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

Good morning, and welcome to Kala Pharmaceuticals EYSUVIS FDA-approved conference call. Please be advised that today's conference call is being recorded. [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. Hi, everyone. Welcome to our conference call to discuss the FDA approval of EYSUVIS. You can access our press release announcing the approval by going to the Investors section of our website at Kalarx.com. With me on today's call are: Mark Iwicki, Chairman, President and Chief Executive Officer; Todd Bazemore, Chief Operating Officer; Mary Reumuth, Chief Financial Officer; Kim Brazzell, Chief Medical Officer; and Hongming Chen, Chief Scientific Officer. Before we begin, I would like to caution that comments made by management during this conference call about Kala's future expectations, plans and prospects are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. I encourage you to review the company's filings with the Securities and Exchange Commission including, without limitation, the company's most recent quarterly report on Form 10-Q to identify specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements. Factors that may affect the company's actual results include, but are not limited to, the impact of extraordinary external events such as the current pandemic health event resulting from COVID-19, whether the company will be able to successfully implement its commercialization plans for EYSUVIS, whether the market opportunity for EYSUVIS is consistent with the company's expectations and market research, the sufficiency of the company's cash resources, broad enforcement of intellectual property, legal compliance and regulatory requirements and other economic and competitive factors. The content of this conference call contains information that is accurate only as of the date of the live call today, October 27, 2020. The company undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. Also, please note that today's call is being recorded, and an archived recording will be available on our website, as indicated by our press release. Now let me pass the call over to our CEO, Mark Iwicki. Mark?

Thanks, Niranjan. Good morning, everyone, and thank you for joining us this morning. Today, we announced that the FDA-approved EYSUVIS for the short-term treatment of the signs and symptoms of dry eye disease. This milestone represents a major achievement for Kala. With EYSUVIS, our second FDA approval in 2 years, we are now able to deliver the first prescription therapy indicated for the short-term treatment of dry eye disease and, more importantly, the first therapeutic that specifically addresses the acute flares that affect approximately 80% of dry eye patients. This approval fosters Kala's mission to become a leader in ophthalmology and optometry, and we are excited to build on the robust foundation we've built through our experience with INVELTYS to establish EYSUVIS as the preferred first-line therapy for dry eye disease. This achievement also marks a critical moment for people living with dry eye disease who have been waiting for a therapy that is safe and effective and capable of providing rapid relief for the signs and symptoms associated with dry eye disease flares. Before turning to today's news in more detail, I want to take a moment to thank all of my Kala colleagues as well as the investigators and patients who have contributed to the development of EYSUVIS. This approval was a tremendous accomplishment, and we are excited to bring to market a medicine that we believe will help millions of patients suffering from dry eye disease. Over the last few months, our commercial team has been developing a launch strategy that will allow us to effectively reach key eye care professionals, including both ophthalmologists and optometrists, and to cover more than 85% of the prescribers of dry eye disease prescriptions. As Todd will describe, our launch of EYSUVIS is bolstered by several differentiating characteristics which we believe will drive success and enable EYSUVIS to make a big impact in the dry eye market. First, with this approval, EYSUVIS becomes the first and only corticosteroid with an FDA indication for the treatment of dry eye disease. Importantly, the indication covers both signs and symptoms of the disease. Second, EYSUVIS has a unique product profile. Like INVELTYS, it utilizes AMPPLIFY, our proprietary mucus-penetrating particle drug delivery technology. This enhances the penetration of drug into the eye, significantly increasing drug delivery to target tissues, by increasing mobility of drug particles through mucus and preventing them from being trapped or eliminated. EYSUVIS also has a predictable safety profile with intraocular pressure, and adverse event profiles comparable to Vehicle across 4 clinical trials in over 2,800 patients. Finally, EYSUVIS is approved for the short-term treatment of dry eye disease, which we believe makes it the ideal first-line prescription product for millions of patients. As a result, we believe EYSUVIS has the potential to usher in a new era in the treatment of dry eye disease and offer an important new medicine to millions of people across the United States. We are thrilled with today's approval and looking forward to introducing EYSUVIS to the market by year-end. We also believe that we are well positioned financially to successfully launch EYSUVIS. As of September 30, 2020, we had cash, cash equivalents and short-term investments of $159.1 million. We anticipate that our existing cash, cash equivalents and short-term investments, along with sales of INVELTYS, will enable us to fund our operations into at least the third quarter of 2022, with additional cash runway expected based on revenues from sales of EYSUVIS. Let me now turn the call over to Kim to further review the approval, then Todd will discuss our commercial plans. Kim?

