Ocular Therapeutix Inc (OCUL) 2015 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by, and welcome to the Ocular Therapeutix conference call.

(Operator Instructions)

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

Thank you, Sariya. Good morning everyone, and thank you for joining us for our fourth-quarter 2015 earnings and business update conference call.

Earlier this morning, we issued a press release providing an update on the Company's product development programs and details of the Company's financial results for the fourth quarter and for the year ended December 31, 2015. These can be accessed on the investor portion of our website at investors.ocutx.com.

Leading the call today will be Dr. Amar Sawhney, our President, Chief Executive Officer, and Chairman, who will provide a summary of our key recent clinical and corporate developments, as well as provide an overview of what we expect to accomplish in 2016. Following Amar's remarks, I will provide an overview of the financial highlights of the fourth quarter of 2015 and full-year 2015, before opening the call for questions. Amar and I are also joined on the call today by Dr. Jon Talamo, our recently hired Chief Medical Officer; Eric Ankerud, our Executive Vice President of Regulatory Quality and Compliance; and 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 in these forward-looking statements, as a result of a number of various important factors, including those discussed in the risk factors section of our most recent annual report on form 10-K with the SEC, which was filed earlier this morning. 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 President, CEO, and Chairman, Dr. Amar Sawhney.

Thank you, Brad. Good morning everyone, and thank you for joining us on our call today.

This past year has been a busy and exciting time for Ocular Therapeutix, and we expect 2016 to be another busy year with a number of important clinical and business milestones. With the July 24, 2016, PDUFA date for our lead product candidate, DEXTENZA, for post-surgical ocular pain, and several ongoing and planned late-stage clinical trials across multiple indications, Ocular Therapeutix is emerging as a fully integrated ophthalmology company on the path to commercialization. We continued to leverage our proprietary hydrogel-based sustained-release platform as we seek to change how treatment is delivered to the eye for various ophthalmic conditions, with large and addressable market opportunities.

We believe that there is enormous potential for our sustained-release therapies to replace standard of care eyedrop regimens. One of the major issues of current standard of eyedrop regimens is patient compliance, particularly in conditions such as glaucoma and post-surgical pain and inflammation. By avoiding the burden and sub-optimal safety profile of daily eyedrops, our sustained-release product candidates may lead to improved patient compliance, offering greater assurance of efficacy and reduced disease progression. We believe that our sustained-release product candidates can provide an improved safety profile compared with eyedrop therapies, due to the absence of preservatives and our ability to avoid the peaks and valleys of dosage associated with topical eyedrop administration.

In December 2015, the FDA accepted our new drug application for filing for our lead product candidate, DEXTENZA, for post-surgical ocular pain indication. Acceptance of the NDA for filing by the FDA indicates that the application permits a substantive review, and that at that time no issues were identified and would be expected to delay progress of the FDA's review. As a result, the FDA has set a target PDUFA date of July 24, 2016, for the potential approval of DEXTENZA for post-surgical ocular pain. The data included in the NDA are from a Phase II clinical trial and two Phase III clinical trials conducted with DEXTENZA for the treatment of post-surgical ocular inflammation and pain.

Our third Phase III clinical trial for DEXTENZA for post-surgical ocular inflammation and pain began in October 2015. This prospective multi-center randomized parallel-arm, double-masked, vehicle-controlled trial will enroll 436 patients undergoing clear cornea cataract surgery at up to 23 sites throughout the United States. Patient enrollment is progressing ahead of schedule, with 285 patients enrolled as of March 7, 2016. As a reminder, some modifications to the trial design were made, as compared to the first two Phase III trials. These included a one-to-one randomization versus a two-to-one randomization; exclusion of patients on high-dose systemic NSAIDs; and providing more detailed physician training regarding the use of rescue medications. Assuming favorable results from this third trial later this year, and subject to potential approval of our NDA for post-surgical ocular pain in July, we plan to submit an NDA supplement for DEXTENZA. Execution of this study is consistent with our strategy to broaden the DEXTENZA label with a potential for post-surgical inflammation indication.

