Good afternoon, ladies and gentlemen. Thank you for standing by, and welcome to the Ocular Therapeutix First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. 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 first quarter 2021 financial results and business update conference call. This afternoon, after the close, 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, 2021. 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 corporate development and an update on the commercial progress of DEXTENZA. Also speaking on the call today will be Dr. Michael Goldstein, our President, Ophthalmology and Chief Medical Officer, who will give an update on our clinical developments and pipeline. Following Michael’s remarks, I will provide an overview of the financial highlights for the first quarter before turning the call back over to Antony for his summary and questions. For Q&A, we will be joined by Scott Corning, our Senior Vice President, Commercial; and Chris White, our Senior Vice President, Business and Corporate Development. As a reminder, on today’s call, certain statements we will be making may be considered forward-looking for the purposes of the Private Securities Litigation Reform Act of 1995. In particular, any statements regarding our regulatory and product development plans as well as our research activities are forward-looking statements. These statements are subject to a variety of risks and uncertainties that may cause actual results to differ from those forecasted, including those risks described in our most recent quarterly report on Form 10-Q filed this afternoon with the SEC. I will now turn the call over to Antony.

Thank you, Donald, and welcome, everyone, to Ocular Therapeutix first quarter 2021 earnings report. It’s been a good start to the year and we’re pleased with our progress in the first quarter both on the commercial front, as well as with advances in our pipeline of product candidates being developed to target several of the largest market opportunities in ophthalmology. Overall, total net product revenue for the quarter was $7.3 million. Beginning with DEXTENZA, we achieved $6.7 million in net sales to our distributors for the first quarter. While the net sales growth over the previous quarter is essentially flat, the picture in market billable sales unit shows more clearly the development of DEXTENZA sales primarily because it isn’t obscured by variations in distributor inventory levels. For the first quarter of this year, we achieved a record quarter for in-market and billable units of 16,634 representing nearly 15% sequential quarterly growth. While billable units were just over 4,500 and 4,900 in January and February, respectively, March billable units grew strongly to over 7,000 units our highest monthly total today. We believe March sales reflect both reopenings and higher capacity utilization of ASCs and HOPDs. I’m also pleased to report that the March momentum has continued into April, sales of billable units to end customers in April are expected to exceed 8,000 units and comfortably set a new monthly record. This is especially gratifying in that April is the first month of a new quarter when in-market sales are typically slow to build up. We believe that this recent acceleration of in-market demand reflects a continued growth in our share of total cataract volume, and also return to more normal levels of cataract surgeries being performed across the U.S. We expect these drivers to continue to propel growth throughout the year.…

Thanks, Antony. Let me begin with an update on our back of the eye program OTX-TKI. We continued to the subjects in a multicenter open-label dose escalation Phase 1 clinical trial being conducted in Australia that is designed to assess the safety, durability and tolerability of OTX-TKI as well as to assess preliminary biological activity in subjects by measuring anatomical and functional changes. As Antony mentioned, we presented incremental interim data at ARVO. This update highlights data from the first three fully enrolled cohorts, cohort 1, 200 micrograms; cohort 2, 400 micrograms; and cohort 3A, 600 micrograms, as well as from cohort 3B, 400 micrograms OTX-TKI used in combination with anti-VEGF induction therapy, which is currently enrolling. We continue to see signals of biological activity including decreases in retinal fluid in some subjects as early as two months following insertion in cohorts 2 and 3A. Additionally, we are seeing encouraging durability of six months or longer in all cohorts and durability out to 13.5 months in one subject to in cohort 2 and nine months in one subject in cohort 3A. OTX-TKI has generally been well tolerated, and it’s been observed to have a favorable safety profile. No ocular serious adverse events including subjects with elevated intraocular pressure and subjects needing steroids to treat ocular inflammation have been observed or reported to date. While the drug product profile is still emerging, we are pleased with the interim data and OTX-TKI’s potential to reduce intraretinal and/or subretinal fluid. In terms of next steps, we plan to initiate a clinical trial in the United States starting in the middle of the year, using a single 600-microgram OTX-TKI implant along with anti-VEGF induction therapy. Moving to our glaucoma program, OTX-TIC, this study is a Phase 1 prospective multicenter open-label clinical trial enrolling subjects…

