Good morning, and welcome to the Kala Pharmaceuticals Fourth Quarter and Full Year 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following management’s prepared remarks, a Q&A session will be held. As a reminder, this call is being recorded. I would now like to turn the call over to Niranjan Kameswaran, Senior Vice President of Strategy for Kala Pharmaceuticals. Please proceed.

Thank you, operator, and thank you all for participating in today's call. Joining me from the company are Mark Iwicki, Chairman, President and Chief Executive Officer; Todd Bazemore, Chief Operating Officer; Kim Brazzell, Chief Medical Officer; Mary Reumuth, Chief Financial Officer; and Hongming Chen, Chief Scientific Officer. Today's call is being webcast live. The webcast link can be found in the Investors section of our website. During this call, we will be referring to non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is available in our press release issued today, which can also be found on our website. On this call, we will make certain comments about Kala's future expectations, plans and prospects that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements will include statements regarding the potential market and commercial launch plans for EYSUVIS; observations associated with our commercialization of EYSUVIS and INVELTYS; statements regarding our preclinical development programs; and sufficiency of our cash resources. These and other forward-looking statements are based on the beliefs and expectations of management as of this conference call. Our actual results may differ materially from our expectations. The company undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances that occur after this conference call, except as required by law. Investors should carefully read the risks and uncertainties described in today's press release as well as the risk factors, which identify specific factors that may cause actual results or events to differ materially from those described in our forward-looking statements included in the company's annual report on Form 10-K and other filings we make with the SEC. The Form 10-K will be filed with the SEC later today and will be available on our website. I will now turn the call over to Kala's CEO, Mark Iwicki.

Thanks, Niranjan, and good morning, everyone. Thank you for joining us today to review Kala's fourth quarter and full year financial results and business highlights. This is a very exciting time for Kala. We have built a portfolio of innovative therapies, including two marketed products, and established a commercial organization with deep experience working across the ophthalmology and optometry markets, and bringing new treatment options to eye care professionals and patients. As we look to the future, our goals are clear. We aim to establish EYSUVIS as the market leader for the short-term treatment of dry eye disease and to grow INVELTYS to treat more patients with post-operative ocular inflammation and pain, while strategically investing in the development of our internal pipeline of proprietary new chemical entities for the treatment of a range of front and back of the eye diseases. Before turning the call over to Todd and Kim to provide an update on our commercial and R&D efforts, I'd like to spend a few moments to reflect on 2020 and our recent accomplishments. Last year was a pivotal year for Kala. In October, we received FDA approval for EYSUVIS as the first medicine specifically developed to treat the short-term signs and symptoms of dry eye disease. This approval was based on the results from four clinical trials that demonstrated the differentiated efficacy, rapid onset, safety and tolerability of EYSUVIS. Immediately following approval, our team turned its full attention to finalizing commercial preparations, and in January, we successfully commenced promoting EYSUVIS in the United States. We are very encouraged by the early launch and feedback from both doctors and patients. It's clear that our commercial team is making strong progress with eye care professionals so they can quickly gain experience with EYSUVIS and their dry eye patients. Additionally, despite the challenges of COVID-19 and more specifically, the pandemic's impact on ocular surgeries, INVELTYS continued to have a meaningful place in the market. As the vaccine rollout progresses and the pandemic begins to subside, we believe we'll continue to see ocular surgeries resuming and INVELTYS prescriptions growing. Finally, we are advancing our next wave of therapeutic candidates, a suite of proprietary and wholly owned new chemical entities for both front and back of the eye diseases. As Kim will explain shortly, we believe these preclinical development programs have the potential to fuel our long-term growth, providing meaningful impact to millions of people worldwide. As we work towards establishing our commercial leadership in eye care with EYSUVIS and INVELTYS, we are excited to invest in our early stage pipeline, where our novel platform capabilities and scientific know-how enable us to design and develop differentiated therapies for major unmet medical needs. With our existing cash resources, we believe we have sufficient capital to fund our operations into at least the fourth quarter of 2022, and expect the anticipated revenue from EYSUVIS to provide additional runway. With that, I'd like to turn the call over to Todd to go through the updates for EYSUVIS and INVELTYS.

