Ocular Therapeutix’s (OCUL) CEO Antony Mattessich on Q1 2022 Results – Earnings Call Transcript

Ocular Therapeutix, Inc. (NASDAQ:OCUL) Q1 2022 Earnings Conference Call May 9, 2022 4:30 PM ET

Company Participants

Donald Notman – Chief Financial Officer

Antony Mattessich – President & Chief Executive Officer

Michael Goldstein – Chief Medical Officer

Conference Call Participants

Joe Catanzaro – Piper Sandler

Dane Leone – Raymond James

Jon Wollenben – JMP Securities

Yi Chen – H.C. Wainwright

Anita Dushyanth – Berenberg Capital

Operator

Good afternoon, ladies and gentlemen, thank you for standing by. And welcome to the Ocular Therapeutix First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time.

It is now my pleasure to introduce Donald Notman, Chief Financial Officer of Ocular Therapeutix. Please go ahead, sir.

Donald Notman

Thank you, operator. Good afternoon, everyone and thank you for joining us on our first quarter 2022 financial results and business update conference call. This afternoon, after the close, we issued a press release providing an update on the company’s product development programs and details of the company’s financial results for the quarter ended March 31, 2022. The press release can be accessed on the Investors portion of our website at investors.ocutx.com.

Leading the call today will be Antony Mattessich, our President and Chief Executive Officer, who will provide an update on the commercial progress of DEXTENZA and a summary of our corporate developments. Also speaking on the call today will be Dr. Michael Goldstein, our President, Ophthalmology and Chief Medical Officer, who will give an update on our clinical developments and pipeline.

Following Michael’s remarks, 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. For Q&A, we will be joined by Chris White, our Chief Business Officer and Scott Corning, our Senior Vice President, Commercial.

As a reminder, on today’s call, certain statements we will be making may be considered forward-looking for the purposes of the Private Securities Litigation Reform Act of 1995. In particular, any statements regarding our regulatory and product development plans as well as our research activities and our financial projections are forward-looking statements. These statements are subject to a variety of risks and uncertainties that may cause actual results to differ from those forecasted, including those risks described in our most recent quarterly report filed this afternoon with the SEC and our annual report on Form 10-K filed on February 28 with the SEC.

I will now turn the call over to Antony.

Antony Mattessich

Thank you, Donald, and welcome everyone to the Ocular Therapeutix first quarter 2022 earnings report. It has been a quick turnaround following our year-end call held a little more than two months ago. We continue to make good progress executing on our commercial efforts and with the development of our leading ophthalmology pipeline. Beginning with DEXTENZA, we achieved $12.5 million in net product revenues and 87% growth over the comparable quarter in 2021. DEXTENZA’s performance was impacted in the quarter by the surge in COVID Omicron variant and its sub-variant AB.2 that slowed cataract procedures and challenged ASC, and HOPD staffing primarily in the month of January.

Sales of in-market billable units were bounded starting in February and in March we recorded approximately 10,500 inserts sold for ASCs and HOPDs in the calendar month. Easily surpassing the old record of 9,976 set last November. Despite the ongoing staffing challenges, we are expecting a generally improving environment for the growth of DEXTENZA in 2022.

First, we are anticipating a tailwind from increased cataract surgery volumes as the backlog of delayed surgeries begins to enter the market. We think about it this way. There were approximately 4.2 million cataract procedures in 2019 forecasted to grow at a rate of between 3% to 5% annually, according to Market Scope Research. This number dropped to approximately 3.6 million in 2020 at the height of COVID. While Market Scope estimated that volumes did bounce back in 2021 to an estimated 4.4 million cataract procedures. We believe the data still suggests the potential goals of at least 800,000 backlog procedures. We anticipate that this volume will work its way back into ASCs and HOPDs over the coming few quarters and contribute to DEXTENZA’s growth.