Thank you, Mark. Let me begin by echoing Mark's sentiments about the significance of this accomplishment and how excited all of us at Kala are to achieve this important milestone. I want to congratulate our team who helped us get to this point and extend our thanks to all the patients and investigators that participated in the clinical trials. The approved indication for EYSUVIS is for the short term up to 2 weeks treatment of the signs and symptoms of dry eye disease. This represents the first corticosteroid approved for the treatment of dry eye disease, the first prescription product specifically indicated for the short-term treatment of dry eye and only the second product approved for treating both the signs and symptoms of dry eye disease. Included in the clinical section of the label are the dry eye symptom data for days 8 and 15 of the trial. These data demonstrate significant improvements in ocular discomfort severity in 3 clinical trials for each of the time points. This is the first approved trial product in which data is showing significant improvements after only 1 week of treatment are presented in the label. More importantly, in the clinical trial, significant improvements in symptoms were seen as early as day 2 in STRIDE 1 and day 3 in STRIDE 3, which we feel will be an important feature of EYSUVIS compared to other prescription dry eye products. The data for the clinical sign of conjunctival hyperemia at day 15 are also included in the label, which demonstrates significant improvement in all 4 clinical trials. We feel this is also a key feature of EYSUVIS as hyperemia is a hallmark sign of inflammation in dry eye disease. And these status suggest a rapid improvement in the ocular inflammation that drives the disease. Only one adverse event is reported in the label, installation site pain, which was reported by 5% of EYSUVIS patients compared to 4% of those treated with the Vehicle. All other adverse events were reported by less than 1% of patients. Although the rates of intraocular pressure are not included in the label, it should be noted that in over 2,800 patients studied across our 4 clinical trials, the incidence of IOP was similar between EYSUVIS and placebo, with only 9 of those 2,800 patients or 0.6% demonstrating an increase in IOP of greater than 5 millimeters, leading to IOP of greater than or equal to 21 compared to 0.2% of patients treated with placebo. We believe the excellent, safety and tolerability profile is another important feature of EYSUVIS. With regards to warnings and precautions in the label, those in our label are similar to those and other approved ocular steroid products. As a reminder, the full prescribing information for EYSUVIS can be found at www.eysuvis.com. With that, I'll turn the call over to Todd to discuss our commercial strategy. Todd?

