The following discussion and analysis of the results of operations and financial
condition of Eyenovia, Inc. ("Eyenovia," the "Company," "we," "us" and "our") as
of September 30, 2021 and for the three and nine months ended September 30, 2021
and 2020 should be read in conjunction with our unaudited condensed financial
statements and the notes thereto included elsewhere in this Quarterly Report on
Form 10-Q and with our audited financial statements and the notes thereto
included in our Annual Report on Form 10-K for the year ended December 31, 2020
as filed with the U.S. Securities and Exchange Commission ("SEC") on March 30,
2021.
Forward Looking Statements
This report contains "forward-looking statements." Specifically, all statements
other than statements of historical facts included in this report, including
regarding our financial position, business strategy and plans and objectives of
management for future operations, are forward-looking statements. These
forward-looking statements are based on the beliefs of management at the time
these statements were made, as well as assumptions made by and information
currently available to management. When used in this report, the words
"anticipate," "believe," "estimate," "expect," "may," "might," "will,"
"continue" "intend," and "plan" and words or phrases of similar import are
intended to identify forward-looking statements. These statements reflect our
current view with respect to future events and are subject to risks,
uncertainties and assumptions related to various factors that could cause actual
results and the timing of events to differ materially from future results
expressed or implied by such forward-looking statements. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed in the section titled "Risk Factors" included in our most recent
Annual report on Form 10-K filed with the SEC. Furthermore, such forward-looking
statements speak only as of this Quarterly Report on Form 10-Q. Except as
required by law, we undertake no obligation to update any forward-looking
statements to reflect events or circumstances after the date of such statements.
Overview
We are a clinical stage ophthalmic biopharmaceutical company developing a
pipeline of advanced therapeutics based on our proprietary microdose array print
(MAP™) therapeutics. We aim to achieve clinical microdosing of next-generation
formulations of well-established ophthalmic pharmaceutical agents using our
high-precision targeted ocular delivery system, branded the Optejet® which has
the potential to replace conventional eye dropper delivery and improve safety,
tolerability, patient compliance and topical delivery success for ophthalmic eye
treatments. In the clinic, the Optejet has demonstrated the ability to
horizontally deliver ophthalmic medication with a success rate significantly
higher than that of traditional eye drops (~ 90% vs. ~ 50%). Our technology is
designed to achieve single-digit µl-volume physiologic drug delivery with up to
a 75% reduction in ocular drug and preservative topical dosing and has
demonstrated significant improvement in the therapeutic index in drugs used for
mydriasis and IOP lowering through three Phase II and Phase III trials.
Conventional eye formulations lack high-precision micro-volume delivery and
expose the ocular surface to approximately 300% more medication and
preservatives than are physiologically indicated leading to clinically
recognized ocular and non-ocular side effects. Using the Optejet, we are
developing the next generation of smart ophthalmic therapeutics which target new
indications or new combinations where there are currently no comparable drug
therapies approved by the U.S. Food and Drug Administration, (the "FDA"). Our
microdose therapeutics follow the FDA-designated pharmaceutical registration and
regulatory process. Consistent with the recent FDA reclassification of MydCombi,
we believe that most of our product candidates are, or will be, classified by
the FDA as drug-led combination products.
Our pipeline is currently focused on the late-stage development of novel,
potential first-in-class therapeutic indications for over an estimated five
million potential patients with progressive myopia in the United States and over
an estimated one hundred million potential patients with age-related near vision
impairment, or presbyopia - indications where there is tremendous unmet need and
no known existing FDA-approved therapies. We are also developing the first
microdose fixed combination ophthalmic pharmaceutical for mydriasis to address
the estimated over 100 million annual comprehensive eye exams with pupil
dilation.
