Ocular Therapeutix Inc (OCUL) 2014 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by and welcome to Ocular Therapeutix fourth-quarter and year-end 2014 earnings conference call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time.

It is now my pleasure to turn the floor over to Brad Smith, Chief Financial Officer of Ocular Therapeutix. Please go ahead, sir.

Thank you. Good morning, everyone, and welcome to Ocular Therapeutix fourth-quarter 2014 earnings conference call.

This morning we issued a press release providing details of the Company's financial results for the fourth quarter and also the year ended December 31, 2014. We also issued a press release announcing the topline efficacy results from our Phase 3a clinical trial of OTX-DP for the treatment of postsurgical ocular inflammation and pain. These press releases are available on the investor portion of our website at investors.OCUTX.com.

Leading the call today will be Dr. Amar Sawhney, our President and CEO, who will review our clinical and business milestones achieved during 2014 and recently and we will then conclude with a discussion of some of our upcoming milestones. Following Amar's remarks, I will provide an overview of the financial highlights for the fourth quarter and also full-year 2014 before we then open the call for questions.

Also joining us this morning are Scott Corning, our Vice President of Sales and Marketing, and Eric Ankerud, our Executive Vice President of Clinical, Regulatory and Quality.

As a reminder during today's call we will make certain forward-looking statements. Various remarks that we make during this call about the Company's future expectations, plans and prospects constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of a number of different factors including those discussed in the risk factors section of our most recently quarterly report on 10-Q filed with the SEC.

In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views change. These forward-looking statements should not be relied upon as representing our views of any date subsequent to today.

I will now turn the call over to Amar Sawhney.

Thank you, Brad. Good morning, everyone, and thank you for joining us today on our fourth-quarter and full-year ended 2014 earnings call.

2014 was a very busy year for Ocular Therapeutix and we are pleased to tell you that we have accomplished the goals that we set forth this year. We have made a great deal of clinical progress in 2014 and are very excited to see the momentum carrying into 2015.

Ocular is emerging as a fully integrated ophthalmology Company focused on both front of the eye and back of the eye conditions. Our vision is to change how treatment is delivered to the eye for various ophthalmic conditions using our proprietary hydrogel technology. This technology has solid intellectual property with multiple layers of protection. For front of the eye diseases and conditions, we are developing therapies with large market opportunities. We believe that its potential for our innovative drug-eluting punctum plugs to replace the standard of care eye drop regimens.

These plugs are noninvasively inserted into a natural opening called the punctum, an area located in the inner portion of the eyelid near the nose where they reside comfortably in the canaliculus below the punctal opening. We believe that our product candidates can provide an improved safety profile compared with eye drop therapies due to the lack of preservatives and our ability to avoid the peaks and valleys of dosage associated with topical eye drop administration.

With standard eye drop therapy given that 95% of the active drug is washed away after five minutes by the tears, high levels of drug are required to achieve the desired level of efficacy. Our lead punctum plug sustained-release product, OTX-DP, includes only 7% of the amount of drug required in eye drops and we believe has the potential to treat numerous inflammatory conditions. Importantly, we believe that our products may ultimately both increase treatment efficacy and reduce disease progression associated with patient noncompliance with eye drop therapies.

Our punctum plug candidates are designed to deliver drug either as a single dose replacement for acute conditions such as inflammation or replaceable two- to three-month therapy for chronic conditions.

We have a late stage product pipeline with several product candidates in Phase 2 and Phase 3 clinical development. OTX-DP is in Phase 3 clinical development for the treatment of postsurgical ocular inflammation and pain following cataract surgery. We selected the corticosteroid, dexamethasone, for sustained delivery through our punctum plugs for this indication. I will discuss the topline results we announced earlier this morning in the first of the two Phase 3 clinical trials shortly.

These trials were not only our first Phase 3 clinical trials for a sustained release pharmaceutical but we believe are the first Phase 3 trials ever to be conducted for a sustained release drug-eluting punctum plug.

