Brad Smith - CFO Amar Sawhney - President, CEO and Chairman Jon Talamo - Chief Medical Officer Scott Corning - VP of Sales and Marketing.

Tyler Van Buren - Cowen & Co. Adnan Butt - RBC Capital Markets Andrew Berens - Morgan Stanley Hartaj Singh - BTIG.

Good morning, ladies and gentlemen. Thank you for standing by. And welcome to Ocular Therapeutix's 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 Brad Smith, Chief Financial Officer of Ocular Therapeutix. Please go ahead, sir..

Thanks Cyria, good morning everyone, and thank you for joining us for our fourth quarter 2015 earnings and business update conference call.

Earlier this morning, we issued a press release providing up update on the company's product development programs and details of the company’s financial results for the fourth quarter and for the year ended December 31, 2015. These can be accessed on the Investor portion of our website at investors.ocutx.com. Leading the call today will be Dr.

Amar Sawhney, our President, Chief Executive Officer and Chairman, who will provide a summary of the key recent clinical and corporate developments as well as provide an overview of what we expect to accomplish in 2016.

Following Amar's remarks, I will provide an overview of the financial highlights for the fourth quarter of 2015 and full year 2015 before opening the call for questions. Amar and I are also joined in the call today by Dr.

Jon Talamo, our recently hired Chief Medical Officer, Eric Ankerud, our Executive Vice President of Regulatory, Quality and Compliance, and Scott Corning, our Vice President of Sales and Marketing. 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 in these forward-looking statements as a result of various important factors including those discussed in the Risk Factors section of our most recent annual report on Form 10-K with the SEC, which was filed earlier this morning.

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 future point, we specifically disclaim any obligation to do so, even if our views change.

These forward-looking statements should not be relied upon as representing our views as of any date subsequent to today. I will now turn the call over to our President, CEO, and Chairman, Dr. Amar Sawhney..

Thank you, Brad. Good morning everyone and thank you for joining us on our call today. This past year has been a busy and exciting time for Ocular Therapeutix and we expect 2016 to be another busy year with a number of important clinical and business milestones.

With the July 24, 2016 PDUFA date for our lead product candidate DEXTENZA for post-surgical ocular pain and several ongoing and planned late-stage clinical trials across multiple indications, Ocular Therapeutix is emerging as a fully integrated ophthalmology company on the path to commercialization.

We continue to leverage our proprietary hydrogel based sustained-release platform as we seek to change how treatment is delivered to the eye for various ophthalmic conditions, with large and addressable market opportunities.

We believe that there is an enormous potential for our sustained-release therapists to replace standard of care eye drop regimens.

One of the major issues with current standard of eye drop regimens is patient compliance, particularly in conditions such as glaucoma and post-surgical pain and inflammation by avoiding the burden and sub-optimal safety profile of daily eye drops of sustained-release product candidates mainly to improve patient compliance offering greater assurance of efficacy and reduce disease progression.

We believe that our sustained-release product candidates can provide an improved safety profile compared with eye drop therapies due to the absence of preservatives and our ability to avoid the peaks and values of those associated with topical eye drop administration.

In December 2015, the FDA accepted our new drug application for filing for our lead product candidate DEXTENZA for post-surgical ocular pain indication.

The acceptance of the NDA for filing by the FDA indicates that the application permits a substantive review and at that time no issues are identified and would be expected to delay progress of the FDA’s review. As a result, the FDA has set a target PDUFA date of July 24, 2016 for the potential approval of DEXTENZA for post-surgical ocular pain.

The data included in the NDA are from Phase 2 clinical trial and two Phase 3 clinical trials conducted with DEXTENZA for the treatment of post-surgical ocular inflammation and pain. Our third Phase 3 clinical trial for DEXTENZA for post-surgical ocular inflammation and pain began in October 2015.

This prospective multi-center randomized, parallel-arm, double-masked, vehicle controlled trial will enroll 436 patients undergoing clear corneal cataract surgery at up to 23 sites throughout the United States. Patient enrolment is progressing ahead of schedule with 285 patients enrolled as of March 7, 2016.

