Post by tomsylver on Aug 20, 2018 6:28:05 GMT
Donald Notman, Ocular Therapeutix, Inc. - CFO [2]
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Thank you, Ashley. Good afternoon, everyone, and thank you for joining us on our Second Quarter 2018 Financial Results and Business Update Conference Call. This afternoon, we issued a press release providing an update on the company's product development programs and details of the company's financial results for the quarter ended June 30, 2018. The press release can be accessed on the Investors portion of our website at investors.ocutx.com.
Leading the call today will be Antony Mattessich, our President and Chief Executive Officer, who will provide a summary of our corporate developments and upcoming clinical milestones. Scott Corning, our Senior Vice President, Commercial, will then provide an update on the commercial plans for DEXTENZA. Following Scott's remarks, I will provide an overview of the financial highlights for the second quarter of 2018 before turning the call back over to Antony for a summary and questions. For Q&A, we will also be joined by Dr. Michael Goldstein, our Chief Medical Officer; Dr. Dan Bollag, our Senior Vice President, Regulatory and Quality; and Kevin Hanley, our Senior Vice President, Technical Operations.
As a reminder, during today's call, we will be making certain forward-looking statements. Various remarks that we make during this call about the company's future expectations, plans and prospects constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of our most recent quarterly report on Form 10-Q, which was filed with the SEC today, August 7, 2018. In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views change.
I will now turn the call over to Antony.
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Antony Mattessich, Ocular Therapeutix, Inc. - President, CEO & Director [3]
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Thanks, Donald. I'm pleased to report that Ocular has made significant progress in the second quarter. The transformation process, which began 12 months ago, is well underway and we are seeing the tangible results. By far, the most important of which is the resubmission of our NDA for DEXTENZA followed by the formal acceptance of the filing by the FDA, which we announced on July 19. Most importantly, the agency has also given a PDUFA date of December 28, 2018.
As a reminder, the issues outlined in the previous complete response letter for DEXTENZA centered exclusively on CMC with no request for additional clinical data on safety or efficacy. Consequently, we believe the most critical remaining requirement for approval should be a successful preapproval inspection. As mentioned in prior quarterly earnings calls, our strategy for ensuring a successful inspection has been to fully and adequately address all of the 43 observations from previous inspections and also to upgrade the overall production and quality oversight systems through a continuous improvement plan. We believe that we have fully accomplished the first objective and that our quality and production systems already demonstrate our ability to supply the market upon approval.
As we await FDA inspection, we're moving from planning to execution of the U.S. launch of DEXTENZA. Thankfully, we have the benefit of a running start from the work that was done in the first half of 2017. However, we're taking the opportunity to question previous assumptions and integrate learnings from the market, particularly from recent reimbursement experience in the ophthalmology space. With our insights into the marketplace and a product that is competitively well positioned, we believe a small company with targeted resources such as Ocular can be successful in maximizing revenue potential while building a near-term path to product profitability.
As we move from planning to execution, we're working to ensure Ocular has adequate resources to continue moving its pipeline forward while securing an optimally resourced launch for DEXTENZA. Like most biopharmaceutical companies at this stage, we are always evaluating the most appropriate options to finance the company for its next phase of growth and will likely use a mix of options to fund the company going forward. Along with traditional equity offerings, we're looking at business development, partnerships and royalty financing as sources of future capital.
It is important to remember that aside from our collaboration with Regeneron, we hold worldwide exclusive commercial rights to our entire pipeline, we are unburdened by significant royalty obligations and we're positioned to achieve high gross margins. We believe that an approval of DEXTENZA before year-end creates a near-term revenue story that significantly expands the financing options available to the company moving forward, both dilutive and nondilutive.
I'd now like to turn the call over to Scott Corning, Senior Vice President, Commercial, to discuss the steps we're taking to prepare for commercial launch of DEXTENZA
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Scott Corning, Ocular Therapeutix, Inc. - SVP of Commercial [4]
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Thanks, Antony. As many of you know, DEXTENZA is an intracanalicular insert of the approved drug dexamethasone that is being developed to treat patients with postsurgical ocular pain for up to 30 days with a single administration. We believe that DEXTENZA is a potentially transformational asset for both patients and physicians.
For patients, DEXTENZA would offer the convenience of a full course of postsurgical steroid treatment in a single insert. This novel means of delivery could replace a complex eye drop regimen that, under the current standard of care, would require up to 70 topical ocular steroid drops. For physicians, this represents an important first step toward the realization of droplet surgery, which surgeons have wanted for several years.
In our Phase III study of nearly 1,000 patients, DEXTENZA met its primary efficacy endpoints in the treatment of postoperative pain with a safety profile comparable to placebo. While the canaliculus is a novel area to employ as a site for improved drug delivery, we know physicians generally understand how to place these inserts given their familiarity with and use of punctal plugs. Notably, from a treatment perspective, clinicians have been looking for ways to address the issue of noncompliance with drops due to patients' inability to administer drops properly, if at all.