During the fourth quarter, we initiated a Phase 2b clinical trial of OTX-DP, our product candidate for the treatment of -- OTX-TP -- our product candidate for the treatment of glaucoma and ocular hypertension. Additionally, during the fourth quarter, we completed a Phase 2 trial for OTX-DP for the treatment of allergic conjunctivitis and I will discuss those results in a moment.

Most recently in January we began an exploratory clinical trial to address a potential large market dry eye, a condition for which we believe our punctum plugs have great potential to deliver effective treatment.

Now I would like to recap all of our clinical accomplishments achieved in 2014. Let's begin with our anterior segment or front of the eye punctum plugs therapies.

Our clinical program evaluating sustained release dexamethasone, OTX-DP, continues to advance in multiple conditions including post surgery ocular inflammation pain as well as allergic conjunctivitis. In September 2014, we completed enrollment in two Phase 3 trials enrolling a total of 487 patients at 33 clinical sites in the US. This study is evaluating our sustained-release dexamethasone, OTX-DP, for the treatment of ocular post-surgical ocular pain inflammation following cataract surgery.

OTX-DP is a one-time administration product candidate placed in the canaliculus and designed to deliver dexamethasone to the ocular surface for approximately four weeks. Following treatment, OTX-DP resorbs and exits the nasolacrimal system without the need for removal. Following surgery, patients are randomized to receive either OTX-DP or a placebo vehicle punctum plug without active drug. Primary efficacy endpoints for the study are the absence of inflammatory cells in the interior chamber of the eye at day 14 and absence of pain at day eight.

This morning we announced the topline results from the first of the two Phase 3 clinical trials evaluating this drug product. We successfully achieved the co-primary endpoints of this Phase 3a trial which included 247 patients. We showed statistically significant differences between the treatment and control groups in the absence of inflammatory cells defined as zero cells at day 14 and the absence of pain defined as a score of zero being no pain at day eight. 33.7% of OTX-DP treated patients showed an absence of inflammatory cells in the anterior chamber of the study eye on day 14 following our drug product insertion compared to 14.6% of those receiving placebo vehicle controlled punctum plug, a P value of 0.0015.

In addition, 76.1% of patients receiving OTX-DP reported absence of pain in the study eye on day eight following insertion of the drug product compared to 36.1% of those receiving placebo vehicle controlled punctum plug, a P value less than 0.0001.

We expect to have results from the Phase 3b trial which includes 240 patients by the end of March and if we obtain favorable aggregate results for the two Phase 3 trials, we expect to submit an NDA to the FDA in the second quarter of 2015.

In November 2014, we announced encouraging results from our Phase 2 clinical trial for OTX-DP for the treatment of allergic conjunctivitis. The trial enrolled 68 patients with the intent to treat for reactions to a variety of allergens over a 42-day period. The primary efficacy measures were ocular itching and conjunctival redness at 14 days post insertion. We demonstrated statistically significant differences between the treatment and control groups across all days and all time points. Patients in the OTX-DP treatment group received a mean difference of more than 0.5 units on a five-point scale at day 14 and also at day 28 and day 42 for both ocular itching and conjunctival redness. We did not achieve a 1.0 unit difference at the majority of time points for ocular itching and conjunctival redness.

While these are the two treatment success criteria previously established by the FDA with other anti-allergic drops in the Ora-CAC or CAC model, there have been a number of our drops approved without meeting the 1.0 unit difference at the majority of time points. We observed a 0.8 to 1.0 unit difference at the majority of time points for ocular itching and saw a 1.0 unit difference for the third enrollment cohort in the study. We are designing the Phase 3 trials consistent with this third cohort.

In [recent] discussions we held with the FDA subsequent to the Phase 2 clinical trial, we have decided to advance this program in two Phase 3 clinical trials with two 72 patient studies which we expect to initiate in the second quarter of 2015. Importantly, we believe that we can leverage the safety data from prior OTX-DP studies for this program.