As a reminder, some modifications to the trial design were made as compared to the first two Phase 3 trials. These included a 1:1 randomization versus 2:1 randomization, exclusion of patients on high-dose systemic end phase and providing more detailed physician training regarding the use of rescue medications.

Assuming favorable results from this third trial later this year, and subject to potential approval of our NDA for post-surgical ocular pain in July, we plan to submit an NDA supplement for DEXTENZA. Execution of this study is consistent with our strategy to broaden DEXTENZA label with a potential post-surgical inflammation indication.

During the fourth quarter, we also reported topline results from our first Phase 3 trial with DEXTENZA for the treatment of allergic conjunctivitis. DEXTENZA successfully met a primary endpoint for ocular itching associated with allergic conjunctivitis at all time-points evaluated.

There was a statistically significant difference of the p-value of less than 0.0001 in the main scores between DEXTENZA treatment group and the placebo group for ocular itching at all three time points measured on day 7 post insertion of the intracanalicular depot.

The difference in scores for ocular itching between the DEXTENZA group and the placebo group was greater than 0.5 units at all time-points on day 7 post insertion and was greater than one unit at a majority of the time points on day 7 post insertion.

While our first Phase 3 trial has conjunctival redness as a primary end point, DEXTENZA designated as a secondary endpoint in the second Phase 3 allergic conjunctivitis trial. As many of you are aware, most commercially available prescription medication for the treatment of allergic conjunctivitis have an indication for ocular itching only.

Ocular itching is the most important symptom and the primary reason most patients suffering from allergic conjunctivitis visit their doctor. Approved products, including the current market leading once-a-day eye drops such as Pataday, Lastacaft, and PAZEO are also using only ocular itching indications.

Patients who have strong seasonal allergies would benefit from a sustained-release therapy, which could provide long-lasting relief throughout the allergy season with a one-time administration. As noted above, DEXTENZA had all the requirements for a successful clinical trial for itching in this Phase 3 trial.

In accordance with prior FDA guidance of needing two Phase 3 clinical trials for NDA approval, in November 2015, we commenced enrollment in a second Phase 3 clinical trial to evaluate the safety and efficacy of DEXTENZA versus a placebo vehicle intracanalicular depot using ophthalmic research associates modified Conjunctival Allergen Challenge, Ora-CAC model as in the first study for the treatment of allergic conjunctivitis.

DEXTENZA or the placebo intracanalicular depot will be administered 48 to 72 hours after final confirmatory exposure to the allergen. The primary endpoint that we evaluated is ocular itching at day 7 following insertion. As I mentioned, conjunctival redness will be evaluated as a secondary end point.

Patient enrollment is progressing nicely with approximately 50% of the patient enrolled in the study as of March 8, 2016. Assuming favorable results and approval of the NDA for the pain indication, we expect to file an NDA supplement for ocular itching associated with allergic conjunctivitis indication in the fourth quarter of 2016.

If approved, DEXTENZA would potentially set a new standard in terms of duration of effect offering by far the longest acting ocular allergy medication with a one-time administration therapy. As all of you can see, we have made substantial progress in the development of DEXTENZA.

If the FDA grants marketing approval for DEXTENZA for the treatment of post-surgical ocular pain on the PDUFA action date, we expect to launch this product in the first half of 2017. DEXTENZA may be approved for two additional indications in 2017, ocular itching associated with allergic conjunctivitis and ocular inflammation.

We intend to launch DEXTENZA for post-surgical ocular pain in the US through direct sales leadership and through contract sales organization or CSO, sales representatives.

If approved by the FDA, DEXTENZA would be the first and only preservative free steroid available to ophthalmologists, and would also be the first and only FDA approved drug available to ophthalmologists to provide the complete course of therapy with a single placement.

As DEXTENZA’s label broadens, we would like to start to transition CSO representatives to direct sales representatives and expand our sales team as the business scales. We may also elect to enter into a co-promotion arrangement with a corporate partner to accelerate market penetration.

Further, we will explore and potentially enter into international partnerships and/or licensing deals for distribution of DEXTENZA in markets outside the US, although our current focus is on the US. With respect to reimbursement, we expect to apply for a transitional pass-through code for DEXTENZA for post-surgical ocular pain.

