Ocular Therapeutix Inc
NASDAQ:OCUL
Earnings Call Analysis
Q3-2023 Analysis
Ocular Therapeutix Inc
In the latest earnings call, the company's executives brought a wave of optimism, highlighting significant growth in confidence among surgeons, ASCs, and staff towards DEXTENZA's efficacy and safety profile, leading to substantial adoption over the past four quarters. The anticipation is that this growth trajectory will persist into Q4 and beyond. Financially, the company stands on solid ground with a reiterated DEXTENZA net product revenue guidance for 2023 forecasted between $55 million and $60 million, anticipating a growth of roughly 10% to 20% over the prior year.
Revenue saw a healthy rise with total net revenue, including DEXTENZA product revenue and collaboration revenue, reaching $15.1 million for Q3 2023, a 26% increase from Q3 2022. Despite increased R&D expenditures, mainly due to clinical trials and personnel costs, the company efficiently managed selling and marketing expenses, reflecting a slight decrease. With a robust balance sheet featuring $110.6 million in cash and equivalents, the company is well-positioned to fund operations and capital needs into 2025 without financial strain.
The company's dedication to refining its offerings is evident in its decision to adjust DEXTENZA's formulation, reducing the dosage while accelerating release rates to match successful trial results. This indicates careful optimization to match drug delivery with the bioresorption profile. Such commitment to product improvement highlights the company's strategic approach to strengthen its market position.
Key regulatory discussions, such as those regarding the Special Protocol Assessment (SPA) with the FDA, have fortified the company's clinical trial roadmap. Addressing potential drop-offs and clarifying treatment failure protocols with the FDA exemplifies the company's meticulous planning. The capacity to start patient enrollment immediately, coupled with the potential to expand patient criteria within the trials, illustrates strategic foresight and adaptability.
The executive team conveyed cautious optimism about its funding strategies. While no specific commitment was made, the company's current financial health, along with non-dilutive and dilutive possibilities, suggests a proactive approach to support future pivotal trials. With a strategic path laid out due to the SPA providing clarity, the company views itself in a favorable position to attract investment or partnerships, thereby accelerating its march towards tapping into a multibillion-dollar opportunity.
The closing remarks underscored an enthusiastic outlook, with the company eager to progress from planning to executing clinical trials. The support received from the FDA and the readiness of infrastructure, particularly in the U.S. for conducting wet AMD trials, have positioned the company advantageously to advance its clinical programs and ultimately, deliver its product to market.
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Good day, and thank you for standing by. Welcome to the Third Quarter 2023 Ocular Therapeutix Earnings Conference Call. [Operators Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Donald Notman, CFO.
Thank you, operator. Good afternoon, everyone, and thank you for joining us on our third quarter 2023 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 third quarter ended September 30, 2023. 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 Ozden, our Chief Medical Officer; Steve Meyers, our Senior Vice President, Commercial; and Dr. Peter Kaiser, our Chief Medical Adviser, Retina. Unfortunately, Peter will not be available during the Q&A session. Following their comments, I will provide an overview of the financial highlights for the quarter before turning the call back over to Anthony for a summary and questions. 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 anticipated net product revenues and our regulatory and product development plans as well as our research activities 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 Form 10-Q filed this afternoon with the SEC and our most recent annual report on Form 10-K filed March 6, 2023. I will now turn the call over to Anthony.
