KALA BIO, Inc. (KALA) Earnings Call Transcript & Summary

Good morning and welcome to the Kala Pharmaceuticals investor and analyst event. [Operator Instructions] I would now like to turn the call over to Niranjan Kameswaran, Senior Vice President of Strategy for Kala Pharmaceuticals. Please proceed.

Thank you, operator, and thank you, everyone, for joining us today. Today's event will focus on EYSUVIS, our product candidate for the short-term treatment of dry eye disease and is being webcast live. The audio webcast link along with the slides for today's presentation can be found in the Events page on the Investors section of our website, Kalarx.com. Please open the slides now. We kindly ask that you manually advance the slides as the speakers move through the presentation. On this call, we will make certain comments about Kala's future expectations, plans and prospects that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements will include information regarding the regulatory and commercial plans for EYSUVIS, which are based on the beliefs and expectations of management as of this conference call. Our actual results may differ materially from our expectations. The company undertakes no obligation to revise or update any statements to reflect events or circumstances after this conference call. Investors should carefully read the risks and uncertainties described in our most recent quarterly report on Form 10-Q and other filings we make with the SEC which identifies specific factors that may cause actual results or events to differ materially from those described in the forward-looking statement. Since the early days of the company, our mission has been to provide safe, effective and innovative treatments for diseases of the eye. In January of 2019, we launched our first commercial product, INVELTYS, the first and only twice daily postsurgical ocular corticosteroid. Now just over 1.5 years later, our second program, EYSUVIS, is currently under FDA review for the short-term treatment of the signs and symptoms of dry eye disease with a PDUFA goal date of October 30. If approved, we believe EYSUVIS could become the first-line prescription therapy for the short-term treatment of the signs and symptoms of dry eye disease. This could bring profound benefit to the millions of people in the U.S. who are diagnosed with dry eye disease, who today do not have an FDA-approved short-term and rapid-acting treatment option. The approval of EYSUVIS represent a milestone event for Kala. We are deep into preparations for the potential launch and look forward to delivering EYSUVIS to patients and eye care professionals later this year. We are incredibly grateful to the entire organization, our clinical and research partners and to the many patients who have participated in our clinical studies, all of whom have enabled our progress to date. We have a lot of ground to cover today. I want to begin by introducing our guest speakers. We are honored to have with us today, Dr. Kelly Nichols and Dr. Edward Holland, who will provide the optometrist and ophthalmologist perspectives, respectively. Dr. Nichols is a leading expert in dry eye disease with significant teaching and research interest in the field. She is currently Dean of the School of Optometry at the University of Alabama at Birmingham. Dr. Holland is an internationally recognized ophthalmologist who specializes in the field of cornea and external disease. He currently serves as Director of Cornea Services at Cincinnati Eye Institute and as Professor of Ophthalmology at the University of Cincinnati. The agenda for today is on Slide 3 of the presentation. We will begin our program with Dr. Nichols, who will provide an overview of dry eye disease and characterize the unmet need. She will be followed by Dr. Holland, who will discuss the EYSUVIS clinical data and its implications for clinical practice. We will then have a Q&A session where you can address questions to our 2 KOL speakers. Following this, our Chief Operating Officer, Todd Bazemore, will provide an update on Kala's commercial strategy for EYSUVIS, including an overview of market research and ongoing launch preparations. Then, we will host a second Q&A session with the Kala management team. Mark Iwicki, our Chief Executive Officer; Mary Reumuth, Chief Financial Officer; Kim Brazzell, Chief Medical Officer; Hongming Chen, Chief Scientific Officer; and I will also be available for Q&A. I now turn the call over to Dr. Kelly Nichols. Dr. Nichols, please go ahead.

