EYEPOINT PHARMACEUTICALS, INC. Note Regarding Forward-Looking Statements
Various statements made in this Quarterly Report on Form 10-Q are forward-looking and involve risks and uncertainties. All statements that address activities, events or developments that we intend, expect or believe may occur in the future are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements give our current expectations or forecasts of future events and are not statements of historical or current facts. These statements include, among others, statements about:
•
the potential for EYP-1901, as an investigational sustained delivery
intravitreal anti-VEGF treatment targeting wet age-related macular degeneration
("wet AMD"), non-proliferative diabetic retinopathy ("NPDR") and diabetic
macular edema ("DME");
•
our expectations regarding the timing and outcome of our planned Phase 2
clinical trials for EYP-1901, for the treatment of wet AMD, NPDR and DME;
•
our expectations regarding the timing and clinical development of our product
candidates, including EYP-1901;
•
the extent to which our business, the medical community and the global economy
will continue to be materially and adversely impacted by the effects of the
COVID-19 pandemic (the "Pandemic"), or by other pandemics, epidemics or
outbreaks;
•
our cash flow expectations from commercial sales of YUTIQ and DEXYCU;
•
our ability to manufacture YUTIQ and DEXYCU, or any future products or product
candidates, in sufficient quantities and quality;
•
our belief that our cash, cash equivalents, and marketable securities of $171.2
million at June 30, 2022 , combined with anticipated net cash inflows from
product sales, will fund our operating plans through 2024, under current
expectations regarding the initiation of our Phase 2 clinical trials for
EYP-1901;
•
our ability to obtain additional capital in sufficient amounts and on terms
acceptable to us, and the consequences of failing to do so;
•
our future expenses and capital expenditures;
•
our expectations regarding our ability to obtain and adequately maintain
sufficient intellectual property protection for EYP-1901, YUTIQ, DEXYCU and any
future products or product candidates, and to avoid claims of infringement of
third-party intellectual property rights;
•
our expectation that we will continue to incur significant expenses and that our
operating losses and our net cash outflows to fund operations will continue for
the foreseeable future;
•
our expectations regarding our expanded commercial alliance with ImprimisRx for
the sales and marketing of DEXYCU, and ImprimisRx's ability to execute on sales
and marketing activities for the brand; and
•
the effect of legal and regulatory developments.
Forward-looking statements also include statements other than statements of current or historical fact, including, without limitation, all statements related to any expectations of revenues, expenses, cash flows, earnings or losses from operations, cash required to maintain current and planned operations, capital or other financial items; any statements of the plans, strategies and objectives of management for future operations; any plans or expectations with respect to product research, development and commercialization, including regulatory approvals; any other statements of expectations, plans, intentions or beliefs; and any statements of assumptions underlying any of the foregoing. We often, although not always, identify forward-looking statements by using words or phrases such as "likely", "expect", "intend", "anticipate", "believe", "estimate", "plan", "project", "forecast" and "outlook".
The following are some of the factors that could cause actual results to differ materially from the anticipated results or other expectations expressed, anticipated or implied in our forward-looking statements:
•
the extent to which the Pandemic impacts our business, the medical community and the global economy; • the effectiveness and timeliness of our preclinical studies and clinical trials, and the usefulness of the data; • our expectations regarding the timing and clinical development of our product candidates, including EYP-1901, and the potential for EYP-1901 as a sustained delivery treatment for serious eye diseases, including wet AMD, NPDR and DME; • our ability to achieve profitable operations and access to needed capital; • fluctuations in our operating results; • our ability to successfully produce sufficient commercial quantities of YUTIQ and DEXYCU and to successfully commercialize YUTIQ and DEXYCU in theU.S. ; 25
--------------------------------------------------------------------------------
•
our ability to sustain and enhance an effective commercial infrastructure and
enter into and maintain commercial agreements for the commercialization of YUTIQ
and DEXYCU;
•
consequences of fluocinolone acetonide side effects for YUTIQ;
•
consequences of dexamethasone side effects for DEXYCU;
•
the success of current and future license and collaboration agreements,
including our agreements with Ocumension Therapeutics ("Ocumension"), Equinox
Science, LLC ("Equinox") and Betta Pharmaceuticals Co., Ltd.;
•
our dependence on contract research organizations, our commercial alliance
partner ImprimisRx, vendors and investigators;
•
effects of competition and other developments affecting sales of products;
•
market acceptance of our products;
•
protection of intellectual property and avoiding intellectual property
infringement;
•
product liability; and
•
other factors described in our filings with the SEC .
