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Item 1. Business

2021-03-11 compared with 2020-03-12 · 977 added, 1430 removed, 858 unchanged (74% of the section changed)

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We are a biopharmaceutical company focused on the formulation, development and commercialization of innovative therapies for diseases and conditions of the eye using our proprietary, bioresorbable hydrogel platform technology.

We use this technology to tailor duration and amount of delivery of a range of therapeutic agents of varying duration in our product candidates.

We are pursuing three overall strategic goals:

To make prescription eye drops obsolete;

To make immediate release, back-of-the-eye injections obsolete;

To extend our hydrogel platform technology for use beyond the eye to other areas of the body.

We use this technology to tailor duration and amount of delivery of a range of therapeutic agents in our product candidates.

We currently incorporate therapeutic agents that have previously received regulatory approval from the U.S.

Food and Drug Administration, or FDA, including small molecules and proteins, into our hydrogel technology with the goal of providing local programmed-release of drug to the eye.

We believe that our local programmed-release drug delivery technology has the potential to treat conditions and diseases of both the front and the back of the eye and can be administered through a range of different modalities including intracanalicular inserts, intracameral implants and intravitreal implants.

We have products and product candidates in early commercial, clinical and preclinical development applying this technology to treat post-surgical ocular inflammation and pain, ocular itching associated with allergic conjunctivitis, dry eye disease, glaucoma and ocular hypertension, and wet age-related macular degeneration, or wet AMD, among other conditions.

In November 2018, the FDA approved our new drug application, or NDA, for DEXTENZA ®

(dexamethasone ophthalmic insert) 0.4mg for intracanalicular use for the treatment of ocular pain following ophthalmic surgery.

In June 2019, the FDA approved our supplemental new drug application, or sNDA, for DEXTENZA to treat post-surgical ocular inflammation.

On July 1, 2019, we commercially launched DEXTENZA in the United States for the treatment of post-surgical ocular inflammation and pain.

DEXTENZA is the first FDA-approved intracanalicular insert delivering dexamethasone to treat post-surgical ocular inflammation and pain for up to 30 days with a single administration.

We have enrolled 96 patients in a pivotal Phase 3 clinical trial evaluating DEXTENZA for the treatment of ocular itching associated with allergic conjunctivitis.

In May 2019, we announced the results of the Phase 3 clinical trial of our product candidate OTX-TP (intracanalicular travoprost insert) for the reduction of intraocular pressure, or IOP, in patients with glaucoma and ocular hypertension.

Both DEXTENZA and OTX-TP are local programmed-release, drug-eluting, preservative-free intracanalicular inserts that are placed into the canaliculus through a natural opening called the punctum located in the portion of the lower eyelid near the nose.

In October 2019, we announced that we had met with the FDA who determined that the results did not achieve clinical meaningfulness for OTX-TP.

As a result, we informed the market that we did not intend to advance OTX-TP without a partner.

Our earlier stage assets include two development programs that have initiated clinical trials:

OTX-TIC, an intracameral travoprost implant for the reduction of IOP in patients with glaucoma and ocular hypertension when greater IOP reduction is needed, and OTX-TKI, an intravitreal injection by fine gauge needle of a hydrogel, anti-angiogenic formulation of a tyrosine kinase inhibitor, or TKI, for the treatment of wet AMD.

We also have a collaboration with Regeneron Pharmaceuticals, Inc., or Regeneron, for the development and potential commercialization of products containing our local programmed-release hydrogel in combination with Regeneron’s VEGF inhibitor, aflibercept, currently marketed under the brand name Eylea.

We delivered an initial formulation to Regeneron in December 2017 that was subsequently determined to not achieve the goals of the program.

We are currently negotiating an amendment to the initial collaboration to deliver additional formulations going forward.

In addition to our ongoing drug product development, we currently market ReSure ®

Sealant, a hydrogel ophthalmic wound sealant approved by the FDA to seal corneal incisions following cataract surgery.

ReSure Sealant is the first and only surgical sealant to be approved by the FDA for ophthalmic use.

We are also assessing the potential use of our hydrogel platform technology in other areas of the body.

Front-of-the-Eye Programs:

Intracanalicular Inserts

Poor patient compliance with eye drop regimens and the need for frequent administration of eye drops at high drug concentrations due to rapid washout by the tears can create challenges in the successful management of ocular diseases and conditions.

For example, poor patient compliance can lead to diminished efficacy and disease progression and high drug concentrations can create side effects.

We are developing therapies to replace standard of care eye drop regimens with our innovative local programmed-release, drug-eluting intracanalicular inserts.

The goal for our intracanalicular insert product candidates is to replace the management of many front-of-the-eye diseases and conditions using frequent, pulsed eye drop therapy, characterized by significant variations in drug concentration over time, with longer term, local programmed-release hydrogel-based therapeutic agents to improve patient outcomes.

DEXTENZA ®

(dexamethasone ophthalmic insert)

DEXTENZA incorporates the FDA-approved corticosteroid dexamethasone as an active pharmaceutical ingredient into a hydrogel, drug-eluting intracanalicular insert.

In November 2018, the FDA approved our NDA for DEXTENZA for the treatment of post-surgical ocular pain.

In June 2019, the FDA approved our sNDA, for DEXTENZA to treat post-surgical ocular inflammation.

In connection with our July 1, 2019 commercial launch of DEXTENZA for post-surgical ocular inflammation and pain, we have built our own highly targeted, key account manager, or KAM, sales force that focuses on the ambulatory surgical centers, or ASCs, responsible for the largest volumes of cataract surgery.

Since the commercial launch of DEXTENZA, we have expanded our field sales team to a total of 30 KAMs.

DEXTENZA is now available through a network of distributors.

Our initial commercial efforts are focused on the two million cataract procedures performed annually under Medicare Part B.

Following our receipt of FDA approval on November 30, 2018, we submitted an application for a C-code for transitional pass-through payment status.

On May 29, 2019, we received formal notification from the Centers for Medicare and Medicaid Services, or CMS, that it had approved transitional pass-through payment status and established a new reimbursement code for DEXTENZA.

The code, C9048, became effective on July 1, 2019.

On December 28, 2018, we submitted an application for a J-Code for permanent payment status.

In July 2019, we subsequently received a specific and permanent J-Code, J1096, that became effective October 1, 2019.

A J-Code is a permanent code used to report drugs that ordinarily cannot be self-administered.

With the effectiveness of our permanent J-Code as of October 1, 2019, our C-code is no longer in effect.

We have completed three Phase 3 clinical trials of DEXTENZA for the treatment of post-surgical ocular inflammation and pain.

The data from two of these three completed Phase 3 clinical trials and a prior Phase 2 clinical trial were used to support our NDA for post-surgical ocular pain;

data from a subsequent Phase 3 clinical trial was used to support our subsequent sNDA for post-surgical ocular inflammation.

We have completed two Phase 3 clinical trials of DEXTENZA for the treatment of allergic conjunctivitis and are currently conducting a third Phase 3 clinical trial.

In October 2015, we announced topline results of our first Phase 3 clinical trial for the treatment of ocular itching and conjunctival redness associated with allergic conjunctivitis.

In June 2016 we announced topline results of our second Phase 3 clinical trial for the treatment of ocular itching associated with allergic conjunctivitis.

In the first Phase 3 clinical trial, DEXTENZA achieved the co-primary endpoint of improvement in ocular itching compared with placebo but failed to achieve on the co-primary endpoint of improvement in conjunctival redness compared with placebo, in each case, at certain prespecified timepoints.

For the second Phase 3 trial, DEXTENZA failed to achieve the primary endpoint of improvement in ocular itching compared with placebo, at certain prespecified timepoints.

In the third quarter of 2019, we began dosing patients in pivotal Phase 3 clinical trial evaluating DEXTENZA for the treatment of ocular itching associated with allergic conjunctivitis.

A total of 96 patients were enrolled in this Phase 3 clinical trial, which is a U.S.-based, multi-center, 1:1 randomized, double-masked, placebo-controlled trial testing the safety and efficacy of DEXTENZA (dexamethasone ophthalmic insert) 0.4 mg versus a placebo vehicle punctum plug using the Ophthalmic Research Associates’

modified Conjunctival Allergen Challenge (Ora-Cac®) Model for the treatment of ocular itching associated with allergic conjunctivitis.

