

Yes.

Okay.

Yes, just a quick follow up on that just wondering you mentioned the partnership just wondering if theres anything.

Any companies that you already have in mind are you already in conversations with sort of an ideal partner that you have.

I have in mind.

Yes, certainly forward for CIC and <unk>. The ideal partner is somebody who can appropriately globalize the products that we're developing.

We are developing these products for the benefit of patients throughout the world.

We have certainly the ability to commercialize in the U S, where we built the differentiated buy and bill.

Our commercial sales team.

In front of the eye and we believe we can do it in the back of the eye as well.

But the ideal partner would be somebody that could give justice to these products and make sure that patients throughout the world can benefit from them.

Okay.

Perfect. Thank you for your question Alright again, a reminder, just please press star one on your telephone if you'd like to ask our present cash <unk> question.

Have another question from ethane so hold on one second we put you on the stage.

Go ahead Ian.

Hello go.

Go ahead hi.

For taking my follow up just very quickly was there a precedent into clinical development for Dr.

Candidate was.

<unk>.

He was able to be advancing to phase III trial directly from our phase one trial.

Im sorry, Youre asking if there is a precedent in the industry.

Yes precedent in the entire industry for clinical development for Dr.

I'm not aware of specifically of Drs.

Pass it off to Peter Peter are you there.

When you when you look at how tyrosine kinase inhibitors work they work to prevent downstream activation of certain tyrosine kinase is depending on.

Basically several factors and in the case of <unk>, but has.

See very high potency at the VEGF receptors as well as the potency at the PDGF receptors. When you look at our data from macular degeneration.

It's following the same path that you would expect for an anti VEGF.

To perform at and so because of that we know very well that diabetic retinopathy.

Is formed it helped form by PBF.

And so that they don't have itself.

Show that you would have a benefit.

In terms of clinical precedent. There is there is no previous clinical study in diabetic retinopathy, they've tested tyrosine kinase inhibitor.

Inhibitors, we haven't but it has been tested.

For diabetic macular edema with success.

As well as preclinical models so.

For us there's plenty of data that would support it that's why we're doing a phase one clinical study.

And the goal then is.

With.

That showing what we need to basically.

The thing we need to figure out sort of how quickly does the effect occur.

And what is the magnitude of the effect and from that we can do some power calculations to determine the phase III three the size of the phase III study and so thats, what we intend to get from the from the Phase One study the nice thing.

<unk>.

The study, we're proposing as the FDA.

It allows us to also have a control group and so this really is important, especially when you talk about diabetic retinopathy severity to have a control group to really be able to compare directly.

As opposed to a traditional phase one where were you only put in your own drug and you have really no idea what the control group would be and you have to use natural history.

So we're pretty excited to get those results and then from that design.

A very large study based on it.

I think it's important background also means these contracts phase II and phase III are not FDA concepts. They are actually company concepts.

And the reason why phase twos are done I have a long background in areas like diabetic retinopathy, where you're able to do first in human studies in actual patients. So youre able to get proof of concept well youre getting safety data, which is obviously the primary reason for doing the phase one program. When you have proof of concept the FDA just see.

<unk> pivotal or non pivotal.

And we have the ability because we have proof of concept and so certainly we expect to have proof of concept for diabetic retinopathy.

That we can then jump straight into a pivotal trial. This is done routinely in oncology settings and in other settings, where youre able to do a first in human studies.

And rather than in healthy volunteers and patients with active disease.

And we have 45 patients in wet AMD, where we understand how our drug works in a number of different ways and a number of different populations.

Is adequate from our standpoint.

Adequate from the FDA standpoint, we presume once we have a discussion with them to jump directly into a pivotal trial.

Not a hugely when youre working with known mechanisms and you have clinical trial data and populations with active disease. So we certainly expect to have that box ticked with Dr. Not only with our own programs, but looking at other potential programs that may be able to read on to.

What would give us confidence to go directly into a pivotal.

Got it thank you.

Thank you for your question again, if you'd like to ask our speakers some.

Some questions. Please press star one on your telephone now, we'll just wait a couple of seconds here.

Okay.

Alright.

Alright, okay.

With no additional questions at this time, so I'd like to turn it back over to Anthony Martinez for closing remarks, I just want to thank everyone for their attendance and for the very insightful questions. The usual insightful questions from the analysts.

We are very excited about our future very excited about being able to complete our phase II trials for <unk>, which is often forgotten product that we still have.

I am very strong belief and excitement for.

Clearly our nine months data, we will be releasing at a conference a very soon for for our Ots PKI in that nine month data in wet AMD becomes extremely interesting because that really is the time point that the FDA looks at as the primary endpoint for wet AMD studies. So I think the performance of the drug at nine months is going to be far more.

Interesting than what it was at seven months.

And what we've been seeing so far in the month of October with.

With DEXTENZA and where we've got 11500 billable inserts in October which is almost 1000 more than we've ever done in the past.

I am not going to declare victory yet we want to make sure that that continues to roll forward.

But there are a number of factors that we think will play into.

What we hope to be able to achieve with DEXTENZA.

We're very excited about with the Lps final rule, where we were moved into APC category.

It comes with a 21 $100 payment and the PD.

We still have the status indicator for that that has not changed to allow payment in the ASC setting.

But we believe that we have good data going forward and good arguments to be able to get that status indicator change to the status indicators for all of the other products in that EPC.

And look to our facility payment.

Hopefully sometime in 2024.

Which would rebalance some of the economics around the product and something that would create a lot of excitement in the surgical setting going forward as well.

So with that I, thank everyone for being on the phone and four for sticking with US as we continue to advance our pipeline forward. Thank you.

Q3 2022 Ocular Therapeutix Inc Earnings Call

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