Ocular Therapeutix Inc (OCUL) 2017 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by, and welcome to the Ocular Therapeutix Q3 Earnings Conference Call. (Operator Instructions)

It is now my pleasure to turn the call over to Donald Notman, Chief Financial Officer of Ocular Therapeutix. Please go ahead, sir.

Thank you, operator. Good afternoon, everyone, and thank you for joining us on our third quarter 2017 financial results and business update conference call. Earlier this afternoon, 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 quarter ended September 30, 2017. The press release can be accessed on the investor portion of our website at investors.ocutx.com.

Leading the call today will be Antony Mattessich, our President and Chief Executive Officer, who will provide a summary of our recent clinical and corporate developments. Dr. Dan Bollag, our Senior Vice President of Regulatory Affairs, Pharmaco Vigilance and Quality, will provide an update on our progress in manufacturing quality systems; while Dr. Mike Goldstein, our Chief Medical Officer, will provide an update on the pipeline that is developing from our hydrogel-based formulation technology. Following his remarks, I will provide an overview of the financial highlights for the third quarter of 2017 before we open the call for questions. For Q&A, we will also be joined by Scott Corning, our Vice President of Marketing and Commercial Operations.

As a reminder, during today's call, we'll 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 annual report on Form 10-Q, which was filed with the SEC earlier this afternoon.

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.

I will now turn the call over to Antony.

Thank you, Donald. Now since our last earnings call, we've been working exceptionally hard to get traction in 3 main areas. The first is to expedite the refiling of DEXTENZA, the second is to advance our pipeline and the third is to build a team that maintains our excellence in formulation technology while building a deeper biopharma capability in areas like technical operations, clinical development, business development and regulatory affairs and quality. I'm delighted to update you on your progress -- on our progress of all 3 of these areas, starting with the building of the team.

Since receiving the CRL in July, we now have, along with myself as incoming CEO, a new head of Regulatory Affairs and Quality in Dr. Dan Bollag, a new CMO in Dr. Michael Goldstein and a new CFO in Donald Notman. In addition to the permanent members of the team, we also have a long-term consulting arrangement with Pauline Jen Ryan of Red Sky to handle business and corporate development, and we have engaged Jon Sparks with McCarter & English to be our external general counsel and Head of Intellectual Property. All of the new team has deep experience in the biopharma industry and has been added without comprising our formulation capabilities. The transformation of the team has been truly additive, and the quality of the people we've been able to attract and retain says something about the belief of those who are closest to Ocular. We still have a few key hires to go in our technical operations and quality areas before we can truly have confidence that we are fit for the future. We expect to be making those appointments in the very near future.

One of the most crucial of these new hires, clearly, is Dan Bollag, Head of Regulatory and Quality. Dan has been in the industry over 25 years, and most recently, headed up Regulatory Affairs and Quality at Ariad Pharmaceuticals, where he oversaw the priority review accelerated approvals for 2 new chemical entities over the last 5 years.

I think Dan is the best person to let you know how we are tracking on our most immediate imperative at Ocular, getting an approval for DEXTENZA. Dan?

Thank you, Antony. Since receiving a Complete Response Letter from the FDA in July, our team has been working hard to respond to the outstanding inspectional observations while also making improvements in our manufacturing process and our quality oversight. It may be worth mentioning that the deficiencies noted in the Complete Response Letter only referred to the preapproval manufacturing inspection observations. I'm pleased to let you know that we've recently provided our final responses to the FDA related to the Form-483 observations from earlier this year.

During this time, we've also created a particulate control master plan and a quality improvement project plan, which detail the steps we are taking to upgrade our processes and systems to further enhance our manufacturing capabilities. These concrete steps, along with ongoing efforts to train and increase our staff, will put us in a better state of preparedness for the transition to commercial manufacture of DEXTENZA. We will be requesting a meeting with the FDA to describe our remediation efforts and NDA resubmission plans and hope that such a meeting can occur early in 2018, ideally in the January time frame. Based on the feedback we receive at that FDA meeting as well as data from additional manufacturing runs, we will prepare our resubmission dossier, which we anticipate being able to submit in the first half of 2018. We're working with a strong sense of urgency and the need for speed, but we also recognize how critical it is to ensure that our processes, oversight systems and personnel are well prepared to support commercial manufacture. This is perhaps an obvious statement to make after receiving 2 Complete Response Letters, but it is important to keep in mind as we are moving Ocular forward to be able to support not only DEXTENZA manufacture but also the rich and promising pipeline behind this asset.

