Ocular Therapeutix Inc (OCUL) 2018 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen, thank you for standing by. And welcome to the Ocular Therapeutix Fourth Quarter and Year-end 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, Daniel. Good afternoon, everyone, and thank you for joining us on our fourth quarter and year-end 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 December 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 an update on DEXTENZA, and a summary of our corporate developments and upcoming clinical milestones. Also speaking on the call today will be Scott Corning, our Senior Vice President Commercial, who will provide an update on DEXTENZA's commercial plans. And Dr. Michael Goldstein, our Chief Medical Officer, who will then provide an update on our clinical development and pipeline.

Following Michael's remarks, I will provide an overview of the financial highlights for the fourth quarter and year ended 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, Regulatory Affairs and Quality.

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 the 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-K, which was filed with the SEC today, March 7, 2019.

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, except as we are required to do so by law, even if our views change.

I will now turn the call over to Antony.

Thanks, Donald. 2018 was a transformational year for Ocular. And we're thrilled with early momentum we are seeing as we enter 2019, having recently submitted our sNDA to expand the label for DEXTENZA, commence dosing in our OTX-TKI trial, and closed the $37.5 million convertible debt financing, which strengthens our cash position and extends our runway into early in 2020.

2018 was, obviously, highlighted by the FDA's approval of DEXTENZA, our dexamethasone intracanalicular insert for the treatment of postsurgical ocular pain. This accomplishment brings us one step closer to realizing the significant potential of our hydrogel drug-delivery platform. We are at a critical moment in the company's history as we are on the cusp of becoming a fully integrated, commercial-stage biopharmaceutical company. We remain on track to have DEXTENZA available for sampling in May, with a formal commercial launch set to begin upon confirmation of our pass-through payments status expected in July of this year.

DEXTENZA is not only Ocular's first drug approval but is also the first product approved in an entirely novel dosage form.

Drug alluding intracanalicular inserts are minimally invasive, easily deployable route-of-administration that can deliver drugs to the surface of the eye without the challenges associated with eye drops. While we intend to use just multiply products treating many different diseases using this novel dosage form, we believe DEXTENZA can be transformative for both patients and physicians. For patients, DEXTENZA will offer the kinase of full course of steroid treatment in a single preservative-free intracanalicular insert. This novel means of delivery can replace a complex eye drop regimen that, under the current standard of care, can require up to 70 ocular steroid drops delivered over a full month, and require a weekly change in pathology.

For physicians, DEXTENZA puts control back in their hands by ensuring patient compliance.

We believe that DEXTENZA is simply a better way of delivering a steroid to the eye and fully expect that it could eventually compete for all of the 9 million prescriptions for Ocular steroids each year in the U.S.

While the long-term plan for DEXTENZA is broad, our initial commercial efforts will be laser-focused on the 2 million cataract procedures performed annually under Medicare Part B, where we expect to have full reimbursement at full price from the moment we receive pass-through payment status, anticipated to be effective in the July timeframe.

Given the concentration, the dynamics of this initial target market, we believe commercializing DEXTENZA in the U.S. by ourselves with a specialized field force provides the best opportunity to maximize shareholder value. In preparation for a successful commercial launch, we are hard at work at building the appropriate infrastructure, ensuring commercial supply, and most importantly, securing immediate and long-term reimbursement.

We are pleased that as of today, all 3 of these areas are progressing as expected. And we remain on track to have commercial product available for sampling in May, with a formal national launch plan for July.

Since approval, we have been fully engaged in the build-out of our commercial organization, which Scott will go into shortly. It is important to note, though, that Ocular has been preparing to be a commercial entity from the moment I became CEO. While I have had responsibility throughout my career for all paths of the biopharma business, my direct background is in the commercial space, with over a 29-year career, I've got a multiple -- a multitude of product launches across many therapeutic areas and in nearly every major pharmaceutical market in the world.

While DEXTENZA will be Ocular's first drug product launch, it will benefit from a team that has deep commercial experience, including selling buy-and-go products in the ophthalmology space. Rest assured, we have a sound commercial strategy and are in the process of executing against it.

Regarding reimbursement, we fully appreciate a successful commercial launch of DEXTENZA will be dependent upon having reimbursement firmly in place. As we have said, our goal is to achieve permanent separate payment status for the drug with well-understood procedure coding attached to its deployment. As of today, we are pleased to report that we have pending applications at the Center for Medicare and Medicaid Services that are being reviewed for both C and permanent J codes.

