Ocular Therapeutix, Inc. (OCUL) Earnings Call Transcript & Summary

Okay. Great. Good afternoon, everybody. Thanks for joining us here at the Bank of America Health Care Conference. I'm one of the senior SMID Biotech analysts at the bank. I'm Tazeen Ahmad. Our next session is with Ocular Therapeutix. Sitting next to me is Executive Chair, President and CEO, Pravin Dugel. Dr. Dugel, thanks for making the trip over to Las Vegas.

Tazeen, thank you. This is an honor to be here, and this has been a fantastic meeting. Thanks for including us.

Of course. So I'm hoping you can give a quick introduction about Ocular and what the platform of the company is. We can go then into specifics about upcoming catalysts, but I also wanted to get your view about what you liked about this company because you do have experience in ophthalmology already both as a practicing physician and homing a company that you sold not too long ago. And what was it about this particular company that you found appealing given that you probably could have gone in many different directions?

Yes, thanks for the question. So Ocular Therapeutix has been around for a while. And I knew about the technology some years ago. I was very impressed with the technology, but I really couldn't define what the company was. It really was a company that was almost active like a CRO, where the platform was being used to load drugs and so on and so forth. The next time I visited this was when some of my investor friends just said take a look at this. And what I saw in Ocular were several things. First of all, was the data -- when I dived into that, we had a collection of data that I looked at and said, wow, this is really good data. There's very little doubt. We had a study in Australia that showed that with this drug, the TKI AXPAXLI as a monotherapy in treatment-naive patients what we saw were results that one would expect to see with commercial-grade Eylea or Lucentis. So I had no doubt that the drug worked. With the U.S. study that we did, what I saw was that with a single injection, over 70% of patients were rescue free after 10 months. So clearly, there was durability. And based on that data, that translated into a regulatory pathway that was exactly as the FDA wanted, completely derisked and then an opportunity in the market size, that was enormous. And we talk about the market size just in wet AMD being what you would get with Lucentis plus Eylea and now VABYSMO and high-dose Eylea plus what Avastin would have been if it wasn't for Avastin. But that's only half the story because there's a 50% dropout rate. So if you reduce the dropout rate by having a treatment regimen that's a little bit more sustainable, that market size is expansive. And that doesn't even include other retinal vascular diseases, such as diabetic retinopathy, diabetic macular edema, retinal vein occlusion, et cetera. and it was completely undervalued, but that's why I'm here.

So on the topic of wet AMD, there's entrenched therapies, obviously, that have been around for a long time. As a person who's treated many of these patients, what do you think as a physician you'd be looking for from a product to impress you at this stage?

So it's a great point. So when people look at our product and they say, what is the point of this? They usually look at the sustainability issue, which is very, very important because, as I say, about 50% of the patients with an effective treatment simply cannot follow the regimen, a regimen is only going to be as effective as the patients that can be treated and over 50% drop out. They simply can't follow the regimen although it's effective. And the ability to reach that many more patients with a treatment that works with a workflow that doesn't have to change at all for the ophthalmologist. We're not talking about gene therapy. We're not talking about something surgical. We're not talking about cell therapy. We're talking about doing exactly what retina specialists do on a daily basis, no change in workflow but with a better, more efficient, more effective, more sustainable drug. And that in itself is a huge thing, but that's only half the story. The other half of the story that the people really recognize is the outcome. I'm convinced that this will actually provide better chronic outcomes. And what I mean is this, there's great evidence now that the way that we're injecting patients in a pulsatile fashion, right, is causing the retina in the back -- in the fovea to be thicker and thinner and thicker and thinner. It's like having a concussion over and over and over again. And even in those patients who actually are able to stay in the regimen after 5 years the vast majority get worse than baseline. And they get worse than baseline not by rebleeding, rebleeding is actually quite rare. They get worse than baseline by developing scarring, fibrosis and atrophy. And the reason for that is this pulsatile nature of thickening and thinning and thickening and thinning of the retina. If you're able to suppress in a much more efficient way that is constant then you get rid of that pulsatile motion and the constant concussion. And we're convinced based on the data that's out there that the eventual outcome, the chronic outcome will also be better. So two things. One is sustainability and the other is better outcome.

So on that point, can you just remind us of the efficacy data that's been shown today for AXPAXLI and wet AMD? And then we can talk about the pivotal study design.