MicroPine is our investigational first-in-class topical therapy for the
treatment of progressive myopia, a back-of-the-eye ocular disease associated
with pathologic axial elongation and sclero-retinal stretching. In the United
States, myopia is estimated to affect approximately 25 million children, with up
to five million considered to be at risk for high myopia. In February 2019, the
FDA accepted our investigational new drug application, or IND, to initiate a
Phase III registration trial of MicroPine (the CHAPERONE study) to reduce the
progression of myopia in children. We enrolled the first patient in the
CHAPERONE study in June 2019. Due to the COVID-19 pandemic, we experienced
delays in trial enrollment and initiation as a result of reduced clinical trial
activities and operations at investigator sites. However, we have since been
able to resume enrollment in the CHAPERONE study.
On October 9, 2020, we entered into a License Agreement (the "Bausch License
Agreement") with a subsidiary of Bausch Health Companies Inc. ("Bausch Health")
pursuant to which Bausch Health may develop and commercialize MicroPine in the
United
20
Table of Contents
States and Canada. Under the terms of the Bausch License Agreement, we received
an upfront payment of $10.0 million and we may receive up to a total of $35.0
million in additional payments, based on the achievement of certain regulatory
and launch-based milestones. Bausch Health also will pay us royalties on a
tiered basis (ranging from mid-single digit to mid-teen percentages) on gross
profits from sales of MicroPine in the United States and Canada, subject to
certain adjustments. Under the terms of the Bausch License Agreement, Bausch
Health is in the process of assuming oversight for, and has assumed the costs
related to the ongoing CHAPERONE study.
MicroLine is our investigational pharmacologic treatment for presbyopia.
Presbyopia is a non-preventable, age-related hardening of the lens, which causes
the gradual loss of the eye's ability to focus at near and impairs near visual
acuity. There currently are no known FDA-approved drugs for the improvement of
near vision in patients with presbyopia, although other companies have related
therapies in their pipeline. We have two planned Phase III VISION trials for
MicroLine, and initiated the first of these trials in December 2020. On May 25,
2021, we announced positive topline data from the Phase III VISION-1 study
evaluating MicroLine for the temporary improvement of near vision in adults with
presbyopia. The study achieved its primary endpoint and preparations are
underway for a second Phase III registration study, VISION-2, targeted to be
initiated by the end of this year. VISION-2 will be a double-masked,
placebo-controlled, cross-over superiority trial designed to enroll 120 patients
randomized between 2% pilocarpine and placebo cohorts. Topline data from
VISION-2 is anticipated in mid-2022. These studies will serve as the basis for a
planned New Drug Application (NDA) submission to FDA. VISION-1 results will be
presented at a future ophthalmic-focused medical meeting.
On August 10, 2020, we entered into a License Agreement (the "Arctic Vision
License Agreement") with Arctic Vision (Hong Kong) Limited ("Arctic Vision"),
pursuant to which Arctic Vision may develop and commercialize MicroPine and
MicroLine in Greater China (mainland China, Hong Kong, Macau and Taiwan) and
South Korea. Under the terms of the Arctic Vision License Agreement, we received
an upfront payment of $4.0 million before any payments to Senju Pharmaceutical
Co., Ltd. ("Senju"). In addition, we may receive up to a total of $43.75 million
in additional payments, based on various development and regulatory milestones,
including the initiation of clinical research and approvals in Greater China and
South Korea, and development costs. Milestone revenue includes $2.0 million
related to the MicroStat product resulting from Amendment 1 to the Arctic Vision
License Agreement between the Company and Arctic Vision which was executed on
September 14, 2021. Arctic Vision also will purchase its supply of MicroPine,
MicroLine and MicroStat from us or, for such products not supplied by us, pay us
a mid-single digit percentage royalty on net sales of such products, subject to
certain adjustments. We will pay a mid-double digit percentage of such payments,
royalties, or net proceeds of such supply to Senju pursuant to the Exclusive
License Agreement with Senju dated March 8, 2015, as amended by the License
Amendment dated April 8, 2020, and a Letter Agreement dated August 10, 2020 (the
"Senju License Agreement").