The trial used Ora, Inc.'s late phase conjunctival allergen challenge, or the CAC model, that was specifically developed to evaluate the efficacy of drugs for allergic inflammation. Ora is the world's leading independent full-service ophthalmic clinical research organization and product development firm, having taken part in 20 FDA approvals for ocular allergy products and 37 total FDA approvals to date. Ora is an ideal partner for us to work with. We look forward to our continued interaction with them as we advance our allergic conjunctivitis program.

In January, we expanded the clinical program for our sustained-release dexamethasone OTX-DP program and initiated an exploratory Phase 2 clinical trial for the treatment of inflammatory dry eye. The Phase 2 trial is expected to identify a subgroup of patients who may benefit from a low dose sustained-release dexamethasone therapy for the treatment of inflammatory dry eye disease.

Turning to our sustained-release travoprost product known as OTX-TP, enrollment began last November for a Phase 2b clinical trial evaluating the reduction of elevated intraocular pressure in patients with open angle glaucoma and ocular hypertension on 80 patients who will receive either OTX-TP and placebo drops or a placebo punctum plug and timolol drops. We have enrolled 50 patients in this trial to date and we expect to announce data from this study in the fourth quarter of 2015.

We also continue to evaluate sustained release injectable anti-VEGF drug depots for back of the eye diseases including wet age-related macular degeneration, or wet AMD. Our preclinical feasibility studies for our anti-VEGF hydrogel depots are nearing completion and we will determine our future path once we have the data.

If we obtain a positive outcome we could potentially explore a broader strategic alliance with one of our pharmaceutical company partners with whom we have ongoing feasibility agreements.

We are also conducting our own internal research on the sustained delivery of anti-VEGF drugs in parallel with these partnerships. As you can see, we have been very busy with advancing our robust clinical program for OTX-DP and OTX-TP. And we have executed on the milestones we previously set forth.

I would like to thank our team of employees who have worked hard to achieve our objectives in 2014 and we also look forward to carrying this momentum into 2015.

I will now turn the call back over to Brad who will review the fourth quarter 2014 financials and our liquidity.

Thanks, Amar. So starting with regard to liquidity, as of December 31, 2014, we had $74.8 million in cash, cash equivalents and marketable securities. Cash used in operating activities was $5.6 million for the fourth quarter of 2014 and $20.5 million for the year ended December 31, 2014. We expect cash used in operating activities to increase in 2015 to between $30 million and $35 million as we continue to advance our clinical development programs and expand our personnel to support the business.

We continue to believe that we have sufficient cash and cash equivalents and marketable securities to fund the Company through at least the first half of 2016 and through several very important clinical and commercial milestones within our product development programs.

These milestones include the initial commercialization of our lead OTX-DP program for postsurgical ocular inflammation of pain, assuming favorable clinical results in the combined Phase 3 trials and regulatory approval; the clinical development of expanded indications for OTX-DP in allergic conjunctivitis and inflammatory dry eye with expected clinical trial data readouts in 2015 for both programs; the continued clinical development of OTX-TP for the treatment of glaucoma in ocular hypertension, which is currently in Phase 2b trials in the US; as well as advancing our efforts on sustained-release intravitreal injections of anti-VEGF drugs using our hydrogel depot to treat back of the eye diseases including wet AMD.

For the fourth quarter ended December 31, 2014, we reported a net loss of $8 million or a loss of $0.37 per share. This compares to a net loss of $3.5 million or a loss of $1.32 per share for the fourth quarter of 2013. The net loss for the fourth quarter of 2014 included $1 million in non-cash charges for stock-based compensation compared to only $100,000 for the comparable quarter in 2013.