Sure. So there are 2 main studies for wet AMD, and this is for wet AMD. One in Australia, and the significance of that is that, that was the first time that I know of where a sustained delivery TKI was used as monotherapy in treatment-naive patients. So completely naked. There was nothing else. And what we showed were OCTs. And if you just look at the OCT and the vision as well, it would be no different than what I would expect for commercial-grade Lucentis or Eylea. So clearly, there is an effect, the drug clearly works and again, this is the first time that I have seen it being used as monotherapy in treatment-naive patients, and that was the Australian study. We did another study in the U.S. that had a control arm and the control arm was on label Eylea. And what we're able to show there was that with AXPAXLI with a single injection at 10 months, over 70% of patients were rescue free versus on-label Eylea. So one study in Australia clearly showed an effect and clearly showed the impact. The other study in the U.S. clearly showed durability.

Now the data, as you said, was impressive, but in the grand scheme of things, this not being a rare disease, it was a relatively small line of patients. So why not to risk mitigate run a full Phase II program before moving into pivotal?

Yes. So it's a great question. The fact of it is that if you look at the data, again, we call it a Phase I/II study, but if you look at the data itself, I think the data is absolutely irrefutable in the sense that -- of what I said. The drug works. The drug is durable. The drug suppresses VEGF and there's historic evidence now for more than 30 years that when you suppress VEGF, you're very effective in wet AMD as well as a lot of retinal vascular diseases. It made complete sense to move to a pivotal study to get this drug out as quickly as possible.

So with that in mind, can you walk us through -- before we do that, given that it's an insert, how frequently do you think patients will need to visit their physicians? You talked about physicians not having an interruption in workflow. But how does that also potentially impact looking further ahead, how these physicians are compensated? Because they are usually compensated per injection in the U.S.? And how is that going to work with this product? And does that have an impact on attractiveness?

Yes, it's a great question. And in fact, it's quite the opposite. I think it'll be extremely attractive. And here's the reason, having practice for over 30 years, I mean, you're right, we are reimbursed per injection, we're -- but we're also seeing patients that -- only half the patients, as I said, that actually need the treatment and those patients aren't happy. It's not easy taking for a physician. If you ask a physician what is it like to give an injection, it's like it's 2 seconds. And I get that. For the patient, it's completely different. Patient has to come and find parking in my office, be prechecked, wait to get dilated, get OCT, again wait to get IOP checks, get consent for an injection and then get an injection and then wait and then leave. It's a whole day, right? So the impact of this is that physicians will actually see as many patients as they want, do as many injections as they want, except that it will be with a better drug and the number of patients that are actually sustained with this will be far greater. If that dropout rate goes from 50% and decreases even by 5% or 10%, that's an expansive market. So these patients aren't going to come back every 4 weeks or every 8 weeks. They'll come back every 6 months, and they'll be much, much happier, but there'll be many more patients coming back.

Okay. So do you think it's going to be about every 6 months that a person has to come in?

So the ideal treatment regimen for a retina specialist is going to be 6 months, okay? If you ask anybody, they'll say, "I want to see my chronic patients every 6 months, not 3 years, not 4 months, but 6 months. To have a drug that's going to be -- allow you to see patients every 6 months, that drug has to last at least 9 to 10 months. Patients can get sick, doctors can be on vacation, et cetera, so you want a safety net. And this drug lasts exactly the right amount of time. It's tunable, it's 9 to 10 months.

So this is a naive question I'm going to ask. But let's say the patient has an insert. And then here, she comes to see you at the 6-month time frame, the insert is biodegradable, but it's not fully degraded at the time that the patient comes to see you then what happens? You remove the remainder of the insert and put a new one in? Or do you ask them to make an appointment for another time?

Yes. So in all fairness, it's a great question. So in all fairness, we do not -- we have not announced a repeat dosing study as yet. And so I can't speak to data because we don't have that to be perfectly honest. But we've got many models. We've got animal studies and so on and so forth that have been done. There's no reason to remove the implant at all. There's none. The safety profile is outstanding. We see no reason why another implant can just be given or injection can be given at the same time. This is 1 injection and 1 filament, 1 implant. That's it. There's no stacking issue because it's entirely biodegradable, the PK/PD are matched. So when the drug is gone, the hydrogel is gone. There is no shell that's remaining. So there's no stacking issue whatsoever.

I was always wondering about that, so I thought I'd ask you. So then now talk to us about the study design because it is a well-designed study, but one that I think folks would appreciate getting a little bit of color on why it makes sense to have chosen some of the parameters that the company did.