During the fourth quarter, we also reported top-line results from our first Phase III trial for DEXTENZA for the treatment of allergic conjunctivitis. DEXTENZA successfully met a primary endpoint for ocular itching associate with allergic conjunctivitis at all time points evaluated. It was a statistically significant difference to the P value of less than 0.0001, and the mean] scores between the DEXTENZA treatment group and the placebo group for ocular itching at all three time points measured on day seven post-insertion of the intracanalicular depot. The difference in scores for ocular itching between the DEXTENZA group and the placebo group was greater than 0.5 units at all time points on day seven post-insertion, and was greater than one unit at a majority of the time points on day seven post-insertion.

While our first Phase III trial has conjunctival redness as a primary endpoint, this was designated as a secondary endpoint in the second Phase III allergic conjunctivitis trial. As many of you are aware, most commercially available prescription medications for the treatment of allergic conjunctivitis have an indication for ocular itching only. Ocular itching is the most important symptom, and the primary reason most patients suffering from allergic conjunctivitis visit their doctor. Approved products including the current market-leading once-a-day eyedrops such as Pataday, Lastacaft, and Pazeo, are also using only ocular itching indications. Patients who have strong seasonal allergies would benefit from a sustained-release therapy, which could provide long-lasting relief throughout the allergy season with a one-time administration.

As noted above, DEXTENZA had all of the requirements for a successful clinical trial for itching in this Phase III trial. In accordance with prior FDA guidance of needing two Phase III clinical trials for NDA approval, in November 2015 we commenced enrollment in a second Phase III clinical trial to evaluate the safety and efficacy of DEXTENZA versus a placebo intracanalicular depot using Ophthalmic Research Associates' modified Conjunctival Allergen Challenge Ora-CAC model, as in the first study for the treatment of allergic conjunctivitis. DEXTENZA or the placebo intracanalicular depot will be administered 48 to 72 hours after final confirmatory exposure to the allergen. The primary endpoint that we will evaluate is ocular itching at day seven following insertion. As I mentioned, conjunctival redness will be evaluated as a secondary endpoint. Patient enrollment is progressing nicely, with approximately 50% of the patients enrolled in the study as of March 8, 2016.

Assuming favorable results and approval of the NDA for the pain indication, we expect to file an NDA supplement for ocular itching associated with allergic conjunctivitis indications in the fourth quarter of 2016. If approved, DEXTENZA would potentially set a new standard in terms of duration of effect, offering by far the longest acting ocular allergy medication with a one-time administration therapy.

As all of you can see, we have made substantial progress in the development of DEXTENZA. If the FDA grants marketing approval for DEXTENZA for the treatment of post-surgical ocular pain on the PDUFA action date, we expect to launch this product in the first half of 2017. DEXTENZA may be approved for two additional indications in 2017 -- ocular itching associated with allergic conjunctivitis, and ocular inflammation. We intend to launch DEXTENZA for post-surgical ocular pain in the US through direct sales leadership and through Contract Sales Organization, or CSO sales representatives.

If approved by the FDA, DEXTENZA will be the first and only preservative-free steroid available to ophthalmologist's, and would be also the first and only FDA-approved drug available to ophthalmologists to provide a complete course of therapy with a single placement. As DEXTENZA's label broadens, we would like to start to transition CSO representatives to direct sales representatives and expand our sales team as the business scales. We may also elect to enter into a co-promotion arrangement with a corporate partner to accelerate market penetration. Further, we will explore and potentially enter into international partnerships and/or licensing deals for distribution of DEXTENZA in markets outside of the US, although our current focus is on the US.

With respect to reimbursement, we expect to apply for a transitional pass-through [accord] for DEXTENZA for post-surgical ocular pain. Pass-through payments provide temporary transitional reimbursement for innovative new products for a period of up to three years. We expect to apply to CMS for a standard J Code for DEXTENZA for allergic conjunctivitis, assuming favorable clinical trial results and the approval of the initial NDA for pain, and an NDA supplement for allergic conjunctivitis.

