Good day, and thank you for standing by. Welcome to the Ocular Therapeutix Q3 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising you that your hand is raised. Due to time, you will only get one question and a follow-up. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Donald Notman, the CFO. Go ahead, Donald.
Thank you, operator. Good afternoon, everyone, and thank you for joining us on our Q3 2022 financial results and business update conference call. This afternoon after the close, we issued a press release providing an update on the company's product development programs and details of the company's financial results for the Q3 ended September 30, 2022. The press release can be accessed on the investors portion of our website at investors.ocutx.com. Leading the call today will be Antony Mattessich, our President and Chief Executive Officer, who will provide an update on our pipeline developments and the commercial progress of DEXTENZA. Also speaking on the call today will be Dr. Rabia Gurses Ozden, our Chief Medical Officer, and Dr. Peter Kaiser, our Chief Medical Advisor, Retina.
Following their remarks, I will provide an overview of the financial highlights for the quarter before turning the call back over to Antony for a summary and questions. For Q&A, we will also be joined by Christopher White, our Chief Business Officer, and Scott Corning, our Senior Vice President, Commercial. As a reminder, on today's call, certain statements we will be making may be considered forward-looking for purposes of the Private Securities Litigation Reform Act of 1995. In particular, any statements regarding our regulatory and product development plans, as well as our research activities and our financial projections are forward-looking statements.
These statements are subject to a variety of risks and uncertainties that may cause actual results to differ from those forecasted, including those risks described in our most recent quarterly report filed this afternoon with the SEC and our annual report on Form 10-K filed on February 28th with the SEC. I will now turn the call over to Antony.
Thanks, Donald. The highlight in the quarter for Ocular Therapeutix, it was the release of the seven-month interim results from our U.S.-based phase I trial for OTX-TKI, presented in the late breaker at the AAO annual meeting in September. With the release of the top-line data and our intent to pursue this in both wet AMD and diabetic retinopathy, I believe we are establishing ourselves as a future leader in the back of the eye. Added to our established expertise in the front of the eye, I'm pleased to say that we continue to make significant strides building Ocular Therapeutix as a comprehensive strategic player in the ophthalmology space.
As a reminder of the context for the U.S.-based phase I trial of OTX-TKI, we previously demonstrated in our Australia-based phase I trial that we were able to deliver bespoke depot formulations of our proprietary hydrogel capable of resolving subretinal and/or intraretinal fluids. To do this, we treated uncontrolled patients with OTX-TKI as monotherapy, meaning without the benefit of concomitant medication or induction therapy, and then observed OCT scans and noted clinically meaningful reductions in fluid and even complete resolution in some patients. We don't believe this has been shown previously with any other TKIs delivered individually, nor has it been attempted since. In addition to demonstrating that axitinib delivered through our hydrogel depots was potent enough to resolve fluid as monotherapy in some patients, we also observed a dose response.
We continue to believe the potency of axitinib and its uptake in retinal pigment epithelium or RPE cells are responsible for these observations. The next step was to take OTX-TKI and test its durability in maintaining retinal thickness and BCVA in controlled wet AMD patients and in a setting with an active control group. Our recently reported interim results from our U.S.-based phase I trial did just that with resounding success. I will let Rabia and Peter go over the particulars of the trial, but the takeaway is that we were able to demonstrate that 80% of patients reached the six-month time point without the need for rescue, and 73% were able to go through seven months.
Most importantly, both best-corrected visual acuity as measured by ETDRS charts and retinal thickness as measured by OCT in TKI-related patients were comparable to the control arm of the every-eight-week Eylea. It should also be noted that none of the rescue patients in the trial met the rescue criteria set forth in the clinical trial protocol. In addition to moving OTX-TKI into a phase II-III trial for wet AMD in Q3 of 2023, we also plan to initiate a phase I trial in diabetic retinopathy in the Q1 of 2023.
While I will let Peter elaborate on the opportunity in diabetic retinopathy and our new clinical development plans, I want to highlight that with the current data, and depending on the outcome of phase I diabetic retinopathy trial and its follow-up meeting with the FDA, we believe that we may be in a position to enter a phase III pivotal in diabetic retinopathy in the Q1 of 2024. Finally, let me provide a few comments on our commercial business. In the Q3, we reported net sales of DEXTENZA of $11.9 million, essentially flat year-over-year and down approximately 2% sequentially quarter-over-quarter. Relative to the potential of the opportunity and our own expectations, this represents a disappointing result and is clearly unacceptable.