Thank you, Mark. I'll begin today with the launch update for EYSUVIS. The early response from eye care professionals and patients has been exceedingly positive, and our team has done a great job quickly executing the launch in just three months post approval. As a reminder, dry eye disease affects approximately 38 million people in the U.S. alone, and more than 17 million of these individuals have been diagnosed and are currently under the care of an ophthalmologist or an optometrist. Based on our research, an estimated 75% of patients have never tried prescription therapy, and only approximately 10% of patients are currently on a prescription chronic dry eye medication. Across multiple large quantitative market research studies, approximately 80% of dry eye disease patients report that they suffer from episodic flares, which translates to approximately 14 million of the diagnosed dry eye patient population in the U.S. Prior to the launch of EYSUVIS, there were no FDA approved prescription treatment options with a clinical profile targeted to treat episodic symptoms of dry eye disease. Our market research indicates that the availability of a rapid acting short-term prescription therapy to treat episodic flares has the potential to become the preferred first-line prescription therapy to treat mild to moderate dry eye disease, which represents the majority of diagnosed patients. We designed our launch priorities with the focus on three key objectives. First, educate eye care professionals on the episodic nature of dry eye disease. Second, establish EYSUVIS as the preferred first-line prescription therapy for the short-term treatment of dry eye flares. And third, ensure optimal access and broad payer coverage. The commercial team has been executing against all of these priorities, and we've already begun to see the early results of their hard work. Last week, we were pleased to announce that EYSUVIS was added to Express Scripts' National Preferred, Basic and High Performance Formularies. We believe our success in securing coverage for EYSUVIS at our ESI just one month into launch indicates payer anticipation of significant demand for EYSUVIS. Gaining market access coverage of commercial payers is a core part of our launch strategy in 2021. Commercial payers make up the largest proportion of dry eye prescriptions, and patients with mild to moderate dry eye disease are typically younger and are more likely to have commercial health insurance. We believe commercial payer coverage for EYSUVIS will be a key driver of prescription growth and we expect our commercial formulary coverage to continue to expand in the coming weeks and months. We are also seeing promising week-over-week growth in prescription demand since launch. For the week ending February 12, only six weeks into our launch, an aggregate of more than 2,200 EYSUVIS prescriptions have been filled, and we have had over 550 eye care professionals already prescribe EYSUVIS. These figures reflect data from both Symphony Health and the EYSUVIS I-Save program, Kala’s patient hub. We are also encouraged by the initial feedback we are receiving from eye care professionals. The feedback speaks to the efficacy of EYSUVIS, further confirming the results from our clinical trials. For example, doctors have shared that patients are experiencing the rapid onset of action. Patients have also given feedback that EYSUVIS is a very comfortable eye drop to administer. We believe that early positive experiences by doctors and patients will help us establish EYSUVIS as the preferred first-line prescription therapy for dry eye disease. All-in-all, we are very pleased with the launch to-date, and I look forward to updating you on our progress in the months ahead. I’ll now provide an update on INVELTYS, our twice daily post-surgical ocular steroid. In the fourth quarter, there were approximately 41,000 prescriptions of INVELTYS reported by Symphony Health, which represents an increase of 8% compared to the third quarter of 2020. This was driven primarily as a result of increased sales effort and fewer COVID-19 related restrictions on elective procedures, including ocular surgeries in Q4 compared to Q3. Despite the challenges the pandemic presented throughout the year, we achieved solid prescription growth for INVELTYS in 2020. For the full year 2020, there were approximately 143,000 prescriptions of INVELTYS reported by Symphony Health. This is an increase of approximately 11% compared to 2019. We continue to have strong commercial coverage for INVELTYS with more than 80% of commercial lives covered. We believe that INVELTYS prescriptions and revenues will grow over time. However, we remain unable to project the specific timing or quantify the potential impact on future revenues given the continued uncertainty around the impact and duration of the COVID-19 pandemic on elective procedures. While we believe net revenues from INVELTYS could continue to be negatively impacted in 2021, we remain optimistic about the future growth potential for INVELTYS. And with that, I'd like to turn the call over to Kim now to go through our pipeline. Kim?