Beyond DEXTENZA, we have a highly productive year planned with our pipeline, which continues to advance as well as additions to that pipeline. Dr. Michael Goldstein will talk more about this later. To fund these plans, we are pleased to have announced a number of transactions, including a recently completed $37.5 million convertible note offering that strengthens our financial position and extends our cash runway. Proceeds from this offering, along with existing cash resources will fund the initial U.S. commercial launch of DEXTENZA, and advance all of the pipeline programs we will discuss today into early 2020.

It is important to remember that aside from our collaboration with Regeneron, we hold worldwide exclusive commercial rights at DEXTENZA and our entire pipeline, unburdened by significant royalty obligations and position to potentially achieve high gross margins.

With that, I'd like to turn the call over to Scott Corning, Senior Vice President of Commercial, who will speak to the commercialization of DEXTENZA.

Thanks, Antony. We are incredibly excited about the upcoming launch of DEXTENZA, and I would like to update everyone on the status of our commercialization efforts.

As Antony said, we remain on track to have DEXTENZA available for sampling in May, with plans for our commercial launch in July upon receipt of pass-through payments status when we expect CMS to issue our new C code.

Starting with market opportunity. There are approximately 9 million topical ophthalmic steroid prescriptions in the United States, about 4 million of which are associated with cataract surgery. Of those, approximately 2 million are cataract surgeries performed on patients covered under Medicare Part B. These cataract procedures will be our initial target market as they will be reimbursable with a C code in hand.

We are launching DEXTENZA ourselves in the United States market, and we'll do so with a direct sales force. This is an important aspect of our commercialization strategy based on our strong belief that this specialized sale, essentially, the surgical sale of a pharmaceutical product is best performed by a key account team with experience in ophthalmology, and selling buy-and-go products that can navigate the complexities of account-based selling.

For us, it is important to have a dedicated team that not only shares in DEXTENZA's success as a product but also in ocular's success as a company. We realized there are a number of new and existing products being used presently. Or that will be used post cataract or post ocular surgery. And we believe we are well positioned to compete effectively, given DEXTENZA's unique value proposition as the only drug-alluding intracanalicular insert.

DEXTENZA releases up to 30 days of preservative-free dexamethasone to the ocular surface on a tapering basis. Replacing the most arduous postoperative drop regimen with a single insert, thereby, eliminating the need for a steroid drop post surgery.

We are well underway in the hiring of our commercial team. We are pleased to have a head of sales in place, who has already hired his regional directors. And we are now in the midst of hiring our initial territory sales and field reimbursement personnel.

We plan to launch with an initial footprint of approximately 20 key account managers plus a field reimbursement team, and plan to add to that number as we can gain sales and reimbursement traction with the goal of being at approximately 40 key account managers by the end of the year.

Our commercial strategies and efforts benefit from having a running stock, given the precommercial work we conducted in 2017. Additionally, our distribution network is in place, we are working on our reimbursement services hub, and we will begin meeting with payers in the very near term. Surgeons are excited, along with our insights into the marketplace and with a product like DEXTENZA, we believe a company with targeted resources, such as Ocular, can successfully launch DEXTENZA.

I would now like to turn the call over to Michael Goldstein, our Chief Medical Officer, to discuss progress on our pipeline.

Thanks, Scott. Before getting to our pipeline, it is important to highlight our continued efforts to expand the potential of DEXTENZA. DEXTENZA truly represent a franchise opportunity for the company, with multiple lifecycle expansion opportunities and other indications where a product profile like DEXTENZA has potential to change the standard of care.

In January of this year, we submitted our supplemental new drug application to expand DEXTENZA's label to include the treatment of ocular information following ophthalmic surgery. We expect the FDA to complete its review in the second half of 2019. In addition, as we expand the DEXTENZA franchise, in 2019, we plan to initiate clinical trials that will evaluate DEXTENZA in pediatric cataract surgery and in allergic conjunctivitis. We have received proposals for and plan to support several investigator-initiated trials, evaluating DEXTENZA in different clinical situations.

Beyond DEXTENZA, our development efforts now shift to our pipeline of products that target multiple other ocular diseases of both the front and back of the eye. Each of the products within our pipeline targets and well-defined market that we believe is underserved by the current standard of care.