Antony?

Thanks, Dan. And while DEXTENZA is the most near term and immediate imperative, it's no more important or urgent than development of our pipeline. The hydrogel platform has a multitude of current and potential applications that we intend to bring forward either by ourselves or in partnership with other companies. We are very fortunate to have attracted Mike Goldstein as our CMO. Mike has a long biopharma pedigree, but is also a practicing ophthalmologist and academic. He has taken hold of the clinical stage pipeline and is the best person to walk you through the current stage of that pipeline.

Mike?

Thanks, Antony. It is a great pleasure and honor to join the Ocular Therapeutix team. The hydrogel platform is really exciting, and I look forward to working with the team to transform the potential for longer-acting drug delivery to benefit patients.

While much of company focus has been on DEXTENZA, our pipeline also includes 2 products, OTX-TP and OTX-TIC, to treat primary open angle glaucoma and ocular hypertension; and 2 products, OTX-TKI and anti-VEGF protein depots, for the treatment of retinal diseases, such as age-related macular degeneration, diabetic macular edema and retinal vein occlusion. OTX-TP and OTX-TIC are both long-acting, drug-delivery inserts designed to meet one of the biggest unmet needs for patients with glaucoma and ocular hypertension difficulty with compliance with daily drops.

OTX-TP is a long-acting travoprost insert designed to release travoprost over 3 months from a punctal plug. This insert targets patients with mild to moderate primary open angle glaucoma and ocular hypertension. This program is currently enrolling patients in our first Phase III clinical trial with OTX-TP for the treatment of glaucoma and ocular hypertension. We are targeting enrollment of 550 subjects and remain pleased with the pace of enrollment. As a reminder, the primary efficacy endpoint is the statistically superior reduction of interactive pressure from baseline with OTX-TP compared to placebo insert at 2, 6 and 12 weeks following insertion. These include statistically superior IOP reduction at 3 diurnal time points of 8 a.m., 10 a.m. and 4 p.m. at each of these weeks.

In addition, while not a primary endpoint, the IOP reduction will also need to be clinically meaningful for regulatory approval. We expect top line efficacy data from the first Phase III trial to be available in the second half of 2018 and believe that it'll be necessary to complete a second Phase III clinical trial for regulatory approval. While we have previously guided towards the initiation of a second Phase III by the end of 2017, we now plan, subject to the available allocation of funding, to initiate the second Phase III in 2018.

In parallel, we are making strong progress on the development of OTX-TIC, which is a bioresorbable travoprost containing hydrogel depot delivered intracamerally via a fine-gauge needle injection. We are developing OTX-TIC to address the need for a higher level of intraocular pressure reduction for patients who have moderate to severe glaucoma. Preclinical studies in animal models have demonstrated good safety, clinically meaningful reduction in intraocular pressure up to 4 months and favorable pharmacokinetics in the aqueous humor. We have initiated a pilot human clinical trial with OTX-TIC outside of the United States. This study is a prospective single-center, randomized, double-masked, sham-controlled study, designed to evaluate the safety, efficacy and tolerability of OTX-TIC compared to travoprost eyedrops in up to [28] patients with primary open-angle glaucoma or ocular hypertension. We also plan to file a U.S. IND in the first quarter of 2018 to conduct a multicenter clinical trial evaluating the safety efficacy and tolerability of the OTX-TIC in patients in the same indication. If the results from these trials are promising, we plan to advance OTX-TIC into a Phase II clinical development program.

Turning to our back-of-the-eye efforts, we continue to advance our tyrosine kinase inhibitor intravitreal depot program, OTX-TKI, which we expect to enter Phase I clinical testing in the first half of 2018. OTX-TKI is a preformed bioresorbable tyrosine kinase inhibitor containing hydrogel fiber depot with antiangiogenic properties delivered by intravitreal injection. Preclinical data have demonstrated the ability to deliver an efficacious dose of TKI to the posterior segment of the eye for the treatment of VEGF-induced retinal leakage for an extended duration of up to 6 months.