We understand the market and remain confident in the potential for DEXTENZA. With well over 9 million topical ocular steroid prescriptions a year in the U.S. alone, the majority of which are written for ocular surgeries, chiefly cataract surgeries, the initial market opportunity is substantial. And as we approach the potential approval of DEXTENZA and subsequent commercialization, we understand the importance of a solid reimbursement strategy to ensure a successful launch and adoption of DEXTENZA.
We anticipate the need to train surgeons and practices with DEXTENZA, both from a clinical and reimbursement standpoint. We are also engaging key payers and medical societies and will continue to look at ways to optimize reimbursement dynamics leading up to and after launch.
As a final note on our commercialization efforts, we do intend to commercialize DEXTENZA on our own in the U.S. and planning an execution for the required build-out is well underway. Importantly, we feel confident that we understand the appropriate steps needed for a successful commercial launch and look forward to talking more about our plans in future calls.
I will now turn the call back over to Antony for an update on the clinical progress we have made on the pipeline.
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Antony Mattessich, Ocular Therapeutix, Inc. - President, CEO & Director [5]
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Thanks, Scott. Along with the progress on DEXTENZA, we continue to advance our pipeline of products that targets multiple ocular diseases of both the front and back of the eye. Each of these products is a customized formulation using 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.
Behind DEXTENZA, OTX-TP is our most clinically-advanced asset in the pipeline. The product candidate is currently in Phase III clinical trials and is being developed as a potential treatment for patients with primary open-angle glaucoma or ocular hypertension. OTX-TP is a long-acting, preservative-free formulation of the drug travoprost delivered as an intracanalicular insert designed to release drug over 3 months.
The first Phase III trial is currently enrolling approximately 550 patients, with the primary efficacy endpoint being a statistically superior reduction of intraocular pressure, or IOP, from baseline with OTX-TP compared to placebo inserts at 3 diurnal time points at each of 3 measurement dates of 2, 6 and 12 weeks following insertion. We continue to anticipate top line data in the first half of 2019.
In addition to the ongoing Phase III trial, we are pleased to announce we have dosed our first patient in an open-label 1-year safety extension study 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 glaucoma program in development. The product is a bioresorbable, travoprost-containing hydrogel implant delivered via an intracanular injection designed to deliver a higher level of IOP reduction. We announced the dosing of our first patient in the Phase I trial of OTX-TIC last quarter. This U.S.-based Phase I multicenter, open-label, perspective dose escalation clinical trial will evaluate the safety, efficacy, durability and tolerability of OTX-TIC. As this is an open-label trial, we're also able to assess biological activity as well as safety on an ongoing basis for all patients. We will continue to collect data throughout the rest of the year, expecting to have initial results in the first half of 2019.
Moving to the back of the eye, we expect to dose our first patient during the third quarter in a multicenter, open-label dose escalation Phase I clinical trial for OTX-TKI. OTX-TKI is a bioresorbable hydrogel fiber implant with anti-angiogenic 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 a broader anti-angiogenic activity. Preclinical data have demonstrated the ability to deliver an efficacious dose of a 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 thickness using standard optical coherence tomography.
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 AMD that is currently being developed in partnership with Regeneron. While we are officially in the option period with Regeneron, we cannot contractually comment on any details of the program at this time. But what we can say is that we're pleased with the state of the collaboration, and the teams have been working very well together.
I would like to turn the call back over to Donald, who will review our second quarter 2018 financial results.
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Donald Notman, Ocular Therapeutix, Inc. - CFO [6]
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Thanks, Antony. Let me begin by summarizing our capitalization. As of the quarter ended June 30, 2018, we had $56.8 million in cash and cash equivalents versus $62.9 million at the end of the first quarter. The cash balance benefited from $8.4 million in net proceeds generated from the sale of common stock under the company's 2016 sales agreement, or ATM, during the second quarter. Offsetting the ATM inflows during the quarter were net losses of $13.8 million, principal debt payments of $1.6 million and capital expenditures of $0.6 million.
As of the end of Q2, $24.1 million remained available to be sold under the ATM, and we will continue to monitor the opportunity to sell additional equity as appropriate under this facility. 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 the second quarter of 2019, exclusive of the potential $10 million option payment from our Regeneron partnership. This is, of course, subject to a number of assumptions about our clinical development programs and other aspects of our business.
Research and development expenses for the second quarter were $8.7 million versus $8.1 million for the second quarter of 2017 and reflect an increase in compensation cost associated with additional hiring, primarily in the technical operations and quality departments, as well as an increase in facilities expenses associated with additional lab space at our corporate headquarters.
Selling and marketing expenses for the second quarter were $0.9 million as compared to $6.8 million for the same quarter in 2017. This decrease relates to a significant reduction in precommercial activities as a result of the delay in the planned 2017 launch of DEXTENZA.
Finally, general and administrative expenses were $4.4 million for the second quarter versus $3.7 million in the comparable quarter of 2017. The increase in expenses stemmed primarily from increases in legal costs related to the defense of ongoing legal proceedings.
