Ocular Therapeutix Inc (OCUL) 2015 Q1 法說會逐字稿

Good morning ladies and gentlemen. Thank you for standing by.

Welcome to Ocular Therapeutix's first-quarter 2015 earnings conference call.

(Operator Instructions)

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 and good morning everyone. Welcome to Ocular Therapeutix's first-quarter 2015 earnings and business update conference call.

This morning we issued a press release providing details of the Company's financial results for the first quarter ended March 31, 2015 and we also provided an update on the planned path forward for OTX-DP, our product candidate for the treatment of post-surgical ocular inflammation and pain. The press release is available on the investor portion of our website at investors.ocutx.com.

Leading the call today will be Dr. Amar Sawhney, our President, CEO and Chairman who will provide a detailed update on the OTX-DP Phase 3 clinical development program and also an update on the status of each of our other development programs as well as upcoming anticipated milestones. Following Amar's remarks I will provide an overview of the financial highlights for the first quarter of 2015 before we open the call for questions. We're joined this morning by Eric Ankerud who is our Executive Vice President of Clinical, Regulatory and Quality as well as Scott Corning, our Vice President of Sales and Marketing.

As a reminder during today's call we will be making 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 various important factors including those discussed in the risk factors section of our most recent quarterly report on Form 10-Q which was filed with the SEC earlier this month.

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 as of any date subsequent to today.

I will now turn the call over to our Chairman, President and CEO Amar Sawhney.

Thank you, Brad. Good morning everyone and thank you for joining us today for our first-quarter 2015 earnings call. Following a busy year of accomplishments in 2014 for Ocular Therapeutix we continue to advance four different clinical development stage programs for our lead product candidates OTX-DP and OTX-TP as well as our preclinical program for our sustained delivery hydrogel depot for the delivery of anti-VEGF agents for the treatment of wet age-related macular degeneration or wet AMD.

We recently received conditional acceptance from the FDA for our proposed name DEXTENZA for our OTX-DP drug product candidate for the treatment of post-surgical ocular inflammation and pain. We must now include this name in our planned NDA submissions for further FDA review. Also we are very, very pleased to announce that following our most recent meeting with the FDA we plan to proceed with an NDA submission in the second half of 2015 for an ocular pain indication using the existing pain data from our clinical trials completed to date.

As a recap, in March and April 2015 we reported top-line efficacy results of our two Phase 3 clinical trials for DEXTENZA for the treatment of post-surgical ocular inflammation and pain. The two primary efficacy endpoints were statistically significant differences between the treatment group and the placebo group for the absence of pain on day 8 and absence of inflammatory cells on day 14.

In the first Phase 3 trial which enrolled 247 patients we met both primary endpoints for both ocular inflammation and pain with statistical significance. The second Phase 3 trial which enrolled 240 patients achieved a primary endpoint for the absence of pain at day 8 but did not achieve the primary endpoint for absence of inflammatory cells at day 14.

While the treatment effect of pain and inflammation observed was similar and consistent in the DEXTENZA treatment arm across all trials we did not see the same magnitude or differential between the treatment and placebo groups with regard to the absence of inflammatory cells in the second Phase 3 trial as compared to the first Phase 3 trial. This was in large part due to the placebo group presenting with a higher level of absence of inflammatory cells, 33.1% in the second Phase 3 trial versus 14.1% in the first Phase 3 trial. While we did not meet the inflammatory cell endpoint in the second Phase 3 trial we remain confident about our platform technology and about our product candidate for the treatment of post-surgical ocular inflammation and pain.

Some additional post hoc analyses were performed and provide further insight on the trial. When we pooled the results between the two Phase 3 trials we saw statistically significant differences between the treatment and placebo groups for both pain at a p-value of less than 0.0001 and inflammation at a p-value of 0.0025. When we combined zero inflammatory cells, 0.0 on a scale of zero to 4, and very mild inflammation, 0.5 on the same scale, for the second Phase 3 trial we saw statistically significant differences between the treatment and placebo groups also, a p-value of 0.0004.

After a thorough review of the results of the second Phase 3 trial we believe that there were factors that impacted the results. There were a number of patients who were on high doses of oral naproxen for unrelated medical conditions in the placebo group. In addition there were a number of patients in the treatment group who were given rescue medications at day eight even though they were experiencing mild levels of inflammation.

We believe that both of these factors impacted the study results and can be addressed moving forward. An important point would like to make is that although we have been conducting our Phase 3 clinical trials of DEXTENZA in patients who have undergone cataract surgery these trials are intended to support a label for all post-surgical ocular inflammation and pain. There are over 5 million ocular surgeries performed annually in the US including 3.8 million cataract procedures.

