Ocular Therapeutix Inc

NASDAQ:OCUL

Earnings Call Transcript 2024-Q3

[Operator]

Good morning, and welcome to the Ocular Therapeutix Third Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded and will be available for replay on the Investor Relations section of the Ocular Therapeutix website.

I would now like to turn the call over to Ocular's Vice President of Investor Relations, Bill Slattery, Jr. Please go ahead, Mr. Slattery.

[William Slattery, executive]

Good morning, everyone, and thank you for joining us today. Earlier this morning, we issued a press release outlining our financial results and business updates for the third quarter 2024.

Mindful of everyone's time, Ocular's Executive Chairman, President and CEO, Dr. Pravin Dugel, will briefly provide a summary of recent business highlights, so we can quickly get to your questions. Joining Dr. Dugel for the Q&A portion of the call will be Donald Notman, Chief Financial Officer and Chief Operating Officer; Sanjay Nayak, Chief Strategy Officer; and Steve Meyers, Chief Commercial Officer.

We refer everyone to this morning's press release and our Form 10-Q for a comprehensive update of third quarter financial and business results. During today's call, certain statements we will be making constitute forward-looking statements under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially as a result of a variety of factors, including risks and uncertainties identified in the Risk Factors section of our annual report on Form 10-K and our other SEC filings.

With that, I'd like to hand the call over to Dr. Pravin Dugel to review our recent updates. Pravin?

[Pravin Dugel, executive]

Thank you, Bill, and thank you to everyone for joining us today. When I joined Ocular, our #1 priority was bringing AXPAXLI to market for wet age-related macular degeneration. Wet AMD affects about 1.65 million people in the United States, which translates to approximately 1 in every 160 adults. That means many of us are likely to know someone who is affected by this disease. And it reminds us that this market is large and underserved with up to 40% of patients discontinuing treatment within the first year alone.

Just before AAO in mid-October, we reported that recruitment has progressed rapidly for SOL-1, allowing us to project full randomization by year-end 2024, which is well ahead of our prior guidance. Today, we are thrilled to share that following this outstanding SOL-1 recruitment success, our active study sites can now enroll new patients directly into SOL-R, our second registrational trial for AXPAXLI in wet AMD.

Let me repeat. SOL-1 has reached a key enrollment milestone, and we have turned the switch, allowing clinical sites to directly enroll patients into SOL-R. This is a significant milestone, and we expect this adjustment to further accelerate the pace of SOL-R enrollment.

As we reflect on the start of this year, there were widespread concerns that enrolling SOL-1 would be challenging. The consensus was that the trial's unique superiority design, which we believe is directly in line with the FDA's draft guidance and validated with a Special Protocol Agreement would lead to significant recruitment hurdles. In fact, some investors projected it would take us as long as 18 months to 2 years to complete randomization.

In response, we assembled a world-class team who went beyond simply activating clinical trial sites. The team leaned on decades of experience and relationships to actively engage and communicate with the retina community in a way that resonated deeply. This extraordinary level of engagement sparked a remarkable level of enthusiasm and commitment from investigators and study coordinators for both our SOL studies.

Our approach has transformed what was expected to be a difficult enrollment process into one marked by rapid and enthusiastic participation. Accelerating the enrollment timelines for SOL-1 has positioned us for an impactful year in 2025, setting the stage for a significant milestone with clinical data expected in the fourth quarter. By reaching enrollment targets ahead of schedule, we are advancing more rapidly toward the top line data that will provide pivotal insights into AXPAXLI's potential in treating wet AMD.

This acceleration brings us one step closer to potentially delivering a much-needed therapeutic option to patients who deserve a more sustainable treatment and better long-term outcomes. But enrolling SOL-1 is just the beginning. SOL-1 is the first of 2 registrational studies for AXPAXLI in wet AMD. Our second registrational trial, SOL-R, is a repeat dosing non-inferiority study. These 2 studies were meticulously crafted to work in harmony, strategically designed to enhance each other's enrollment while providing a broad evaluation of AXPAXLI's durability, repeatability and flexibility.

SOL-1 focuses on highlighting AXPAXLI's durability. The goal here is to establish superiority in durability over 2-milligram aflibercept. SOL-R, on the other hand, is a more familiar repeat dosing non-inferiority trial that is designed to ensure our findings are robust and applicable in real-world settings. Both studies were thoughtfully aligned with regulatory guidance. SOL-1 supported by a Special Protocol Agreement and SOL-R supported by a Type C written response from the FDA earlier this year.