Revenues for the second quarter of 2018 were driven exclusively by ReSure Sealant and totaled approximately $0.6 million compared with $0.4 million in the same period for 2017, reflecting principally an increased number of units sold. As noted in the past, we are not currently providing promotional support for ReSure, and we do not expect product revenues to keep in trail in 2018.
With respect to financial results for the second quarter ended June 30, 2018, we reported a net loss of $13.8 million or a loss of $0.37 per share. This compares to a net loss of $18.7 million or a loss of $0.64 per share for the same period in 2017. The net loss for the second quarter of 2018 included $2.4 million in noncash charges for stock-based compensation and depreciation compared to $2.1 million for the same quarter in 2017. The company had approximately 38.5 million shares issued outstanding as of June 30, 2018.
This concludes my comments on our second quarter financial results, and I would like to turn the call back to Antony for some summary comments.
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Antony Mattessich, Ocular Therapeutix, Inc. - President, CEO & Director [7]
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Thanks, Donald. Before opening the call up for questions, I'd like to recap the company highlights for the second quarter. We have resubmitted the NDA for DEXTENZA, received our PDUFA date of December 28, 2018, and are awaiting a preapproval inspection. We are moving from planning to execution on the U.S. commercial launch of DEXTENZA and continue to explore the sources of dilutive and nondilutive funding that will allow us to optimize DEXTENZA launch while continuing to develop and augment the pipeline.
We are completing enrollment on our first pivotal Phase III trial for OTX-TP and expect the results in the first half of 2019. Additionally, we have also dosed the first patient in our open-label safety extension study for OTX-TP.
Finally, we've made progress on both of our Phase I programs with the dosing of our first patient for OTX-TIC and the initiation of our first in-human trial for OTX-TKI. We are encouraged with our progress for the first half of 2018. The on-time resubmission and establishment of a PDUFA date for DEXTENZA were critical achievements, and we're pleased to have accomplished them. Clearly, we need to demonstrate to our stakeholders that the transformation we have experienced internally will continue to produce externally validated results. While the team understands the approval of DEXTENZA is our top priority, we will continue to drive forward a pipeline of significant opportunity that should be increasingly appreciated as we demonstrate our ability to execute.
We can now open up the line for questions.
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Questions and Answers
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Operator [1]
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(Operator Instructions) Our first question comes from Donald Ellis of JMP.
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Donald Bruce Ellis, JMP Securities LLC, Research Division - MD & Senior Research Analyst [2]
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I have 2 questions, I'll ask them one at a time. First question is regarding the U.S. cataract market. Can you tell us what percent of that market is commercial pay versus CMS?
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Antony Mattessich, Ocular Therapeutix, Inc. - President, CEO & Director [3]
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I think the more appropriate number to look at is really what is the Medicare Part B, which is really what we're going to head after first. And that's 50% of the total cataract market, so there's about 4 million cataract surgeries a year. About 2 million of them are Medicare Part B, and that's the area that we think we would get the reimbursement in first so that we would go after that as an initial area. But yes, so it's about 50% of the total cataract is Medicare Part B.
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Donald Bruce Ellis, JMP Securities LLC, Research Division - MD & Senior Research Analyst [4]
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Okay, and so that's the target for '19. And then what about the process of applying for and granting a pass-through status? Is that something that would kick in by January of 2020? And how would that expand your market opportunity?
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Antony Mattessich, Ocular Therapeutix, Inc. - President, CEO & Director [5]
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What I'll do is have Scott Corning actually answer the questions on the mechanics of that. But as we've discovered from the changes recently, that they are a bit in motion about how pass-through works, but he'll give you the state of play at the moment. But the short answer is yes, we do expect it before the end of 2019. But Scott, go ahead.
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Scott Corning, Ocular Therapeutix, Inc. - SVP of Commercial [6]
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Yes, with FDA approval possible by the end of the year, this would allow us to apply for transitional pass-through payment status at the first available opportunity, which would be March 2019. And that would be for a hopeful July 1 approval. So with the PDUFA date at the end of the year and a C code application to follow thereafter, it is possible we could see a C code approval midyear 2019, and then we'd have a half year of commercial launch potential.
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Antony Mattessich, Ocular Therapeutix, Inc. - President, CEO & Director [7]
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We won't get into details on this, but pass-through is not a fait accompli. There's a number of options that could be open to us given the way DEXTENZA is administered and what DEXTENZA is, but we -- it shouldn't be considered that we will definitely do pass-through. There are other options that may be available to us that might have a larger area under the curve.
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Donald Bruce Ellis, JMP Securities LLC, Research Division - MD & Senior Research Analyst [8]
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Okay. So just to make sure I understand and then I'll go back in the queue. So for 2019, you'll have access to roughly 50% of the cataract market as far as reimbursement goes?
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Antony Mattessich, Ocular Therapeutix, Inc. - President, CEO & Director [9]
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Yes, I think that's true to say.
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Operator [10]
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Our next question comes from Adnan Butt of Guggenheim Securities.
