Donald Notman - Chief Financial Officer Antony Mattessich - President and Chief Executive Officer Michael Goldstein - Chief Medical Officer Scott Corning - Senior Vice President, Commercial Daniel Bollag - Senior Vice President, Regulatory Affairs.

Adnan Butt - Guggenheim Securities Donald Ellis - JMP Securities Yi Chen - H.C. Wainwright & Co Joseph Pratt - Stifel, Nicolaus & Company Joseph Catanzaro - Piper Jaffray.

Good afternoon, ladies and gentlemen, thank you for standing by. And welcome to the Ocular Therapeutix Third Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time.

It is now my pleasure to turn the call over to Donald Notman, Chief Financial Officer of Ocular Therapeutix. Please go ahead, sir..

Thank you, Bridget. Good afternoon, everyone, and thank you for joining us on our third quarter 2018 financial results and business update conference call. This afternoon, we issued a press release providing an update on the Company's product development programs and details of the Company's financial results for the quarter ended September 30, 2018.

The press release can be accessed on the Investors portion of our website at investors.ocutx.com. Leading the call today will be Antony Mattessich, our President and Chief Executive Officer, who will provide an update on DEXTENZA, and a summary of our corporate developments and upcoming clinical milestones. Dr.

Michael Goldstein, our Chief Medical Officer, will then provide an update on the clinical developments and our pipeline. Following Michael's remarks, I will provide an overview of the financial highlights for the third quarter of 2018. Before turning the call back over to Antony for a summary and questions. For Q&A, we will also be joined by Dr.

Dan Bollag, our Senior Vice President, Regulatory Affairs; and Scott Corning, our Senior Vice President-Commercial. 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 the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of our most recent Quarterly Report on Form 10-Q, which was filed with the SEC today, November 7, 2018.

In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our views change.

I will now turn the call over to Antony..

Thanks, Donald. Has been another busy quarter for Ocular on a number of fronts are highest priority remains DEXTENZA and we continue to anticipate the U.S. Food and Drug Administration to take action under the Prescription Drug User Fee Act or PDUFA by the target date of December 28 of this year.

Regarding DEXTENZA, we recently completed at the end of October the pre-approval inspection at our manufacturing facility here in Massachusetts.

As mentioned in prior quarterly earnings calls, our strategy for ensuring a successful inspection has been to fully and adequately addressed all of the 43 observations from previous inspections as well as importantly to upgrade the overall production and quality oversight systems through a continuous improvement plan.

Following the FDA's recent review our facility, we can confirm that we are - that there were no repeat 43 observations and can therefore conclude that we have satisfactorily addressed all prior inspectional observations. However, we received additional 43 observations and are now in the process of fully responding to those.

Until the FDA completes its review of our responses we will not comment or speculate further on these observations. We are initiating commercial batches and preparing for product launch while we await notification from the FDA as to whether the NDA is approvable by the December 28, PDUFA date.

As reminder, DEXTENZA is an intracanalicular insert of the approved drug dexamethasone that is being developed to treat patients with post-surgical ocular pain for up to 30 days with a single administration. We believe that DEXTENZA is a differentiated and potentially transformational asset for patients and physicians as well as for Ocular.

For patients, DEXTENZA would offer the convenience of a full course of post-surgical steroid treatment in a single canalicular insert. This novel means a delivery to replace the complex eye drop regimen that under the current standard of care would require up to 70 topical ocular steroid drops.

For physicians DEXTENZA has the potential to provide a solution to address the issue of non-compliance with drops due to patient's inability to administer drops properly, if at all. As we wait our PDUFA date, we continue preparing for the U.S. launch and commercialization of DEXTENZA.

We are actively recruiting for our field organization and are continuing the process of executing our commercial strategy. We have the benefit of a running start given the pre-commercial work we conducted last year.

We also are taking the opportunity to build on the previous assumptions and integrate learnings from the market, particularly from recent reimbursement experiences, both inside and outside the ophthalmology space.

With our insights into the marketplace and a product that is competitively well-positioned, we believe that a small company with targeted resources such as Ocular can be successful in maximizing revenue potential while building a near-term path to product profitability.

As we move from planning to execution, we are working to ensure Ocular has adequate resources to finance the potential loss of DEXTENZA and advance our pipeline.