We believe that there are three main reasons for DEXTENZA's performance. The first is that our customers, ASCs, and HOPDs, remain in a difficult situation. Since the pandemic, the majority of our customers have been chronically short of staff or recently restaffed with generally less experienced people than they had before the pandemic. Buy and bill products like DEXTENZA, while a huge advantage for the ASC and HOPD when administered appropriately, do require experienced back-office staff and surgical staff to properly implement and administer. Understandably, in the current environment, ASCs and HOPDs are reluctant to add extra work and complexity. The second reason is that we are in a similar position as our customers in our own ability to maintain an experienced field-based team with minimal vacancies, which have been higher than we would have liked over the past few quarters.
The final reason behind DEXTENZA's performance has to do with changes in the reimbursement landscape for the procedure code CPT 68841, and it is clear that volume has been impacted due to the reduction in physician payment for the insertion of DEXTENZA when our procedure or CPT code was converted from a category three T code into a category one code effective January 1st, 2022. Most important going forward, though, is not about what has caused the slowdown, but how we plan to reignite growth. I'm happy to report the variable over which we believe we have the most control is the closest to being resolved. We are now nearly at full capacity in our field force with the team trained and in the field.
Clearly, it's not just about having vacancies filled, but also about focusing on a strategy of deepening involvement with our customers and helping them get beyond patients with Medicare Part B into advantage plans and commercial play-payers. We have had tremendous improvements in coverage and reimbursement of late, and we need to get our customers comfortable giving more patients access to the benefits of DEXTENZA. The next two elements over which we believe we can have the most control are the value proposition for DEXTENZA and the procedure code 68841 associated with insertion. Last quarter, we began issuing an off-invoice discount that was well-received by our customer base as it removed the most common objection voiced by our accounts.
We also have implemented a number of strategies working with CMS in an effort to appropriately rebalance the value proposition for DEXTENZA and CPT 68841 in the future. While early in the implementation, we started the Q4 well, with October recording the strongest monthly in-market sales ever, nearing 11,500 billable units and eclipsing our previous record by more than 900 inserts. While we fully expect this growth to continue for the remainder of the Q4 and accelerate going forward, we do not believe that we will have a Q4 strong enough to reach our original guidance of $55 million to $60 million in net revenues. Consequently, we are adjusting guidance for full-year net revenues to between $48 million and $52 million, which represents a growth over prior year of between 10% and 20%.
With that as a summary, let me turn the call over to our Chief Medical Officer, Dr. Rabia Gurses Ozden, to take you through the pipeline.
Thanks, Antony. Let me begin with an update on our back of the eye program, OTX-TKI. During the AAO meeting in September, we had multiple presentations providing updates on OTX-TKI being developed for the treatment of wet AMD and other retinal indications. By far and away, the highlight from the meeting was the presentation of month six and month seven interim data from our U.S.-based phase I trial. This was a multicenter prospective randomized controlled trial in 21 subjects evaluating a 600 microgram OTX-TKI dose in a single implant containing axitinib compared to aflibercept administered every eight weeks in controlled wet AMD subjects previously treated with anti-VEGF therapy. The trial is designed to assess the safety, durability, and tolerability of OTX-TKI and to assess preliminary biological activity in subjects by measuring anatomical and functional changes of the retina.
Overall, we could not have been more pleased with the results. OTX-TKI was generally well-tolerated. There were no drug-related ocular or systemic serious adverse events, SAEs. There was one SAE of acute endophthalmitis in the OTX-TKI arm, which occurred following a mandated aflibercept injection at month one. Using a data cut-off date of August 24, 2022, the data showed subjects treated with a single OTX-TKI implant demonstrated stable and sustained best-corrected visual acuity, BCVA, mean change from baseline of -1.3 letters, and central subfield foveal thickness, CSFT, mean change from baseline of +9.2 micrometer in the OTX-TKI arm at seven months, which was comparable with the aflibercept arm dosed every eight weeks. Mean change from BCVA baseline of -1 letter. Mean change from CSFT baseline +0.4 micrometer.