Second, we are entering 2022 with greater clarity on DEXTENZA’s reimbursement with pass-through payment status through 2022 and then very importantly, eligibility for separate payment beginning in 2023 and potentially beyond in ASCs through the non-opioid pain management supply provisions. In addition, physician reimbursement for the insertion of DEXTENZA is now available under our Category 1 code, which became effective January 1, 2022, ensuring more reliable payment to physicians for DEXTENZA placement across all payer types and in all settings of care.

We believe the easier we can make it for physicians to provide DEXTENZA to their patients. The better we will do in growing that DEXTENZA franchise. Simplifying ensuring reimbursement is key to accomplishing this and having this clarity is a huge advantage for Ocular today.

Third, in 2022, we are expanding our commercialization of DEXTENZA into the office setting. I’ve long stated that a key strategic goal of the company is to expand our presence into ophthalmology and optometric offices by providing customers with numerous innovative buy-and-bill products, including those developed internally and potentially those licensed from other companies in the future.

The FDA’s approval of DEXTENZA for the treatment of ocular itching associated with allergic conjunctivitis, an indication that is treated in the ophthalmology and optometric office environments, gives us the opportunity to take the first step in doing that. While the strategic potential of the office environment is exciting, it represents a new space for Ocular Therapeutix, with a unique set of challenges and opportunities.

You’ve been able to learn a lot from launch of DEXTENZA in the surgical setting and found that the primary barriers of entry were the logistics associated with ASC and HOPD administration. We believe launching into the ophthalmology and optometric offices will be analogous, but with different drivers that require bespoke solutions. We recently hired a VP of Sales with over 20 years experience, successfully selling buy-and-bill products to office-based physicians to lead this initiative.

We have established a separate office-based business unit consisting initially of four new key account managers supported by the field reimbursement team, who will be tasked exclusively with selling into the office setting. We anticipate these offers – these efforts will have some impact in 2022 but more materially in 2023 and beyond. Shifting to our pipeline, we have four clinical programs.

OTX-TKI for wet AMD and other retinal diseases, OTX-TIC for glaucoma and OTX-DED and OTX-CSI for the treatment of dry eye disease, each of these programs is being developed to produce a highly differentiated buy-and-bill ophthalmology specialty product with associated procedure code that addresses key unmet needs in their respective disease states.

In the quarter, we took major steps forward with OTX-TKI, where we completed enrollment in a Phase 1 study in the U.S. and with OTX-TIC, where we began dosing patients in our Phase 2 program. We anticipate having interim data for the OTX-TKI U.S. trial in the third quarter this year. We are also happy to report that our collaboration with Mosaic Biosciences has yielded a lead compound for our complement inhibitor program for the treatment of dry AMD.

We believe that this compound has the potential to be best-in-class in the compliment space with targeted dosing every three to four months. Our collaboration with AffaMed Therapeutics has also advanced during the first and second quarters of this year. In January, AffaMed dosed its first patient in a real-world setting study being conducted at the Bo’ao Super Hospital in Hainan province in China. The trial is designed to evaluate the safety and efficacy of DEXTENZA for the treatment of ocular inflammation and pain following cataract surgery and is intended to support and potentially accelerate efforts to register DEXTENZA in China.

More recently, AffaMed announced in April that DEXTENZA was approved in Macau, China. To-date Ocular has earned a total of $3 million in milestone in clinical support payments under the AffaMed agreement. In the quarter, we also shared updates on our programs at a number of medical meetings. At this year’s American Society of Cataract and Refractive Surgery Annual Meeting held on April 22 through 24, we shared 15 presentations, including seven company sponsored studies and eight investigator-initiated clinical trials of DEXTENZA as well as OTX-DED. These presentations included real-world data evaluating the demographics and safety profile of the first 10,000 DEXTENZA inserts placed.

This was the largest scientific presence we’ve ever had at a major medical meeting. And I believe it highlights the medical community’s significant interest in our Ocular Surface programs. We also have had a large presence at this year’s Association for Research in Vision and Ophthalmology Annual meeting held May 1 through 4, 2022. This is one of the major ophthalmic research conferences and Ocular made multiple presentations highlighting exciting pipeline preclinical and clinical data.