Importantly, neither of these trials require sham for masking. The FDA has repeatedly stated, including most recently on a podium at AAO, that they do not recommend sham for masking because sham can elicit bias. In addition to taking important steps to reduce our regulatory risk, we've focused just as much attention on taking steps to derisk the clinical outcomes and reduce variability between subjects.

In SOL-1, we are administering 2 loading doses of aflibercept and requires subjects to gain at least 10 ETDRS letters in BCVA or to reach approximately 20/20 vision prior to randomization. This ensures that we are only selecting subjects that have been responsive to anti-VEGF therapy and allows us to focus on durability of each treatment arm.

Meanwhile, in SOL-R, we've gone a step further by incorporating 5 loading doses and 2 observation periods to carefully screen out subjects who are highly VEGF dependent. This approach emphasizes patient stability. Again, here, we are continuing to focus on reducing risk by taking action to ensure that the enrolled patient population is as homogeneous as reasonably possible.

By building in these measures, we're reducing variability, enhancing patient selection and we believe strengthening the potential for successful clinical trial outcomes. From the onset, we also designed SOL-1 and SOL-R to complement each other and boost recruitment for both studies. Initially, all subjects enrolling in SOL-R were required to be loading or randomization failures in SOL-1. This approach ensured that SOL-R, which is widely seen as the more attractive trial for physicians to enroll their patients in, did not cannibalize enrollment in SOL-1.

As I shared at the outset of my comments, today, we're announcing that SOL-1 has reached a key enrollment milestone and our trial sites are now enrolling subjects directly into SOL-R. We expect this important update will lead to further acceleration in SOL-R enrollment, which is already well underway.

As SOL-1 very quickly approaches complete randomization, subjects who are not ultimately randomized can seamlessly transition into SOL-R. This coordinated approach allowed us to avoid the typical slowdown seen toward the end of trial enrollment, creating a streamlined and efficient pathway that capitalizes on recruitment momentum at our clinical sites. We believe that this will provide us with a tremendous advantage as we continue to strengthen our deep history and strong relationships with our clinical trial sites heading into 2025.

The bottom line is that we've seen outstanding demand for participation in our AXPAXLI clinical studies, underscoring the strong enthusiasm and interest within the retina community for a durable treatment option. This level of demand is particularly encouraging as it signals the excitement for AXPAXLI among both patients and physicians.

Based on our historical clinical data generated for AXPAXLI, combined with actions we have taken to derisk our SOL studies, we remain confident in the potential success of both SOL-1 and SOL-R. To date, AXPAXLI is the only TKI we are aware of to show proof of concept for monotherapy activity in treatment-naive wet AMD patients.

To take that a step further, if you look at our prior U.S. wet AMD study, treatment with AXPAXLI alone resulted in an impressive 100% per protocol rescue-free rate at 6 months. And that was in a trial where no steps were taken to derisk the patient population or trial design. Finally, we believe AXPAXLI is the only TKI to show clear signals of efficacy in subjects with nonproliferative diabetic retinopathy or NPDR.

In our HELIOS trial, the administration of a single AXPAXLI hydrogel, literally 0 subjects were observed to have developed any vision-threatening complications at 48 weeks compared to 38% of subjects in the sham control arm, which is in line with natural history data. In other words, not a single patient after just one injection of AXPAXLI developed a potentially blinding complication at 48 weeks.

Moreover, every subject in the AXPAXLI arm with non-center-involved diabetic macular edema experienced disease improvement. It cannot be overstated. These types of results do not occur by accident.

We believe the results from SOL-1 and SOL-R may set a new standard, emphasizing the strength of our data and underscoring our advantages in the competitive landscape. As such, it is imperative that we be prepared for a strong commercial launch should AXPAXLI be approved. If clinical demand is a proxy for commercial interest, and we believe it is, then we should plan for strong commercial interest in AXPAXLI, potentially ushering in a new era of wet AMD treatment.

We benefit greatly from having a remarkable commercial team that is currently achieving excellent results with DEXTENZA, the first and only drug-eluting intracanalicular insert. DEXTENZA utilizes the same ELUTYX technology that is used in AXPAXLI, and its performance strengthens our market presence and provides a strategic edge that we're committed to maintaining.