The trial is designed to assess the effect of DEXTENZA compared with a placebo on allergic reactions using a series of successive allergen challenges over a 30-day period.

The primary efficacy endpoint being evaluated in the study is ocular itching one week following the insertion of DEXTENZA.

DEXTENZA is administered by a physician as a bioresorbable intracanalicular

insert and designed for drug release to the ocular surface for up to 30 days.

If this trial is successful, we plan to submit a supplemental NDA to the FDA for the indication of ocular itching associated with allergic conjunctivitis.

We recently completed enrollment and topline results from this trial are anticipated to be reported in the second quarter of 2020.

We are also planning to evaluate DEXTENZA in pediatric subjects that are 0 to 3 years of age undergoing cataract surgery beginning in the fourth quarter of 2020.

The planned pediatric trial is a post-approval commitment to the FDA.

Additionally, we have initiated several investigator-initiated trials evaluating DEXTENZA in different clinical situations.

We have also completed a small proof-of-concept Phase 2 clinical trial of DEXTENZA for the treatment of episodic dry eye disease which suggests that DEXTENZA may have benefit in treating ocular surface disease.

OTX-TP (intracanalicular travoprost insert)

Our product candidate OTX-TP is an intracanalicular insert that delivers a preservative-free formulation of the drug travoprost, an FDA approved prostaglandin analog, for the reduction of intraocular pressure, or IOP, in patients with primary open-angle glaucoma or ocular hypertension.

OTX-TP is designed to lower IOP for up to 90 days and to address the poor adherence associated with chronic, daily eye drop regimens, the current standard of care.

On May 20, 2019, we reported topline results of a Phase 3 randomized, double blind, placebo-controlled clinical trial that was conducted across more than 50 sites and enrolled 554 subjects with open-angle glaucoma or ocular hypertension in the full analysis set, or FAS, population.

The trial’s primary efficacy endpoint was an assessment of mean IOP at nine different time points, three diurnal time points (8:00 a.m., 10:00 a.m., and 4:00 p.m.) at each of 2, 6, and 12 weeks following insertion.

The secondary endpoints included an evaluation of whether OTX-TP demonstrated a statistically superior mean reduction of IOP from baseline for OTX-TP treated subjects compared with placebo insert treated subjects (Table 1) compared with placebo insert treated subjects at the same nine time points.

Topline results show that the trial did not achieve its endpoint of statistically significant superiority in mean reduction of IOP compared with placebo at all nine time points.

OTX-TP was generally well tolerated and no ocular serious adverse events were observed.

The most common ocular adverse events seen in the study eye were dacryocanaliculitis (approximately 7.0% in OTX-TP vs.

3.0% in placebo) and lacrimal structure disorder (approximately 6.0% in OTX-TP vs.

4.0% in placebo).

We have met with the FDA to discuss data we reported in May 2019 from our completed Phase 3 trial.

Our conversation with the FDA was productive and involved a discussion around the importance of compliance and how a product like OTX-TP could address the issue of non-compliance by delivering a prostaglandin analog formulated with our local programmed-release hydrogel to lower intraocular pressure for up to 12 weeks with a single insert.

While the FDA did not feel that the data from this clinical trial met the standard of clinical meaningfulness in the population studied, there were constructive discussions about potential pathways forward in specific patient populations for whom drops are problematic.

Based on the feedback following these discussions with the FDA, we do not intend to initiate a second Phase 3 clinical trial at this time without the assistance of a collaborative partner.

We believe that if we were to find a partner for our OTX-TP program, we or such partner could decide to conduct additional Phase 2 clinical trials to address feedback from the FDA prior to another Phase 3 clinical trial.

Given the potential use of OTX-TP as a chronic therapy, however, we have decided to continue an ongoing open-label, one-year safety extension study , generating six-month and one-year safety data for a limited number of subjects to support a potential future product registration.

We anticipate data from this safety study including pharmacokinetic data later this year.

Front-of-the-Eye Programs:

Implants for Intracameral Injection

OTX-TIC (travoprost implant for intracameral injection)

OTX-TIC is our product candidate for glaucoma patients in need of a more significant reduction in IOP.

OTX-TIC is a bioresorbable hydrogel implant incorporating travoprost that is designed to be administered by a physician as an intracameral injection with an initial target duration of drug release of four to six months.

Preclinical studies to date have demonstrated reduction of IOP and pharmacokinetics in the aqueous humor that suggest a pharmacodynamic response of IOP reduction in humans.

Our investigational new drug application, or IND, for our U.S.

trial became effective in the first quarter of 2018, and we dosed the first patient in May 2018.

This clinical trial is a multi-center, open-label, dose-

escalation, proof-of-concept study designed to evaluate the safety, biological activity, durability, and tolerability of OTX-TIC in patients with primary open-angle glaucoma or ocular hypertension.

We presented initial results from the first cohort, comprised of five patients, in this clinical trial at the Association of Research and Vision of Ophthalmology (ARVO) meeting in April 2019 and the American Society of Cataract and Refractive Surgery annual meeting in May 2019.

We subsequently presented results from the second cohort, comprised of four patients, at the Glaucoma 360 conference in February 2020.

These data demonstrated that, with a single implant, subjects were able to achieve IOP lowering from baseline for up to eighteen months.

In addition, the hydrogel carrier, as designed, biodegraded in approximately five to seven months.

There were no clinically meaningful changes in corneal health as measured by endothelial cell evaluation and corneal pachymetry.

Several subjects reported low grade inflammation and peripheral anterior synechiae that we believe may be addressable with modifications to the implants.

We are currently collecting additional data from the first two cohorts and have begun enrolling a third and fourth cohort to assess the impact of a faster degrading implant with the same therapeutic dose as administered in cohort one and a fourth cohort to assess an additional formulation with a smaller implant of OTX-TIC.

We expect to provide topline data for the third and fourth cohorts in the second half of 2020.

Back-of-the-Eye Programs

We are engaged in the development of formulations of our hydrogel administered via intravitreal injection to address the large and growing markets for diseases and conditions of the back of the eye.

Our initial development efforts are focused on the use of our extended-delivery hydrogel in combination with anti-angiogenic drugs, such as protein-based anti-VEGF drugs, or small molecule drugs, such as TKIs, for the treatment of retinal diseases such as wet AMD, retinal vein occlusion and diabetic macular edema.

Our initial goal for these programs is to provide extended delivery over a four to nine-month period thereby reducing the frequency of the current monthly or bi-monthly immediate release intravitreal injection regimen for wet AMD and other retinal diseases.

OTX-TKI (tyrosine kinase inhibitor intravitreal implant containing axitinib)

OTX-TKI is a preformed, bioresorbable hydrogel fiber incorporating axitinib, a small molecule TKI with anti-angiogenic properties delivered by intravitreal injection.

We believe that our local programmed-release drug delivery technology has the potential to treat conditions and diseases of both the front and the back of the eye and can be administered through a range of different modalities including intravitreal implants, suprachoroidal implants, intracameral implants and intracanalicular inserts.

We have product candidates in preclinical and clinical development designed to utilize this technology to treat retinal diseases including wet age-related macular degeneration, or wet AMD;

glaucoma and ocular hypertension;

and ocular surface diseases and conditions including dry eye disease and ocular itching associated with allergic conjunctivitis.

We also have two FDA-approved products in commercialization in the United States:

DEXTENZA ® , an intracanalicular insert for the treatment of post-surgical ocular inflammation and pain, and ReSure ® Sealant, an ophthalmic device designed to prevent wound leaks in corneal incisions following cataract surgery.

Our earlier-stage assets include four programs in clinical development:

● OTX-TKI, an axitinib intravitreal implant administered by fine-gauge needle for the treatment of wet AMD;

● OTX-TIC, a travoprost intracameral implant for the reduction of intraocular pressure, or IOP, in patients with glaucoma or ocular hypertension;

● OTX-CSI, a cyclosporine intracanalicular insert for the chronic treatment of dry eye disease;

● OTX-DED, a dexamethasone intracanalicular insert for the short-term treatment of the signs and symptoms of dry eye disease.