During the third quarter, the Company opportunistically sold common stock under our ATM facility and cash at the end of the third quarter essentially match that at the end of the second quarter.

We continue to evaluate both dilutive and non-dilutive financing options to fund the commercialization of DEXTENZA and support the existing and future pipeline. This includes traditional equity and debt, royalty financings, and business development opportunities.

It is important to remember that aside from our collaboration with Regeneron, we hold worldwide exclusive commercial rights to our pipeline, unburdened by significant royalty obligations and position to achieve high gross margins. Before turning the call over to Dr.

Michael Goldstein from an in-depth update on our pipeline, I'd like to touch briefly on two recent additional developments.

First, as disclosed in September, we amended our agreement with Incept, the company from which we licensed our original hydrogel technology that allows us to expand our intellectual property portfolio and further leverage the hydrogel platform in both Ocular and non-Ocular conditions.

Second, as disclosed in October, the FDA issued a warning letter on ReSure Sealant, citing a perceived lack of progress on the enrollment of a post-approval trial requirement. We believe we have made substantial efforts to enroll this trial, having close to 150 investigational sites, and none of which expressed interest in conducting the trial.

In light of these circumstances, the company has appealed the warning letter. We do not anticipate ReSure Sealant revenue to be material and we do not expect this warning letter to impact our DEXTENZA filing for the development of any of our other product in our pipeline.

Nonetheless, we take very seriously our commitments to the FDA and we will work to resolve this issue. With that, I'd like to now turn the call over to Dr. Michael Goldstein..

Thanks Antony. With DEXTENZA approaching a potential commercial launch, we are pleased with the recent data published in the Journal of Cataract & Refractive Surgery in October.

The data from 438 patient, prospective, multicenter, randomized, controlled, Phase III study, demonstrating statistical significance in not only pain, but also Ocular inflammation both the P value is less than 0.0001.

This was our third Phase III trial DEXTENZA in post-operative cataract surgery patients and continues to show DEXTENZA has generally been safe and well tolerated. Outside of DEXTENZA, we continue to advance our pipeline of products that targets multiple ocular diseases of both the front and back of the eye.

Each of these products is a customized formulation using our proprietary hydrogel technology platform that we believe can produce treatments that offer significant benefits over those offered by existing drugs on the market today. After DEXTENZA, OTX-TP is our most clinically advanced asset in the pipeline.

The product candidate is currently in Phase III clinical trials and is being developed as a potential treatment for patients with primary open-angle glaucoma or ocular hypertension. OTX-TP is a long acting preservative free formulation of the drug trial cost delivered as an intracanalicular insert designed to release drug over three months.

In this trial, we targeted enrollment of 550 subjects with the primary efficacy endpoint being a statistically superior reduction of intraocular pressure or IOP from baseline with OTX-TP compared to placebo inserts at three diurnal time points at each of three measurement days of two, six and 12 weeks following insertion.

In addition, while not a primary endpoint the IOP reduction will also need to be clinically meaningful for regulatory approval. We are pleased to announce that we have completed our target enrollment at this point and are not screening any additional subjects.

In the next few days, some subjects still in the washout period of the trial maybe randomize. We continue to anticipate topline data in the first half of 2019. In addition to the ongoing Phase III trial, we continued to enroll an open-label, one-year safety extension trial with OTX-TP that will be included as part of the current pivotal program.

This study will provide additional long-term safety data with repeat administration of OTX-TP. OTX-TIC is our second glaucoma program in development. The product is a bioresorbable, travoprost-containing hydrogel implant delivered via intravitreal injection designed to deliver a higher level of IOP reduction. We continue to enroll patients in a U.S.

based Phase I perspective multicenter open-label dose escalation clinical trial to evaluate the safety, efficacy, durability and tolerability of OTX-TIC. This is an open-label trial; we will be able to assess early biological activity and safety and now treated our first subject for six months with a single insert.

We expect to present the initial results in the first half of 2019. Moving to the back of the eye, we have initiated a multicenter, open-label Phase I clinical trial for OTX-TKI.