Thanks, Mike. Gross product revenue net of discounts, rebates and returns, which the company refers to as total net product revenue, was $7.3 million for the three months ended March 31, 2021, representing a greater than 175% increase over the first quarter of 2020. Net product revenue of DEXTENZA in the first quarter was $6.7 million versus $2.1 million in the comparable quarter of 2020 and reflects an approximately 220% increase. Total net product revenue for the first quarter also includes net product revenue of $0.6 million from ReSure Sealant. Research and development expenses for the first quarter were $10.9 million versus $6.1 million for the comparable period in 2020, primarily driven by increased head count as well as increased clinical trial costs associated with the ongoing Phase 2 clinical trial for OTX-CSI, the commencement of the Phase 2 clinical trial of OTX-DED and the ongoing Phase 1 clinical trials of OTX-TKI and OTX-TIC. Selling and marketing expenses in the quarter were $8.1 million as compared to $7.1 million for the same quarter in 2020, reflecting increased personnel costs associated with the expansion of the sales force. Finally, general and administrative expenses were $7.7 million for the first quarter versus $5.2 million in the comparable quarter of 2020. The increase in expenses stemmed primarily from increased personnel expenses and professional fees. With respect to the financial results for the first quarter, the company reported net income of $3.1 million or $0.04 per share on a basic basis and a net loss of $20.8 million or a loss of $0.24 per share on a diluted basis. This compares to a net loss of $21.5 million or a loss of $0.41 per share on a basic and diluted basis for the same period in 2020. As operating expenses increased quarter-over-quarter, the modest…

Thanks, Donald. So before opening the call up for questions, let me do a quick summary. We are pleased with continued progress in our pipeline and our growing presence of key medical meetings like ARVO that allow us to share our progress. And wet AMD, our Phase 1 continues to support OTX-TKIs differentiated product profile that could potentially set a new standard of care for durability, remain on plan to initiate a U.S.-based Phase 1 clinical trial in the middle of 2021. In glaucoma, data from our Phase 1 trial of OTX-TIC continues to support a durable, rapid onset product profile that could potentially set the standard of care for patient compliance. We plan to advance that program into a Phase 2 clinical trial in the fourth quarter of 2021. In dry eye disease, we initiated two Phase 2 clinical trials, one for OTX-CSI and one for OTX-DED. For OTX-CSI, we now expect top line data in the fourth quarter of this year. For OTX-DED, we expect top line data in the first half of 2022. Beyond dry eye disease, we submitted our sNDA for DEXTENZA in allergic conjunctivitis in December 2020 and have a PDUFA target action date of October 18, 2021. Finally, DEXTENZA achieved a record quarter for in-market billable sales units and is off to a very strong start in Q2. We look forward to a busy and productive 2021. And with that, I will turn the call over for questions.

Thank you. [Operator Instructions] Our first question comes from Joe Catanzaro with Piper Sandler. Your line is now open.

Hey, guys. Thanks for taking my questions here. And congrats on all the progress on all fronts here. Anthony, I was wondering if you can elaborate a little bit more on the dynamics that drove the April DEXTENZA numbers that you’re referencing and whether there are one-off events there. And relatedly, are your expectations that may will grow off that 8,000 number followed by a bump in June with the rebate effect. And then what should we expect in July? Does it return back to that dynamic that you’ve observed historically? Thanks.

Great. Well, thanks for the question. We expected the bump in March. We didn’t expect to surpass March sales in April. That was a bit of a surprise to us. We have to remember that January and February were bad months, there were bad months for COVID and there were bad months for weather. So the return of what is somewhat normalcy for March was very much well expected. But typically, our pattern has been that the first two months of the new quarter are below the last month of the previous quarter. So whether this sets a new bar and we’ll continue to grow off this level and expect to have the usual bump at the end of the quarter. It’s hard to predict, but it’s certainly from anecdotal reports in from the field. It’s really driven by the fact that surgery centers were back open. Surgeons have been vaccinated, the administrators have been vaccinated and more importantly, the patients have been vaccinated. So our universe is essentially getting back to normal. And when you’re gaining share in a growing market, it really can accelerate your sales. So I’m not going to sort of go on record and say, where I expect to be next month and the month after. But I would still expect that sort of sawtooth kind of growth given the popularity of our rebate program.