Moreover we are very pleased with a favorable safety profile of DEXTENZA as confirmed in all of the clinical trials conducted to date. Since this safety information will be key to our indication expansion strategy for DEXTENZA which I will explain further in just a moment.

As I mentioned, we met with the FDA last month to discuss the path forward for the clinical development and to review submissions for DEXTENZA. We are now planning to proceed with the submission of an NDA for the treatment of post-surgical ocular pain in the second half of 2015.

In order to expand the label of DEXTENZA's indication for use to include the treatment of post-surgical ocular inflammation we intend to use the existing safety data from the two Phase 3 trials already conducted and supplement the efficacy data with another Phase 3 trial which is being designed based on our learnings from these prior trials. We plan to initiate this third Phase 3 trial for DEXTENZA in the second half of 2015 and enroll approximately 330 patients in this trial.

As mentioned previously some modification to the design of this third Phase 3 trial compared to our two completed Phase 3 trials for DEXTENZA are planned as follows. 1 is to 1 patient randomization of treatment and placebo groups instead of a 2 to 1 randomization, excluding of patients who are being treated with high dosage levels of oral NSAIDs and improvement of the protocol training and adherence for the on-site investigators including the appropriate use of rescue medications.

If the results of our third Phase 3 trial of DEXTENZA are favorable and subject to receiving approval for the pain indication pursuant to the initial NDA we plan to submit an NDA supplement for DEXTENZA for the treatment of ocular inflammation following ophthalmic surgery to expand the labeling. We look forward to keeping you apprised on the progress of the milestones associated with the path forward for DEXTENZA.

I will now turn to our sustained release hydrogel depot for the delivery of anti-VEGF drugs for the treatment of wet AMD. During the recent ARVO meeting in Denver the Company presented eight posters which highlighted our sustained release hydrogel technology platform including three posters on our anti-VEGF program. We are excited about the promise of this technology for treating retinal diseases, currently treated with monthly or bimonthly intravitreal injections with the projection for an extended release depot capable of four to six months of therapy with a single injection.

The anti-VEGF drug market opportunity is large with $3.5 million in sales for Eylea and Lucentis in the US in 2014. The preclinical data presented was focused on the delivery of bevacizumab or Avastin and other anti-VEGF agents as model proteins to demonstrate the viability of our platform as a means for developing sustained release therapy for retinal diseases. Data generated to date have been highly encouraging and have demonstrated that anti-VEGF agents maintain their structure and bioactivity within our hydrogel.

We have further shown tolerability of the depots when implanted in animal models of intravitreal injections and release of drug into retina, choroid and vitreous at clinically meaningful concentrations. We're pursuing a multipronged strategy to maximize the potential of this technology. We're collaborating with several different pharmaceutical companies using protein-based anti-VEGF agents for this program and are also conducting our own internal developments using bevacizumab.

Additionally we are exploring the delivery of small molecule drugs such as tyrosine kinase inhibitors or TKIs in our hydrogel depot and have been researching the optimal candidates for this program. We believe that this class of drugs is well suited for use with our platform given their high potency, multi-target capability and lower solubility.

In the absence of sophisticated drug delivery systems these drugs have been difficult to deliver to the eye at therapeutic levels without causing local and systemic toxicity. We feel our local drug delivery technology gives us many advantages in this regard. By selecting compounds that are compatible with our hydrogel platform and that will have expiration of relevant patents within the timeline of our development program, we would also award the need to license these molecules thus retaining full worldwide rights to our products.

We may elect to move forward on delivery of a small molecule on our own in parallel with a protein-based anti-VEGF delivery program which would require the involvement of a partner. We plan to continue working with our pharmaceutical company partners on development efforts and exploring potential business development deal structures as well as advancing our internal development programs on the sustained release hydrogel depot for treatment of back-of-the-eye diseases.

In addition our other clinical programs for DEXTENZA and OTX-TP continue to advance. Consistent with our strategy of expanding DEXTENZA's label we plan to initiate both of the two Phase 3 clinical trials for DEXTENZA for the treatment of allergic conjunctivitis in the middle of 2015. Each of the two Phase 3 trials are expected to enroll 72 patients with a randomization of patients in the treatment and placebo groups in a 1 to 1 ratio.