We cannot guarantee that the results and other expectations expressed,
anticipated or implied in any forward-looking statement will be realized. The
risks set forth under Item 1A of our Annual Report on Form 10-K for the fiscal
year ended
Our forward-looking statements speak only as of the dates on which they are made. We do not undertake any obligation to publicly update or revise our forward-looking statements even if experience or future changes makes it clear that any projected results expressed or implied in such statements will not be realized.
Our Business Overview
We are a pharmaceutical company committed to developing and commercializing
innovative therapeutics to help improve the lives of patients with serious eye
disorders. Our pipeline leverages our proprietary Durasert® technology for
sustained intraocular drug delivery including EYP-1901, an investigational
sustained delivery intravitreal anti-VEGF treatment initially targeting wet
age-related macular degeneration ("wet AMD"), the leading cause of vision loss
among people 50 years of age and older in
Recent Developments
•
InJuly 2022 , the Company announced that the CMS indicated its intention not to provide further pass-through extension to certain drugs, including DEXYCU® in the 2023 CMS Draft HOPPS (Hospital Outpatient) rule. If the draft rule becomes final, DEXYCU will lose pass-through separate reimbursement status onDecember 31, 2022 and will instead be bundled into the general Cataract procedure reimbursement code starting onJanuary 1, 2023 . We anticipate that the loss of pass-through status will negatively impact DEXYCU revenue. • In July, we announced the appointment ofKaren Zaderej to our Board of Directors.Ms. Zaderej is currently the President, Chief Executive Officer, and Chair of the Board atAxoGen Corporation (Nasdaq:AXGN), and brings more than 35 years of biopharmaceutical and medical device experience to the role. • In June, we announced the appointment ofAnthony (Tony) Adamis , M.D. to our Board of Directors.Dr. Adamis is a highly accomplished ophthalmology executive with more than 30 years or research and development experience in the biopharmaceutical industry. • InJune 2022 ,China's Center for Drug Evaluation (CDE) of theNational Medical Products Administration (NMPA) approved YUTIQ 0.18mg for the treatment of chronic non-infectious uveitis affecting the posterior segment of the eye. • InMay 2022 , we entered into an Exclusive License Agreement (the "Betta License Agreement") with Betta Pharmaceuticals Co., Ltd. ("Betta"). Under the Betta License Agreement, we granted to Betta an exclusive, sublicensable, royalty-bearing license to develop, use (but not make or have made), sell, offer for sale and import EYP-1901 in the field of ophthalmology (the "Betta Field") in the Greater Area ofChina , includingChina , theHong Kong Special Administrative Region , theMacau Special Administrative Region , andTaiwan (the "Betta Territory"). Under the terms of the Betta License Agreement, we 26
--------------------------------------------------------------------------------
retained all ophthalmic rights to EYP-1901 outside of the Betta Territory and to, among other things, conduct clinical trials on EYP-1901 in the Betta Field in the Betta Territory. • Concurrently with the execution of the Betta License Agreement, we entered into Amendment #1 (the "First Amendment") to that certain Exclusive License Agreement, datedFebruary 3, 2020 (the "Equinox License Agreement"), withEquinox Sciences, LLC ("Equinox"), regarding our exclusive, sublicensable, royalty-bearing right and license to certain patents and other Equinox intellectual property to research, develop, make, have made, use, sell, offer for sale and import the compound vorolanib and any pharmaceutical products comprising the compound for local delivery to the eye for the prevention or treatment of wet AMD, DR and RVO using our proprietary localized delivery technologies (the "Original Field"), in each case, throughout the world exceptChina ,Hong Kong ,Taiwan andMacau . Pursuant to the First Amendment, the Original Field was expanded to cover the prevention or treatment of all ophthalmology indications, using our proprietary localized delivery technologies. • Customer demand for YUTIQ in Q2 2022, represented as units purchased by physicians from our distributors, was 43% higher versus Q1 2022, driven by higher demand. • Customer demand for DEXYCU in Q2 2022, represented as units purchased by ambulatory surgical centers ("ASCs"), was flat over Q1 2022. • InMarch 2022 , we entered into a loan agreement for senior secured credit facilities in the aggregate amount of$45 million withSilicon Valley Bank to replace our existing credit facility with CRG.