Looking ahead into 2022, we plan to provide an important interim update for our U.S. based clinical trial of OTX-TKI for the treatment of wet AMD in the third quarter. Wet AMD represents a potentially large market opportunity for Ocular and OTX-TKI offers a new mechanism of action with compelling durability data.

Lastly, before turning the call over to Mike to discuss our pipeline in more detail, I wanted to take the opportunity to share for the first-time annual revenue guidance for 2022. We have historically not provided guidance due the unpredictable impact of the COVID pandemic on elective surgery volumes. To remind you nearly all of our sales to-date have come from cataract surgeries, which are considered elective surgeries in the ASC and HOPD setting.

We experienced a near total shutdown in those cataract surgeries in the second quarter of 2020 due to the initial surge in COVID cases. And more recently, we experienced a significant disruption in December of last year and January of this year, due to the Omicron surge. Going forward, we are assuming that closures of ASCs and HOPDs to elective surgeries would no longer be as significant for risk.

However, we expect the indirect effects of COVID will be felt for at least the remainder of 2022 as the labor shortage has left ASCs and HOPDs short staffed at a time when demand for surgeries is rising. Our challenge in growing DEXTENZA to its full potential in a surgical setting is to go deeper into established accounts by driving adoptions by more surgeons and moving into new payer types as we also set up new accounts and ASCs and HOPDs where DEXTENZA is not currently available.

All of these growth levers require Ocular personnel to work closely with administrative and surgical support staff to help them institute new policies, procedures, and protocols to allow for the use of DEXTENZA for the deep understanding of the market environment and an expectation of gradual resolution to the macroeconomic effects of COVID. We believe we have adequate line of sight to project forward sales of DEXTENZA in the surgical environment. Accordingly, we are now guiding total annual net product revenue of $55 million to $60 million for 2022.

This guidance represents anticipated annual growth of between 26% to 38%. Importantly, this guidance assumes growth will be almost entirely driven by sales of DEXTENZA in the surgical setting and therefore excludes any material contribution from sales of DEXTENZA in the office setting. We believe the office setting represents a significant source of long-term upside but given the early stages of this initiative, we have excluded any material contribution in this guidance.

With that, I’d now like to hand the call over to our President of Ophthalmology and Chief Medical Officer Dr. Michael Goldstein, who will provide an in depth look at our pipeline.

Michael Goldstein

Thanks, Anthony. Let me begin with an update on our back of the eye program OTX-TKI. In February, we presented an update from the ongoing Australian-based Phase 1 trial of OTX-TKI for the treatment of wet AMD at the Angiogenesis, Exudation, and Degeneration 2022 meeting. As background, this study was designed to assess the safety and tolerability of OTX-TKI and assess preliminary biological activity.

Our goal for this study was to answer the question, can a tyrosine kinase inhibitor administered intravitreal as a monotherapy show biological activity in wet AMD. We believe the best way to show this is to start with patients with active subretinal and/or intraretinal fluid and follow them to see if OTX-TKI can eliminate that fluid. This is the population that was enrolled in this Australian study. The data we shared at Angiogenesis has been encouraging, and we found a clinically meaningful decrease in intraretinal and/or subretinal fluid in many subjects and in some subjects, all of the fluid being treated.

In addition, extended duration of activity of six months or more was observed in over 60% of subjects across all cohorts and over 80% of subjects in cohort 3a, the 600 microgram cohort, which we believe could represent a compelling drug product profile. We are also currently running a U.S. based Phase 1 clinical trial that is now fully enrolled. This is a U.S. based multicenter prospective randomized controlled trial that is evaluating a 600 microgram OTX-TKI dose in a single implant containing axitinib compared to aflibercept administered every eight weeks in subjects previously treated with anti-VEGF therapy. The clinical trial is being conducted under an exploratory IND application at five sites targeting a total of 20 randomized subjects with a 3:1 randomization weighted toward OTX-TKI treated subjects.

