Good afternoon, ladies and gentlemen. Thank you for standing by and welcome to the Ocular Therapeutix Fourth Quarter and Year End 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 Therapeutics. Please go ahead, sir.

Thank you, Catherine. Good afternoon, everyone and thank you for joining us on our fourth quarter and year end 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 and fiscal year ended December 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 developments 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 quarter and the fiscal year before turning the call back over to Anthony for a summary and questions. For Q&A, we will be joined by Scott Corning, our Senior Vice President, Commercial; and Chris White, our Chief Business Officer. 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 annual report on Form 10-K filed this afternoon with the SEC. I will now turn the call over to Antony.

Thank you, Don and welcome, everyone, to the Ocular Therapeutix fourth quarter and year end 2021 earnings Q4. Ocular's had another strong quarter and a productive year. The commercialization of DEXTENZA continues to ramp. We achieved $12.3 million in total net product revenues in the fourth quarter and $43.5 million for 2021. This represents a 66% growth over the comparable quarter in 2020 and 150% growth in 2021 on a full year basis. I'm pleased with our commercial efforts and our team's ability to grow product revenues in each quarter of 2021 despite lower-than-expected cataract surgery volumes attributable to the COVID panic -- pandemic. DEXTENZA represents a tremendous growth driver for Ocular as we continue to put ourselves in the best possible position to grow the product. We've made significant progress on reimbursement as we enter 2022, with DEXTENZA currently maintaining faster payment status through 2022 and then very importantly, being eligible for separate payment beginning in 2023 and potentially beyond as a non-opioid pain management supply provision in ASCs. In addition, physician reimbursement for the insertion of DEXTENZA is now broadly available under our Category I code which became effective January 1, 2022, ensuring reliable payments to physicians for DEXTENZA placement across all payer types and in all settings of care. In October, we received FDA approval of our sNDA expanding the use of DEXTENZA for the treatment of ocular itching associated with allergic conjunctivitis. This approval represents an important strategic milestone not just because it expands the market opportunity for DEXTENZA but because we believe it opens up growth potential in a new site of care, in ophthalmology and optometric office environments. Allergic conjunctivitis is treated in the office environment as opposed to the ASC and HOPD where DEXTENZA against the vast majority of it's current use in…

Thanks, Antony. Let me begin with an update on our back-of-the-eye program, OTX-TKI. We are pleased to have recently completed enrollment in the U.S.-based multicenter prospective randomized controlled trial that is evaluating a single 600-microgram OTX-TKI implant containing axitinib compared to aflibercept administered every eight weeks and subjects previously treated with anti-VEGF therapy. This U.S.-based Phase I clinical trial, OTX-TKI, is being conducted under an exploratory IND application at five sites targeting a total of 20 randomized subjects with 3:1 randomization weighted toward OTX-TKI treated subjects. We plan to report interim six month data in the second half of the year. This trial is designed to assess the safety, durability and tolerability of OTX-TKI as well as to assess preliminary biological activity and subjects by measuring anatomical and functional changes of the retina. Critical to remember is that the population being studied here is different than the population being studied in our ongoing Phase I clinical trial of OTX-TKI in Australia. In this trial, we are including only subjects who have been previously treated with anti-VEGF therapy and asking the question, how long can we maintain subjects without need for retreatment? Whereas in the Australian trial, we study subjects with pre-existing intraretinal and/or subretinal fluid and ask the question, could we get rid of fluid with the TKI? We recently presented the interim data on OTX-TKI from the Australia-based Phase I trial at the Angiogenesis, Oxidation and Degeneration 2022 Meeting held on February 11 and 12. This latest analysis of interim data in subjects with subretinal and/or intraretinal fluid due to wet AMD continues to support the product safety profile and preliminary evidence of biological activity. In this trial, we found a clinically meaningful decrease in the intraretinal and/or subretinal fluid in many subjects. Extended duration of activity of six…