The primary efficacy measure for these studies will be the difference between treatment groups and placebo groups of at least 0.5 units on a scale of 0 to 4 on day seven at three different time points for ocular itching and conjunctival redness and the differences between the treatment group and the placebo group of at least 1.0 unit on a scale of 0 to 4 on day seven and the majority of time points for ocular itching and conjunctival redness. We expect to have top-line efficacy data for the first DEXTENZA clinical trials for allergic conjunctivitis in the fourth quarter of 2013. We also expect to have top-line efficacy data for our exploratory Phase 2 trial of DEXTENZA in the treatment of inflammatory dry eye disease in the fourth quarter of 2013.

Also in the fourth quarter of 2015 we expect to have data from our Phase 2b clinical trial evaluating OTX-TP for the treatment of glaucoma and ocular hypertension. We have now enrolled 67 patients in this 80-patient trial and expect to complete enrollment in the third quarter of 2015. The primary efficacy endpoint for this study is the difference between the treatment groups OTX-TP with placebo eyedrops versus timolol for the placebo nondrug-eluting plug and the mean change in intraocular pressure from baseline at day 60 following insertion of the plug.

Keep in mind that this is an 80-patient trial and we designed the trial to assess clinically meaningful response to treatment. This study is not powered to demonstrate statistical significance.

We have been conducting additional non-significant risk or NSR studies on various product designs and have achieved a retention rate of 92% at day 19. In the OTX-TP Phase 2b trial we are using an earlier-generation plug with a lower retention rate but it is important to note that our clinical trial protocol calls for replacement of any plugs that are not retained.

We continue to be excited about the opportunity for OTX-TP for the treatment of glaucoma and ocular hypertension. As a reminder there are over $2 billion in annual sales of drugs for glaucoma in the United States. The current standard of care eyedrop therapy has significant limitations including difficulty with administration of eye drops, peaks and valleys of dosage at times well above the required level of therapeutic benefit and at times well below the optimal therapeutic benefit for compliance.

Six months after initial diagnosis of glaucoma only 50% of patients are complying with their prostaglandin analog therapy. The need for high concentration of drug due to the fact that greater than 95% of the active drug in eyedrops is washed out by the tears and doesn't penetrate the intraocular tissues, side effects from the preservatives contained in eyedrops. We address all of these issues with our OTX-TP product candidate.

Compliance is taken out of the hands of the patient and placed in the hands of the physician. We provide a sustained release of drug at therapeutic levels without the peaks and valleys of dosage and our product candidates contain no preservatives. As you can see, we have been busy on many fronts and are pleased with the progress we have been making and feel confident about our path forward for all of our programs including DEXTENZA, OTX-TP and our sustained release hydrogel depot for the treatment of wet AMD.

I will now turn the call back over to Brad who will review the first-quarter 2015 financials.

Thanks Amar. With regard to our cash and investment position, as of March 31, 2015 we had $67.4 million in cash, cash equivalents and marketable securities. Cash used in operating activities was $6.9 million for the first quarter of 2015 compared to $4 million in the first quarter of 2014.

We continue to believe that we have sufficient cash and cash equivalents to fund the Company through the first half of 2016 and through several important clinical and commercial milestones with our product development programs, many of which Amar just covered. So just to highlight they include submitting an NDA for DEXTENZA for the treatment of post-surgical ocular pain, initiating and completing patient enrollment in a third Phase 3 clinical trial for DEXTENZA for post-surgical ocular inflammation and pain, initiating two Phase 3 clinical trials for DEXTENZA for the treatment of allergic conjunctivitis, completing patient enrollment and reporting top-line efficacy data, completing patient enrollment in our Phase 2 exploratory clinical trial of DEXTENZA for the treatment of inflammatory dry eye disease and reporting top-line efficacy data, completing the patient enrollment in our ongoing Phase 2b clinical trial of OTX-TP for the treatment of glaucoma and ocular hypertension and reporting top-line efficacy data and then initiating Phase 3 clinical trials for that program, and finally advancing our sustained-release hydrogel depot clinical program, preclinical program for the intravitreal delivery of anti-VEGF for the treatment of wet AMD.

For the first quarter ended March 31, 2015 we reported a net loss of $7.6 million, or a loss of $0.35 per share. This compares to a net loss of $7 million or a loss of $2.45 per share for the first quarter of 2014. The net loss for the first quarter of 2015 included $900,000 in non-cash charges for stock-based compensation compared to $2.9 million in non-cash charges for licensing, consulting fees paid in the form of stock plus stock-based compensation for the comparable quarter in 2014.