Thank you, Kim. I'd like to start by thanking Kim and the clinical team for all of the tremendous work they've done over the years to advance EYSUVIS through development. Their efforts, coupled with the support of the thousands of patients and the physicians who participated in our clinical trials, played a critical role in bringing us here today. We are so appreciative of all your hard work and join you in celebrating this achievement on behalf of the millions of people with dry eye disease. Our commercial team has been working hard to prepare for this day with the goal of developing and implementing a comprehensive launch strategy that will enable us to rapidly and efficiently deliver EYSUVIS to eye care professionals and their patients. Let me begin by reminding you of the dry eye disease treatment landscape. Until today, there was no FDA-approved option specifically intended for the short-term treatment of the signs and symptoms of dry eye disease. This is despite the fact that dry eye disease has an estimated prevalence of 38 million people in the U.S. alone, with more than 17 million patients diagnosed and currently under the care of either an ophthalmologist or an optometrist. Remarkably, approximately 75% of these patients have never tried a prescription therapy. And of the estimated 10% of patients prescribed a chronic prescription therapy, 80% discontinued treatment within the first 4 months. Currently, only about 3% of the 17 million diagnosed dry eye patients receive an off-label prescription for a steroid eye drop. Additionally, multiple market research studies suggest that approximately 80% of dry eye patients routinely experienced flares, which are acute exacerbations of their disease regardless of current treatment. This includes about 80% of patients treated with only artificial tears and about 90% of patients on a prescription dry eye medication. Patients suffer a median of 5.5 multi-day flare episodes per year, each of which can bring ocular discomfort, dryness, itching, burning and redness and significantly decrease both quality of life and workplace productivity. Together, these data reveal a significant market opportunity for EYSUVIS. We estimate that the diagnosed dry eye patients experience about 330 million treatable flare days per year in U.S. alone. We are thrilled to now be in the position to deliver EYSUVIS as the first and only FDA-approved product specifically intended for the short-term treatment of the signs and symptoms of dry eye disease and the first and only FDA-approved corticosteroid approved for dry eye disease. As discussed at our key opinion leader symposium event back in September, it is clear that eye care professionals are frustrated with the current options for treating dry eye disease, and feel there is a substantial opportunity to better manage the many people living with mild-to-moderate disease who until today have often gone untreated with prescription therapy due to the lack of a rapid-acting, safe and well-tolerated options. Nearly all eye care professionals we surveyed reported they are interested in the availability of a corticosteroid with a dry eye disease indication. And our market research suggests that eye care professionals intend to use EYSUVIS across the vast majority of the patients they treat. This includes mild-to-moderate patients being treated in the first-line setting as well as more severe patients needing adjunctive treatment as either induction therapy to chronic prescription medications or those needing to treat breakthrough flares despite already being on a chronic therapy. And our research with dry eye sufferers, they also describe current treatments as a continuous source of frustration. Artificial tears provide minimal palliative relief but do not address the inflammation that is the root cause of their dry eye flare. And patients on current prescription therapy often report limited satisfaction due to unwanted side effects and because it takes weeks-to-months to work. Regardless of dry eye disease severity, the majority of patients say they suffer from flares and desire a fast-acting treatment they can use short term during times when they are experiencing symptoms versus a chronic daily medication. When shown the product profile, 90% of dry eye patients said they intend to ask their eye care professional about EYSUVIS. We have crafted a purpose-built commercial organization that will enable us to launch EYSUVIS to adjust this substantial opportunity while continuing to promote INVELTYS in parallel. Over the last 2 years, we have built a team of very experienced leaders in the ophthalmology space across market access, marketing, medical affairs and sales who are well-equipped to execute on the launch. Our colleagues have extensive experience in both ophthalmology and optometry, have worked on multiple eye care brands and bring significant dry eye experience. Our plan has always been to grow the sales organization from our current 56 sales representatives and 7 frontline sales managers to a total of approximately 125 sales representatives who will report up through 14 regional sales leaders. As we stated on the KOL event call in September, we plan to conduct this expansion in 2 ways. Initially, we will grow the sales force to approximately 90 representatives with plans to expand to approximately 125 reps sometime in 2021, COVID permitting. Ultimately, this sales team will allow us to call on key eye care professionals split almost evenly between ophthalmologists and optometrists, who represent approximately 85% of all dry eye and steroid prescribing. And the overlap with INVELTYS is almost 100% of the current prescriptions being written. Now let me turn to market access and coverage. From a payer standpoint, commercial represents about 50% of all prescriptions in the dry eye market and Medicare Part D about 40% of the prescriptions. As we've described before, we believe commercial coverage has the opportunity to come during the first year of launch, and we anticipate coverage pickup throughout 2021. Medicare Part D coverage typically comes a bit later. We plan to submit bids in the fourth quarter of this year and are targeting formulary coverage in 2022 with the potential for early adds in 2021. I know many of you likely have questions about price. We will disclose the WACC price closer to the date when EYSUVIS is launched to wholesalers. In closing, let me reiterate that we are entering this launch in a position of strength with a clear set of priorities and the opportunity to disrupt the dry eye market. We are excited for the opportunity to deliver EYSUVIS to the millions of patients in need of a safe, effective and rapidly-acting treatment for their dry eye disease, and look forward to keeping you updated as we progress through the launch. Let me now turn the call back over to Mark.

Thanks, Todd. From our company's founding, we built Kala to develop a portfolio of medicines to advance and improve the treatment of eye diseases. Today's announcement represents a critical next step on our journey, demonstrating the impact of our approach and the power of our amplified technology to enable better patient outcomes. We look forward to making EYSUVIS available to eye care professionals and patients by year-end and longer term to continuing to leverage our capabilities to deliver additional therapeutics. With that, we'd like to open the floor for questions. However, before we begin the Q&A, please note that as we have not yet finalized our full financial results for the period ended September 30, 2020, we will only be answering questions regarding EYSUVIS approval and dry eye disease. Operator?