Revenues for the fourth quarter 2014 totaled $500,000 including $300,000 in collaboration revenue from our feasibility agreements with pharmaceutical company partners, and that is for the back of the eye anti-VEGF program as well as $200,000 in product revenue from sales of the ReSure Sealant. We don't expect product revenues from the sales of ReSure Sealant to be material in 2015 as we do not plan to hire a direct sales force until we prepare for the launch of our initial OTX-DP sustained drug delivery product candidate.

Total operating expenses during the fourth quarter of 2014 were $8 million which compares to $3.4 million for the same period in 2013. Research and development expenses increased to $5.1 million in the fourth quarter of 2014 compared to $2.8 million in the same period in 2013. The increase is due to a greater level of clinical development activities including the Phase 3 trials for OTX-DP for postsurgical inflammation and pain as well as the Phase 2b trial for glaucoma.

Internal development efforts on the anti-VEGF program as well as an expansion of the number of development programs we are pursuing for our OTX-DP product for multiple inflammatory conditions.

We had $15 million in debt outstanding as of December, 2014, and we have an interest-only period on that debt that extends through September of this year. And total shares outstanding as of the end of December 2014 were 21.3 million.

This concludes my comments on the fourth-quarter and full-year financial results in 2014 and also on our liquidity. And I will now turn it back over to the operator who will queue those of you up who have questions.

(Operator Instructions). Ken Cacciatore, Cowen.

Hey, guys, congratulations on the data today. Just a question around that program first. Can you just give us a sense of what the data looks like if you were comparing it to an active eye drop as opposed to placebo? Maybe just give us a sense of how that would potentially look.

And then on your Avastin I believe hydrogel program, wondering if you could give us a sense of what type of data and when we might see it as you have continued to try to play around with your own technology? Thank you.

Let me comment, this is Amar. Let me comment on the Avastin program first and then I will turn it over to Scott Corning to talk a little bit about the comparabilities.

The Avastin program, as you know, we have been doing internal work on it primarily for us to continue to advance our technology platform and to be able to have regulatory affairs types of discussions say with the agency. So this allows us to move forward independently and not be gated in that progress by interactions with our partners since we are restricted on how we can use their drug product. And we have been able to do a fair amount of work on that and understand release rates, activity, et cetera, and some of those data will be presented in two papers at the upcoming ARVO conference in May. So that is one thing that we are doing.

We also did have a conversation with the FDA in a pre-IND meeting where we discussed this program and what kind of preclinical and toxicology work would be required in order for us to enter into a Phase 1 type of clinical program. And we did get some meaningful feedback from them which makes it technically feasible. Now we are not necessarily saying we are charging ahead with that but it makes it technically feasible and also sheds light should we collaborate with a partner in moving forward over here on what some of that work up required to a Phase 1 might be.

So I think it gives us input both ways and we are now in the process of determining what is the best strategy to move forward.

Now with regards to the data of how this compares -- these results compare to that from other topical kind of medications, I will let Scott Corning speak to that.

Yes. We believe generally speaking that in terms of efficacy that we would be comparable to topical steroid drops with quite possibly better safety results as we saw in Phase 2. As Amar alluded to, we have not yet seen the safety results for the Phase 3 trials. But in Phase 2 from an efficacy standpoint, we looked at some of the branded steroid trials and saw, as I stated before, that we were comparable on an efficacy basis in terms of absence of sales and pain at day 14 and day eight respectively for cells at 14 and pain at day eight.

Remember that we have yet to look at all the secondary endpoints so we will be examining as part of the study secondary endpoints; for example, pain will be looked at as early as day two. That data is not currently available and we will be presenting the full detailed findings at the upcoming ASCRS meeting taking place in San Diego. So that will be discussed next month.

And so I would just stay tuned for that where we will present the full information as well as the information as we get it for the Phase 3b trial and be able to present those findings potentially in totality. So the picture is obviously going to be completed. This is just the early topline data that we have which looks very promising.

Great, thank you very much.

Adnan Butt, RBC Capital Markets.