R&D Highlights
•
InJuly 2022 , the Company announced that the first patient was dosed in the Phase 2 DAVIO2 clinical trial of EYP-1901 for the treatment of wet AMD. The twelve-month, randomized, controlled DAVIO2 trial is expected to enroll approximately 150 patients previously treated with a standard-of-care anti-VEGF therapy, and topline data is expected in the second half of 2023. More information about the study is available at clinicaltrials.gov (identifier: NCT05381948). • InJuly 2022 , we announced positive 12-month safety and efficacy data from the DAVIO Phase 1 clinical trial evaluating EYP-1901 for the treatment of wet AMD. The final twelve-month data presented from the Phase 1 DAVIO clinical trial showed no reports of ocular serious adverse events ("SAEs") or drug-related systemic SAEs. There were no reported events of vitreous floaters, endophthalmitis, retinal detachment, implant migration in the anterior chamber, retinal vasculitis, posterior segment inflammation, or retinal vascular occlusive events. Additionally, updated data from the twelve-month follow-up confirm stable best corrected visual acuity (BCVA) (-4.12 ETDRS letters), stable central subfield thickness (CST) on optical coherence tomography (OCT) (-2.76 ?m), and an expected late increase in supplemental anti-VEGF therapy given the insert's expected drug depletion, with 53% supplement free up to six months and 35% of eyes supplement free up to twelve months. Additionally, there was positive treatment burden reduction of 74% at twelve months versus 79% at six-months. • The FDA has recently updated the regulatory requirements for combination drug/device products such as YUTIQ 50. Based on updated guidance from the FDA, these regulatory changes will require us to conduct additional clinical trials for YUTIQ 50 beyond what was originally contemplated for the efficacy supplement of our NDA, resulting in a significant increase in the program's anticipated cost. Accordingly, we have decided to pause enrollment for the YUTIQ 50 clinical trial and evaluate if there is a viable path for resumption of the program. • InFebruary 2022 , we announced updated positive interim safety and efficacy data from the ongoing Phase 1 DAVIO clinical trial evaluating EYP-1901 for the treatment of wet AMD. We presented eight-month data from the DAVIO Phase 1 clinical trial of EYP-1901 for wet AMD at the Angiogenesis, Exudation, and Degeneration 2022 virtual meeting. The data showed no dose limiting toxicities, no reports of ocular SAEs and no drug-related systemic SAEs, consistent with the six-month data presented inNovember 2021 . The DAVIO data has also shown that following a single dose of EYP-1901, 53% and 41% of patients did not require a supplemental anti-VEGF treatment up to six and nine months, respectively. The treatment burden was reduced by 79% and 75% at six months and eight months respectively compared to prior to dosing with EYP-1901. Additionally, the eight-month data confirmed continued stable and sustained BCVA (-3.0 ETDRS letters) and CST/OCT (+13 ?m). • InJanuary 2022 , we announced that we completed a positive Type C meeting with theU.S. Food and Drug Administration (FDA) and expect to initiate a Phase 2 trial of EYP-1901 for wet AMD in Q3 2022 and in NPDR in the second half of 2022 with initial top-line data for the wet AMD trial anticipated in the second half of 2023.
Critical Accounting Policies and Estimates
The preparation of consolidated financial statements in conformity with GAAP requires that we make certain estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. We base our estimates, judgments and assumptions on historical experience, anticipated results and trends, and on various other factors that we believe are reasonable under the circumstances at the time. By their nature, these estimates, judgments and assumptions are subject to an inherent
27
--------------------------------------------------------------------------------
degree of uncertainty. Actual results may differ from our estimates under
different assumptions or conditions. In our Annual Report on Form 10-K for the
fiscal year ended
Results of Operations
Three Months Ended
Three Months Ended
June 30, Change
2022 2021 Amounts %
Revenues:
Product sales, net $ 11,318 $ 8,738 $ 2,580 30 %
License and collaboration
agreements 49 94 (45 ) -48 %
Royalty income 198 181 17 9 %
Total revenues 11,565 9,013 2,552 28 %
Operating expenses:
Cost of sales, excluding
amortization of acquired
intangible assets 1,734 1,929 (195 ) -10 %
Research and development 12,992 5,605 7,387 132 %
Sales and marketing 6,883 6,659 224 3 %
General and administrative 8,557 5,184 3,373 65 %
Amortization of acquired
intangible assets 615 615 - 0 %
Total operating expenses 30,781 19,992 10,789 54 %