Thank you, Niranjan. It is my pleasure to be with all of you this morning and to talk about a topic that is near and dear to me, dry eye disease. I've been involved with dry eye clinical care and research for over 25 years and have been authors on a number of publications that all pertain to dry eye for the most part. So I've been fortunate to be able to teach optometrist as well as work with optometrists. So if you have specific questions how optometrists might manage dry eye disease, please feel free to ask me in the Q&A. Let's get started. What is dry eye? I know that many of you out there probably know this space really well, but there may be some of those of you that have never really thought much or don't know much new to the field in dry eye. So I'd like to provide for you some backdrop as to how we thought about dry eye over the last 20 years. In 1995, dry eye was first diagnosed -- I'm sorry, dry eye was first defined as a condition that impacted the ocular surface. Prior to that point, it did not have an official definition. And then over the past many years, there have been 2 revisions to the definition of dry eye, culminating in the dry eye workshop, which we called DEWS II in 2017. There are several hallmarks of the condition that have been maintained over the years and through the definitions, primarily that dry eye is a multifactorial disease that results in symptoms that patients describe and results in ocular surface inflammation and potential damage to the ocular surface. It's thought to be one of the most common complaints that patients come to the office and talk to practitioners about, whether that be through a routine eye exam or a specialized exam for dry eye, and it's often characterized primarily by the symptoms, which include dryness, irritation, blurriness, fluctuating vision, can be tiredness of the eyes or even tearing. And some of you might experience these symptoms, maybe in certain environments and maybe you even have chronic dry eye. Symptoms are the motivating factor for patients to come into the practice because -- and oftentimes, it's the motivating factor for our patients to seek treatment at the pharmacy on their own. In Slide 7, you'll see some graphics about the prevalence of dry eye. It is thought that there are over 17 million diagnosed patients in the United States and many more that are undiagnosed that maybe don't quite know that they've -- what they have and also perhaps they've been seeking care on their own. It's thought that through all the studies that we've seen across the world that are approximately 5% to upwards of 50% of patients or people actually have dry eye. It's difficult to pin down the prevalence exactly because I mentioned before, dry eye is a multifactorial condition. And therefore, the exact tests that are used in each study to classify dry eye vary. One thing that we have seen, though, is there can be a mismatch between signs and symptoms in dry eye. And that has led to some differences in the definition and, therefore, the prevalence. And now we're seeing younger individuals have a higher prevalence with multiscreen lifestyles. And this has been a focus over the last probably 5 years of research that's really up and coming. It's been largely a group that hasn't been evaluated too much because we've known for many, many years that dry eye increases every year of life and especially among the female population. If you look at the bottom right corner, you'll see a graphic. It's a trend over age span of life 18 to 75 plus years. The pink bars are female. So you can see the pink bars are higher than the blue bars, which are males over all age groups. The right-hand side is -- and you see the bar across the top is the 50-plus year old group. So you can see that as time goes on, certainly, dry eye increases. How much does it increase, you might be asking. It's hard to get exact incidence data. But if you look at the top on the right-hand side, you'll see some data from 2005 to 2012, which are prevalence values, but this gives you an idea of the increasing incidents. In the younger group, it can be about 0.5% more in 2012 than perhaps it was in 2005. And in the 50-year old group is 4% higher in 2012 than 2005. Therefore, you can say that the increase in prevalence is up to 5% per year. We know that the burden of dry eye, both on the patient and on our society, is expected to escalate as the population ages. And certainly, by 2030, we expect to see a big boom in those that are over the age of 65, like we've been currently experiencing. If you look at Slide #8, you can see some of the common symptoms. Now every patient describes dry eye a little bit differently when they come into the practice and will say, my eye feel dry or uncomfortable. That's the most common symptom that's reported, but they also might describe things like eye fatigue or watery eyes, as I mentioned previously. How a patient describes dry eye doesn't necessarily matter in what the practitioner's treatment plan might be. But it is important to sort of address with a patient how they are experiencing their symptoms so you can see if that improves over time or with treatments. In clinical practice and even in some surveys of patients, we know that patients experience waxing and waning of their dry eye, an easy way to call that is a dry eye flare. So there'll be a time in the course of the year, maybe in multiple times in the course of the year, where they'll have a worsening of their symptoms. In fact, they might even use different words during that time to describe how their eyes feel because they feel worse. And so those times are kind of a rapid inflammation-driven response to a stimulus or what we'll call here a trigger. And there are many triggering things that can cause even layering on one another and increase in symptoms. Flares, though, cannot generally be managed with the current ongoing therapy, whether that ongoing therapy be nothing or a chronic disease treatment, topical treatment. And in those cases, you want patients often come in because there's a worsening that they're experiencing, and they want some aid in helping with that worsening symptomatology. These tend to occur usually at certain times of the year, but then they can occur at individual events when some sort of stress or trigger happens. And the best example of that is if you have a dry eye patient who takes a flight on the airplane, remember those days when we used to fly on airplanes. But yes, in that scenario, under the dry environment, then they might then trigger an existing dry eye to worsen. Moving on to the next slide, Slide #9. I've made a graphic here of some of the triggers that I'm talking about. So you can see there are some new things that were recently -- that we're really interested in studying more, including increased screen time. Certainly, I just mentioned, air travel, but also some surgical indications, like if a patient has dry eye and they're going into cataract surgery, it's a -- we like to get that under control before surgery so that they have a better outcome. In California these days, you know that it's a very smoky condition. So I'm sure that dry eye symptomatology is really increasing. Now of course, lot of those patients have other things on their mind, but I imagine that the environment out there is going to lead to a significant increase in dry eye that will have to be managed. That can also impact contact lens wear. So if you have a smoky environment and you wear contact lenses and you have some underlying dry eye, all these triggers stacking on each other can really make for a flare. Certain medications and starting new medications or changing medication regimens for other systemic conditions can impact dry eye as well as what we -- almost all of us experienced some flare related to allergy that is stacked on to the dry eye or the fragile ocular surface. And those can be specific times of the year like ragweed in the fall or these blooming things in the spring, depending on what geographic location the patient might live. And usually, practitioners know what's blooming in their area and know what to expect in terms of flares. But all these things together then can really impact patients in their flares, and they usually last for a few days. Sometimes they'll go away on their own, but patients are bothered by them enough often that they'll come in seeking care for that flare. And that may be multiple times over the course of a year. All right. I mentioned before, and in Slide 10, it talks about the quality of life. And this has been a particular interest to me over the years because it impacts how patients function in their regular world and their regular lives. And as you know, right now, we're under a very different environment than we used to be -- I didn't mention previously, but one of the triggers that we're talking about right now is something called mask-induced or mask-associated dye eye, or MADE, and that's due to wearing of a surgical mass all the time. So of course, many physicians and nurses have been wearing masks forever in their practical life, but a lot of us now wearing masks and we've never worn them before. So this MADE is when air would blow up out of the top of the nose piece and onto the eyes with increasing frequency. And so in this sort of a literature and out there in the community, doctors are talking a lot about increasing symptoms patients coming in and associating that with a mask wear. And so that can be a trigger. Another trigger would be something like the zillions of Zoom calls that we all have. So maybe there's something called Zoom-associated dry eye as well. But that would just be the increased computer use. And you see this patient here on the left, who's trying to work on her computer, probably late at night, maybe she's got multiple screens. She's got her phone next to her. Maybe she's got the TV on because she needs a little bit of a break. But all of that screen use cause impact on life and then impact their day-to-day performance. Several years ago, I was part of the study, which looked at workers in the work and found that the dry eye symptomatology that patients experience resulted in an approximately a 30% decrease in their ability to perform their day-to-day activities. It did not result in them needing to be out of work. So they're coming to work with the dry eye, and it's bothering them and impacting their job and how they are functioning in their job, but they're still working. So you can imagine what a better place of the world would be if we were able to manage that a little bit better in terms of being able to function and quality of life. There have been other studies which have looked at dry eye and the impact on day-to-day activities, like reading, using computer use, watching TV, et cetera. And those studies have shown that there's about a 2 to 3x more increased difficulty with those activities in patients with dry eye. And certainly, that can wax and wane with flares over the course of a year. We also know that dry eye is the number one reason that patients quit contact lens wear, and that often happens to women, and that's the most common group that drops out, especially in the 50- to 60-year range. Then I mentioned previously that cataract and refractive surgery can be impacted by having dry eye and not being appropriately managed on the front end or the back side. If you don't have a smooth and healthy peer film, the measurements that are made for cataract surgery in order to predict what lens to use can be altered. And if that is slightly altered, it can result in a worse outcome visually for the patient after the surgery. So how is dry eye diagnosed? Well, on Slide 11, you see kind of the sort of 4 main areas of things that we're looking at when we diagnose dry eye clinically. It starts with the symptoms, and I mentioned the patients often come in presenting with symptoms, but sometimes I mentioned also there's a mismatch of signs and symptoms. So you have to drag out of some patients the symptomatology if you see some signs on the ocular surface. But we look at symptoms, and we also assess the quality and quantity of the tear film. So that tear film stability and then the tear film evaluation part. So what does the tears look like? And do they have that tear film homeostasis that we're looking for? If any one thing impacts the homeostasis of the tear film, it can throw the entire system off. So when we evaluate the tear film in terms of stability and quality and quantity, we use a variety of clinical tests, and I'll go over a few of those in the next slide. But primarily, you've read about fluorescein staining and perhaps even conjunctival redness and lissamine green staining as both tests that are used commonly in practice as well as in many of the clinical trials that you perhaps have seen is certainly Kala's clinical trials as well. There isn't one single best test, and so we often do a variety of tests in order to come up with a diagnosis of dry eye. Let's take a look at what some of these tests are. And so -- and I've also mentioned that some of you are very familiar with this space and so you've heard these words before. And some of you might not have even looked up close at an eye, like you're going to see here. But in the first panel, these are drawings to give you a better idea of what we're looking for as clinicians. So the first panel, hyperemia or redness of the ocular surface is shown. On the top eye, there's a slight bit of pink to a normal eye. And then you can see in the bottom, a graphic of what redness would look like if it's covering the entire white part of the eye. And also important to note that the eye lid margin. So along the bottom, you see that's a little bit more pink. And if you were to pull down and look kind of underneath the eye lid, that also gets a bit more pink or inflamed with dry eye. The second series is of what we call fluorescein staining. It's a yellow dye, but when we put it on the eye, and we use a special blue light, we can see little yellow dots. And it's really hard to picture here. But in the bottom of the 2, you right underneath the pupil, the round thing in the middle, there's a little dots there that look yellowish or well are they look greenish. And so under high magnification, we kind of assess how many of those dots are present in a particular area, and we evaluate all the areas of the cornea. So what you can obviously see here in this picture without the magnification is there's inferior damage, so the inferior corneal area has got staining. In the third column, you see lissamine green, which is a greenish dye and when looked with white light, you can see it kind of shows up these little green dots. The most common place for those little green dots is what you're looking at right there, which is the white part of the eye that's closest to the nose. So these are 3 common evaluations that we make under magnification with an instrument called the slit lamp. The last column is -- or the last picture is a test called the Schirmer test, and that measures the amount of tears that the eyes can produce. It's over 5 minutes, we stick that little piece of paper in their eye. And obviously, you can see that this fellow doesn't look quite that comfortable with that strip in his eye. The Schirmer test was discovered or defined or described, I guess, by Dr. Schirmer, a German ophthalmologist in 1903. And so it's been around for a long time, and it still is maintained as one of the more common ways that you can measure the amount of production of tears that come from the glands that produce the tears of the eye. Most studies for clinic -- most clinical trials involve an assessment of the amount of tears that the eyes can make generally for inclusion, but not all of them do. You can also look at the volume of tears that sort of pool right above the inferior lid margin as a quick way to determine clinically if a patient has some lack of the tears on the ocular surface. The next slide talks a little bit, and that Slide 13 talks a little bit about dry eye diagnosis with symptom assessment. Many practitioners will give a survey or ask some questions on an intake form about dryness of the eyes. In clinical trials, we will use validated questionnaires. And so 4 validated questionnaires are listed here in the top box. And across different trials and with different companies, you'll see a variety of these used. The middle picture is of the Ocular Surface Disease Index, OSDI, which has been used probably the most frequently, but the others have been used also in numerous, numerous trials and then non-FDA but other trials, research trials on dry eye over the last 20 years. The OSDI has 12 questions, and they're answered on a 1 to 5 scale in terms of sort of the frequency and severity of symptoms as well as some impact on quality of life. The SANDE questionnaire, which is the questionnaire on the left, also ask about frequency of symptoms, how often and how severe those symptoms are, not shown here, but the SANDE also has an option of determining change over time. So there's a couple of additional questions that can be used clinically if -- or in a study if so needed. The DEQ-5 is a 5-item questionnaire, which has been validated in several studies. It's not often used in clinical trials, but it has been used in clinical practice. As well as the SPEED study, which has been used in a number of clinical studies and patient-based studies as well as -- and it was designed for use in contact lens wear. They all correlate with each other pretty well because they often ask similar questions like about the severity and frequency of dryness symptoms, either individually or as a group, and you can see the correlation is fairly significant between the OSDI and the SANDE questionnaire, a modified SANDE survey was used in some of Kala studies, the Phase I and Phase II clinical trials. Moving on to Slide 14. This is a complicated picture, but I'll simplify it with a couple of sentences. There's a lot going on, on the ocular surface when in response to any type of stimulus, either it be chronic stimulus or in acute short-term stimulus. So when anything in the body responds to a stimulus like that, inflammation occurs. And the inflammatory system is very complicated. What happens once you trigger the inflammatory system? There's an acute response. And then there's a long-term response. The long-term response pulls in a lot of inflammatory mediators to that area. And so the bottom circle that's right above the word lymph node is all -- represents all those inflammatory mediators that are triggered by the innate response that turns into the adaptive response. So then all of those little immune mediators go to the target organ, in this case, we're talking about the eye and continue to perpetuate an inflammatory scenario. It is not that ocular surface inflammation plays a role in all types of dry eye, whether it be the response to a stimulus or something, there's an up-regulation of inflammatory mediators. This has been shown in numerous studies over the years by some very good investigators. One of the ways that we can see that clinically is to view the conjunctival hyperemia or redness, now a member was in the 2 slides ago in the first panel, the redness of the front of the eye. If you were to scratch on the top of your hand, for the remainder of while I'm talking, and then you stop scratching on the top of your hand after that, you would see that you would have redness of that area where you were scratching. Well, you've initiated an innate response to a stimulus by doing so. If you don't scratch on it anymore, then, of course, that's going to go away. Your body is going to adapt to that. Sometimes the body can adapt to it and other times in disease states, the body cannot. So this image sort of shows you that cycle on the ocular surface and demonstrates that looking at the redness is one good indicator of inflammation. Redness, as an indicator, has been used in at least 2 clinical trials as endpoints. And I expect that we'll continue to see it used as more products are developed. A little bit more here on Slide 15 about the innate and the adaptive response to the ocular surface -- of the ocular surface to stimulus, in particular with a flare. So like I mentioned just a minute ago, if you're scratching on your hand and you have an immediate immune response, it's going to go up over a little bit of time, and then it's going to wane. Now of course, a light scratch isn't going to produce much of a response. But if you were to do a heavy scratching, you know that actually might last for a few hours. And then it's going to essentially start to wane. But that response, as I showed you in the previous slide, causes the increase in the adaptive response which can last for days. So if you're thinking about some stimulus that might be impacted or triggered to the ocular surface, especially if what I call that ocular surface fragile if they have a propensity for dry eye, then that can cause a longer adaptive response. And this can incur over and over in a short time frame or it can occur over an overall period of a year, for example, on numerous occasions. When we're measuring some -- when we're looking at the ocular surface and you're thinking about this homeostasis I mentioned earlier, any of these sort of triggers can impact the tear film changing the homeostasis that can -- that -- and one of those things is osmolarity, which results in these downstream pathways that, again, create this adaptive immune response. Corticosteroids target both the innate and adaptive immune response, where some of the other inflammatory-type medications target more the adaptive immunity response. All right. In Slide 16, this is the general approach for dry eye that clinicians use. And it was recommended in the 2017 DEWS report and actually in the 2010 report as well as a stepwise process. So generally, you initiate step 1, move to step 2 and 3 and 4, and this correlates with the severity of the dry eye as well. In step 1, patients in this scenario are often the first time that they've been diagnosed with dry eye and oftentimes that's because they've gone to the pharmacy and tried some palliative dry eye therapies and perhaps failed. But that step 1 in the transitions to step 2 usually is where the doctor would prescribe an anti-inflammatory, immunomodulatory agent or a topical secretagogue. And between steps 1 and 2, that's where most of the patients live in the mild-to-moderate stage. Steps 3 and 4 are ramping up in severity. Step 4 would be the patients that are that usually the most severe, which are receiving what I call the kitchen sink approach to managing dry eye. You're doing everything you can to keep them comfortable, which often includes using topical corticosteroids for longer duration. We usually try to add on as you're managing a patient. Again, and hopefully, you never get to those worse stages because it's much better if you can prevent or limit dry eye from progressing to the more advanced stages over time. On Slide 17, you'll see some images of the vast number of artificial tears and products that patients tend to try and go to the pharmacy and find. Doctors usually have preferred artificial tears that they discuss with their patients if that hasn't been something a patient has tried before, but these are palliative, meaning that they just sort of help immediately and what's going on immediately, but they don't usually address what's going on underneath. Well, they can't address inflammation because they're not anti-inflammatory. So they can help calm or make things feel better. I mean patients usually reply that they feel better when they use artificial tears for a short term, but then their symptoms come back. The next step would be to use anti-inflammatory agents like corticosteroids. They are broad spectrum, and they target both the innate and adaptive immune responses I mentioned earlier. But previously, we have not had safety or efficacy data from large dry eye clinical trials. In optometry, this is particularly important because optometry being a regulated profession prescribes things that are on label. So to have an on-label corticosteroid for dry eye would be a definite bonus for us because it's not something that we would have been able to do before on label. Currently, there isn't an FDA-approved on-label corticosteroid. So this is something that would be definitely of interest, moving forward. After that, there are immunomodulatory agents like cyclosporine, lifitegrast and others, which target the adaptive immune response. And so the vs here isn't intended to say that any one is better than any other. It's just there's a variety of therapeutics in this space that allow for a longer-term treatment intended to be chronic targeting that adaptive immune response. In Slide 18, I'm starting to summarize the first-line short-term therapy need. As I mentioned in optometry, we have not been able to use corticosteroids on indication for dry eye in the past. There are a number of practitioners, both ophthalmologists and optometrists who have used steroids as induction therapy for patients to initiate chronic treatment for dry eye with the thought of the chronic therapies take some time to start working. So if you want to provide the patient with some initial early relief in a short-term way, the steroid is a great way to start therapeutic approaches. Those patients who are on artificial tears or other medications that are experiencing flares would certainly benefit from a short-term treatment in which they could tap down that inflammation and that flare while it's occurring during its window of time. And certainly, there are other indications, which will need to be studied. Should this be approved, will allow for the short-term treatment of signs and symptoms for something like cataract surgery. So having something that can be used short term would be definitely a benefit in the dry eye practice because it's quick and easy and practitioners like quick and easy treatments. It would have fast onset and be effective for signs and symptoms of dry eye if it had that indication, which would be a benefit for practitioners. Being able to target both the inflammation that's from the innate and adaptive immune responses would be beneficial for reducing the overall inflammation on the ocular surface. And certainly, doctors want something that's safe, well tolerated and FDA approved. In summary, dry eye is very prevalent. It's a chronic inflammatory disease, but it does have these episodes where patients worsen or a flare that can occur up to several times a year. And it can last several days. Dry eye has an inflammatory underlying component that involves both the innate and adaptive immune responses and the variety of inflammatory mediators that are on the ocular surface and in those tissues and in the tears. It certainly would be wonderful to have an FDA-approved on indication treatment for -- to address the unmet need. And both optometrists and ophthalmologists play a role in the management of dry eye from the mild to the severe patient. And if you have any additional questions, please do think of them and ask me during the Q&A session. I am concluding my session. I want to thank you all for your time this morning. And back to you, Niranjan.