This trial is designed to assess the safety, durability and tolerability of OTX-TKI and to assess preliminary biological activity in subjects by measuring anatomical and functional changes of the retina. Our goal in this trial is to answer the question of how long can a single 600 microgram OTX-TKI implant containing axitinib keep subjects dry without the need for retreatment. We look forward to reporting interim six month data in the third quarter of this year. We believe achieving a similar response rate and durability to that seeing the Australian-based study would represent a compelling drug product profile.

Moving to our glaucoma program, OTX-TIC. We recently presented data from the completed U.S.-based Phase 1 clinical trial, evaluating the safety, biological activity, durability and tolerability of OTX-TIC in subjects with primary open ankle glaucoma or ocular hypertension at the Glaucoma 360 meeting held on February 11. We believe the Phase 1 data presented highlights OTX-TIC’s ability to provide a clinically meaningful decrease in intarocular pressure, or IOP, comparable to travoprost as early as two days following administration and for as long as six months, six or more months with a single implant while preserving corneal health, representing its potential for a unique and differentiated drug product profile.

With this data in hand we’ve initiated and are actively dosing subjects in a U.S.-based Phase 2 clinical trial. This trial is a prospective multicenter randomized controlled trial evaluating the safety, tolerability and efficacy of OTX-TIC for the treatment of patients with primary open angle glaucoma or ocular hypertension. The trial will enroll approximately 105 subjects in three different arms, 35 subjects per arm randomized 1:1:1 in which subjects will receive a single OTX-TIC implant containing a 5 microgram or 26 microgram dose of travoprost compared with an implant of DURYSTA.

The 5 microgram arm is utilizing a fast degrading implant, while the 26 microgram arm is utilizing a standard implant. The trial will observe the change in diurnal IOP changes from baseline at 8:00 AM, 10:00 AM and 4:00 PM at two, six and 12 weeks and follow duration of IOP response over time. Regarding our ocular surface disease programs, we remain committed to the development of our two dry eye programs. OTX-DED a low dose intracanalicular insert of preservative free dexamethasone for the short term treatment of the signs and symptoms of dry eye disease. And OTX-CSI for the chronic treatment of patients with dry eye disease.

For OTX-DED, we are developing an optimized clinical regulatory and manufacturing plan. This plan is expected to include some additional improvements to the products formulation and the development of an improved vehicle comparator. For OTX-CSI we are doing some reformulation work to improved retention and are also developing an appropriate placebo comparator.

I would now like to turn the call back over to Donald to review our first quarter financial results.

Donald Notman

Thanks, Mike. Net revenue, which includes both gross product revenue net of discounts, rebates, and returns, which the company refers to as total net product revenue combined with collaboration revenue was $13.2 million for the first quarter and represented an 81% increase over the same period in 2021. Net product revenue have the extends in the first quarter of 2022 with $12.5 million versus $6.7 million in the comparable quarter of 2021, reflecting an approximate 87% increase.

Total net revenue for the first quarter also included collaboration revenue of $0.7 million from a clinical support payment under our licensing agreement with AffaMed. Research and development expenses for the first quarter were $13.1 million versus $10.9 million for the comparable period in 2021, driven primarily by an increase in unallocated expenses, predominantly unallocated personnel costs and increased clinical trial costs.

Selling and marketing expenses in the quarter were $9.1 million as compared to $8.1 million for the same quarter in 2021, reflecting increased personnel costs associated primarily with an expansion of the commercial field force. General and administrative expenses were $7.6 million for the first quarter versus $7.7 million in the comparable quarter of 2021.

The company reported a net loss of $12.5 million or a loss of $0.16 per share on a basic basis and a loss of $0.22 per share on a diluted basis for the three months ended March 31, 2022. This compares to net income of $3.1 million or income of $0.04 per share on a basic basis and a loss of $0.24 per share on a diluted basis for the same period in 2021. Net loss in the first quarter of 2022 included a $7 million non-cash gain in the fair value of the derivative liability associated with the company’s convertible notes, driven by a decrease in the price of its common stock during the quarter. Non-cash charges for stock-based compensation and depreciation and amortization were $4.8 million in the first quarter versus $3.7 million for the comparable quarter in 2021.