[Operator Instructions] And our first question comes from Liana Moussatos with Wedbush.

Your exact WACC pricing closer to the launch to wholesalers, is that around year-end? And are you still thinking if the price is going to be somewhere between generic and branded corticosteroids and fully branded, so that would be somewhere around $400 to $600 per prescription?

Liana, this is Mark. I don't know about others, but I think we missed the very beginning of your question, but I think you're asking about when we'll release the WACC price, the exact timing. And then I think we heard the end of the question about the actual price of the product. Todd, do you want to handle that?

Sure. Happy to. So our planning is to begin the wholesaler launch later in the year towards the end of the year. We'll release price at that point. And I would say that the guidance we have given in the past around what we think the range of the pricing opportunity being between the current price of branded steroids and the current price of the branded dry eye prescription therapy still holds, so somewhere in that range that we have discussed before. And once we get ready to initiate the launch, we'll communicate the WACC price.

And our following question comes from the line of Tazeen Ahmad with Bank of America.

Congrats on the approval. This is Bill Maughan on for Tazeen. So how are you thinking about supporting a launch in the first year as you're still waiting for commercial coverage? So in other words, looking at co-pay cards or sampling, just in order to prevent any frustration on the doctor's part before coverage sets in?

Great question. Todd, do you want to handle that?

Happy to do so, and really good question. We're going to launch with the full suite of tactics in place to make sure that we're assisting more patient access. So we certainly will have samples. We'll have co-pay cards to help to offset the patient's co-pay. And so I would describe it as all the normal tactics you would expect for any new product launch, while we're working through securing market access and certainly with the commercial payers in the first year we are planning for and making sure that we can help both the patients and the physicians with the smooth transition and getting prescriptions filled.

Okay. And is the WACC price internally set at this point? Or is there still information that you're incorporating in before you determine that and disclose later in the year?

Yes. We -- I appreciate the question. We're just not disclosing it other than that we plan to release the WACC price as we get closer to the launch to wholesalers.

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

Congratulation on the approval. So my first question is kind of on the sources of patient volumes for the EYSUVIS launch. You've talked about the broadest opportunity really coming from the 90% of mild-to-moderate patients who currently don't receive a prescription treatment. I was just wondering, how quickly do you think you can adopt those patients who are either receiving patients or receiving steroids or ocular steroids for dry eye flares or as an induction therapy? And then I have one follow-up after.

Todd, do you want to take that?

Sure. Happy to. We're really excited for the launch. We've done a lot of extensive research as we've reported in the past, with not only eye care professionals but also with patients and really feel like there's a significant amount of excitement and pent-up demand for a product like EYSUVIS. And so we're really optimistic that across the different patient buckets that physicians have told us that they're interested in prescribing EYSUVIS, both the mild -- more mild-to-moderate patients that are not on prescription therapy today but also the more severe patients that are on a chronic prescription therapy or initiating a chronic prescription therapy for the first time, that there's intent to use EYSUVIS broadly across those patients. So we really think that there's a significant opportunity, and really looking forward to making the product available to both physicians and patients.

That's helpful. And then second one is on peer access and coverage. Can you just help us expectations in terms of what we should expect with the launch -- specifically, do you expect an increase in payer interactions now as you've gotten the approval? And kind of where do you stand versus what you laid out earlier at the KOL event?

Sure. So as you know, we've been engaging with payers. Throughout 2020, we've had discussions, disease related discussions, specifically about dry eye flares and what that looks like within the dry eye patient population. We have already begun clinical presentations with payers. And we'll be in a position now, with the approval, to increase the number of interactions with payers. And as we've already stated, we think that the commercial coverage typically comes more quickly than does Medicare Part D that will have opportunity to continue to grow and gain commercial coverage throughout 2021. And that most of the Medicare coverage would expect to come in second year in 2022, although we note the opportunity for some early Medicare adds in 2021 as we will have submitted all those Medicare bids and those bids will be under review and discussion with the payers.

And our next question comes from Biren Amin with Jefferies.