The first-quarter 2014 included a $1.7 million license fee for the expansion of the scope of the worldwide exclusive licensing rights with Incept. Revenues for the first quarter of 2014 totaled $426,000 including $188,000 in collaboration revenue from our feasibility agreements with pharmaceutical company partners and $238,000 in product revenue from the sales of our ReSure Sealant. As previously stated we don't expect product revenues from the sales of the ReSure Sealant to be material in 2015 as we are deferring the hiring of a direct sales force until we launch our initial sustained release drug delivery product.

Total operating expenses during the first quarter of 2015 were $7.5 million which compares to $6.9 million for the first quarter of 2014. Research and development expenses totaled $4.7 million in the first quarter of 2015 compared to $5 million in the first quarter of 2014. The first-quarter 2014 R&D expenses included the previously mentioned $1.7 million licensing fee with Incept whereas there were no such licensing fees in the first quarter of 2015.

Offsetting the decrease in licensing fees were increases in R&D expenses related to a greater level of clinical development activities including the Phase 3 clinical trials of DEXTENZA for the treatment of post-surgical ocular inflammation and pain as well as the Phase 2b clinical trial of OTX-TP for the treatment of glaucoma, the internal development efforts on our anti-VEGF for the treatment of back-of-the-eye diseases as well as the other programs we are pursuing for DEXTENZA.

We had approximately 21.4 million shares outstanding as of March 31, 2015. We also had $15 million in outstanding debt as of the end of the first quarter and our principal payments on that debt are scheduled to start in the fourth quarter of this year.

That concludes my comments on the first-quarter 2015 financial results. We will now turn it back over to the operator for questions and answers.

(Operator Instructions) Ken Cacciatore, Cowen and Company.

Great guys, thanks, a lot of progress. Thanks for the update. Just want to clarify a few things.

You indicated a conditional acceptance of the NDA. Can you please clarify what that exactly means and again a little bit more on the timelines to finish the next study?

And then also on your commentary around the TP program you indicated the last-generation products we're seeing 92% retention. Can you talk about how much more progress or if you're continuing to make any modifications of these most recent generation programs?

And then maybe historically help us out with the NSR study correlation to what you've seen when you've actually gone into broader clinical programs? Thanks a lot.

In regard to the proprietary name DEXTENZA we submitted an application to FDA and through the normal processing of the review we received a response of conditional acceptance which is typical for that stage of the review. The name now is to be included in our NDA submission for the completion of the formal proprietary review name and ultimate approval.

So this is for the name, not for the application --

Got you, thank you. That clarifies it. Thanks.

Yes, the application will be -- the NDA will be submitted for the post-surgical pain indication in the coming few months. (multiple speakers) So with regards to the second question on the NSR studies and what we are seeing with the plugs, etc., I think as we've always said that the NSR studies tend to lead the way in terms of plug design and optimization and the drug studies since they enroll slower and are more infrequent take typically a little bit longer. So they lag behind a generation or so in terms of the plug design.

So what we are working with in the -- the important point in order that they do mimic each other quite a bit in that what we learned from the NSR studies is very applicable for the drug plug studies. So what we've been learning in summary is that trying to optimize the size of the plug, the stiffness of the plug, the ease of insertion because these are a little bit larger plugs than the dexamethasone, the DEXTENZA plugs. So some of those learnings come about and if we have to optimize the design, for example rounding off the tip to be able to allow for easier insertion or to look at a certain stiffness of the plugs for comfort and removal because these are also chronic use plugs.

We want to be able to insert them and also they will not be fully absorbed by the time we come in for the second therapy, repeat therapies and stuff because you want to have some degree of overlap. So they need to be removable. So those of the things that we are optimizing in the NSR studies.

The retention rates that we are seeing in the NSR studies are very encouraging and we feel fully applicable for the OTX-TP and we expect to incorporate those learnings prior to heading into the Phase 3 trials. So we routinely will conduct NSR studies and then take all the collective learnings from that and then get into the Phase 3 results. So the objectives of this current Phase 2b studies are mainly to estimate the level of effect that we're getting, it's not statistically powered, but to just get a level of effect that we are seeing relative to the control that we need to be measured to which is timolol.

The second thing we are trying to assess is can patients identify if their plug has been lost so that they can ask for a replacement, and remember that with the visualization we are monitoring that. And then obviously we hope to have a reasonable level of retention to make for a therapy and see if that effect can be sustained for 60 and 90 days. So those are the two different time points over which the efficacy measures will be taken.

So those are broadly the objectives of this trial. This is meant to inform us for our strategy for the Phase 3 study that we hope to pursue sometime early next year.