Thank you, Dr. Nichols. I would now like to turn the call over to Dr. Edward Holland, who will discuss the EYSUVIS clinical data and its implications for clinical practice. Dr. Holland, over to you.

Thank you, Niranjan. It's a pleasure to be here. I'm a cornea specialist and have been treating dry eye patients for over 35 years. It's certainly one of the biggest unmet needs in all of ophthalmology and optometry. Patients are kind of very frustrated with the condition, and we don't have enough approved therapies for these patients. Fortunately, in the last 5 to 10 years, there's been an increased awareness of the significance of dry eye and the quality of life issues these patients face. And so I'm very excited to be working with the Kala team on hopefully the next approved treatment for dry eye. On Slide 21, we'll talk about the formulation of KPI-121 and what makes it unique. The mucus barriers that we have in our body act as a defense mechanism to keep pathogens out of our tissues. But unfortunately, mucus barriers block the penetration of drugs. And so Kala has this AMPPLIFY technology applied to KPI-121 in which a nanoparticle has a proprietary coating, which allows it to penetrate the mucus barrier and increase the absorption of the drug into the ocular tissues, which is very, very important in terms of what we're looking at in terms of efficacy of this drug. Slide 22 kind of looks at the enhanced drug delivery in an early trial. You can see on the box on the right. This was a study on KPI-121 at 0.4% compared to branded loteprednol at 0.5% in penetration of the cornea following a single topical dose. And you can see that there was a three to fourfold increase of delivery of loteprednol into the tissue with the AMPPLIFY technology. The KPI-121 at 0.25% is what has been evaluated in clinical trials. We will report on data from 4 clinical trials in over 2,800 patients, Phase II and then 3 Phase III trials. The original NDA was filed in October of 2017 based on a Phase II and then STRIDE 1 and STRIDE 2 Phase III. A complete response letter received in August of 2019 noted one deficiency and the need for an additional positive trial. And therefore, the STRIDE 3 Phase III trial was undertaken, and the NDA was resubmitted on April 30, 2020, and the new PDUFA date of October 30, 2020, was given. On Slide 23, you can see the design and the key endpoints of the EYSUVIS clinical trials. So many of you know that the FDA's kind of rules for approval in dry eye you have to pick a clinical sign and a clinical symptom, prespecified. You have to hit clinical significance in the sign and symptoms, and then you have to replicate those trials. The prespecified clinical sign chosen by Kala was conjunctival hyperemia at day 15 which, as Dr. Nichols has pointed out, is a very important sign in ocular surface inflammation. A secondary sign was also looked at, and that was total corneal fluorescein staining at day 15. Corneal fluorescein staining is often picked as a clinical sign in many, many dry eye trials. Typically, it takes many, many weeks to move corneal fluorescein staining, and we'll show some data on how well KPI-121 did. The symptom chosen was ocular discomfort severity score and on the SANDE questionnaire at day 15. Certainly, also, safety was monitored, including intraocular pressure data, which is very, very important for any topical corticosteroid trial as well as drug tolerability. And again, this was a very robust trial with over 2,800 patients. Slide 24 shows the efficacy results on symptoms on day 15. And you can see that highly significant significance was seen in STRIDE 1 at p-value of 0.0001. In STRIDE 3, p-value was 0.0002 and a nominal significance was seen in the Phase II trial. There was a prespecified subgroup of patients with more severe baseline symptoms. You can see that on the data on the right. And clinical significance was seen in STRIDE 1 and STRIDE 3. On Slide 25 is pool data showing the onset of symptom improvement, which is very, very important for what patients want when they have a treatment of dry eye. And you can see from mean change from baseline, starting on day 1, there was improvement. It became significant on day 2 and stayed significant through the 14 days that this data was evaluated. So again, it's quite important that patients want a rapid improvement in symptoms that was seen starting early as day 1 in this treatment. Day 8 was the earliest time point in which that was prespecified time point, and you can see that, in this right-hand panel, significant improvement in ocular discomfort at day 8 was seen in all 3 of the Phase III trials. Moving on then to Slide 26. This is pool safety data from 4 clinical trials. And Dr. Nichols has pointed out why topical corticosteroids have not been widely adapted -- is adopted by clinician is because we don't have an on-label steroid, and there is concerns about the safety of topical corticosteroids. Now in looking at the adverse events, there was only one adverse event in more than 1% of patient that was installation site pain. It was seen in 5.2% of the EYSUVIS group and 4.4% of the vehicle group, quite acceptable and very similar to other data. The other AEs were very, very minimal and no real significant difference between the EYSUVIS group and the vehicle. I think data that's going to be very important to clinicians is intraocular pressure. And you can see that the pressure data between the treatment group and the vehicle was very, very similar. We looked at less than 1% of patients experience an increase of intraocular pressure of greater than 5 millimeters of mercury that resulted in a pressure over 21, which is considered to be the cut off of normal. It was seen in only 0.6% of the EYSUVIS group and then 0.2% of the treatment group. And so a very, very acceptable intraocular pressure data showing the safety of this treatment. Slide 28 kind of summarizes the safety and efficacy of EYSUVIS for the treatment of dry eye, significant improvement was seen in both signs and symptoms in the same population in all 4 trials. Conjunctival hyperemia was statistically significant in all the trials. Improvement in the prespecified symptom of ocular discomfort severity was seen in Phase II, the STRIDE 1 and STRIDE 3, with a positive trend in STRIDE 2. Again, surprisingly, the corneal fluorescein staining data was seen in all 3 of the Phase III trials. So EYSUVIS for up to 29 days was safe and well tolerated with no unexplained adverse events. The IOP data was very, very similar between the treatment group and the vehicle group and very -- I think will be very well accepted by both ophthalmologists and optometrists. Minimum adverse events were seen. Again, the drug was very, very well tolerated. Slide 29, I do believe EYSUVIS can meet an unmet need in dry eye. Inflammation is common in all types of dry eye. EYSUVIS provided rapid onset release in both the signs and symptoms. And as Dr. Nichols pointed out, eye care professionals really preferred on-label steroid. If you look at who uses corticosteroids for dry eye, it's really only cornea specialists have been using corticosteroids for dry eye. The comprehensive ophthalmologists and the optometrists have really held back because we don't have an on-label steroid. And there are concerns of raising intraocular pressure in an off-label steroid is quite a concern. I started noticing that patients preferred topical corticosteroids for dry eye back when we were first using the approved topical cyclosporine. When we started using cyclosporine, we noted that 20% of patients had significant discomfort and pain on the initiation of the treatment. And I was involved in a clinical trial in which we pretreated our dry eye patients for 2 weeks with loteprednol and then started the topical cyclosporine. What we noted over the next few years is many of the patients would call in for refills of the loteprednol, not the restasis, and they started self-treating dry eye flares with loteprednol for 3 to 5 days and wanted refills and certainly got me interested in treating in dry eye flares. And as Dr. Nichols has pointed out, this concept of flare, I think, is very important. Slide 30 kind of walks us through what is a dry eye flare. It's defined as a rapid onset of inflammation driven response to a variety of triggers that typically cannot be adequately managed by maintenance therapy. So we know that dry eye flares occur in all patient groups. And data on patient-reported flares, we see that 75% to 90% of all dry eye patients report some type of flare, 81% of patients who are on artificial tears report dry eye flares. And what I think is very important is that patients who are on cyclosporine or lifitegrast, over 90% of these patients report dry eye flares. So I've certainly seen in dry eye patients, whether they're on maintenance therapy or not, where they take artificial tears or not, they have these triggers of flares and the flares are what get patients to call into the office, and it's a real phenomenon. There is no better treatment of a flare than a topical corticosteroid. It's the fastest acting medication that we have. It gives immediate relief to dry eye patients with their flares. What has been the kind of reserve is that clinicians want to use on-label therapy. And because we don't have an on-label corticosteroid, we haven't seen the adoption of using corticosteroids in dry eye flares really outside the cornea specialists' arena. So it is my prediction that EYSUVIS, once approved, will move into first-line therapy. Clinicians find that dry eye patients are difficult to treat. They take long chair time in their office. The complexity of dry eye, whether it's due to aqueous tear deficiency or meibomian gland disease is difficult for the noncornea specialist. And there's not a real push to diagnose, let alone treat dry eye, and that's why it's one of the biggest unmet needs in all of ophthalmology and optometry. I think having an approved topical corticosteroid will allow clinicians to treat dry eye flares and actually position EYSUVIS as first-line therapy for most of their dry eye patients. I thank you for your attention. And certainly, I'm available for any questions that the audience may have.