Congrats on the approval today. So I guess let me just start. I think you've had pricing discussions with payers. Can you just talk about what percentage do you expect whether you would receive Tier 2 status versus Tier 3 status based on your discussion so far? I understand it's probably a moving target. And then what should we expect as it relates to the gross to net discount at launch? Would it -- would EYSUVIS be similar to INVELTYS?

Biren, thanks a lot for the questions. Todd?

Sure. Yes, Biren, we haven't given any guidance on our expectation on split of coverage for Tier 2 versus Tier 3. A lot of that will materialize as we actually start getting rebate offers in front of the payers and have discussion around the different rebate levels required for Tier 2 versus Tier 3. And then our own internal assessment of, depending on the controls and restrictions at the individual payer, what's the best level of access to be contracting for. So not a direct answer other than to say that, that will materialize throughout 2021. And then we're not giving guidance on gross to net. Certainly, as we launch and get through our first couple of quarters, we'll be reporting. But at this point, we're not giving direct guidance on gross to net.

Okay. And then I guess you mentioned that commercial payers will come online over 2021. How many payers, Todd, do you think will be covering EYSUVIS at the time of launch? So like right out of the box given your preliminary discussions with them?

Yes. Again, we just haven't given or are not planning to give guidance on expectations for coverage at time of launch. But we will report on a quarterly basis, Biren, once we do launch the amount of market access coverage that we have acquired.

And our next question comes from the line of François Brisebois from Oppenheimer.

All right. Congrats on the approval. A couple of questions here. First of all, I just wanted to know more about maybe a little bit the read-through between INVELTYS. You talked about the reps and basically having similar docs to approach. But I'm just trying to understand, in terms of INVELTYS and EYSUVIS, I think the impact here could be quite different with the COVID situation, so clearly different. If you could just help give us a little color on why those are different and how you're going to navigate this new reality that we're dealing with in.

Yes, it's a great question. I think the first thing at a high level is to understand that for INVELTYS, the product was really impacted by COVID because surgeries were almost stopped for a while and then only came back on board very, very slowly. Maybe it's back to about 75% of pre-COVID levels. If you look at the dry eye market, it was reasonably resilient. It is an indication in a disease that lends itself more to telehealth, virtual health over Zoom And in our interactions and conversations with doctors, they said that to us that their dry eye assessments and prescribing has been a little bit easier than some of the other conditions, obviously, than surgery. The patients, especially new patients, still need to be evaluated. So I'm sure there will be some impact if COVID continues, but it's a very different market than the surgery market. So we're really optimistic that we can get a good start, again. Even in the surgery market, it appears that surgeries are at about 75% or 80%. Physician throughput or office throughput is probably at about that same level. And so we believe we have a good opportunity in front of us. And hopefully, if COVID begins to wane over the next couple of months as we prepare for launch that will only improve the situation.

Okay. Great. And then this is a little bit twofold. Launch by year-end, any gating factors there to help us gauge a little bit when it can start? And then can you just talk on the patient journey? And just in terms of flares, is this something that happens pretty quick? So do they get the flares, go see the doctor, try to get prescriptions? Or can they get prescriptions that will last them for when another flare comes up? Or just to understand the patient journey a little more.

Yes, great questions. Getting it launched by year-end, we just got to make the final manufacturing actions and get it all packaged up and then get our sales organization fully trained, so just really the standard things. And of course, we have some holidays in between there. So we believe we're on track, and we're going to go as quickly as we can. And related to your question about the patient journey, it's a really good one. Maybe there's as many as 35 million patients in the U.S. that have dry eye disease and about 17 million are already diagnosed with dry eye disease by the doctor and under doctor care. But as we've said, the majority of them, as many as 85% to 90%, are not on a prescription therapy today. So their journey is a bit frustrating as they cycle through OTC therapies or tears or other things because there's really nothing appropriate for them if they're suffering from 2 or 3 episodes a year, you know that we call those episodes flares. And there's really been no approved prescription therapy that had the right clinical profile to treat those flares quickly. So do we expect that a doctor, an optometrist or an ophthalmologist can catch a flare when it's happening? Sure, if the patient is really feeling bad and they call up and get in to see the doctor, yes, sure. But also these visits are happening all the time, 2 to 3 visits to their eye care professional a year. If you have dry eye disease, certainly if you're in contacts or glasses that can reinforce the need to go to the eye doctor. And dry eye disease is something that's often discussed and talked about. And we feel that even if a patient is not in an active flare, if they describe these episodes to the doctor, they're very likely a candidate for EYSUVIS. So we think there's a bunch of different ways for the patient to get the medicine. We know that doctors really like the profile of EYSUVIS. They like that it's rapid acting, starts to work within a few days, has excellent effect on inflammation, which is what the physicians are really focused on, as well as providing that symptomatic relief very quickly. And we've had really positive feedback from all of the eye care professionals that this could be their kind of go-to first-line product.