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Adnan Shaukat Butt, Guggenheim Securities, LLC, Research Division - Senior Analyst [11]
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Antony, on the reimbursement front, since -- for an extended period, the strategy seemed to have been passed through. On the call today, you mentioned some learnings about reimbursement and now you're saying that pass-through is an option but may not be the only option. Can you give us some details? Or when would you be able to give us details about the reimbursement strategy?
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Antony Mattessich, Ocular Therapeutix, Inc. - President, CEO & Director [12]
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Thanks for adding that last little bit. I don't want to be sort of drawn into too deep a conversation about what we think the optimal pathway is, but we certainly will be able to give a lot of color on that before the end of the year. So before we expect to get approval, we hope to give you some pretty concrete updates about what we think the optimal pathway is for us from a reimbursement standpoint.
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Adnan Shaukat Butt, Guggenheim Securities, LLC, Research Division - Senior Analyst [13]
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How about on the J code side? Is that still a target even if pass-through is not necessarily the initial target?
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Antony Mattessich, Ocular Therapeutix, Inc. - President, CEO & Director [14]
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I mean, J is the Holy Grail, right? That's what we're gearing toward. We believe that given that our product is associated with a procedure that is essentially office-based in most cases or in cases where it's used today, we think that we should have a clear shot at a J code. But we really have to kind of do some things with our -- along the reimbursement pathway to secure that hope for a J code. But that is absolutely the goal and the expectation.
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Adnan Shaukat Butt, Guggenheim Securities, LLC, Research Division - Senior Analyst [15]
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One question on the application itself. Good to see it get filed and then accepted for review on time. Is it too soon to have expected an inspection to be scheduled? And once the inspection is done, does the FDA communicate the CMC review portion separately or as part of the final review?
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Antony Mattessich, Ocular Therapeutix, Inc. - President, CEO & Director [16]
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Yes, with that, I'll hand it over to Dan Bollag to sort of talk about the process of the PI. But the short answer for the first one is no, we haven't expected it to date. It would've been very early had we already had the inspection, but it is -- as each day passes, the likelihood of it grows but, Dan, you want to...
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Daniel M. Bollag, Ocular Therapeutix, Inc. - SVP of Regulatory Affairs & Quality [17]
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Yes, sure, I concur with the way that Antony has summarized it. I think it would be reasonably unusual to have an inspection in the first couple of months within the review cycle time, but that certainly is possible. We're certainly now into our second month, so we would be ready when the FDA shows up. What would occur subsequent to that is we'll undergo the inspection, we'll have a close-out meeting at which the FDA will let us know about the findings. None of that really is public at that stage. And in fact, just those findings don't provide any clear path about the actual approval itself. So I think we'll be in a difficult position to kind of make too many extrapolations at that stage. But we'll have to see how the rest of the review proceeds after that. And obviously, if there's something critical to be communicating that's material, we'll certainly be doing that.
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Adnan Shaukat Butt, Guggenheim Securities, LLC, Research Division - Senior Analyst [18]
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And just one on the pipeline. For the TKI program, I think in the past or today, you've mentioned that its long-term durability potentially out to 12 months. So how long before we should expect some type of an update from the Phase I? Is it a 12-month update? Or could there be something sooner than that?
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Antony Mattessich, Ocular Therapeutix, Inc. - President, CEO & Director [19]
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As I mentioned, it's a trial that's being done in patients in open-label trial that will -- using OCT, that it will chart the efficacy of the drug or the biological activity of the drug. We don't know exactly when we'll be in a position to be able to describe the case studies that we see in the Phase I, but we won't have to wait until the end of the treatment period to do that. We'll be able to see that, the reaction. The drawing of the vasculature, if it is effective, should happen relatively soon. How soon we'll have those patients to be able to describe, we don't know at the moment. But yes, you won't need to wait for the full duration of the depot to resorb before you know that.
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Operator [20]
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(Operator Instructions) Our next question comes from Yi Chen of H.C. Wainwright.
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Yi Chen, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [21]
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My first question is just for clarification. As of today, is the manufacturing facility ready for FDA inspection? Or you need to do a little bit more work before they show up?
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Antony Mattessich, Ocular Therapeutix, Inc. - President, CEO & Director [22]
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We wouldn't have filed if we didn't believe it was ready for inspection. So yes, it is ready.
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Yi Chen, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [23]
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Okay, great. Second question is, as you plan for a commercialization, what are the likely sales and marketing expenses in the -- we can expect to see in the second half of this year and 2019?
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Antony Mattessich, Ocular Therapeutix, Inc. - President, CEO & Director [24]
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I think it's a little premature to sort of announce what we think those numbers are going to be, but I think it's sort of fair to say this is a highly concentrated market where we know the centers that we would go to first and that we would be able to cover quite a percentage of those Medicare Part B patients with a fairly light footprint. So it will be likely the numbers that you'll see will -- won't be like one big bang of expense where we hire a huge team. It'll be rolled in to a -- to the success that we see in the centers that we target. So the numbers will ramp up as the year goes along, but not in any significant way that would create a step change in the kind of expenses that you're seeing now.