Thank you, Todd. I'm excited to update our early stage pipeline, which, as Mark mentioned, includes multiple proprietary preclinical candidates targeting diseases of both front and back of the eye. We're currently evaluating three internal preclinical programs: selective glucocorticoid receptor modulator, or SEGRM; a selective small molecule Tyrosine Kinase inhibitor targeting EGF; and an ocular surface targeted steroid. We are particularly excited about the potential of our SEGRM program as it can provide novel therapies for both front and back of the eye. As you are aware, traditional corticosteroids work via activation of the glucocorticoid receptor, which stimulates gene expression along two pathways, the transrepression pathway and the transactivation pathway. There's mounting evidence that the transrepression pathway alone may be sufficient for anti-inflammatory and immunomodulatory activity, with the transactivation pathway being primarily responsible for the untoward effects often seen with ocular and systemic corticosteroids, such as elevated intraocular pressure, hypertension, and osteoporosis. With our SEGRM program, we have designed a novel class of compounds that can selectively activate the transrepression pathway to maximize the anti-inflammatory activity while limiting activation of the transactivation pathway to minimize the untoward effects. We believe that this approach has the potential to deliver anti-inflammatory activity comparable to that of current corticosteroids without the associated side effects. We further believe that a safe and effective SEGRM compound would have significant utility in the treatment of diseases of the front of the eye, such as dry eye disease and other ocular surface inflammatory diseases, as well as a variety of retinal diseases where inflammation is a critical component. We are targeting identification of a development candidate for our SEGRM program by the end of this year. In our Tyrosine Kinase Inhibitor program, we have developed a proprietary, highly selective, and potent lead compound which has demonstrated subnanomolar in vitro potency against the VEGF receptor-2 kinase and good selectivity against many of the off-target receptor effects. We have demonstrated compelling preclinical pharmacokinetics and efficacy data in relevant animal models and are exploring both topical and sustained in vitro delivery approaches. We believe that our Tyrosine Kinase Inhibitor program can provide new and exciting therapies for retinal diseases, such as AMD and diabetic eye disease. Our team is excited by the possibility that these programs provide for new and exciting therapies. We are continuing to progress and evaluate each program as part of our portfolio assessment and anticipate providing an update on these programs in the coming months. I'd like to now pass the call to Mary to go over the financial results.