Pass-through payments provide temporary transitional reimbursement for innovative new products for a period of up to three years.

We expect to apply to CMS for a standard J code for DEXTENZA for allergic conjunctivitis assuming favorable clinical trial results and the approval of the initial NDA for pain and an NDA supplement for allergic conjunctivitis.

Turning to OTX-TP, our sustained-release travoprost drug product candidate for the treatment of glaucoma and ocular hypertension, we recently reported topline efficacy results from a Phase 2b clinical trial. As a reminder, this study was not powered for statistical significance.

Our objectives for the study were to assess the ability of OTX-TP to deliver a clinically meaningful level of intraocular pressure or IOP lowering, to assess OTX-TP performance relative to Timolol, to assess the duration of IOP lowering effects and to determine if patients can visualize the presence of our drug depot and get a replacement as needed.

We are pleased with the results shown average IOP lowering effect of approximately 5mm at the 8 a.m. time point at day 60 with OTX-TP, which is clinically meaningful. We also saw comparable level of IOP lowering effect at the 8 a.m. time point at day 90 with as little as a single administration.

In our pilot Phase 2 clinical trial, we had observed even higher IOP lowering of about 6.7mm at 8 a.m. on day 60 in a study that did not include placebo drops, which in the Phase 2b trial may have blunted the effect of OTX-TP by watching out drug eluted by the intracanalicular depot out of the tear front and off the surface of the eye.

In the Phase 2b trial, the Timolol arm performed better than expected and it may be that the performance of Timolol is improved by the placebo plug retaining the drug on the surface of the eye for a longer period of time as seen in a number of studies of non-drug eluting depots in several published articles.

We have a drug depot that has the potential to significantly improve compliance, which clinicians believe and the literature supports, is a single biggest issue with current glaucoma therapies. Another objective of the Phase 2b trial was to assist in the design of our Phase 3 clinical trials.

We had a meeting with the FDA in January of 2016 and following this meeting, we have announced that our Phase 3 development program for OTX-TP in glaucoma and hypertension.

The planned trial design for the two Phase 3 clinical trials includes an OTX-TP treatment arm and a placebo controlled comparator arm that would use a non-drug eluting intracanalicular depot.

We do not expect our Timolol comparator, our validation arm will be required in the study design and do not expect that eye drops of placebo or active will be administered in either arm.

We expect that the FDA will require the OTX-TP to show a statistically superior reduction of intraocular pressure compared to the placebo as a primary efficacy end point while also inducing a clinically meaningful IOP reduction.

This is great news as we believe that a direct comparison of OTX-TP with a placebo comparator reflects the simplest and most real world appropriate clinical study design for this product.

We expect to initiate the first of the two planned Phase 3 clinical trials in the third quarter of 2016 after holding an end of Phase 2 meeting with the FDA in the second quarter of 2016. In December, we announced the encouraging topline results from an exploratory Phase 2 trial for DEXTENZA in patients with inflammatory dry eye disease.

This trial was intended to explore which measures would be appropriate to include in the design of a future clinical trial to evaluate the efficacy of DEXTENZA or other molecules in a sustained-release product as a potential therapy for dry eye disease.

Designed as serial phase study to optimize the enrolment of patients based on science, patients in this trial first received a placebo vehicle depot for 45 days to establish a baseline for the investigational drug treatment.

Qualified patients will continue to exhibit signs of dry eye at the end of the initial 45 day period were rolled in the treatment phase of 30 days randomized to receive either DEXTENZA or placebo vehicle in a one-to-one ratio.

While the study was not designed to show statistical significance, total corneal staining at day 30 following randomization decreased by a statistically significant degree from baseline in the DEXTENZA group compared to the placebo group.

Inferior staining also showed clinical significance differences in the change from baseline in the DEXTENZA group compared to the placebo. Corneal staining is a primary endpoint that has been used in recent Phase 3 dry eye clinical trials conducted by other ophthalmology companies for dry eye disease.

We plan to meet with the FDA to discuss these results and potential clinical study design for future clinical trials in dry eye.