Thank you, Dr. Holland. We would now like to open the call for our first Q&A session with Dr. Nichols and Dr. Holland. As a reminder, there will be another Q&A session at the end of the event, which will include the Kala management team. So we ask that you please focus on questions for our guest speakers. Operator?

[Operator Instructions] Our first question comes from the line of François Brisebois with Oppenheimer.

I just -- this is probably for Dr. Nichols more. You mentioned the diagnosis rate. And I was just wondering for dry eye, how you get to 17 million? And can you talk a little bit about maybe the different types of dry eye, like evaporative? And if it is evaporative or a certain type of dry eye, how does that affect the potential treatment of choice here? And I have a follow-up after that.

Sure. All right. Also if I -- okay. So it looks at with the prevalence. So most prevalence data is determined based on survey. So of the large population-based studies, they've -- and these are usually incorporated with studies like the women's health study or the men's health study or other large, large population-based studies. They've asked dry eye symptomatology questions that has been validated against a battery of dry eye diagnostic test. So they're often not examine and then find out exactly there is some -- there's an element of prediction associated with smaller cohorts and the way patients respond to symptomatology. And so there's been probably, I'd say 20 or so prevalent -- large prevalent space studies across the world over the past 20 years. And based on the summary of all those studies, you can say, in the U.S. they're about 17 million. And those largely are from the women's and men's health studies that have been done by Debra Schaumberg over the years. So it's a primary data point that would drive that data. That's question number one. Remind me again, question number two -- oh, diagnosis, how do we diagnose different subtypes.

I just mean -- maybe yes, the different subtypes and with a different subtype, such as evaporative dry eye that might not be the majority of the 17 million affects the treatment that prescribers would use?

Good question. So in the diagnosis, we typically will kind of screen for dry eye and then get more elaborate into sort of classifying what type of dry eye it is. It's understood now that there is evaporative dry eye as well as aqueous-deficient dry eye, but they're not separate from one another. They are largely blend. And so you might have more of one than the other, but often both kind of subtypes are present. There's just a predominant type in a given patient, and it can switch over time as well. So treatments usually are targeted towards whichever of those 2 seems to be the most common. But then there's some underlying characteristics of inflammation that occur across both and that increase across disease severity. So it tends to be that the aqueous-deficient dry eyes are often thought of as being the worst ones, the ones that have a harder time sort of rebounding their tear film. And so they may have more therapies than somebody who just has early-stage meibomian gland dysfunction. So it's a complicated assessment if you're really trying to look that much into the details. But if you take a step back and kind of look at the overarching dry eye, I kind of like to say, you look, ask and then do something with the patient and kind of try and keep it simple in terms of approach of diagnosis and therapy after that, that usually corresponds with severity or chronicity. So did that help?

Absolutely. No. Yes. For sure. And then if I just can sneak in one for Dr. Holland here. In terms of the safety profile and obviously always looking at the rise in IOP, have you -- is the medical community maybe concerned that in 29 days it's hard to actually see the rise of IOP? In the real-world where you use corticosteroids, where people are clearly using them off-label even though not as much, I'm just wondering in that period of time, is that enough for doctors to feel comfortable that there's clearly an advantage here versus what else has been used in on the -- that have been used on the corticosteroid side? And then just a quick one on the misdiagnosis rate that that's out there right now for dry eye.

Well, I mean, 2 very good questions. So first on the IOP, the fear of intraocular pressure elevation and optic nerve damage is certainly very real. It's one of the leading causes of lawsuits in eye care is that a patient that is on a long-term corticosteroid and has not been detected. So you have to understand, first of all, the types of steroids, the majority of corticosteroids are keytone steroids, and they have a much higher incidence of raising intraocular pressure and they raise it to a higher level. Loteprednol is an ester steroid. And so it's the only ester steroid we have in ophthalmology. And certainly, its safety profile is very, very good compared to keytone steroids. And then because of the AMPPLIFY formulation technology, the concentration of this loteprednol has been reduced to 0.25%. So it's going to be the -- in the choice of steroid in the formulation and concentration one of the safest steroids, which I think will allow clinicians to feel more comfortable. You're right in that we wouldn't want patients to use long-term corticosteroids without following their pressure. But remember, this is going to be a 2-week indication, and patients are going to be treating flares of dry eye for short term. And they're not going to be on maintenance therapy. Now we do a lot of -- a lot of cornea clinicians have corticosteroids on -- patients on corticosteroids for maintenance therapy, but we bring them in and follow their intraocular pressure. So that whole issue of IOP is important. I do think that EYSUVIS is positioned quite well because of the type of steroid, the low concentration and the indication for short-term use. And your second question, can you give it to me again?

Yes. Sorry, that was very helpful. And then it was maybe more for Dr. Nichols, I guess, I apologize, was more in terms of the diagnosis. This is just s multi-symptomatic. It's -- there's multiple ways to diagnose dry eye. So I'm just wondering if there's anything out there on the misdiagnosis rate.

So if I -- I'll respond first. So dry eye is complicated. And unfortunately, there's a lot of misdiagnosis. There's pure aqueous tear deficiency which really is the sweet spot for a topical cyclosporine, topical lifitegrast, but that's actually the smallest category of dry eye. Then there's meibomian gland disease and evaporative dry eye, which is much more common. And then the most common is actually a mix between some form of aqueous tear deficiency and MGD. The problem is the clinicians, again, non-dry eye specialists, noncornea specialists have a tough time trying to differentiate it. That's why a lot of cyclosporine prescriptions are not refilled because a lot of them are written for the wrong patient, and there's no efficacy. The one thing about corticosteroid, it makes all dry eye better. So whether you are astute in really diagnosing the exact type of dry eye or not, patients with all dry eye diagnosis have flares and corticosteroids make these patients better. So it will allow the clinician to not be as astute in terms of what type of dry eye. And the other type of ocular surface disease that might get misdiagnosed in this category is allergic eye disease, which is very, very common. The symptoms can be confused with dry eye. And one of the most effective treatments for allergic eye disease is a topical corticosteroid. So again, this allows the patient with any of the dry eye symptoms to have a first-line therapy that will be beneficial for even the misdiagnosed patients.

This is Dr. Nichols. I do absolutely agree with Dr. Holland. We often don't call them misdiagnosis. We just call them masquerading disorders or diseases. And very often, they concurrently occur together. So somebody that has a high likelihood of having ocular allergy will often have dry eye too. And if you think back to the definition where it said that a loss of homeostasis of the tear film is the hallmark of dry eye disease. A loss of homeostasis of the tear film can happen because of these masquerading conditions. So if you have allergic eye disease, and it disrupts the tear film, you're going to kind of have dry eye too at that particular time. And so these conditions, blepharitis or other things all do impact the ocular surface in terms of the -- in terms of the homeostasis. And if you can help reduce the inflammation that occurs in all of these conditions, you're going to have a more stable tear film and a closer return to homeostasis of the tear film and the reduction of dry eye.

Excellent. You guys knocked out about 3 other questions I had.

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

My question is for both Dr. Nichols and Dr. Holland. So in your practice, what percentage of dry eye patients will receive corticosteroid eye drops? And since it is off-label use, what the insurance companies provide any reimbursement? Is there any requirement for prior authorization? And how much are patients paying out of pocket for those corticosteroid eye drops?

Dr. Holland, would you field this one?

Sure. So I have a tertiary care practice, and I see lots of dry eye patients at various stages. A lot of them have come to me as the third or fourth eye care professional. And the -- many of them are told to just continue their tears or they just to get an exchange of tear because the clinician doesn't feel comfortable in really trying to understand the underlying etiology and the treatment. The second group of patients I get are patients who have been treated with topical cyclosporine or topical lifitegrast. And while many of these patients are improved, it takes a lot more than a single therapy to manage patients. And as the data shows, these patients, even on maintenance therapy, have flares. So I have -- I use topical corticosteroids. And the vast majority of patients I treat, they're frustrated. They're frustrated with eye care professionals. They're frustrated they have to see so many doctors. And so it's a very high percentage of patients that I put on a topical corticosteroid. Because of the safety aspects of loteprednol, loteprednol has been my first choice for these patients. And I use it in 2 different ways. I use it for acute flares, and I've been managing flares, as I've understood this, both from understanding patients -- those patients I described who were on maintenance cyclosporine, and then they called in for the refills and also working with the Kala team to actually better understand and all the data they have [indiscernible]. So I treat dry eye flares with short-term loteprednol right now. And then I have a lot of patients on maintenance loteprednol as an adjunct to their maintenance therapy. In terms of approval, that has been a problem with insurance companies because we get denials because we don't have an on-label steroid. So frequently, patients can't get that or they are sometimes asked to use a generic. But prednisolone is not the same medication as a loteprednol and certainly not has the safety parameters. Prednisolone is a keytone steroid, is at a much higher risk of raising intraocular pressure. And so I'm not comfortable with that. In terms of the payers, I think the Kala team would probably have a better understanding of that landscape in terms of what patients pay out of pocket right now. And I'm not sure if one of them is available to answer that question.

Sure. This is Todd Bazemore. I'll cover that a little bit later in the presentation. I've got some information on pricing of both the approved dry eye products as well as some of the ophthalmic steroids that are used off label. So we'll cover that a little bit later.

Our next question comes from the line of Christopher Neyor with JPMorgan.

Thinking about your experience treating dry eye patients, what are the limitations you see for the currently approved dry eye treatments? And how are you thinking about the use of Restasis and Xiidra in your practice overall? And then second, you referred to use of topical steroids as an induction therapy. How prevalent do you see this practice amongst clinicians? And what do you see as the potential for EYSUVIS as induction therapy?