Thanks, Kim. During this discussion of our financial results, I will reference certain non-GAAP financial measures. These non-GAAP financial measures exclude stock-based compensation, non-cash interest expense, and depreciation and amortization. For a full reconciliation of our GAAP to non-GAAP financial measures, please refer to today's press release which is available on our website. Our cash position as of December 31, 2020, was $153.5 million compared to $85.4 million as of December 31, 2019. This increase reflects net proceeds of approximately 158.6 million received from our underwritten public offering of common stock in March 2020, as well as sales of common stock under our ATM offering program in 2020, partially offset by cash used in operations. We anticipate that our cash resources as of December 31, 2020, together with anticipated INVELTYS revenue and 18.2 million in net proceeds we raised in January of 2021 under our ATM offering program, will enable us to fund our operations into at least the fourth quarter of 2022. We also expect that anticipated revenue generated from sales of EYSUVIS will provide additional cash runway. For the fourth quarter of 2020, we reported net product revenues of 2.2 million, which is comprised of 1.9 million of net revenues from INVELTYS sales and 300,000 of net revenue from EYSUVIS sales. As a reminder, we recognize revenue when product is shipped to wholesalers. Our fourth quarter 2020 net revenues of 2.2 million compare to 1.2 million from INVELTYS in the fourth quarter of 2019 or an increase of 1 million from the same period last year. Cost of product revenues for the fourth quarter of 2020 was 1.4 million compared to 700,000 for the same period in 2019. Included in cost of product revenues and due to COVID-19 was a reserve of 500,000 for excess INVELTYS inventory. Non-GAAP cost of product revenues was 1.3 million for the fourth quarter of 2020 compared to 600,000 for the same period in 2019. SG&A expenses for the fourth quarter of 2020 were 26.5 million compared to 14.5 million for the same period in 2019. The increase was primarily due to an increase in costs related to preparing for the launch of EYSUVIS, including the expansion of the sales force and increased stock-based compensation costs. Non-GAAP SG&A expenses were 23.1 million for the fourth quarter of 2020 compared to 12.7 million for the same period in 2019. R&D expenses for the fourth quarter of 2020 were 3.4 million compared to 6.1 million for the same period in 2019. This decrease was primarily due to a decrease in external spend on our Phase 3 clinical trial of EYSUVIS. Non-GAAP R&D expenses were 2.5 million for the fourth quarter of 2020 compared to 5.5 million for the same period in 2019. Loss from operations for the fourth quarter of 2020 was 29 million compared to 20.2 million for the same period in 2019. Non-GAAP operating loss was 24.7 million for the fourth quarter of 2020 compared to 17.6 million for the same period in 2019. Net loss for the fourth quarter of 2020 was 31.1 million or $0.55 per share compared to a net loss of 22 million or $0.63 per share for the same period in 2019. Non-GAAP net loss was 26.5 million for the fourth quarter of 2020 compared to 19.2 million for the same period in 2019. Please refer to today's press release for the weighted average number of shares used in the calculation of our net loss per share for each of the quarterly and yearly periods discussed. That concludes our prepared remarks for today. I will now pass the call over to the operator for questions.

Our first question comes from Christopher Neyor of JPMorgan.

Good morning and congrats on the Express Scripts contract. First question’s on EYSUVIS payer contracting. Todd talked about the potential for adding formulary coverage in the coming weeks and months. Acknowledging that these are ongoing negotiations, can you speak to what gives you confidence in additional contracts? And what aspects of EYSUVIS’ product profile have peers found attractive in initial discussions? I'll start there and then I have one follow up.

Hi, Chris. Good morning. It's Todd Bazemore. So to your first question, what I would say is that we are deep into those discussions and negotiations with other large commercial payers. We're quite happy with where those discussions currently are, and are very optimistic that we'll be successful and get additional adds. And also with the ESI contract, that also gives us access to all of their custom clients. So there are a number of additional lives under the ESI umbrella that have the ability to access the contract that we have in place, which will continue to help us grow coverage in the coming weeks and months ahead. So we just feel really good about where we are in all of those discussions and expect to continue to improve commercial access here in 2021.

Great, that's helpful. Second question’s on EYSUVIS sales force. What impact are you seeing from COVID-19 on the initial product launch? And specifically, are there any limitations on face-to-face marketing? It seems like you might be seeing a benefit from the early vaccination of physicians and physician office staff. Perhaps maybe any color on what impact that may be having?

Yes. We've been really, really pleased with the response to our sales force in the launch of EYSUVIS. As you know, we have set ourselves up to be able to do both in-person face-to-face promotion as well as a full suite of virtual promotional tactics that are available. That having been said, six weeks into launch, 90% of our sales interactions are face-to-face with eye care professionals. So we're seeing really, really great receptivity. We're getting in to see most of our customers face-to-face, which means we're able to deliver a sales presentation and make sure they have EYSUVIS samples. So we're just really happy with how that is going, and we can expect it to only continue to improve to your point as more and more of the population becomes vaccinated.

That's great. Thanks for the questions.

Thank you.

Our next question comes from Andreas Argyrides with Wedbush Securities.

Good morning, everyone. Thank you for taking our questions. I'm on for Liana Moussatos. Good question regarding the previous question regarding formulary access, so congrats by the way. And could you maybe just talk about what factors went into that? And how do you now anticipate the ramp of the launch kind of changing as a result? And then I have one more follow-up.