Turning to OTX-TP, our sustained-release travoprost drug product candidate for the treatment of glaucoma and ocular hypertension, we recently reported top-line efficacy results from a Phase IIb clinical trial. As a reminder, this study was not [followed] for statistical significance. Our objectives for the study were: to assess the ability of OTX-TP to deliver a clinically meaningful level of intraocular pressure, or IOP, lowering; to assess OTX-TP performance relative to Timolol; to assess the duration of IOP-lowering effects; and to determine if patients can visualize the presence of our drug depot and get a replacement as needed.

We are pleased that the results showed an average IOP-lowering effect of approximately 5 millimeters at the 8:00 AM time point at day 60 with OTX-TP, which is clinically meaningful. We also saw a comparable level of IOP-lowering effect at the 8:00 AM time point at day 90, with as little as a single administration. In our pilot Phase II clinical trial, we had observed even higher IOP lowering of about 6.7 millimeters at 8:00 AM on day 60 in a study that did not include placebo drops, which in the Phase IIb trial may have blunted the effect of OTX-TP by washing out drug eluted by the intracanalicular depot out of the tear [phone], and off the surface of the eye.

In the Phase IIb trial, the Timolol arm performed better than expected, and it may be that the performance of Timolol is improved by the placebo plug, retaining the drug on the surface of the eye for longer period of time, as seen in a number of studies of non-drug eluting depots and several published articles. We have a drug depot that has the potential to significantly improve compliance, which clinicians believe, and the literature supports, is a single biggest issue with current glaucoma therapies.

Another objective of the Phase IIb trial was to assist in the design of our Phase III clinical trials. We had a meeting with the FDA in January of 2016, and following this meeting we have announced that our Phase III development program for OTX-TP and glaucoma and hypertension. The planned trial design for the two Phase III clinical trials includes an OTX-TP treatment arm and a placebo-controlled comparator arm that would use a non-drug eluting intracanalicular depot. We do not expect our Timolol comparator or validation arm will be required in the study design, and do not expect that eyedrops -- placebo or active -- will be administered in either arm.

We expect that the FDA will require the OTX-TP to show us statistically superior reduction of intraocular pressure compared to the placebo as a primary efficacy endpoint, while also inducing a clinically meaningful IOP reduction. This is great news, as we believe that our direct comparison of OTX-TP with a placebo comparator reflects the simplest and most real-world appropriate clinical trial study design for this product. We expect to initiate the first of the two planned Phase III clinical trials in the third quarter of 2016 after holding, and end of Phase II meeting with the FDA the second quarter of 2016.

In December, we announced the encouraging top-line results from an exploratory Phase II trial for DEXTENZA in patients with inflammatory dry eye disease. This trial was intended to explore which measures would be appropriate to include in the design of a future clinical trial to evaluate the efficacy of DEXTENZA or other molecules in a sustained release product as a potential therapy for dry eye disease. [Designed as a serial-phased] study to optimize the enrollment of patients based on [signs], patients in this trial first received a placebo [vehicle] depot for 45 days to establish a baseline for the investigational drug treatment. Qualified patients who continued to exhibit signs of dry eye at the end of the initial 45-day period were enrolled in the treatment phase of 30 days, randomized to receive either DEXTENZA or placebo [wakel] in a one-to-one ratio. While the study was not designed to show statistical significance, total corneal standing at day 30 following a randomization decreased by a statistically significant degree from baseline in the DEXTENZA group compared to the placebo group.

[Inferior] standing also showed clinically significant differences in the change from baseline in the DEXTENZA treatment group compared to placebo. Corneal standing is the primary end point that has been used in recent Phase III dry-eye clinical trials conducted by other ophthalmology companies for dry eye disease. We plan to meet with the FDA to discuss these results and potential clinical study design for future clinical trials in dry eye. We may move forward with the strategy of developing an induction therapy for the treatment of patients with inflammatory dry eye, with DEXTENZA followed by an intracanalicular depot releasing an immunosuppressant, such as cyclosporine, for chronic dry eye therapy.

We also continue to make strong progress with our sustained-release protein-based anti-VEGF drug depots of the achievement of back-of-the-eye diseases, including wet AMD or age-related macular degeneration. We're pursuing this in addition to a small-molecule TKI, or tryosine kinase inhibitor, initiatives. We continue to pursue potential partnerships with strategic partners and are encouraged by the progress of these discussions.

