Good day, and thank you for standing by. Welcome to the Ocular Therapeutics First Quarter 2023 Earnings Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Donald Notman, Chief Financial Officer. Please go ahead.

Thank you, Julia. Good afternoon, everyone, and thank you for joining us on our first quarter 2023 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 first quarter ended March 31, 2023. The press release can be accessed on the Investors portion of our website at investors.ocutx.com. Leading the call today will be Antony Mattessich, our President, and Chief Executive Officer, who will provide an update on our pipeline developments and the commercial progress of DEXTENZA. Also speaking on the call today will be Dr. Rabia Ozden, our Chief Medical Officer; and Steve Meyers, our Senior Vice President, Commercial. Following their remarks, I will provide an overview of the financial highlights for the quarter before turning the call back over to Anthony for a summary on questions. For Q&A, we will be joined by Chris White, our Chief Business Officer; and Dr. Peter Kaiser, our Chief Medical Adviser, Retina. 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 Form 10-Q filed this afternoon with the SEC and our most recent annual report on Form 10-K filed March 6, 2023. I will now turn the call over to Anthony.

Thanks, Donald, and welcome, everyone, to the Ocular Therapeutics First Quarter 2023 update. We're very pleased with our progress in the quarter, both on the development of our pipeline and the commercial side of the business. Importantly, on the heels of an ARVO meeting last month that highlighted the emergence of TKIs as an exciting new potential option for the treatment of retinal diseases. We thought it would be a good idea to reintroduce OTX-TKI to the many new investors who have recently become interested in the space. We started on our OTX-TKI program because we believe there is a desperate need for novel MOAs that enable new treatment paradigms for VEGF-mediated retinal diseases, like wet AMD, diabetic macular edema, diabetic retinopathy and retinal vein occlusion. Despite the emergence of antibody treatments that have the ability to quickly reduce fluid in the retina, the problem is far from toll and the constraints of current treatment paradigms result in many patients with wet AMD remaining untreated. For those who are lucky enough to get treatment, real-world studies have demonstrated the initial vision games from treatment are not maintained. As a result, VEGF-mediated retinal diseases remaining a leading cause of blindness. So why is there such a need despite seemingly effective therapies? We believe it has to do with deficiencies inherent in those therapies. Efficiencies that OTX-TKI is designed to overcome. Fundamentally, VEGF-mediated retinal disease is caused by cellular dysfunction that results in chronic disease. Existing antibody treatments like EYLEA, LUCENTIS and are only effective in binding the proangiogenic ligands in the extracellular space. Additionally, existing treatment affects only specific ligands, mainly VEGFR-2, while data demonstrates that the presence of all the isoforms of VEGF as well as PDGF play a role in the disease process through other types of receptors. Most…

Thank you, Anthony. Let me begin with an update on our back-of-the-eye program, OTX-TKI. We are currently completing a multicenter prospective mass randomized controlled U.S.-based clinical trial in 21 subjects evaluating a 600-microgram OTX-TKI dose in a single implant containing axitinib compared to set administered every eight weeks in controlled wet AMD subjects previously treated with anti-VEGF therapy. The trial is designed to assess the safety, durability and tolerability of OTX-TKI and to assess biological activity in subjects by measuring anatomical and functional changes of retina. To date, we have reported interim data at two time points, seven months and 10 months, and have not observed any drug-related ocular or systemic series adverse events in OTX-TKI treated subjects. Importantly, the 73% of the OTX-TKI activated subjects who were rescue-free at month seven interim analysis remain rescue-free at month 10, highlighting what we believe is best-in-class durability. Furthermore, we saw in the trial, a 92% reduction in treatment burden for up to 10 months while patients showed stable and sustained best-corrected visual acuity and central thickness comparable with the aflibercept arm dosed every eight weeks. We believe the data highlights the potential OTX-TKI to become a differentiated product capable of providing a durable anti-VEGF response that improves upon today's standard of care in the management of the wet AMD. We continue to have productive dialogue with the FDA and recently completed a formal meeting with the agency that included a discussion of our data and clinical development strategy. Based on the feedback, we believe we have two potential designs for the pivotal design -- pivotal trial. We will share more about the trial design that we plan to use in future and still intend to be prepared to initiate the first two required pivotal trials in wet AMD as early as…

