Brad Smith - CFO Amar Sawhney - President, CEO and Chairman Andy Hurley - Chief Commercial Officer Jonathan Talamo - Chief Medical Officer.

Ken Cacciatore - Cowen & Co. Donald Ellis - JMP Securities Elemer Piros - Cantor Fitzgerald Dane Leone - BTIG.

Good morning, ladies and gentlemen. Thank you for standing by. And welcome to the Ocular Therapeutix 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, Andrea. Good morning everyone, and thanks for joining us for our fourth quarter and year-end 2016 earnings and business update conference call.

Earlier this morning, 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 fourth quarter and the full year ended December 31, 2016. The press release can be accessed on the Investor portion of our website at investors.ocutx.com.

Joining me on the call today will be Dr. Amar Sawhney our President Chief Executive Officer and Chairman; Dr. Jon Talamo, our Chief Medical Officer; Andy Hurley, our Chief Commercial Officer; and Eric Ankerud, our Senior Vice President of regulatory quality and compliance.

Amar, Jon and Andy will provide a summary of our most recent clinical and corporate developments with a particular focus on the status of our commercial preparation activities for DEXTENZA.

I will then provide an overview of the financial highlights for the fourth quarter and full year 2016 and we'll summarize the debt financing that we closed earlier this week and our recent equity financing that we completed in January before we open up the call for questions.

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 act 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 is on file with the SEC.

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'll now turn the call over to Dr. Amar Sawhney..

Thank you, Brad and good morning everyone thank you for joining us. During today's call we will discuss the significant progress we have made recently across our development programs as we seek to alter the landscape of ophthalmology with innovative drugs that are built on our proprietary hydrogel based drug delivery platform.

2017 is an important year for Ocular as we nearing a potential FDA approval for our lead drug candidate DEXTENZA and approaching its potential commercial launch enabling our transition into a fully integrated commercial stage revenue generating company.

Before I review the status of our programs, I just wanted to take a step back and highlight why Ocular's approach is distinguished from others and ultimately why acquisitions are success.

Importantly programs in our pipeline are not focused on new molecules or mechanisms of actions, we're focused on utilizing approved drugs that already work well aiming to improve the way they are delivered to the eye thereby enhancing the outcomes for both patients and physicians.

Our platform enables us to diversify our programs across different drug classes such as steroids and prostaglandin analogs diversify in terms of drug delivery location such as back-of-the-eye or front-of-the-eye. Diversify in terms of drug type from small molecules to large molecules.

And diversify across delivery modalities from insertions to injections as well as duration of therapy from chronic to one time administrations. Combined we believe that these aspects of our technology platform decreased risk and make our technology highly applicable across broad spectrum of ophthalmology.

Simply put there are fundamental limitations associated with the current standard of care follow many ophthalmic conditions ranging from lack of compliance to an increase chance of certain side effects.

Using our proprietary hydrogel technology platform we aim to eliminate these potential limitations and improve both the patient experience and clinical outcomes. Together, our programs target combined market opportunities of more than $11 billion in the United States alone.

As I alluded to we have a July 19th PDUFA date fast approaching for our lead product candidate DEXTENZA for the treatment of post-surgical ocular pain. Post-surgical ocular pain is an important and underserved market opportunity.

According to market scope, approximately 3.9 million cataract cases and over 5.6 million total ocular surgeries were expected to be performed in the United States in 2016. Physicians currently prescribed topical corticosteroids as part of the standard post-operative care regimen.

These eye drops are given in tapering regimens with several different doses per week and patient take these drops in addition to other eye drops as part of their post-operative standard of care such as NSAID drops. The quality and complexity of post-operative eye drop regimen creates compliance issues.

DEXTENZA has the potential to remove approximately 70 eye drop administration from the post-operative standard of care thereby potentially improving patient compliance and clinical outcomes. If approved we believe DEXTENZA will serves as an attractive alternative for steroid eye drops in this large market.

Feedback from surveys from both physicians and patients has been extremely positive. Nearly 80% of physicians surveyed had indicated that they would expect the product like DEXTENZA to become their standard of care and 92% of patients who participated in clinical trials of DEXTENZA reported the highest level of overall product satisfaction.

As such, commercial preparations activities at Ocular are well underway. I will let Andy Hurley our Chief Commercial Officer and Jon Talamo our Chief Medical Officer provide more granularity around the status and timeline of commercial launch plans and reimbursement ground work for DEXTENZA in a few minutes.