Along with our partner, Regeneron, we also continue to make good progress on the development of a sustained-release formulation of the VEGF trap, aflibercept, or Eylea, as well as other protein-based biologics targeting VEGF for the treatment of serious retinal diseases, such as wet ARMD. We value our partnership with Regeneron and believe it speaks to the innovative nature of our technology.

I would now like to turn the call back over to Donald, who will review our third quarter 2017 financial results.

Thank you, Mike. Let me begin by summarizing our capitalization as of September 30, 2017. At that time, we had $51.2 million in cash, and cash equivalents. We had approximately 29.4 million shares issued and outstanding as of that date. With respect to operations during Q3, our operating cash burn was $14.4 million in the third quarter of 2017 compared to $7.3 million for the third quarter of 2016. The increase was due to increased personnel costs associated with supporting our ongoing development programs, facilities costs associated with the relocation of company headquarters and the impact of $2.1 million in restructuring and other costs associated with the company's recent initiative to enhance operations and reduce expenses surrounding the delayed DEXTENZA launch, as announced in August of 2017.

Going forward, we expect to realize savings in operating expenses as a result of the restructuring. With these anticipated cost savings and based on our current plans and forecasted expenses, we believe that existing cash and cash equivalents will fund operating expenses, debt service obligations and capital expenditure requirements into the fourth quarter of 2018. This is, of course, subject to a number of assumptions about our clinical development programs and other aspects of our business.

With respect to financial results for the third quarter ended September 30, 2017, we reported a net loss of $15.6 million or a loss of $0.54 per share, this compares to a net loss of $9.6 million or a loss of $0.39 per share for the third quarter of 2016. The net loss for the third quarter of 2017 included $2.2 million in noncash charges for stock-based compensation and depreciation compared to $1.6 million in similar non cash charges for the comparable quarter in 2016.

Research and development expenses for the quarter ended September 30, 2017, were $8.1 million compared to $5.7 million for the quarter ended September 30, 2016, and reflect an increase in personnel costs and facilities expenses associated with increased lab space at our corporate headquarters.

Selling and marketing expenses for the quarter ended September 30, 2017, were $3.2 million as compared to $1.3 million in the third quarter of 2016. This increase primarily represented the costs of precommercial activities in preparation for the planned launch of DEXTENZA. The selling and marketing costs are expected to decrease significantly over the next several quarters.

General and administrative expenses were $4.2 million for the quarter ended September 30, 2017, as compared to $2.6 million in the third quarter of 2016. The increase in expenses stemmed largely from increases in personnel costs, professional fees and facilities expenses.

Revenues for the third quarter of 2017 totaled approximately $500,000 from the sales of ReSure Sealant. As noted in the past, we don't expect product revenues from the sales of ReSure Sealant to be material in 2017.

This concludes my comments on third quarter 2017 financial results. I would now like to turn the call back over to the operator so we can go ahead and take your questions.

(Operator Instructions) Our first question is from Adnan Butt of Guggenheim.

First on DEXTENZA, could you tell us -- it seems like, but could you confirm that if all the outstanding items are addressed in your response? And at what point would you expect the FDA to reinspect the plant, if that's needed?

Yes, thanks. This is Dan Bollag, appreciate your question, Adnan. The -- at this point, our dossier is not under review since we received our Complete Response Letter earlier this year. So I would expect a reinspection to occur after we resubmit our dossier. As indicated, our expectation is to do that resubmission in the first half of 2018. And so the FDA would likely inspect after receiving that application.

So Dan, perhaps you can shed some light on -- the company has had data on these few successful studies for some time, so what's the rate-limiting step between the meeting, presumably, in January and then refiling the NDA?

Yes, thanks. So there are a number of kind of concurrent streams of activity, which all will inform that. We are executing some additional manufacturing runs to confirm consistency. We are executing on a couple of improvement plans, a quality improvement plan, as well as a particulate reduction strategy plan. And so between that information and any feedback that we receive from the FDA, for example, at that meeting, will guide us in terms of when we feel we will be ready to make that resubmission. So again, these activities are ongoing, and as they read out, we'll be able to have more precision around when that submission can occur.

Okay. And in terms of DEXTENZA's opportunity, at this time are there plans to conduct any additional studies with DEXTENZA?

Yes, this Scott Corning. The company, as you know Adnan, has already undertaken some studies in the areas of allergic conjunctivitis as well as dry eye therapy. And it's possible that we would continue development there, but I personally won't speak to the timing of that. But we have 1 successful Phase III study, and there are discussions as to when we'd pursue a second one in that regard.