We may move forward with a strategy of developing an induction therapy for the treatment of patients with inflammatory dry eye with DEXTENZA followed by an Intracanalicular Depot releasing an immune suppressant such as cyclosporine for chronic dry eye therapy.

We also continue to make strong progress with our sustained release protein-based anti-VEGF depots for the treatment of back of the eye diseases including wet AMD or age-related macular degeneration. We are pursuant in addition to a small molecule TKI or tyrosine-kinase inhibitor initiative.

We continue to pursue potential partnerships with strategic partners and are encouraged by the progress of these discussions. Lastly, we also strengthened our management team with the appointment of Dr. Jon Talamo as of Chief Medical Officer. Dr.

Talamo joins Ocular with more than 30 years of industry experience as an ophthalmologist, innovator, and industry consultant. He is an exciting addition to our team and his wealth of expertise will be an important asset as we continue to advance our late phase pipeline through the clinical regulatory and potential commercialization process.

With that, I will now turn the call over to Brad Smith, our CFO who will review our fourth-quarter 2015 financial results..

Thanks Amar. Before turning to our financial results, I would like to announce that we will be hosting our inaugural Analyst Day event in New York City on April 6. In addition to members of the senior management team at Ocular, we will also be joined by several leading cataract, glaucoma and retinal specialists.

If you're interested in attending this event, please contact Steve Klass at Burns McClellan, his contact details are included in our fourth quarter 2015 earnings press release. We hope to see all of you there.

With regard to our cash and investment position, as of December 31, 2015, we had $105.1 million in cash, cash equivalents and marketable securities. Cash used in operating activities was $8.6 million for the fourth quarter of 2015 and $33.7 million for the year ended December 31, 2015.

We expect cash used in operations to be between $45 million and $48 million in 2016 and we also expect capital expenditures to be in a range of $6 million to $7 million for 2016. Furthermore, we expect existing cash and investments to fund the Company's operating activities, capital expenditures and debt service through the third quarter of 2017.

This guidance is of course subject to a number of assumptions about our clinical development programs, commercialization of DEXTENZA and other factors included in our recently filed 10-K.

We also had $15.6 million in outstanding debt as of December 31, 2015 having recently refinanced the debt and we are able to defer any principal payments associated with the debt until January 2017.

For the fourth quarter ended December 31, 2015, we reported a net loss of $10.6 million or $0.43 per share this compares to a net loss of $8 million or $0.37 per share for the same quarter in 2014.

The net loss for the fourth quarter of 2015 includes $1.3 million in non-cash stock compensation charges compared to $1 million for the same compensation charges in the fourth quarter 2014.

Revenues for the fourth quarter of 2015 were $0.4 million including collaboration revenue from a feasibility agreement with one of the partners as well as revenue from the sales of ReSure Sealant.

As previously stated we don't expect product revenues from ReSure Sealant product to be material in 2016 as we are deferring the deployment of our sales force until we launch our initial sustained product drug delivery product.

Our total operating expenses during fourth quarter of 2015 were $10.7 million which compares to $8.1 million for fourth quarter of 2014.

We increased our investment in R&D in 2015 as we advanced DEXTENZA for the treatment of allergic conjunctivitis through first Phase 3 clinical trial, initiated the second trial for that program, advanced our third Phase 3 trial for inflammation and pain, advanced our OTX-TP product for the treatment of glaucoma and ocular hypertension through a Phase 2b clinical trial, advanced our exploratory Phase 2 clinical trial of DEXTENZA for the treatment of inflammatory dry eye disease.

And in addition made investments in our preclinical development programs including the treatment of wet AMD and other back of the eye diseases. R&D expenses totaled $6.9 million in the fourth quarter of 2015 compared to $5.1 million in the fourth quarter of 2014. As of the end of 2015, we had approximately 24.8 million shares issued in outstanding.

This concludes my comments on the fourth-quarter and full-year 2015 financial results and I'll now turn the call back over to the operator for Q&A..

[Operator Instructions] Our first question comes from Tyler Van Buren of Cowen & Co. Your line is now open..