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Thank you, Ashley. Good afternoon, everyone, and thank you for joining us on our Second Quarter 2018 Financial Results and Business Update Conference Call. This afternoon, we issued a press release providing an update on the company's product development programs and details of the company's financial results for the quarter ended June 30, 2018. The press release can be accessed on the Investors portion of our website at investors.ocutx.com.
Leading the call today will be Antony Mattessich, our President and Chief Executive Officer, who will provide a summary of our corporate developments and upcoming clinical milestones. Scott Corning, our Senior Vice President, Commercial, will then provide an update on the commercial plans for DEXTENZA. Following Scott's remarks, I will provide an overview of the financial highlights for the second quarter of 2018 before turning the call back over to Antony for a summary and questions. For Q&A, we will also be joined by Dr. Michael Goldstein, our Chief Medical Officer; Dr. Dan Bollag, our Senior Vice President, Regulatory and Quality; and Kevin Hanley, our Senior Vice President, Technical Operations.
As a reminder, during today's call, we will be making certain forward-looking statements. Various remarks that we make during this call about the company's future expectations, plans and prospects constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of our most recent quarterly report on Form 10-Q, which was filed with the SEC today, August 7, 2018. In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views change.
I will now turn the call over to Antony.
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Antony Mattessich, Ocular Therapeutix, Inc. - President, CEO & Director [3]
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Thanks, Donald. I'm pleased to report that Ocular has made significant progress in the second quarter. The transformation process, which began 12 months ago, is well underway and we are seeing the tangible results. By far, the most important of which is the resubmission of our NDA for DEXTENZA followed by the formal acceptance of the filing by the FDA, which we announced on July 19. Most importantly, the agency has also given a PDUFA date of December 28, 2018.
As a reminder, the issues outlined in the previous complete response letter for DEXTENZA centered exclusively on CMC with no request for additional clinical data on safety or efficacy. Consequently, we believe the most critical remaining requirement for approval should be a successful preapproval inspection. As mentioned in prior quarterly earnings calls, our strategy for ensuring a successful inspection has been to fully and adequately address all of the 43 observations from previous inspections and also to upgrade the overall production and quality oversight systems through a continuous improvement plan. We believe that we have fully accomplished the first objective and that our quality and production systems already demonstrate our ability to supply the market upon approval.
As we await FDA inspection, we're moving from planning to execution of the U.S. launch of DEXTENZA. Thankfully, we have the benefit of a running start from the work that was done in the first half of 2017. However, we're taking the opportunity to question previous assumptions and integrate learnings from the market, particularly from recent reimbursement experience in the ophthalmology space. With our insights into the marketplace and a product that is competitively well positioned, we believe a small company with targeted resources such as Ocular can be successful in maximizing revenue potential while building a near-term path to product profitability.
As we move from planning to execution, we're working to ensure Ocular has adequate resources to continue moving its pipeline forward while securing an optimally resourced launch for DEXTENZA. Like most biopharmaceutical companies at this stage, we are always evaluating the most appropriate options to finance the company for its next phase of growth and will likely use a mix of options to fund the company going forward. Along with traditional equity offerings, we're looking at business development, partnerships and royalty financing as sources of future capital.
It is important to remember that aside from our collaboration with Regeneron, we hold worldwide exclusive commercial rights to our entire pipeline, we are unburdened by significant royalty obligations and we're positioned to achieve high gross margins. We believe that an approval of DEXTENZA before year-end creates a near-term revenue story that significantly expands the financing options available to the company moving forward, both dilutive and nondilutive.
I'd now like to turn the call over to Scott Corning, Senior Vice President, Commercial, to discuss the steps we're taking to prepare for commercial launch of DEXTENZA
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Scott Corning, Ocular Therapeutix, Inc. - SVP of Commercial [4]
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Thanks, Antony. As many of you know, DEXTENZA is an intracanalicular insert of the approved drug dexamethasone that is being developed to treat patients with postsurgical ocular pain for up to 30 days with a single administration. We believe that DEXTENZA is a potentially transformational asset for both patients and physicians.
For patients, DEXTENZA would offer the convenience of a full course of postsurgical steroid treatment in a single insert. This novel means of delivery could replace a complex eye drop regimen that, under the current standard of care, would require up to 70 topical ocular steroid drops. For physicians, this represents an important first step toward the realization of droplet surgery, which surgeons have wanted for several years.
In our Phase III study of nearly 1,000 patients, DEXTENZA met its primary efficacy endpoints in the treatment of postoperative pain with a safety profile comparable to placebo. While the canaliculus is a novel area to employ as a site for improved drug delivery, we know physicians generally understand how to place these inserts given their familiarity with and use of punctal plugs. Notably, from a treatment perspective, clinicians have been looking for ways to address the issue of noncompliance with drops due to patients' inability to administer drops properly, if at all.