We have a collaboration with Regeneron Pharmaceuticals, Inc., or Regeneron, for the development and potential commercialization of products containing our local programmed-release hydrogel in combination with Regeneron’s vascular endothelial growth factor, or VEGF inhibitor, aflibercept, currently marketed under the brand name Eylea.

We also continue to assess the potential use of our hydrogel platform technology in other areas of the body.

Retinal Disease Programs

We are engaged in the development of formulations of our hydrogel administered via intravitreal injection to address large markets for diseases and conditions of the back of the eye which we believe have significant growth potential.

Our initial development efforts for our retinal disease programs have focused on the use of our extended-delivery hydrogel in combination with anti-angiogenic drugs, such as TKIs or protein-based anti-VEGF drugs, for the treatment of retinal diseases such as wet AMD;

diabetic macular edema, or DME;

and retinal vein occlusion, or RVO.

Our initial goal for these programs is to provide extended delivery for at least six months, thereby reducing the frequency of the current monthly or bi-monthly immediate release intravitreal anti-VEGF injection regimens for wet AMD and other retinal diseases.

OTX-TKI (axitinib intravitreal implant)

Our product candidate OTX-TKI is a preformed, bioresorbable hydrogel fiber implant incorporating a small molecule tyrosine kinase inhibitor, or TKI, axitinib, with anti-angiogenic properties delivered by intravitreal injection

and designed for a duration of six months or longer.

TKIs have shown promise in the treatment of wet AMD.

In May 2017, we reported data from preclinical studies evaluating the efficacy, tolerability and pharmacokinetics of OTX-TKI.

In this study, OTX-TKI was well-tolerated, and high levels of drug were maintained in the tissue for up to twelve months in Dutch belted rabbits.

In the first quarter of 2019, we began dosing patients in a Phase 1 clinical trial in Australia.

This clinical trial is a multi-center, open-label, dose escalation study designed to evaluate the safety, durability and tolerability of OTX-TKI.

We also plan to evaluate biological activity by following visual acuity over time and measuring retinal thickness using standard optical coherence tomography.

Two cohorts of six subjects each have been enrolled, a lower dose cohort of 200 μg and a higher dose cohort of 400 μg.

In these cohorts, OTX-TKI was generally well tolerated and observed to have a favorable safety profile with no ocular serious adverse events noted.

In the higher dose cohort, OTX-TKI showed a decrease in central subfield retinal thickness as measured by mean changes in central subfield thickness values by decreases in intraretinal and/or subretinal fluid in some subjects.

We plan to continue long-term evaluation of these cohorts .

We plan to amend our current clinical trial protocol to enroll a third, higher-dose cohort.

This Phase 1 clinical trial is not powered to measure any efficacy endpoints with statistical significance.

OTX-IVT (intravitreal aflibercept implant) in Collaboration with Regeneron

In October 2016, we entered into a strategic collaboration, option and license agreement, or Collaboration Agreement, with Regeneron for the development and potential commercialization of products using our hydrogel in combination with Regeneron’s large molecule VEGF-targeting compounds for the treatment of retinal diseases, with the initial focus on the VEGF trap aflibercept, currently marketed under the brand name Eylea.

Under the terms of the agreement, we granted Regeneron an option, or the Option, to enter into an exclusive, worldwide license under our intellectual property to develop and commercialize products using our hydrogel in combination with Regeneron’s large molecule VEGF-targeting compounds, or Licensed Products.

The Collaboration Agreement does not cover the development of any products that deliver small molecule drugs, including TKIs, for any target including VEGF, or any products that deliver large molecule drugs other than those that target VEGF proteins.

Under the terms of the Collaboration Agreement, we and Regeneron have agreed to conduct a joint research program with the aim of developing an extended-delivery formulation of aflibercept that is suitable for advancement into clinical development.

We refer to the formulation we are developing with Regeneron as OTX-IVT.

Under the terms of the Collaboration Agreement, Regeneron is responsible for funding an initial preclinical tolerability study.

If the Option is exercised, Regeneron will conduct further preclinical development and an initial clinical trial under a collaboration plan.

We are obligated to reimburse Regeneron for certain development costs during the period through the completion of the initial clinical trial, subject to a cap of $25 million, which cap may be increased by up to $5 million under certain circumstances.

We do not expect our funding requirements under the collaboration to be material over the next twelve months.

If Regeneron elects to proceed with further development beyond the initial clinical trial, it will be solely responsible for conducting and funding further development and commercialization of product candidates.

If the Option is exercised, Regeneron is required to use commercially reasonable efforts to research, develop and commercialize at least one Licensed Product.

Such efforts shall include initiating the dosing phase of a subsequent clinical trial within specified time periods following the completion of the first-in-human clinical trial or the initiation of preclinical toxicology studies, subject to certain extensions.

Under the terms of the Collaboration Agreement, Regeneron has agreed to pay us $10 million upon exercise of the Option.

We are also eligible to receive up to $145 million per Licensed Product upon the achievement of specified development and regulatory milestones, including successful results from the first-in-human clinical trial, $100 million per Licensed Product upon first commercial sale of such Licensed Product and up to $50 million based on the achievement of specified sales milestones for all Licensed Products.

In addition, we are entitled to tiered, escalating royalties, in a range from a high-single digit to a low-to-mid teen percentage of net sales of Licensed Products.

In December 2017, we delivered to Regeneron a proposed final formulation for the initial preclinical tolerability study.

Regeneron initiated an initial preclinical tolerability study in early 2018.

We and Regeneron have subsequently reached an understanding that the proposed formulation did not meet the goals of the program, was not final and have therefore ceased development of it.

We are currently in discussions with Regeneron, in accordance with the terms of the Collaboration Agreement, regarding the development of an alternative formulation.

ReSure ®

We commercially launched this product in the United States in 2014.

ReSure Sealant is approved to seal corneal incisions following cataract surgery.

In the first quarter of 2019, we began dosing patients in a multi-center, open-label, dose-escalation Phase 1 clinical trial in Australia designed to evaluate the safety, durability and tolerability of OTX-TKI.

We are evaluating biological activity by measuring retinal thickness using spectral domain optical coherence tomography, or OCT, and following visual acuity over time.

Two cohorts were initially enrolled:

a lower dose cohort of 200 µg with six subjects and a higher dose cohort of 400 µg with seven subjects.

We are actively enrolling a third cohort of 12 subjects, split between parallel arms of six subjects each.

Subjects in the first arm of the third cohort will receive a dose of 600 µg, and subjects in the second arm will receive a 400 µg dose combined with an anti-VEGF induction injection.

At the Angiogenesis, Exudations, and Degeneration Virtual Conference in February 2021, we presented interim data from the Phase 1 clinical trial.

In the Phase 1 clinical trial, OTX-TKI was observed to have a generally favorable safety profile, with no reported ocular serious adverse events.

Some subjects in the Phase 1 clinical trial have shown a decrease in intraretinal or subretinal fluid by two months, and interim data suggests that OTX-TKI might have an extended duration of action beyond that of the current standard of care.

We plan to initiate a prospective, randomized, controlled Phase 1 clinical trial in the United States under an exploratory investigational new drug, or eIND, application in mid-2021 to evaluate a single implant 600 µg dose of OTX-TKI (combined with an anti-VEGF induction injection) in comparison with a 2 mg dose of aflibercept.

We have requested a pre-investigational new drug, or IND, application meeting with the FDA to discuss the possibility of transitioning from an eIND application to a traditional IND application.

Pending our receipt and review of the topline data from the Phase 1 clinical trial in Australia and related regulatory discussions, we also plan to initiate a Phase 2 clinical trial in Australia to compare the administration of a single implant 600 µg dose of OTX-TKI (combined with an anti-VEGF induction injection) to a 2 mg dose of aflibercept dosed every 8 weeks as the comparator.

OTX-AFS (aflibercept suprachoroidal injection) in collaboration with Regeneron

As described above, in October 2016, we entered into a strategic collaboration, option and license agreement with Regeneron for the development and potential commercialization of products using our local programmed-release hydrogel in combination with, among other things, Regeneron’s large molecule VEGF-targeting compounds for the treatment of retinal diseases, with the initial focus on the VEGF trap aflibercept.