Importantly, the data also showed that 80% of the subjects in the OTX-TKI arm were rescue-free up to six months, and 73% of subjects in the OTX-TKI arm were risk-rescue-free up to seven months. We believe the data highlights the potential of OTX-TKI to become a differentiated product capable of providing a durable anti-VEGF response that improves upon today's standards of care in the management of wet AMD. We plan to share this data along with the encouraging data from our Australia-based phase I trial with the FDA, and subject to discussions with the FDA, plan to initiate a phase II-III clinical trial in the Q3 of 2023. We plan to provide a second data update of the U.S.-based phase I OTX-TKI trial at the Angiogenesis, Exudation, and Degeneration 2023 annual meeting in February that will include month 10 safety and efficacy data.
In addition to wet AMD, we plan to initiate a phase I trial evaluating OTX-TKI for the treatment of diabetic retinopathy in the Q1 of 2023, and Peter will give more information on this trial. Moving to our glaucoma program, OTX-TIC. We continue to actively enroll subjects in the U.S.-based phase II clinical trial. This trial is a prospective multicenter randomized controlled trial evaluating the safety, tolerability, and efficacy of OTX-TIC for the reduction of intraocular pressure in patients with primary open-angle glaucoma or ocular hypertension. We plan to enroll approximately 105 subjects in three different arms, randomized 1-to-1 to 1, in which the subjects will receive a single OTX-TIC implant containing a 5 microgram or 26 microgram dose of travoprost compared with an implant of DURYSTA.
The 5 microgram arm is utilizing a fast-degrading implant, while the 26 microgram arm is utilizing a standard degrading implant. The trial is designed to observe the changes in diurnal intraocular pressure, IOP, from baseline at 8 A.M., 10 A.M., and 4 P.M. at two, six, and 12 weeks, and follow duration of IOP response over time. We plan to provide a top-line data release for this phase II clinical trial in the Q4 of 2023. Regarding our ocular surface disease programs, we remain committed to the development of our two dry eye programs in a measured manner. OTX-DED, a low-dose intracanalicular insert containing dexamethasone for the short-term treatment of the signs and symptoms of dry eye disease, and OTX-CSI, a cyclosporine intracanalicular insert for the chronic treatment of patients with dry eye disease.
With regards to OTX-DED, we remain on track to begin a collaborative trial in the H1 of 2023 to evaluate the performance of OTX-DED versus placebo inserts, namely fast-dissolving collagen plugs and no inserts at all. We have designed this trial to explain the magnitude of the placebo effect seen in both, the OTX-DED and the OTX-CSI phase II trials, in which the vehicle hydrogel placebo insert or placebo comparator remain in the canaliculus longer than anticipated, performing more like an active comparator than a placebo comparator. We plan to use the results of this trial to inform the selection of a more appropriate placebo comparator for both the OTX-DED and the OTX-CSI programs moving forward. I would now like to turn the call over to Peter to discuss more specifics around our development plans for OTX-TKI in both wet AMD and diabetic retinopathy.
Thanks, Rabia. At AAO, we announced plans to advance OTX-TKI into phase II/III trial in wet age-related macular degeneration, as well as initiate a new trial in a new indication evaluating OTX-TKI for treatment of diabetic retinopathy. In wet macular degeneration, we have been doing a tremendous amount of work since the U.S.-based phase I interim results were first made available to find ways to expedite trials powered to statistically demonstrate the profile that we see emerging. As we pursue this, importantly, we have the benefit of a deep base of experience with the product that may be underappreciated. For example, in the TKI program, we dosed our first patient in early 2019 and have now had over 45 patients who have received OTX-TKI therapy with over 850 patient visits. The drug has been studied as both a monotherapy and in combination with anti-VEGF.
It has been tested in a randomized study, in a well-controlled and actively leaking patient study, as well as in patients who are treatment naive, both as a monotherapy and combination therapy. Across it all, OTX-TKI has demonstrated a remarkable consistency of effect. We believe this gives Ocular the largest data set relative to any other company evaluating a TKI in wet macular degeneration, which we of course plan to share with the FDA at our Type C meeting at which we will discuss our phase II-III strategy. In addition to wet AMD, we plan to initiate a phase I trial to evaluate OTX-TKI in diabetic retinopathy in the Q1 of 2023. Diabetic retinopathy is a leading cause of blindness, affecting an estimated 8.4 million patients in the U.S. and 140.9 million globally, according to Market Scope.