With the recent successful readout from our third Phase 3 clinical trial with DEXTENZA for the treatment of post-surgical ocular inflammation and pain, DEXTENZA has now been extensively studied in over 550 clinical trial participants.

In our most recent Phase 3 clinical trial DEXTENZA successfully met its two primary efficacy endpoints for inflammation and pain, achieving statistically significant differences between the treatment group and the placebo group for the absence of inflammatory cells on day 14 and absence of pain on day 8 respectively.

The degree of pain control we saw in the study was quite significant, with nearly 80% of patients’ pain free at day eight. Secondary efficacy endpoints included differences in the absence of anterior chamber flare, absence of anterior chamber cells and ocular pain.

All of these secondary endpoints were met with statistical significance at all-time points, with the exception of the endpoint for absence of AC cells at day two.

In fact approximately 46% of patients in the DEXTENZA treatment group has shown to have an absence of AC flare as early as four days after insertion, which we believe further provide support for the early onset anti-inflammatory effect of DEXTENZA. In addition we have now completed the full safety assessment for the Phase 3 trial.

DEXTENZA continues to exhibit a favorable safety profile and has been very well tolerated in all clinical trials, regardless of indication. We have about 21 presentations coming up at the upcoming RVO [ph] and ASCRS meetings in May and about 10 of which will be focused on DEXTENZA.

So there will be a lot of good data getting out there and the excitement in the clinical community is building.

We are pleased to now have clear visibility from the FDA in regards to our PDUFA date for the potential approval of DEXTENZA for the treatment of ocular pain occurring after ophthalmic surgery and we look forward to working collaboratively with the FDA as they complete their review of our NDA submission.

Given the most recent Phase 3 trial results and if DEXTENZA has approved for post-surgical ocular pain on or before July 19th PDUFA date. We intent to submit an NDA supplement for DEXTENZA to broaden its level to include an indication for post-surgical inflammation.

We believe, DEXTENZA has a potential to become the first approved non-invasive extended release drug product that can provide a full post-operative courses therapy following cataract surgery with a single placement.

When we look at the full DEXTENZA Phase 3 data set, for pain inflammation and as we think about the positive feedback we have received from both patients and ophthalmologist, we are optimistic there will be a positive market reception for DEXTENZA.

As many of you know, as part of our label expansion strategy, DEXTENZA is also in Phase 3 clinical development for the treatment of allergic conjunctivitis.

We’re currently planning to initiate a non-significant risk study in the middle of 2017 to confirm the effect of efficacy of the placebo insert used in prior studies compared with a rapidly absorbing placebo insert.

Subject to favorable results from this study, we plan to conduct an additional Phase 3 clinical trial to further evaluate DEXTENZA for the treatment of allergy conjunctivitis. Our top priority right now is gaining the approval of DEXTENZA for post-surgical pain.

We then plan to execute on our label expansion strategy we should include the potential submission of an sNDA for the allergic conjunctivitis indication pending favorable results from future trials in this indication. Now turning to OTX-TP.

Our extended release travoprost drug candidate, enrollment continues at a strong pace for our first Phase 3 clinical trial with OTX-TP for the treatment of glaucoma and ocular hypertension. This U.S.

based perspective multi-center randomized parallel arm placebo control study is expected to enroll approximately 550 patients with glaucoma or ocular hypertension across 50 clinical sites.

The primary efficacy endpoint is statistically superior reduction of intraocular pressure from baseline, with OTX-TP compared to placebo at three different diurnal time points of 8 am, 10 am, and 4 pm at intervals of 2, 6 and 12 weeks following insertion. Just to reiterate.

The Phase 3 study designed does not include a timolol comparator or validation arm, and does not have active or placebo eye drops administered in either arm. The comparator arm utilizes a nondrug eluting hydrogel-based intracanalicular insert. In accordance with FDA guidance requiring two Phase 3 clinical trials for potential NDA approval.

We expect to commence our second Phase 3 clinical trial with OTX-TP for the treatment of glaucoma and ocular hypertension in the second half of 2017. Glaucoma is a significant market opportunity and a key area of focus for us.

According to IMS Health data, there were 36 million prescriptions and sales of approximately $2.9 billion of drugs administered by eye drop for treatment of glaucoma in the United States in 2016.