We and Regeneron amended this agreement in May 2020 to, among other things, transition joint efforts under the collaboration to the research and development of an extended-delivery formulation of aflibercept to be delivered to the suprachoroidal space which we refer to as OTX-AFS.

Under the amended agreement, we have provided certain formulations to Regeneron who have agreed to perform preclinical assessments of OTX-AFS.

Glaucoma Program

Our development efforts for our glaucoma program have focused on the use of our extended-delivery hydrogel in combination with travoprost, an FDA-approved prostaglandin analog designed to lower elevated IOP.

Our initial goal for this program is to provide extended delivery over at least four months with a single treatment.

OTX-TIC (travoprost intracameral implant)

Our product candidate OTX-TIC is a bioresorbable hydrogel implant incorporating travoprost that is designed to be administered by a physician as an intracameral injection with an initial target duration of drug release of four to six months.

We are currently conducting a multi-center, open-label, dose-escalation, proof-of-concept Phase 1 clinical trial to evaluate the safety, biological activity, durability and tolerability of OTX-TIC compared to topical travoprost (eye drops) in patients with primary open-angle glaucoma or ocular hypertension.

The trial consists of four patient cohorts:

cohort 1 is 5 subjects who are receiving a 15 µg dose, cohort 2 is 4 subjects who are receiving a 26 µg dose, cohort 3 is 5 subjects who are receiving a 15 µg with a fast-degrading implant, and cohort 4 is 5 subjects who are receiving a 5 µg with a fast-degrading implant.

We presented interim data on all four patient cohorts at the Glaucoma360 Virtual Conference in January 2021.

In this Phase 1 clinical trial, with a single implant, several subjects were able to achieve a decrease in IOP at least as large as that of the current standard of care.

Many subjects exhibited an IOP-lowering effect of more than six months in

cohorts 1 and 2 and between three and six months in cohorts 3 and 4, the cohorts in which the fast-degrading implant was used.

In the clinical trial, OTX-TIC was observed to have a generally favorable safety profile, with no reported ocular serious adverse events.

Corneal health, as measured by endothelial cell counts, pachymetry assessments and slit lamp examinations did not indicate a clinically meaningful change from baseline.

In mid-2021, we plan to initiate a Phase 2 clinical trial to evaluate two formulations of OTX-TIC for the treatment of glaucoma or ocular hypertension in patients compared to Durysta (Allergan).

The non-study eye of each patient will receive a topical prostaglandin daily.

Certain subjects in the Phase 2 clinical trial will receive the same formulation used in cohort 1 of the Phase 1 clinical trial, containing a 26 µg dose of drug and utilizing a standard implant, and others will receive the same formulation used in cohort 4 of the Phase 1 clinical trial, containing a 5 µg dose of drug and utilizing a fast-degrading implant.

Ocular Surface Disease Programs

We are engaged in the development of formulations of our hydrogel administered via intracanalicular inserts to address large markets for diseases and conditions of the surface of the eye.

Our initial development efforts are focused on the use of our extended-delivery hydrogel in combination with well-known and well-understood drugs (cyclosporine and corticosteroids) for the treatment of dry eye disease and allergic conjunctivitis.

Dry Eye Disease

OTX-CSI (cyclosporine intracanalicular insert)

Our product candidate, OTX-CSI, incorporates the FDA-approved immunomodulator cyclosporine as a preservative-free active pharmaceutical ingredient into a hydrogel, drug-eluting intracanalicular insert.

The product candidate is designed for a duration of three to four months for patients suffering from moderate to severe dry eye and to be administered by a physician as a bioresorbable intracanalicular insert.

In October 2020, we reported topline data from our five subject Phase 1 clinical trial evaluating OTX-CSI in the treatment of dry eye disease.

All subjects completed the 16-week study period with no drop-outs.

There were no serious adverse effects reported.

The inserts were observed to be generally well-tolerated, and there were no adverse events of stinging, irritation, blurred vision or tearing reported or observed.

In September 2020, we dosed the first patients in a Phase 2 clinical trial designed to assess the safety, tolerability, and durability and to evaluate the efficacy of OTX-CSI for the chronic treatment of dry eye disease.

The Phase 2 clinical trial is a U.S.-based, randomized, double-masked, multi-center trial evaluating two different formulations of OTX-CSI compared to a vehicle insert in approximately 140 subjects who are to be followed for a period of approximately 16 weeks.

Endpoints include tear production as measured by the Schirmer’s test;

signs of dry eye disease as measured by corneal fluorescein staining;

and symptoms of dry eye disease as measured by the visual analog scale, or VAS, eye dryness severity score and the VAS dry eye frequency score.

We currently anticipate receiving topline data from this Phase 2 clinical trial by year-end 2021.

OTX-DED (dexamethasone intracanalicular insert)

Our product candidate OTX-DED incorporates the FDA-approved corticosteroid dexamethasone as a preservative-free active pharmaceutical ingredient in a hydrogel, drug-eluting intracanalicular insert.

OTX-DED incorporates the same active drug as DEXTENZA, but it includes a lower dose of the drug, delivers it via a smaller insert, and is designed to release it over a period of two to three weeks, compared with up to thirty days in the case of DEXTENZA.

We believe that OTX-DED will address several of the current limitations of existing dry eye disease steroid treatments, the toxicity associated with preservatives, and the potential for abuse of topical steroids.

In February 2021, we dosed the first patient in a U.S.-based prospective, randomized, double-masked, vehicle-controlled Phase 2 clinical trial evaluating two different formulations of OTX-DED for the short-term treatment of the signs and symptoms of dry eye disease compared to a hydrogel insert in approximately 150 subjects.

We anticipate receiving topline data from this Phase 2 clinical trial in the first half of 2022.

Allergic Conjunctivitis

DEXTENZA (dexamethasone ophthalmic insert) for the Treatment of Ocular Itching Associated with Allergic Conjunctivitis

DEXTENZA, incorporating the corticosteroid dexamethasone, is our FDA-approved intracanalicular insert for the treatment of post-surgical ocular inflammation and pain.

We believe that allergic conjunctivitis represents a discrete potential market for DEXTENZA as a physician administered, hands-free, therapy administered in the office setting and designed to release preservative-free dexamethasone to the ocular surface for up to 30 days.

In April 2020, we reported topline results of a 96-subject, third pivotal Phase 3 clinical trial evaluating DEXTENZA for the treatment of ocular itching associated with allergic conjunctivitis.

DEXTENZA-treated subjects demonstrated a statistically significant (p-value < 0.0001) difference in mean ocular itching scores, compared to vehicle-treated subjects, at all three pre-specified time points.

In the fourth quarter of 2020, w e filed a supplemental new drug application, or sNDA, for DEXTENZA to include the treatment of ocular itching associated with allergic conjunctivitis as an additional indication.

The FDA has accepted our sNDA for filing and has established a target action date under the Prescription Drug User Fee Act, commonly known as PDUFA, of October 18, 2021.

If our sNDA is approved, we expect to launch DEXTENZA for the treatment of ocular itching associated with allergic conjunctivitis in the first half of 2022.

Post-Surgical Ocular Inflammation and Pain

DEXTENZA (dexamethasone ophthalmic insert) 0.4 mg for intracanalicular use for the Treatment of Post-Surgical Ocular Inflammation and Pain

As described above, DEXTENZA incorporates the FDA-approved corticosteroid dexamethasone as a preservative-free active pharmaceutical ingredient into a hydrogel, drug-eluting intracanalicular insert for the treatment of post-surgical ocular inflammation and pain.

We commercially launched DEXTENZA in the United States in July 2019.

DEXTENZA is the first FDA-approved intracanalicular insert delivering dexamethasone to treat post-surgical ocular inflammation and pain for up to 30 days with a single administration.

In September 2020, we announced that we had dosed the first patients in a Phase 3 clinical trial evaluating DEXTENZA for the treatment of post-surgical ocular inflammation and pain in children following cataract surgery.