Sure. Good morning, Andreas. Good questions. What I would tell you is that in all of our clinical presentations to the payers that we have met with to date, there's been good recognition of the clinical differentiation of EYSUVIS in the marketplace, based on its indication, right, unique indication of rapid acting short-term treatment approved for the signs and symptoms of dry eye disease. And then obviously because of the clinical data that supported approval, and the fact that we show a very rapid onset of action, great resolution of signs and symptoms with it only being used for two weeks. So that's being recognized as unique by payers. We are actually having great success with payers actually carving out a unique place in their formularies for EYSUVIS as the only short-term acute dry eye medication that's available. And those conversations have just gone really well. And it sounds like you may have a follow-up question.

I apologize, I was on mute. Looking ahead at the pipeline and specifically the wet AMD program, you mentioned two potential routes: topical and intravitreal. Topical TKIs have faced challenges in the past. What about our program gives you confidence that the topical route is a viable option? Additionally, how do you view the potential compliance issues with a topical treatment that may need to be administered a couple of times a day? Thank you.

Yes. This is Kim Brazzell. I’ll try my best to answer your question. First of all, we've done a great deal of pharmacokinetic and preclinical efficacy evaluations of our topical TKI. And as a start, the compound was designed specifically for use in the eye by scientists at Kala. We've shown with topical administration, we get concentrations that are well above that needed for efficacy by the IC50, but interestingly also a similar or higher concentration that have been shown in animal studies with the current inserts that are delivered intravitreally into the eye. So we think that we have robust preclinical data. We're continuing to generate data and analyze this, and also look at the option of doing an insert as well. But we think both products would have a significant place in the treatment armamentarium. A topical product would allow sort of maintenance therapy for patients that don't want to or can't get the frequent intravitreal injections that are required for maintaining the diseases such as AMD and so forth. The logistical issues and so forth make that difficult for some patients. It also could have applicability in patients that have significant AMD in one eye and are developing AMD in the other eye to slow the progression of that. So we see significant opportunities with this product and still have work to do to get it to the next step of going into full development.

Great. Thank you for taking my questions and congrats on the quarter and progress in the new year. Thank you.

Thank you.

Our next question comes from Frank Brisebois with Oppenheimer.

Hi. Thanks for answering my questions. I was curious about the 550 eye care professionals who have already prescribed. Can you elaborate on how many you are actually targeting? Also, is there a few who have prescribed significantly more than the others? What level of detail is available regarding that number? I have a follow-up as well.

Hi Frank, good morning. This is Todd. To answer your first question, we are currently targeting about 12,000 eye care professionals with our 91 representatives. The group is made up of both ophthalmologists and optometrists. We have already gained 550 subscribers, which indicates that we have good broad prescribing across the entire group. In terms of dry eye, this initial group is seeing patients with flare-ups. They have started not only prescribing but also distributing samples, which is providing us with valuable clinical experience. The feedback has been overwhelmingly positive. With our patient starter kits, we implemented a feedback mechanism that allowed doctors to collect clinical responses from patients regarding their experiences. The two most common themes reported by patients in these early experience programs are that they noticed a very rapid onset of action from the drug, providing quick relief from symptoms, and that the eye drops are comfortable, with no issues of burning, stinging, or blurred vision. Overall, the feedback has been very positive, reinforcing the use of EYSUVIS among eye care professionals.

Okay, great. And then on the reimbursement side, congrats on Express Scripts obviously. Is that kind of quicker than expectations? It seems pretty quick into launch. And what other big players are there out there? How much does Express Scripts kind of cover in terms of commercial side percentage there? And then if you can just remind us again, you compare it to the generic steroids that aren't necessarily the cheapest either. Can you just talk about the co-pay that's necessary with the coverage here compared to generic steroids? And basically, if you are programmed to maybe help with the co-pay and how much that might penalize you, I guess; so just more on the reimbursement side?