Lastly, we also strengthened the management team with the appointment of Dr. Jon Talamo as our Chief Medical Officer. Dr. Talamo joins Ocular with more than 30 years of industry experience as an ophthalmologist, innovator, and industry consultant. He is an exciting addition to our team and his wealth of expertise will be an important asset as we continue to advance our late-stage pipeline through the clinical, regulatory and potentially commercialization process.

With that, I will now turn the call over to Brad Smith, our CFO, who will review our fourth-quarter 2015 financial results.

Thank you, Amar.

Before turning to our financial results, I would like to announce that we will be hosting our inaugural Analyst Day event in New York City on April 6, 2016. In addition to members of the senior management team at Ocular, we will also be joined by several leading cataract, glaucoma, and retinal specialists. If you are interested in attending this event, please contact Steve Klass at Burns McClellan. His contact details are included in our fourth-quarter 2015 earnings press release. We hope to see all of you there.

With regard to our cash and investment position, as of December 31, 2015, we had $105.1 million in cash, cash equivalents, and marketable securities. Cash used in operating activities was $8.6 million for the fourth quarter of 2015, and $33.7 million for the year ended December 31, 2015. We expect cash used in operations to be between $45 million and $48 million in 2016, and we also expect capital expenditures to be in a range of $6 million to $7 million for 2016.

Furthermore, we expect existing cash and investments to fund the Company's operating activities, capital expenditures, and debt service through the third quarter of 2017. This guidance is, of course, subject to a number of assumptions about our clinical development programs, commercialization of DEXTENZA, and other factors included in our recently filed 10-K.

We also had $15.6 million in outstanding debt as of December 31, 2015, having recently refinanced the debt; and were able to defer any principal payments associated with the debt until January 2017.

For the fourth quarter ended December 31, 2015, we reported a net loss of $10.6 million, or $0.43 per share. This compares to a net loss of $8 million or $0.37 share for the same quarter in 2014. The net loss for the fourth quarter of 2015 includes $1.3 million in non-cash stock compensation charges, compared to $1 million of the same compensation charges in the fourth quarter of 2014.

Revenues for the fourth quarter 2015 were $0.4 million, including collaboration revenue from a feasibility agreement with one of our partners, as well as revenue from the sales of ReSure Sealant. As previously stated, we don't expect product revenues from the ReSure Sealant product to be material in 2016, as we are deferring the deployment of a sales force until we launch our initial sustained-release drug delivery product.

Our total operating expenses during the fourth quarter of 2015 were $10.7 million, which compares to $8.1 million for the fourth quarter of 2014. We increased our investment in R&D in 2015 as we advanced DEXTENZA for the treatment of allergic conjunctivitis through our first Phase III clinical trial, initiated the second trial for that program, advanced our third Phase III trial for inflammation and pain, advanced our OTX-TP product for the treatment of glaucoma and ocular hypertension through our Phase IIb clinical trial, advanced our exploratory Phase II clinical trial of DEXTENZA for the treatment of inflammatory dry eye disease, and in addition, made investments in our pre-clinical development programs including the treatment of wet AMD and other back-of-the-eye diseases. R&D expenses totaled $6.9 million in the fourth quarter of 2015, compared to $5.1 million in the fourth quarter of 2014.

As of the end of 2015, we had approximately 24.8 million shares issued and outstanding.

This concludes my comments on the fourth-quarter and full-year 2015 financial results, and I will now turn the call back over to the operator for Q&A.

Thank you.

(Operator Instructions)

Tyler Van Buren, Cowen and Company.

Hello, good morning. Given the upcoming approval date for DEXTENZA post-surgical ocular pain, was hoping you could talk a little bit about the market opportunity in associated commercialization strategy? More specifically, in terms of what targets and doctors you honestly attack with the sales force?

What sales force size will be required for the initial launch? And the message that you will be approaching doctors with? Thanks so much.

This is Scott Corning. The market size is over $0.75 billion, in terms of single agent steroids. A lot of that is generic. Much of it also, is also a mixture of branded.

