Ocular Therapeutix Inc (OCUL) 2018 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by, and welcome to the Ocular Therapeutix First Quarter 2018 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, Liz. Good afternoon, everyone, and thank you for joining us on our first quarter 2018 financial results and business update conference call. 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 March 31, 2018.

The press release can be accessed on the Investors 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. Michael Goldstein, our Chief Medical Officer, will then provide an update on the pipeline. Following Michael's remarks, I will provide an overview of the financial highlights for the first quarter of 2018 before turning the call back over to Antony for a summary and questions.

For Q&A, we will also be joined by Dr. Dan Bollag, our Senior Vice President of regulatory and quality; Kevin Hanley, our Senior Vice President of Technical Operations; and Scott Corning, our Senior Vice President, Commercial.

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 today, May 8, 2018.

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.

Thanks, Donald. Following a year of transition, Ocular Therapeutix enters 2018 with an exciting set of opportunities that included a number of regulatory and clinical milestones we will discuss on the call today. Our strategy to bring forward to commercialization our late-stage pipeline while aggressively leveraging our core competence in the formulation of new delivery technologies using our hydrogel-based platform is guiding us to a set of near-term objectives that can transform the company over the next several quarters.

With the right strategy, objectives and leadership in place, we're now able to turn our full attention to execution, and most importantly, to the demonstration of our ability to deliver on the immense promise of our platform technology. Top among our objectives are the planned resubmission of DEXTENZA and the continued advancement for our product pipeline.

Let me start with an update on DEXTENZA. Just 4 months into the year, I am pleased to report that we are making significant progress. The resubmission of our DEXTENZA new drug application remains the company's most important order of business. Over the last 6 months, with significant contributions from both new and legacy members of the Ocular team, we've made substantial progress addressing not only the specific issues raised by the FDA in the most recent CRL, but perhaps more importantly, we've been instituting important upgrades to the overall quality systems and key operating procedures. As we have continuously stated, our goal is to respond not just to the specific issues outlined in the Form 483, but more importantly, to improve our GMP compliance and our overall inspection readiness, not only for the approval of DEXTENZA but also for the rest of our pipeline. Based on our progress, I would like to reiterate our prior guidance that we are retargeting a resubmission in the second quarter this year. To discuss this more specifically, you may recall in our last quarterly conference call, we identified several ongoing work streams leading to manufacturing and quality preparedness. I'm happy to report back that all these work streams are either in the late stage or have already been completed. We are conducting additional DEXTENZA manufacturing runs intended to demonstrate control of the manufacturing process. The key remaining steps before resubmission will be the successful completion of these manufacturing runs and acceptable performance during an upcoming mock inspection. With these workflows advancing well, we are intensifying our planning for our U.S. launch of DEXTENZA. Thankfully, we have the benefit of a running start with the work that was done in the first half of 2017. However, we are taking the opportunity to question previous assumptions and integrate learnings from the market, particularly from recent past experiences in the ophthalmology space. We are insight into the marketplace and the unique opportunities of DEXTENZA. We believe that a small company with targeted resources like Ocular can be very successful in maximizing revenue potential while building a short path to profitability. So as we speak today, we've made important progress towards our DEXTENZA resubmission, and work is underway to plan our promotional and reimbursement approaches. We believe that DEXTENZA will be a transformational asset for patients and providers as well as for Ocular. We remain committed to our time lines but also want to be clear that the highest quality resubmission package is the goal. We understand clearly that we need to rebuild credibility with the both the FDA and our investors so we will continue to be very careful and deliberate in the work we do to support the resubmission. The resubmission of DEXTENZA is clearly our highest priority. Regulatory approval would be a validation of our platform technology as a whole and would further affirm the value of the rich pipeline that continues to advance behind it. To discuss our pipeline, I would like to turn the call over to our Chief Medical Officer, Michael Goldstein.