Sure. So to your first question, yes, we feel like this initial EYSUVIS coverage came very quickly, only 30 days after the launch. It is very common for new product launches with the three large PBMs to not be reviewed for the first six months they are on the market. Quite often the PBMs will implement sort of this six-month new to market block where they don't even consider adding new formulary. That has not been the case. We are deep into discussions with all three of the major PBMs; ESI, CVS Caremark, and OptumRx, and we’re very pleased with the way those discussions are progressing. And we’re optimistic as I said that we're going to continue to grow our access here in the coming weeks and months. So we feel really good about that. You had a second part to your question, Frank. Can you remind me what it was?

Yes, regarding the co-pay, I understand it may vary for some individuals, but your organization has a program to assist with the co-pay. Could you please remind us how this compares to the generic steroid market?

We believe with the ESI contract, again, it depends on the patient's specific health plan, the benefit design within that plan, but the range of potential co-pays could be anywhere from $25 to $75. But as you know, we have a co-pay program that we've put out there for commercial patients where they never have to pay more than $40. We can dial the co-pay down to $40. So net, that means essentially that most of those patients should end up with a co-pay somewhere in the $25 to $40 range, again, depending on their health plan. And the feedback we've received from speaking with eye care professionals is that's very reasonable, particularly considering that EYSUVIS is an acute medication used on a short-term basis and most patients may only need two or three prescriptions per year, unlike chronic medications where they have to refill their prescription every month and incur that co-pay cost every single month.

Okay, great. That's very helpful. If I can, I'd like to ask a quick question. You mentioned that we can track the scripts through Symphony. It seems there are certainly some scripts not only through Symphony but particularly with the patient hub, especially early in the launch. Is it fair to say that most scripts are being reported through Symphony at this point? I'm trying to understand the percentage that remains difficult for us to track because of the patient hub.

Yes, that's a great question. We have been monitoring the patient hub. The EYSUVIS I-Save program, our internal patient hub, is being used, but most prescriptions are captured by Symphony. Some prescriptions get billed directly through the hub and are not reported by Symphony. It's also important to note that the hub allows doctors to send prescriptions that may need prior authorization if a patient's health plan does not yet cover EYSUVIS. In addition to the 2,200 prescriptions reported through Symphony, there are another 1,200 prescriptions sent to our patient hub that are in the process of getting prior authorization approval to hopefully secure insurance coverage for those patients, enabling them to fill their prescriptions at local pharmacies. So, when considering the prescriptions reported through Symphony, it’s reasonable to think there’s about another 50% in demand that has been prescribed and is in the prior authorization process at our patient hub.

Okay, that’s extremely helpful. Thank you.

Sure. Thank you, Frank.

Our next question comes from Biren Amin with Jefferies.

Hi, guys. Thanks for taking my questions. Could you comment on the prescribers that have written for EYSUVIS and just your outreach there, and I guess their incentive in writing for a service? Are these mainly high prescribers in dry eye disease? Anything you could provide in terms of color, in terms of the prescribing base currently? Thanks.

Yes, Biren, I’m happy to do so. Good morning. So a couple of things. At this point, we're still really early in March so we still haven't gotten to a little less than half of our targeted dry eye physicians that we've had a chance to get at least one sales call on, and most of them we've had the opportunity to sample. So we're really happy with the early uptake considering that we still have half of our targeted physicians to get to here in the second half of the first quarter. With those that have started prescribing, the 550 that are prescribing to date, that split is about 55% optometrists and 45% ophthalmologists. So we are seeing those optometrists really sort of stepping forward as early adopters. We're not surprised by that, right, because we've always said in the past that optometrists tend to treat a higher volume of the patients with more mild to moderate dry eye disease that are more likely to present with more episodic manifestation of their symptoms and are probably ideal candidates for short-term treatment with a drug like EYSUVIS a few times a year. And certainly that's what we're seeing. In terms of sort of the mix of prescribing, we definitely are seeing the higher decile I think of 7 to 10 doctors being the ones that are coming on first and initially trialing EYSUVIS. But as the sales force gets further reach and starts calling on doctors in the low to mid-deciles, we expect them to start prescribing as well. It's just a matter of needing more time and territory so we can reach more of our targeted physicians.