OTX-TKI is a bioresorbable, hydrogel fiber implant with anti-angiogenic properties delivered by intravitreal injection being developed to treat patients with wet Age-related Macular Degeneration and other retinal diseases. As a reminder TKIs or tyrosine kinase inhibitors act upstream of VEGF and therefore may have a broader anti-angiogenic activity.

Preclinical data have demonstrated the ability to deliver an efficacious dose of a TKI to the posterior segment of the eye for the treatment of VEGF-induced retinal leakage for an extended duration of up to 12 months.

The Phase I trial will test the safety, durability, and tolerability of OTX-TKI and evaluate biological activity by following visual acuity over time and measuring retinal thickness using standard optical coherence tomography. As previously disclosed, we continue to plan to dose our first subject in the fourth quarter of this year.

Finally, OTX-IVT is a sustained-release formulation of the VEGF trap aflibercept or Eylea for the treatment of serious retinal diseases such as wet Age-related Macular Degeneration that is currently being developed in partnership with Regeneron. As we have said on prior calls, contractually we are unable to comment on any details of the program.

I would now like to turn the call back over to Donald, who will review our third quarter of 2018 financial results..

Thanks Michael. Let me begin by summarizing our capitalization. As of the quarter ended September 30, 2018, we had $56.9 million in cash and cash equivalence versus $56.8 million at the end of the second quarter.

The cash balance benefited from $12.9 million in net proceeds generated from the sale of common stock under the Company's 2016 Sales Agreement or ATM, during the third quarter. Offsetting the ATM inflows during the quarter were a net loss of $15 million, principal debt payments of $1.5 million, and capital expenditures of $473,000.

As disclosed in this afternoon's 10-Q, we've continued to opportunistically sell common stock under the ATM into the fourth quarter, raising an additional $3.6 million net of expenses and leaving $7.2 million available to be sold under the ATM facility moving forward.

Based on our current plans and forecasted expenses, we believe that existing cash and cash equivalents will fund operating expenses, debt service obligations, and capital expenditures into the second quarter of 2019. This is of course subject to a number of assumptions about our clinical development programs and other aspects of our business.

Research and development expenses for the third quarter were $9.7 million versus $8.2 million for the third quarter of 2017 and reflect increased unallocated other costs, primarily in consulting services, outside testing expenses, facilities expenses associated with additional lab space at our corporate headquarters and slightly increased compensation costs associated with additional hiring, primarily in the technical operations and quality departments.

Selling and marketing expenses for the third quarter were $1.1 million as compared to $3.2 million for the same quarter in 2017. This decrease relates to a significant reduction in pre-commercial activities as a result of the delay in the planned 2017 launch of DEXTENZA.

Finally, General and Administrative expenses were $4.4 million for the third quarter versus $4.2 million in the comparable quarter of 2017. The increase in expenses stemmed primarily from increases in legal costs related to the defense of the Company in ongoing legal proceedings.

Revenues for the third quarter of 2018 were driven exclusively by ReSure Sealant and totaled approximately $0.5 million during each of the three-month periods. And as noted in the past, we are now currently providing promotional support to ReSure and we do not expect product revenues to be material in 2018.

With respect to financial results for the third quarter ended September 30, 2018, we reported a net loss of $15 million or a loss of $0.38 per share. This compares to a net loss of $15.6 million or a loss of $0.54 per share for the same period in 2017.

The net loss for the third quarter of 2018 included $2.4 million in non-cash charges for stock-based compensation and depreciation compared to $2.2 million for the same quarter in 2017. The company had approximately 41.1 million shares issued and outstanding as of November 1, 2018. This concludes my comments on our third quarter financial results.

And I would like to turn the call back to Antony for some summary comments..

Thanks, Donald. Before opening the call up for questions I'd like to recap the company highlights for the third quarter. We have had our pre-approval inspection and continue to anticipate the FDA to take action regarding the NDA by our target PDUFA date of December 28, 2018. We began planning the execution of the U.S.

commercial launch of DEXTENZA with the build out of our field organization. We have reached target enrollment for the first pivotal Phase III study for OTX-TP and expect the results in the first half of 2019. We have made progress on both of our Phase I programs. For OTX-TIC, we have dosed our first patient out to six months with a single insert.