And like DEXTENZA, each of the products in the pipeline is a customized formulation that uses our proprietary hydrogel-technology platform, that we believe can produce treatments that offer significant benefits over those offered by existing drugs on the market today.

Two programs within the pipeline that we are very excited about target patients with glaucoma or elevated contractor pressure. And as many of you know, glaucoma is a large market and a disease that impacts an estimated 2.7 million people in the United States. It is recognized as the leading cause of blindness in people over 50 years of age. It is also an area where we believe one of the greatest unmet clinical needs is improving patient compliance. And as current standard of care relies on patients placing eye drops every day, the ability of patients to use and place eye drops is challenging. The prostaglandins are the most commonly used class of medications to treat patients with glaucoma. The products that we are developing are designed to address the issue of compliance by delivering a prostaglandin analog using our programs release hydrogel platform to potentially lower interactive pressure for many months with a single insert.

Our most clinically advanced asset in the pipeline is OTX-TP, which is fully enrolled for the first Phase III pivotal trial. OTX-TP is being developed as a potential treatment for patients with primary open-angle glaucoma or ocular hypertension. The product is a long-acting, preservative-free formulation of the drug, travoprost delivered as an intracanalicular insert designed to release drug over approximately 3 months. In the Phase III clinical trial, we completed enrollment of 557 subjects with the primary efficacy endpoint being a statistically superior mean reduction of intraocular pressure or IOP from baseline for OTX-TP trade of subjects compared to placebo insert to the subjects. A 3 diurnal quartile points of 2, 6 and 12 weeks following insertion.

In addition, while not a primary endpoint, the IOP reduction will need to be clinically meaningful for regulatory approval. We remain on track to announce the top line data from this clinical trial in the first half of this year. If this trial is successful, we will need to conduct an additional Phase III efficacy trial for regulatory approval.

In addition to the ongoing Phase III trial, we're conducting an open-label 1-year safety extension trial with OTX-TP, that will be included as part of the current pivotal program. This study will provide additional long-term safety data with repeat administration of OTX-TP.

OTX-TIC is our second pro forma program in development. This product is a bioresorbable travoprost-containing hydrogel implants, delivered via an intracameral injection designed to deliver a higher level of IOP reduction. We continue to enroll patients in a Phase I prospective, multicenter and open-label dose escalation clinical trial to evaluate the safety, efficacy, durability and tolerability of OTX-TIC.

As this is an open-label trial, we will be able to assess early biological activity and safety. And then now treat our first subject for 9 months with a single insert. We expect to present initial results at the ARGO meeting in April of this year.

Moving to the back of the eye, we have initiated a multicenter open-label Phase I clinical trial for OTX-TKI. OTX-TKI is a bioresorbable hydrogel fiber implant with antiangiogenic properties, delivered by intravitreal injection being developed to treat patients with wet age-related macular degeneration and other retinal diseases. As a reminder, TKIs or tyrosine kinase inhibitors, act upstream of VEGF and therefore, may have broader antiangiogenic properties.

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. The Phase I trial will test the safety, durability and tolerability of OTX-TKI and evaluate biological activity by following visual acuity over time and measuring retinal fitness using standard optical coherence tomography.

Last month, we announced that we dosed our first patient in this Phase I clinical trial. We are now pleased to announce that we have also successfully dosed our second subject in this trial.

Finally, OTX-IVT is 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, that is being developed in partnership with Regeneron. As we have said on prior calls, contractually, we are unable to comment on any details of the program.

I would now like to turn the call back over to Donald, who will review our fourth quarter and year ended 2018 financial results.

Thanks, Michael. Let me begin by summarizing our capitalization. As of the quarter ended December 31, 2018, we had $54.1 million in cash and cash equivalents versus $56.9 million at the end of the third quarter.

The cash balance benefited during the fourth quarter from $5 million in net proceeds generated from the sale of common stock under the company's 2016 sales agreement, or ATM, and $12 million of net proceeds from an expansion and extension of our existing 5-year term loan facility. Offsetting the ATM inflows during the quarter with net losses of $17.4 million, and a principal debt and interest repayments of $1.5 million.

As disclosed in this afternoon's 10-K filing, we have continued to opportunistically sell common stock under the ATM into 2019, raising an additional $5 million net of expenses. At this point, we have exhausted the current ATM facility. In addition, as announced 2 weeks ago, we raised $37.5 million in a convertible note offering to further support the launch of DEXTENZA and the ongoing development of our pipeline.