As of May 6, 2022, the company had approximately 76.8 million shares outstanding. As of March 31, 2022, the company had $145.4 million in cash and cash equivalents versus $164.2 million at December 31, 2021. Based on current plans and related estimates of anticipated cash inflows from DEXTENZA and anticipated cash outflows from operating expenses, the company believes that cash and cash equivalents will enable the company to fund planned operating expenses, debt service obligations and capital expenditure requirements through 2023. This cash guidance is subject to a number of assumptions including those related to the impacts from the ongoing COVID-19 pandemic; the revenues, expenses and reimbursement associated with DEXTENZA; and the pace of research and clinical development programs, among other aspects of the business.

I would now like to turn the call back over to Anthony for some final thoughts.

Antony Mattessich

Thanks, Donald. So before opening the call up for questions, let me do a quick summary. The company demonstrated solid commercial performance growing total net product revenue for DEXTENZA 87% over the comparable quarter of 2021. We are guiding net revenue for 2022 between $55 million to $60 million representing approximately 26% to 38% growth year-over-year driven predominantly by sales of DEXTENZA in the surgical setting.

We are expanding our commercial team to address the opportunity for DEXTENZA in the office setting as we launch our recently approved indication for itching associated with allergic conjunctivitis. With the November 2021 OPPS final rule, CMS has laid out a path for the continued separate payment for DEXTENZA in the ASE environment after the pass their expiration. This would allow us to maintain and strengthen our surgical business as we build a new source of growth in the office environment.

The U.S.-based trial of OTX-TKI evaluating a single 600 microgram implant plus anti-VEGF injection versus standard of care every eight week Eylea is now fully enrolled, and we expect to announce six month interim data in the third quarter of 2022. We recently dose subjects on our Phase 2 clinical trial of OTX-TIC for the treatment of glaucoma, which triggered a $2 million clinical support payment from our partner AffaMed Therapeutics.

We are also happy to report that our collaboration with Mosaic Biosciences has yielded a lead compound for our complement inhibitor program for the treatment of dry AMD. We believe this compound has best-in-class potential in the complement space with targeted dosing every three to four months. Finally, the company ended the quarter with $145.4 million in cash on the balance sheet as of March 31 with a continued expected cash runway through 2023. We look forward to a strong 2022.

And with that, I’ll turn the call over for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Joe Catanzaro with Piper Sandler.

Joe Catanzaro

Great. Thanks for taking my questions guys, and thanks for the DEXTENZA guidance. And maybe I could start there. So the growth you’re projecting for DEXTENZA in 2022 in the surgical setting, can you maybe quantify how much is that is coming from increase penetration that you alluded to versus expectations for increased volumes and working through that estimated backlog. And maybe relatedly, it seems like we were off in the contribution from office usage this year. I guess, at this point and I realize it’s early. What’s been the learning there thus far. And what do you see as the biggest gating factor for this opportunity and what might be some of those bespoke solutions that Anthony you’ve mentioned? Thanks. And maybe I have a quick follow-up.

Antony Mattessich

Sure. Great. Thanks for the question, Joe. I think on the first point, we really haven’t quantified exactly where that growth is going to come from. But I think implicit in the growth number that we have is really going to come from existing accounts and from additional cataract surgeries in those accounts. As we mentioned, we have a nice tailwind when it comes to the increased number of surgeries, but a fairly stiff headwind when it comes to the chronic underemployment or under staffing of the ASCs and hospitals.

As I mentioned in the call, really the work that it takes to grow the number of accounts requires an extra effort with that with the staff inside the ASC and hospital. And the willingness of those – the people in those places to do additional work at this moment is not particularly high. We think that’s going to resolve gradually. And we think certainly as we look into 2023 that’s going to be – it’s going to reverse itself. So we’ll have two tailwinds. But yes, that very much is in the growth number that we have now. That expectation, that situation is not going to resolve itself at anytime soon.

