Form 8-K OTONOMY, INC. For: Feb 11

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OTIVIDEX^® Phase 3 trial results in Ménière’s disease expected by end of February

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OTO-313 Phase 2 trial in tinnitus planned to start in first quarter of 2021 with top-line results expected in mid-2022

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OTO-413 Phase 1/2 trial expansion in hearing loss expected to start in second quarter of 2021 with results anticipated in mid-2022

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OTIVIDEX: results for Phase 3 trial in Ménière’s disease expected by end of February. This trial enrolled a total of 149 patients from the United States and Europe, exceeding the target of 142 patients. In November 2020, Otonomy announced that a review of the revised statistical analysis plan by the U.S. Food and Drug Administration (FDA) confirmed use of the Negative Binomial model for analysis of the primary endpoint in this trial. The last patient last visit was completed at the end of December 2020 and results are expected by the end of

this month. Assuming positive results, we plan to submit a New Drug Application to the FDA in the third quarter of 2021.

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OTO-313: Phase 2 trial in tinnitus planned to start in the first quarter of 2021 with top-line results expected in mid-2022. In July 2020, Otonomy reported positive top-line results from the Phase 1/2 trial of OTO-313 in patients with unilateral tinnitus of at least moderate severity. This trial demonstrated a positive clinical response for a single intratympanic injection of OTO-313 using the Tinnitus Functional Index (TFI) that was correlated with tinnitus loudness, tinnitus annoyance and patient global impression of change measures. Based on these results, Otonomy plans to conduct a Phase 2 trial that will enroll approximately 140 patients with unilateral tinnitus. To enrich the study population, the trial will exclude patients with severe hearing loss and increase the minimum TFI score required for entry. The company will also expand the unilateral patient population eligible for enrollment by increasing the time from tinnitus onset from six months to one year, and will extend the observation period to assess durability of the treatment effect.

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OTO-413: Phase 1/2 trial expansion planned to start in second quarter of 2021 with top-line results expected in mid-2022. In December 2020, Otonomy announced positive top-line results from an ascending single dose safety and exploratory efficacy study for OTO-413 in patients with hearing loss. This trial demonstrated that a single intratympanic injection of OTO-413 was well-tolerated across all dose cohorts. Furthermore, the therapeutic activity of OTO-413 versus placebo was demonstrated across multiple clinically-validated speech-in-noise hearing tests at consecutive time points (Days 57 and 85). Beginning in the second quarter of 2021, Otonomy plans to enroll additional hearing loss patients in an expansion of the Phase 1/2 trial to evaluate a refined study protocol in preparation for Phase 2. This expansion will randomize subjects to a single treatment with OTO-413 or placebo and evaluate a reduced number of endpoints focusing on the phrase, word and digit speech-in-noise hearing tests assessed in the initial patient cohorts. Enrollment criteria will continue to target a broad hearing loss population to support design of a Phase 2 trial.

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OTO-825: GJB2 gene therapy product candidate selected. Otonomy and Applied Genetic Technologies Corporation (AGTC) are collaborating to co-develop and co-commercialize an AAV-based gene therapy to restore hearing in patients with hearing loss caused by a mutation in the gap junction beta-2 (GJB2) gene -- the most common cause of congenital hearing loss. Preclinical results presented at conferences during 2020 demonstrated that a gene of interest can be expressed in support cells of the cochlea, which are the relevant target cells for treating GJB2 deficiency, using novel and proprietary AAV capsids. Also, consistent gene expression was observed for at least 12 weeks in non-human primates following a single local administration. These results supported selection of OTO-825 for advancement into IND enabling studies.

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OTO-510: preclinical development ongoing for novel and proprietary otoprotection molecule. Cisplatin is a potent chemotherapeutic agent that is widely used to treat a variety of cancers in adults and children, however, it is commonly associated with severe adverse effects including cisplatin-induced hearing loss (CIHL). Otonomy has identified a novel series of molecules with improved otoprotection in preclinical CIHL studies compared to other agents

in development. Preclinical development continues for a small molecule from this class formulated to provide sustained exposure from a single intratympanic injection.

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OTO-6XX: preclinical development ongoing for hair cell repair and regeneration program. In July 2020, Otonomy entered into an exclusive license agreement with KYORIN Pharmaceutical Co., Ltd. (Kyorin) that provides Otonomy with exclusive worldwide rights to develop, manufacture and commercialize a novel compound for the treatment of sensorineural hearing loss. Otonomy is formulating the patent-protected compound utilizing the company’s proprietary technology to provide sustained drug exposure in the inner ear following a single local administration. The OTO-6XX program targets hair cell repair and regeneration for the treatment of severe hearing loss.