For OTX-TKI, we have initiated several sites and we expect to dose the first patient this quarter. We continue to explore sources of dilutive and non-dilutive funding that will allow us to optimize DEXTENZA while continuing to develop and augment the pipeline.

Finally, we have amended the Incept agreement that now allows us to expand our IP portfolio and pursue opportunities in both ocular and non-ocular indications. In summary, we are encouraged with our progress in the quarter both with DEXTENZA as well as with our pipeline.

With that, I want to thank you for your time and we can now open up the line for questions..

Thank you. [Operator Instructions] And our first question is from Adnan Butt with Guggenheim Securities. Your line is open..

Hey, thanks for taking the question. Antony we have to ask, can you provide some context vis-a-vis the observations you mentioned.

What makes the company believes that it may not impact the December 20th PDUFA date?.

Well, we've stated that we are in the process and we'll soon have fully responded to those 43 observations. And clearly the actions that we're proceeding with in terms of building out the field force suggest that we think that the December 28th date is viable. I really don't want to go into more detail and what these are.

I think in some ways, it's over disclosing and what most companies would do, most companies wouldn't even mention that we'd had the inspection.

And I think I've mentioned all along that the inspection - most inspections and the inspection that we expected to have we thought would result with some additional 43, which is what's happened and we continue to proceed at pace..

Okay. Just one follow-up. I mean, it seems overall the inspection went more right than wrong.

So is the scale or scope of these additional observations very different than the prior 483?.

I'm going to try not to take the beta. The actions of proceeding with our launch plans should speak very, very loudly. Clearly, we have no intention of investing in a launch that we don't think is going to happen.

We certainly do not want to go through another riff as I did in my first week on this job, so we were hoping that our actions speak louder than words, but I'll try and stick to discipline and not get into the details of the observations themselves..

Okay. Then just one pipeline question from me.

OTX-TIC, when you mentioned there is a patient on treatment for six months, so are you referring to the durability of the insert? Or are you referring to efficacy or both?.

We're referring to the duration of that patient in the trial. So the patients who were dosed with a single insert on day one, and we've now track that patient out past six months. So all of the measures that we're taking in a Phase I trial, of course, will be taken out to six months.

I mentioned before, these trials are inpatients, so they're patients with elevated ocular hypertension, and so we will be tracking the biologic response as well as the durability of the insert itself..

Okay. Let me get back in line please. Thanks..

Our next question comes from the line of Donald Ellis with JMP Securities. Your line is open..

Thank you. You may have said this, but can you let us know where you are as far as hiring sales management? Are you hiring sales reps right now? And kind of what's your target for the number of reps? And the second question is regarding, the glaucoma enrollment has got a little bit slower than what some people might have thought.

Are there any enrollment issues or hurdles that are causing the slow environment? Thanks..

Okay, I'll farm both of these questions out, the first to Scott Corning concerning the commercial aspect.

Scott?.

Yes, hi. Where we are with hiring is that we've engaged with the recruiter and where we're well downstream in terms of hiring management personnel. We have no announcements to-date as to who those individuals are.

And we're also looking at the market as far as the representative candidates and we feel good about the profile that we've identified and so we're well downstream on that. But we have yet to hire those people in and frankly on the representative side intend to do so contingent upon a FDA approval.

So we still have some time there, but when we have an announcement as it relates to a sales leader, we would make that announcement..

Okay..

Great, and then concerning the glaucoma trial, I mean we certainly since the last disclosure there, there's been no slippage in the rate of enrollment. There were some general issues from the original timeline that was set more than a year ago. But I'll let Mike speak to what some of those issues might have been.

Mike?.

Yes, thanks for the question. In terms of the glaucoma enrollment, I think you're talking about the OTX-TP program. And what I can say is that the enrollment has been consistent and steady.

The biggest rate limiting step with enrollment has been - that we have a unique feature in the trial in that we want to, because this is a long acting insert, we want to make sure to enroll subjects that could potentially respond to the prostaglandin.

And so as part of the trial design, patients have to show a certain degree of change once washed out of the prostaglandin that they're on or if they weren't on the prostaglandin and it need to be challenged for the prostaglandin and show a certain degree of response, and we have certain metrics for that.