Okay, and then last one maybe -- go ahead.

Yes, sorry, as it relates to inflammation, you know that we conducted the third Phase III study in order to hit the primary endpoint there. And if you were talking about when we follow up with the inflammation indication, that would be after gaining approval for DEXTENZA. So we would file a supplement directly or shortly after approval for [pain] should we gain that.

Okay. And maybe one for Antony. Antony, what is your strategy for the company? The platform, presumably, has a lot of promise, what additional opportunities do you foresee for the platform itself?

Well, I mean, the first and foremost, we're going to focus on the products that we have in the pipe and the ones that we're having -- we have close to market. But the real benefit of having a platform like hydrogel is that it has so many potential applications. We are working on a number of formulations for different indications in different areas of the eye and beyond. At the moment, in areas where it -- we won't be splitting our efforts. So our formulation people can work on new areas while the commercial, the clinical and the regulatory people are focused on the ophthalmology area. So I'm not going to reveal exactly where we are, but we certainly will exhaust the opportunities in all of the areas of the eye, in the punctum, in the anterior chamber and then, of course, in the vitreous. So we have a lot of backlog to be able to work through, once we start getting traction on the front end of the pipeline.

Our next question is from Yi Chen of H.C. Wainwright.

Might be on mute. Hello?

Hello? Can you hear me?

Yes, there we go..

(inaudible)

Sorry about that. So my first question is, I wonder if it's possible for you to give us some -- a little bit more details on the improvement in the manufacturing process, particularly regarding the particulate matter previously found in the finished product?

Yes, thanks, Yi. As you're aware, we -- a substantial amount of the concern from the FDA in their 483 observations from earlier this year revolved around the finding and the identification and the control of particulates, in particular aluminum particulates. So we have been engaged in a fairly comprehensive review of looking at all aluminum surfaces in the manufacturing chamber, with an idea of narrowing down where -- what the sources could have been, making appropriate changes to manufacturing equipment, as needed, and then observing the impact of that. So that's sort of how we've gone about our efforts to control the aluminum particulates and particulates in general. But the particulate reduction plan that I referred to earlier, really, takes some a more global look at particulate identification and control and reduction overall, going beyond just metallic or aluminum particulates. So we feel that we are looking at this more broadly and in a way that is in alignment with how the industry does approach these types of particulate concerns. So we're optimistic that we're on a good path to getting this into a good shape that we can manage during the review, but especially during our commercialization of the product, to make sure that things are kept well under control.

Second question is, could you please update us with your current thinking on the commercial plan for DEXTENZA?

Yes. I mean, we are focused primarily on -- our core strategy is really leveraging our formulation capabilities and then, obviously, getting up to an environment where we can be a global supplier from a manufacturing side as well. Anything beyond that is opportunistic. So we see ourselves as clinical developers, where we can develop a product that we can do better than somebody else, and same is true from a commercial standpoint. As it regards DEXTENZA, we will go as far as it's profitable for us to go, but we are open to partnerships and to possible collaborations, certainly, outside of the U.S. But inside the U.S., we have a very credible plan of how we would be able to bring this product to market in a very profitable way. But if somebody is willing to or is very interested in partnering with us in the U.S. market as well, we'd be interested to hear. So that is much more an opportunistic play for us and not part of our core strategy necessarily.

Okay. Third question is that your press release mentioned that you may initiate a second Phase III trial of OTX-TP in 2018, could that happen before the top line readout of the first Phase III trial?

The answer is, yes, it could happen before the readout of that, and it will happen before the readout of that. It's a -- there is -- the opportunity that we see with OTX-TP is a -- is substantial, and clearly, we want to bring the approval forward. It's not really the first to filing, it's the first to approval. And that what we've seen...

Will the second -- sorry, go on.

No, go ahead.

Will the second trial replicate the same trial design as this first trial?

The current assumption is that it would. But one of the opportunities that we have by staggering the trials a bit is to be able to look at some of the data, obviously, in an unmatched way to be able to inform what we might do with the second trial. But the going-in assumption is that the trial would be substantially similar to the first.

Okay. And will the first trial have any kind of interim analysis?