Thanks, Don. Hello, and welcome, everyone, to our third quarter 2023 earnings call. We are pleased to share with you the tremendous progress we've made over the past 3 months to build on our previous successes and provide clarity on our plans going forward. I'm also pleased to announce a number of exciting developments for OTX-TKI, [indiscernible] containing intravitreal implant for the treatment of wet AMD. To begin, I'm pleased to share that we have announced a new trade name OTX-TKI, that we will now refer to as AXPAXLI.As the program has advanced into its first pivotal trial, we thought it appropriate to introduce this new name to begin to establish our brand identity for potential commercialization. Clearly, though, the most important development in the AXPAXLI program is the recent agreement on our special protocol assessment with the FDA we received just last week. The special protocol assessment or AXPAXLI allows the FDA to officially evaluate and provide written guidance to sponsors. This feedback helps companies assess the adequacy and acceptability of critical elements in the protocol design to support future marketing applications on the basis of the efficacy and safety endpoints in the trial.For AXPAXLI, we aim to secure alignment with the FDA on both the protocol design and the statistical analysis plan. Regarding protocol design, we have gained agreement on several crucial aspects. These include the precise competition of the study population to be enrolled in our clinical trial, the identification of a suitable control arm for AXPAXLI, the determination of its dosing regimen, the specification of baseline criteria, the selection of primary endpoints and their corresponding timing as well as the establishment of an appropriate sample size to ensure the statistical robustness of our pivotal trial.This alignment with the FDA is instrumental in upholding the scientific rigor and regulatory standards of our study. By coming to an agreement with the FDA on the specific elements of our pivotal trial design and statistical analysis plan analysis plan, we believe we now have a clear regulatory path forward. This is a program we are very excited about based on the compelling data that we have shared in the past year. This program has demonstrated the potential for best-in-class durability, and we believe truly has the potential to change the standard of care in this multibillion-dollar market.Now with the initiation of trial sites already underway and the SPA in place, we look forward to screening and enrolling patients. We remain on track to begin dosing our first subject before the end of the year. While we believe the path for AXPAXLI is now clear, and our internal focus now turns from careful planning to flawless execution. There's still a tremendous amount of education we've done.We believe the FDA's new draft guidance, coupled with our interpretation of the additional feedback we have received from the FDA has created significant change for the development of treatments in wet AMD, particularly for treatments like AXPAXLI that are designed to demonstrate extended durability.We are extremely lucky to have deep connections in the Retina community with Dr. Jeff Heier on our Board and the recent addition of Dr. Peter Kaiser as our Chief Medical Adviser, Retina. Both Jeff and Peter have been instrumental in guiding the community through the implications of the changes and the reasons behind it. Our goal in bringing AXPAXLI forward is to improve the lives of patients living with wet AMD, and we realize that only strong endorsement from the Retina community will allow AXPAXLI to achieve its full potential. Let me finish with an update on DEXTENZA.We are pleased to report another impressive quarter for DEXTENZA with net product revenues of $15 million for the third quarter of this year, 26% over the same quarter previous year and in line with Q2 net product revenues. Based on the trends, we continue to anticipate DEXTENZA net product revenue guidance for the full year 2023 will come in at the upper end of our current $55 million to $60 million range provided at the start of the year. Steve Meyers, our Senior Vice President, Commercial, will walk you through the drivers behind this growth. With this background, I'd like to turn the call over to Dr. Rabia Ozden, our Chief Medical Officer, who will introduce you to the ongoing AXPAXLI pivotal trial, which we refer to as the AXPAXLI trial and provide some details on the SPA agreement. Rabia?
Thank you, Anthony. With the FDA agreement under Special Protocol Assessment, we are excited to prepare for the enrollment of the first subject in our first pivotal trial for AXPAXLI, our investigational bioresorbable hydrogel implant containing axitinib in the treatment of wet-AMD by the end of December. Let me first describe the proposed design of the superiority trial. The trial will be a prospective, multicenter, randomized [indiscernible] pivotal Phase III trial that will be run primarily at U.S. sites and is designed to enroll approximately 300 evaluable wet-AMD subjects who are treatment naive in the study eye.In the trial, we will be comparing a single implant of AXPAXLI containing 450 microgram of axitinib to a single injection of aflibercept to assess the safety and efficacy of AXPAXLI in subjects with wet-AMD by measuring BCVA and CSFT. Our trial is anticipated to enroll subjects with good visual acuity at screening that every subject will receive 2 aflibercept injections, 1 at VIC-8 and another at VIC-4. Subjects reaching 2020 vision will then be randomized in the trial at day 1 baseline to receive either one implant of AXPAXLI in the investigational arm or one injection of aflibercept in the control arm and will be followed monthly and rescued for the pre-specified criteria.Our primary endpoint is the proportion of subjects who maintain visual acuity, defined as less than 15 ETDRS letters of BCVA loss at [indiscernible]. We are happy to receive the guidance from the FDA that [indiscernible] is an acceptable time point for the primary endpoint analysis in our study design with a note that although [indiscernible] is acceptable, the FDA prefers Vic40. After additional internal discussions, we may choose to move the endpoint timing to Vic40.Our rescue criteria is 15 or more ETDRS level loss compared to baseline or a new hemorrhage that is likely to cause irreversible vision loss. When a subject meets the rescue criteria, they will be treated with aflibercept injections and then the next rescue treatment will be at the investigator's discretion. We asked the FDA's guidance on 2 important questions. First, where the FDA would allow 15 or more [indiscernible] loss at any time in the trial to count as a treatment failure at Vic36; and second, what would be the best analysis of subject dropouts during the trial? The FDA confirmed that loss of 15 letters at any point in the trial would be considered as having met the endpoint as a treatment failure.Regarding subject dropouts, the FDA informed us that patient characteristics and circumstances at the time of dropout from the study will be subject to review and provide detailed guidance on how we should best capture the information on the dropout in the trial. Overall, we are excited to have agreement on our special protocol assessment and look forward to running our first pivotal trial for this FDA guidance. As in the last note on the protocol, I would like to inform everyone that we intend to move forward into the pivotal trials with an optimized drug load of 450 micrograms of axitinib implant.This optimized configuration has the same components that are axitinib and hydrogen is our single 600 microgram axitinib implant. However, provides for a slightly increased data release of the drug and is designed to improve synchronization of axitinib drug depletion with hydrogel bioresorption. With that introduction, I would like to turn the call over to Peter to discuss the first clinical community reaction to our special protocol assessment agreement and the prospects of successfully enrolled our first pivotal trial. Peter?