This planned clinical trial is a post-approval requirement of the FDA in accordance with the Pediatric Research Equity Act of 2003, in connection with the FDA’s prior approval of DEXTENZA for the treatment of inflammation and pain following ophthalmic surgery in adults.

Additionally, we have received proposals for, and plan to support, several investigator-initiated trials evaluating DEXTENZA in different clinical situations.

To date, third-party clinical investigators have initiated over 25 trials to study the use of DEXTENZA in cataract surgery, other ophthalmic surgeries and other potential indications.

Seven of the trials have completed enrollment, and the remaining trials are actively enrolling and treated patients are being followed.

ReSure Sealant

In 2014, we commercially launched ReSure Sealant in the United States as a device approved to prevent wound leaks in corneal incisions following cataract surgery.

In the pivotal clinical trials that formed the basis for FDA approval, ReSure Sealant provided superior wound closure and a better safety profile than sutured closure.

The FDA required two post-approval studies as a condition for approval of our premarket approval, or PMA, application for ReSure Sealant.

The first post-approval study, identified as the Clinical PAS, was to confirm that ReSure Sealant can be used safely by physicians in a standard cataract surgery practice and to confirm the incidence of the most prevalent adverse ocular events identified in our pivotal study in eyes treated with ReSure Sealant.

We submitted the final study report to the FDA in June 2016, and the FDA has confirmed the Clinical PAS has been completed.

The second post-approval study, identified as the Device Exposure Registry Study, is intended to link to the Medicare database to ascertain if patients are diagnosed or treated for endophthalmitis within 30 days following cataract surgery and application of ReSure Sealant.

The Device Exposure Registry Study is required to include at least 4,857 patients.

Due to difficulties in establishing an acceptable way to link ReSure Sealant to the Medicare database and lack of investigator interest, we have been unable to enroll trial sites and patients, collect patient data and report study data to the FDA.

We have provided regular periodic reports to the FDA on the progress of this post-approval study.

We received a warning letter from the FDA in October 2018 relating to our compliance with data collection and information reporting obligations in the Device Exposure Registry Study.

The FDA warning letter refers to a lack of progress with the enrollment and related data collection and information reporting obligations for a required post-approval trial.

In November 2018, we appealed this warning letter.

In December 2018, the FDA rejected our appeal.

Failure by us to conduct the required post-approval trial for ReSure Sealant to the FDA’s satisfaction may result in withdrawal of the FDA’s approval of ReSure Sealant or other regulatory action.

A teleconference was held with the FDA in January 2019 resulting in tentative agreement on a proposed retrospective registry study of endophthalmitis rates to satisfy the Device Exposure Registry Study requirements.

In a letter dated June 7, 2019 from the FDA, the agency acknowledged receipt of a letter dated March 29, 2019 from us in which we proposed conducting the proposed retrospective analysis of the IRIS Registry, comparing endophthalmitis rates from sites that purchased ReSure versus those sites that did not purchase ReSure.

If the rates are no different, the FDA has indicated that it will consider the post-approval requirement to have been fulfilled.

If there is a statistically significant increase in endophthalmitis rates at sites purchasing ReSure compared with those not purchasing ReSure, a

prospective study will be required.

The FDA has indicated it will consider our response to the warning letter adequate once it approves the study protocol for the retrospective analysis of the IRIS Registry and the outline of the prospective study.

In December 2019, we submitted the protocol for the agreed upon retrospective study and prospective study outline, as required per the terms of the warning letter.

We received feedback from the FDA in February 2020 and responded to the FDA in March 2020.

We expect a response from the FDA in the middle of 2020.

ReSure Sealant currently remains commercially available in the United States, though there is no sales support provided to the product at this time.

The FDA has confirmed that first post-approval study, identified as the Clinical PAS, has been completed.

The second post-approval study, which we refer to as the Device Exposure Registry Study, was a retrospective analysis of the IRIS Registry, comparing endophthalmitis rates from sites that purchased ReSure Sealant versus those sites that did not.

We completed the retrospective study in accordance with our agreement with the FDA and submitted the final study report for the Device Exposure Registry Study to the FDA in January 2021.

We anticipate

that the FDA will review the report within 90 days of our submission and notify us as to whether our obligation to conduct the post-approval study has been satisfied.

While ReSure Sealant remains commercially available in the United States, commercial and sales support for this product are modest at this time.

We have received only limited revenues from ReSure Sealant to date and anticipate only limited sales for 2021.

AffaMed License Agreement

In October 2020, we entered into a license agreement and collaboration with AffaMed Therapeutics Limited, or AffaMed, for the development and commercialization of DEXTENZA and OTX-TIC in mainland China , Hong Kong , Macau , and Taiwan ;

South Korea ;

and the ASEAN markets ( Brunei , Cambodia , Indonesia , Laos , Malaysia , Myanmar , the Philippines , Singapore , Thailand and Vietnam ).

Under the terms of the agreement, we received an upfront payment of $12 million and are eligible to receive development, regulatory and commercial milestone payments and clinical development support payments of up to $91 million in the aggregate, as well as royalties from future product sales.

Royalties are tiered and will range from the low teens to low twenty percent range.

In return, we agreed to grant AffaMed exclusive rights to develop and commercialize DEXTENZA for the treatment of post-surgical inflammation and pain following ophthalmic surgery and ocular itching in patients with allergic conjunctivitis, and OTX-TIC for the reduction of elevated intraocular pressure in patients with primary open-angle glaucoma or ocular hypertension in specified Asian markets.

We retain the right to develop and commercialize DEXTENZA and OTX-TIC in all other global markets.

Additional Potential Areas for Growth

We continue to leverage the potential of our hydrogel platform to explore areas for growth with our focus on formulating, developing and commercializing innovative therapies for diseases and conditions of the eye.

We are also assessing the potential use of our hydrogel platform technology in other areas of the body and are studying several localized delivery platforms including via wound inlays;

sinus and ear inserts;

and subcutaneous, peripheral, and intra-articular injections.

In September 2018, we entered into a second amended and restated license agreement, or Second Amended Agreement, with Incept LLC, an intellectual property holding company, or Incept.

The Second Amended Agreement expands the scope of our intellectual property license to include products delivered for the treatment of acute post-surgical pain or for the treatment of ear, nose and/or throat diseases or conditions, subject to specified exceptions.

The Second Amended Agreement expanded the scope of our intellectual property license to include products delivered for the treatment of acute post-surgical pain or for the treatment of ear, nose and/or throat diseases or conditions, subject to specified exceptions.

Market Background

Our clinical stage product candidates and our marketed product are based on a proprietary bioresorbable hydrogel technology platform that uses polyethylene glycol, or PEG, as a key component.

Our clinical stage product candidates and our marketed products are based on a proprietary bioresorbable hydrogel technology platform that uses polyethylene glycol, or PEG, as a key component.

Bioresorbable materials gradually break down in the body into non-toxic, water soluble compounds that are cleared by normal biological processes.

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Our technology platform allows us to tailor the physical properties, drug release profiles and bioresorption rates of our hydrogels to meet the needs of specific clinical indications.

We have used this platform to engineer each of our intracanalicular insert product candidates, our intracameral product candidates, our intravitreal implant product candidates, and ReSure Sealant.

We have used this platform to engineer each of our intracanalicular insert, intracameral implant, and intravitreal implant product candidates;

our suprachoroidal formulations;

and ReSure Sealant.

Our technical capabilities include a deep understanding of the polymer chemistry of PEG-based hydrogels and the design of the specialized manufacturing processes required to achieve a reliable, preservative-free and high purity product.

Our product candidates target large and growing markets.

Grand View Research estimates that the global ophthalmic drugs market size was valued at approximately $30 billion in 2018 and is expected to grow at a CAGR of 4.5% from 2018 to 2026.

Increased funding by public and private bodies for conducting research on ocular disorders along with the presence of strong emerging pipeline drugs are among the key factors responsible for the growth of this market.

We have in-licensed a significant portion of the patent rights and the technology for ReSure Sealant and our hydrogel platform technology product candidates from Incept, LLC, or Incept, an intellectual property holding company.

Amarpreet Sawhney, our former President and Chief Executive Officer and former Chairman of the Board of Directors, is a general partner of Incept and has a 50% ownership stake in Incept.