Yes. So I'll go back to the FDA. What the FDA has said with no doubt whatsoever is that they are not going to accept studies by sponsors that compare their drug to a label that's never used. And the Eylea and Lucentis label are never used, right? There's nobody on the planet that follows that label. Everybody does treat and extend. The FDA has also said very clearly that they don't consider sham injections to be properly masked. And it's not -- simply not ethical to inject saline. So given that the FDA has issued guidelines very, very clearly last year, that says, okay, if you want to do a noninferiority study, this is the design we will accept. If you want to do a superiority study, this is the design we'll accept. So we follow their guidelines to a T to design a superiority study. In fact, that's exactly what they designed. It's validated by a SPA, and our SPA amendment has been validated by the incoming -- the same FDA agency right now. We are very, very confident that even up to date right now that the SPA that we have is absolutely aligned with the FDA's current thinking. The FDA will allow people to do studies as long as it's not illegal or unethical. They will not stop you from doing studies, but they'll tell you, you're doing at risk. If you ask them, can this be pivotal? They'll say, yes, at risk under review. We try to avoid that. We have done -- we've taken a track -- we've taken a path from a regulatory point of view that is about as derisked as possible with a spot. So we're very, very confident even up to the moment that the SPA aligns with their current thinking.

So understanding that how are patients going to be dosed in the study. And should we expect you to give updates as the study is enrolling?

Yes. So the study design is such that patients that are targeted who are 20/80 or better. So patients with good vision and I mention that because we have no competition with any other trials. Most trials look for patients at a bad vision because they don't want a ceiling effect. But the vast majority of patients that come in de novo with wet AMD don't have 20/200 or 20/400 vision. They've got actually very good vision. And they'll say, I don't see the doors being straight. I see a little bit of crookedness or I see a little spot and their vision maybe 20/30, 20/20, 20/50, whatever it is. There is no study for them. So there's no competition that we have in recruiting the majority of patients that retina specialists see de novo. So those patients are then enrolled. They are given 2 loading doses of Eylea. And if their vision improves by 10 letters or more or gets to 20/20. They are then randomized to receive a single injection of Eylea, which is a control versus a single injection of AXPAXLI, which is the treatment arm. And then those patients are followed and the primary endpoint is at 9 months. And the primary endpoint is the proportion of patients who maintain vision. And we are very, very confident that at that point, we are and we'll be in a position to have an excellent result based on this trial design as well as based on the fact that we've chosen patients that we believe are enhanced for this trial as well.

And then using aflibercept, why not use one of these newer agents that purport to be longer-acting as your control to potentially be more impressive on the outcome?

Yes. So I don't know, quite honestly, Tazeen, there's a big difference in terms of longevity. Maybe there's a slight difference in incremental difference between the VABYSMO and the HD -- Eylea and so on and so forth. But frankly that -- those -- when the trial design -- when these kind of trials are designed and contemplated, it takes quite a long time to actually have it come to fruition after many discussions with the FDA. I don't know that, that was actually -- I wasn't here in this company, but I don't know that, that was actually even available at that point.

That makes sense. And how are you thinking about the pace of enrollment? Because that is a question that comes up frequently.

Yes, that's a great question. And when I did my due diligence on this company, it was clear to me that there was one challenge and that one challenge is communication. Communication to my peer -- to the PIs in terms of why this trial was designed the way it was done and what it means. And what it means is that we are waiting for the patient once to lose a net of at most 5 letters of vision because remember, they've got to gain at least 10. So from baseline at most 5 letters of vision. It's really what we do when we do treat and extend, right? But we do it repeatedly. Here we're doing at once. And if the patient is rescued, the patient is on label Eylea for the rest of the clinical trial, once we're able to communicate that to my colleagues, then really the light pops up and they go, "Wow, that actually makes a lot of sense." This is about as clean a study as you can possibly get. The best service you can do for patients or to the community is to have an answer. The worst thing that can happen is when you have a trial and it's ambiguous and you're not really sure what it means. Does it work, does it not work, you've got to do all these retrospective analysis and so on and so forth. None of that will happen here. It's about as clean as you can get. It's -- we'll have a binary answer in a relatively short period of time with a very simple, very clear trial design.

And assuming that your colleagues in this space will listen to the pitch that you just made and recommended to their patients, I'm curious as to what you think the patient's response will be. Maybe for the lay person explain what does the 5-letter loss in vision mean? And how do you think a patient would feel about potentially having to lose that level of vision, fully knowing though that they can be rescued?

So look, I have a family history of macular generation, it's fair to ask me, would you allow your mother to lose 15 letters of vision. And the answer is absolutely not. But my mother is seen once every 6 months. These patients are seen at least every 4 weeks. And these are good seeing patients, remember, I said 20/80 or better. If they're going to lose a net of 5 letters of vision, probably most of them will be asymptomatic of their rescue.