Thanks, Rabia. This year, there have been a lot of changes in the world of drug development for wet age-related macro degeneration. For those of us who have spent our lives developing drugs, the FDA requirements for clinical studies in wet AMD have remained remarkably consistent throughout the years, but these have changed. For understandable reasons, the FDA has released new draft guidelines that change how we need to design studies. The FDA needs to protect the public against misbranding and ensure that any product reaching the market is truly safe and effective. The new rules released by the FDA required that durability to be proven by the comparator arm dose, the same frequency as the study arm.For treatments like AXPAXLI that promises greater durability than our current treatments, we believe that non-inferiority, while still acceptable if you're comparing treatments at the same dosing frequency as control is no longer enough to ensure approval with a label of greater durability. For that, a superiority study is needed. We should be pleased that the FDA is encouraging direct comparison in a superiority setting. As a clinician, if I switch a patient from EYLEA to a product claiming greater durability, I want to know that it will really extend the dosing interval for my patients.With some of the newer recent product launches within wet AMD, we have no direct comparison against the standard of care at the same dosing schedule and with the same rescue criteria. So comparisons about durability are not possible. The new rules, we believe will now require a company to provide this vital data going forward. I've talked a lot about what has changed, but one thing that has definitely not changed is the unmet need for greater durability products in wet AMD mainly due to the heavy injection burden of currently approved treatments, visual outcomes in the real world do not come close to matching those we see in clinical trials.Continuous control treatments like AXPAXLI that are designed to treat wet macular degeneration with a single injection for 9 to 12 months are sorely needed and could change the visual outcomes for millions of patients worldwide. As clinicians, we realize that innovation is the most important need for our patients. Clearly, we need to balance the needs of the broader population with the protection of subjects in clinical trials. My colleagues and I who run retinal clinical studies believe that the protocol in the special protocol assessment recently agreed to by the FDA does exactly this. We also believe that how we conduct the trial will be hugely important in generating the right outcomes and protecting the safety of the enrolled subjects.I'm very excited to be associated with this trial, and I believe the community will increasingly understand and endorse the approach we are taking. I would now like to turn the call back over to Rabia to discuss additional program updates.