So the limitations -- this is Dr. Holland. The limitations on topical cyclosporine and lifitegrast are significant. First of all, they take months to take -- to have an onset. So we have a dry eye patient who comes in with acute symptoms, and they have red sore eyes and blurred vision. And then we have to sit down and have this discussion. We're going to start Restasis or Xiidra. It may take 2 or 3 months for Xiidra to work. It may take 3 to 4 months for Restasis to work. And patients are frustrated with that. That led to the -- that and along with the instillations type discomfort in over 20% of, again, Restasis and Xiidra patients, where the patients have red sore eyes and we stop the treatment, that led to the induction therapy of using a topical corticosteroid. And I was on -- published paper on that whole concept and dosing and things like that. The problem is it's really only been adopted by cornea specialists who kind of understand the role of corticosteroids. And we haven't seen a significant uptake in general ophthalmology and optometry unless say an optometrist is in the dry eye space and really understands it. And the big barrier is the fact that it's not on-label. And they don't want to give a patient a topical corticosteroid for dry eye disease in an off-label steroids. That's the big barrier. So our 2 approved therapies work for a small percent of patients, those would be -- primarily those patients with aqueous tear deficiency. They take months to take effect, and patients are frustrated with that approach. I do believe induction therapy and then use of corticosteroids in -- for acute flares has been widely accepted by patients. And that's why patients like to refill on the steroids, not necessarily the Restasis or Xiidra, because it treats what really bothers them, their acute flares. I think EYSUVIS will slide into this category as induction therapy. We do have patients that absolutely need maintenance therapy, and I prescribe a lot of Xiidra and Restasis as maintenance therapy. But we also need other treatments to go along with maintenance therapy because these patients have flares. I think EYSUVIS will be, again, considered kind of first-line therapy for patients with dry eye and then slide into that role of induction therapy along with the maintenance medications.

And this is Dr. Nichols. I just want to echo Dr. Holland's comment. In my situation in a teaching institution for optometry, in our optometry clinics, we need to focus on treatments for dry eye that we can prescribe. And so the use of corticosteroids occurs in our dry eye clinics. In general, we can't teach to something that's not FDA approved. So it would be really critical for us to be able to adopt something that is on-label, for a steroid that's on-label for all the reasons that Dr. Holland mentioned. And I think that whether it be induction therapy or to aid the patient that's having a flare that's on chronic therapy or even for our patient who's kind of just in the earlier stages of dry eye that's having flares as the primary hallmark of their disease at that stage would benefit from a short-term -- acting corticosteroid.

Thank you all for the great interest in questions. In the interest of timing, we are going to jump to the next session now and defer remaining questions to the second Q&A session. I'd now like to turn the call over to Todd Bazemore, our Chief Operating Officer, who will provide an update on our commercial strategy for EYSUVIS and review our recent market research and ongoing launch preparations. Todd?