We have taken several steps over the past few months to build on our existing commercial infrastructure to support the eventual manufacture and distribution of AXPAXLI to retina specialists. And we plan to further expand these efforts in 2025.

As we continue to execute, our commitment to the investment community is to maintain financial discipline. Based on our current operating plans, we believe our cash and cash equivalents of approximately $427 million on hand at the end of the third quarter provides runway into 2028 and fully funds SOL-1 and SOL-R to top line results.

As we conclude the prepared remarks in today's call, I'd like to leave you with these key messages. Our mission at Ocular is clear. We are dedicated to becoming a leader in the treatment of retinal disease and improving vision in the real world. We are making outstanding progress on the 2 complementary studies in our registrational program for AXPAXLI in wet AMD, SOL-1 and SOL-R.

SOL-1 has reached a key enrollment milestone, and we expect to complete SOL-1 randomization by year-end with topline data to follow in the fourth quarter of 2025. SOL-R enrollment continues to gain momentum and physicians can now enroll their patients directly into this clinical trial.

In Type C written responses received this year, the FDA has agreed that the design of these 2 studies should be sufficient to meet our regulatory requirements, and we believe positive data from these studies will enable us to achieve a differentiated product label, provide commercially relevant data and meet the real-world need for a sustainable treatment option that improves long-term outcomes for patients with wet AMD.

2024 has been a year of significant change and tremendous execution at Ocular. But this is all in anticipation of what's ahead as we prepare for what we expect will be a milestone year in 2025. We thank you for your ongoing encouragement and support for Ocular Therapeutix.

Operator, I would now like to open the call for questions.

[Operator]

[Operator Instructions] Our first question comes from Tazeen Ahmad with Bank of America.

[Tazeen Ahmad, analyst]

Congratulations on the continued momentum with the studies. Maybe a couple of points of clarification, Pravin. Can you talk to us about how many of the sites for SOL-1 and SOL-R are currently overlapping? And are you still planning on activating additional sites for SOL-R? The pace of enrollment has continued to be above expectations. Just curious if you still think you need additional sites to get to the finish line.

[Pravin Dugel, executive]

Tazeen, thank you for your question, and good morning. The answer is, yes, there are quite a few sites that are overlapping, and that is by design. As you know, these 2 studies are designed very thoughtfully to complement each other in terms of their recruitment. One of the really outstanding features here is that there is no slowdown. Typically, what happens at about this time is the sponsor says, look, we are enrolling and please slow down or we're completing enrollment and please slow down. And the sites think of that as, okay, we got to stop now and perhaps think of another trial.

That's not happening with us at all. We are full speed ahead. We don't slow down whatsoever, and there's a seamless transition between SOL-1 and SOL-R. So yes, there are overlapping sites, and this is absolutely by design. So there's a seamless transition. And yes, we are continuing to activate other sites. SOL-R is a larger study, and we will continue to go ahead and press forward with that and execute as quickly as we possibly can. Thank you.

[Operator]

Our next question comes from Biren Amin with Piper Sandler.

[Biren Amin, analyst]

Congrats on all the progress. Pravin, you mentioned that you expect to have a differentiated product label with AXPAXLI. Could you maybe define that for us? Is that based on treatment frequency? Or are you focused on other metrics?

[Pravin Dugel, executive]

Biren, good morning, and thank you for your question. It's a very important question. And look, again, I go back to the design of SOL-1 and SOL-R. And what I would say is that as a clinician, I can tell you, it answers all the questions that clinicians have, which is how relevant is this clinically in terms of the way I would treat a patient. It certainly answers the question of durability, which is from SOL-1. It answers the question of repeatability, which is SOL-R. It answers questions in regards to how it compares to aflibercept 2 milligram as well as the high-dose EYLEA.

So our expectation is that if we are fortunate enough to have this drug approved that we will have a strategic program in terms of a label that may include flexibility from 6 months to 9 months with SOL-1 and SOL-R, repeatability based on SOL-R as well as potentially the only label that will have a superiority. So we believe that we'll have both a regulatory advantage as well as a commercial advantage potentially if this drug should be approved.

[Operator]

Our next question comes from Tara Bancroft with TD Cowen.

[Tara Bancroft, analyst]

So now that SOL-R enrollment can accelerate as a stand-alone trial, are you going to be providing regular updates on enrollment progress? And what are your general expectations for how long enrollment could take for SOL-R now?