Thank you, Peter. I'd like to briefly cover the [indiscernible] for AXPAXLI to treat non-proliferative diabetic retinopathy. We have completed enrollment of our Phase I HELIOS trial, a multicenter prospective mask randomized controlled U.S.-based trial in 22 subjects, evaluating a single implant of AXPAXLI containing 600 microgram of axitinib compared to sham injection procedures. To appreciate the potential value of AXPAXLI in this indication requires first and understanding of the condition and its population. In the early stages, diabetic retinopathy will not affect site, but it's left untreated, it progresses and eventually site will be affected.In fact, diabetic retinopathy is the #1 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 [indiscernible] therapies make effective treatment, especially challenging, and this is where we believe AXPAXLI with its desired durability of up to 9 months or longer, may be especially effective. We believe the same attributes that make AXPAXLI a compelling product in wet macular degeneration, the ease of use of an office-based injection and long-term durability could establish this as the first standard of care in the treatment of diabetic retinopathy.Recently, in consultation with our scientific advisers, we made the decision to unmask the HELIOS trial at 9 months versus the initial 6-month time point. We believe 9 months is a more meaningful time point and will allow us to better evaluate the effect of AXPAXLI on this population. We look forward to sharing the top line 9-month data from the HELIOS trial in Q2 of 2024. We are also making excellent progress with another one of our late-stage pipeline programs, OTX-TIC, [indiscernible] intracameral implant being developed for the treatment of patients with primary open-angle glaucoma or ocular hypertension.While there are many medications available to lower intraocular pressure, or IOP, glaucoma remains a leading cause of blindness in part because of unwanted side effects in proper drop installation technique or simply forgetting to take their daily drugs, we believe most patients fail to comply and may ultimately lose their vision. OTX-TIC is being developed to close the gap between clinical trials and real-world outcomes by taking patient compliance out of the equation. This prospective multicenter masked randomized controlled U.S.-based Phase II clinical trial is evaluating the safety, tolerability and efficacy of OTX-TIC for the reduction of IOP in subjects with primary open-angle glaucoma or ocular hypertension.The trial is designed to observe the changes in diurnal IOP from baseline at 2, 6 and [indiscernible] and full of durational IOP response over time compared to [indiscernible]. As shared previously, the Phase II trial enrollment is now complete. We plan to share Phase II top line clinical data from the single dose portion of the trial at the ASCRS meeting in early April of 2024. I'm also very pleased to report that the sub-study to evaluate the safety of repeat dose of OTX-TIC 26 micrograms in a small subset of subjects within the current Phase II clinical trial is progressing well. After receiving a second implant of OTX-TIC 26 microgram, these subjects will be followed for at least 6 months to evaluate their endothelial [indiscernible].The data on the preservation of endothelial [indiscernible] in this pilot repeat dose cell study could provide preliminary support that the product candidate is suitable for repeat dosing. Regarding our ocular surface disease programs, we remain committed to the development of our 2 dry eye programs. 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 cyclosporin intracanalicular insert for the chronic treatment of patients with dry eye disease.Enrollment is going well in our study to evaluate the performance of ODX TD versus placebo inserts, namely fast-dissolving college unplug and no inserts at all. We plan to use the results of this trial to inform the selection of a more appropriate placebo comparator for use in future clinical trials for both OTX-TP and OTX-CSI, potentially de-risking the pivotal programs moving forward. I would now like to turn the call over to Steve for a commercial update. Steve?
Thank you, Rabia. In Q3 2023, DEXTENZA recorded net product revenue sales of $15 million, approximately 26% higher than the same period last year. Also in market unit volume, units sold to ambulatory surgery centers and hospital outpatient departments closed at 36,902 units, which represents a 38% increase over Q3 2022. After a modest start in July, DEXTENZA sales rebounded in August and September by recording the highest consecutive 2-month volume in 2023. Over the last 4 quarters, customer ordering sizes have also grown. In Q3 2023, 49% of all DEXTENZA orders were for 30 or more units compared to 29% during the same time period in 2022.We believe the increase in order size and number of orders is attributable to several factors, including the DEXTENZA's clinical efficacy, safety profile and market access coverage. Earlier this year, we launched a commercial assurance program to help with patient out-of-pocket costs, and that has also helped increase surgeon utilization of DEXTENZA beyond Medicare Part B. Surgeons typically prefer to use the same treatment algorithm on all patients, and many surgeons have recently expanded with DEXTENZA beyond Medicare Part B. We believe the commercial and Medicare Advantage payer landscape provides another growth opportunity for DEXTENZA.Now I'll provide an update on CMS's decision for CPT-6-8841, a code that describes the insertion procedure for DEXTENZA. Recall the HOPS panel, which is an advisory arm of CMS recommended a change to the status indicator to allow for the insertion payment in the ASC. Additionally, surgeons, ASC administrators and staff across the entire U.S. sent over 1,000 letters to CMS during the open comment period also requesting the change. Despite these efforts, CMS made the decision to not change the status indicator. While we're disappointed in the final ruling, we are still confident in DEXTENZA's long-term prospects.Our forecast models were built on the assumption that CMS would not change the status indicator. Surgeons, ASC and staff confidence in DEXTENZA's efficacy and safety profile has resulted in significant growth over the last 4 quarters, and we expect that to continue in Q4 and beyond. While the CMS rule is final for 2024, to be clear, we intend to revisit the status indicator for calendar year 2025. Finally, as Anthony noted previously and based on performance year-to-date and trends over the last several months, we remain confident reiterating our DEXTENZA net product revenue guidance for the full year 2023 to be between $55 million and $60 million, representing potential growth of approximately 10% to 20% over 2022.With that, let me turn the call back to Donald to discuss our financial results.