Given the upcoming approval date for DEXTENZA post-surgical ocular pain, I was hoping you could talk a little bit about the market opportunity and associated commercialization strategy, you know more specifically in terms of what targets and doctors you will initially attack with the salesforce with the salesforce size will be required for the initial launch and the message that you’ll be approaching doctors with? Thanks so much..

Yeah, this is Scott Corning. The market size is over $0.75 billion in terms of single agent steroids. A lot of that is generic; much of it is also mixture of branded.

So the sizing that we would go after would be - we’re doing the analytics now and so we are looking at the sizing and alignment as being worked on presently doing the analytics, but we would enter the market with a staged approach and that would be whether we go with or without a partner and we would start with somewhere in the order of 10 working up to as I said a staged approach going to up to 50 or 60 but that would be over time as we assess the opportunity to train and gain momentum.

The primary target that we would be approaching the market would be cataract surgeons although the approval for this product would be for all ophthalmic surgeries but again primary market opportunity and target would be cataract surgeons..

So Tyler, this is Amar. There are 5.5 million surgeries, so the approval that would be therefore for DEXTENZA would be for all ocular surgeries while the trials are done in cataract surgeries.

The approval would be for all ocular surgeries and some of the market research that we are conducting has revealed that there is enthusiasm for using the product and procedures such as glaucoma surgeries, retinal surgery and PRK or vision correction kind of surgeries in additions where pain can be significant.

The price points right now of branded and generic steroids on average are somewhere in the $100 kind of range between the generic and branded average kind of price points so that's what leads to that $750 million to $800 billion kind of single agent steroid market.

Pricing through the pass-through mechanism is likely to be significantly higher than that given that the pass-through mechanism requires the price points to be set at a certain threshold to be able to qualify for pass-through.

So, technically if you were to just do that translation it results in a larger market opportunity but I think that’s something that we just need to watch carefully before we can claim that we would expand the market opportunity by many-fold..

Thank you. And our next question comes from the line of Adnan Butt of RBC Capital Markets. Your line is now open..

So let me ask on launch plans.

Amar, why wait 5, 6 months for the launch of DEXTENZA and then if I assume it gets approved and then does guidance for 2016 assume any SG&A build at this time?.

So I’ll tackle the first part of that question and then let Brad comment on the second part. With regards to timing, I think it is important that we have the code in place.

So we’re not waiting 5, 6 months if you think about end of July, so effectively August is when you get your approval and it takes even a fairly ready, we would apply for pass-through and it takes a few months for the pass-through code to actually come through. And thereafter it becomes effective only in the following quarter.

We would need to wait at a minimum until the beginning of next year assuming everything kind of goes like clockwork to have the code in hand. And then the code is effective for three years after that given rate. So we'll do it basically as soon as we can.

There is the opportunity to bill under a miscellaneous code before that but our stance is that it results in you know firstly significantly more paperwork for physicians and not that they would not be able to do that I think it's training to one thing and then very quickly training to another thing which may create a certain level of confusion.

So based on analyzing all of those aspects and the fact that we would need to be doing KOL engagement, MSL deployment et cetera, we feel that it's probably best to not create much more confusion and just sort of you know it's basically going to be a few months, couple of months if anything.

And just to come out strong with the code in place so that there is a mechanism to get paid now. I’ll let Brad comment on the G&A buildup..

So, yes we plan on and we are in the process of expanding Scott Corning's team as we speak. So in terms of his comment about the sales reps, we will likely make those offers contingent on the PDUFA date approval of the product.

And as Scott mentioned likely start with 10 reps probably through a contract sales organization so there will be cost associated with that at the back half of the year. Internal sales management, medical affairs which will report to Jon Talamo. And then we’ve already started to bring some reimbursement expertise to help us there as well.

On the G&A front, we look at modest increases but it's primarily going to be in the buildup of sales and marketing..

And then Adnan, this is Scott, more specifically as it relates to pass-through and the PDUFA, the pass-through operates on a quarterly schedule and with a PDUFA date of late July, September represents the first opportunity that we have to apply for pass-through status.

And the waiting period then is 3 to 4 months, so January would be the first date that we could even get pass-through status because it has specific times that you apply and when it's granted..