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OTIPRIO^®: co-promotion partnership initiated and expanded with ALK-Abelló, Inc. (ALK). In June 2020, Otonomy entered a co-promotion agreement that provided ALK with an exclusive right to promote OTIPRIO for acute otitis externa (AOE). This agreement was expanded in October 2020 to include OTIPRIO’s other FDA-approved indication, use during ear tube surgery. During the multi-year agreement, Otonomy will receive co-promotion fees and reimbursement of a proportion of product support costs while also retaining a share of adjusted gross profits from the sale of OTIPRIO by ALK.

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Cash Position: Cash, cash equivalents, and short-term investments totaled $86.3 million as of December 31, 2020, compared to $60.7 million as of December 31, 2019. In July 2020, Otonomy completed an underwritten public offering of 17,275,000 shares of its common stock, which includes the underwriters’ full exercise of their option to purchase additional shares, and the Company sold pre-funded warrants to purchase up to 4,000,000 shares of its common stock, for total gross proceeds of approximately $69.1 million, before deducting underwriting discounts and commissions and other offering expenses payable by Otonomy. All of the securities were sold by Otonomy.

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Long-term Debt: Otonomy obtained a $15.0 million term loan from Oxford Finance LLC in December 2018. In July 2020, the terms of the loan were amended to extend the interest-only repayment period from 24 months to 36 months, followed by 23 months of amortization.

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Operating Expenses: GAAP operating expenses were $10.1 million for the fourth quarter of 2020, compared to $10.7 million for the fourth quarter of 2019. For the full year 2020, GAAP operating expenses were $42.6 million compared to $44.5 million for 2019. Non-GAAP operating expenses, which exclude stock-based compensation, were $8.5 million for the fourth quarter of 2020, compared to $10.2 million for the fourth quarter of 2019. For the full year 2020, non-GAAP operating expenses were $36.5 million compared to $39.6 million for 2019.

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Research and Development Expenses: GAAP research and development (R&D) expenses for the fourth quarter of 2020 were $6.4 million, compared to $7.0 million for the fourth quarter of 2019. The decrease for the quarter was primarily due to reduced third-party

development costs that were partially offset by increased compensation expense. For the full year 2020, GAAP R&D expenses were $28.0 million compared to $32.8 million for 2019.

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Selling, General and Administrative Expenses: GAAP selling, general and administrative (SG&A) expenses in the fourth quarter of 2020 were $3.7 million, compared to $3.6 million for the fourth quarter of 2019. For the full year 2020, GAAP SG&A expenses were $14.6 million compared to $11.7 million for 2019.

As of December 31,

As of December 31,

2020

2019

Cash and cash equivalents

$

30,767

$

25,194

Short-term investments

55,576

35,476

Right-of-use assets

14,082

15,465

Total assets

106,265

83,018

Long-term debt, net

15,158

14,967

Leases, net of current

13,847

15,320

Total liabilities

39,999

42,785

Accumulated deficit

(504,624

)

(459,893

)

Total stockholders’ equity

66,266

40,233

Three Months Ended

Years Ended

December 31,

December 31,

2020

2019

2020

2019

(unaudited)

Product sales, net

$

53

$

93

$

273

$

600

Costs and operating expenses:

Cost of product sales

274

276

1,188

912

Research and development

6,374

7,034

27,997

32,805

Selling, general and administrative

3,692

3,625

14,575

11,690

Total costs and operating expenses

10,340

10,935

43,760

45,407

Loss from operations

(10,287

)

(10,842

)

(43,487

)

(44,807

)

Other (expense) income, net

(360

)

(83

)

(1,244

)

132

Net loss

$

(10,647

)

$

(10,925

)

$

(44,731

)

$

(44,675

)

Net loss per share, basic and diluted

$

(0.20

)

$

(0.36

)

$

(1.10

)

$

(1.45

)

Weighted-average shares used to compute net loss per share,

basic and diluted

52,257,321

30,768,174

40,845,844

30,726,786

Three Months Ended

Years Ended

December 31,

December 31,

2020

2019

2020

2019

(unaudited)

GAAP operating expenses

Research and development

$

6,374

$

7,034

$

27,997

$

32,805

Selling, general and administrative

3,692

3,625

14,575

11,690

Total GAAP operating expenses

10,066

10,659

42,572

44,495

Non-GAAP adjustments

R&D stock-based compensation expense

(632

)

183

(2,456

)

(2,085

)

SG&A stock-based compensation expense

(950

)

(628

)

(3,642

)

(2,793

)

Total non-GAAP adjustments

(1,582

)

(445

)

(6,098

)

(4,878

)

Non-GAAP operating expenses

$

8,484

$

10,214

$

36,474

$

39,617