[Pravin Dugel, executive]

Tara, thank you, and good morning to you. We will be providing updates as appropriate. What I would emphasize here is what I said in the beginning, which is how thoughtfully these 2 trials are designed. Realize that there is no slowdown here whatsoever. All the patients that are in SOL-1 currently will seamlessly transition into SOL-R. So SOL-R, which is already recruiting, will have a really large bolus of patients coming in from SOL-1. And that is, again, very thoughtfully and deliberately designed.

So what I would also say is that from the very beginning, as you know, the challenge was really the enrollment of SOL-1, which may be less of a familiar design than SOL-R. And I think most people have always said that SOL-R may be the more familiar treatment -- the more familiar clinical trial design as it is a non-inferiority design. So we do believe that, that transition from SOL-1 to SOL-R will be seamless. We're very encouraged in terms of the recruitment pace for SOL-R. And yes, we will provide updates when appropriate.

[Operator]

Our next question comes from Kelly Shi with Jefferies.

[Dingding Shi, analyst]

Just quickly, can you share with us the progress of the discussion with EMA? That's the first question. And secondly, as both SOL-1 and SOL-R show great physician and patient engagement reflected by enrollment progress, can you share what kind of patient population mostly suitable for AXPAXLI in wet AMD based on trial enrollment experience?

[Pravin Dugel, executive]

Kelly, good morning to you, and thank you for your question. In regards to regulatory agencies outside the U.S., we certainly are engaged in discussions. We haven't guided you yet as to the formal basis of those discussions, and we will, when appropriate.

In terms of patient population, there are 2 different aspects to this. One is the patient population that we're enrolling for clinical trials and the other one is what would be relevant when this -- if this is approved and is out in the market. So in terms of the clinical trial, as you've heard from my prepared remarks, I think we've gone out of our way to make sure that we derisk this patient population as much as possible in order to increase the chance of success. And we've done that in a very bespoke manner for each clinical trial, SOL-1 and SOL-R, as we've discussed.

With SOL-1, as you know, as a superiority study, what we've done is to select patients that we believe would be most responsive to anti-VEGF treatment. With SOL-R, what we've done is to select patients that would be as stable as possible for a non-inferiority clinical trial, again, a very derisked patient population.

In regards to the market, we firmly believe that this drug, AXPAXLI, if approved, will be the drug of choice for all patients. Our job at this point is to get this drug approved. However, what will happen, we believe, in the market as has been shown historically, is a much wider use of this drug.

[Operator]

Our next question comes from Sean McCutcheon with Raymond James.

[Sean McCutcheon, analyst]

Pravin, can you elaborate a bit more on the commercial efforts you alluded to in your comments? And obviously, too early to talk about pricing specifics, but we hear a lot, and I'm sure you do as well, on speculation around the buy-and-bill model for the currently marketed intravitreal injectable therapeutics in the space and how that could influence prescribing patterns. So what are your high-level thoughts on the pricing model for, say, a Q6 month or longer product and how that plays into your strategy on how you can leverage those incentives at these high-volume centers?

[Pravin Dugel, executive]

Good morning, Sean, and thank you for your question. It's a great question. And obviously, we're a little bit early in terms of talking about pricing. What I will tell you is from a commercial point of view, look, I'm in a situation here where I'm very, very fortunate that we have a fantastic commercial team that has been very successful with DEXTENZA. And in order to leverage that talent into retina is really a privilege.

Look, in terms of pricing, we firmly believe that we will be able to obtain premium pricing. I think it is a little bit early at this point to talk about the specifics of the strategy for pricing. We will certainly address that when appropriate. But thank you for the question.

[Operator]

Our next question comes from Jonathan Wolleben with Citizens JMP.

[Unknown Analyst]

This is [ Catherine ] on for Jon. I have 2 quick ones for DEXTENZA. I'm just wondering if you guys are reiterating your guidance for 2024. And also, any commentary on the CMS rule for 2025 and kind of how that's going to affect pricing of DEXTENZA going forward?

[Pravin Dugel, executive]

[ Catherine ], again, thank you again for your question, and good morning. I'm very fortunate, again, as I say, to have a fantastic commercial team for DEXTENZA, and I'm fortunate also to have Steve Meyers here with me, who is our Chief Commercial Officer. And let me hand over to Steve to answer that question. Steve?