Our founders and management team have significant experience in developing and commercializing medical products for other companies using bioresorbable hydrogel technology, including FDA-approved and currently marketed medical products such as SpaceOAR (marketed by Boston Scientific, Inc.), a hydrogel spacer used to reduce a common and debilitating side effect that men may experience after receiving prostate cancer radiotherapy;

DuraSeal Dural Sealant ®

(marketed by Integra Lifesciences, Inc.), a sealant for cranial and spine surgery;

and Mynx ®

(marketed by Cardinal Health, Inc.), a sealant for femoral artery punctures after angiography and angioplasty.

Product Pipeline

The following table summarizes the status of our key product development programs and our marketed product.

We hold worldwide exclusive commercial rights to the core technology underlying all of our products in development

and have not granted commercial rights to any marketing partners other than the Option on commercial rights we granted to Regeneron for the delivery of protein-based anti-VEGF drugs in our hydrogel depot for the treatment of retinal diseases.

The following table summarizes the status of our key product development programs and DEXTENZA, our marketed product.

We hold worldwide exclusive commercial rights to the core technology underlying all of our products in development and have not granted commercial rights to any marketing partners other than the option on commercial rights we granted to Regeneron for the delivery of protein-based anti-VEGF drugs in our hydrogel depot for the

treatment of retinal diseases and a license agreement and collaboration with AffaMed for the development and commercialization of DEXTENZA and OTX-TIC in the geographies agreed to between the parties .

We are pursuing three overall strategic goals:

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The key tactics of our strategy to achieve these goals are:

Commercialize DEXTENZA ®

(dexamethasone ophthalmic insert) 0.4mg for intracanalicular use for the treatment of ocular pain following ophthalmic surgery.

DEXTENZA is the first FDA-approved intracanalicular insert delivering dexamethasone to treat post-surgical ocular inflammation and pain for up to 30 days with a single administration.

We launched the commercialization of DEXTENZA in July of 2019 and have built a commercial field force consisting of 30 key account managers, eight field reimbursement specialists and five medical sales liaisons.

Create proprietary solutions for ophthalmic diseases and conditions based on our bioresorbable hydrogel and complete clinical development of and seek marketing approval for other intracanalicular insert product candidates and implants for intracameral injection for diseases and conditions of the front of the eye.

Allergic Conjunctivitis.

In the first quarter of 2020, we completed enrollment of our pivotal Phase 3 clinical trial evaluating DEXTENZA for the treatment of ocular itching in connection with allergic conjunctivitis.

A total of 96 patients were enrolled in this trial.

This trial represents the third

Phase 3 clinical trial in allergic conjunctivitis conducted by us and, if successful, we plan to submit a supplemental NDA to the FDA for an indication of ocular itching associated with allergic conjunctivitis.

We recently completed enrollment and topline data from this trial is anticipated to be reported in the second quarter of 2020.

Our IND for our U.S.

Phase 1 trial of OTX-TIC became effective in the first quarter of 2018, and we dosed the first patient in May 2018.

Data generated to date has demonstrated that, with a single implant, subjects were able to achieve IOP lowering for up to eighteen months.

In addition, the hydrogel carrier, as designed, biodegraded in approximately five to seven months.

There were no clinically meaningful changes in corneal health as measured by slit lamp examination, endothelial cell evaluation, and corneal pachymetry.

We are currently collecting additional data from the first two cohorts and have begun a third and fourth cohort to assess the impact of a faster degrading implant with the same therapeutic dose as administered in cohort one and a fourth cohort to assess an additional formulation with a smaller implant.

Pursue development of our intravitreal implant and other technologies for back-of-the-eye diseases and conditions.

In the first quarter of 2019, we began dosing patients in a Phase 1 clinical trial in Australia.

After review of data from the first cohort of patients in the Phase 1, the independent Data Safety and Monitoring Committee recommended moving to a higher dose of OTX-TKI and we are currently treating the next cohort of subjects.

We have treated two cohorts of six subjects each.

Two cohorts have been enrolled, a lower dose cohort of 200 μg and a higher dose cohort of 400 μg.

In the first two fully enrolled cohorts to date, OTX-TKI was generally well tolerated and observed to have a favorable safety profile with no ocular serious adverse events noted.

In the higher dose cohort, OTX-TKI showed a decrease in central subfield retinal thickness as measured by mean central subfield thickness values by decreases in intraretinal and/or subretinal fluid in some subjects.

The Company plans to continue long-term evaluation of the first two cohorts.

In December 2017, under the Collaboration Agreement with Regeneron, we delivered a proposed final formulation of our extended-delivery hydrogel in combination with Regeneron’s large molecule VEGF-targeting compound aflibercept, currently marketed under the brand name Eylea, for an initial preclinical tolerability study by Regeneron.

Regeneron initiated this preclinical study in early 2018.

We and Regeneron have subsequently reached an understanding that the proposed formulation did not meet the goals of the program, was not final and have therefore ceased development of it.

We are currently in discussions with Regeneron, in accordance with the terms of the Collaboration Agreement, regarding the development of an alternative formulation.

Apply our local programmed-release intracanalicular insert technology for the treatment of additional diseases and conditions of the front of the eye .

We intend to apply our proprietary PEG-based bioresorbable hydrogel technology platform to product candidates that are designed to provide local programmed-release of therapeutic agents to the eye using active pharmaceutical ingredients that are currently used in ophthalmic drugs approved by the FDA and that are or are expected to become available on a generic basis prior to anticipated launch dates.

By focusing on the development of products based on FDA-approved therapeutic agents, we believe that we can advance potential products efficiently and predictably through the development cycle based on well-defined clinical and regulatory approval pathways.

We believe this strategy represents an attractive risk-reward profile relative to new drug development.

We currently have a number of preclinical programs that we have positioned for further development including OTX-CSI for episodic dry eye, for which we filed an IND in the United States in December 2019 and intend to initiate a Phase 1 clinical trial in the middle of 2020;

OTX-BPI for acute ocular pain;

and OTX-BDI for post-operative inflammation, pain and bacterial infection.

● Advance our four core clinical development programs through Phase 2.

We believe the greatest potential value inflection points for us are the topline data readouts of the Phase 2 clinical trials of our four core clinical development programs:

OTX-TKI for the treatment of wet AMD, OTX-TIC for the treatment of glaucoma or ocular hypertension, OTX-CSI for the treatment of dry eye disease, and OTX-DED for the short-term treatment of the signs and symptoms of dry eye disease.

● Expand Commercialization of DEXTENZA for the treatment of ocular inflammation and pain following ophthalmic surgery.

We expect to grow our salesforce to increase our active number of accounts and penetrate each account more deeply.

We intend to focus sales efforts on ambulatory surgical centers, or ASCs, that generate the largest volumes of cataract surgeries in the United States.

We are also seeking to expand the label for DEXTENZA—beginning with our sNDA to add ocular itching associated with allergic conjunctivitis as an approved indication—to permit the product’s use outside of the surgical setting and into ophthalmologists’ offices.

● Apply our local programmed-release hydrogel-based technology to create additional proprietary solutions for ophthalmic diseases and conditions.

In collaboration with Regeneron, we are conducting preclinical research

and development activities regarding an extended-delivery formulation of the VEGF trap aflibercept, currently marketed under the brand name Eylea, to be delivered to the suprachoroidal space.

We are assessing preclinical product candidates for the ophthalmic space that leverage not only our proprietary PEG-based bioresorbable hydrogel technology platform but also active pharmaceutical ingredients used in FDA-approved ophthalmic drugs that are or are expected to become available on a generic basis.

Finally, we are frequently in discussions with other companies operating in the ophthalmic space regarding potential collaborations to combine our local programmed-release hydrogel technology with their proprietary drug formulations to address additional diseases and conditions of the eye.

● Address rest-of-world commercial opportunities through licensing and collaborations agreements .

In the fourth quarter of 2020, we announced a license agreement and collaboration with AffaMed for the development and commercialization of DEXTENZA and OTX-TIC in specified Asian markets.

From time to time, we may consider additional arrangements with other companies to address markets outside of the United States.

● Utilize our hydrogel platform to enable local programmed-release of therapeutics to areas of the body outside the eye.