We understand the market and remain confident in the potential for DEXTENZA. With well over 9 million topical ocular steroid prescriptions a year in the U.S. alone, the majority of which are written for ocular surgeries, chiefly cataract surgeries, the initial market opportunity is substantial. And as we approach the potential approval of DEXTENZA and subsequent commercialization, we understand the importance of a solid reimbursement strategy to ensure a successful launch and adoption of DEXTENZA.
We anticipate the need to train surgeons and practices with DEXTENZA, both from a clinical and reimbursement standpoint. We are also engaging key payers and medical societies and will continue to look at ways to optimize reimbursement dynamics leading up to and after launch.
As a final note on our commercialization efforts, we do intend to commercialize DEXTENZA on our own in the U.S. and planning an execution for the required build-out is well underway. Importantly, we feel confident that we understand the appropriate steps needed for a successful commercial launch and look forward to talking more about our plans in future calls.
I will now turn the call back over to Antony for an update on the clinical progress we have made on the pipeline.
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Antony Mattessich, Ocular Therapeutix, Inc. - President, CEO & Director [5]
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Thanks, Scott. Along with the progress on DEXTENZA, we continue to advance our pipeline of products that targets multiple ocular diseases of both the front and back of the eye. Each of these products is a customized formulation using 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.
Behind DEXTENZA, OTX-TP is our most clinically-advanced asset in the pipeline. The product candidate is currently in Phase III clinical trials and is being developed as a potential treatment for patients with primary open-angle glaucoma or ocular hypertension. OTX-TP is a long-acting, preservative-free formulation of the drug travoprost delivered as an intracanalicular insert designed to release drug over 3 months.
The first Phase III trial is currently enrolling approximately 550 patients, with the primary efficacy endpoint being a statistically superior reduction of intraocular pressure, or IOP, from baseline with OTX-TP compared to placebo inserts at 3 diurnal time points at each of 3 measurement dates of 2, 6 and 12 weeks following insertion. We continue to anticipate top line data in the first half of 2019.
In addition to the ongoing Phase III trial, we are pleased to announce we have dosed our first patient in an open-label 1-year safety extension study 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 glaucoma program in development. The product is a bioresorbable, travoprost-containing hydrogel implant delivered via an intracanular injection designed to deliver a higher level of IOP reduction. We announced the dosing of our first patient in the Phase I trial of OTX-TIC last quarter. This U.S.-based Phase I multicenter, open-label, perspective dose escalation clinical trial will evaluate the safety, efficacy, durability and tolerability of OTX-TIC. As this is an open-label trial, we're also able to assess biological activity as well as safety on an ongoing basis for all patients. We will continue to collect data throughout the rest of the year, expecting to have initial results in the first half of 2019.
Moving to the back of the eye, we expect to dose our first patient during the third quarter in a multicenter, open-label dose escalation Phase I clinical trial for OTX-TKI. OTX-TKI is a bioresorbable hydrogel fiber implant with anti-angiogenic 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 a broader anti-angiogenic activity. Preclinical data have demonstrated the ability to deliver an efficacious dose of a 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 thickness using standard optical coherence tomography.
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 AMD that is currently being developed in partnership with Regeneron. While we are officially in the option period with Regeneron, we cannot contractually comment on any details of the program at this time. But what we can say is that we're pleased with the state of the collaboration, and the teams have been working very well together.
I would like to turn the call back over to Donald, who will review our second quarter 2018 financial results.
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Donald Notman, Ocular Therapeutix, Inc. - CFO [6]
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Thanks, Antony. Let me begin by summarizing our capitalization. As of the quarter ended June 30, 2018, we had $56.8 million in cash and cash equivalents versus $62.9 million at the end of the first quarter. The cash balance benefited from $8.4 million in net proceeds generated from the sale of common stock under the company's 2016 sales agreement, or ATM, during the second quarter. Offsetting the ATM inflows during the quarter were net losses of $13.8 million, principal debt payments of $1.6 million and capital expenditures of $0.6 million.
As of the end of Q2, $24.1 million remained available to be sold under the ATM, and we will continue to monitor the opportunity to sell additional equity as appropriate under this facility. 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 the second quarter of 2019, exclusive of the potential $10 million option payment from our Regeneron partnership. This is, of course, subject to a number of assumptions about our clinical development programs and other aspects of our business.
Research and development expenses for the second quarter were $8.7 million versus $8.1 million for the second quarter of 2017 and reflect an increase in compensation cost associated with additional hiring, primarily in the technical operations and quality departments, as well as an increase in facilities expenses associated with additional lab space at our corporate headquarters.
Selling and marketing expenses for the second quarter were $0.9 million as compared to $6.8 million for the same quarter in 2017. This decrease relates to a significant reduction in precommercial activities as a result of the delay in the planned 2017 launch of DEXTENZA.
Finally, general and administrative expenses were $4.4 million for the second quarter versus $3.7 million in the comparable quarter of 2017. The increase in expenses stemmed primarily from increases in legal costs related to the defense of ongoing legal proceedings.