In terms of the second question on the receptivity on the office side, we have not yet launched the team that is now in place to really drum up business in that sector. So it’s not like we’ve discovered a lot of things actually on the ground with the launch in the office environment. What we do get is a lot of very eager optometrists, eager general ophthalmology practices that are looking at ways to medicalize their business and to offer something more for patients that have itching associated with allergic conjunctivitis.

So as you can see, we’ve been very conservative with what we think we’re going to get for the rest of the year. I hope next quarter, I’ll be able to report at least qualitatively what we’ve been able to see and maybe even quantitatively being able to demonstrate the penetration that we’re starting to see. But it’s really too early right now. Unfortunately, Omicron kind of delayed us getting out into the market at the time we really would’ve preferred to, but given that allergy season is starting just now it’s a good time to be getting into the offices.

Joe Catanzaro

Great. Thanks. That’s really helpful. And I can just squeeze in a couple on TKI. I know you just presented the six month NHP, GLP data at ARVO. If I recall correctly, I think that was one of the big gating factors to filing a full IND. I’m just wondering if having these data now changes anything or is the plan still to let the U.S. Phase 1 run its course. And I know the Australian studies enrolling a single implant cohort. Is it possible we see any data there first ahead of the U.S. study or is the U.S. study the next data update we should expect? Thanks.

Michael Goldstein

Yes. Thanks, Joe. It’s Mike. So in terms of your first question, yes, in terms of converting the exploratory IND to the IND we needed to have the GLP tox data. So that’s the six month data. We actually have data further out than that. So the plan would be to submit that data to the FDA and convert the exploratory IND to an IND, which should happen later this summer. At the same time, as you note, we’ve got the U.S. TKI trial, which is fully enrolled, and we look forward to having data from that trial in the third quarter of this year.

And to your last question about the Australian data, as you correctly note, we do have a group going with a single implant 600 microgram group in Australia. And I think what we’ve always said is when we have something meaningful to say, we would say, I think the timing of that would be somewhere probably after the U.S. data. I would guess where we actually have enough patients that are far enough along. So I think the next readout on that would be the U.S. trial data.

Joe Catanzaro

Okay. Got it. Thanks. That’s all helpful. Thanks for taking my questions.

Operator

Thank you. And our next question comes from the line of Dane Leone with Raymond James.

Dane Leone

Hi. Thank you for taking the question. Congratulations on the progress. I think it would be helpful to maybe just go through some expectation setting on the OTX-TKI readout at the six month mark in the U.S. study. Based upon your knowledge of the patients at baseline that are being enrolled into the study and feedback from some of your PIs, what are you looking for in this six month outcome when compared to the active aflibercept arm? Are you looking for actual resolution intraretinal fluid? Are you looking for maintenance of patients that that had minimal fluid at baseline, or just a pure comparison in terms of the amount of standard of care or rescue injections in the active arm or in the OTX-TKI arm? Anything on that would be super helpful. Thank you.

Michael Goldstein

Thanks for the question. So great question as always. So it’s really important to keep in mind that the population we’re looking at in the U.S. is different than the population we looked at in Australia. So the Australian population came in, they could have been previously treated naive, but they had to come in with a fair amount of fluid to get in the trial and we were really trying to see if with a TKI, could we get rid of that fluids. Not could we stabilize it, but could we actually get rid of that fluid? And I think what we found is with an intravitreal injection, we could get rid of that fluid. And in some cases we could completely get rid of that fluid and we could do that durably or in many patients six months or longer.

And we didn’t have any safety signals that we were concerned about. So with that, we went into the U.S. trial and that trial is looking at a different population. I think we would – I think most KOLs would say it’s an easier population. So it’s a group of patients that have previously been treated and are coming in a relatively dry state.

And we’re asking a different question, which is, if you have patients who come in, who don’t have a lot of fluid, can you maintain them in that dry state? And we did. So that trial is – another difference is that trial is a mass trial. And it was randomized 3:1 to TKI versus the aflibercept, which was every eight weeks. And so what we would expect is would the aflibercept, we would expect those subjects would remain dry. We would expect vision to be stable and that that they would – and that the OCTs would remain without fluid.