Typically, diabetic patients will develop diabetic retinopathy after they have had diabetes for between three and five years. In the early stages, diabetic retinopathy will not affect sight, but if it is not treated and progresses, eventually the sight will be affected. In fact, it is the number one cause of legal blindness in the working age population. Given the slow onset and the fact that diabetes affects a younger working age population, the required frequency of current anti-VEGF therapies makes effective treatment especially challenging. This is where we believe OTX-TKI, with its designed durability of up to nine months or longer, may be especially effective. We believe the same attributes that make OTX-TKI a compelling product in wet macular degeneration, the ease of use of our office-based injection and long-term durability, could establish this as the first standard of care in the treatment of diabetic retinopathy.
We also believe that the regulatory path is more straightforward, given that the comparator in a registration trial would likely be placebo, since there's no established standard of care. Finally, we see the diabetic retinopathy space, given its requirement for extended durability, as inherently less competitive than the wet AMD market. We plan to conduct a U.S.-based phase I trial under an EIND across approximately 10 sites, and will include approximately 20 patients randomized to either 600-microgram OTX-TKI single implant containing axitinib or sham control. Based on the positive interim results in our U.S.-based phase I trial in wet age-related macular degeneration, we believe that OTX-TKI should perform well in the phase I diabetic retinopathy trial.
With the current data, and depending on the outcome of the phase I DR study and a follow-up meeting with the FDA, we believe that we may be in a position to move aggressively and to initiate our first phase III pivotal trial of OTX-TKI for the treatment of diabetic retinopathy in the Q1 of 2024. I would now like to turn the call back over to Donald.
Thanks, Peter. Net revenue, which includes both gross product revenue, net of discounts, rebates, and returns, which the company refers to as total net product revenue, and collaboration revenue was $12 million for the Q3 of 2022, and represented an approximately 2% decrease over the same period in 2021. At DEXTENZA, net product revenue was $11.9 million, flat to the comparable quarter of 2021 and down approximately 2% on a sequential quarterly basis. Net revenue in the Q3 of 2022 also included $0.1 million in collaboration revenue associated with the company's work with AffaMed, and net product revenue in the Q3 of 2021 included $0.3 million attributable to the sales of ReSure Sealant.
Research and Development expenses for the Q3 were $13.7 million versus $12.7 million for the comparable period in 2021, driven primarily by an increase in personnel and a higher level of preclinical development activity. Selling and marketing expenses in the Q3 were $10.2 million, as compared to $9.6 million for the comparable period of 2021, reflecting primarily an increase in field force personnel. General and administrative expenses were $8.5 million for the Q3 versus $8.1 million in the comparable quarter of 2021, primarily due to an increase in personnel-related costs, including stock-based compensation.
The company recorded a net loss for the Q3 of $24.2 million, or a loss of $0.31 per share on a basic and diluted basis, compared to net income of $2.6 million, or net income of $0.3 per share on a basic basis and a loss of $0.23 per share on a diluted basis for the same period in 2021. Net loss in the Q3 of 2022 included a $1.1 million non-cash item attributable to an increase in the fair value of the derivative liability associated with the company's convertible notes, as the price of its common stock increased during the quarter.
Non-cash charges for stock-based compensation and depreciation and amortization were $4.7 million in the Q3 of 2022 versus $4.4 million for the same quarter in 2021. As of November fourth, 2022, the company had 77 million shares outstanding. As of September thirty, 2022, the company had $121 million in cash and cash equivalents versus $134.5 million at June thirty, 2022. Based on current plans, the company believes that its existing cash and cash equivalents are sufficient to fund operations through 2023. I would now like to turn the call back over to Antony for some final thoughts.
Thanks, Donald. Before opening the call up for questions, let me do a quick summary.
We are excited to be able to share with the world our seven-month interim results from our U.S.-based phase I trial for OTX-TKI in wet AMD, building further evidence of a potential product profile that could set the standard of care for durability in the treatment of wet AMD and diabetic retinopathy. We intend to initiate a phase I trial of OTX-TKI for diabetic retinopathy in the Q1 of 2023, and believe we may be positioned to commence our first phase III pivotal trial in the Q1 of 2024. We plan to initiate phase II/III trial of OTX-TKI for wet AMD in the Q3 of 2023. We plan to continue enrollment of the phase II trial of OTX-TIC in glaucoma and should be in a position to release top-line data in the Q4 of 2023.
We now have a full team in place selling DEXTENZA in the surgical setting with an enhanced value proposition that we believe should reignite our growth trajectory. We have started with a record month in October, and we have $121 million in cash as of September 30th and continue to guide a cash runway through 2023. We look forward to a strong remaining 2022. With that, I'll turn the call over for questions.
Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. With limited time, we will only have time for one question and one follow-up. Please stand by as we compile the Q&A roster. All right. Our first question comes from the line of Joe Catanzaro from Piper Sandler. Go ahead, Joe.
Hey, guys. Thanks for taking my questions here. I'll try and stick to two questions. Maybe first, on diabetic retinopathy. Just wondering why that study is moving forward under an exploratory IND and not a traditional IND that would maybe allow potentially for a more robust study and whether, you know, 20 patients' worth of data is a sufficient data set to answer any questions ahead of a potential phase III start in 2024. Then, with regards to the Type C meeting, and the FDA and TKI and wet AMD, I guess, what is the sort of main questions and feedback you're hoping to get there, and how does the reformulation work that you guys are doing factor into those discussions, if at all? Thanks.
I guess I'll farm that question out to Peter since he's the point person on the diabetic retinopathy. Peter, you wanna try and tackle that?
Sure. Thanks for the question. You know, when it comes to
Hold on a sec.
When it comes to diabetic retinopathy, the key feature here is, you know, we have to decide, is it better to use our 1 / 600, or is it better to use our and start forward now, or is it better to, you know, work later with maybe a reformulated version? To us, moving forward with the eIND, given the number of patients that it allows us to use, works perfectly fine. The second question in terms of the macular degeneration, you have to look at the. You know, when we look at the FDA, the FDA will allow us to, you know, the decision is going to be what type of combination therapy they're gonna call it if you do, say, three anti-VEGF injections, versus one, versus none.
Should we enroll patients who are treatment naive, all comers, patients previously treated, and what do they consider previously treated? It's a discussion that any company looking at this space is going to have to have with the FDA. We don't wanna have that discussion until we have all the patients basically from both our phase one studies completing the study so we have best chance of deciding what is best to move out. Did that answer your question?
Yeah. Yeah. That's all very, very helpful. Thanks for taking my questions.
All right. Our next question comes from Christopher Howerton from Jefferies. Hold on one second, Christopher. All right, your line is now open.
Hi, this is Kombi on for Chris. Thanks for taking the question, team. For DEXTENZA, what is the priority in office for ambulatory surgical centers? On OTX-TKI, what is the best indication to first get a label for that product, wet AMD or diabetic retinopathy? Thank you very much.
Yeah. For the core first part on DEXTENZA, I mean, clearly our business runs on in the surgical setting now, and the focus is getting growth reignited in the surgical setting. That is, you know, priorities one, two, and three at the moment. Secondarily, talking about diabetic retinopathy and why we think that's such a great opportunity, given the profile of the diabetic retinopathy patient, as Peter had mentioned, they are patients who are primarily working age population. They have a number of other conditions for which they're receiving active treatment.
The burden of a frequent injection is actually too much for them to bear, and they would rather risk losing sight than have to go in for either once monthly or once weekly injections with anti-VEGF. We think that we have a formulation that we believe that could last for a year or longer. We think that changes the goalpost entirely. In a once yearly formulation in diabetic retinopathy with a favorable safety profile, we think that would be tolerable. We wouldn't expect every diabetic retinopathy patient to convert to therapy with OTX-TKI. But given the number of patients with diabetic retinopathy, changing that number from 90% of patients being untreated to 80% of patients being untreated creates a significant product opportunity.
You marry that with the easier regulatory path that we can go directly against sham rather than against an active comparator. We think this is a natural opportunity for us. That doesn't mean wet AMD is not an opportunity that we are very excited about and seeking to develop a clinical program in order to get registration there. We do understand that's a highly competitive environment, and that is also expensive, far more expensive clinical trial. We're not doing an either/or approach, but we are particularly excited about diabetic retinopathy because we think our product profile actually creates a new opportunity in that space that doesn't exist presently.
Great. Thank you very much.
All right. Our next question comes from the line of Yi Chen from H.C. Wainwright. Hold on one second, Yi. All right. Your line is now open. So sorry. Go ahead again.
Hello? Can you hear me?
Yep.
Yes.
Oh, okay. Sorry. My first question is, can you elaborate on the cause of staffing shortage and why do you believe it is a transient problem?
Well, staffing shortage is the same staffing shortage you realize when your flight's delayed 4 hours because they can't find pilots to fly it.
Mm-hmm.
It's a post-pandemic issue that's across the board in a number of different industries. There's nothing particularly different, I think, in the ASC and hospital environment, particularly on the administrative level where these are fairly low-level employees that seem to have disappeared during the COVID pandemic and not come back into the workforce with the same vigor as they left it. We are very much at the mercy of the macroeconomic situation. When that ameliorates, I expect our ASC and hospitals to be back to normal as well.