Revenues for the second quarter of 2018 were driven exclusively by ReSure Sealant and totaled approximately $0.6 million compared with $0.4 million in the same period for 2017, reflecting principally an increased number of units sold. As noted in the past, we are not currently providing promotional support for ReSure, and we do not expect product revenues to keep in trail in 2018.
With respect to financial results for the second quarter ended June 30, 2018, we reported a net loss of $13.8 million or a loss of $0.37 per share. This compares to a net loss of $18.7 million or a loss of $0.64 per share for the same period in 2017. The net loss for the second quarter of 2018 included $2.4 million in noncash charges for stock-based compensation and depreciation compared to $2.1 million for the same quarter in 2017. The company had approximately 38.5 million shares issued outstanding as of June 30, 2018.
This concludes my comments on our second quarter financial results, and I would like to turn the call back to Antony for some summary comments.
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Antony Mattessich, Ocular Therapeutix, Inc. - President, CEO & Director [7]
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Thanks, Donald. Before opening the call up for questions, I'd like to recap the company highlights for the second quarter. We have resubmitted the NDA for DEXTENZA, received our PDUFA date of December 28, 2018, and are awaiting a preapproval inspection. We are moving from planning to execution on the U.S. commercial launch of DEXTENZA and continue to explore the sources of dilutive and nondilutive funding that will allow us to optimize DEXTENZA launch while continuing to develop and augment the pipeline.
We are completing enrollment on our first pivotal Phase III trial for OTX-TP and expect the results in the first half of 2019. Additionally, we have also dosed the first patient in our open-label safety extension study for OTX-TP.
Finally, we've made progress on both of our Phase I programs with the dosing of our first patient for OTX-TIC and the initiation of our first in-human trial for OTX-TKI. We are encouraged with our progress for the first half of 2018. The on-time resubmission and establishment of a PDUFA date for DEXTENZA were critical achievements, and we're pleased to have accomplished them. Clearly, we need to demonstrate to our stakeholders that the transformation we have experienced internally will continue to produce externally validated results. While the team understands the approval of DEXTENZA is our top priority, we will continue to drive forward a pipeline of significant opportunity that should be increasingly appreciated as we demonstrate our ability to execute.
We can now open up the line for questions.
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Questions and Answers
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Operator [1]
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(Operator Instructions) Our first question comes from Donald Ellis of JMP.
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Donald Bruce Ellis, JMP Securities LLC, Research Division - MD & Senior Research Analyst [2]
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I have 2 questions, I'll ask them one at a time. First question is regarding the U.S. cataract market. Can you tell us what percent of that market is commercial pay versus CMS?
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Antony Mattessich, Ocular Therapeutix, Inc. - President, CEO & Director [3]
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I think the more appropriate number to look at is really what is the Medicare Part B, which is really what we're going to head after first. And that's 50% of the total cataract market, so there's about 4 million cataract surgeries a year. About 2 million of them are Medicare Part B, and that's the area that we think we would get the reimbursement in first so that we would go after that as an initial area. But yes, so it's about 50% of the total cataract is Medicare Part B.
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Donald Bruce Ellis, JMP Securities LLC, Research Division - MD & Senior Research Analyst [4]
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Okay, and so that's the target for '19. And then what about the process of applying for and granting a pass-through status? Is that something that would kick in by January of 2020? And how would that expand your market opportunity?
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Antony Mattessich, Ocular Therapeutix, Inc. - President, CEO & Director [5]
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What I'll do is have Scott Corning actually answer the questions on the mechanics of that. But as we've discovered from the changes recently, that they are a bit in motion about how pass-through works, but he'll give you the state of play at the moment. But the short answer is yes, we do expect it before the end of 2019. But Scott, go ahead.
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Scott Corning, Ocular Therapeutix, Inc. - SVP of Commercial [6]
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Yes, with FDA approval possible by the end of the year, this would allow us to apply for transitional pass-through payment status at the first available opportunity, which would be March 2019. And that would be for a hopeful July 1 approval. So with the PDUFA date at the end of the year and a C code application to follow thereafter, it is possible we could see a C code approval midyear 2019, and then we'd have a half year of commercial launch potential.
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Antony Mattessich, Ocular Therapeutix, Inc. - President, CEO & Director [7]
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We won't get into details on this, but pass-through is not a fait accompli. There's a number of options that could be open to us given the way DEXTENZA is administered and what DEXTENZA is, but we -- it shouldn't be considered that we will definitely do pass-through. There are other options that may be available to us that might have a larger area under the curve.
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Donald Bruce Ellis, JMP Securities LLC, Research Division - MD & Senior Research Analyst [8]
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Okay. So just to make sure I understand and then I'll go back in the queue. So for 2019, you'll have access to roughly 50% of the cataract market as far as reimbursement goes?
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Antony Mattessich, Ocular Therapeutix, Inc. - President, CEO & Director [9]
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Yes, I think that's true to say.
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Operator [10]
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Our next question comes from Adnan Butt of Guggenheim Securities.