Okay, got it. That’s helpful. And then maybe along this line of discussion, can you provide some details around the gross to net that you’re seeing or saw in the quarter for DEXTENZA. And maybe how much that fluctuates moving forward based on the extent of the rebate program usage?

Yes, there wasn’t a great fluctuation in the gross to net. The fluctuation was really in the inventory at our 3PL. We finished last quarter around 30 days worth of inventory, we finished this quarter about 22 days. So that was the lion’s share of the difference that you see in the in-market versus the two market. There were some adjustments, clearly, our rebate program is extremely popular. So it does have an effect. But the anomaly that you’re seeing between two markets sales and in-market sales is almost exclusively driven by that change in distributor holding.

Maybe if I could squeeze in one last one. So as we think about the rebate program and surgical volumes seemingly picking up. Is there more room for the rebate program to have even a bigger impact than what you’ve saw over the last two or three quarters when that rebate program was put in place?

Absolutely. I mean, you look at the size of the customers that we have, you look at an [indiscernible] some of these really large consortia. We’re just scratching the tip of the iceberg. So they are getting, of course, to the highest levels with the ASCs they have online. But the work at hand now is to get more of their ASCs participating. So we fully expected that rebate program will continue to drive volume both in breadth, but I think more importantly in depth.

Okay. Perfect. Thanks for taking my questions here.

Thanks, Joe.

Thank you. Our next question comes from Jonathan Wollenben with JMP Securities. Your line is now open.

Hey, congrats. And thanks for taking the question. Just a couple for me on the pipeline. You mentioned the new start for the OTX-TIC study due to some changes in the injector. I was hoping you could give us some more color in what you’re trying to optimize for with these changes.

Yes. Hi, Jon. It’s Mike speaking. Thanks for the question. So we obviously want to optimize the patient and physician experience and there are just some optimization work that needs to be done on the injector for the intracameral delivery. And that’s caused a slight delay in the start of the Phase 2 program.

Okay. And then with OTX-TKI, obviously, we’re seeing progress in wet-AMD, but you’ve had kind of DME and RVO lift as potential opportunities. Wondering if you have any development plans and works there? Or how are you thinking about the opportunities beyond wet-AMD?

Yes, great question. We do think there’s big, big opportunities beyond wet-AMD and the two leading areas are DME and RVO. And we very much do have plans to pursue both of those opportunities in the future. We haven’t announced exactly when those trials would start, but clearly well within our plan.

Okay, great. Thanks for taking the questions.

Thank you. Our next question comes from Georgi Yordanov with Cowen and Company. Your line is now open.

Hey, guys. Thank you so much for taking the questions and congratulations on the progress. So I do have a couple in the pipeline. It is clear for OTX-TKI that you have observed some striking responses during the study. Do you believe that there is a biomarker that could help you identify those patients that would respond to treatment before initiating treatment? And as a follow-up to that, have you considered exploring higher doses given the excellent safety profile and that you have not reached a maximum tolerated dose? And then I do have a follow-up.

Yes, two great questions. I think looking for biomarkers to look for responders is sort of the Holy Grail for not just us for many companies. So I would love to tell you, we found what those biomarkers are to identify responders, but we have not, but we will keep looking. And in terms of a higher dose, yes, we are interested in exploring a higher dose. We do we have shown an excellent safety profile state up to 600 micrograms. We are – our immediate plans are to go forward with a single implant 600 microgram dose, which, although it seems similar to the current dosing we have in Australia, that dosing is three 200 microgram implants. That turns out that you do get a higher flux rate out of the implant per day, when you go to a single implant. So that there will be a – if you will dose escalation there. That said, we are – we will continue to pursue the opportunity to look at higher doses. I think we’re going to be limited, not by tolerability, but really the ability to formulate in an implant that’s of reasonable size. And so I think that will end up being what will prevent us from going too high, but we do have room to go higher than 600 micrograms.