Compliance is seen as the biggest issue with existing therapies for glaucoma, and more than 50% of patients on topical prostaglandin analogs are not compliant with their therapy within the first six months of treatment.

OTX-TP aims to address this issue directly, by allowing patients who are either unable to administer their eye drops, forget to use their eye drops or incorrect the administer eye drop regimens to have a convenient way to manage their disease. A three month sustained therapy OTX-TP could really be a gain changed in this indication.

As many of you know there is also a need for higher level of intraocular pressure reduction for some patients who have moderate to severe glaucoma. There for example, 7 to 9 millimeters of IOP decreases desirable. These patients are often placed on multiple drugs or combination drugs and or undergo invasive surgery to achieve this level of effect.

To this end, we are developing in parallel to OTX-TP an intracameral drug depot for the treatment of glaucoma.

OTX-TIC are intracameral drug product candidate is a resorbable travoprost containing hydrogel insert delivered by a fine needle injection into the anterior chamber of the eye where an initial target duration of drug release of three to four months.

Preclinical studies to-date has demonstrated a good safety profiles, clinically meaningful intracameral pressure loading and favorable pharmacokinetics in the aqueous humor. We expect to initiate a pilot human clinical trial outside the United States in the second half of 2017 to assess safety and obtain initial efficacy data.

The studies expected to be a perspective single center randomized double masked sham-controlled clinical study to evaluate the safety efficacy and tolerability of OTX-TIC compared to travoprost eye drops and up to 20 patients with open angle glaucoma or ocular hypertension.

If the results from the study are promising, we plan to advance to a Phase 2 clinical development program in the United States. We also continue to advance, our sustainably delivery depots more intravitreal injections, aiming to address many serious back of the eye conditions such as wet AMD, RVO and DME.

As many of you are aware we are collaborating with Regeneron in the development of a sustained release formulation after VEGF trap, aflibercept as well as other protein based biologics targeting VEGF for the treatment of serious retinal diseases such as wet AMD and DME.

Regeneron’s aflibercept is currently approved by the FDA for certain indications including wet AMD under the brand name EYELEA and is one of the largest selling is not the largest selling drug in ophthalmology. This program continues to advance into late stage preclinical testing.

We believe that a four to six months sustained release formulation has a potential to advance the current standard of care in wet AMD and other retinal diseases by significantly diseasing the current frequency of injections for these diseases.

Over the past several months, we have also made substantial progress on the development of our tyrosine-kinase inhibitors or TKI intravitreal depots.

We continue to produce promising data on pharmacokinetics, pharmacodynamics and tolerability and our plan is to continue into our developer of a sustained release TKI depot which we believe will also enter human clinical trials in the second half of this year.

With that I’ll now turn the call over to Andy who will walk through our commercialization preparation activities and associated timelines for DEXTENZA..

Thanks, Amar. For those of you who don’t know me, I recently joint Ocular as Chief Commercial Officer in October of last year. According to U.S.

census data by the year 2020 it is estimated that the number of Americans diagnose with cataracts is expected to rise to approximately $30 million, representing a substantial increase over current prevalence estimates. Given these numbers, it is not surprising that cataract removable is the most commonly performed surgical procedure in the U.S.

Medicare eligible population.

We’re currently working to address the unmet needs in the ophthalmology marketplace by building a unique commercial model that is comprised of specialty sales force as well as a dedicated field team that is solely focused on supporting the office staff to help them properly navigate the reimbursement process for DEXTENZA.

As we have previously stated if the FDA brands marketing approval for DEXTENZA for the treatment of ocular pain occurring after ophthalmic surgery, we expect to apply for a pass-through reimbursement code or C-code to be used in the hospital and ambulatory surgery center setting.

Pass-through payments provide temporary transitional reimbursement for innovative new products for a period of three years. If DEXTENZA is approved on or before its PDUFA date, we would plan to apply for the C-code by September 1st, as the application process is quarterly. The C-code if approved would then become effective on January 1, 2018.

In terms of additional commercial capabilities, we continue to build out our internal commercial theme, making sure that from a sales, reimbursement, payer and hub perspective that we have all the necessary personnel, strategies and tactics in place to execute a successful launch.

We are currently hiring our sales leadership team that will be Ocular employees and plan to utilize a contract sales organization of approximately 70 sales representatives in order to launch DEXTENZA in the U.S.

Utilizing a CSO will allow us to increase expediency to market and our CSO partner has done a very good job in identifying our desired profile for sales and reimbursement leadership that will enable a strong launch uptake for DEXTENZA.