Thanks, Antony. Beyond DEXTENZA is a deep pipeline consisting of 4 product candidates that target multiple ocular diseases, both the front and back of the eye. Each of these projects has a customized formulation using our proprietary hydrogel technology platform that we believe will produce drugs that offer significant benefits over those offered by existing drugs in the market today.

Now let me provide an update on our pipeline. OTX-TP is a long-acting preservative-free formulation of travoprost for patients with primary open-angle glaucoma and ocular hypertension. Our product is an intracanalicular insert designed to release drug over 3 months. What differentiates OTX-TP from currently marketed products is the extended delivery profile that reduces the number of drops patients are required to take, which we believe directly addresses the issue of compliance and ultimately, may improve the benefit of the drug. This program is currently targeting and enrolling approximately 550 patients in our first Phase III clinical trial with OTX-TP. As a reminder, the primary efficacy endpoint is the statistically superior reduction of intraocular pressure from baseline with OTX-TP compared to placebo inserts at 2, 6 and 12 weeks following insertion. These include statistically superior IOP reductions 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, we also expect that the FDA will require us to demonstrate that the IOP reduction to be clinically meaningful to obtain regulatory approval. While enrollment in this large trial has continued to advance and investigator interest remains high, in the recent quarter, a gap has emerged between the company's original expectations and the actual pace of enrollment. To be prudent, we are adjusting guidance that top line data will now be available in the first half of 2019 rather than the second half of 2018, as previously guided. In addressing this issue, we're intensifying efforts with current sites to identify eligible patients and are adding new sites to accelerate enrollment.

Despite the potential delay in top line data, there have been some very satisfying developments in the OTX-TP program. We now plan to begin open label, one-year safety extension study in the second quarter of 2018 to be included as part of the current pivotal program. This study will help support the FDA's long-term safety requirement for chronic therapies for NDA submission.

OTX-TIC is our second glaucoma program in development. The product is a bioresorbable travoprost containing hydrogel implant delivered via the intracameral injection and as a drug that targets patients who need a higher level of interactive pressure reduction. Preclinical work is complete and the drug demonstrated a good safety profile, favorable pharmacokinetics in the aqueous humor, a marked reduction in our intraocular pressure and a sustained 0-order release that supports human dosing with a duration of 4 to 6 months with a single implant. As we mentioned on the last conference call, we have initiated a Phase I clinical trial outside the United States and with the U.S. IND now in fact, we've opened our U.S. Phase I clinical trial. This U.S.-based Phase I, open label proof-of-concept clinical trial will value the safety, durability, tolerability and efficacy of OTX-TIC in patients with primary open-angle glaucoma and ocular hypertension. We have recently dosed our first patient in this trial as you may have seen from our press release last week. As this is an open label trial, we will be collecting data over 2018 with the full data set anticipated in the first half of 2019.

OTX-TKIs. Moving to our efforts in the back of the eye, we continue to advance our tyrosine kinase inhibitor implants program, OTX-TKI, which is being developed to treat patients with wet age-related macular degeneration and other retinal diseases. OTX-TKI is a bioresorbable hydrogel fiber implant 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 12 months.

We anticipate the Phase I clinical trial to begin outside the United States in the second quarter of 2018. The study will be a multicenter, open label, dose escalation study to test the safety, durability and tolerability of OTX-TKI. We also plan to evaluate biological activity by following visual acuity over time and measuring retinal thickness using standard optical coherence tomography, or OCT.

Finally, along with our partner Regeneron, we continue to progress in the development of a sustained-release formulation of the VEGF trap aflibercept or Eylea for the treatment of serious retinal diseases such as wet age-related macular degeneration. 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 first quarter 2018 financial results.

Thanks, Michael. Let me begin by summarizing our capitalization.

As of the quarter ended March 31, 2018, we had $62.9 million in cash and cash equivalents and approximately 37.3 million shares issued and outstanding. The increase in cash over the fourth quarter of 2017 reflects the addition of $34.7 million in net proceeds from the completion of our common stock follow-on offering in January of this year.