Okay. What kind of sales boost DEXTENZA do you expect in 2023, considering the fact that Dexycu will no longer has its pass-through status starting January 1st?
Well, we certainly expect to pick up some of the volume that Dexycu has been able to achieve. They have somewhere between 1/3 and 1/2 of what our volume is. We would expect some of that to move over. We would expect some of it would probably go into some of the formulations that exist on the compounding side. We have certainly internal assumptions of what we think we'll be able to get, and we have certainly some anecdotal data of people who are looking to place orders as they move their business over to a product that will continue to have separate payment. We have not quantified that, and we will give some guidance as we move past the Q4.
We've seen a really nice trend break starting in October. We believe that's real. We believe it's real both because of the staffing we have internally, because the market's getting better, but also because I think our strategy is deepening in how we are able to move our customers past Medicare Part B and take advantage of some of the gains we've made in the private payer environment. We'll wait to see what that trend line looks like before we look at what 2023 guidance will look like.
Wonderful. Thank you for that question. Again, as a reminder, if you'd like to ask a question to one of our presenters, please press star one one on your telephone and wait for your name to be called. Our next question comes from the line of Yanan Zhai from B. Riley. Your phone line is now open.
Hi. Thank you for taking our question. Dr. Kaiser, can you comment on the diabetic retinopathy patient journey? What's the percentage of the patients are non-proliferative for NPDR? At which point this patient will feel the urgency to get the current treatment, the anti-VEGF? Thank you.
That's a great question, Yanan. You know, to us, when a patient comes in with diabetic retinopathy, there's sort of two different buckets. One is the patient who doesn't realize why they're there, and their endocrinologist or primary care doctor says, "You have to get an eye exam." The second type of patient is one who's actually losing vision from diabetes and diabetic retinopathy.
Joe, can you hear me?
Yes. Can you hear us?
Sorry.
What I was saying is that there's two types of patients with diabetic retinopathy. One doesn't realize they have it, and it doesn't have any visual changes, and the other is one who is noticing visual changes. It doesn't really you know, you can have this with severe non-proliferative disease. By the time it gets to proliferative disease, you're usually symptomatic. Oftentimes those patients will have floaters, they'll have decreased vision, they may even have it way worse than that, from the neovascularization that we see in proliferative disease. When it comes to non-proliferative disease, most of these patients would qualify for treatment, but we currently don't treat those patients with any of the FDA-approved products, which would be LUCENTIS or Eylea, because it requires so frequent injections.
As Antony said at the outset, you know, that's where we think we offer a good choice because these are patients who would improve their diabetic retinopathy with a treatment. Theoretically, our treatments would last seven, eight, nine, maybe even longer months. An injection every so often in these working age patients is very palatable. The benefit is very real. The reason we don't use it and patients don't want it is because as much as the benefit is real, it's just the frequency of injection is just not possible to keep up. Now I do have patients who get anti-VEGF injections for diabetic retinopathy, but they're in the vast minority. Hopefully that answered your question.
Yes. That's very helpful. Thank you.
All right. Just again, as a reminder, if you'd like to ask our speakers a question, please press star one one on your telephone keypad to be placed in the queue. All right. Our next question comes from the line of Georgi Yordanov from Cowen. Georgi, your phone line is open.
Well, thank you so much for taking our questions and congratulations on all the progress and the data from OTX-TKI. Maybe to follow up with some of the previous discussion on the reformulations that you're planning. You mentioned that on the previous call you're looking into a lower drug load insert that has a faster drug release profile. Maybe can you talk about what made you explore this option and what would you be looking for in terms of product profile before you can initiate the trial? I guess when do you think you'll have clarity if you've been able to successfully achieve your goal?
Yeah. Let me start with that. I think it's this is one of the elements where I, you know, made a lot of mistakes in my life. Probably one of the bigger ones was talking about reformulation with OTX-TKI. Essentially, we have a formulation that works, and we have a formulation that will work in wet AMD. We have a formulation that works in diabetic retinopathy, and we're very happy with that formulation with what it's been able to demonstrate from a clinical program. If we need to go forward with that, we will go forward with that formulation. There's nothing formulation related that's causing any delays in what we look at going forward. Now, as formulators, there's a magical, perfect formulation.