The Senju License Agreement was amended further by the License Amendment 2,
effective September 14, 2021 (the "Amendment 2"). The Amendment 2 excludes
Greater China and South Korea from the territory in which Senju was granted an
exclusive royalty-bearing license from the Company. In consideration for this
exclusion, and upon and after the execution of Amendment 1 with Arctic Vision,
the Company must make payments to Senju based on non-royalty license revenue and
sales revenue, including a one-time upfront payment of $250,000 which
represented an inducement to Senju to approve Amendment 1 of the Arctic Vision
License Agreement related to the MicroStat Product. This upfront payment to
Senju was in addition to and separate from the previously established 40%
payment on milestone revenue.
MydCombi™ (or MicroStat) is our fixed combination formulation of
phenylephrine-tropicamide for mydriasis, designed to be a novel approach for the
estimated over one hundred million office-based comprehensive and diabetic eye
exams performed every year in the United States. We have completed two Phase III
trials for MydCombi and announced positive results from these studies, known as
MIST-1 and MIST-2. In March 2021, the FDA accepted our NDA, for MydCombi for
use to achieve mydriasis in routine diagnostic procedures and in conditions
where short-term pupil dilation is desired. On October 25, 2021, the Company
announced the reclassification of the Company's proprietary, first-in-class
combination microdose formulation of tropicamide and phenylephrine for in-office
pupil dilation, MydCombi, as a drug-device combination product by the FDA in a
Complete Response Letter ("CRL") received on October 22, 2021, following a
change in the agency's legal interpretation of its authorities imposed by a
recent court ruling. The Company is preparing the necessary documents for
expedited resubmission of the new drug application for MydCombi in response to
the CRL.
We have not received U.S. marketing approval for any product candidate and we
have therefore not generated any revenues from product sales.
Historically, we have financed our operations principally through equity
offerings, including our initial public offering, numerous public offerings in
2018, 2019 and August 2020, and our private placement that closed in March 2020.
We have also generated cash through licensing arrangements and our credit
facility with Silicon Valley Bank ("SVB"). However, based upon our current
operating plan, there is substantial doubt about our ability to continue as a
going concern for a period of at least the next twelve months. Our ability to
continue as a going concern depends on our ability to raise additional capital,
through the sale of equity or debt securities
21
Table of Contents
to support our future operations. If we are unable to secure additional capital,
we may be required to curtail our research and development initiatives and take
additional measures to reduce costs.
Our net losses were $5.6 million and $15.8 million for the three and nine months
ended September 30, 2021. As of September 30, 2021, we had working capital and
an accumulated deficit of $2.7 million and $93.2 million, respectively.
Financial Overview
Revenue and Cost of Revenue
In August and October 2020, we entered into the Arctic Vision License Agreement
and Bausch License Agreement, respectively. Both of these agreements provide for
the Company to earn revenue from an upfront licensing fee, the achievement of
various development and regulatory milestones, and royalty income on sales of
licensed products. Pursuant to the Senju License Agreement, we will pay a
mid-double digit percentage of such payments from the Arctic Vision License
Agreement to Senju. See Note 7 - Commitments and Contingencies and Note 8 -
Related Party Transactions.
Research and Development Expenses
Research and development expenses are incurred in connection with the research
and development of our microdose-therapeutics and consist primarily of contract
service expenses. Given where we are in our life cycle, we do not separately
track research and development expenses by project. Our research and development
expenses consist of:
direct clinical and non-clinical expenses, which include expenses incurred
? under agreements with contract research organizations, contract manufacturing
organizations, and costs associated with preclinical activities, development
activities and regulatory activities;
personnel-related expenses, which include expenses related to consulting
? agreements with individuals that have since entered into employment agreements
with us as well as salaries and other compensation of employees that is
attributable to research and development activities; and
facilities and other expenses, which include direct and allocated expenses for
? rent and maintenance of facilities, marketing, insurance and other supplies
used in research and development activities.