With respect to operations during Q1, our operating cash burn was $12.5 million compared to $14.6 million for the first quarter of 2017. The decrease of $2.1 million was primarily a result of the savings in operating expenses due to the restructuring in the third quarter of 2017. Based on our current plans and forecasted expenses, we believe that existing cash and cash equivalents, including the proceeds from the January 2018 offering, will fund operating expenses, debt service obligations and capital expenditure requirements through the first quarter of 2019, exclusive of the potential $10 million option payment from our Regeneron partnership. 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 first quarter ended March 31, 2018, we reported a net loss of $13.8 million or a loss of $0.40 per share. This compares to a net loss of $16 million or a loss of $0.58 per share for the same period in 2017. The net loss for the first quarter of 2018 included $2.4 million in noncash charges for stock-based compensation and depreciation compared to $2 million in similar noncash charges for the comparable quarter in 2017.

Research and development expenses for the quarter ended March 31, 2018, were $8.2 million compared to $6.7 million for the first quarter of 2017 and reflecting increasing compensation costs associated with additional hiring, primarily in our clinical regulatory and quality departments, as well as an increase in facilities expenses associated with additional ad space at our corporate headquarters.

Selling and marketing expenses for the first quarter of 2018 were $0.7 million as compared to $6 million for the comparable quarter in 2017. This decrease relates to a significant reduction in precommercial activities as a result of the delay in the planned launch of DEXTENZA.

General and administrative expenses were $4.8 million for the quarter ended March 31, 2018, as compared to $3.3 million in the first quarter of 2017. The increase in expenses came from increases in legal costs related to the defense of ongoing litigation as well as increased compensation expenses associated with the hiring in the second half of 2017. Revenues for the first quarter of 2018 were driven exclusively by ReSure Sealant. First quarter revenues totaled approximately $340,000 compared with $475,000 in the same period for 2017. As noted in the past, we are not currently providing promotional support to ReSure and do not expect product revenues to be material in 2018.

This concludes my comments on our first quarter March 31, 2018, financial results. Now I would like to turn the call back to Antony for some summary comments

Thanks, Donald. Overall, I'm pleased with the progress we have made in the quarter, and I'm extremely grateful for the hard work of all of our employees as we work towards the earliest possible approval of DEXTENZA.

In the last 3 months, we have accomplished a lot. And I believe I speak on behalf of the team in saying that we're extremely excited about what to expect in 2018.

Before opening the call for questions, I'd like to recap our near-term milestones one last time. First and foremost, we expect to resubmit DEXTENZA in the second quarter of 2018 and anticipate receiving a decision from the FDA before the end of the year. With regard to OTX-TP, our intracanalicular insert for the treatment of glaucoma, while we were clearly disappointed with our change in guidance, we are excited to announce the addition of an open label safety trial for patients in our current Phase III pivotal trial. With both of our Phase I programs, OTX-TIC, our intracameral implant for the treatment of glaucoma, and OTX-TKI, our intravitreal implant for the treatment of wet AMD, we expect to collect data before the end of 2018 that will give us an early read, not only on the safety and tolerability of these products, but also on their biologic activity.

Finally, with regard to or OTX-IVT, our collaboration with Regeneron on extending the dosing interval for Eylea, we expect continued progress. Since we do not control the pace of preclinical work, we cannot give guidance expectations for 2018. However, with the emphasis on the VEGF competitive landscape on longer acting drug delivery, we remain hopeful for disclosable news flow in 2018. We have a great deal to look forward to in the near term, and we're providing you with additional updates in the future. At this time, I'd like to turn the call back to the operator to answer any questions. Operator?

(Operator Instructions) Our first question comes from Adnan Butt with Guggenheim Securities.

Antony, on the NDA refiling, your timing seems to be very confident in terms of submitting and then getting it approved within 6 months. Is that based upon the fact that the manufacturing runs are complete and you're in the process of driving up responses? Or what is that based?