And likewise with the TKI group, we would expect that those patients will maintain their vision and also be maintained without fluid. So that’s the data we will have in the third quarter of this year. And again, if you compare that data to the Australian population, we believe this is a lower bar to hit. You’ve already had the fluid removed, we think maintaining that is a lower bar than trying to actually get rid of the fluid with the TKI.

Dane Leone

Great. And if I could ask just one follow-up on that. And this is a question that just comes up across a couple of your programs. Now I think given the results that we had with OTX-CSI, could you maybe just take us through your level of confidence that the formulation with OTX-TKI is effective as a single dose and you will not run in or show issues with the formulation of the product that have been an issue in some of the other programs? Thank you.

Michael Goldstein

Yes. I mean, every program is different, so they all use different hydrogels, different eggs and they’re all specific to each program. And also the place that we’re placing the inserts or implants is different. So in the case of CSI was intracanalicular and here when we’re talking about an intravitreal injection it’s obviously inside the eye. We know that there’s more consistency with hydrogels and breakdown when they’re in fluid filled spaces. So when you put something in the eye, whether it’s intracameral or intravitreal we know that’s more consistent than it is when you place into intracanalicular, so virtually only exposed the fluid at sort of the top end, if you will.

So I don’t think there’s any read through from CSI to TKI. I think based on the Australian data, we’re very confident about what we’ll see in the U.S. trial. Is there more work we could do with formulation? Yes, there always is and there’s always tweaks that we could make. And I expect we would do that.

In terms of CSI, I’ll just from a brief point, so we actually – the issue was pretty straightforward with CSI. There was a certain excipient that was placed in to help with the mixing of the drug just because there’s some unique properties with the drug. And we think that made for lower retention in the intraocular. And we think that we have other ways of mixing the drug. We can get rid of that excipient and by doing that, we can actually improve retention for CSI. So I don’t think there’s any read through to the TKI. And I also think CSI, we have a good way to get it back on track.

Dane Leone

Excellent. Thank you very much. I appreciate the additional commentary on CSI. Thank you.

Michael Goldstein

Thanks Dane.

Operator

Thank you. And our next question comes from the line of Jon Wollenben with JMP Securities.

Jon Wollenben

Thanks for the updates and taking the questions. One on DEXTENZA and then a couple on the pipeline, if I may. You mentioned the strong quarter in March, in terms of billable inserts, wondering if you could provide any comments on how April or early May have looked? Or are we going to continue to see the last month of the quarter be the strongest? And then, partly that you end of month demand with the backlog. Just how to think about the demand throughout the quarter?

Antony Mattessich

Well, April and May have been entirely consistent with guidance that we’ve given. So there’s certainly no reason to believe that we’d be falling behind that guidance. I think there is good reason to expect that the last month of each quarter is going to be – is going to definitely help the majority of the units in the quarter. So I don’t think that would be there many reasons change that going forward.

Jon Wollenben

Okay. And I might have missed this in the prepared remarks, but do you have a timeline and we could get an update on CSI and DED in terms of next trial initiations?

Michael Goldstein

Hey, Jon, thanks. This is Mike again. So you didn’t miss it. We haven’t given an update on the timeline. What I can tell you is, just to mention today’s question for CSI, the issue is some reformulation work on the active and active work that’s going on for both programs there’s work that needs to go on in terms of the comparator. As we’ve discussed before, the comparator for both of these trials is an intracanicular insert with the hydrogel. And what we know is that the hydrogel is a very effective way to block the canalicular. And this is a treatment that we use for dry eye disease. So it’s no surprise then that you actually had not a placebo comparator here, but an active comparator. So we are working on other appropriate placebos, which will play a role for both CSI and the DED. We plan to bring both back into Phase 2 programs but we haven’t revealed a timeline of when that will happen yet.

Jon Wollenben

Okay. And last one for me, I saw the data coming at ASGCT, how are you thinking about delivery of AAV vectors via your hydrogel I guess at a high level strategic perspective. And then also what are the potential benefits of your sustained delivery of a gene therapy to the eye?