Regarding the hub, you previously mentioned that about 50% of the 2,200 scripts are accompanied by another 1,200 scripts waiting for reimbursement related to prior authorization. Typically, how long does it take to navigate through that? Additionally, of the scripts written so far, have these mostly been for patients with private insurance? Could you provide a breakdown between private and government insurance?

Yes, really good questions. That by our process we're finding can take anywhere from a week to two depending on the patient's health plan, sometimes also it can depend on how quickly the doctor's office gets back if there's additional information that they have to provide to the insurance plan for that patient in order to secure approval. So it’s probably reasonable to assume it can take up to a couple of weeks to work through that process. In terms of the early split, it is skewing predominantly to commercial. I think early on, at least for the prescriptions that are getting filled, upwards of 70% of those prescriptions are to commercial payers.

Okay. And then maybe just one last question for me. I know the company’s probably not going to provide annual sales guidance, but how should we think about the EYSUVIS launch? Currently, if I look at consensus, total sales are 37 million across both EYSUVIS and INVELTYS. And if we assume 9 million to 10 million for INVELTYS, that kind of suggests that EYSUVIS’ consensus is around 27 million, 28 million. So given where you're at with the first six weeks, do you think we're thinking about the EYSUVIS launch the right way with consensus about 27 million, 28 million?

Hi, Biren. It’s Mark. Thanks for the question. We're really excited by the early uptake and in particular, the feedback. It was great to get the ESI contract as well. So I feel like we're on a good track. It certainly will be great if the pandemic starts to subside or the vaccinations really take hold. And we are hoping that the surgery market will rebound a bit. In INVELTYS, performance has been robust but the market is still significantly down and also has an impact on launching EYSUVIS obviously as procedures within offices are altered versus the normal interactions that sales professionals can have. So we believe that we're seeing all of the right signs and hopefully that we will be able to have a strong year.

Great. Thank for taking my questions.

Thank you.

Our next question comes from Yi Chen with H.C. Wainwright.

Thank you for taking my questions. First question is, when do you plan to increase the sales team for EYSUVIS? Is it in any way related to increasing formulary access?

Hi, Yi. Good morning. It's Todd. So we're conducting those assessments right now. We haven't determined the final timing of expanding the sales force, that second wave expansion to get to approximately 125 reps. I would say there’s two major determinants in the timing of that. One is what you said, right, which is securing additional payer access and we're very pleased with that payer coverage. Looks like it is coming quicker than what we had even initially anticipated. And then secondly would be where we stand with the pandemic and the impact that it's having on patient flows into the office. And as we continue to assess those two things and feel like we're in a good position, we know that we can very quickly pull the trigger to begin the expansion to grow the sales force. But more to come on the specific timing.

Got it. And could you please comment on the trend of ocular surgeries in the past two months?

Yes. They definitely have been negatively impacted by the increases that we've seen. I think we've sort of seen two additional spikes in COVID cases across the country post the holidays, right. There was sort of that post Thanksgiving holiday break spike and then another one that occurred after the Christmas holidays. Those have definitely created some headwinds for the number of surgical procedures that has continued to be down. As Mark said a little bit earlier, we're really happy with INVELTYS performance within the market. We have around 11.5% branded new prescription market share. So we're near our sort of all-time high in our market share for INVELTYS. But that's a market share in a currently declined market because of the COVID impact on the number of elective procedures that are occurring. But that's also why we're really optimistic because INVELTYS has performed so well that once we get a significant portion of the population vaccinated and surgical volume returns to the pre-COVID levels, we're very optimistic about INVELTYS potential growth in the future.

Got it. Last question with respect to the TKI candidate in the pipeline for AMD, is it going to be a long-acting treatment?

As we've said, and I said earlier, we're really right now looking at the two options, one being a topical treatment that would be given on a daily basis, and the other would be an intravitreal sustained release delivery, which we would target for six to nine months or even longer. So we're currently evaluating both approaches. We think both have their advantages and would have a unique position in the marketplace.