Thank you, Niranjan. And thank you, Dr. Nichols and Dr. Holland, for their presentations this morning. I'm going to turn to Slide 32, just to give you an overview of the agenda of what I'll cover this morning. We'll start with the market overview and then dive into our situational analysis with some important recent key learnings, some quantitative market research we've been conducting over the last couple of months, and that will be across prescribers, patients and payers. We'll take a look at our brand plan and where we are in the launch planning process from a timing standpoint, and we have an update for you today also on our sales force planning. Moving ahead to Slide 33. I think as I go through my presentation this morning, there were 3 key points, or takeaways for you, it would be around the significant unmet need that exists within the dry eye market. I think both Dr. Holland and Dr. Nichols nicely covered this. And interestingly enough, knowing that the majority of dry eye patients -- diagnosed dry eye patients have never tried a prescription therapy and those that have tried one of the existing prescription therapies have stated that they're looking for a more effective, rapid-acting alternative that's going to be better tolerated. Secondly, EYSUVIS is well positioned to disrupt the dry eye market. And I think Dr. Holland covered this quite nicely in his presentation of the clinical data. Clearly, EYSUVIS has a rapid onset and provides meaningful improvements for both signs and symptoms of dry eye disease and has a very good tolerability and safety profile. And then we'll spend time talking about commercial readiness, and you'll come away knowing that the Kala Commercial Organization will be prepared to launch EYSUVIS in the fourth quarter of 2020. Moving on to Slide 34 for a market overview. Dr. Nichols covered these data pretty well. There's estimated to be about 38 million people in the U.S. who suffer from dry eye. Currently, more than 17 million of those patients have been diagnosed and are currently under the care of an eye care professional, either an optometrist or an ophthalmologist. Interestingly, 75% of these patients have never tried a prescription therapy. Only about 10% of diagnosed patients today are currently on an FDA-approved dry eye prescription chronic therapy, typically either Restasis or Xiidra. And while there is some use of off-label corticosteroids to treat dry eye disease, it's very limited. Less than 3% of currently diagnosed dry eye patients ever receive a prescription for a steroid. Certainly, those numbers can vary a little bit more when you talk to cornea specialist who are more used to using steroids in dry eye, and we expect will be very early adopters of EYSUVIS. But when we look across the broad patient population of diagnosed patients under the care of an eye care professional and we look specifically at prescription data that are tied to ICD-10 codes and diagnosis codes, it's less than 3% of patients who get a prescription for an off-label steroid. There are a little more than 6 million prescriptions per year written for one of the FDA-approved chronic dry eye therapies and combined annual net revenues are at about $1.5 billion. That's really impressive, considering that 80% of patients prescribed an FDA-approved chronic dry eye therapy, discontinue that therapy within the first 4 months after the prescription is written. And as was presented by Dr. Holland and Dr. Nichols, several large quantitative patient market research studies have indicated that 75% to 90% of dry eye patients report that they routinely experience dry eye flares. Moving on to Slide 35. I think Dr. Holland has covered this nicely. I'll dig a little deeper and talk more about those patients that are experiencing dry eye flares, report that they're experiencing dry eye flares. Very interesting that it's over 80% of patients that are treated with artificial tears only that report flares and 91% of patients that are on a prescription dry eye medication report that they're suffering from flares. These data make sense considering that the current chronic therapies that are approved are typically reserved for patients that have more severe chronic and persistent symptoms. And because of the more severe dry eye, they are likely to be more prone to having breakthrough flares and represent a patient population that EYSUVIS should work well for. These patients report that they have a median of 5.5 per year. These data are updated from previous data we had presented based on some large quantitative market research studies conducted this summer. And so currently, we have it at about 5.5 flares per year for patients. On Slide 36, if we look at the total addressable market for dry eye disease flares in the U.S., 75% to 90% of the 17 million diagnosed patients experiencing 5.5 flares per year represents about 330 million treatable flare days per year or a total addressable market of $8 billion annually in U.S. alone. Moving on to Slide 37. The commercial team at Kala has done extensive market research across all key customer segments. And this research has generated some really important actionable insights as we're preparing to launch. We, at this point, have spoken to approximately 950 eye care professionals. You can see the breakout between ophthalmologists and optometrists on this slide. We have now spoken to over 1,600 dry eye patients, and we have spoken to approximately 40 payers, both commercial and Medicare Part D plans as well as the big national pharmacy benefit managers. Moving on to Slide 38. These are key insights we've learned from our conversations and market research of eye care professionals. First and really interesting, eye care professionals are frustrated with the lack of broadly effective therapies for treating dry eye disease patients and they are motivated to hear about new products, new FDA approved products. Most ECPs define dry eye as a chronic inflammatory condition, but they do recognize that most patients have an episodic pattern of their symptoms or flares that do not require chronic prescription therapy. ECPs believe that there's an opportunity to better manage many of the mild-to-moderate dry eye disease patients that currently go untreated with prescription therapy because the current therapies take too long to work, and they often have significant tolerability issues. Eye care professionals have a large proportion of patients that suffer from flares, and they state that they would discuss the topic of flares more proactively with their patients if there was an FDA-approved short-term treatment option. ECPs cited that the rapid relief and the safety and tolerability profile of EYSUVIS are the top advantages and they view these advantages as favorable to the currently approved dry eye therapies, including the use of -- the limited use of off-label steroids. And finally, ECPs tell us they intend to use EYSUVIS first-line for the treatment of flares as well as adjunctive to chronic prescription therapies to treat breakthrough symptoms or for induction when they're beginning those chronic prescription therapies. Also, as Dr. Nichols pointed out in her presentation, we've gotten a lot of positive feedback and high interest in using EYSUVIS for short-term treatment of dry eye disease prior to ocular surgery, cataract or refractive surgery in order to clean up the ocular surface and generate better surgical outcomes. Moving on to Slide 39. Here what you think are the most important and actionable key patient insights from our research. Patients often self-treat their dry eye disease for several years with over-the-counter artificial tears before they bring it up in a routine annual eye appointment with their eye care professional. Once they've been diagnosed, patients are often first recommended just to try another over-the-counter artificial tear. Dr. Nichols talked about this. Eye care professionals often have a specific artificial tear that they prefer and often we'll recommend a specific artificial tear to their dry eye disease patients when first diagnosed. These patients report that they continue to suffer with their symptoms until their next doctor visit and bringing it up again that idea that the artificial tears only provide some short-term temporary palliative relief but can't really address the underlying inflammation that's causing the dry eye flare. This is really a continuous source of frustration for patients. They say the artificial tears are providing minimal palliative relief. And when they do get on doing chronic prescription therapy, they're very unhappy with the fact that it takes a really long time to work. This slow onset of weeks to months while they're experiencing tolerability issues, this caused a lot of frustration for patients. Patients describe their flares in terms of increased dryness, itching, burning and redness, and the majority say that they suffer from flares whether they're on an artificial tear or a chronic prescription medication. Regardless of dry eye disease severity, the majority of patients say they suffer from flares and desire a fast-acting treatment that they can use on a short-term basis or during times when they're actually experiencing their symptoms. And patients see EYSUVIS as a breakthrough therapy because it provides rapid relief and only has to be used short-term versus chronically. And 90% of the respondents that we have spoken to and shared the product profile with, have said that they intend to ask their eye care professional about EYSUVIS. Moving on to Slide 40. We've done quite a bit of work to develop a dry eye disease patient journey. And I think this is a really good pictorial way of thinking about what a dry eye disease patient goes through before they can ultimately end on prescription medication. So patients typically will start to experience symptoms. They'll do a little online searching to figure out what exactly may be going on with their eyes and typically will go to a pharmacy and start self-treating with an over-the-counter artificial tear themselves. What happens, though, is they continue to have symptoms, flare-ups of their disease, and these flares may increase both in frequency and intensity to the point where the patient will eventually bring up their symptoms to their eye care professional in a routine visit. And what we found very interesting is what happens most often at that point is that the eye care professionals recommending a different OTC drop and patients continue to just treat with OTC artificial tears. And really, this can go on for months and in some cases, even years through multiple visits in which the patient's dry eye disease will continue to worsen, again, with more flares and those flares maybe of increasing intensity. And when they get to a point where eventually, they have more continuous symptoms, at that point, then the eye care professional in about 10% of diagnosed dry eye patients will prescribe one of the currently available chronic Rx medications. We really believe that EYSUVIS represents an opportunity to treat these patients much earlier and potentially even at the time of first diagnosis when they're in to see their eye care professional. Slide 41, I think, some very meaningful approach that we've gotten directly from patients in the market research we've conducted. It really highlighted the fact that patients are suffering and coping with the impact of their dry eye disease and the flares that they're experiencing. Some really interesting quotes here: Once I start feeling the burning, I know it's coming. I don't know if it's going to last a few days or for weeks. My artificial tears help my eyes feel better, but not for long. It's just like a band-aid. Patients that are on chronic medications have said that I should be using my daily chronic drops all the time, but I often stop or forget to take them because they don't really help me anyways. And when we present the product profile, as you can see, there's a high level of excitement across patients. They want to know when EYSUVIS will become available. They do not want to be on daily chronic medications, particularly if they're only experiencing a few episodes a year. They really want to be able to use a more on-demand, short-acting therapy like EYSUVIS. And one of my favorites is that patients have reported that EYSUVIS would be like their security blanket. Moving on to Slide 42. We -- there's really a clear opportunity here to drive proactive discussions about flares and the availability of a short-term treatment option. The vast majority of patients report that they are suffering from these flares. That they're having about 5.5 a year, and these flares are typically lasting anywhere from a week to 2. And patients often are just trying to cope and self-treat themselves with over-the-counter artificial tears. When we talk to eye care professionals, they acknowledge that the majority of these patients suffer from flares. They say it comes up in about 42% of their annual office visits, yet they agree that there's an opportunity for more proactive discussions and that the amount of flares that patients are suffering are probably underreported because they're not being more proactive in questioning patients about whether or not they're experiencing these flares. And we believe from our work that the availability of an FDA-approved short-term treatment option will drive -- help to drive more proactive discussions about the need to identify and treat the dry eye flares that the vast majority of patients report that they're suffering from. Moving on to Slide 43. We've conducted extensive payer market research. At this point, we have some additional research that is still ongoing, and we recognize that formulary access and coverage will be one of the most critical success factors for commercializing EYSUVIS, and some really interesting learnings that have come out of the research to date. One on the management front, dry eye disease is considered a moderate priority category for payers. We know that coverage will depend both on the net cost to the plan as well as the clinical profile and really the differentiation and opportunity to treat patients on a short-term basis versus chronic basis. From a formulary positioning standpoint, commercial payers represent about 50% of all prescriptions in the dry eye market. Medicare Part D represents about 40% of all prescriptions. And as you've heard us state before, the commercial coverage has an opportunity to come quickly within the first year of launch. Medicare Part D coverage typically comes a little bit later. We'll submit your bids in the fourth quarter of this year. We'll be negotiating bids throughout 2021 with many of the ads coming in 2022, although the potential for early ads does exist in 2021. On the restriction front and how the category is currently being managed, the majority of commercialized have unrestricted access for the existing dry eye therapies. There are some soft prior authorizations in place that require a confirmation of diagnosis of dry eye disease. And currently, there are limited restrictions in Part D. It's just either you're on the formulary or you're off formulary. As you can see below, some really positive quotes that we've received from a number of the payers that we've conducted research with. Moving on to Slide 44. The key payer insights that are important as we get ready to launch EYSUVIS. Currently, only chronic medications are available to treat dry eye. Payers perceive dry eye as a lower priority category for them, one that has moderate disease burden. It's not one of the big, what they would call, typical budget breakers for them at this point, which helps it to be more of a low priority category from a management standpoint. Payers had a very positive reaction to the EYSUVIS product profile and the value method of less frequent dosing is very compelling to payers. So what's the approach for EYSUVIS? We're going to continue to educate payers on data showing that most patients suffer from flares and not continuous symptoms. We're going to highlight the clinical results showing the rapid onset of action with a favorable safety profile that's been demonstrated in well-controlled clinical trials for EYSUVIS, and highlight both the clinical and economic benefits of short-term treatment versus chronic therapies in the more mild-to-moderate dry eye disease patient population. And again, followed by a number of really positive quotes from payers in the research that we've conducted, in particular, one of the largest national health plans have stated that this product could be used for the flare population bucket. So I guess there's a potential that it will be used for 85% of all dry eye disease patients. Moving on to Slide 45. I know there's -- one of the big question on all of your minds has been around pricing and where is the pricing of EYSUVIS going to land. As we have said before, we've not completed that yet and obviously, we will not be staying price until after the product has been approved. But I think a really good reference point for all of you is where are some of the current products used to treat dry eye disease priced today. As we've stated, we think that we've got a pricing opportunity that lies somewhere between where some of the ophthalmic steroids that are commonly used to treat dry eye are and then obviously, on the higher end, where the current FDA-approved dry eye therapies are today. So as you can see, Restasis, Xiidra and Cequa are all in a price range of around $500 to almost $600 per prescription. And then the loteprednol formulations on the market, branded Lotemax suspension and branded Alrex, they are now generics for loteprednol suspension. There's -- the 2 leading ones are from Akorn and Oceanside. But as you can see, in the 10-milliliter package, and EYSUVIS will be in a 10-milliliter bottle, the pricing of these products are quite high, even the generics are as high as $375 to $427. So we think this gives us a really, really good price range to work with them, and we have certainly received very good feedback from payers about this. Moving on to Slide 46. Again, some more feedback from eye care professionals in our research, and I think really supportive of the comments made by both Dr. Holland and Dr. Nichols. We know that eye care professionals prefer an on-label steroid for dry eye disease. Off-label steroids have varied safety profiles. There's a risk of IOP elevation when prescribing steroids off-label and IOP elevation can lead directly to damage at the optic nerve. Dry eye disease indication also provides patient comfort and confidence. Patients want to use a drug that is on-label. And the fact that the efficacy and safety has been well vetted by the FDA, again, just further supports the need for an on-label steroid to treat dry eye disease. And in our market research, nearly 100% of eye care professionals indicated that they are interested in the availability of a steroid that has a dry eye disease indication. And this is why we believe EYSUVIS has the potential to become the preferred prescription therapy for the treatment of dry eye disease flares. Moving on to Slide 47, what are our primary focus or goals for the launch of EYSUVIS? It will be to educate on the short-term episodic nature of dry eye disease flares and make sure we're driving routine proactive discussion between eye care professionals and patients about the flares and the need to treat these flares. We will establish EYSUVIS as the first-line prescription therapy in the eye care professional's office and really be promoting the fact that we're the first and only rapid-acting treatment for the short-term relief of dry eye disease signs and symptoms that is safe and well tolerated. And then finally, as we stated before, ensuring access and coverage to EYSUVIS, which will be critically important for the launch. Moving on to Slide 48. You've heard me say before that Kala has been built with very experienced leaders in the ophthalmology field that are really poised to capture this market opportunity. Whether you're looking at our market access and trade group, our marketing teams, the medical affairs team or the sales team, we have extensive experience in both ophthalmology and optometry, have worked on multiple brands, and there are significant dry eye disease experience within the organization and many people that were involved in launching and commercializing both Restasis and Xiidra. We do plan to expand the sales team and have them onboarded for the fourth quarter of 2020, and I'll talk about that plan now. Moving on to Slide 49. Our current plan is to address the growth of our sales organization from the current 56 sales representatives and 7 frontline regional sales managers, to ultimately a sales force of 125 sales reps reporting up through 14 sales leaders. We will do this in a phased approach. In the fourth quarter of this year, we will initially grow to the 14 regions and 14 regional sales leaders and to our sales force initially of somewhere between 90 and 100 sales representatives. This is going to provide us flexibility in case there is a second wave of COVID-19 that occurs in this fall and winter flu season. Currently, our sales organization is back to seeing most of their customers face-to-face. About 80% of our interactions at this point are face-to-face, about 20% of the remaining virtual. And we just want to be prudent in our planning and the growth of the sales force as we head into the fall and winter flu season. The structure also will allow us for rapid future growth once we get ready to expand to the full 125, which we will do in 2021. And also will allow us to take advantage of increasing market access and coverage with both commercial and Medicare Part D plans to pull that trigger on growing to 125. And as you can see, ultimately, we will be covering a little more than 16,000 eye care professionals. It's almost an even split between ophthalmologists and optometrists. This will allow us to cover 85% of the prescribing of all chronic dry eye medications and any off-label steroid usage that's occurring. And the overlap with INVELTYS is almost 100% of the current prescriptions being written. Moving on to Slide 50. From a time line standpoint, the team is really taking this launch in 3 phases. Phase I has been ongoing for some time now. That's really the building of the foundation in preparing the organization in the market for the launch. Phase II is disease state education, which has begun and will be the early experience very quickly after EYSUVIS has been approved. And as we have said before, we'll have the ability to launch quickly after approval of the existing sales force of 56 reps as we then begin to ramp up that sales force to about 100 representatives before the end of the year. And then what we view as sort of Phase III and full commercial launch that will occur at the end of 2020 and heading into the first quarter of 2021. In summary, on Slide 51, really, EYSUVIS presents a transformational opportunity for Kala. It will potentially be the first and only dry eye product that has a rapid onset and is approved for the short-term treatment of the signs and symptoms of dry eye disease. We believe we have the opportunity to capture a large, significant unmet need in the dry eye market with a deeply experienced group of professionals with both ophthalmology and optometry experience across the entire organization. We have a strong IP position that last until at least 2033, and we have proprietary and proven manufacturing processes for the development -- for the manufacturing of both EYSUVIS and INVELTYS. Finally, we have cash and cash equivalents of $184.6 billion (sic) [$184.6 million] as of June 30, 2020, and we have stated that our existing cash resources are expected to fund operations into at least the second quarter of 2022. And as I presented earlier, the total addressable market for dry eye disease flares is massive and in excess of $8 billion annually just in U.S. alone. Operator, that concludes my prepared remarks for today. Why don't we open up the line for Q&A.