In September 2018, we entered into the Second Amended Agreement with Incept to expand the scope of our intellectual property license to include products delivered for the treatment of acute post-surgical pain or for the treatment of ear, nose and/or throat diseases or conditions, subject to specified exceptions.

We intend to explore programs outside of the eye not only on our own but also potentially through partnerships or collaborations with third parties who have expertise and experience with other therapeutics as well as other areas of the body.

We have licensed certain of Incept’s intellectual property rights for the development of product candidates for the treatment of acute post-surgical pain or for the treatment of ear, nose and/or throat diseases or conditions, subject to specified exceptions.

We intend to explore programs outside of the eye not only on our own but also potentially through collaborations with third parties who have expertise and experience with other therapeutics as well as other areas of the body.

Eye disease can be caused by many factors and can affect both the front and back of the eye.

The front of the human eye consists of the cornea on the surface of the eye, the lens and the aqueous humor, which is a transparent fluid that fills the anterior chamber between the lens and the cornea.

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It helps to protect the eye from microbes and to lubricate the eye.

The back of the eye contains the retina, which is the light sensing layer of tissue, the vitreous humor, which is a transparent gel that fills the vitreous chamber between the lens and the retina, and the optic nerve, which transmits visual information from the retina to the brain.

Diseases and conditions affecting the front of the eye have generally been treated with either surgery or with medications delivered to the ocular surface by eye drops.

The back of the eye contains the retina, which is the light sensing layer of tissue;

the vitreous humor, which is a transparent gel that fills the vitreous chamber between the lens and the retina;

and the optic nerve, which transmits visual information from the retina to the brain.

Eye disease can be caused by many factors and can affect both the front and back of the eye.

Diseases and conditions affecting the front of the eye are generally treated either with surgery or with medications delivered to the ocular surface by eye drops.

Intravitreal injections or oral pills are typically used to deliver medications to the back of the eye.

Intravitreal injections or oral pills have typically been used to deliver medications to the back of the eye.

Cross Section of Eye

Tear Drainage System

Front-of-the-Eye Diseases and Conditions

Ocular Inflammation and Pain

Ocular inflammation and pain are common conditions caused by a variety of factors, including ophthalmic surgery, allergic conjunctivitis and dry eye disease.

Post-Surgical Ocular Inflammation and Pain

Ocular inflammation and pain are common side effects following ophthalmic surgery.

Frequently performed ophthalmic surgeries include cataract, refractive, vitreoretinal, cornea, and glaucoma procedures.

Physicians prescribe anti-inflammatory drugs, such as corticosteroids, which are typically administered through eye drops multiple times per

day, following ocular surgery as the standard of care.

These drugs improve patient comfort and also accelerate recovery through disruption of the inflammatory cascade resulting in decreased inflammation and reduced activity of the immune system.

Physicians also frequently prescribe non-steroidal anti-inflammatory drugs, or NSAIDs, as adjunctive or combination therapy to supplement the use of corticosteroids.

If left untreated, inflammation of the eye may result in further ocular complications, including pain, scarring and vision loss.

Market Scope has estimated that approximately 6.1 million ocular surgeries were to be performed in the United States in 2019.

Allergic Conjunctivitis

Allergic conjunctivitis is an inflammatory disease of the conjunctiva resulting primarily from a reaction to allergy- causing substances such as pollen or pet dander.

The primary sign of this inflammation is redness and the primary symptom is acute itching.

Allergic conjunctivitis ranges in clinical severity from relatively mild, common forms to more severe forms that can cause impaired vision.

According to a study on the management of seasonal allergic conjunctivitis published in 2012 in the peer-reviewed journal Acta Ophthalmologica , allergic conjunctivitis affects 15% to 40% of the U.S.

The first line of defense against allergic conjunctivitis is avoidance of the allergen.

If this is not successful, physicians typically prescribe a combination of a topical mast cell stabilizer and anti-histamine.

These treatments act to reduce the signs and symptoms of the early phase allergic reaction.

For the subset of patients with chronic or more severe forms of allergic conjunctivitis, anti-histamines and mast cell stabilizers are often not sufficient to treat their signs and symptoms.

These refractory patients are frequently treated with topical corticosteroids administered by prescription eye drops.

Dry Eye Disease

Dry eye disease affects the ocular surface and is characterized by dryness, inflammation, pain, discomfort and irritation.

The current standard of care for moderate to severe dry eye disease is the use of artificial tears and topical anti- inflammatory and immune modulating drugs administered by prescription eye drops.

The anti-inflammatory and immune modulating prescription drug market for the treatment of moderate to severe dry eye disease consists of Restasis ®, for increasing tear production, marketed by Allergan;

Cequa™

for increasing tear production, marketed by Sun Ophthalmics in the United States;

lifitegrast, for the treatment of the signs and symptoms of dry eye disease, marketed by Novartis under the brand name Xiidra®;

and off-label use of corticosteroids.

Based on our review of industry sources, we estimate that approximately 20 million people in the United States have dry eye disease, including approximately five million people who suffer from moderate to severe dry eye disease.

Dry eye disease is a chronic, multifactorial disease affecting the tears and ocular surface that can result in tear film instability, inflammation, discomfort, visual disturbance and ocular surface damage.

Dry eye disease can have a significant impact on quality of life and can potentially cause long‑term damage to the ocular surface.

Due to the impact of dry eye disease on tear film dynamics, the condition can affect performance of common vision‑related activities such as reading, using a computer and driving, and can lead to complications associated with visual impairment.

In addition, the vast majority of dry eye patients experience acute episodic exacerbations of their symptoms, which are commonly referred to as flares, at various times throughout the year.

These flares can be triggered by numerous factors, including exposure to allergens, pollution, wind and low humidity, intense visual concentration such as watching television and working at a computer, hormonal changes, contact lens wear, smoking and sleep deprivation, which cause ocular surface inflammation and impact tear production and/or tear film stability.

Based on third‑party academic research, we believe dry eye disease results in approximately $55 billion in direct and indirect costs in the United States each year, of which approximately $3.8 billion are direct medical costs.

The exact prevalence of dry eye disease is unknown due to the difficulty in defining the disease and the lack of a single diagnostic test to confirm its presence.

The Beaver Dam Offspring Study, a major epidemiological study published in 2014 in the American Journal of Ophthalmology , reported that in a cohort of over 3,000 patients, dry eye disease was self‑reported by 14.5% of the patients.

The prevalence of dry eye disease increases with age, and we expect that the number of dry eye disease cases will increase as the U.S.

population continues to age.

The most commonly used treatments for dry eye disease in the United States are over‑the‑counter eye drops, often referred to as “artificial tears,”

and three prescription pharmaceutical products, Restasis ®

Xiidra ®

and Cequa™.

Artificial tears are intended to be palliative in nature to supplement insufficient tear production or improve tear film instability, but do not treat the underlying inflammation in dry eye disease.

Restasis increases tear production and Xiidra treats the signs and symptoms of dry eye disease, however, both Restasis and Xiidra are typically used chronically for dry eye patients

who have continuous symptoms.

Restasis had sales in 2018 of approximately $1.2 billion in the United States.

Xiidra, which was commercially launched in the United States in August 2016, had sales of approximately $255.1 million for the nine-month period ended September 30, 2018.

As each of Restasis and Xiidra have a relatively long onset of action, they are not generally used for the short‑term treatment of episodic dry eye flares.

In addition, they have significant issues with stinging and burning.

According to IMS Health data, approximately 20.0 million prescriptions were filled in the United States in 2019 for anti-inflammatory drugs administered by prescription eye drops for ocular diseases and conditions, resulting in sales of approximately $4.5 billion.

These prescriptions consisted of approximately 8.3 million prescriptions and $752 million in sales for single-agent corticosteroids, 3.2 million prescriptions and $366 million in sales for NSAIDs, 4.6 million prescriptions and $294 million in sales for corticosteroid and antibiotic combination products and approximately 3.8 million prescriptions and $2.9 billion in sales of Restasis and Xiidra for dry eye disease.

According to IMS Health data, approximately 7.0 million anti-allergy eye drop prescriptions were filled in the United States in 2019, resulting in sales of approximately $487 million.