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Adnan Shaukat Butt, Guggenheim Securities, LLC, Research Division - Senior Analyst [11]
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Antony, on the reimbursement front, since -- for an extended period, the strategy seemed to have been passed through. On the call today, you mentioned some learnings about reimbursement and now you're saying that pass-through is an option but may not be the only option. Can you give us some details? Or when would you be able to give us details about the reimbursement strategy?
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Antony Mattessich, Ocular Therapeutix, Inc. - President, CEO & Director [12]
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Thanks for adding that last little bit. I don't want to be sort of drawn into too deep a conversation about what we think the optimal pathway is, but we certainly will be able to give a lot of color on that before the end of the year. So before we expect to get approval, we hope to give you some pretty concrete updates about what we think the optimal pathway is for us from a reimbursement standpoint.
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Adnan Shaukat Butt, Guggenheim Securities, LLC, Research Division - Senior Analyst [13]
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How about on the J code side? Is that still a target even if pass-through is not necessarily the initial target?
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Antony Mattessich, Ocular Therapeutix, Inc. - President, CEO & Director [14]
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I mean, J is the Holy Grail, right? That's what we're gearing toward. We believe that given that our product is associated with a procedure that is essentially office-based in most cases or in cases where it's used today, we think that we should have a clear shot at a J code. But we really have to kind of do some things with our -- along the reimbursement pathway to secure that hope for a J code. But that is absolutely the goal and the expectation.
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Adnan Shaukat Butt, Guggenheim Securities, LLC, Research Division - Senior Analyst [15]
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One question on the application itself. Good to see it get filed and then accepted for review on time. Is it too soon to have expected an inspection to be scheduled? And once the inspection is done, does the FDA communicate the CMC review portion separately or as part of the final review?
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Antony Mattessich, Ocular Therapeutix, Inc. - President, CEO & Director [16]
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Yes, with that, I'll hand it over to Dan Bollag to sort of talk about the process of the PI. But the short answer for the first one is no, we haven't expected it to date. It would've been very early had we already had the inspection, but it is -- as each day passes, the likelihood of it grows but, Dan, you want to...
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Daniel M. Bollag, Ocular Therapeutix, Inc. - SVP of Regulatory Affairs & Quality [17]
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Yes, sure, I concur with the way that Antony has summarized it. I think it would be reasonably unusual to have an inspection in the first couple of months within the review cycle time, but that certainly is possible. We're certainly now into our second month, so we would be ready when the FDA shows up. What would occur subsequent to that is we'll undergo the inspection, we'll have a close-out meeting at which the FDA will let us know about the findings. None of that really is public at that stage. And in fact, just those findings don't provide any clear path about the actual approval itself. So I think we'll be in a difficult position to kind of make too many extrapolations at that stage. But we'll have to see how the rest of the review proceeds after that. And obviously, if there's something critical to be communicating that's material, we'll certainly be doing that.
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Adnan Shaukat Butt, Guggenheim Securities, LLC, Research Division - Senior Analyst [18]
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And just one on the pipeline. For the TKI program, I think in the past or today, you've mentioned that its long-term durability potentially out to 12 months. So how long before we should expect some type of an update from the Phase I? Is it a 12-month update? Or could there be something sooner than that?
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Antony Mattessich, Ocular Therapeutix, Inc. - President, CEO & Director [19]
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As I mentioned, it's a trial that's being done in patients in open-label trial that will -- using OCT, that it will chart the efficacy of the drug or the biological activity of the drug. We don't know exactly when we'll be in a position to be able to describe the case studies that we see in the Phase I, but we won't have to wait until the end of the treatment period to do that. We'll be able to see that, the reaction. The drawing of the vasculature, if it is effective, should happen relatively soon. How soon we'll have those patients to be able to describe, we don't know at the moment. But yes, you won't need to wait for the full duration of the depot to resorb before you know that.
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Operator [20]
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(Operator Instructions) Our next question comes from Yi Chen of H.C. Wainwright.
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Yi Chen, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [21]
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My first question is just for clarification. As of today, is the manufacturing facility ready for FDA inspection? Or you need to do a little bit more work before they show up?
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Antony Mattessich, Ocular Therapeutix, Inc. - President, CEO & Director [22]
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We wouldn't have filed if we didn't believe it was ready for inspection. So yes, it is ready.
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Yi Chen, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [23]
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Okay, great. Second question is, as you plan for a commercialization, what are the likely sales and marketing expenses in the -- we can expect to see in the second half of this year and 2019?
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Antony Mattessich, Ocular Therapeutix, Inc. - President, CEO & Director [24]
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I think it's a little premature to sort of announce what we think those numbers are going to be, but I think it's sort of fair to say this is a highly concentrated market where we know the centers that we would go to first and that we would be able to cover quite a percentage of those Medicare Part B patients with a fairly light footprint. So it will be likely the numbers that you'll see will -- won't be like one big bang of expense where we hire a huge team. It'll be rolled in to a -- to the success that we see in the centers that we target. So the numbers will ramp up as the year goes along, but not in any significant way that would create a step change in the kind of expenses that you're seeing now.