Well, I'll let Dan Bollag handle that question. But as I mentioned in the discussion, we're actually not completed with the manufacturing runs yet. Although we're in the middle of them, and we're pleased with what we've seen so far. But as to the timing of getting a decision before the end of the year and the process of what we expect to be a Class II submission, I'll hand it over to Dan. So Dan?

Sure. Yes, we -- I think we have come quite a long ways with the manufacturing progression. So we're in process, but we are where we want it to be. And our timing looks very good to meet the guidance that we provided, so we do feel confident in that. As I think we've discussed before, the review time line that the FDA has is 6 months from the date that they receive the submission. So again, with the submission in the late second quarter, the action should be before the end of the year.

Okay. And on OTX-TP enrollment, do you see any regional differences in terms of enrollment? Is there a competition from other studies? What exactly led to this change from the prior updates?

I'll let Mike Goldstein handle that. But we haven't really seen any regional differences. And certainly, there's no competitive products that we see taking patients away. But I'll let Mike sort of complete the fuller color on that. Mike?

Yes, this is Mike Goldstein. So the short answer to your question is, no, we don't see it. I mean, there are always programs out there, but we don't see any competitive programs. But just to remind you, the inclusion includes -- the exclusion criteria in this trial are very strict. And we've enriched the trial for those patients who respond well to prostaglandins. And so we've seen -- and during the trial, we've seen steady enrollment throughout, and investigator interest remains high. But the forecast, the original forecast for the trial, contemplated accelerated enrollment as we got near the end. And we haven't seen that. We've sort of seen steady enrollment. And in the phase of accelerating projections, we're seeing a separation between what we projected and what we're actually seeing. And so due to that preparation, we feel it's prudent at this point to change our guidance. And there are a number of things that we've done -- we've already done to address this. This is something we've seen. So we are working very closely with the sites to identify appropriate patients, and there are a number of initiatives that are going on in this area. In addition, we have already added a handful of new sites and will add a couple additional sites to the trial. So we believe by making these changes, we'll get and will get enrollment back on track to where we want it to be. But I think at this point, until we see the results of these changes, I think it's prudent to update guidance at this point.

So Michael, it seems that it's not a physician referral challenge. It's more the inclusion/exclusion criteria, is that fair?

That's correct.

Okay. And then just the last one on the OTX-TP implant, what's the level of IOP lowering, your target for that? And is that also a biodegradable implant?

So do you mean the OTX-TIC?

The intracameral.

Okay. So yes, it's completely biodegradable. It's an implant that's inserted into the front part of the eye, known as the anterior chamber, and we're looking for IOP lowering of between 7 and 10 millimeters.

Our next question comes from the line of Dane Leone with BTIG.

I just want to go back to the progression on the resubmission. When we had update on the fourth quarter call, you guys noted that you're finishing up the manufacturing runs. It sounds like you are still doing that. Yes, maybe as the first part of the question, could you just go in to maybe a greater level of detail of kind of why over the past 3 months, it's still not quite wrapped up? Is there stuff that you're still moving around in terms of the process optimization? Or is there something else there?

Good question. I'll let Kevin follow up on that call. But I mean, we certainly had planned the continuing runs, and we also plan runs post submission as well. So the fact that we're doing runs is not indicative that we somehow feel that we haven't -- we're not making progress, but that doesn't mean that we can't further improve it. But I will let Kevin sort of chime in on where we are and what we expect out of the current series and then what we expect out of the [PTQ] after the submission. So Kevin?

Thanks, Antony. This is Kevin Hanley. So we actually executed a campaign in which several batches were successfully meeting the standards that we expected. And it really is in now just we're increasing our confidence. So we have additional batches that are planned for that we're in the middle of another campaign. And as Antony just mentioned, even subsequent completion of this, we believe the data will be more compelling to include in the NDA that we would continue even after submission of the NDA for further batches that we would execute.