But just one more question on this, the pass-through is drug specific or is it indication specific because Ocular could see the label expanded in 2017?.

Yeah. It's drug specific, but it's not site - it applies to the indication that is surgical. And so once we have an indication that is non-surgical, we expect to be able to gain a more favorable means of reimbursement by applying for a J code..

Okay. That's helpful.

If I can change tacks and ask on OTX-TP, are the two Phase 3 trials going to be identical in design or is that to be determined?.

That is still to be determined. The guidance from our statisticians is to have them be of similar size. So design obviously is not necessarily going to be identical, because in one of those studies, we expect to follow patients out to one year for safety, for FDA's guidance that you need 100 patients for safety out to 1 year for glaucoma trials.

So it is likely that one of those trials will be structured to deliver that safety population, while the other trial will be one that is only structured for delivering the primary endpoint, which is out to three months of efficacy determination.

Of course, as part of that safety population out to three months, which FDA's guidance is that, needs to be in the range of 300 to 500 patients, would be delivered by both studies, but one of the trials will go out for a longer duration.

We expect these trials to be staggered and not begun simultaneously, since they will involve a significant number of sites, we estimate about 50 sites, 40 to 50 sites in each of these trials. So it just takes time to kind of go ahead and get all of those up and running..

Okay.

And lastly on the back-of-the-eye program, are the focus very much now the small molecule compound program or are you placing equal emphasis on the biologics and what's the status there?.

Sure. The emphasis remains two-pronged. The difference is that with the small molecule, we can control the entire process. So we can run and get the progress ourselves and that seems to be going quite nicely and in the Analyst Day, we’ll be able to talk a little bit more details about where we are and what the data looks like et cetera.

The protein based anti-VEGF is obviously gated by the partner engagement, because we feel that these protein based anti-VEGF agents, the biosimilar drugs are not up to kind of a level of certainty yet that we can proceed down those pathways. So it behooves us to engage with the partner in that.

There is a good progress on that front and hopefully stay tuned in a few months for updates on that. So we're still optimistic on the protein based anti-VEGF, it's just that in the small molecule, we control our destiny fully..

Thank you. And our next question comes from Andrew Berens of Morgan Stanley. Your line is now open..

Hi, guys. Good morning. Thanks for taking the question and congrats on moving the products forward. Just wanted to get a little more clarity on the pass-through status.

How do CMS determine that a product is sufficiently innovative, is it actually a formal review process that you have to go through?.

Yeah. Andy, this is Scott.

New drugs and other medical technologies, they need to meet certain specific clinical value and cost metrics or requirements and so there is an application process that you go through, and these pre-specified parameters boil down to generally representing a cost that is not insignificant to the cost of the procedure that the drug is associated with.

And so it kind of boils down to our pricing question and should you meet that threshold and other requirements like being a new and innovative product that doesn't have or just getting approval, you generally qualify for pass-through..

Okay.

And is there - you mentioned some sort of clock, but is there like a formal period that CMS has to get an answer back to you or is it kind of not specific?.

Yeah. It is fairly specific as we understand it. September, as I said, so it goes quarterly, September is the first opportunity we have to apply after the PDUFA date. I mean September is the first date we have to apply the July PDUFA date and with that, we expect January approval. So there are sort of four month gates.

So then, March would be the next approval after that..

Okay.

And then if you get the pass-through status, you would obviously be pricing it significantly higher, then you would get three years, is that a guaranteed three years?.

Yeah. Pass-through remains in effect for at least two years and no more than three.

And so with the current timing, we would be able to maximize the pass-through period at exactly three years and if we were to be delayed by a quarter in our application and subsequent approval, we would then be at two years and three quarters and then another three months would be 2.5 and so on.

And so we're currently in position to maximize the pass-through period..

Okay.

And then after the pass-through period is over, it will become part of the DRG again and what do you foresee with the pricing then like in terms of allergic conjunctivitis, because obviously I think we had thought it would be detrimental to allergic conjunctivitis indication at that level?.

I mean, a lot is going to happen between now and then, we have a lot of work to do on it. We also have our dry eye program, which I think would have serious implications on how we're able to price if we're able to get any sort of induction label or anything associated with dry eye.