Got it. And just related on TKI, we didn’t notice that on the safety, you have indicated that in the most recent update, there has been a moderate ocular AE. Have you disclosed the nature of that AE?

We have not.

And then the last question is on the TIC program. So that’s another very interesting program, you presented some pretty interesting early data. Could you remind us of the legacy OTX-TIC glaucoma program and the issues there with development and more differentiated this clearly superior TIC product?

Yes. Great question. So both of the programs use the travoprost, which is a prostate gland and analog and very commonly used in clinical practice as an eyedrop. The OTX-TP program delivered to the prostate gland and through an intracanalicular delivery. And the OTX-TIC program delivers the travoprost through an intracameral delivery. So in the – and clearly when you go intracameral, you get the higher dose of the drug to the target tissue, which is inside the eye. So as expected, we’re seeing much higher levels of the – much higher ability to lower eye pressure with the OTX-TIC product over a longer period of time. So we’re seeing approximately 7 to 11 millimeters of IOP lowering and we’ve looked at four different formulations or we’re seeing anywhere from three to nine months of durability with a single implant. So that’s compared to the OTX-TP, the surface intracanalicular delivery, where it was more like between 2 and 4 millimeters of delivery for approximately three months. So clearly much better efficacy, when you go to – when we’re going to the intracameral delivery.

Great. Thank you so much. This is super helpful. Thank you.

Thank you. Our next question comes from David Steinberg with Jefferies. Your line is now open.

Hi, it’s actually Ed Chung on for Dave. A quick question on the you’d historically talked about a 5,000 insert per month as a threshold for achieving breakeven on your commercial platform now. Was that before or after your salesforce expansion?

Ed, that was before our salesforce expansion clearly, we’ve added a few people not a huge amount, but we’re spending about $7 million now in our total marketing and sales effort. So yes, we’ve ramped up a bit that that number would be a bit higher. So around the – it’s probably be closer to 7,500 units to get to breakeven.

Got it. Great. Thanks. And in terms of R&D spend, I mean how should we be thinking about the ramp as these programs go into Phase 2 and obviously that’s probably going to cost you a little more than what – and your ability to fund them into Phase 2s.

Well, we stated that we have sufficient cash and cash equivalents to be able to fund all of the programs that we have through their Phase 2 readouts.

Okay.

So we are comfortable with obviously a counter set of an expectation for DEXTENZA sales. We’re currently running ahead of our expectations on DEXTENZA sales, so we feel pretty comfortable that, that we’re – we don’t have a cash issue through those readouts. But you are right. We would be – the costs would be increasing as we enter Phase 2 and a larger Phase 1 study with TKI.

Got it. Perfect. Thanks.

Thank you. Our next question comes from Anita Dushyanth with Berenberg. Your line is now open.

Hi, congrats on the progress, and thanks for taking my question. Just wanted to know if you could remind us the market opportunity in the acute versus chronic dry eye disease. And also recently the – I assume it was approved for the acute treatment, I think and I just wanted to know how when the DED candidate comes on, it would fair in the market. Is there – is it going to be filling some gaps or displacing the competition?