Of special note, our 70% sales team will be 100% dedicated to DEXTENZA and they will be complemented by an extensive team of reimbursement specialist, who will be focused on ensuring that all claims that are submitted for DEXTENZA are both processed and paid.

With the product that goes through a C-code reimbursement process, it's important to get surgeons and their office staff comfortable with the reimbursement coding and process to get medical claims paid for the drugs they utilized. They can be completely comfortable with the product clinically.

But if they are not comfortable with the reimbursement cascade that needs to happen in order for these claims to be processed and paid, this is where frustration and installing of reimbursement can potentially occur.

Therefore as part of our early experience program that we will be conducting between the potential approval of DEXTENZA and the C-code being in place. We’ll be very proactive in talking with surgeons, posting surgery days for example getting them completely comfortable with the product clinically.

We will also be extremely proactive and talking with the surgeons' office staff to let them understand how they can utilize our internal reimbursement hub to process their claims.

The hub is meant to provide offices with the resource to help manage the reimbursement process through the payer channel and essentially serve as a concierge service for reimbursement.

In parallel, we continue to conduct payer research to understand payer dynamics to determine how best to facilitate access to DEXTENZA across each specific Managed Care plan.

During the pass-through transitional period of three years, we would have the ability to have DEXTENZA carved out from the facility feed bundle and fully reimburse through Medicare Part B. During this time, we would plan to file for an extending J-code, which would extend the lifecycle of DEXTENZA beyond the three year period.

Overall the launch planning team has been making great progress in building out our commercial strategy and go to market plan and we are looking forward to a successful launch of DEXTENZA subject to FDA approval.

With that I will now turn the call over to Jon, who will review our commercial preparation activities from a medical affairs point of view..

Thank you, Andy. As Amar mentioned, our goal with DEXTENZA is to improve patient experiences and transfer control of pharmaco therapy back to the physician for the entire course of post-surgical therapy. Steroids such as dexamethasone are already common to use in ophthalmology.

Our aim with DEXTENZA is to release dexamethasone in a much more intelligent fashion. From a medical affairs perspective our goal is to ensure surgeons are as educated as possible with respect to DEXTENZA, as well as our hydrogel platform prior to our potential launch and C-code being in place.

The familiarity with the product candidate is already good. In fact in a recent market survey conducted by a third part and commission by us approximately 80% of ophthalmologists stated that DEXTENZA could become the new standard of care for post-surgical use.

We've hired experienced medical science liaisons who will interact with key opinion leaders whom we believe could educate the population of ophthalmic surgeons that perform cataract surgery, which comprised 4 million out of the 6 million ocular surgeries performed annually in the U.S.

and is the most commonly performed elective surgery in the country. To that end, we aim to educate roughly 6,500 U.S. cataract surgeons to make sure they are well aware of the advantages of DEXTENZA as a therapeutic platform in DEXTENZA's strong clinical dataset as we approach a potential commercial launch.

It is clear that both patients and physicians seek a better alternative to the current standard of care steroid eye drop therapies and once approved we believe DEXTENZA may service this alternative. I'll now turn the call back over to Brad Smith who will review our fourth quarter 2016 financial results and recent equity and debt financing..

Thanks, Jon. Start with our cash and investment position, as of December 31, 2016 we had $68.1 million in cash, cash equivalents and marketable securities. In addition we're pleased to have completed a registered underwritten public offering of shares of our common stock with gross proceeds of $25 million in January of this year.

We also have $40 million ATM facility in place, under which shares of our common stock may be sold from time-to-time. In addition, earlier this week we amended the terms of our existing credit facility to increase the total commitment to $38 million from the previous commitment of $15.6 million.

The $38 million facility includes $18 million of closing which occurred on Wednesday, which was used primarily to pay off outstanding balances as of the closing date and includes options on two additional tranches of $10 million each. The availability of which is based on the achievement of certain regulatory and commercial milestones.

In connection with this financing, the interest only payment periods was extended to February 1, 2018 with provisions to further extend the interest only period based on the achievement of again certain regulatory and commercial milestones.

Cash used in operating activities was $7.5 million for the fourth quarter of 2016 and $33.9 million for the year ended December 31, 2016.