We expense research and development costs as incurred. We record costs for some
development activities, such as clinical trials, based on an evaluation of the
progress to completion of specific tasks using data such as subject enrollment,
clinical site activations or other information our vendors provide to us.
In addition, our license agreements with Arctic Vision and Bausch Health require
them to assume or reimburse us for specified research and development costs.
We expect that our research and development expenses will increase with the
continuation of the aforementioned initiatives.
General and Administrative Expenses
General and administrative expenses consist primarily of payroll and related
expenses, legal and other professional services, as well as non-cash stock-based
compensation expense. We anticipate that our general and administrative expenses
will increase in the future as we increase our headcount to support our
continued research and development and the potential commercialization of our
product candidates. We also anticipate increased expenses related to audit,
legal, regulatory, and tax-related services associated with maintaining
compliance with exchange listing and SEC requirements. In addition, director and
officer insurance premiums and investor relations costs associated with being a
public company are expected to increase in future periods.
22
Table of Contents
Results of Operations
Three Months Ended September 30, 2021 Compared with Three Months Ended September
30, 2020
Research and Development Expenses
Research and development expenses for the three months ended September 30, 2021
totaled $3.5 million, an increase of $0.1 million, or 3%, as compared to $3.4
million recorded for the three months ended, September 30, 2020. Research and
development expenses consisted of the following:
For the Three Months Ended
September 30,
2021 2020
Direct clinical and non-clinical expenses $ 818,015 $ 1,745,880
Personnel-related expenses
1,386,602 890,771
Non-cash stock-based compensation expenses 489,121 346,294
Supplies and materials 496,738 325,517
Facilities and other expenses 279,712 55,297
Total research and development expenses $ 3,470,188 $ 3,363,759
The decrease in direct clinical and non-clinical expenses was primarily due to
the Vision I Study having concluded in early 2021 and significantly higher cost
reimbursements from Bausch Health and Arctic Vision. The cost reimbursements are
booked as contra expense. The increase in personnel-related expenses was
primarily due to new hiring in preparation for commercialization. The increase
in non-cash stock-based compensation was due to new option grants. The increase
in supplies and materials resulted from an increase in spending on device
inventory. The increase in facilities and other expenses was primarily due to
rent and utilities related to the Redwood City facility. The main factor in
these increases was the preparation for commercialization.
General and Administrative Expenses
General and administrative expenses for the three months ended September 30,
2021 totaled $2.4 million, an increase of $0.7 million, or 41%, as compared to
$1.7 million recorded for the three months ended September 30, 2020. This
increase was primarily attributable to a $0.3 million increase in salaries and
benefits resulting from new hiring in preparation for commercialization, a $0.3
million increase in sales and marketing, primarily related to the MydCombi
promotional campaign, a $0.1 million increase in insurance expense related to
Directors & Officer insurance and a $0.1 million increase in other G&A expense,
primarily due to increased travel resulting from the lifting of COVID-19
restrictions. This was slightly offset by a decrease of $0.1 million in
professional services, primarily due to legal fees incurred for the Bausch
Health and Arctic Vision licensing deals in 2020.
Nine Months Ended September 30, 2021 Compared with Nine Months Ended September
30, 2020
Revenue and Cost of Revenue
In August 2020, we received a $4.0 million upfront payment under the Arctic
Vision License Agreement, and made a related payment of $1.6 million to Senju.
This upfront payment was recorded as $4.0 million of deferred license fee and
$1.6 million of deferred cost of revenue. The trial data for one of the two
products (MicroPine) was fully submitted to Arctic Vision in March 2021 and the
trial data for the other product (MicroLine) was fully submitted to Arctic
Vision in June 2021. As a result, the Company recognized the $4.0 million of
deferred license fees and recognized $1.6 million of deferred license costs
related to the Senju payment during the nine months ended September 30, 2021.
There was no revenue for the nine months ended September 30, 2020.
