Good day, and welcome to Kala Pharmaceuticals Fourth Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, a Q&A session will be held. And as a reminder, this call is being recorded. I would now like to turn the call over to Mary Reumuth, Chief Financial Officer for Kala Pharmaceuticals. Please proceed.

Thank you, Operator, and thank you all for participating in today's call. Joining me from the company are Mark Iwicki, Chairman, President, and Chief Executive Officer; Kim Brazzell, Chief Medical Officer; Todd Bazemore, Chief Operating Officer; and Hongming Chen, Chief Scientific Officer. Today's call is being webcast live, and the webcast link can be found in the Investors and Media section on the Kala corporate Web site. Today's call is also being recorded, and an archived recording will be available on our Web site as indicated by our press release. During this call, we will be referring to non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with Generally Accepted Accounting Principles. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures in available in our year-end press release issued today, which can be found in the Investor Relations section of our Web site, www.kalarx.com. On this call, we will make certain comments about Kala's future expectations, plans, and prospects that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements will include observations associated with our commercial launch of INVELTYS in the U.S., statements regarding our ongoing STRIDE 3 clinical trial, and the sufficiency of our cash resources. These statements are based on the belief and expectations of management as of today. Our actual results may differ materially from our expectation. Investors should read carefully the risks and uncertainties described in today's press release as well as the Risk Factors included in the company's filings with the Securities and Exchange Commission, including without limitation the company's annual report on Form 10-K, which will be filed with the SEC before the market opens tomorrow, and will be available on our corporate Web site, which identifies specific factors that may cause actual results or events to differ materially from those described in the forward-looking statement. The content of this conference call contains time-sensitive information that is accurate only as of the date of the live call today, Monday, March 11, 2019. The company undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. I will now turn the call over to Kala CEO, Mark Iwicki. Mark?

Thank you, Mary. Good afternoon everyone, and thank you for joining us today. Earlier today, Kala issued our financial results for the quarter and year ended December 31, 2018. 2018 was a landmark year for Kala. In August, we received FDA approval for INVELTYS, the first and only twice-daily corticosteroid indicated for the treatment of post-operative inflammation and pain following any ocular surgery. Following the approval, we completed the build-out of our commercial infrastructure for INVELTYS, including the on-boarding of a highly experienced ophthalmology specialty sales organization and payor account team. INVELTYS was launched in the U.S. in January of this year, and the physician feedback in the first few weeks of launch has been positive, and we are really pleased with the uptake in prescription volume along with the progress made in gaining market access. Todd Bazemore, Kala's Chief Operating Officer, will provide further details later in the call. We've also made significant progress with KPI-121 0.25%, our product candidate for the temporary relief of the signs and symptoms of dry eye disease. Based on the results from our two completed Phase 3 clinical trials, STRIDE 1 and STRIDE 2, and our Phase 2 clinical trial, we filed an NDA for KPI-121 0.25%. The NDA was accepted for review by the FDA in December of 2018, and given a PDUFA target action date of August 15, 2019. Enrollment also continues to progress as planned in our STRIDE 3 trial in dry eye disease, and we look forward to receiving top line data from STRIDE 3 anticipated in the fourth quarter of 2019. In the fourth quarter of 2018, we strengthened our balance sheet with successful debt and equity financings that resulted in aggregate net proceeds of $123.6 million. I will now turn the call over to Todd Bazemore, Kala's Chief Operating Officer, to discuss the INVELTYS launch.

Thank you, Mark, and good afternoon everyone. I'm pleased with the early days of the INVELTYS launch. As many of you have seen from prescription data, the launch appears to be off to a good start. Our goal during this early phase of launch is to ensure that physicians are gaining clinical experience with INVELTYS, and that patients are able to fill their INVELTYS prescriptions at the pharmacy without restrictions. Early clinical experience feedback from eye care professionals has been positive. Based on the early feedback we received, we believe clinicians are very receptive to INVELTYS's product profile. We have heard from a number of our top prescribers that they are impressed with the efficacy of INVELTYS, including its strong results in inflammation. INVELTYS has been available since early January, and we conducted our National Launch Meeting in the last week of January. We launched with a list price of $225 per bottle, and this compares to Lotemax suspension, which has a list price of $237 per bottle. We are pleased to report that in just the first two months more than 4,000 prescriptions of INVELTYS have already been filled according to Symphony data. This represents a branded [indiscernible] share of 2.2%, just eight weeks into launch. Scripts have been showing strong growth with an average weekly growth rate of 56% since launch. As we noted earlier this year, we have hired a very experienced team of 57 sales representatives, who have on average over 8.5 years of ophthalmology experience, in addition to an experienced sales management team that oversees them. All representatives have been focusing their efforts on high prescribing targets with the majority of our sales calls and samples going to [indiscernible] five through 10 eye care professionals, who currently comprise 89% of all INVELTYS prescription since launch.…