Yes, I’ll take the first part of the question, and then Mike obviously is not only our CMO, but he’s also a practicing ophthalmologist. So we can sort of let you know from an ophthalmologist standpoint what they mean. I mean first of all, caller, we have to thank them for actually creating the indication for short-term treatment. So your – it was very creative them and very, very good dialogue that they had with the FDA in order to be able to create that opportunity. What the relative sizes of the short-term market is relative to the chronic. It’s hard to say at this point, because the short-term market is so new. I think it’s pretty clear to say though that the chronic market is comfortably larger and orders of magnitude larger than what the short-term market would be. So the sizes are considerable for both, but we feel certainly the chronic market is far larger. Considering the differences that, that our DED program would bring on the short-term treatment, relative to what you see with ASU or with off-label steroids is that we would be obviously position administered. So there would be a non-abuse ability aspect to the product. So the doctor’s putting it in. It releases its product it and then the insert buyer resorts and goes down the nasolacrimal duct. So the patient is actually taken out of the equation. And over use of steroids is one of the worries that doctors have when they treat either short or they certainly wouldn’t treat long-term, but they would treat short-term dry eye that they worry that patients would like the way they work so much that they would find somebody else’s drops and continue to use them. And then they would develop elevated intraocular pressure and cataracts. So we would have that advantage. We would also be a preservative free product. Currently there are no preservative free steroids on the market. Many patients do respond to preservatives, particularly when you have a dry eye condition, you have a compromised ocular surface, putting your preservative on a compromised ocular surfaces is generally not advisable. And finally, we of course would have [indiscernible] product that has a procedure code attached. So the office environment, the office economics would be substantially different than a Part D product where you’re writing a script and the patient is going to the pharmacy to fill that script. So they’d be very different products. I think they would both have certainly a space for both of them. And I think I assume these got a really great future in front of it. It’s a fantastic product, and Kala has done a fantastic job in creating this indication. I don’t know, Mike, do you want to add some more to the overall onset.

That was pretty complete response. It’s almost sound like an ophthalmologist. And I’ll just – I would just add, I mean this is a market that we as ophthalmologist have access for a long time. So we know that steroids have been very effective for treating patients with inflammatory flares with dry eye. And it’s pretty common and we’ve used off-label low dose steroids or compounded steroids for a long time. So as Antony mentioned, shout out to Kala and in particular, their Chief Medical Officer, Kim Brazzell who worked with FDA to actually get this as an approvable indication. I think a lot of us didn’t actually think that would happen. So we’ve sort of looked at their – what they’ve done. We think this is a really, really interesting opportunity. I think the big clinical advantage we offer as Antony said is that we’re not an eye drop. This is physician administered in the office that can’t be abused by a patients. And therefore, the concerns that we have as physicians about using steroids for dry eye, which are that patients will overuse them and develop adverse events like glaucoma or cataracts so off the table, because the patients can’t abuse, it could only placed by the physician. So we think – I think that’s the big clinical advantage that we offer here, but we’re really excited about this as a potential indication.

That was very helpful. Thank you.

Thank you.

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

Hi, this is Boobalan dialing in for Yi Chen. So if you could comment on your expectations for DEXTENZA adoption for the year 2021 that that would be appreciated. And do you anticipate any potential roadblock as the country’s coming out of COVID-19 with the impressive vaccination rate?

Yeah. We have not given guidance – forward guidance about DEXTENZA. The market is fast returning to a normal situation where the COVID is no longer seemingly affecting the – our customers. So our excuses for not giving guidances are probably going away. But we have not given that. And what we’ve done instead is we’ve given extraordinary transparency into our in-market sales and billable units, which really is a pretty granular level of a look into what our sales are. We would at some point switch to giving guidance and then give also only quarterly net sales, but until we do that, we won’t give guidance.

All right. Understood. Could you comment on the Phase 2 program for OTX-DED other than what has been stated in your press release? And what are your expectations from the trial? And when can we hear about the interim findings?

So the OTX-DED Phase 2 program is 150 subjects. It’s two different formulations of the OTX-DED against a vehicle insert. The primary endpoint is looking at conjunctival redness at two weeks, but we’re also looking at other signs and symptoms of dry eye disease. The trial enrollment is going very well, despite COVID things have moved along as much as it did with the CSI trial. And there is no interim look at the data we – but we’ve disclosed that we will release the top line data in the first half of next year.

All right. One final question from me. So do you think DEXTENZA for allergy conjunctivitis will be priced differently?

No, we can’t price it differently. It’s the same NDA. So the price will be the same.

That’s it from me. Thanks so much and congrats.

Okay. Thanks so much for the questions.

Thank you. This concludes today’s conference call. Thank you for participating. You may now disconnect.