The first trial will have a top line efficacy readout in -- at the -- in the latter part of 2018. We are using all the available data we have from the first trial, from the completers of the first trial. Clearly, the data is math so it has its limitations. But we will use whatever data we have to be able to inform the entire program going forward.

Our next question is from Bill Maughan of Cowan and Company.

So on the DEXTENZA manufacturing process, how similar is it to what you see the OTX-TP manufacturing process as? In other words, once the DEXTENZA process is smoothed out and approved, is there a lot of variations you'll have to make for your OTX-TP product?

This is Dan. Thanks for that question. It is an insightful one. And it -- at a high-level, the manufacturing processes are quite similar. So we certainly expect that we'll be able to benefit from the learnings and the improvements for DEXTENZA to the OTX-TP manufacturing process. So that is something that we do look forward to in the future. It underlines, I think, a point that I was trying to make in that, the attention and the investment that we're placing into DEXTENZA now from a manufacturing and quality perspective will pay substantial dividends as we apply that to our further pipeline products.

Okay. And then on the second Phase III for OTX-TP, given -- and this is sort of following up on the last question, given that it'll start before the data, the full data from the first Phase III, will there be any flexibility built into the trial design so that you could possibly alter it sort of on the fly after the first Phase III top line?

So this is Mike Goldstein speaking. So I mean, as Antony mentioned, we will look at the masked data from the first trial and learn as much as we can from that trial, and we will apply those learnings to the second Phase III trial. And -- but once the trial gets going, I don't anticipate any significant changes to the trial.

Our next question is from Justin Kim of Cantor Fitzgerald.

Just touching back on manufacturing, could you provide some of the findings from your investigation on the manufacturing process? And maybe, perhaps on a high level, some of the adjustments made to optimize or streamline the process?

So this is Dan. Thanks for the question Justin. I think that the -- sort of that level of detail is really something that I don't really want to go into at this point. Again, we have taken a fairly comprehensive look at the equipment and at the procedures, the flow of the whole manufacturing process. And we've made adjustments. We've explained a number of those in our -- we have explained those in our responses to the FDA. We may make some additional adjustments on our way to the submission in the process of, again, continuing to improve our overall control and the robustness of the process. So that -- I'm -- I'll -- I'm confident that when we do resubmit, we'll have things in very good control, and we'll be very well prepared both for FDA inspection as well as for supporting the commercial manufacturing.

I think what's important is that when we think of DEXTENZA, there are really 2 streams of work. The first is really to get full control and understanding of the process around DEXTENZA itself. And that is really where -- the 483 was around the issues related to the process around DEXTENZA. That is somewhat easier than the other bit of work, which is about the continuous improvement plan that's meant to bring the production unit up to GMP standards. That's a little longer and more nebulous than the first. As we said, we've issued the responses to the 483, the complete responses to the 483, already to the FDA. Meaning that we feel as though we have good control over the process for DEXTENZA. The [step] for us is really to ensure that we have the proper SOPs, procedures, training in place for the people in the production unit to ensure that it is inspection ready for the next time the FDA, should they choose to come and reinspect us, that they won't find some other issue that could cause us problems.

Okay. And so subject to feedback with regulators, would a class 2 review be consistent with a reinspection that follows the resubmission?

Yes, this is Dan. That would be my expectation. It's hard to imagine that the FDA would complete their review of a resubmission without inspecting again, given the prior history. So yes, that would be my expectation -- a Class 2 review at about a 6 months' time frame.

Okay, great. And then lastly, are there any time lines you could share on the nonclinical studies that were expected with allergic conjunctivitis?

So I think the -- this is Mike, again. So as Scott had mentioned, we're -- we -- the company has already completed studies looking at allergic conjunctivitis and dry eye. And we're looking at the data and currently planning the best path forwards. But we're not releasing any time lines or plans at this point.

I'm showing no further questions at this time. I'll turn the call over to CEO, Antony Mattessich, for closing remarks.

Okay, thank you. I want to thank everyone for taking the time to join us on the call today. We look forward to updating you on -- during the months ahead and the -- as we work towards resubmitting our NDA for DEXTENZA, continue enrollment in our first Phase III clinical trial with OTX-TP and continue to advance our earlier-stage development programs, all of which we believe are poised to become game changers in their respective indications. We also plan to be at the Guggenheim Conference next month and hope to see you there. You may now disconnect.