Congrats from me as well. So two questions again. First on OTX-DP, the two Phase 3s, are they identical in design and what is the most important attribute if you have done any doctor or marketing types of studies, is it efficacy, safety or is it the 30-day dosing?

And then on the anti-VEGF program, if you can say does each anti-VEGF react the same way to the hydrogel technology as perhaps Avastin is working in terms of efficacy or do they have different outcomes? Thanks.

Okay, so, let's go ahead and look at the first question that you had, which is the identical nature of the two trials. The short answer is, yes, they are identical. The only minor difference is numbers of patients in (inaudible) one has 247 and the other has closer to 240 patients. So otherwise they are just done in different sites but the design is identical.

Then coming to the question on the other anti-VEGF agents and how they react to the hydrogel, I am presuming what you mean is the encapsulation within the hydrogel. You need slightly different formulations depending on the molecular weights of these since Avastin is the largest and some of the other ones are smaller in molecular weight. But broadly speaking the technology that is used is very similar. There are some nuances in the formulations.

Now going further from there into actually looking at whether efficacy wise they have any meaningful differences, it is too early for us to comment upon that at this stage. I think we have been doing PK work and tolerability work, we have not done too much efficacy work. So we will be relying on the partners' molecule or -- to be able to achieve a meaningful difference. I think the main thing over here is that you may be able to use much lower amounts of drug compared to what is done in injections because you are not having the drug clear as rapidly. So what that does is that you can use smaller amounts of drug more efficiently and potentially in a better way because similar to what we see in the front of the eye, for example, we use only 7% of the drop equal in dose with the steroids. And we can achieve a difference, the type of efficacy that drops achieve and safety better than drops.

No reason to believe this may not actually also hold true. We don't have the data for it. So it is pure speculation right now. But that is something that we would be examining with interest also for the anti-VEGF agents to see if we can utilize the drug more efficiently and potentially decrease some of the concerns and maybe there won't be that much of an efficacy difference between the different anti-VEGF molecules because right now the efficacy is mainly impacted by the fact that some clear faster, some have longer residence times, for example.

Amar, thanks. If I can get a follow-up. In terms of what is expected at ARVO, what should we expect from the anti-VEGF program?

So at ARVO, we will basically be presenting the two papers on the use of formulation of bevacizumab and its PK profile in vivo. So we will be basically having two poster presentations that speak to it. So it's essentially a description of our technology which right now we have been somewhat restricted in disclosing given our confidentiality obligations to our partners. It has been hard for us to disclose much detail of this work that has been going on, which has been quite promising and to some extent a little frustrating for us not to be able to talk about it. So this is -- provided an avenue for us to discuss our technology platform through using product that has not been acquired as part of the collaborative effort but independently by us.

And what time -- is there a specific time point at which you would decide whether to pursue the Avastin program yourself or if you would opt to partner? Is there a specific --.

So we are currently engaged in discussions. So we have provided our guidance to some of our potential partners and we are in the process of getting their responses and interest indications of interest back. Once we have their indications and we have some meaningful discussions with them as to what level of flexibility and negotiations move forward, we will look at whether it is attractive enough compared to the other options that we have on the table such as potentially pursuing a pathway independently ourselves or with maybe a biosimilar provider.

So there are multiple ways in which we may be able to proceed and whatever it ends up being the most attractive and meaningful option for the Company we will take that. I cannot say which way we will lean until some time passes and we have the opportunity to fully explore these options.

Great, thank you. I will get back in line.

(Operator Instructions). Yigal Nochomovitz, Oppenheimer.

Congrats again on the first positive Phase 3 for the Company's technology platform. If I could just like to ask another few questions on the Phase 3a. What is the plan as far as how you are going to submit the data to the FDA? Are you going to submit both studies separately or is there a plan to do a formal pooled analysis? And can you comment at all on the retention rate of profiles that you have seen in the Phase 3a? Thank you.