[Operator Instructions] Our first question comes from the line of Tim Chiang with Northland Capital.

Todd, maybe just a question on payer coverage or payer access for EYSUVIS. Where do you expect EYSUVIS to fall on the tiering, assuming it gets approved, this fall? And do you think it would be covered on a comparable level to other chronic treatments like Restasis and Xiidra?

Really good question, Tim. And I think there's a lot of opportunities there. I think we'll have some mix of Tier 2 and Tier 3 mostly. And so if you think of a commercial plan, think of that co-pay range of typically being sort of a $25 to $50 range. Obviously, we have the ability to use co-pay cards and coupons for patients that have a higher tier, higher co-pay to help buy them down to a lower level, and that's very, very common, as you know, in the industry today. I think where the upside opportunity exists, particularly as it relates to chronic therapies, is we have been pleasantly surprised and I researched to have several payers come back to us and tell us that there may be an opportunity to step chronic therapies through EYSUVIS, meaning that they're interested in the ability to potentially use a short-term treatment on an as-needed basis just to treat flares and try that approach with patients first before approving reimbursement or use of a chronic therapy in patients. So that's something that's been interesting. The research will continue to pursue and learn more about that. But we expect EYSUVIS to achieve broad open formulary coverage with both commercial and Medicare Part D plans. As I stated before, the commercial coverage will come quicker. We expect that to be coming onboard throughout 2021. And the Medicare Part D coverage will take a little bit longer as it always does with new product launches.

Got it. I have 1 follow-up for Dr. Nichols and Dr. Holland. Obviously, you guys have talked about the market, the disease state and the clinical data. Assuming EYSUVIS is approved, I mean, do you see there being some pent-up demand to prescribe a product like EYSUVIS? And how quickly would you consider switching from off-label steroids to an on-label steroid product like EYSUVIS?

I have a very quick comment, and then I'll pass it over to Dr. Holland. Actually, that's -- actually, Dr. Holland, why don't you go ahead and start? Because I think you can answer both with the comment about the steroid use and switchover?

Yes. So I think there's 2 groups of clinicians that we want to think about. The cornea specialists have been using corticosteroids for years and years and years. We will switch to an on-label because we get our patients in night, sometimes we write off-label. But the pent-up demand is there because we have not been able to convince the general ophthalmologists, the optometrists to use a topical corticosteroid, and Todd showed that data quite well that even though we kind of -- cornea people kind of get to set the disease stage and the treatment paradigm, and that's really what drove the adoption of Restasis and Xiidra. But unfortunately, the barrier of having a non-on-label steroid is too great. And I think clinicians will rapidly adopt EYSUVIS because it will be on-label.

I want to briefly add to that, too, that since we've been talking about dry eye for so long, so many years, and have had so few treatment options. Anytime a new treatment option comes to the market, there's a significant amount of interest in understanding that particular product and wanting to try it in patients to expand the toolkit, so to speak. So there's always a lot of enthusiasm across both segments, I think, when a new product is launched in the dry eye space.

Maybe just 1 follow-up. Maybe you could all provide some feedback to it. It seems like a lot of prescription eye care products are in samples? I mean do you expect sampling will be an important part for a successful launch of EYSUVIS and the adoption of EYSUVIS?

Sampling is kind of a mixed bag. I think sampling really hurt Restasis because patients who used the sample and find out the drug didn't work immediately and lost faith in the drug. I don't -- I mean, I think sampling, and Kala can answer the strategy. But we know it's going to work immediately. And patients are going to get immediate relief. Samples are important to try to get people to get convinced the drug works and then convince them to take it maintenance wise. And that's how sampling has been -- typically been used in ophthalmology. This drug will have an immediate effect on the first day and the patients will understand how to use it and how often to use it. So I don't think it will be that critical, but Kala can maybe answer how they strategize that.

Yes. This is Todd. Look, I agree with everything that Holland said. We will have samples available. We do have a smaller sample size of the new trade. So where clinicians feel like it would be helpful to give a patient a sample so they could have a few days of therapy right away and start getting that benefit immediately while they're getting their prescription filled, those samples will be available.

Okay. Our next question comes from the line of Liana Moussatos with Wedbush Securities.

This is Andrea for Liana. Continuing from the last line of questioning for Dr. Nichols and Dr. Holland, and maybe I'm asking this in a similar way. But across the spectrum of symptoms, how comfortable are you in prescribing EYSUVIS before other DED treatments? And maybe you can put a number from your personal practices as to how quickly you would prescribe EYSUVIS for your patients? And then I have a follow-up question for Todd.

This is Dr. Holland, I'll answer that. Almost every patient I see, by the time they get to me, is frustrated. So I almost treat every patient with the topical corticosteroids. So I will convert that to EYSUVIS as my first-line therapy. And number one, it makes me look at it better than the other eye care professionals because they've been rotated on artificial tears. They've been treated maybe with cyclosporine lifitegrast where that isn't the best approach, and they're frustrated. And I put them on a topical corticosteroid. They get immediate relief, and they think I'm a better clinician. And the clinicians realize that corticosteroids will be part of all dry eye patients therapy, whether they use it only for flares, and the patients will kind of help decide that, or whether they will added on to maintenance therapy because we know our patients who are on maintenance therapy have flares. So in my practice, it's probably well over 90% of patients that I see with a dry eye diagnosis, if they haven't been instructed on how to use corticosteroids for flares or an adjunctive maintenance therapy, then I put them on.

Okay. And then let me ask you as far as monitoring your patients, you have experience with the off-label steroids. So would you be more inclined to monitor patients with EYSUVIS more frequently given no experience at this point? Or would you kind of trust that based on the superior safety profile that they would be better off than the current steroids? And then I'll follow up with the question to Todd.

Okay. So because EYSUVIS is loteprednol, which is the safest of the topical steroids, and it's 0.25%, it's going to have the best IOP safety parameters of all steroids we have. That being said, we -- when we are following patients who take corticosteroids for dry eye, we like them to tell us how often they're using it, how many days in the average month, and we do -- if a patient uses intermittent steroids or certainly chronic steroids, we typically follow them twice a year to check their intraocular pressure. And patients have to understand the side effects. Again, I think it's going to be very, very uncommon that we'll see an IOP rise if we treat short-term use of EYSUVIS for flares. But it's important to tell patients if they're -- I don't know if steroids, they need to have their intraocular pressure checked, and that's true for any steroid.

All right. Great. And for Todd, just given the generic market for steroids and the obvious superiority with EYSUVIS, is that kind of a low-hanging fruit area that the sales force plans to address?

Sure. So look, there's -- as we said earlier, really and I think nicely covered by Dr. Nichols and Dr. Holland. With the exception of some dry eye or cornea specialists, there's limited use of steroids out there right now. So certainly, anybody that is using steroids in dry eye will be low-hanging fruit that we'll go after right away. I'm very pleased, that's the first time I heard talked Dr. Holland, knowing what his intent was, but knowing that many others likely feel the same way and will convert. Many cornea specialists are using a lot of steroids today will likely quickly convert that over to on-label EYSUVIS is really encouraging. I think it speaks to a lot of pent-up demand. And certainly, we'll target that with our sales force. But broadly, we're going to be calling on the ophthalmologists and optometrists that represent about 85% of prescribing for all dry eye products. And we certainly think that the -- over time, the biggest opportunity is the 90% of patients that have more mild-to-moderate disease that are currently not treated with a prescription therapy. We know that 10% of prescription therapy will get EYSUVIS added. That's, maybe again to use your phrase, low-hanging fruit. But really, the opportunity over time is that 90% of patients today are not on a prescription therapy because they have a more intermittent pattern to their symptoms and the current therapies are inadequate for treating that because of long onset of action. So that 90% of patients today that are sort of suffering and coping just using over-the-counter artificial tears, that we think represent the biggest market opportunity for EYSUVIS to become first-line prescription therapy.

Our next question comes from the line of Biren Amin with Jefferies.

Okay. Great. So maybe I'll start with a question for the company. I think, Todd, you mentioned in your presentation that you estimate that the market for dry eye flares is about $8 billion. Why do you think we haven't seen more programs focused on dry eye flares? Because to date, I think the focus has been on developing chronic therapy for dry eye versus acute dry eye flare.

Yes. Really good question, Biren. There was a program years ago, I believe it was Allergan's, that was not successful. There was also a little bit of some clinical work done in the early days of Lotemax looking at potentially pursuing that. Interestingly enough, going back probably 10 years ago, there was some off-label promotion occurring from Bausch with Lotemax for dry eye disease, and it generated a warning letter from the FDA. And for whatever reason, the program did not continue at that point. I would tell you that I think the biggest issue is what we've seen in our own clinical development program and others have seen, which is just really, really hard to do these studies, right? And it takes a really dedicated and large investment in order to get across the finish line to produce the type of data that could generate an FDA approval for signs and symptoms of dry eye disease. So it's hard for me to say exactly what decisions were made or not made. We've certainly seen some have tried smaller studies, call them sort of maybe early studies to determine whether to move forward for program and some of those studies were unsuccessful. But fortunately, we've made the commitment and the investment to get to where we are today.

Got it. Okay. That's -- and then I guess I have a couple of questions for the doctors. What type of compliance do you typically see in patients that receive dry eye treatments? Maybe can you talk about, I guess, for both compliance on approved dry eye medication. And then to Dr. Holland, what's the compliance rate for steroid drops that you prescribe? And then I guess the last question for both is what would you expect the compliance for EYSUVIS to be since it's a 4x daily eye drop?

Well, that's a great question. I mean, compliance is a huge issue. It's a much, much bigger issue for chronic therapy. So if we look at data from glaucoma, about half the eye drop prescribed are taken on a chronic basis. It's different for short-term therapy. If you tell patients to take a drop 4x a day for 3 or 4 days, they're going to do it. So I think it's the length of therapy. So I think patients -- I know patients are compliant with topical corticosteroid for acute flares. They're not as compliant for maintenance therapy. And we see Restasis scripts not refilled. The Xiidra scripts were not refilled. And then in some of my severe patients who are on long-term corticosteroid, and they are all using the PRN for their acute flares and they're not using them on a daily basis, which, in some cases, we recommend. I think patients will figure out their dosing. I think they'll stick with -- if 4x a day makes them feel better for 4 or 5 days or 10 days, they'll do it. They may find that twice a day may work in their situation, then they'll do that. Patients don't like chronic medicines. We know that from all fields, but they will comply with short-term recommendations for therapy.

And I'll echo that. I was just going to...