This 7-year note bears annual interest at a rate of 6%, and is convertible into common stock at $6.50 per share, representing an 80% premium to the closing stock price on the day of announcement. We are pleased to have put this additional funding in place that's ought to minimize dilution to existing shareholders.

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 expenditures into early 2020. This is, of course, subject to a number of assumptions about the pace of, not only our research in clinical financial development programs but also the cost related to the commercialization of DEXTENZA as well as other aspects of our business.

Research & Development expenses for the fourth quarter were $10.3 million versus $7.9 million for the fourth quarter of 2017, and reflect increased unallocated other costs, primarily in personnel costs, consulting services, outside testing expenses, and costs associated with additional hiring.

Overall, R&D expenses for the full year ended December 31, 2018, increased $6 million to $36.9 million from $30.9 million in 2017, reflecting increased unallocated personnel costs, consulting services and facility expenses associated with additional lab space at our corporate headquarters.

Selling and marketing expenses for the fourth quarter were $2.3 million as compared to $2.9 million of the same quarter in 2017. This increase relates to initial scale-up and precommercial activities, as a result of the early approval of DEXTENZA on November 30, 2018.

For the full year ended December 31, 2018, selling and marketing expenses decreased $12.1 million from $17 million to $4.9 million, driven primarily by decreased expenses associated with the previously delayed launch of DEXTENZA.

Finally, general and administrative expenses were $5.1 million for the fourth quarter versus $4.3 million in the comparable quarter of 2017.

For the year ended December 31, 2018, G&A expenses increased $3.3 million to $18.8 million from $15.5 million in 2017. The increase in expenses for both the fourth quarter and year ended 2018, stemmed primarily from increases in legal costs, related to the defense of the company and ongoing legal proceedings.

Revenues for the fourth quarter and year ended 2018 were driven exclusively by ReSure Sealant, and totaled approximately $0.5 million and $2 million, respectively. As noted in the past, we are not currently providing promotional support to ReSure, and we do not expect product revenues to be material in 2019.

With respect to the financial results for the fourth quarter ended December 31, 2018, we reported a net loss of $17.4 million or a loss of $0.42 per share. This compares to a net loss of $13.1 million or a loss of $0.44 per share for the same period in 2017. The net loss for the fourth quarter of 2018 included $2.5 million in noncash charges for stock-based compensation and depreciation, compared to $2.6 million for the same quarter in 2017. The company had approximately 42.8 million shares issued and outstanding as of March 1, 2019.

For the full year ended December 31, 2018, we reported a net loss of $60 million or a loss of $1.57 per share. This compares to a net loss of $63.4 million or a loss of $2.20 per share for the full year 2017.

This concludes my comments on our fourth quarter and year ended 2018 financial results. And I would like to turn the call back to Antony for some summary comments.

Thanks, Donald. Before opening the call up for questions, I'd like to recap the company's upcoming milestones for 2019. We remain on track to launch DEXTENZA midyear pharmacy to the C code. We anticipate the FDA to complete its review of our sNDA to expand DEXTENZA label and include information in the second half of 2019. We expect to report results from our first pivotal Phase III study for OTX-TP in the first half of 2019. We have made progress on both of our Phase I programs. For OTX-TIC, we have completed dosing our first quarter cohort and begun dosing our second cohort. We expect to present initial results at the ARGO meeting in April of this year. For OTX-TKI, we are pleased to announce, we have commenced dosing and plan to continue to recruit this Phase I trial over the course of the year. In both of these programs, we will collect safety data, and also have an indication of biological activity by the end of 2019. Finally, we remain active in business development discussions, seeking to leverage our hydrogel platform, our pipeline programs and the uncovered territories for DEXTENZA. Our expectation is that the approval of DEXTENZA will enhance our ability to negotiate deals that will bring fair value back to the company.

In summary, we are encouraged with our progress in all aspects of our business and look forward to evolving into a commercial biopharmaceutical company.

Before returning the call over for questions, I'd like to quickly mention that we have a plan to host later this month, an R&D day in New York City to highlight our pipeline and the opportunities we have with our hydrogel platform. We'll be sending along a save-the-date note, shortly. And I certainly hope to see you all there.

