Abstract The overall goal of Skyran Biologics is to develop a potent topical therapeutic for diabetic retinopathy (DR), a leading cause of vision loss globally. Our research team identified Pigment Epithelium-Derived Factor (PEDF) and showed it is expressed in the eye and provides significant protection to the injured retina. Since its discovery, we identified a 44-mer N-terminus bioactive region of PEDF, then generated over 40 structurally different analogs to this region. We screened these mimetics for biological activity in a set of rigorous in vitro and in vivo assays for DR and identified Spx81-5 as a lead small PEDF mimetic with improved bioactivity in the DR retina over the native 44-mer fragment. A chemically and reproducibly synthesized small bioactive peptide removes some of the therapeutic challenges and cost encountered with a large glycoprotein in treating ocular diseases. STTR Phase I Preclinical Summary: We extended previous studies showing that Spx81-5 reduces inflammation, vascular pathologies, and cell death in DR to now show that topical instillations of Spx81-5 effectively improves visual acuity and contrast thresholds in diabetic rodents, activates MAPK through the ATGL receptor, and is detected at therapeutic concentrations after a single low dose in rabbit retinas where there is substantial back-to-front vitreal flow. We also show that Spx81-5 is stable at various temperatures for >5 months and that a novel formulation FLP3 delivers ~70% more Spx81-5 to the retina than artificial tears. Pre-clinical Phase II study: We propose to continue to develop Spx81-5 for DR and will use three aims to address key scientific issues essential for filing an IND application: The first is to establish Dosage and Instillation Frequency of Spx81-5 in a novel eye drop Formulation (FLP3) to achieve maximal therapeutic benefits in a genetic mouse model (Ins2Akita) of DR. The second is to validate Bioavailability (PK) and Efficacy of Spx81- 5/FLP3 in Larger Rabbit Eyes with DR, and the third is to assess Safety and Tolerability of Spx81-5/FLP3 in rabbit ocular and non-ocular tissues to allow prediction for human treatment. Commercial Potential: Skyran Biologics Inc. can significantly increase clinical value of Spx81-5 by definitively demonstrating that (i) the improved FLP3 topical vehicle enhances posterior segment delivery of the peptide, (ii) topical instillations of Spx81-5/FLP3 restores visual function across multiple models of DR, and (iii) the peptide is safe and tolerated in large animals. These studies are critical and essential to support the current regulatory paradigm and to inform a pathway to human trials. The milestones achieved by the successful completion of this work will position us to propose development of GMP grade peptide and formulation for clinical translation. The Phase II work will move us towards essential IND-enabling studies for FDA approval and development of clinical phase translational strategies.