Thanks very much.

(Operator Instructions) Adnan Butt, RBC Capital Markets.

Hey, good morning and let me ask three questions here. First on the DEXTENZA filing, why not wait until you get data from the inflammation study and then file and would you hire a sales force with just the pain indication?

Then on the anti-VEGF depot program, so from what I understood at ARVO it showed that in vitro at least biologics could be dosed much longer than four months. Is that correct and what's the optimal period there?

And is the Company working with any small molecule TKIs at this time or planning to work with any that you might think are a better fit than others? That's it. Thanks.

Great. Yes a let me answer the first question first which is why not wait for the indication. As we look at the data that we have we find that we have extremely strong and compelling data on the pain indication and we have all of the other information that is needed from the safety standpoint, from the preparedness for the NDA filing standpoint, to move ahead and begin the review process and gain an initial label.

Remember that our strategy all along has been that of expanding the label for DEXTENZA, getting an initial label and then expanding it. And that label expansion strategy will go in many different dimensions. There are various types of inflammation, inflammation that leads to after-surgery inflammation that may lead to dry eye, inflammation associated with allergic conjunctivitis and there are other inflammation-oriented conditions like uveitis, etc., also.

So our strategy all along has been get an initial label and then continue to expand that label to cover as much of that $2.7 billion inflammation market as possible. So this basically is consistent with that strategy of ours. People have a fairly good sense, the clinical community, as to the efficacy of steroids and we are going to be able to deliver the first and only one of its kind front-of-the-eye controlled release one and done steroid for the market.

And there is a strong receptivity to that. We will build upon that, we're not going to rest on our laurels, we will build upon that. But I think it is important for us to get the product in the hands of the clinical community that is anxiously awaiting a product of this sort.

Going back to the other question of anti-VEGF agents, we continue to collaborate with the partners and we are working with them; in fact, we have received proposals from some of them for business structures which we are continuing to negotiate and optimize. Some of these may meet our threshold of interest. Some of these may not meet our threshold of interest.

But it does not have a reflection on the technology as such. I think from our standpoint and from the partner standpoint the technology has a lot of promise. It's just more a question of deal economics as to whether we proceed with a partner because we have to figure out how much time we spend and where we spend our time and it's more of a business decision than a technical decision on the protein-based molecule partnerships.

Now for the TKIs and the small molecules the reason for us to pursue that is if you recall Avastin itself came from the oncology world and from the oncology world this drug was created and then it found utility and ophthalmology. If you think about where TKIs are they are in the same kind of range where they are currently being used for cancer treatments in renal cell carcinoma, etc. and have a lot of broad-spectrum effects and can be useful anti-antigenic agents; however, when delivered systemically at high doses they may have concerns of toxicity. But they are very low solubility compounds ideally suited for use with our technology.

So how we are optimizing, there are a number of TKIs available and many of these go off patent in 2019, 2020 time frame. When people have tried to use them directly they have not performed to their expectations because when they are injected intravitreally as a free particle they will get washed out to the front of the eye with the vitreous flow or they will settle on the retina and have some level of contact toxicity or they will blur the vision because they are floating around.

By confining them in our hydrogel depots away from the access of the visual access we're able to keep them out of the visual access, prevent them from floating to the front and prevent them from touching the retina, and, yes, releasing meaningful levels of drug concentration. So we feel that our delivery systems are ideally suited for this type of a class of molecules and we are in the process of now figuring out which are the ones of the number that are available are the best suited.

So we will keep you informed over the next few months as we put these molecules through our funnel of optimization and decide which candidate we want to pursue. But this allows us to basically control the worldwide rights and go with a meaningful new molecule or a molecule in this area on our own.

If there are no further questions I will now turn the call back over to Amar Sawhney for closing remarks.

Well I want to thank everyone for taking the time to join us on the call today. I hope the information we have provided on our plan for our path forward for our DEXTENZA product candidate for the treatment of post-surgical ocular inflammation and pain was both helpful and encouraging as we continue to advance this program towards commercialization. We have a number of important value creating milestones this year across five different clinical and preclinical programs and I look forward to keeping you apprised as to our progress on each of these.

I also want to thank our employees, advisors and Board members who have been devoting their time, energy and passion to contribute to the Ocular Therapeutix mission and vision. On behalf of the entire Ocular team thank you for all your support. You may now disconnect.

Thank you, ladies and gentlemen. That does conclude today's conference.

You may all disconnect. Everyone have a wonderful day.