And with that, I want to thank you for your time. And we can now open up the line up for questions.

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

First on the glaucoma program. Antony, would you think you need to see from the OTX-TP Phase III study to start the second Phase III? And then for OTX-TIC, what does that compound need to show in terms of IOP lowering to stay competitive in this space?

Thanks for the question, Adnan. I'll farm that out to Mike Goldstein, who has answered it a number of different times in essentially the same way, so I'll give you Mike.

Yes, so thanks, Adnan. This is Mike. So I think as we've said before, we'd like to see the data come in from the OTX-TP Phase IIIa study before we commence the IIIb study. The primary endpoint is to show a statistically significant difference between the active treated group and the placebo group at the 9 diurnal time points. So that's a 2-week, 6 weeks and 12 weeks and it's looking at 8 a.m., 10 a.m. and I think, 4 p.m. And the additional part -- so that's what the primary point to the study are. To get approval, the additional part is that the change from baseline that we see with the active group needs to be clinically meaningful. I think it's that point that they're -- it's really a risk-benefit discussion with the FDA to determine how you come up with clinically meaningful, given that we have a single insert that will provide therapy for a period of up to 3 months. So I think it's really analyzing that data, having the discussion with the FDA, and then crafting the appropriate IIIb study. As far as OTX-TIC, so that's our intracanalicular program. So by clearing the travoprost into the eye, we expect to have greater IOP lowering effect. And we fully expect this -- and we fully expect to see that with the TIC program relative to the TP program. And we've seen that in the small number of patients that we've dosed thus far.

Mike, a follow-up here. In terms of OTX-TP, when the company says in discussions that the benefit has to be clinically meaningful. Is that not yet defined by the FDA? Or is that something that's negotiated, and you don't want to commit to that?

So I think the -- so the FDA has not defined that. And it's up to the sponsor to justify what's clinically meaningful, based on the unique product characteristics that we have. I think the definition for that would be very different for a product that's got the value proposition that this has, which again is a single insert, no drops for a period of 3 months. That's a very different value proposition to -- you have to administer drops either once or twice or 3 times a day, every single day. So ultimately, it's the risk-benefit. What's the benefit that we see, and then what's the risk? And how does compliance play a role in that? It's up to the sponsor to make the justification to the FDA as to what's clinically meaningful in that setting.

Now there is another long-acting insert that's past Phase III studies. Do you think the FDA has a view of risk-benefit will be impacted by that particular compound? And then that's why I post the OTX-TIC question as well. What do you think is the hurdle for that one in terms of being viable?

Yes, I mean, so OTX-TIC, again, is the intracanalicular injection of travoprost. So that's a more -- still minimally invasive procedure, but certainly more invasive than putting something in the canaliculus. As you note, there is a program that is completed 2 Phase III programs. And they've shown nice efficacy, on par, maybe, even slightly greater than what you'd see with a very compliant topical-drop patient. So I think that's a reasonable efficacy barrier or a reasonable efficacy mark to hit. But I think the products will have very different -- other profiles. So the OTX-TIC platform uses the same hydrogel platform that was used in other programs, and it's been programmed to completely go away in approximately 6 months. And so I think that could be a really interesting competitive differentiation. And then we need to look at other safety metrics, including -- it helps with the cornea in the long run with each of these products. So again, ultimately, it's going to be a risk-benefit looking at the various -- the profiles of the different products. But I think both will really solve a key unmet need, and probably the most important unmet need in glaucoma, which is patient compliance. So while coming up with new mechanisms is certainly important, being able to come up -- being able to solve the compliance issue in glaucoma, I think when you talk to most glaucoma experts, I think that would be probably the biggest unmet need in glaucoma.

Last one before I get back in line. You mentioned TIC data at ARGO, Antony, does the company plan to top line that personal lease debt? Or do we have to wait for the medical meeting to see?

So you'll have to wait for the medical meeting. That will not be full data set, it will be not from all the subjects, it will be a snapshot of where we are at that particular point in time. So we believe -- so it won't be 1 or 2 or 3 patients, it'll be more than that. But we will not have been able to follow all 10 patients out to the full -- originally, we designed the trial for 6 months, we have actually seen, in the first couple of patients, longer efficacy. So we have extended the trial for a little bit longer period of time. But we will not be able to see the full efficacy for all the patients at that meeting. But it will give you a snapshot of where we are at that point.