A perfect formulation is that from the moment the last particle of drug elutes out of the depot, the depot spontaneously bioresorbs and disappears. Now, you will never get a formulation that is that perfect. There's always going to be a situation where either the depot lasts longer than the drug or the drug lasts longer than the depot. What we are doing is what we do with all of our formulations, and every time we move forward, we attempt to improve upon the formulation that we have. We have a number of projects going forward that are looking at improved formulations that fit closer to that ideal. If those formulations aren't ready at the time that we're ready to go into phase III, we'll go with the existing formulation.
Particularly, we have the advantage of being able to do first and second pivotals, where the second pivotal is where you need your final marketed formulation. There's nothing in the formulation of these products that's delaying us, but we are searching for perfection, and we are starting really much with the end in mind that we think that we need to bring forward products that are not only commercially viable, but actually will be the best product that we can develop before we go into that final pivotal.
This is super helpful. Maybe just as my follow-up. Do you have any, I guess, pointers or idea of like what would be the timeline to seeing results from phase II/III trial? Is it possible that this trial serves as one of two pivotals?
Yeah. That's what's really. When we talk about, you know, people saying, why is it taking a while before we get into these later stage clinical trials? The reason why is because we believe that the phase I programs that we're using supply us with ample validation of wet AMD, which we believe we already have, and diabetic retinopathy, which of course, we expect to be able to see before we start those later stage clinical trials. We don't see doing a classic phase II as a necessary strategy for us. We are looking very much to going directly into a first pivotal and then running in parallel on top of that, a second pivotal.
There will probably be a little bit of a delay between the first and second pivotals in order just to get those started in the best possible way. We are able to look at those programs and then think about the next act being the completion of those trials and then the NDA filing. We are very much collapsing these programs. We haven't given guidance on when we actually expect to get those data back yet, but we will once we get those programs started.
Thank you. Our next question comes from the line of Caroline Palomeque from Berenberg. Go ahead, Caroline.
Hi. Thanks for taking the question. Just thinking about the next 12-18 months, you have several late-stage trials you expect to initiate, both in wet AMD and in DR. Just wondering if you can give some guidance as to the increase in R&D spend or the cost of the trials themselves. Thanks.
We have not released the cost of those trials. I mean, clearly diabetic retinopathy is far less expensive, mainly because of the comparator that we would be going after, which would be sham. Wet AMD trials are somewhat longer and more involved. We have put, as you noticed, with wet AMD, phase II/III trial. In our runway calculations, we have put in enough patients for the phase II trial, but we are clearly looking at potential partnerships that could help us grow that up into a first pivotal. It's really about the number of patients. Now, we've long stated that the next trials we would go into after our phase I would be trials that if they had enough patients in them, would serve as pivotals.
Clearly, we're going to get the advice of the FDA before we settle on exactly what those protocols look like. It's hard to exactly price them up and understand exactly when they're gonna complete before we really know what those protocols look like.
Great. That's really helpful. I appreciate that. Just a quick follow-up. Not sure whose phone that is.
That's me. Yes.
Okay. Yeah, just a quick follow-up on that. Just wondering, you mentioned partnership. Just wondering if there's anything or any companies that you already have in mind or you're already in conversations with. Is there an ideal partner that you know, have in mind?
Yeah, certainly for TIC and TKI, the ideal partner is somebody who can appropriately globalize the products that we're developing. You know, we are developing these products for the benefit of patients throughout the world. We have certainly the ability to commercialize in the U.S., where we've built a differentiated buy and bill commercial sales team, certainly in the front of the eye, and we believe we can do it in the back of the eye as well. The ideal partner would be somebody that could give justice to these products and make sure that patients throughout the world can benefit from them.
Perfect. Thank you for your question. All right. Again, a reminder, just to please press star one one on your telephone if you'd like to ask our presenters some questions. We have another question from Yi Chen. Hold on one second. Let me put you on the stage. Go ahead, Yi Chen.
Hello.
Hi. Go ahead.
Hi. Thank you for taking my follow-up. Just very quickly, was there a precedent in the clinical development for DR that a candidate was able to be advanced into a phase III trial directly from a phase I trial?
I'm sorry. Is it a precedent in the industry of a
No. Yeah, a precedent in the entire industry for a clinical development for DR.
I'm not aware specifically of DR. I can pass that off to Peter. Peter, are you aware?