We expect cash used in operations to increase significantly in 2017 as we pursue pre-commercialization activities relating to DEXTENZA as Andy described and prepare for the launch of this product subject to FDA approval. And as we advance our clinical development stage programs including our Phase 3 glaucoma trials.

It is important to note that while we are investing in pre-commercialization resources and activities in advance of the potential approval of the DEXTENZA NDA. The hiring of our field sales force and reimbursement teams will be contingent on FDA approval of DEXTENZA and raising additional capital.

We expect existing cash, cash equivalents and marketable securities will be sufficient to fund the company's operating expenses, debt service obligations and capital expenditures into the second quarter of 2018.

This is for subject to a number of assumptions of other clinical development programs, commercialization of DEXTENZA and other aspects of our business. Again we will need to raise additional capital to fully fund the commercial launch of DEXTENZA.

For the fourth quarter ended 31, 2016 we reported a net loss of $12.8 million or a loss of $0.52 per share. This compares to a net loss of $10.6 million or a loss of $0.43 per share for the same quarter in 2015.

The net loss for the fourth quarter of 2016 included $1.7 million in non-cash charges for stock-based compensation compared to $1.3 million for the same quarter in 2015. For the full year ended December 31, 2016 we reported a net loss of $44.7 million or a loss of $1.80 per share.

This compares to a net loss of $39.7 million or a loss of $1.71 per share for the same period in 2015. The net loss for 2016 included $6 million in non-cash charges for stock-based compensation compared to $4.6 million in similar charges for the same period in 2015.

Revenues for the fourth quarter of 2016 totaled approximately $500,000 from the sales of ReSure Sealant. And as we have previously stated, we don't expect product revenues from this product to be material in 2017 and are really focused on the potential launch of DEXTENZA.

Total operating expenses during the fourth quarter of 2016 were $13 million compared to $10.7 million for the same quarter in 2015. Research and development expenses totaled $7.3 million in the fourth quarter compared to $6.9 million in the same quarter last year.

As we continue to advance the preclinical and preclinical development of our hydrogel platform technology and the portfolio of our various drug product candidates.

We had approximately $25 million shares issued and outstanding as at the end of 2016 and with the equity financing activities to-date in the first quarter of this year, we currently have $28.8 million shares issued and outstanding. This concludes my comments on our financing activities on our fourth quarter and year-end financial results.

And I will now turn the call back over to the operator to open it up for Q&A..

[Operator Instructions] And our first question comes from the line of Ken Cacciatore with Cowen. And your line is now open. .

Good morning, guys thanks for the update. I had a couple of questions just on the DEXTENZA upcoming launch, I was wondering Andy could you give us some perspective of similar launches -- similar recent launches some of the maybe mistakes made, some of the positives learned.

I know this is definitely a different type of launch sounds like you have to have real hand in gloves with your sales force and reimbursement. So maybe a little bit of perspective around that. Then I had a follow-up question..

Ken it’s a great question. I think one of the bigger things that we’ve learned is with a buy and build products in the ophthalmology marketplace you can’t underestimate the need for the reimbursement pull through.

I think you can have as I mentioned on the call you can have a clinical profile that everybody wants, but unless they understand the process by which the claims are processed and paid. And have feet on the street as well as an outside hub working kind of hand in glove to be able to go and work with office staff to understand that process.

That’s where things fall down. So we’ve been able to really understand where folks have been able to do that well. And then where things have kind of come up short. Especially in a C-code environment because C-code is a virtually new realm that’s happening within ophthalmology.

So for us going in with a very consorted effort with critical mass on the reimbursement side we feel we’re going to be able to go in and approach it from the two sides of the street, which is the clinical profile and making sure that they feel perfectly comfortable with the value that DEXTENZA will bring right to the patients.

And as well once that value is understood working with the office staff to understand all of the process, work with them and then have all of the resources at their disposal, in much like a concierge fashion to make sure that the process is fluid and the claims are being paid. So that’s really the big one.

The other piece that I think really comes down to it is we want to make sure that we’re really focusing on the targeting in the right way.

And that is really identifying the ambulatory surgery centers that have the highest volume who are the folks that are really going to be some of the thought leaders in the marketplace that you really want to get understanding the clinical value of the product so that they can be able to go and speak to that in the marketplace.

And we’ve identified a KOL engagement strategy both from the commercial as well as the medical side to make sure that that’s happening as well..

Okay. And then on DSO… go ahead sorry..