Thank you, Todd, and good afternoon everyone. As a reminder, in January of 2018 we announced top line results from our two Phase 3 clinical trials, STRIDE 1 and STRIDE 2 that evaluate safety and efficacy of KPI-121 0.25% versus placebo in patients with dry eye disease. In both trials, we achieved statistical significance for the pre-specified primary sign endpoint of conjunctival hyperemia at day 15. In addition, we achieved statistical significance for the pre-specified primary symptom endpoint of ocular discomfort at day 15 in STRIDE 1 with the trend toward treatment effect in STRIDE 2. We also achieved statistical significance for a second pre-specified primary endpoint of ocular discomfort severity at day 15 in patients with more severe baseline discomfort in STRIDE 1 with a strong trend towards a treatment effect in STRIDE 2, both as a pre-specified secondary endpoint. Positive treatment effects were also observed for ocular discomfort severity at day 8; a key pre-specified secondary endpoint in both trials. In October of 2018, we filed an NDA for KPI-121 0.25%. The NDA submission was supported by data from STRIDE 1, STRIDE 2, and the Phase 2 trial. In December, we announced that NDA had been accepted for review by the FDA with a PDUFA target action date of August 15, 2019. If approved, KPI-121 0.25% is expected to be the first product indicated for the temporary relief of signs and symptoms of dry disease, which would also include the treatment of dry eye flares. Also based on FDA's recommendation, we have initiated an additional Phase 3 clinical trial, STRIDE 3. As we previously disclosed, we believe that we have identified key factors that contributed to the differences observed in the results from STRIDE 2 compared to those of STRIDE 1 in the Phase 2 trial, and we have accordingly made changes to the inclusion/exclusion criteria of STRIDE 3 that we believe will increase the probability of success of that trial. The STRIDE 3 trial is rolling on track, and we expect to report top line results in the fourth quarter of 2019. I will now turn the call back to Mary Reumuth, our Chief Financial Officer, who will briefly discuss our financial results.

Thank you, Kim. We are early in the launch of INVELTYS, we will not be providing financial guidance, but I am pleased to provide our key financial highlights. Our cash position as of December 31, 2018 was $170.9 million, compared to $114.6 million as of December 31, 2017. We anticipate that our existing cash will enable us to fund operations through at least mid-2020 with additional runway when including revenue from INVELTYS. Our net loss was $25.2 million, or $0.76 per share for the quarter ended December 31, 2018, compared to a net loss of $11.3 million or $0.46 per share for the same period in 2017. Net loss for the full-year-ended December 31, 2018 was $66.7 million or $2.49 per share compared to a net loss of $42.2 million or $3.71 per share for the same period in 2017. Please refer to today's press release for the weighted average number of shares used in the calculation of our net loss per share of the quarterly and annual periods discussed. For the fourth quarter of 2018, our non-GAAP net loss was $22.7 million compared to $9.6 million for the same quarter of 2017. For the year ended December 31, 2018, non-GAAP net loss was $57.5 million compared to $36.4 million for the same period of 2017. Non-GAAP net loss excludes the impact of stock-based compensation, depreciation, non-cash interest expense, and the change in fair value of warrants. Please see the press release for a full reconciliation of GAAP to non-GAAP financial measures. Our R&D expenses for the fourth quarter of 2018 were $9.2 million compared to $5.9 million for the same period in 2017. The increase in R&D expenses for the fourth quarter was primarily due to STRIDE 3, as well as increased head count and costs in anticipation of…

Thanks, Mary. We're very pleased with the progress that we've made in 2018 with the approval of INVELTYS, the filing and acceptance of the KPI-121 0.25% NDA, and the initiation of [technical difficulty] 3 trial. We've already made tremendous progress in the first few months of the year with the launch of INVELTYS proceeding really well. We believe that 2019 will be another exciting year for Kala, with further progress on the INVELTYS launch, as well as the KPI-121 0.25% PDUFA in August, and STRIDE 3 results by the end of the year. That concludes our prepared remarks for today. Operator, we're ready to take questions.

[Operator Instructions] We have a question from David Maris with Wells Fargo. Your line is now open.

Good afternoon. Just wanted to ask about the recent approval from Bausch, and how you view that competitively, does that change the dynamic at all, or is it pretty much the same as you expected it? Thank you.

Hi, David. Good afternoon, good question. I don't think it changes the dynamic. We've been planning and aware of that potential launch. We're expecting it to come some time in the second quarter of this year. And I think importantly to note, that product was approved with [PID] [ph] dosing. So still does not match the label for delta switches, still the only ocular steroid approved for twice-a-day dosing.

And just as a follow-up to that, I mean I'm sure -- is there anything that you're aware of that they can counter detail on? I mean, you have very good efficacy and you have lower dose burden, I mean to me that would seem from a payer standpoint if you can be competitive price-wise that would be a no-brainer, but are you hearing any pushback or perceiving any pushback? Thank you.

Nothing at this point, David.

Great, thank you very much.

Our next question comes from Liana Moussatos with Wedbush. Your line is now open.

Thank you for taking my question. So, with an August 15th PDUFAs for dry eye, when do you think STRIDE 3 data in Q4, will be early in Q4, late in Q4, you have any idea yet?

Hi, Liana, this is Kim. Our guidance has been in Q4. We're looking towards the end of Q4, but it's still early in terms of recruitment. Recruitment is on track. So we'll monitor that as we go, but right now everything is as planned.

Thank you.

[Operator Instructions] Our next question comes from Yi Chen with H.C. Wainwright. Your line is now open.

Thank you for taking my question. Bausch Health company expects to have loss of exclusivity on Lotemax in second-half of '19 or first-half of 2020. How much impact do you expect coming from generic Lotemax?

Great question. We expect most impact as you would imagine coming from the launch of generic Lotemax to be on Lotemax itself. We've been very successful early in launch in contracting for really good access for INVELTYS and expect to continue to improve that access over time. And so, we would not expect an impact on INVELTYS, but rather direct impact on Lotemax.

Thanks. A quick financial question, will the 10-K be filed today?

Yes, it will be filed before market tomorrow.

Thank you.

At this time, I'm showing no further questions. I'd like to turn the call back over for any closing remarks.

Well, I just would like to say thank you to everyone for joining the call and for the questions, and we really appreciate your following and support of Kala, and we look forward to updating everyone soon. Thank you, and have a great evening.

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