When you look at how tyrosine kinase inhibitors work, they work to prevent downstream activation of certain tyrosine kinases depending on, you know, basically several factors. In the case of axitinib, it has a potency, very high potency at the VEGF receptors as well as the potency at the PDGF receptors. When you look at our data from macular degeneration, it's following the same path that you would expect for an anti-VEGF to perform at. Because of that, we know very well that diabetic retinopathy basically mirrors macular degeneration when it comes to the anti-VEGF effect. When you add the anti-PDGF effect, where we know that in diabetes, one of the sorta late complications is something called a tractional retinal detachment, which is formed and helped formed by PDGF.
That in and of itself would show that you would have a benefit. In terms of clinical precedent, there's no previous clinical study in diabetic retinopathy. They've tested tyrosine kinase inhibitors. We haven't, but it has been tested for diabetic macular edema with success, as well as preclinical models. For us, there's plenty of data that would support it. That's why we're doing a phase I clinical study. The goal then is, with that showing what we need to basically, the thing we need to figure out is sorta how quickly does the effect occur, and what is the magnitude of the effect.
From that, we can do some power calculations to determine phase II/III, the size of phase II/III study. That's what we intend to get from the phase I study. The nice thing
About the study we're proposing is the FDA allows us to also have a control group. This really is important, especially when you're talking about diabetic retinopathy severity, to have a control group to really be able to compare directly, as opposed to a traditional phase I, where you only put in your own drug and you have really no idea what the control group would be, and you have to use natural history. We're pretty excited to get those results. Then from that design, a very large study based on it.
I think it's important background also means these constructs. phase II and phase III are not FDA concepts. They're actually company concepts.
The reason why phase IIs are done, I have a long background in areas like diabetic retinopathy, where you're able to do first-in-human studies in actual patients, so you're able to get proof of concept while you're getting safety data, which is obviously the primary reason for doing a phase I program. When you have proof of concept, the FDA just sees pivotal or non-pivotal. We have the ability, because we have proof of concept, and we certainly expect to have proof of concept for diabetic retinopathy, that we can then jump straight into a pivotal trial. This is done routinely in oncology settings and in other settings where you're able to do first-in-human studies in, rather than in healthy volunteers, do them in patients with active disease.
We have 45 patients in wet AMD, where we understand how our drug works in a number of different ways in a number of different populations. That is adequate from our standpoint and adequate from the FDA's standpoint, we presume, once we have the discussion with them to jump directly into a pivotal trial. It's not a huge leap when you're working with known mechanisms and you have clinical trial data in populations with active disease. We certainly expect to have that box ticked with DR, not only with our own programs, but looking at other potential programs that may be able to read onto what would give us confidence to go directly into a pivotal.
Got it. Thank you.
Thank you for your questions. Again, if you'd like to ask our speakers some questions, please press star one one on your telephone now. We'll just wait just a couple of seconds here. All right. There appears to be no additional questions at this time, so I'd like to turn it back over to Antony Mattessich for closing remarks.
I just wanna thank everyone for their attendance and for the very insightful questions, the usually insightful questions from the analysts. We are very excited about our future, very excited about being able to complete our phase II trials for OTX-TIC, which is often the forgotten product that we still have very strong belief and excitement for. Clearly, our nine-month data we will be releasing at a conference very soon for our OTX-TKI. That nine-month data in wet AMD becomes extremely interesting because that really is the time point that the FDA looks at as the primary endpoint for wet AMD studies. I think the performance of the drug at nine months is going to be far more interesting than what it was at seven months.
What we've been seeing so far in the month of October with DEXTENZA, where we've got 11,500 billable inserts in October, which is, you know, almost 1,000 more than we've ever done in the past. This is particularly interesting because this is the first month of a quarter, and we usually do best in our last month of quarter. The previous two records were in final month of quarter. I'm not gonna declare victory yet. We wanna make sure that that continues to roll forward.
There are a number of factors that we think will play into what we hope to be able to achieve with DEXTENZA, one of which we're very excited about with the OPPS final rule, where we were moved into an APC category, that comes with a $2,100 payment in the HOPD. We still have the status indicator for that has not changed to allow payment in the ASC setting.
We believe that we have good data going forward and good arguments to be able to get that status indicator changed to the status indicator for all of the other products in that APC, and look to a facility payment, hopefully sometime in 2024, which would rebalance some of the economics around the product and something that would create a lot of excitement in the surgical setting going forward as well. With that, I thank everyone for being on the phone and for sticking with us as we continue to advance our pipeline forward.