Thank you, Steve. Total net revenue, which includes both gross DEXTENZA product revenue net of discounts, rebates and returns, which the company refers to as net product revenue and collaboration revenue was $15.1 million for the third quarter of 2023, an increase of approximately 26% over third quarter 2022 net revenue of $12 million and in line with second quarter net revenue of $15.2 million. For the third quarter of 2023, DEXTENZA net product revenue grew to $15 million from $11.9 million over the comparable period in 2022, while collaboration revenue was approximately $0.1 million for each period.Research and development expenses for the third quarter of 2023 were $15 million versus $13.7 million for the comparable period in 2022, driven primarily by an increase in expenses associated with clinical trial programs and personnel-related costs, including stock-based compensation, supported these programs. Selling and marketing expenses in the third quarter of 2023 were $9.3 million as compared to $10.2 million for the comparable quarter of 2022, reflecting primarily a decrease in professional fees and services. General and administrative expenses were $8.6 million for the third quarter of 2023 versus $8.5 million in the comparable quarter of 2022, primarily due to an increase in personnel-related costs, including stock-based compensation, offset by lower professional related fees and services.The company reported net loss for the third quarter of 2023 of $0.5 million or a loss of $0.01 per share on a basic basis and $0.25 per share on a diluted basis compared to a net loss of $24.2 million or a net loss of $0.31 per share on both a basic and diluted basis per share for the comparable period in 2022. Net loss in the third quarter of 2023 included a $6.7 million noncash gain attributable to a change in the fair value of the derivative liabilities associated with the company's convertible notes and the bearings credit facility.The company also recorded gains and losses from debt extinguishment, net of $14.2 million in the third quarter of 2023. Noncash charges, stock-based compensation and depreciation and amortization were $5.4 million in the third quarter of 2023 versus $4.7 million for the comparable quarter in 2022. As of September 30, 2023, the company had $110.6 million in cash and cash equivalents versus $102.3 million as of December 31, 2022. Based on current plans and related estimates of anticipated cash inflows from DEXTENZA and anticipated cash outflows from operating expenses, the company believes that existing cash and cash equivalents and reflecting our compliance with the $20 million minimum cash covenant in the Bearings credit agreement are sufficient to enable the company to fund planned operating expenses, debt service obligations and capital expenditure requirements into 2025.This cash guidance is subject to a number of assumptions, including the revenue, expenses and reimbursements associated with DEXTENZA and the pace of research and clinical development programs, among other aspects of the business. As of November 7, 2023, the company had approximately 79.4 million shares outstanding. I would now like to turn the call back to Antony for some final thoughts.
Great. Thanks, Don. So before turning the call over to questions, let me go over a quick summary. We received FDA agreement on our special protocol assessment for AXPAXLI on track to enroll our first sector year-end, we are anticipating a number of updates in our pipeline that we intend to share at upcoming medical meetings. First, we recently completed enrollment in our Phase II program evaluating OTX-TIC, our travel cells containing intracameral implant for the treatment of glaucoma and expect to present top line results in April 2024.With the recent interest around the iDose program at Glaukos, we are excited about the prospects of bringing a fully bioresorbable prostaglandin delivery implant that is designed to be suitable for chronic dosing into pivotal programs as our next step. Secondly, we look forward to sharing our interim 9-month data from the HELIOS trial evaluating AXPAXLI in nonproliferative diabetic retinopathy in Q2 of 2024. We recorded $15 million in net product revenue for DEXTENZA in the third quarter of 2023, 26% over the same quarter prior year and in line with Q2 2023. Based on the results, we are reaffirming our guidance and expect to come in at the high end of the current $55 million to $60 million range.Finally, I'd like to mention that we will be hosting an R&D Day in December to further detail our plans around AXPAXLI pivotal program and discuss the rest of the development pipeline as well as DEXTENZA. Please keep an eye out for further details on the date. So I hope it's clear that this is a very exciting time for Ocular, and we're thrilled with our progress to date and look forward to sharing additional updates in the coming quarters. With that, I will turn the call over to the operator for questions.