And our next question comes from Dane Leone with Raymond James.

I wanted to ask and just double check here that there's no potential delay in the review for the C code given the disruption in the government operations as you guys were submitting that for DEXTENZA?

We certainly don't expect there to be a delay. We were -- as you might remember, we actually submitted as part of the previous cycle. But did not have it fully complete -- we didn't yet have a published price. We were told by CMS that they would put us on the top of the pile for the next round, which we understand is progressing at -- when it's supposed to. So we have every expectation that we'll be able to get the C code in the July time frame.

Okay, great. In terms of just alleviating some of the capital position that you have, obviously, you have a pretty deep pipeline that you're looking to accelerate. Can you just, kind of, touch on what you want to do? Is that capital constraints are alleviated that you guys have been working on? And what we could expect from the timeline or maybe bringing new programs out that haven't been unveiled yet over the course of this year? And just, kind of, general thoughts of balancing the commercial effort that you're rolling into the DEXTENZA versus still some of the developmental efforts?

Right. Let me -- clearly, the commercial efforts around DEXTENZA will be sacrosanct. We are going to be optimally resource that launch. And we have -- we are, sort of, refencing any kind of investment that we would do around that, that DEXTENZA launch to make sure that we get the traction that we need with our product. As Donald mentioned, with the existing cash and cash equivalents that we have in place, we would be able to find the entire pipeline that Mike went through, through the first -- through early 2020. We also gave a teaser about our pipeline -- potential additions to the pipeline that we will be talking about in the March Investor Conference. Accelerating some of those into an earlier clinical path would clearly be something we do if we had additional resources. But certainly, the early-stage development formulation and pre-R&D work, we can do relatively inexpensively and relatively quickly. So we really don't need any additional financial resources to get those to the clinic. Clearly, once we're in the clinic, then having multiple programs in later stage clinical trials, we would need additional resources for that. And we would either get that by ourselves or we would work through partners who would be able to help fund those and potentially fund other programs that we have in development as well.

And could you just, kind of, clarify the wording on the final formulation for OTX-IVT? Is that new wording? Or is that just, kind of, the same thing that's been evaluated over the last 12 months?

It's exactly the same thing. I mean, I think we're as frustrated as everyone else that we're not able to announce that there have been changes, one way or the other, in that program. And we're clearly working very hard as our Regeneron to try and understand what -- how we go forward with this. But there has been no change, and very purposely no change because there is nothing material that we can talk about.

Just, I think this was disclosed when the partnership was signed, but they do owe you some milestone payment if it goes into Phase I, right?

If we keep with the existing agreement and they option the product, then yes, there's a $10 million payment associated with that. That's assuming that we keep the existing agreement and action the existing agreement.

Okay. Then one last one for me to get Mike in here. The contacts -- the 9 months target for OTX-TIC, maybe you could provide some color in terms of -- we thought we saw some of this formulation, some novel-compound formulations are extended-duration formulations presented at the Angiogenesis Conference a few weeks back. Just, kind of, where is your thinking in terms of competitive positioning, if you really can't get this OTX-TIC -- sorry, OTX-TKI to work up to 9 months as a sustainable delivering mechanism, and what AMD?

Yes, thanks for the question. Yes, so we talk -- so OTX-TIC, the glaucoma program. And so there we are targeting 6 months. But it seemed longer. OTX-TKI...

Yes, sorry I was talking about the TKI.

The TKI program, which -- you were talking about TIC at Angiogenesis, I got it. So I think there are 2 novel opportunities there. So one is duration, and as you know standard of care or macular degeneration and diabetic macular edema is it's treatment to every 1 to 2 months. There are some known near-term programs that probably extend that to every 3 months. And so from a durability perspective, we think anything greater than 3 months is going to be pretty novel. Without having to refill D products in the eye. So getting a single insert, getting beyond 3 months, we think would be pretty novel.

With the animal data, we've had and we've actually seen that effect out to about 12 months with a single insert, but when you, sort of, take into account different size of the eye and different viscosity of the vitreous, we think that correlates to the human to about every 9 months. But we think it'd be clinically viable even if we don't hit every 9 months, if we are able to show 3 or 4 months in that range, we still think that will be clinically viable. So I think that's, sort of, one line of thinking. The other is new mechanisms in the AMD space. So clearly anti-VEGF drugs have revolutionized the space and they clearly work. But they don't work for everyone and there are certainly opportunities to come up with new novel mechanisms. So with the TKI program, we think we hit on both of those. We've got a novel mechanism, and we think we can increase the durability of the effect.