23
Table of Contents
Research and Development Expenses
Research and development expenses for the nine months ended September 30, 2021
totaled $11.3 million, an increase of $1.4 million, or 14%, as compared to $9.9
million recorded for the nine months ended September 30, 2020. Research and
development expenses consisted of the following:
For the Nine Months Ended
September 30,
2021 2020
Direct clinical and non-clinical expenses $ 4,696,396 $ 5,076,662
Personnel-related expenses
3,886,683 2,533,439
Non-cash stock-based compensation expenses 1,138,331 1,002,150
Supplies and materials
936,566 1,108,021
Facilities and other expenses 676,320 193,024
Total research and development expenses $ 11,334,296 $ 9,913,296
The decrease in direct clinical and non-clinical expenses was primarily due to
significantly higher cost reimbursements from Bausch Health and Arctic Vision
which are booked as contra expense. The increase in personnel-related expenses
was primarily due to new hiring in preparation of commercialization. The
increase in non-cash stock-based compensation was due to new option grants. The
decrease in supplies and materials resulted from higher costs incurred for the
clinical cartridge supply in 2020. The increase in facilities and other expenses
was primarily due to rent and utilities related to the Redwood City facility and
increased travel due to the lifting of COVID-19 restrictions.
General and Administrative Expenses
General and administrative expenses for the nine months ended September 30, 2021
totaled $7.1 million, an increase of $1.4 million, or 25%, as compared to $5.7
million recorded for the nine months ended September 30, 2020. This increase was
primarily attributable to a $0.8 million increase in salaries and benefits
resulting from new hiring in preparation of commercialization, a $0.7 million
increase in sales and marketing, primarily related to the MydCombi promotional
campaign, a $0.2 million increase in insurance expense related to Directors &
Officer insurance and a $0.1 million increase in other G&A expense, primarily
due to increased travel resulting from the lifting of COVID-19 restrictions and
higher director fees attributable to a new Board member. This was offset by a
decrease of $0.4 million in professional services, primarily due to legal fees
incurred for the Bausch Health and Arctic Vision licensing deals in 2020.
Liquidity and Capital Resources
Since inception, we have experienced negative cash flows from operations. As of
September 30, 2021, our accumulated deficit since inception was $93.2 million.
As of September 30, 2021, we had a cash and cash equivalents balance of $21.4
million (of which $13.5 million is unrestricted), working capital of $2.7
million and stockholders' equity of $4.2 million. As of September 30, 2021 and
December 31, 2020, we had $7.3 million and $0.5 million, respectively, of debt
outstanding.
These conditions raise substantial doubt about our ability to continue as a
going concern for at least one year from the date that the financial statements
included elsewhere in this Quarterly Report on Form 10-Q are issued. Our
financial statements do not include adjustments to the amounts and
classification of assets and liabilities that may be necessary should we be
unable to continue as a going concern. Our ability to continue as a going
concern depends on our ability to generate sufficient recurring revenue or our
ability to raise additional capital through the sale of equity or debt
securities to support our future operations. Our operating needs include the
planned costs to operate our business, including amounts required to fund
research and development activities including clinical studies, working capital
and capital expenditures. Our future capital requirements and the adequacy of
our available funds will depend on many factors, including our ability to
successfully commercialize our products and services, competing technological
and market developments, and the need to enter into collaborations with other
companies or acquire other companies or technologies to enhance or complement
our product and service offerings. If we are unable to generate sufficient
recurring revenue or secure additional capital, we may be required to curtail
our research and development initiatives and take additional measures to reduce
costs in order to conserve our cash. During the nine months ended September 30,
2021 and 2020, our sources and uses of cash were as follows:
24
Table of Contents
On May 7, 2021, the Company entered into a Loan and Security Agreement (the
"Loan") with SVB for an aggregate principal amount of up to $25.0 million. The
Loan bears interest at an annual rate equal to the greater of (a) the sum of
1.25% plus the prime rate as reported in The Wall Street Journal and (b) 5.00%.