So the sizing that we would go after would be -- we are doing the analytics now, so we would be looking at -- the sizing and alignment is being worked on presently, doing the analytics. But, we would enter the market with a staged approach, and that would be whether we go with or without a partner, and we would start with somewhere in the order of 10 working up to - as I said a staged approach - going up to 50 or 60. But that would be over time as we assess that the opportunity, train and gain momentum.

The primary target that we would be approaching the market with would be cataract surgeons, although the approval for this product would be for all ophthalmic surgeries. But again, the primary market opportunity and target would be cataract surgeons.

Tyler, this is Amar. There are 5.5 million surgeries. So the approval that would be there for DEXTENZA would be for all ocular surgeries - while the trials are done - and cataract surgeries.

The approval would be for all ocular surgeries. Some of the market research that we are conducting has revealed that there is enthusiasm for using the product, and procedures such as glaucoma surgeries, retinal surgeries and PRK, or vision correction kind of surgeries [in additions], where pain can be significant. The price points right now of branded and generic steroids, on average, are somewhere in the $100 kind of range between the generic and the branded average kind of price point, so that's what leads to that $750 billion to $800 billion kind of single-agent steroid market.

Pricing through the pass-through mechanism is likely to be significantly higher than that, given that the pass-through mechanism requires the price points to be set at a certain threshold to be able to qualify for pass-through. So technically, if you were to just do that [translation], it results in a larger market opportunity, but I think that is something that we just need to watch carefully before we can claim that we would expand the market opportunity by many fold.

Great, thank you. That's a great level of detail. I appreciate it.

Adnan Butt, RBC Capital Markets.

Hello, thank you. So let me ask on the launch plans? Amar, why wait five to six months before launching DEXTENZA?

And, then, assuming it gets approved? And then does guidance for 2016 assume any SG&A billed at this time?

I'll tackle the first part of that question and then let Brad comment on the second part.

With regards to timing, I think it is important that we have the Code in place. We're not waiting five to six months, if you think about -- end of July, so effectively August, is when you get your approval. It takes -- even if you are fairly ready, if we were to apply for pass-through - and it a takes a few months for the pass-through Code to actually come through, and thereafter it becomes effective only in the following quarters.

So, we would need to wait - at a minimum - until the beginning of next year, assuming everything goes like clockwork, to have the Code in hand, and then the Code is effective for three years after that, at that given rate. So we will do it basically as soon as we can. There is the opportunity to bill under a miscellaneous Code before that.

But our sense is that it results in, firstly, significantly more paperwork for physicians, and not that they would not be able to do that - I think its training to one thing, and then very quickly training to another thing - which may create a certain level of confusion. So based on analyzing all of those aspects, and the fact that we would need to be doing KOL engagement, MSL deployment, et cetera, we feel that it is probably best to not to create much more confusion, and just sort of -- it is basically going to be a few months, couple of months if anything. And just to come out strong with the Code in place, so that there is a mechanism to get paid.

Now I will let Brad comment on the G&A [build].

Yes, certainly. So yes, we plan on -- and we're in the process of expanding Scott Corning's team as we speak. So in terms of his comment about the sales reps, we will likely make those offers contingent on the PDUFA date approval of the product.

As Scott mentioned, we'll likely start with 10 reps, probably through a contract sales organization. So there will be costs associated with that in the back half of the year. Internal sales management, medical affairs which will report to Dr. Jon Talamo, and then we've already started to bring in some reimbursement expertise to help us there as well.

So on a G&A front, we look at modest increases but it's primarily going to be in the buildup of sales and marketing.

Yes, and adding - this is Scott - more specifically, as it relates to pass-through and the PDUFA - the pass-through operates on a quarterly schedule, and with the PDUFA date of late July, September represents the first opportunity that we have to apply for pass-through status. The waiting period then is three to four months, so January would be the first date that we could even get pass-through status, because it has specific times that you can apply, and when it is granted.

And just one more question on this. The pass-through is drug-specific? Or is it indication specific, because Ocular could see the label expanded in 2017?

It is drug specific. But it is not site specific -- it applies to the indication, that is surgical. Once we have an indication that is nonsurgical, we expect to be able to gain a more favorable means of reimbursement by applying for a J Code.