The steroid market for eye drops to treat ocular diseases and conditions consists of both branded and generic products.

Branded steroids include Lotemax and Alrex (loteprednol etabonate) marketed by Bausch & Lomb, and Durezol (difluprednate) marketed by Alcon.

Commonly used generic steroids include prednisolone, dexamethasone and fluorometholone.

In addition, an injectable suspension of dexamethasone, Dexycu, is commercially available and approved for treatment of post-operative ocular inflammation.

Glaucoma is a large market and a disease that is estimated to impact more than 2.7 million people age 40 or older in the United States.

The primary goal of glaucoma treatment is to slow the progression of this chronic disease by reducing intraocular pressure, and many medications can accomplish this.

Importantly, however, adherence to current topical glaucoma therapies is known to be particularly poor with reported rates of non-adherence from 30% to 80%.

These low compliance rates may be associated with disease progression and loss of vision, and may be part of the reason that glaucoma is a leading cause of blindness in people over 60 years of age.

We currently focus on some of the largest markets in ophthalmology.

According to the Market Scope 2019 reports, our product candidates seek to address select indications within segments of ophthalmology that, in the aggregate, account for more than $20 billion global annual sales.

Retinal Diseases

One of the principal retinal diseases is wet AMD, a serious disease of the central portion of the retina, known as the macula, that is responsible for detailed central vision and color perception.

Wet AMD is characterized by abnormal new blood vessel formation, referred to as neovascularization, which results in blood vessel leakage and retinal distortion.

If untreated, neovascularization in wet AMD patients typically results in formation of a scar under the macular region of the retina.

The current standard of care for wet AMD is treatment with drugs that target VEGF, one of several proteins involved in neovascularization.

Wet AMD is the leading cause of blindness in people over the age of 55 in the United States and the European Union.

According to the 2019 Market Scope Retinal Disease Report, there are approximately 8.0 million people in the United States who suffer from vision-threatening retinal diseases.

This population is expected to grow at a 2.4% compound annual growth rate through 2024.

Because eye drops are unable to carry effective drug concentrations to the back of the eye, intravitreal injections or oral medications are used to deliver medications to this location.

However, the frequency of intravitreal injection can be a significant burden on patients, caregivers and clinicians.

For example, the current treatment protocol for wet AMD involves monthly or bi-monthly injections.

Intravitreal injections can lead to patient discomfort, a transient increase in IOP, and ocular inflammation and infection.

Although serious adverse event rates after treatment with anti-VEGF compounds are low, intravitreal injections can result in severe complications and damage to the retina and other structures of the eye, such as ocular hemorrhage and tears in the retinal pigment epithelium.

The global market for retinal disease was approximately $13.0 billion in 2019 and was estimated to grow at approximately 11% per year through 2024 according to Market Scope.

market accounted for just over 50% of the global market or $6.8 billion in 2019.

The anti-VEGF market for the treatment of wet AMD consists predominantly of three drugs that are approved for marketing and primarily prescribed for the treatment of wet AMD:

Eylea, marketed in the United States by Regeneron;

Lucentis, marketed in the United States by Genentech;

and Beovu, marketed in the United States by Novartis.

Avastin, a cancer treatment drug, marketed by Genentech, is also used off-label for the treatment of wet AMD.

Glaucoma is a progressive and highly individualized disease in which elevated levels of IOP are associated with damage to the optic nerve, which results in irreversible vision loss.

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Patients with ocular hypertension are at high risk of developing glaucoma.

Glaucoma impacts more than 2.7 million people age 40 or older in the United States.

The primary goal of glaucoma treatment is to slow the progression of this chronic disease by reducing IOP, and many medications can accomplish this.

Importantly, however, adherence to current topical glaucoma therapies is known to be particularly poor with reported rates of non-adherence from 30% to 80%.

These low compliance rates may be associated with disease progression and loss of vision and may be part of the reason that glaucoma is a leading cause of blindness in people over 60 years of age.

In a healthy eye, fluid is continuously produced and drained to maintain pressure equilibrium and provide nutrients to the ocular tissue.

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The ability of patients to use and place daily eye drops is challenging.

The products that we are developing are designed to address the issue of compliance by delivering a prostaglandin analog formulated with our programmed release hydrogel to lower intraocular pressure for several months with a single insert.

According to IMS Health data, approximately 35.6 million prescriptions were filled in the United States in 2019 for drugs administered by eye drops for the treatment of glaucoma, resulting in sales of approximately $3.3 billion.

A typical prescription provides approximately one month of treatment.

We expect prescription volume to grow, in large part as a result of the aging population.

According to IMS Health, PGAs accounted for approximately half of the prescription volume in the glaucoma market in 2019.

The products that we are developing are designed to address the issue of compliance by delivering a prostaglandin analog, or PGA, formulated with our programmed release hydrogel to lower IOP for several months with a single insert.

The global market for glaucoma was estimated by Market Scope at $4.8 billion in 2019 with the U.S.

market representing $1.9 billion.

The market for drugs administered by eye drops for the treatment of glaucoma consists of both branded and generic products.

Branded products have maintained premium pricing and significant market share.

These products include Travatan Z (travoprost) marketed by Alcon and Lumigan (bimatoprost)

marketed by Allergan.

These products include Travatan Z (travoprost) marketed by Alcon and Lumigan (bimatoprost) marketed by Allergan.

The relevant patents covering travoprost expired in December 2014.

Commonly used generic drugs include latanoprost and timolol.

The Use of Eye Drops and their Limitations

Ocular Surface Diseases

Dry Eye Disease

Dry eye disease is a chronic, multifactorial disease affecting the tears and ocular surface that can result in dryness, inflammation, irritation, pain, tear film instability, visual disturbance and ocular surface damage.

Dry eye disease can have a significant impact on quality of life and can potentially cause long-term damage to the ocular surface.

Due to the impact of dry eye disease on tear film dynamics, the condition can affect performance of common vision-related activities such as reading, using a computer and driving, and can lead to complications associated with visual impairment.

In addition, the vast majority of dry eye patients experience acute episodic exacerbations of their symptoms, which are commonly referred to as flares, at various times throughout the year.

These flares can be triggered by

numerous factors, including exposure to allergens, pollution, wind and low humidity, intense visual concentration such as watching television and working at a computer, hormonal changes, contact lens wear, smoking and sleep deprivation, which cause ocular surface inflammation and impact tear production and/or tear film stability.

There are approximately 17.2 million patients diagnosed with dry eye disease in the United States, according to the Market Scope 2019 Dry Eye Products Market Report.

Approximately 8.6 million of those patients are diagnosed with moderate to severe dry eye while the remaining 8.6 million patients are diagnosed with episodic dry eye disease.

The prevalence of dry eye disease increases with age, and we expect that the number of dry eye disease cases will increase as the U.S.

population continues to age.

The current standard of care for moderate to severe dry eye disease is the use of artificial tears and topical anti- inflammatory and immune modulating drugs administered by prescription eye drops.

The anti-inflammatory and immune modulating prescription drug market consists of Restasis®, for increasing tear production, marketed by Allergan;

Cequa™ for increasing tear production, marketed by Sun Ophthalmics in the United States;

lifitegrast, for the treatment of the signs and symptoms of dry eye disease, marketed by Novartis under the brand name Xiidra®;

and off-label use of corticosteroids.

As each of Restasis and Xiidra have a relatively long onset of action, they are not generally used for the short- term treatment of episodic dry eye flares.

In addition, patients have reported significant issues with stinging and burning when using several of the current treatments.

The global market for dry ocular surface disease, which we refer to as dry eye disease, was estimated by Market Scope at $5.1 billion in 2019 with the U.S.

market representing $2.1 billion, composed of approximately $1.5 billion in prescriptions and $0.6 billion in over-the-counter medications.

Within the prescription category, Restasis recorded sales in 2019 of approximately $1.2 billion in the United States while Xiidra recorded estimated sales of $0.3 billion in the United States.

Allergic Conjunctivitis

Allergic conjunctivitis, another ocular surface disease, is an inflammatory disease of the conjunctiva resulting primarily from a reaction to allergy- causing substances such as pollen or pet dander.