Yeah Ken this is Amar I just want to make an additional point that one of the lessons that we also learned is without taking specific names. Drugs that are introduced which were not routinely being used in the past.

So you’re sort of adding something new to the care regimen will have a little bit more resistance because we’re changing the way people think about managing their patient. In our case steroid based therapies are routine.

So we expect that reception to be better compared to a drug that was not prior being used and now one is trying to get it used prophylactically you may face more resistance on that. So not go into specifics beyond that, but I think we feel that DEXTENZA should enjoy strong acceptance..

Okay, that makes sense. And then on the CSO front just trying to understand they are responsible for the hiring just how much influence you will have? I mean this is clearly a very specific area and trying to better understand the decision of going that route versus kind of full ownership internally of hiring the sales force.

And then I’ll just have one other question after that..

Yeah Ken so this is my fourth time leveraging a contract sales organization and I have had success through the first three as well. You get an opportunity to partner with someone that has expanded resources than a small company is able to have in the early goings of the launch.

So what we do is we identify the exact profile that we’re looking for in both our leaders as well as our sales and reimbursement folks and we work and consult with them to make sure that we’re identifying all of those folks through the resume review processes.

We are involves in the interview process, although from a co-employment perspective the contract sales organization owns that and they ultimately makes the hires to those individuals. But we are involved in that process to make sure that we’re seeing the core competencies that we’re looking for and the skill sets in the individuals we’re hiring.

I said on the call, I have been thrilled with the folks that we have already hired from the both sales leadership, as well as the reimbursement leadership the folks that are going to be managing the individuals that are on the sales side and reimbursement side.

I have been thrilled with the caliber that we have gotten already and that’s par for the course of what I have seen in my past. So, it allows for you to get just really additional resources and the expediency to market is a lot quicker by using a CSO environment..

Okay, that makes a lot of sense. And then last question Amar, this is probably a little tough, but on the ongoing glaucoma study is there any aspect of it that you are not blinded to discontinuation, safety, retention, is there sort of kind any nuance or perspective you can give.

I know you might have indicated I think in the prepared remarks, enrollment is going a little bit faster. So I don’t know if there is any kind of lose perspective you can give around that that study? Thanks..

So, no we are completely masked in the study, it is mask study in terms of everybody gets an insert and the inserts basically look similar, the placebo insert looks very similar or nearly identical to the active insert. So we have no way of telling which patient is treated or not treated.

Of course as trials run everybody has their own speculations and clinicians will voice their opinions so that they think the product is working or not working, but we can’t go by that.

We will be monitoring the patients for retention of the product at the times when they come back for their post-operative -- whatever placement visit set at the times of the end points of two weeks, say six weeks, et cetera.

So if depots are found to be lost without knowing whether they are placebo or active depose they will be replaced according to whatever was the initial type of placement. So that will continue, so we just have to kind of continue to execute the study, we are not seeing anything out of the ordinary from our expectations.

So things are going smoothly, enrollment seems to be going smoothly. So, so far so good..

Great, thanks so much. .

Thank you. And our next question comes from the line of Donald Ellis with JMP Securities. Your line is now open..

Thank you and good morning guys.

First question, could you give us some more details about the sampling program you’re proposing? And then second question, is there anything about the pass-through application process that drives some of your assumptions on pricing for DEXTENZA?.

Yeah, Don, so first one on the sampling program. We’re really terming it an early experience program and this is a luxury that we have, that we want to take full advantage of, because what we don’t want to do is go to the market and say because we have an FDA approval we just start using miscellaneous J-codes.

What that causes is frustration in the marketplace, because it’s a buy and built product they are assuming the liability of buying the product in and then they’re going to be putting through a code that would potentially work and potentially not work, up until the point where we get a C-code. We don’t want to have that happen.

What we really want to be able to do in that three to four month period before we actually get the C-code in place is to allow for some free product or sample product to be given to offices so they can really do a DEXTENZA day if you will, get a number of patients that can use DEXTENZA free and clear from the reimbursement environment.

And allow for them to get clinically savvy with the product, up until the point where we get the C-code in place and then we are working with them all the while in that three or four months to understand the reimbursement process. So for day one, let’s say January of 2018 as we talked about, they we able to put it right through.

So that’s really something that we want to make sure that we do well, get around to all of our targets we’re roughly going to be targeting about 6,500 targets to get them enough free product for them to get comfortable. And then ultimately when the C-code comes in place we’ll have commercial product in the marketplace.