Okay. So the -- so in terms of putting together, you spoke to about, Antony, in the package in and of itself and having the right confidence of the package to be resubmitted. I guess, could you maybe try that another angle and give us a heads up in terms of what parts of the package you're still kind of filling in here for the resub?

Sure, I'll pass it off to Dan who's knee-deep in putting the package together, so he'd be able to go into exquisite detail. And I'll try and keep him high level as possible, but you want to try and handle one, Dan?

Yes, sure. We're very much involved in kind of compiling the sections for the resubmission. Some of the data from these manufacturing runs will go into those. But again, we have very clear time line. We are perfectly well on that time line, and we will insert those data as that time point nears. So again, I have really no concerns about where we are either on the manufacturing front nor on the NDA compilation submission front. We're right on track.

Okay. Maybe I could ask one more, switching gears a little bit. With the disclosure that you will be getting into the TKI effort that the trial is going to open, could you kind of give us a little bit more in terms of design, how you're trying to approach it on the next U.S. basis and kind of what that means in terms of longer-term regulatory strategy?

Okay. I'll hand it off to Mike. Mike, you want to handle that one?

Sure. I'm Mike Goldstein, again. So the OTX-TKI is a program we're really excited about. As you know, the age-related macular degeneration market is huge and dominated by 3 anti-VEGF drugs and lots of -- there's lots of interest in developing drugs with other mechanism. So we believe tyrosine kinase inhibitors would be a great mechanism. We have developed an implant that with a single injection into the vitreous can last up to a year depending on dosing. And so we've designed a trial to begin outside the United States, which would be a dose escalation study, which would escalate through several doses. And then when we get to the maximum tolerated dose, we would then do a cohort expansion, which would compare monotherapy with the OTX-TKI compared to combo therapy with an anti-VEGF drug. Once we've established data from that trial, we would then plan to file a U.S. IND and bring the trial -- then start trials up in the United States.

I think that the fact that we're starting the trial outside the U.S. wouldn't affect the overall time lines for an eventual submission in the U.S. given that the -- we're doing it in countries that are well recognized to have good clinical practice and at sites that have been involved in FDA submissions before. So the fact that it's not starting in the U.S. doesn't mean that it will somehow be later to market or in some ways delayed with an FDA submission.

(Operator Instructions) Our next question comes from the line of Yi Chen with H.C. Wainwright.

This is Yi. Regarding the OTX-TIC trial that just started, how stringent is the inclusion excluding -- exclusion criteria? And do you see that there's a possibility for a similar enrollment issue going forward?

Mike, do you want to handle that?

Sure. So this is Mike, again. So I mean, one huge difference is the OTX-TP program is 550 subjects whereas the OTX-TIC is a Phase I trial. So the numbers are much, much different. And the truth of the matter is the patients -- the site reviews have already identified patients in this trial. So we do expect -- so while the inclusion/exclusion trial criteria are strict, we do expect enrollment to happen relatively quickly in this trial. But the big difference is the numbers are just much, much smaller with a Phase I trial versus a Phase III trial.

Okay. And just one quick follow-up. Do you expect the severe glaucoma patients to have dry eye symptoms so that they can be enrolled to the study?

So it is true that many of the patients that have glaucoma are elderly, and there is a huge overlap between the dry eye population and the glaucoma population. So it is -- it's also true that the mechanism of action, at least for the intracanalicular insert, will block the outflow and should help those patients with the dry eye. So that's sort of a secondary advantage we'll be able to get with this product, so not only lower IOP, but should help with the dry eye. In addition, one point that's not often discussed is the product is preservative-free. So putting a preservative-free drop on the eye is again another advantage to patients who have an ocular surface that's already compromised.

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

I don't have any more closing remarks. I appreciate the questions, and I certainly appreciate all of our investors' patience with us as we work our way through to the resubmission of DEXTENZA and the advancement of pipelines. So thank you very much for the questions and for your participation on the call.

Ladies and gentlemen, you may now disconnect.