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

Just to clarify, you previously mentioned the full commercial launch in first quarter next year. So when you say launch by year-end, that means a full commercial launch, correct?

Yes. Well, we're still working it out, to be truthful, and some of it depends on COVID. Hopefully, we can get everything done and out to the wholesalers, field force trained and get them out there. But the timing is right around the end of the year. There are other actions and everything that might likely come into the beginning of next year, but we do hope to get the product out there and launched right around the end of the year. I hope that clarifies.

Got it. Would you be able to comment on the amount of the co-pay assistance card?

Yes, we're still working on those details. So at this time, we're not ready to discuss all of that. But we do think this is a market very different than we had with INVELTYS, where we were essentially competing with many other products with the same indication. Here, as you know, we have a very kind of unique opportunity only a few products have been approved, and really only 2 products to treat the signs and symptoms of dry eye disease. And our product positioned very differently in the current maintenance therapies on the market, more of that first-line product for episodic dry eye disease and treating flares. So we think we have some opportunities, not at all trying to say that dry eye disease is not a competitive market but a different kind of competition. So we feel like we have some opportunity to refine the program. Certainly, we want to make sure that when doctors write the product, especially early in the launch, that patients can get the product and we get early trial.

Got it. And lastly, could you confirm that you currently have 90 sales reps? And how many ophthalmologists and optometrists these sales rep could reach upon launch of EYSUVIS? And would the promotion of EYSUVIS reduce their time spend on promoting INVELTYS?

Yes, great questions. We're just in the process of expanding up now. Of course, we wanted to wait until we secured the approval. So that's part of the gating items to get the product fully launched and then, of course, to get everyone trained. So we're on that aggressively, and we'll be able to update all of you soon. And then as it relates to INVELTYS and EYSUVIS. For INVELTYS, as Todd mentioned, the overlap with the EYSUVIS targets is virtually 100%. So all of those ophthalmologists we've been calling on they are also EYSUVIS targets. So that gives us a great opportunity to maintain a very strong level of promotion for INVELTYS. And with only 2 products, we believe that our sales team can do a terrific job. They're highly skilled and very experienced ophthalmology sales professionals. And then we'll also call on the optometrists, and there, the focus will really be on EYSUVIS.

[Operator Instructions] And our next question is a follow-up from the line of Liana Moussatos with Wedbush.

What percent of doctors are okay with a virtual prescription for a new patient? And are we going to be able to track EYSUVIS prescriptions on Symphony Health and those kind of databases?

Yes. Liana, great questions. I think just reviewing and thinking about all the market research we've done, if it's a truly brand-new patient, the doctor is going to want to see that patient and evaluate them. If it's someone they've been treating for quite a while and they know really well, that may very well be something that lends itself to the virtual prescribing. And that's what we've heard in market research. And just as a reminder, there are 17 million patients out there who are diagnosed and under doctor care, so it's a huge opportunity. And not immediately a need to start getting brand-new undiagnosed patients into the doctor's office. And again, about 85% and 90% of those patients are not currently on a prescription therapy. So they're under the doctor's care, the doctor knows them well and knows their issues, and so we do think there's an opportunity there for the physician to do that remotely. But of course, that's going to be up to the doctor, and we'll learn more about that as we get out and interact with them.

And will we be able to track prescriptions of EYSUVIS?

Oh, I'm sorry. Yes, yes, yes, you will, just like INVELTYS, yes.

And our next question comes from the line of Tim Chiang with Northland Securities.