Thank you, Rabia. On the commercial front, we finished the quarter with DEXTENZA net product revenue sales to specialty distributors at $13.2 million, representing growth of approximately 6% over the same period last year. Importantly, in-market billable units were up 25% versus the prior year period, which represents an increase of over 7,200 units, measured against fourth quarter 2022 and in-market billable units in the first quarter of 2023 grew by over 2,500 units or 8%. Throughout the quarter, weekly and monthly DEXTENZA in market sales continue to accelerate. In fact, in March, DEXTENZA recorded the highest in-market sales ever, surpassing 13,000 units in one month. We anticipate that with the full sales team in place, a revised pricing discounting strategy that was implemented in the third quarter of last year and our strong market access, DEXTENZA will continue its growth in 2023. Looking at DEXTENZA Q1 net revenue, our recorded net revenues were slightly down versus Q4. The difference between DEXTENZA's recorded net sales and the growth of DEXTENZA's in-market billable units is due to distributor stocking patterns, not changes in gross to net. The specialty distributors closed March with eight fewer days of product on hand compared to Q4. However, with the continued strong in-market unit volumes recorded in April, we believe specialty distributors' inventories have been rebuilt to meet end market demand of DEXTENZA. Looking ahead, I remain bullish for the remainder of the year. We have secured several national strategic account contracts over the past few quarters that are now in place in helping fuel our growth. We've also achieved exceptional market access coverage for DEXTENZA, including 100% coverage in Medicare Part B, over 90% coverage in Medicare Advantage and over 70% coverage on the commercial payer side. Additionally, in Q1 2023, we launched a commercial assurance program to provide assistance with patients' out-of-pocket costs, and the early feedback has provided us more confidence to expand into the commercial patient population. Based on these dynamics, we remain confident reiterating our DEXTENZA net product revenue guidance for the full year 2023 to be between $55 million and $60 million, representing potential growth of approximately 10% to 20% over 2022. With that, let me turn the call back to Donald to discuss our financial results.

Thank you, Steve. Total net revenue, which includes both gross DEXTENZA product revenue, net of discounts, rebates, and returns, which the company refers to as net product revenue and collaboration revenue was $13.4 million for the first quarter of 2023, slightly ahead of first quarter of 2022 net revenues of $13.2 million and slightly behind fourth quarter net revenue of $14.1 million. DEXTENZA net product revenue grew from $12.5 million to $13.2 million over the comparable period in 2022, while collaboration revenue declined from $0.7 million to $0.2 million. Research and development expenses for the quarter of 2023 were $14.7 million versus $13.1 million for the same period in 2022, driven primarily by an increase in expenses associated with clinical and preclinical programs. Selling and marketing expenses in the first quarter of 2023 were $10.8 million as compared to $9.1 million for the same quarter of 2022, reflecting primarily an increase in field force personnel. General and administrative expenses were $9.1 million for the first quarter of 2023 versus $7.6 million in the comparable quarter of 2022, primarily due to an increase in personnel-related costs, including stock-based compensation and professional fees. The company reported a net loss for the first quarter of 2023 of $30.3 million or a loss of $0.39 per share on both a basic and diluted basis compared to a net loss of $12.5 million or a net loss of $0.16 per share on a basic basis and a loss of $0.22 per share on a diluted basis for the comparable period in 2022. Net loss in the first quarter of 2023 included a $6.6 million noncash item attributable to a change in the fair value of the derivative liability associated with the company's convertible notes, increasing total other expenses as the price of the company's common stock increased during the quarter. Noncash charges for stock-based compensation and depreciation and amortization were $5.1 million in the first quarter of 2023 versus $4.8 million for the comparable quarter in 2022. As of March 31, 2023, the company had $79 million in cash and cash equivalents versus $102.3 million as of December 31, 2022. Based on current plans and related estimates of anticipated cash inflows from the expenses and anticipated cash outflows from operating expenses, but excluding any expenses related to our planned pivotal clinical trials for OTX-TKI. The company believes that its existing cash and cash equivalents are sufficient to enable the company to fund planned operating expenses, debt service obligations and capital expenditure requirements to the middle of 2024. As of May 4, 2023, the company had approximately 77.5 million shares outstanding. This concludes my comments on our first quarter, and I would like to turn the call back to Anthony for some final thoughts.