Michael Goldstein

Yes, great question. So I think there are two fundamental problems that we can address with the hydrogel. The first is that all gene therapy programs, the dirty secret in gene therapy is that all gene therapy programs have issues with inflammation and it’s dose dependent inflammation. And we believe that by delivering the viral vectors, using a hydrogel, we can deliver higher concentrations or a higher number of viral vectors without inducing as much inflammation. So that’s one big opportunity.

The second is location. So when you do gene therapy, particularly when you’re doing subretinal delivery, you make a bleb – subretinal bleb with the viral vectors. And you hope that it goes where you want it to go. But sometimes it doesn’t, sometimes – sometimes doesn’t, sometimes it does. And what’s done now is you just put more in if it’s not going in the direction that you want. And so you end up with a very large bleb and a lot of that then goes back through the retina automate.

So there is the potential to exactly place in a very customized way, the viral vectors in the area you want it, if you put them in – if you can imagine like a sheet of hydrogel, you could place that exactly where – exactly under the cells that you want to transduce and therefore get better location.

So we think that it has an opportunity in terms of decreasing inflammation or delivering more of our vectors. We think that there’s an opportunity to deliver a more appropriate locations. I think those are the two big benefits that we could get. And as you said, we have data now on this in animal models, that, that first presentation of that data will be at the ASGCT Conference coming up.

Jon Wollenben

Exciting stuff. Thanks again for taking the questions.

Operator

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

Yi Chen

Thank you for taking my questions. At this point, could you comment on whether the momentum you observed in March sort of persisted in this into the current quarter?

Antony Mattessich

What I mentioned before is that, that the – what we’ve seen in April and May is entirely consistent with the guidance that we’ve given. So that, that is definitely we were seeing a return in the market. But we certainly have great deal of confidence will be able to satisfy our guidance going forward.

Yi Chen

Got it. Do you expect any revenue generated from AC at all during this year?

Antony Mattessich

Yes, we do. We just don’t expect it to be material relative to the surgical setting.

Yi Chen

And it’s not part of your guidance, right?

Antony Mattessich

That’s not part of the guidance, right.

Yi Chen

Got it. Got it. And do you anticipate to pay them any part of your current outstanding debt during 2022?

Antony Mattessich

We don’t at this point, not that, we’ll stick to the initial payment scheduled for that.

Yi Chen

Okay. Thank you.

Antony Mattessich

Thank you.

Operator

Thank you. And our next question comes from the line of Anita Dushyanth with Berenberg Capital.

Anita Dushyanth

Hi, good afternoon. Thanks for taking my question. I just wanted to clarify one more thing related to the guidance on revenues that you’ve given for 2022. Would that be like the lower end of the number that you’re expecting this year considering like you mentioned labor shortages continue to persist and obviously that is quite a bit of headwind combined with the backlogs that are continuing to build through the year.

Antony Mattessich

You get, it’s absolutely correct. There is quite a bit of headwind from the understaffing, which in some ways is exacerbated by the return of a lot of cataract surgeries that, that were delayed during the COVID period, because you have a basically 80% staffing and that staff in the ASC and hospital is typically less experienced than pre-COVID.

You layer on top of that and increase in demand, it makes it harder to install new accounts or to go into existing accounts, into different payer types, into existing accounts. Like I said, as we go through the year, we would expect this to resolve, but it is a macroeconomic issue that that will resolve I think with the entire economy, not just ASCs and hospitals.

Anita Dushyanth

Okay, thank you. That’s helpful. And then lastly, in the – in terms of launching in China, well, did – sorry if I missed it, was there any timelines communicated that priorly?

Chris White

So Anita, this is Chris White. I oversee the AffaMed relationship. What we referenced in relative to our partnership with AffaMed is that the product has been approved in Macau and is now actually has been launched in Macau. Our partner AffaMed is continuing to pursue the registration of DEXTENZA in China.

Anita Dushyanth

Good. Thanks. That’s it for me.

Operator

Thank you. Ladies and gentlemen, this concludes today’s conference call. Thank you for participating and you may now disconnect.

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