Thank you. [Operator Instructions] Our first question comes from the line of Jonathan Wolleben with JMP, your line is now open.
A couple from me. First on [indiscernible] and then I got a follow-up on AXPAXLI. Just wondering without the CMS facility decision the other week, what can accelerate the DEXTENZA growth in the surgical setting in 2024? And then are you currently promoting DEXTENZA for allergic conjunctivitis or plan on starting that next year? Just wondering if you have any details there?
Sure, I'll hand it off to Steve.
Sure. Yes. So next year, in terms of our growth, this year, we expected to grow about 26% in market volume, and we expect to see the same next year. As it relates to the CMS decision with the facility payment I think at the end of the day, the HOPS panel made the recommendation to change the status indicator. We also had over 1,000 comments in the open comment period of change. Their rationale for not changing as they consider it to not be a stand-alone procedure, which we disagree with that decision. So we'll revisit that next year, and we are hopeful that it will happen in 2025.
And allergic conjunctivitis any plans there?
Yes, great question. I think that we have a great opportunity with the AC, but our plans for next year, we're going to continue with the same sales force we have. We'll meet customers where they want to go, whether it's in the office for AC or in the surgery center. But we still believe that the surgery center provides us the greatest opportunity. We've only captured less than 5% of all cataract volume and still believe that's the best opportunity for growth for DEXTENZA in 2024.
Okay. And a couple on AXPAXLI. What percentage of the wet AMD population do you think fit into your current enrollment criteria? And then how do you think about the translatability from the data you'll generate here to the more broad wet AMD population? And then I guess maybe one more, the discussion between week 36 and week 40, what was the discussion with FDA and the difference in opinion there?
That's a lot of questions to squeeze into one. I'll hand it off to Rabia.
Yes. Maybe I'll start with the last one, John. The 36 weeks versus 40 weeks, there is really not a discussion with the FDA. FDA's responses that they accept Vic36 although they prefer [indiscernible], I think that is coming from what is month 9, whether it's the 36 or Vic40, and both of them are acceptable. And we will just have internal discussions and like we really have no issues moving to Vic40 because our drug actually is the durability covers that. That's why that's really the response, 9 months Vic36 is acceptable, although they prefer Vic40. Can you, John, repeat your first and second question?
Yes. What percentage of the population fit your enrollment criteria? And then how do you think the data translate to the broader population?
Yes. I mean, first of all, this is the population. This population exists, and it is like the way they are going to come at the screening is like just a population already at the sites and actually do not qualify for any other AMD trials. We are looking for that good vision wet AMD patients, treatment naive. Again, with our discussions, actually, that population is actually not eligible for any other trial and just waiting to be enrolled in the trial. The applicability, this is a wet AMD population and our enrollment criteria includes that it just they need to show. The patient should have the web AMD vision. And that's why it would be applicable ultimately for the approval perspective. But in addition to that, we're going to definitely have other Phase IV trials and the repeat dose trial, which is going to cover more AMD population as well the less vision patients. But for approvability, this population is completely acceptable.
Yes, we expect a very broad label. We expect for treatment of wet AMD and that was part of the SPA request of what we expected from the indication. So we're very comfortable and certainly with the history of the FDA that the applicability of the label will be extremely broad. The question, I think, that Rabia is bringing up is that we realize that doctors will probably want additional data for marketing reasons later on. So we certainly plan to have a very active Phase IV program prior to launch.
The next question comes from Joseph Catanzaro with Piper Sandler, your line is now open.
Hi everyone, this is Albert on for Joe. My first question was to really better understand how this new formulation compares with what was used in the Phase I study. So I was wondering how this drug was optimized and whether with the different dynamic of drug solution, [indiscernible] still expected to occur around this 8-month mark? And then maybe a follow-up, thank you.