Mark, Todd, how much of this market in dry eye would you surmise is really just getting patients aware of the fact that EYSUVIS is available and the fact that you have a product here that is very fast-acting? Obviously, we're under -- we're still under our COVID pandemic, so I'm sort of -- I wanted to get your thoughts on, now that you have the approval in hand, how aggressive will you be on the digital marketing side? How much targeted promotion do you plan to do especially in 2021?

I'll take the first part, and then Todd can take the second part about the activities. I think you're right that just getting patients and doctors aware is going to be one of the major levers. That's why we're increasing our sales organization. The good news here, again, is that so many patients are already diagnosed, most doctors are aware of the benefits of a steroid and have been waiting for a steroid to be safe and effective and FDA-approved for the treatment of dry eye disease. And I think we're delivering a profile that is exactly what they've been hoping for, great efficacy, works very quickly, provides relief, tolerated well, with a low incidence of adverse events. So I feel like we're in a great position for that and really bringing a medicine to market that the doctors have been waiting for and that we know patients have been waiting for as well. Todd, do you want to handle the second part?

Sure. Happy to do so. I think what I would add to what Mark is saying is from market research, we estimate that about 40% of dry eye patients office visits, a flare is discussed. So I think there's already a tremendous opportunity with the first FDA-approved short-term treatment for signs and symptoms of dry eye and, importantly, a short-term treatment that's going to work very rapidly, so what we think should be an ideal product candidate for treating these dry eye flares. Above and beyond that, once we've done the initial work to make sure we've educated the physicians, make them aware of EYSUVIS availability, as we stated in the past, we will have targeted direct patient communications through digital mediums as well as others to make sure we're also educating patients about the availability of a rapid-acting short-term treatment so that we then are also driving proactive discussions from patients to their eye care provider. But we want to make sure we pace the timing of that appropriately so that eye care professionals have first been educated about EYSUVIS.

Todd, maybe just one follow-up. I sort of recall a lot of eye care prescription products goes through the specialty distribution channel. Is that right? And do you expect a portion of the volumes to go through the specialty distribution channel for EYSUVIS as well?

Well, what we see is in ophthalmology and particularly in the post-surgical space, the significant volume of scripts go through what -- are these sort of independent -- large, independent sort of specialty-like pharmacies. But they're not true specialty pharmacies in the sense that none of the data is reported through the prescription audits. Most of the larger, independent, full-service pharmacies report their prescription data through the traditional audits. So those scripts should be captured the same as prescriptions that are filled at retail outlets such as CVS or Walgreens. We expect the majority of our prescriptions, as is the case for the currently approved dry eye products, to be filled through the traditional retail pharmacies.

And we have a follow-up question from the line of Biren Amin with Jefferies.

Mark, you mentioned that you have some things that you need to complete that would drive the timing of the EYSUVIS launch. Are those more manufacturing related to get supply up? Or is it more BD related where you're seeking a partner for the launch?

No, it's not BD related at all. We're going to increase the size of our sales force. And we just have to finalize packaging everything, get sales force trained, get it out to the wholesaler. So that just takes a number of weeks. And again, we have some holiday periods in there. So we think we're pretty much on track and right along industry standards to get the product out to the market.

Okay. And then just maybe, I guess, one more from me. I guess you're probably not going to be providing sales guidance for this launch until you have some experience, but how should we think about the launch? Should we use Xiidra as a comp and the launch for that given this is first-in-kind label and there's low steroid use currently in dry eye?

Yes, it's a great question. And I think what exacerbates it is what's going on with the COVID pandemic right now and the impact that that has on doctors seeing patients. So it's obviously a little hard to predict. We do think that we'll be able to have a good strong launch. We know that doctors and patients are really excited to have this product available. And we feel like we're going to make a strong effort. And just to reiterate, our sales force will be able to reach about 85% of the prescription base, and so I think we'll be quite competitive. We have an outstanding sales force, significant experience in ophthalmology, many that have worked in and launched other dry eye products. So I think we're going to be able to do a great job, and we'll just continue to update everyone as we get closer and closer to the launch.

And I'm not showing any further questions at this time. I would now like to turn the call back to Mark Iwicki for closing remarks.

Great. Thanks, operator, and thank you again to everybody for your time this morning. We look forward to updating you soon, including all of our 3Q 2020 earnings information that we'll have on the call. I hope everyone stays healthy and safe, and have a great day. Thank you.

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