Okay, that's helpful. If I can change tacks, and ask on OTX-TP - are the two Phase 3 trials going to be identical in design or is that to be determined?

That is still to be determined. The guidance from [Oster Decisions] is to have them be of similar size. So design obviously, is not necessarily going to be identical.

Because in one of those studies, we expect to follow patients out to one year for safety - for FDA's guidance that you need 100 patients for safety out to one year for glaucoma trials. So it is likely that one of those trials will be structured to deliver that safety population, while the other trial will be one that is only structured for delivering the primary endpoint - which is up to three months of efficacy determination. Of course, as part of that safety population out to three months with FDA guidance is that needs to be in the range of 300 to 500 patients will be delivered by both studies, but one of the trials will go out for a longer duration.

We expect these trials to be staggered, and not begun simultaneously, since they will involve a significant number of sites - we estimate about 50 sites, 40 to 50 sites in each of these trials. So it just takes time to go ahead and get all of those up and running.

Okay, lastly, on the back of the eye program? I'm wondering, is the focus very much now the small-molecule compound program? Or are you placing equal emphasis on the biologics, and what is the status there?

Sure. The emphasis remains two-pronged. The difference is that with the small-molecule we can control the entire process. So we can run and get the progress ourselves, and that seems to be going quite nicely.

At the Analysts' Day, I would be able to talk a little bit more detailed about where we are and what the data looks like, et cetera. The protein-based anti-VEGF is obviously gated by the partner engagement, because we feel that these protein-based anti-VEGF agents - the biosimilar drugs are not up to a level of certainty yet, that we can proceed down those pathways.

So it behooves us to engage with a partner in that. There is a good progress on that front, and hopefully - stay tuned in a few months for updates on that. So we are still optimistic on the protein-based anti-VEGF, its just that in the small-molecule we control a lot of destiny fully.

Okay. Thank you.

Andrew Berens, Morgan Stanley.

Hello guys, good morning. Thanks for taking the question and congrats on moving the products forward. Just wanted to get a little more clarity on the pass-through status. How does CMS determine a product sufficiently innovative? Is it actually a formal review process that you have to go through?

Yes. Andy, this is Scott. New drugs and other medical technologies, they need to meet certain specific clinical value and cost metrics or requirements.

So there is an application process that you go through. And these pre-specified parameters boil down to generally representing a cost that is - quote - not insignificant to the cost of the procedure that the drug is associated with. So it kind of boils down to a pricing question.

Should you meet that threshold, and other requirements, like being a new and innovative product that doesn't have, or just getting approval, you generally qualify for pass-through.

Okay. Is there a -- you mentioned some sort of clock, but is there a formal period that CMS has to get an answer back to you, or is it kind of not specific?

It is fairly specific as we understand it. September, as I said. So it goes quarterly.

September is the first opportunity we have to apply after the PDUFA date -- I mean, September is the first date we have to apply after the July PDUFA date. And with that, we expect to January approval. So there are sort of four-month gates - so then, March would be the next approval after that.

Okay. And then, if you get to the pass-through status, you would obviously be pricing it significantly higher? Then you would get three years? Is that a guaranteed three years?

Yes. Pass-through remains in effect for at least two years, and no more than three. And so, with the current timing, we would be able to maximize the pass-through period at exactly three years. And if we were to be delayed by a quarter in our application and subsequent approval, we would then be at 2.75 years and then another three months would be 2.5 years, and so on.

We are currently in position to maximize the pass-through period.

Okay. And then, after the pass-through period is over, it will become part of the DRG again. What do you foresee with pricing then, like in terms of allergic conjunctivitis? Because obviously, we had talked it would be detrimental to the allergic conjunctivitis indication at that level.

A lot is going to happen between now and then. We have a lot of work to do on it. We also have our dry eye program, which I think would have serious implications on how we are able to price, if we're able to get any sort of induction label or anything associated with dry eye.

But we also, as I said, expect to gain more conventional means of reimbursement with the J Code in the nonsurgical setting, so we will see how uptake is outside of surgery. But we also are exploring ways to stay outside the bundle, in surgery. So we need to work on this to see what we can do. But luckily we have 3-plus years to address it.