The Loan is secured by all of the Company's tangible assets. The Loan matures on
May 1, 2025. The Loan requires monthly interest-only payments until June 1,
2022. The initial tranche of the Loan, in the amount of $7.5 million was
received by the Company on May 7, 2021. In connection with the Loan, the Company
issued to SVB warrants to purchase 91,884 shares of common stock at an exercise
price per share equal to $4.76. The warrants are exercisable for a period of ten
years from the date of issuance. At the Company's option, the Company has the
ability to draw down the remaining $17.5 million in gross proceeds in two
tranches over the next two years based upon the achievement of several
milestones in accordance with the terms of the Loan.
On September 29, 2021, the Company and SVB executed the First Amendment to the
Loan and Security Agreement (the "Amendment"). In accordance with the Amendment,
the Company must maintain a collateralized money market account in the amount of
$7,875,000. This account must be maintained until the Release Event occurs
(defined as when the Company has received approval by the FDA of the MydCombi
product and achieved the minimum equity raise under the terms of the amended
agreement, on or prior to November 30, 2021). Given the FDA's recent
reclassification of MydCombi as a drug-device combination and the need to
resubmit a new drug application in early 2022, the restricted cash will become
callable on November 30, 2021, at SVB's election, to satisfy the Loan
obligations. Therefore, the Loan has been fully classified as a current note
payable.
Net cash used in operating activities for the nine months ended September 30,
2021 was $15.0 million, which includes cash used to fund a net loss of $15.8
million, reduced by $1.8 million of non-cash expenses, plus $1.0 million of cash
generated from changes in operating assets and liabilities. Net cash used in
operating activities for the nine months ended September 30, 2020 was $11.9
million, which includes cash used to fund a net loss of $15.6 million, reduced
by $1.9 million of non-cash expenses and $1.8 million of cash used to fund
changes in operating assets and liabilities.
Cash used in investing activities for the nine months ended September 30, 2021
was $1.2 million, which was related to purchases of property and equipment. Cash
used in investing activities for the nine months ended September 30, 2020 was
$0.2 million, which was related to purchases of property and equipment.
Net cash provided by financing activities for the nine months ended September
30, 2021 totaled $9.2 million, which was primarily attributable to $7.5 million
of proceeds from the Loan and $2.3 million from the exercise of warrants and
stock options. This was slightly offset by the repayment of notes payable and
loan issuance costs of $0.6 million. Net cash provided by financing activities
for the nine months ended September 30, 2020 totaled $20.8 million, which was
primarily attributable to aggregate net proceeds from the sale of our common
stock and warrants in our public and private offerings of $18.0 million, $2.6
million of proceeds from the exercise of stock warrants, and $0.5 million in
proceeds from a loan in connection with the Paycheck Protection Program under
the CARES Act. This was slightly offset by the repayment of notes payable of
$0.4 million and payment of offering issuance costs of $0.3 million.
On October 6, 2021, the Company commenced sales of its common stock pursuant to
the at-the-market offering. As of the filing date, the Company has received
approximately $12.8 million in gross proceeds and $12.4 million in net proceeds
from the sale of 2,435,604 shares of its common stock.
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements between us and any other entity that
have, or are reasonably likely to have, a current or future effect on financial
conditions, changes in financial conditions, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that is
material to stockholders.
Critical Accounting Policies
For a description of our critical accounting policies, see Note 2 - Summary of
Significant Accounting Policies in Part 1, Item 1 of this Quarterly Report on
Form 10-Q.
Recently Adopted and Issued Accounting Pronouncements
For a description of recently adopted and issued accounting pronouncements,
including adoption dates and estimated effects, if any, on our condensed
financial statements, see Note 2 - Summary of Significant Accounting Policies in
Part 1, Item 1 of this Quarterly Report on Form 10-Q.
25
Table of Contents
© Edgar Online, source Glimpses
EYENOVIA, INC. 