So that's really been the biggest rate limiting step is as meeting the criteria that they're deemed prostaglandin responder in terms of being able to enter the trial. And again, that's something that was put in because this is all a long acting insert..

Okay. Thank you very much..

Our next question comes from the line of Yi Chen with H.C. Wainwright. Your line is open..

Hi. Thank you for taking my question.

Is it possible to let us know when did the FDA complete the facility inspection?.

Yes, they completed at the end of October, so just recently..

Okay. Thank you..

And our next question comes from the line of Joe Pratt with Stifel. Your line is open..

Yes. Just on PDUFA date, I'm not analyst, just a civilian out here.

PDUFA date, what's the risk, but it doesn't go your way and that they don't move you ahead?.

Well, I don't think I'm going to characterize what the risk is. Clearly our belief in the actions that we're proceeding with is that that this will go as planned and that will be able to have a positive decision and launch in the first half of next year..

But when the FDA gives a company such as yours PDUFA date, to what extent is this guaranteed positive on their part?.

It's never a guaranteed positive on their part. It's a guaranteed that they will give us a response by that day. But what that response will be dependents upon the quality of the NDA, and then the results of the inspection..

Okay. Thank you very much..

Thank you..

And our next question comes from the line of Joe Catanzaro with Piper Jaffray. Your line is open..

Great. Thanks for taking the question.

So I won't ask around the specifics of the observations, but I just want to get some clarification that the observations were addressed in a written response by you guys and would there be expectations that you would hear back from the FDA with regards to that written response ahead of the PDUFA or do you just have to wait until the PDUFA to see if those written responses satisfied the observations?.

Well, the, the FDA technically has 90 days to respond, which of course would be past the PDUFA date. So they need to respond by the PDUFA date. We have no expectation that they will respond however they might. We will submit in the next few days a complete response to those 483s.

We may or may not receive information from the FDA, but we certainly expect to get a decision on the filing by the December 20, PDUFA date..

Okay. Got it. And then maybe just a follow-up.

So what steps have been taken to obtain a C code if any, or do you have to wait until a formal approval before you take those steps?.

Yes. We have to wait until the product is approved before we can apply for a C code and clearly depending on when it gets approved is that depends on which cycle we're able to apply for that C code.

So if it comes on the date of the PDUFA then we would have to wait until the March filing period, which would give us then presumably and approval by July - C code by July..

Okay. Got it. Thanks for taking my questions..

Thanks for the call..

[Operator Instructions] We do have a follow-up question from Adnan Butt with Guggenheim Securities. Your line is open..

Thanks.

Just a couple more maybe on the pipeline, Anthony the OTX-TP and TIC programs, you expect updates from both in the first half? Is it an either or decision or do you see room in the development plan or market for both those?.

Yes, we see definitely room for both of those. They are there different approaches. One is clearly more invasive than the other. One last little bit longer and we would expect sort of varying degrees of efficacy from the two approaches. And there are certainly a huge unmet need out there..

In the Phase I with TIC give you sufficient information to decide on a pivotal or you think it's a traditional phase to you have to do after?.

Well, we're going to learn a lot from this Phase I. Since Phase I as I mentioned it's inpatients and the key elements that we're going to need to C from this drug is the reliable restorability that we want to make sure that the mother ship is gone. By the time that the drug - is the drug payload is paid out.

We're going to want to see that that it's kind of the endothelial cells. So that there isn't damage there and we're going to of course be able to determine that the biologic response. And the fact that we wouldn't expect this to move so it would stay in the inferior angle once it's inserted. So from that we'll be able to tell from the Phase I itself.

Now whether we can go directly into a Phase II, III or whether it needs to be a Phase II, we don't know yet it depends on how robust those results are believe we expect to learn a lot from Phase I..

Okay. Thank you..

And we have a follow-up from Yi Chen with H.C. Wainwright. Your line is open..

Thank you.

Just a quick follow-up, assuming the positive FDA decision on the PDUFA date, how soon where you'll be able to file and his NDA for the inflammation?.

Well, we have the information for the sNDA really on hand. So we'd be able to file it imminently after the PDUFA approval..

Okay. Thank you..

I'm not showing any further questions. So this does conclude the program. Ladies and gentlemen, you may now disconnect. Everyone, have a great day..