Thanks, Mike. Gross product revenues net of discounts, rebates and returns which the company refers to as total net product revenue, was $12.3 million for the fourth quarter and represented a 66% increase over the same period in 2020. Net product revenue of DEXTENZA in the fourth quarter was $12.2 million versus $6.9 million in the comparable quarter of 2020, reflecting a 77% increase. Total net product revenue for the fourth quarter of 2021 also includes net product revenue of $58,000 from ReSure Sealant. Overall, net product revenue for the year was $43.5 million, versus $17.4 million for 2020, reflecting a strong uptick in extended sales. Research and development expenses for the fourth quarter were $12.6 million, versus $7.6 million for the comparable period in 2020, driven primarily by an increase in unallocated expenses, predominantly personnel costs and increased clinical trial costs associated with the initiation of the U.S.-based Phase I clinical trial of OTX-TKI and the initiation of the U.S.-based Phase II clinical trial for OTX-TIC; the Phase II clinical trials for OTX-CSI and OTX-DED, the ongoing Phase I clinical trial of OTX-TKI in Australia and the ongoing post-approval clinical trial for DEXTENZA for post-surgical inflammation and pain in pediatric subjects. Overall, R&D expenses for the full year increased $21.4 million to $50.1 million from $28.7 million in 2020, reflecting the trends identified above. Selling and marketing expenses in the quarter were $9.1 million as compared to $6.8 million for the same quarter in 2020, primarily reflecting increased personnel costs associated with an expansion of the field force. Overall, selling and marketing expenses for the full year increased to $35.2 million from $26.6 million in 2020, driven primarily by increased personnel costs and increased spending on consulting, trade shows and conferences. Finally, general and administrative expenses were $7.5 million…

Thanks, Tom. So before opening the call up for questions, let me give a quick summary. The company demonstrated solid performance growing total net revenue 66% over the comparable quarter of 2020 and approximately 150% in 2021 on a full year basis. With FDA's approval of our sNDA to include ocular itching associated with allergic conjunctivitis in the DEXTENZA label, we are establishing a separate commercial business unit consisting of key account managers and field reimbursement managers to focus exclusively on the office setting, while the main sales team continues to focus on maximizing the opportunity for DEXTENZA in surgical set. With the recent OPPS final rules, CMS has laid out a path for the continued separate payment for DEXTENZA in the ASC environment after the path through expiration. This could allow us to maintain and strengthen our surgical business as we build a new source of growth in the office environment. The U.S.-based trial of OTX-TKI evaluating a single 600-microgram implant versus anti-VEGF injection versus standard of care every eight week Eylea is now fully enrolled and we expect to announce interim data in the second half of 2022. We recently initiated our Phase II clinical trial of OTX-TIC for the treatment of glaucoma and are actively screening subjects. In dry eye disease, we remain dedicated to developing this key market and we're conducting work to find the best formulations in vehicle control to use as we look to advance both OTX-CSI and OTX-DED. And finally, the company ended the quarter with $164.2 million in cash on the balance sheet as of December 31 and an expected cash runway through 2023. We look forward to a strong 2022. And with that, I'll turn the call over for questions.

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

Hey guys, thanks so much for taking my questions here. Congrats on the progress. Maybe the first one for me, I had on DEXTENZA and expectations for 2022 and whether you would expect to provide billable unit data on a monthly basis in the absence of any firm revenue guidance. And what we should think about as we think about modeling DEXTENZA, if you could walk through some of the maybe tailwinds and headwinds that we should keep in mind for the year. And I have a follow-up.

Yes, we have consistently given the monthly in-market insert numbers. That number is also in the earnings report. So until we give -- start getting guidance going forward, we'll continue to give those numbers. I mean essentially, the real headwind is the questions around the ability of ASCs to be able to staff up appropriately to handle the backlog of cataract surgeries that we understand are very much out there and going to come back into the market at some point. We've mentioned before that we had a really good October and November, really strong uptake in sales and you saw the slowdown in December that followed the lower-than-expected number of cataract surgeries due to the Omicron upswing. We saw that continue into January but we have seen in February of bounce back starting in the market as well. So if we understand that going forward, we're not only going to get a normal flow of cataract volume but in fact see that some of those delayed surgeries re-enter the market, we're actually looking forward to a very, very good 2022. Once we have some transparency of what that market is going to look like, we'll revisit the idea about giving guidance.

Okay, got it. Thanks. That's helpful. And then maybe if I could ask one to Mike. And I know there was a recent Phase III extended VEGF wet AMD study that recently read out. I'm wondering if you see any learnings there, whether it be on trial design, enrollment criteria or even how Eylea performs. Any thoughts you have there would be great.

Yes. Thanks, Joe. I think you're talking about the recent Kodiak trial. And I guess the key learning is that getting longer duration therapy with an anti-VEGF monoclonal antibody is challenging and continues to be challenging. And I think if someone can get that get that to work, then that's a huge opportunity. So I think one of the biggest learnings is -- and we've always believed this, that it's really, really tough to get a monoclonal antibody to have an extended duration beyond two or three months. And we're committed. We believe that having a potent small molecule TKI is a really interesting approach. And based on the data we've already shown from the Australian trial to really enroll some of the more challenging patients and we're able to show essentially with monotherapy that we could get rid of fluid and we can maintain that for six or more months is super exciting for us. And then, we have the U.S. trial now which is really enrolling a more similar population to what we see with other U.S. trials where you're coming in with patients who are either getting three injections upfront as they did in the Kodiak trial or in our case, are coming in pretreated. And then you're asking the question, can you maintain that? We think that's a much lower bar than we've already shown in the Australian trial.