Sorry, go ahead Dr. Nichols.

This is Dr. Nichols. And I was just saying that I agree with Dr. Holland about the short-term use and even if you think about your own use, last time you were prescribed an antibiotic for a 2-week period, you probably made it through almost all of them. And then if you had to do it for a month or 2 months or 3 months, certainly, your own personal ability to do that would wane. And we see the same thing with dry eye patients. From the standpoint of -- I see a lot of patients that are coming in for clinical trials. And of course, in those scenarios, they are not allowed to be on other medications, but often patients report -- almost every single patient reports having tried and discontinued some other chronic therapy before coming into the trial. So it's quite widespread. I just want to make one additional comment about that B&L story that we just heard a second ago, which I found fascinating because several years ago, I mean, multiple years ago, in the optometry space, there was a small group of people who are promoting the use of corticosteroids for dry eye on a sort of pulsed therapy, and it was quite popular, and then it ended. And I think that corresponds probably with that warning letter that occurred because, of course, optometrists want to do things on-label. So I do think that within optometry, this would be widely accepted, largely because it's on-label and also because it's short-acting and patients will adhere to this type of therapy for a short-term.

Our next question comes from the line of Christopher Neyor with JPMorgan.

Great. A couple of questions for Todd on formulary positioning. So you referenced Medicare Part D targeting coverage for 2022 and potentially adding earlier in 2021. For those patients that aren't on formulary coverage, how are you thinking about the strategy for addressing those patients? And then secondly -- I'll follow up with the second question afterwards.

Sure. Sure, Chris. Really good question about Medicare Part D. Look, our plan with those will be to use some of the second -- or I guess, I should call them third-party prior auth vendors that exist out there today. We have certainly watched the launch of Xiidra from Shire, employed that tactic successfully, where there are groups you can work with that actually assist the doctor's office in the prior auth process. And as you know, prior auth before you achieve formulary coverage within either a commercial or Medicare Part D plan is an effective way to be able to get prescription approved and reimbursed and paid for by the payer. So we certainly will have tactics like that. We can target towards those Medicare lives. And as I said, we do expect some early adds to occur throughout the year in 2021. It sounds like there's another question there, too.

Yes. Maybe addressing kind of you mentioned Tier 1 and Tier 2 expected coverage for -- particularly for commercial life. How are you thinking about the co-pay levels and the differences between those 2 plans? And then for patients that maybe fall below Tier 2, how you're thinking about the out-of-pocket cost for those patients?

Yes, really good question. So if you think about what a traditional co-pay ranges within commercial plans and sort of Tier 1, which is usually just reserved for generics. And Tier 2 and Tier 3, typically where brands fall with the difference between being Tier 2, typically preferred branded position and Tier 3 nonpreferred branded position. I find that those co-pay ranges for Tier 1 can be in sort of the $15 range; Tier 2 in sort of the, call it, $25 to $35 range; and Tier 3 maybe more the $45 to $50 range. And commercial really becomes a lot less of an issue, right? First off, nobody expects brands to be in Tier 1, generally either in Tier 2 and Tier 3. And as I was stating earlier, you can provide co-pay cards for commercial patients. That can help to buy down the co-pay a little bit and close the gap if you're Tier 3, for example, to get to Tier 2, or if there was any patients that had sensitivity about a co-pay differential between a Tier 2 or Tier 1, you can certainly use it in that instance as well.

Super helpful. And then last 1 for me. For the commercial launch, assuming a successful approval, how are you thinking about pacing the expansion of the commercial sales force? And I guess what factors are gaining around the pace of that ramp?

Sure. And before I jump to your final question, I think the other important point I should make is, remember, this is going to be a short-term, more sort of acute or PRN treatment. And I find typically where the co-pay differential becomes more of a factor with patients and physicians or for chronic therapies that the scripts getting filled every month. So if you have a slight co-pay differential for a therapy, they may only need to fill a few times a year, it typically is much less of an issue. Moving on to your question about sales force and ramp. As I showed in our plans, we plan to grow the sales force initially here in the fourth quarter of this year to somewhere between 90 and 100 reps. And then, we'll be in a position that we can very quickly go from that to 125 reps, dependent on market conditions. And those market conditions, as far as I'm concerned, I think, are sort of 2 things. One is what's going on with the pandemic at that time. Have offices remained open? Do we still have really good access for in-person face-to-face promotion? And if so, we can move very quickly to go from the, call it, 100 to 125 reps. And that's because we're cutting the geographies, the 14 different regions in all the sales territories to support the future growth, having 14 regions of 125 reps. What we're just doing is looking at some territories where we say, well, in the future, they may take 2 representatives to cover this area. But initially at launch, we can cover the area of 1 representative. We just think it's a smart and prudent way to approach the launch. The other thing, too, is to see what the ramp of market access is as well. And if market access starts to come very, very quickly, and the markets are open in lieu of what's happening with the pandemic, again, we can pull the trigger to go very, very quickly and bring on the additional, call it, 25 to 35 reps to finish our growth to 125. We've spent a lot of time -- I've spent a lot of time as has the team talking to multiple companies over the prior months that we've had to launch products during the pandemic, and we are certainly applying a lot of the learnings we've gathered from other companies with regards to our sales force plan and the phased approach to expanding the sales force.

Our next question comes from the line of François Brisebois with Oppenheimer.

So just -- I know we've talked about this a little bit, but I'm interested in the potential for treating just the flares and not necessarily being adjunctive to a chronic therapy. And I think this has a lot of impact on the market opportunity here. So not being a blinding disease. And I understand the IOP has been great so far, but is there any hesitancy or how comfortable do -- should we think, and this might be more for Dr. Holland and Dr. Nichols, just on the comfort of just giving corticosteroids as if it's 5.5x a year that people might feel these, and then never go into chronic, but these come back every year, let's say. I'm just wondering on the comfort level of -- and just because of the lack of long-term data on safety, or is this something where the IOP rise isn't really a concern? Because if you just -- if it's a quick treatment and let's say they come -- they only have it twice a year when you stop treatment, the IOP should come back down. I'm just wondering of the feel for that. And then maybe, Todd, you can touch on -- just trying to see the market as kind of a recurring revenue here of the 5.5x usage a year versus -- so just the nuance between being acute therapy on its own but almost becoming chronic because of the reoccurring flares. So just trying to understand that.

This is Dr. Holland. Maybe I'll start first. Yes. So I mean, the average patient has somewhere between 5 and 7 flares a year. Some will be less, some will be more. We're very comfortable using this type of steroid because typically, when patients have IOP spikes, it's on chronic use of steroid. And again, these patients will be using this steroid for 2 weeks or less. So it's -- but you're right in that if a patient has 5 or 6 or 7 flares a year, would they be better off on maintenance therapy? And actually, that's what we do now. I do have patients that have either symptoms all the time or so many frequent symptoms that we put them on maintenance therapy. Obviously, our concern on IOP changes, if they're on maintenance corticosteroid, we just changed how we follow them. The data on IOP rise on chronic loteprednol 0.5% is less than 2% of patients have an IOP rise, so -- which is very, very different than the other groups of steroids, which are called ketone steroids. In ketone steroid patients, the risk is greater than 10%. So it's a safer molecule, and this is a lower concentration. But I see patients will be using it for flares and also kind of more frequently, you could probably quantify them as more maintenance therapy and it's exactly what we do now in following our patients around corticosteroids for dry eye.

Yes. And Frank, I think if I just jump in on the part of the question you were gearing towards me. Look, there are some patients that will treat for the full 2-week course of therapy. We certainly will encourage that. Considering if you look at the clinical trial results, patients continue to get better every single day over the 2-week period. And so sort of that idea of getting the full benefit and effect. But we're realistic. We realize that in many cases, the eye care professional tell the patient that look, use it for a few days and see how you feel. And after a week, if you feel better, you don't have to keep using it. And so let's say that, that 5.5 flares on average per year with patients treating somewhere between a week and 2 -- a week or 2, it's still less than 10 weeks of treating throughout the course of the year, right? So less than 20% of the time, the patient has to be on an eye drop to treat their dry eye disease versus the current chronic therapies, which are intended to be used every day for the rest of their life. So we really think that the profile of EYSUVIS is going to fit really, really nicely with what we know having spoken out to 1,600 dry eye disease patients. It's exactly what they want. And by the way, it's not unique to dry eye, right? It's what all of us want, which is when we have a highly symptomatic condition, we want a therapy that's going to work the first day we take it. We only want to have to take it for a few days or a week or 2 until our symptoms are gone. And then we don't want to have to use our medication again until the next time we become symptomatic. And knowing that, that's the way patients with dry eye disease describe their disease to us and their desire to treat their disease, we think our EYSUVIS will be very well positioned to take advantage of that.

That's great. And then just a last 1 here. This is something I've just been wondering about. It's more of a geographic question, Todd, from maybe your research. Any thoughts on maybe partnering with smaller pharmacies just because I think the impact here of, let's say, your -- the docs practices in maybe a less affluent region. And I'm just wondering, that transition that you talked about from OTC to going on to something. I'm just wondering if there's any thoughts in these smaller regions where the out of pocket, all those sometimes could be relatively small for an acute condition. I'm just wondering any thoughts on the impact of people just going for what might be still the cheapest in different areas.

Yes. So we'll have a broad trade and pharmacy education program in place targeted both to large national retail chains as well as working with smaller, more regional players, particularly if you think of sort of more of the kind of independent specialty type pharmacies that fill a lot of prescriptions in the ophthalmology field. So we'll be working very closely with both. And we agree with you, there's probably a significant opportunity to not only educate pharmacists about now the availability of the first on-label steroid to treat dry eye, but the benefits for patients, particularly if there's patients that are continuously reaching for an over-the-counter artificial tear. So we agree with you, and certainly, that is in our planning.

Okay. Great. And then the -- you've talked about WAC, and I appreciate you guys kind of comparing the same volume there, but it's sometimes a little tricky on that. But the -- can you talk about the -- any color on the gross to net here thought or is that too early to talk about?

Yes. I'd say that's too early. And we're honestly still in the throes of doing the final pricing and rebating our work and research with payers. So I'd say more on that after launch.

We have no further questions in the queue. I'd like to turn the call back to Todd Bazemore for closing remarks.

Thank you, operator. And in closing, I just want to thank everyone for taking the time to join us this morning and your continued interest in Kala. I'd also like to convey our gratitude to Dr. Nichols and Dr. Holland for joining us today and providing their value perspective. We look forward to updating you again really soon and hope that all of you stay well. So thank you for this morning.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.