Thanks, Donald. So before opening the call up for questions, let me do a quick summary. OTX-TKI continues to progress well, and we are pleased with ongoing FDA communication regarding our potential pivotal programs for both wet AMD and diabetic retinopathy. Enrollment continues to go well in the Phase II trial of OTX-TIC in glaucoma, and we plan to provide top line data in Q4 2023. DEXTENZA had a strong start in 2023 with volumes in the first quarter running over 20% above the first quarter of last year, that leaves us confident in our ability to meet our 2023 guidance of $55 million to $60 million in net sales. And we have a solid balance sheet with $79 million in cash that currently supports our ambitious plans and other planned pivotal programs into the middle of 2024. With that, I'll turn the call over to the operator for questions.

[Operator Instructions] Our first question comes from the line of Jon Wolleben of JMP. Your line is now open.

Hi, good afternoon, and thanks for taking my question. A couple on the 12-month data and then a follow-up on the pivotal trial, if I can. Just wondering if you could give us a little bit more granularity on what you expect to see in the 12-month update as axitinib is getting a bioresorbed in the eye? How is that going to manifest as it just going to be seeing fluid pick back up? Or is there some other manifestation? And then at ARVO, you mentioned the average resorbption was about nine months of the hydrogel, but wondering what kind of variability you saw in the patients within that nine-month average?

Well, I mean, what we expect to see at 12 months is that the disease should start to come back in some patients. What we saw in the trial to date is exactly what we anticipated that the hydrogel goes away in a very tight window in about eight months and that there is a release of drug after that, that stays in the retina for a couple of months. some patients, it clears a little faster than others. So, what we expect to see is, is the disease coming back. We enrolled patients in this trial that had a demonstrated need for anti-VEGF therapy so that as that therapy starts to wane, that you would expect the disease process to come back. And while we expect that to vary quite a bit in terms of individuals to individual, we would expect to see some of that back, and that would be reassuring. So that would show that the pharmacodynamics actually are representative of the pharmacokinetic.

Okay. And can you tell us a little bit more about why two different pivotal trial designs? And when you say one could start in third quarter, how you decide which to move forward? And then is it going to be two differently designed pivotal trials or a subsequent trial identical to the first when you start? Just trying to understand that dynamic a little bit better. Thanks.

Yes, we have a lot of options. And with the new guidance and the feedback from the FDA, there are a lot of paths that we could take. Clearly, we have a very active data room now and discussions with strategics will potentially determine which path we take. So unfortunately, we don't really have the ability to kind of definitively say at this moment, the -- which protocol we would choose to go down which protocol or protocols, but we hope to have that in the very near future. It's actually -- it's a very exciting time. There's a lot of possibilities and we had the data room is extremely active. I hope Dr. Rabia, if she can add. A –Rabia Ozden: Yes. I mean that’s a really good description where we are now. Jon, I just wanted to answer your question whether our pivotals would be the same or not? Yes, it would be the similar design similar design of the going forward. But as Anthony explained, we’re just going to make that decision to move forward, but ultimately, they need to be – they’re going to be similar designs.

Our next question comes from the line of Joe Catanzaro of Piper Sandler. Your line is now open.

Hi, guys. Thanks for taking my question. Maybe just one quick one for me on the potential pivotal design for the wet AMD studies. I think I recall previously, there was maybe some speculation that future pivotal design could maybe include two active arms, two different doses, exploring maybe two different formulations. I'm wondering if that is still a possibility between these two potential designs? Or have you sort of formally committed to moving forward solely with the current formulation? Thanks.

And the quick answer to that is yes. The -- one of the pivotal trial design actually would use both formulations and there's another that would only use one formulation. So, we have the ability to go either direction.

Our next question comes from the line of Tara Bancroft of Cowen. Your line is now open.

Hi, thanks for taking my question. So, I understand you're not disclosing specific details, but I was wondering if you can discuss hypothetically what you would consider the most favorable pivotal design, like perhaps elaborating on the pros and cons of choosing EYLEA versus LUCENTIS as a comparator arm and maybe the possibility of using a superiority endpoint? Thanks.

That’s a great question, and I’m not sure I can be suckered into answering at the moment, but there certainly are that there’s lots of options available and also a potential comparator if you’re thinking about a superiority trial. But yes, it’s all to play for. There’s a noninferiority design that looks very interesting, and there are superiority designs that also are good potentials. But I don’t think we can say anything more other than that until we actually set on the path to take.