Okay, got it. Thanks. That's helpful. And thanks for taking my questions, again.

Thanks, Joe.

Thank you. Our next question comes from Jon Wolleben with JMP Securities. Your line is open.

Hey guys, thanks for taking the questions and congrats on the progress. Just wondering for a little more color on allergic conjunctivitis business unit. First, I just wanted to confirm whether or not there is any sales in AC in this $12.2 million DEXTENZA number for the fourth quarter. And then hoping you could give us a little more color on the size of this business unit and what your expectations might be for the contribution to the top line in AC this year?

No, we don't expect there have been many or any AC sales in that $12.3 million number that we put in the last quarter. What we're doing -- initiating this quarter and will start next quarter is a fully dedicated team in the office environment. That team initially is going to be very small. So we're talking about five account managers, probably one dedicated field reimbursement manager and then a leader of that team. What we would like to do in that environment is to understand what the drivers are in the office environment, how we need to adjust our programs to make sure that they're fit for purpose. And as we start to understand what that opportunity is, we will invest behind that opportunity. So rather than set forth the number that we expect to hit and then resource to hit that number, we've done -- we did with the launch of DEXTENZA which is get in the market, get to understand what drives the market and then invest once we have the formula cracked. And we're going to do exactly that in the office not the metric environment as well. So there's not really a number that we're chasing but we're trying to decode the system. And then once we understand it, we will flog it.

Got it, that's helpful. And just one on OTX-TKI. I know you're enrolling a Cohort 4 in Australia. That could be a nice sneak peek of what to expect in the second half of this year from the U.S. study. Given that's open label, will you be releasing any of that data ahead of the U.S. data?

That's a good question. So we are enrolling a Cohort 4 which has a single implant 600-microgram. As you know, at the Angiogenesis Meeting, we revealed the results from the Cohort 3 which is the 600 microgram but it was the 300, 200-microgram implants to get there. We actually don't think it's going to be meaningfully different, it could be but we don't think it will be. And I think if we've got something meaningfully to say in terms of Cohort 4 in Australia, then there is an opportunity to give an update on the open-label trial. As you mentioned, the U.S. trial, because it's a mass trial, we really need to wait time. Now we do have the opportunity for protocol to do an interim analysis which, as I mentioned, we anticipate to do after all or most of the subjects have hit six months or longer, we think would be a meaningful time to take a look at that.

Got it. Thanks for taking the questions.

Thanks, Jon.

Thank you. Our next question comes from Dane Leone with Raymond James. Your line is open.

Hi, thank you for taking the questions and congratulations on the updates and outlook for 2022. Two questions for me, please. Firstly, as you get closer to having that six month data from the 600-microgram single insert in the U.S. study, what's been the feedback from Angiogenesis in terms of where you think the hurdle is clinically for that six month duration of retreatment, needed retreatment of standard of care. Is it a percentage of the patients? Is it defined by the type of patient and the prior treatment history because that's been one of the major points of debate. So any thoughts there would be appreciated. And then secondly, it does seem like you're trying to rework the dry eye program a bit, both with the cyclosporine and low-dose DEX. Is there kind of a time line where you think you might be able to reengage some Phase II studies with that program?

Thanks, Dane. Good questions as always. In terms of OTX-TKI, I think it's -- so I think the number is really a trade-off depending on the safety signal that you're seeing -- and given that to date, we've been pleased with the strong safety signal we've shown with OTX-TKI. We think something around 50% of subjects into six months or longer is a reasonable clinical target. Now if you look at our 600-microgram data from Cohort 3, we actually were up around 80% of subjects. So if we can replicate that in the U.S. trial or something like that, we'd be really happy. And again, just to point out what I've said before, the Australian trial started with patients who had a lot of fluid and we're trying to get rid of that fluid with the TKI. That's something that no one else has done that we know of and no one else continues to show. So we think that's a much higher bar. And we've actually been able to show some subjects for the fluids come away completely. We've maintained that out to six months or longer. The U.S. trial, more similar to what others are doing, starting with patients who are treated or who in other cases where people have gotten floating doses and seeing if you can maintain people in that dry state for a longer period of time. So frankly, we'd be pretty disappointed if we don't hit 60% or higher when we go to the 600-microgram single implant in the U.S. trial but we will -- I guess we'll find out in the near future. But I think if we hit that target, that's a blockbuster given the safety profile and that we had a lot of inflammation, if you had a lot of [indiscernible],…

Let me explain on that. I mean the one thing we understand is that these trials in dry eye, particularly are very high risk trials. And we want to make sure that we thoroughly mine the data that we have from our Phase II and also understand the process by which we can scale up on the -- on both the vehicle and the active drug side with an eye toward the preservation of our cash runway. So there are ways that we can already bring that forward which will obviously increase the risk of those trials. What we'd rather do is we'd rather do it absolutely the right way and make sure that we have the appropriate vehicle and we have the appropriate active in both CSI and BEV and start trials that we have full confidence -- are going to be able to yield results that can lead to registerable products. So -- and so we could go one or two ways that we could either go very, very short term and get in the clinic as quickly as possible or we could take a longer road and lower risk with lower cash burn. We are definitely leaning toward the lower risk and lower cash burn side.