Andy, the allergic conjunctivitis would not be subject to the bundling, because it would have its own separate J Code. The question is - are there other office-based administrations - such as dry eye - which is oftentimes a concomitantly presenting condition, with most patients coming for cataract surgery, most elderly patients. And that is why having some level of exploration of getting a dry eye-based approval and subsequent reimbursement can be impactful, even for this surgical population.

Okay. And while the drug is actually in the pass-through status, the 6% on top ASP - is that paid to the physician or to the surgical center?

The surgical center.

Okay. But with the physician -- there would be no additional payment to the physician for the procedure?

We will let Dr. Talamo comment on that, since he ran his own surgery center --

Andy, it is Jon. I think in general, the call point, and the place where most of the product inventory is going to land, is going to be a surgical facility in the early going. But if a physician in his or her office setting chose to order the product, it would be similar to a buy-and-bill for other drugs.

So it could be a physician practice. It could be the ordering entity, the ordering facility.

Okay. Thank you for all the color, guys, I appreciate it.

Hartaj Singh, BTIG.

Hello there, can you hear me?

Yes. We can.

Thanks for the question. I just had a couple of questions. One is an overall question, and then second -- and I'm really looking forward to the Analyst Day in April -- but just as you are thinking about going from being a clinical company to a commercial stage company, what do you think in terms of just the operating expenditures?

How do you think they will change over the next 12 to 24 months? And then the second question is, in terms of - after PDUFA date - can you outline very clearly, what are the clinical and regulatory catalysts we're going to expect before the end of the year? Thank you.

Let me speak to the regulatory catalysts and then I will let Brad comment upon the expenses. Regulatory catalysts that are there before the end of the year, include for DEXTENZA, the PDUFA date, and the approval for the pain indication. Then comes the allergic conjunctivitis, second Phase 3 readout.

And then, by the end of the year comes the ocular inflammation data from the third Phase 3 trial for DEXTENZA. So those are there for DEXTENZA. Other regulatory milestones for OTX-TP would include the beginning of the first of the Phase 3 clinical trials.

Another would be some update on the dry eye, as to what path may lay forward based on our discussions with the agencies that we plan to have over the next several months. Schedule a discussion on dry eye indications, and what type of trials may be required to support it and is that really something which we want to pursue moving forward? Is that a target that we think we can achieve, et cetera.

So those are going to be some of the regulatory catalysts lying ahead of us. And then Brad could speak to some of the other stuff.

Good morning, Hartaj, thanks for joining us. The guidance that we are giving for 2016, is compared to 2015, where we saw roughly $34 million in operating cash, use of cash in operations. We're looking at a range of $45 million to $48 million.

Clearly, a lot of that is driven by building up the sales and marketing infrastructure, in connection with our pending approval of DEXTENZA. But also, of course, all of the clinical trial development programs that we will have underway. So as we have indicated, we expected to start the Phase 3 glaucoma trial - the first of two - in the back half of the year, so that is also reflected in those numbers.

But it does reflect, as Scott indicated, into 2016, initially starting with 10 sales reps or eight contract sales organizations, building medical affairs, reimbursement capabilities. So that is all baked into the plan.

Great, thank you. I appreciate that.

Thank you. At this time I'm showing no further participants in the queue. I would like to turn the call over to management for any closing remarks.

I want to thank everyone for taking the time to join us on the call today. We feel very confident in our hydrogel-based sustained-release platform. We have an NDA filed with the FDA for post-surgical ocular pain, and are awaiting potential approval on July 24 of this year.

We have recently completed a successful Phase 3 study for allergic conjunctivitis. And have observed encouraging results for our candidate for glaucoma, which we expect will soon enable us to initiate our Phase 3 program. We hope to see you all on April 6, 2015, at our Analyst Day in New York City, as Brad mentioned.

We look forward to updating you on our important milestones throughout 2016. On behalf of the entire Ocular team, thank you for all of your support. You may now disconnect.

Ladies and gentlemen, thank you for your participation on today's conference. This concludes your program. You may now disconnect. Everyone have a great day.