Yes. It's really kind of a miss number to call this a new formulation. In fact, the hydrogel portion of it is exactly the same as what we've been using, what we've changed is we've changed the load. So we've gone from 600 microgram to 450 micrograms. And we've discovered ways to allow that to come out faster. So we'll have a faster release and we'll have a higher amount daily drug delivery, which matches the 3x 200 that we saw in the Phase I trial in Australia, so we have the bulk of our work with naive. So obviously, at the end of the life of the depot, which is exactly the same as we've seen in all the other trials between 8 and 9 months, we'll have a little bit less drug available.We want to have drug available. We'd like to create a sort of a period where there is drug in the vitreous where you can redose without another foreign body being in the vitreous at that time, if a doctor finds that to be important. But this just better matches up the drug delivery with the bioresorption and as formulators, we're very excited that we can bring this forward.
Okay, thanks. I was also wondering about the plans on how to handle subject of drop off. I know you mentioned the patient characteristics and circumstances are subject to review. Maybe you can just maybe speak a little more on this if you can.
Sure. I'll start first and then maybe hand over to Rabia. But I mean there were 2 hugely important points in this SPA that we brought in that could have made the trial either more difficult or made us rethink the trial. The first was what a lot of people are talking about LOCF, meaning that if a patient achieves a 15-letter loss at month 3, and then is rescued several times through the rest of the balance of the 9 months are they considered a treatment failure at 9 months. And that was very unequivocal from the FDA saying, yes, that person would be treated as a treatment failure at 9 months, even though their failure occurred at month 3.The second thing was realizing that this is a trial that in the EYLEA arm is likely to have a relatively high number of dropouts comparatively to other trials that may be in the space. We asked the FDA if we could take the protocol violators and the dropouts and consider them in an ITT analysis that would have them all put into the 15-letter loser category. The FDA understood the question, told us that it would be a review issue clearly for patients that are dropping out or going outside of treatment protocol for efficacy reasons, that appeared to be a reasonable approach and that as part of the review, we would look at all of the data in its totality.That was a hugely reassuring bit of information from us because, as you know, on an ITT analysis, those dropouts and protocol violations generally need to go in 1 of the 2 categories. And we wanted to be sure that they would not be placed arbitrarily in the non-15-letter loser cohort. And that was confirmed by the FDA. I don't know, Rabia, is there anymore you can add on this?
No. I mean, you described it really well, Anthony. The only thing that I would add is that we are really like happy to receive the guidance from FDA, how we should collect the information on those patients, very clear like a direction on the information FDA wants us to collect on whether they drop out because of the safety, efficacy or some other reason. That, as Anthony mentioned, it's very encouraging.
Thank you. One moment please. Our next question comes from the line of Colleen Kusy with Baird, your line is now open.
This is Abbie on for Colleen. Congrats on the SPA and all the progress. I had a question regarding the patients at baseline. Previously, you had said you were planning on enrolling patients that were closer to 2020 vision or you got a 2020 vision after an induction with EYLEA. Is that still the plan? And can you comment on how you think this entry criteria will impact the rate of enrollment?
Yes. That's what's in our SPA. Our SPA is for patients that after 2 doses of EYLEA induction improved to 2020 that they are enrollable in the trial. Now the great thing about having the SPA is that it's really allowed us to have a concrete response from the FDA and allowed us to have a tremendous number of conversations with sites and key opinion leaders and we've had a lot of feedback from those sites now that they're used to the concept of what we're doing with this trial and now that we have the endorsement from the FDA that this is a legitimate trial for registration, a lot of ideas about other broadening that definition, allowing more patients into the trial.Now clearly, to make any changes to that protocol, we need to go through a process with the FDA to ensure that the SPA reflects that. But even as is, we're able to start enrolling patients immediately and we do think that, that patient population that can get to 2020 is reasonably sizable, especially given the earlier diagnosis of wet AMD with the nearly ubiquitous use of OCTs in yearly [indiscernible]. So we think we're going to have enough patients with the protocol as is, but there are opportunities to broaden that entry criteria as well.
Wonderful. And then I was wondering if you could talk through what your expectations are in the EYLEA control group as to what proportion of those patients you'd expect to lose 15 letters?
The working assumption is between 30% to 50% of those patients would progress to a 15 letter loss is allowed to do so.
Thank you. One moment for our next question. The next question comes from Kelly Shi with Jefferies, your line is now open.
Hi, this is Klara on for Kelly. Thanks for taking the question and congrats on the progress. Just wondering what the agreed study design with FDA to be applicable to the second wet-AMD trial as well? And also for diabetic retinopathy, what kind of data do you need to see to move forward to a Phase III pivotal trial? And what might be the expected cost associated with that trial?
Sure, Rabia, do you want to fill that?