Thank you.

Thank you. And our next question comes from Yi Chen with H.C. Wainwright. Your line is open.

Thank you for taking my questions. First question is regarding the new sales unit for the office setting use of DEXTENZA. Are those people new hires? Or they are your existing reps and they are just being allocated to the new team?

There will likely be a mix. We don't have the team in place yet but what we've done is we've opened up the vacancies that our team -- the surgical team is allowed to apply for. My guess is, in the end, it will turn out to be a mix of new hires and existing people within the surgical team.

Okay. So do you expect revenue -- the company to start recognizing revenue from DEXTENZA for AC in the current quarter or the second quarter?

I think it will ramp slowly in the second quarter. And once we crack the code about the proper way to sell DEXTENZA in the office environment, we will layer on resources as needed. And I would expect in the latter part of the year and certainly the beginning of 2023 to really start to see the ramp-up in that office environment. I mean assuming those are there once again, we're starting with a small team that's trying to look at the pressure points in that environment. We believe that it's there -- there is a tremendous reservoir of unsatisfied patients and there's a great need in the office environment for a buy-and-bill product for the front of the eye that has a procedure code attached. So the ingredients are right. We just need to figure out what the right alchemy is.

Okay. And for the wet AMD indication, for those patients who do not respond well to anti-VEGF therapy, do you think there's a chance they can possibly respond to OTX-TKI?

Yes, I think there is. I mean as you know, TKIs have a broader spectrum of activity compared with currently available in the VEGF drugs. So it is certainly possible that those patients who don't respond well to anti-VEGF drugs will respond well to TKIs. That said, the U.S. trial is enrolling patients who are responding well to anti-VEGF drugs. So we're not selecting for those patients who don't respond. The Australian trial is a bit of a mix. And we've got some patients who are naive, some who responded well to anti-VEGF and some who didn't have great response to the anti-VEGF.

Got it. And for the glaucoma trial, do you still expect the trial to complete enrollment in the second half of this year?

So we haven't given guidance on when we expect enrollment to finish. I think it's about 105 patients over. So finishing this year, I think, would be an aggressive target. I think we'll -- we'll see how enrollment goes, and as we go, we'll give an update at some point with appropriate guidance. But I think it would be unrealistic to expect enrollment to fully enroll this year.

Okay. Thank you.

Thanks, Yi.

Thank you. [Operator Instructions] Our next question comes from Anita Dushyanth with Berenberg Capital. Your line is open.

Hi, good afternoon and thanks for taking my question, and congrats on the progress. Just two for me here. I know you spoke about the next steps in the DED and CSI candidate. Could you talk about maybe the timelines associated with the development, especially now that you are working internally to develop the comparator?

Yes. So as I mentioned, we will develop the appropriate -- we'll reveal the appropriate clinical regulatory and manufacturing plans in the second quarter of this year. And so that will be the time to give -- we'll give an update on guidance. But we don't anticipate starting a Phase II trial in either program in the near future for the reasons Anthony mentioned previously.

Okay. And then what are some of the metrics that you probably look at in terms of the backlog that will be addressed with the surgical procedures that use DEXTENZA.

Well, the metrics are essentially that there's usually in a normal year around four million cataract surgeries that are done in the United States. We believe that in 2021, that number was closer to $3 million. Because cataracts don't spontaneously resolve and you, at some point are going to need to get the cataract done, the assumption is that those million-or-so cataracts that weren't done in 2021 will springle themselves in the latter half of 2022 and early 2023. So just giving rough numbers, you would expect $4.5 million this year and probably another $4.5 million or more next year which would give us a really nice bump on a basis of what we saw in 2021.

Okay, that was helpful. And then the last question is -- do you -- are there any updates from the collaboration with Mosaic Biosciences.

Good question. So that collaboration is to develop a longer-duration drug in the dry AMD space and it's going extremely well and it's on target and we hope to develop a new candidate at some point in the near future.

Okay. Okay, thank you for that.

Thanks for the questions.

Thank you. And that's all the questions we have. This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.