And they will be ready to go in order to really use it and adopt it very quickly. So that’s really the whole genesis of why we want to do this early experience program versus going out and just allowing for a miscellaneous J-code to drive our business.

Make sense?.

Yes.

And next question is about pricing and is anything evolved in the application for the pass-through process kind of driving your assumptions on pricing?.

Yeah Don it’s a really good question, because there are factors that go into setting your price. So what factors into it is in the application itself, the price is not insignificant in relation to the actual CPT or the surgical procedure. What we know is it's about roughly $1,700 of reimbursement through the hospital outpatient department side.

So we have to have -- there is a three part calculation that has to be factored into account for what is non-insignificant. And you can look as it has to be about 20% of that $1,700 in order to hit the bottom threshold of what the pricing needs to be.

Then you factor in that we're going to be looking at the individual commercial payers to see is there going to be a need for any type of contracting with them to position ourselves to have access to the product to the commercial payers. And that ultimately will affect our ASP, if we have to go and pay out rebates and contracts for such.

So those all factor into what our pricing strategy is we're still underway and working through that. We're doing payer research right now to understand that dynamic. So on the C-code application itself it's that non-insignificant threshold of price that needs to be established before they will even entertain it being in a C-code.

And just to step back what the government does is they puts together a pull of money for the medical community to use new and innovative products. So they're actually separating it. So this allows for people to get some experience with these really novel products before they figure out really where they want to place them in a J-code type setting.

So that's really what we want to have the physician community to be able to take advantage of through the C-code process. .

Okay.

So using those numbers then if $1,700 per procedure and roughly 20% that would get you to a price of $340 and does that price that have to be net of all those discounts for contracting?.

It does. So your ASP is going to be affected by your other contracts and other things that are going to be bringing your ASP down a bit. So we're looking at it as we have to factor those things in to what the ultimate price will be for the product..

Okay.

So then the price will have to be something north of $340?.

You're correct. Yes, so we would say that it's going to be north of -- at a probably a range of $425 to $525 somewhere in that range based on whatever we feel the contracting strategy will need to be..

Terrific.

And one last question for Brad, where are you going to be booking the early experience program product on your P&L?.

Yes so it won't be -- there won't be any revenue right until we actually have the code and have the full launch. So if we have our approval on the PDUFA date in July. We would be submitting in September and the code would go effective at the beginning of 2018. So we wouldn't be looking at revenue until the first quarter of 2018.

The product that we -- the sample program would be a selling expense during that period of time before the actual code gets in place and we fully launch..

Great, thank you very much. .

Thanks, Don..

Thank you and our next question comes from the line of Elemer Piros with Cantor. Your line is now open. .

Good morning, gentlemen. Amar would you please elaborate a little bit on the so called non-significant risk device study, one when does it then payout [ph] please..

So the non-significant risk studies are conducted by us routinely to evaluate form function types of things to be able to improve for example the design of some of our inserts as -- if so if you recall for glaucoma program we had done several studies to look at improving retention by looking at size of these or stiffness or persistence of the materials et cetera.

So what is meant by a non-significant risk study is that you basically regard the -- it's a device, you regard it as something that is done routinely and for example punctum plugs, et cetera are placed routinely and are kind of class one type of products for the regulatory purposes. So they are low risk kind of products.

So when you come up with something of that sort you basically can conduct the study with IRB notification and then IDE, do we have to -- it does no -- sort of IDE required for that. So I think it allows you to sort of rapidly look at the designs of….

Hello?.

We're okay, somebody muted accidently. Improvement in the change of the design of the insert. So in this case for allergy what we are trying to do is to look at and insert that with liquefy in a very short order so it would basically turn to liquid within a day.

So that we can preserve the masking of the study, but not have the interference in the function and that it's blocking the nasolacrimal duct and that's not allowing allergen to go into the nasolacrimal duct, which can be a source of the itching signal.

So making sure that the signal is coming through unimpeded and we can actually conduct a more true world, real world type of test for the allergy study. So to be able to make such a placebo device for competitor purposes, we would conduct a non-significant risk study.

And see if that indeed does give us that difference in the signals compared to a longer lasting placebo. And if that is the case then we would go ahead and conduct those studies in a Phase 3 kind of fashion..

And somewhat relevant or a follow-up here, Amar.

Do our patients aware that the plug actually dissolved or was lost, is it noticeable to them at arm?.