Yes. The first question, whether the second pivotal would be the same. Yes, it would be the same design like the design that we are going to run with the first trial? And can you please repeat your second question, Klara?
Yes, sure. So I was asking in terms of diabetic retinopathy, what kind of data in Q4, do you need to see in order to move forward to Phase III pivotal trial? And what might be the expected cost associated with the pivotal trial? And how do you plan to fund the trial?
Okay. I'll just take the first part of that question. I'll leave the funding to Anthony. For the DR trial is our expectation. As you know, this is a small trial. The number of the subjects we enrolled 22 subjects in the trial, and they are like 2:1 in AXPAXLI versus the [indiscernible]. Our expectation is to see a trend in the improvement in the DRSS score. We are really not looking for any non-inferior to our sample size is not enough for that. That's why we are looking for a trend in the DRSS score improvement. Anthony, would you like to take the rest of the question?
Sure. I mean obviously, we're not committed to a particular form of funding at the moment. I mean, we're very fortunate that we have cash at the moment, and we have a runway into 2025. There are opportunities in a number of different both dilutive and non-dilutive opportunities to be able to help fund that second trial. Clearly, the SPA gives clarity that we did not have before and that creates an investment or a partnership opportunity that's a bit more clear than what existed in the past.So I think this SPA actually opens up more avenues than we had before, but we haven't committed to a particular source of funding. Clearly, once we get traction on this first pivotal, the desire to set up another pivotal in order to get to market in a reasonably short period of time it's overwhelming given that the destination, the value of 2 positive pivotals in wet AMD with a 9- to 12-month product is a multibillion dollar opportunity, and we'd like to get there as fast as we possibly can.
Thank you.
Thank you.
One moment for our last question. This question comes from the line of Yi Chen from H.C. Wainwright. Your line is now open.
I recall you previously reported that 73% of patients were rescue free at months 10 with 600 microgram. Now you are using 450 micrograms. So what percentage of patients do you expect to be rescue-free at the end of 9 months?
Well, we would expect that number to be the same or higher. I mean this new formulation will deliver just like the older formulation or the pre-optimized formulation. It will deliver drug continuously for 9 to 12 months. And as we mentioned for the first 9 months, it will deliver drug at a slightly faster rate than the 600 microgram dose. So up until 9 months, you're actually going to get more drug to the target tissues than you would have with the previous 600-microgram formulation. So up through that 9-month time frame, we're very confident that we'll do at least or better than that.Certainly, in terms of the drug delivery, we will, we believe we'll still have enough drug in the target tissues and in the vitreous post to be able to extend the effective concentrations in the RPE in the choroid up into month 12.
And will you use the 450-microgram formulation for MTTR as well in the future?
I believe we will, yes. I mean it's an optimized formulation better marrying the drug elution with the life of the insert. So I don't see why we would want to go with that formulation, but it's just a better iteration of what we've done before for all [indiscernible].
Yes. And do you expect the same safety profile during the first 9 or 10 months with more drugs to be delivered by this new formulation?
Well, we're comfortable that the amount that we're delivering is well within the safety window. It is, as you probably heard me mention earlier, the dilution rate that we have on this optimized formulation is about the same as we had on the 3x 200 that we had in Australia. So we certainly don't expect any difference in the safety, having maybe a little less drug around at the end of the life of the insert actually not that we had safety issues with what we had before, but it certainly would give us greater confidence that there'd be less drug moving around the vitreous at the end of the life of the insert.
Okay, thank you.
Thank you.
I'm showing no further questions at this time. I would now like to turn the call back to Anthony Mattessich for closing remarks.
Well, thanks, everybody, for joining us today. I mean it has not come through, we are unbelievably excited to have the SPA behind us now that we have a clear road map. We've done a lot of planning, a lot of discussing with the FDA, a lot of educating of the market that we still need to do. But we really are in a situation now where we're going from really intense planning. So really putting our head down and getting behind the execution of this trial.We have our sites that are excited to be able to join it. We actually are very lucky that we're launching this trial in a period where there's a lot of infrastructure, particularly in the U.S. that's capable of doing wet AMD trials that are currently not being utilized at a very high rate. So we're very eager to get started. We're very eager to get this product to patients and just can't wait to get going. So thank you so much for attending today.
Yes. Thank you for your participation in today's conference. It does conclude the program, and you may now disconnect.