But we also, as I said, expect to gain more conventional means of reimbursement with the J code in the non-surgical setting and so, we'll see how uptake is outside of surgery, but we also are exploring ways to stay outside the bundle in surgery. And so we need to work on this to see what we can do, but luckily we have three plus years to address it..

So Andy, the allergic conjunctivitis would not be subject to the bundling, because it would have its own separate J code. The question is, are there other office based administrations such as dry eye, which is often times a concomitantly presenting condition with most patients coming for cataract surgery, most elderly patients.

And that's why having some level of exploration of getting a dry eye based approval and subsequent reimbursement can be impactful even for this surgical population..

Okay.

And while the drug is actually in the pass-through status, the 6% ASP, is that paid to the physician or to the surgical center?.

The surgical center..

Okay.

And with the physician, there would be no additional payment to the physician and for the procedure?.

So we'll let Dr. Talamo comment on that since he ran his own surgical center..

Andy, it's Jon. I think in general, the call point and the place where most of the product inventory is going to land is going to be a surgical facility in the early going, but if a physician in his or her office setting chose to order the product, it would be similar to a buy and bill for other drugs.

So it could be a physician practice, it would be the ordering entity, ordering facility..

Thank you. Our next question comes from Hartaj Singh of BTIG. Your line is now open..

I just had a couple of questions. One is the overall question and second, and I'm really looking forward to the Analyst Day in April.

So just as you are thinking about going from being a clinical company to a commercial stage company, what are you thinking in terms of just the operating expenditures, how do you think that will change over the next 12 to 24 months? And then the second question is, in terms of after PDUFA date, can you just outline very clearly what are the clinical and regulatory catalysts we are going to expect before the end of the year? Thank you..

So, let me speak to the regulatory catalyst and then let Brad comment upon the expenses. So the regulatory catalysts that are there before the end of the year include for DEXTENZA, obviously the PDUFA date and the approval for the pain indication.

Then comes the allergic conjunctivitis, second Phase 3 read out and then by the end of the year comes the Ocular Inflammation data from the third Phase 3 trial for DEXTENZA. So those are there for DEXTENZA.

Other regulatory milestones for OTX-TP would include the beginning of the first of the Phase 3 clinical trials and then another would be some update on the dry eye as to what path may lie forward based on our discussions with the agencies that we plan to have over the next several months, schedule a discussion on dry eye indications and what type of trials may be required to support it and is that really something which we want to pursue moving forward is that a target that we think we can achieve, et cetera.

So those are going to be some of the regulatory catalysts lying ahead of us.

And then Brad can speak to some of the other stuff?.

Yeah. Good morning, Hartaj. Thanks for joining us. So the guidance we’re giving for 2016 is compared to 2015, where we saw roughly 34 million in operating cash, use of cash in operations. We're looking at a range of 45 million to 48 million.

So clearly, a lot of that is driven by building up the sales and marketing infrastructure in connection with our pending approval of DEXTENZA, but also of course all the clinical trial development programs that we will have underway.

So, as we have indicated, we expect to start the Phase 3 glaucoma trial, the first of two in the back half of the year. So that's also reflected in those numbers.

But it does reflect, as Scott indicated, in 2016, initially starting with 10 sales reps or eight contract sales organization, building medical fares, reimbursement capabilities, so that's all baked into the plan..

Thank you. And at this time, I'm showing there are no further participants in the queue. I would like to turn the call over to management for any closing remarks..

I want to thank everyone for taking the time to join us on the call today. We feel very confident in our hydrogel-based sustained release platform. We have an NDA filed with the FDA for postsurgical Ocular pain and are waiting potential approval on July 24 of this year.

We have recently completed a successful Phase 3 study for allergic conjunctivitis and have observed encouraging results for our candidates for glaucoma, which we expect will soon enable us to initiate our Phase 3 program. We hope to see you all on April 6 at our Analyst Day in New York City as Brad mentioned.

We look forward to updating you on our important milestones throughout 2016. On behalf of the entire Ocular team, thank you for all your support. You may now disconnect..

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