No, in general, when you -- when these inserts are placed, they are noticeable for the patient. So patient doesn't really feel anything, because they're design to feel essentially like soft tissue, they are -- we design the stiffness to feel like soft tissue and there nothing is projecting out from the eyelid. So it's under the opening of punctum.

So you really don't see anything, you don't feel anything, unless you take some kind of specialized equipment to look for it, which the patient doesn't readily have access to, you remain masked. And I think FDA has been satisfied that this will allow them to preserve the masking without actually interfering with the results..

Okay. Two more quick follow-up, please.

In the glaucoma study, would you remind us please when did you treat the first patient in the trial? And how many sites do you have open of the total that is -- that you plan to have?.

Sure. Elemer, this is Jon Talamo, we have about 130 patients that have been enrolled at this point. And the way the trial works and we have 46 of our 50 sites that have been qualified and are screening. The way the study works is that everyone coming into this trial has to demonstrate that they're responsive to a topical prostaglandin medication.

So they have to be washed out of that medication, so there is a six to eight week period once they've entered into the trial before they're treated. But we're pleased with how enrolments going, it's ramping nicely..

Okay.

The last question is what would be an announcable milestone in your collaboration with Regeneron Amar? And what sort of timing -- rough timing can you put on that?.

Well, I think it's -- we would have to bring that up in our joint sharing committee as we conduct some of the preclinical studies whether or not they would choose to let us announce those things, we can't take a unilateral action on that.

Certainly if they choose to exercise the option over the next 12 to 18 months that would definitely be an announceable thing because that is something that we can announce at our own discretion..

Okay, thank you very much..

[Operator Instructions] Our next question comes from the line of Dane Leone with BTIG. Your line is now open..

Hi, thank you for taking the questions.

I just want in terms of thinking about the intraocular hydrogel formulation, do you have an idea of size and how that would interact with the vision of the patient? Whether it looks like minor floater or would they just have a large floater in their eye for extended period of time three days or how it will kind of dissolve and impact the vision overtime?.

Sure this is Jon Talamo again, I’ll take that question. We mentioned two different types of intraocular hydrogels during the call this morning. One is our newer program for glaucoma and the others and that’s inserted into the inter chamber of the eye near the front of the eye. And then the depots that we’re developing for retinal diseases.

Let me take them separately, for glaucoma the implant is a small very small rod like piece of hydrogel medication embedded and it tends to settle and what’s called the inter chamber angle of the eye and it’s visually for the most part invisible to the patient.

In the case of intravitreal injections there will be some low level optical phenomena, but the footprint of the types of depots we’re designing is no greater from an optical sense than one might encounter with OZURDEX which is a product currently on the market for intravitreal use and the depots tend to settle in the interior inferior vitreous.

So out of the visual access..

Yes Dane just to comment a little bit more so none of these will be freely floating around in the eye in general that tend to settle down .And in the front of the eye for the glaucoma intracameral approach they would settle into the way angle.

So the preclinical work that we have done to-date has shown good stability in the angle and they remain without changing in size.

This change in size for some of the other companies that are taking approaches similar types of approaches with conventional type of polymers not advanced polymers like what we’re using those can change in shape as time goes by.

And they can swell up and not absorb consistently and those are potential issues that can arise in such of the earlier generation type of products.

What we’re developing over here we pay close attention to the fact that it doesn’t -- it can go through a very fine gauge needle doesn’t change in shape and resides squarely within the angle and absorbs consistently so making room for the next one to come in subsequent maybe four months down the line.

So very pleased with how the pre-clinical stuff has been going so far. And look forward to keeping that up in the future. .

Yes exactly that is what I kind of getting at is once inserted into the eye for I guess either formulation of other drug the rod I guess is what it generally looks like would kind of stay uniform in shape and would have uniform dissolution without I guess change or movement of the structure and chucks breaking off or something like that as it dissolve..

And it’s completely by dissolvable. .

Okay, all right. Thank you..

I'm showing no further questions at this time. I would now turn the call back over to Amar Sawhney for closing remarks. .

I want to thank everyone for taking the time to join us on the call today. And we look forward to updating you on the milestones through 2017 especially as we approach our PDUFA date for DEXTENZA and continue to enroll patients in our Phase 3 program with the OTX-TP for the treatment of glaucoma and ocular hypotension.

On behalf of the entire Ocular team, thank you for all your support. You may now disconnect..