This is Eric Ankerud. We are planning to submit the Phase 3 and 3b data combined analysis in an NDA submission in the second quarter. We will be analyzing each study separately but then submitting a combined presentation to FDA as we have discussed with FDA in a pre-NDA conversation. The retention rate is part of our secondary analysis which data is still coming into us so we are still quality checking the secondary endpoint information and that will be part of our presentation at the ASCRS meeting.

Great, thanks.

I want to point out that the protocol analysis as well as intent to treat analysis were looked at as part of the topline and they were not meaningfully different. So retention doesn't seem to be playing any meaningful role in this.

Now until we have the full data I wouldn't read too much into this. I am just pointing out that that work is still ongoing and we wanted to kind of get the results out to you guys as early as possible as when they were available to us. I think I wouldn't read anything much more beyond that just that we will present the full data when we have it.

Okay, thanks, Amar. And then just going back to the Avastin program and the ARVO papers which you discussed, are we going to get some sort of sense -- you mentioned PK as far as the duration of the release profile in terms of actual time and what do think the partners and you guys are looking for there to -- as a threshold to move the program forward?

So, short answer to that is that we can control the release rate. It is not just because we present a particular release rate at the ARVO doesn't mean that is a restriction of the technology. For example, we may present a 3-month release rate but with partners we can go out to six months. Some partners may want it to be of a shorter duration, some may what it to be of a longer duration.

So what I am saying is that that is not the technology's limitation, it is more of a question of what is desired by whom. If it were in our hands of wanting to move forward, we would probably look at something in the four- to six-month kind of duration as being a meaningful step forward in the state-of-the-art and something that would be a compelling proposition in the market. And I think the partners share that vision we have publicly communicated that vision. The technology is capable of executing on that vision. So I think what we want to be able to just because we show a particular sliver, remember that these presentations lag about a year behind what we can actually achieve in the labs ourselves. So this is presenting data from some time ago. Still very meaningful data but we continue to push the ball forward every day.

And then one question on going back to the plug design, you didn't specifically mention the work going on in the background on the nonsignificant risk studies. Can you comment there on how those are progressing and is there any areas of the plug design you believe could benefit from additional optimization?

Sure. So remember that the issues that Yigal is raising over here are pertinent probably more for the glaucoma plug than the dexamethasone punctum plug, so for the travoprost punctum plug OTX-TP. We have been refining the blank formulations of those plugs in non-significant risk studies. And to date have seen results as high as up to 90% retention at two months.

So we are continuing to improve the designs and we have seen some encouraging results over there. We are conducting this -- remember OTX-TP Phase 2b study incorporates two aspects, one is certainly the retention aspect but more importantly also the ability for the patients to visualize periodically using a blue light for the presence of the plug. And in the conduct of the study, that seems to be progressing well. It is too early to again comment upon the retention rate because that study is ongoing but we are satisfied with the conduct of the study to date. And the physicians participating in the study have also not expressed any dissatisfaction in that regard.

So I think all of us would love to have the results before we have them but I think we should just wait until such time as October. But we are internally satisfied with the progress we are making in that regard.

Great. And, Brad, just one quick question. You mentioned the $15 million in debt. What is the plan there? Are you going to just kind of hold that on the balance sheet or kind of try to just clear that up this year? Thanks.

We are considering some refinancing options so the $15 million has as I mentioned, has an interest-only period that extends out through September of this year. And so we are looking at some options around potentially refinancing that and just giving us a little more runway.

Great, thanks. Thanks, guys.

(Operator Instructions). I am showing no further questions at this time. I would like to turn the conference back over to Amar Sawhney for closing remarks.

Well thank you everyone for participating in the call this morning with us and we appreciate all the interest. We are really excited with how things are going and this has been an exciting year for Ocular Therapeutix. We look forward to continuing this momentum in 2015. We expect to achieve a number of important milestones this year and look forward to updating you as the year progresses.

On behalf of the entire Ocular team, thanks again for taking the time to join us on our year-end call. You may now disconnect. Thank you.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day.