And our next question comes from Bill Maughan with Cowen and Company.

I was hoping can we get any metrics on the size of the planned sampling program for DEXTENZA that will be starting later this spring? And secondly, how can -- how should we view the launch of DEXTENZA in terms of the competitive environment with another product launching into the same space at the same time?

Okay, great. I'll handle the first question about the sampling. We've yet to determine what the sampling level will be. We won't be restricted though by the amount of volume that we expect to be able to produce. We have -- we are lucky enough to have -- control our own means of production and then we're able to produce really as much as we think we could possibly need. The main issue around that is going to be that we are going to remain in compliance and ensure that we don't run afoul of any kind of compliance arrangements with potential oversampling. But we'll give as much as we can. I'll let Scott, our Head of Commercial, sort of, handle the competitive situation.

Yes. Thank you. We look forward to launching into a really competitive and vibrant market. There is 2 topical launches, our new products that will be taking place as well as 1 injection and then on top of that, of course, DEXTENZA. We believe -- we know the market's been clamoring for sustained release products for years. And so we think we will compete very effectively versus any topical drop Prednisolone Acetate, of course, the generic is the lion's share of the market. So that's really the main competitor. But as far as the other competitive entrants, we look forward to being in that space and to use the smoking cliché, a rising tide lifts all boats. And so we will be entering into offices and to ASCs after someone else has already talked about the steroid market place and vice versa, so I think we'll all benefit from, as I said, a vibrant marketplace.

And then as a follow-up, is there any thought to maybe an ex-U. S. launch of partnership anytime in the foreseeable future?

Absolutely. I mean, this is something, we're very actively involved in looking at potential ex-U. S. partners that at this moment, we don't have a desire to go direct ex-U. S. We have not given any guidance on when we would intend to file ex-U. S. and particularly in Europe and some of the other large markets. Once we get those -- the clear understanding of what it takes to follow on in those areas and are able to commit to a timeline, we'll come forward with one. But absolutely, these are -- this is a better way of giving a steroid drop, and steroid drops are given all over the world. So the intention is very much to leverage that the -- our global rights to this product.

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

This is Rob on for Yi. Just 2 questions, if I may. First one being as to has the CMS indicated that the procedure of inserting DEXTENZA could be separately reimbursed? And the second one would be, what are your expectations for sales and financing before the issuance of the J code?

I'm sorry, I didn't get the second question.

The second one is, what are your expectations for sales of DEXTENZA in 2019 before the issuance of a J code?

Okay. The first one, the CMS has not indicated that the product -- you're talking about the product or the insertion?

The procedure for inserting DEXTENZA. Could it be separately reimbursed?

Yes, it would be separately reimbursed, but that's one of our key goals we'll be determining under what circumstances and how that gets reimbursed. That becomes a key driver in the uptake of the product, but having gone through this movie before, what you have to do is you have to test the code, you have to submit it and then you have to do a bit of hand-to-hand combat to ensure that it gets reimbursed in a reliable fashion.

We'll launch as a category-3 code, which is an experimental code. And there are some payers that are more willing to pay against that code than others. Over time, the goal is very much to turn that into category-1 code, where it will be universally, separately reimbursed. But we have some work to do before we get there. In terms of the expectation, I'll turn it over to Scott for the second part of the question.

Yes. As far -- as we stated our expectations to launch, with a laser focus on Medicare Part B reimbursement suggest that we are not waiting for the J code. Of course, that opens things up widely for us, and we look forward to the day when we have the J. But as stated, we are launching with a limited size sales force that's targeted on the surgical opportunity very purposely. And once we get the sales and reimbursement engine up and running, that's when we plan to expand rapidly as I said to about 40 key account managers by year-end. But as far as a specific number, that's something that we're not giving at this point. Our goal is to get patients treated, and we want to do that by getting out into the marketplace, speaking to surgeons in their offices, and of course, working with them in their ASCs. And getting DEXTENZA into the hands of the physician who can get it into the patient's. So our goal will be overall patients treated as opposed to units sold in the first few months of deploying it to the field.

And I'm not showing any further questions at this time. Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program and you may all disconnect. Everyone, have a wonderful day.