Okay. Thanks.

Our next question comes from Colleen Kusy of Baird. Your line is now open.

Great. Good afternoon. Thanks for taking my question. So just to clarify, on the two wet AMD trials that you're considering it sounds like one might include two formulations, one might include one. Is there anything else that you're willing to share in terms of how you're thinking about the two different trial designs?

I don't think at this point, it would be wise to do that. But I do appreciate the question and would love to be more fulsome in the response. But until we get some sort of actually nails down, I think it's not wise to say anything more.

Fair enough. And then on diabetic retinopathy, have you discussed with the FDA what the success would be? Or do you have any internal hurdle on what you'd like to show move into pivotal in diabetic retinopathy?

Diabetic retinopathy as far as clear, I can defer Rabia to fill you on where we are with diabetic retinopathy.

Yes. In our Type C meeting, Colleen, we had a discussion on the diabetic retinopathy design as well. Therefore, we have the design agreed by the agency, the design we proposed to them. It would be a TKI versus one injection anything of the -- per our understanding, sham injection is not a good comparator, but any injection would be accepted. That's why that design is clear. It's the injection of TKI at baseline versus an injection on the other comparator and the follow-up for 12 months. It's a very clear design and we are ready to move forward as soon as we have Anthony was pointing out, our partnering process is done.

Okay. Great. That's helpful. Thank you. And just one quick follow-up on the ongoing study in diabetic retinopathy, how much follow-up would we expect to see in the initial readout from that study?

The – I don’t think we disclosed how long the initial readout is going to be top line. That’s why I’m just going to keep it for now. But we do follow up the patients 12 months and even more for the safety reasons.

Our next question comes from Yi Chen of H.C. Your line is now open.

Hi, thank you, for taking my questions. Could you give us a rough estimate of the cost to complete the Phase III trial in wet AMD and the Phase III trial in DR?

Insurance varies widely. It depends on the design of the pivotal and that is -- that's really dependent upon whether we're going to go after a noninferiority design or superiority design. But we're looking at ranges of potentially $70 million for two pivotals in a DR or a superiority in wet AMD to $300 million for two pivotals in a noninferiority. That's kind of wet finger in the air at the moment, but that's -- those are the numbers that we've quoted in the past.

And regarding the Phase II trial in glaucoma, could you talk about your expectations for the top line readout in the fourth quarter?

Rabia, you want to handle that one?

Sure. The -- if we -- like just mentioned, that trial is currently enrolling well. And our expectation is share the top line data in the fourth quarter of this year, that data, of course, would provide the IOP reading as required by the FDA and also durability information. In addition, we're going to have the data on the corneal endothelial cell in that top line.

Okay, thanks. Last question is, when can we expect to see the results from the small study of OTX-DED?

Yes. We have recently initiated that trial and the -- we have not guided any time line to share the top line data yet. In future, we're going to share when the data should be expected.

[Operator Instructions] Our next question comes from the line of Caroline Palomeque of Berenberg Capital Markets. Your line is now open.

Hi, thanks for taking my question. So, on the expenses, you mentioned that there's revised pricing and the discounting strategy that you've implemented in the third quarter. Just wondering if you could elaborate more on that and particularly how that is affecting your gross to net? And then just a follow-up. On the business side, just wondering if also do you have any guidance on operational spend for 2023?

I’ll defer this to Steve; I just want to there has been no change in the gross to net from the fourth quarter of last year until the first quarter of this year. So, the growth in in-market sales is and the decrement in net sales is due entirely to a stockholder to the distributor stockholding. So, I’ll turn on to Steve for the changes in our discounting.

Yes. Thanks, Anthony. Last year, from January until June, customers were purchased index the acquisition cost was higher than the reimbursement. And following the close of a quarter, the customers were getting a rebate. They didn't like the cost economics of that. In July, we changed our pricing strategy so that the customer would get a discount at the time of purchase. So, we provide a discounted acquisition cost that they got below equaled reimbursement in July, starting in July of last year. It took about three months for our customers to get appointed with this. But since then, we've seen tremendous growth in both Q4 and Q1 and customers now get a discount at the time of purchase and then they also get rebates at the end of the quarter. That's determined by their aggregate purchases throughout the quarter.

That’s helpful, thanks.

Thank you for your participation. This concludes our Q&A and today's conference call. You may now disconnect.