Thank you.

Our next question comes from Tim Chiang with Northland Securities.

Hi. Thanks. Mark, could you just comment on the sampling program? Are all the prescriptions that you're seeing so far are all coming from samples, or are you seeing prescriptions being written from some of your high prescribing eye care professionals, even without the samples for EYSUVIS?

Hi, Tim. This is Todd. I'm happy to comment on that. One, just to be clear, the prescriptions you are seeing reported by Symphony are actual prescriptions. So that's not free product that's been given away. But you bring up a really good point. There have been prior launches within the dry eye category where the prescriptions that were generated certainly in the first couple of quarters of launch were a lot of free product that was being given away at the pharmacy. And that is not what we're doing here. So these are actual prescriptions that are being written and filled at the pharmacy for these patients. As to whether or not prescriptions are being written with or without a sample being handed out, we think there's a lot of sampling going on right now. We've made sure we've put a lot of samples into the marketplace because we think in the early days of launch, while we're securing broad market access coverage, we want to make sure that doctors have samples that they can give to patients to start developing that clinical experience. And that does include that sometimes the patients are being given a sample and a prescription is being written so that they can use the sample for the first few days, because our sample bottle size is smaller than the chain bottle size, and then go fill that prescription so they can continue to treat for the rest of the duration of that flare.

Interesting. Todd, maybe just one follow up then. How many of the face-to-face meetings that your sales force is having with eye care professionals are leading to an immediate impact, i.e., prescriptions being filled literally that day or that week? Are you guys tracking that? And I'm just wondering how many of your prescriptions are you actually seen through virtual marketing efforts?

Yes, certainly. Tim, we haven't commented specifically on the speed at which prescriptions are generated after sales presentations. The answer to that really depends. If there is good coverage within that practice, especially with the ESI formulary, there is an opportunity for quicker prescriptions. However, in areas where coverage isn't as strong in the coming months, doctors may start by offering samples so patients can use the product immediately. Overall, we're pleased with the early feedback from both eye care professionals and patients, whether prescriptions were written or samples distributed. The clinical response has been overwhelmingly positive, which we believe is crucial for driving additional use and prescribing, particularly for conditions like dry eye.

Just one last question, Todd. You're not receiving feedback from physicians indicating that price is a concern, correct?

We have, as I mentioned earlier, with our contracted position with ESI and the use of our co-pay card, the vast majority of patients' co-pays should be around $25 to $40. This has been accepted well by people. Moreover, considering this is an acute medication that patients typically only need to fill two or three prescriptions per year, that co-pay amount is seen as quite reasonable.

Very good. Thanks, Todd.

Sure.

Our next question is a follow-up from Frank Brisebois with Oppenheimer.

Hi. Just a quick follow up here. Can you compare and contrast the gross to net expectations between EYSUVIS and INVELTYS? Thanks.

Yes, Frank, I'm happy to jump in. We're not giving specific gross to net numbers. But as we have guided in the past, we do not expect EYSUVIS to face some of the same gross to net pressures that INVELTYS did during launch, because the market dynamics are just very different in the post-surgical market versus the dry eye market which is much more of a traditional retail market, largely driven by commercial insurance whereas in this surgical market it’s much more impacted by Medicare. And in the post-surgical market, that type of programs you roll out for patient access, particularly for the Medicare patients that are having cataract surgery, put a lot more pressure on the gross to net. So we do expect that the gross to net for EYSUVIS will be more favorable than what we saw during the INVELTYS launch.

Great. Thanks.

Sure.

And I'm not showing any further questions at this time. I would like to turn the call back over to Mark.

Thank you very much, operator. We appreciate everyone joining this morning. The past 12 months has marked many milestones for Kala, and we're really looking forward to a strong 2021. We're focused on driving the uptake of EYSUVIS and are pleased with our early launch trends. So thank you very much and we look forward to updating everyone soon.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.