[Steve Meyers, executive]

Yes. Thanks, Pravin. Yes, DEXTENZA definitely remains on track to hit the guidance that we guided to previously. So we feel great there. Regarding the CMS rule, we are very pleased with the results of the rule. We continue to have separate payment in the ASC, but the rule reconfirms that we're going to return separate payment in the HOPD. So we feel great about the rule that was issued and the effect it will have in 2025. Thanks for the question.

[Operator]

Our next question comes from Yi Chen with H.C. Wainwright.

[Yi Chen, analyst]

I have a question regarding the program in diabetic retinopathy. So do you think -- do you believe the next trial for MDR will be a Phase II or Phase III trial? And which efficacy endpoint do you think will be appropriate as a pivotal trial endpoint? Is it DRSS improvement? Or is it disease progression from nonproliferative stage to proliferative stage of DR?

[Pravin Dugel, executive]

Yi, good morning, and thank you for your question. It's a great question. What I will tell you is, look, there are 2 takeaways that we have from the HELIOS study. One is the line of sight to the success of the SOL programs. There is no doubt whatsoever that this drug is present, safe and effective at 48 weeks per the HELIOS study. The second takeaway is the opportunity that we have for diabetic retinopathy and for diabetic macular edema. I think what's probably forgotten a little bit is that every single patient who had diabetic macular edema in the HELIOS study, and I mean every single patient had improvement. And this was non-center-involving diabetic macular edema. But even in this non-selected patient population, every single patient that had a non-center-involving diabetic macular edema improved with the drug. That's a really important thing.

What we've committed to doing is to going to the FDA and pursuing diabetic retinopathy as well as diabetic macular edema. We'll wait for the feedback from the FDA. We're very flexible in terms of what we need to do. We'll make a very thoughtful strategic choice. As to the endpoints, again, that is pending the discussion with the FDA. But what I want to emphasize here, which I think is, as a clinician, I can tell you is absolutely remarkable, is what we look for is the prevention of blindness in diabetic retinopathy, what we call vision-threatening complications, and that primarily is diabetic macular edema as well as proliferative diabetic retinopathy.

And with a single injection of AXPAXLI at week 48, vision-threatening complications was literally 0. In the control arm, it was over 30%, which is what one would expect with the natural history studies. So to have the possibility of sitting with a patient and saying, Mr. Smith, your chance of having vision-threatening complications that are potentially blinding are over 30% year upon year, but with a single injection of AXPAXLI, if you come to see me once a year as you would go to your dentist for teeth cleaning, your chance of maintaining vision and not going blind is literally 0, that's a pretty powerful argument.

So we absolutely are very excited about diabetic retinopathy and diabetic macular edema, and we will pursue that pending our discussion with the FDA. The only reason, and I want to emphasize that, that hasn't happened as yet is simply because our priority at this point is the SOL programs, SOL-1 and SOL-R. And as SOL-R gets underway, as you've heard, we will be pursuing diabetic retinopathy and diabetic macular edema. Thank you for your question.

[Operator]

Our next question comes from Greg Harrison with Scotiabank.

[Gregory Harrison, analyst]

Just thinking about the regulatory submission in wet AMD, will you need to submit data from SOL-1 and SOL-R simultaneously? Or is there a potential for rolling submission once you have topline data from SOL-1? Just trying to understand how much of a gating factor SOL-R enrollment will be.

[Pravin Dugel, executive]

Greg, thank you for your question, and good morning to you. Look, what I would say is our regulatory path is about as clear as it can possibly be. As you know, we have a SPA for SOL-1. For SOL-R, we have a written Type C meeting response. It clearly states that all we need are these 2 studies for approval, we don't need anything else. Traditionally, the FDA has required 2 positive studies. We believe that, that will still be the case. We are in a very close collaboration with the FDA. But at this point, our assumption is that we will need 2 positive studies as has been the case historically. Thank you for your question.

[Operator]

This concludes our question-and-answer session. I will now turn the call back over to Dr. Pravin Dugal for closing remarks.

[Pravin Dugel, executive]

Thank you. Once again, I'd like to thank everyone for taking the time to join our call today. We look forward to updating you on our progress. And if you have any follow-up questions, please reach out to Bill Slattery, our Vice President of Investor Relations. Thank you again for joining our call. Have a great day, everyone.

[Operator]

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.