Loss from operations (19,216 ) (10,979 ) (8,237 ) 75 %
Other income (expense):
Interest and other income, net 362 280 82 29 %
Interest expense (552 ) (1,376 ) 824 -60 %
Gain (loss) on extinguishment
of debt - 2,065 (2,065 ) -100 %
Total other income (expense),
net (190 ) 969 (1,159 ) -120 %
Net loss $ (19,406 ) $ (10,010 ) $ (9,396 ) 94 %
Net loss per share - basic and
diluted $ (0.52 ) $ (0.35 ) $ (0.17 ) 49 %
Weighted average shares
outstanding - basic and diluted 37,322 28,744 8,578 30 %
Net loss $ (19,406 ) $ (10,010 ) $ (9,396 ) 94 %
Product Sales, net
Product sales, net represents the gross sales of YUTIQ and DEXYCU less
provisions for product sales allowances. Product sales, net increased by
License and collaboration agreement
License and collaboration agreement revenues decreased by
28
--------------------------------------------------------------------------------
Royalty Income
Royalty income increased by
Cost of Sales, Excluding Amortization of Acquired Intangible Assets
Cost of sales, excluding amortization of acquired intangible assets, decreased
by
Research and Development
Research and development expenses increased by
Sales and Marketing
Sales and marketing expenses increased by
General and Administrative
General and administrative expenses increased by
Amortization of Acquired Intangible Assets
Amortization of acquired intangible assets totaled
Interest (Expense) Income
Interest expense totaled
Interest income from amounts invested in marketable securities and institutional
money market funds increased to
29
--------------------------------------------------------------------------------
Six Months Ended
Six Months Ended
June 30, Change
2022 2021 Amounts %
Revenues:
Product sales, net $ 20,328 $ 15,540 $ 4,788 31 %
License and collaboration
agreements 108 435 (327 ) -75 %
Royalty income 423 361 62 17 %
Total revenues 20,859 16,336 4,523 28 %
Operating expenses:
Cost of sales, excluding
amortization of acquired
intangible assets 3,511 3,319 192 6 %
Research and development 22,937 11,084 11,853 107 %
Sales and marketing 13,576 12,318 1,258 10 %
General and administrative 17,106 10,299 6,807 66 %
Amortization of acquired
intangible assets 1,230 1,230 - 0 %
Total operating expenses 58,360 38,250 20,110 53 %
Loss from operations (37,501 ) (21,914 ) (15,587 ) 71 %
Other income (expense):
Interest and other income, net 423 281 142 51 %
Interest expense (1,745 ) (2,722 ) 977 -36 %
Gain (loss) on extinguishment
of debt (1,559 ) 2,065 (3,624 ) -175 %
Total other income (expense),
net (2,881 ) (376 ) (2,505 ) 666 %
Net loss $ (40,382 ) $ (22,290 ) $ (18,092 ) 81 %
Product Sales, net
Product sales, net represents the gross sales of YUTIQ and DEXYCU less
provisions for product sales allowances. Product sales, net increased by
License and collaboration agreement
License and collaboration agreement revenues decreased by
Royalty Income
Royalty income increased by
Cost of Sales, Excluding Amortization of Acquired Intangible Assets
Cost of sales, excluding amortization of acquired intangible assets, increased
by
30
--------------------------------------------------------------------------------
Research and Development
Research and development expenses increased by
Sales and Marketing
Sales and marketing expenses increased by
General and Administrative
General and administrative expenses increased by
Amortization of Acquired Intangible Assets
Amortization of acquired intangible assets totaled
Interest (Expense) Income
Interest expense totaled
Interest income from amounts invested in marketable securities and institutional
money market funds increased to
Liquidity and Capital Resources
We have had a history of operating losses and an absence of significant
recurring cash inflows from revenue, and at
Financing Activities
During the six months ended
On
31
--------------------------------------------------------------------------------
The loans under the Credit Facilities are due and payable on
The repayment of all unpaid principal and accrued interest under the Credit
Facilities may be accelerated upon consummation of a specified change of control
transaction or the occurrence of certain other events of default (as specified
in the SVB Loan Agreement). Subject to certain exceptions, we are also required
to make mandatory prepayments of outstanding loans under the Credit Facilities
with the proceeds of asset sales and insurance proceeds, which amounts in the
case of the Revolving Facility, subject to the conditions set forth in the SVB
Loan Agreement, may be re-borrowed. In addition, we may make a voluntary
prepayment of the SVB Loan, in whole but not in part, at any time. All mandatory
and voluntary prepayments of the Term Facility are subject to the payment of
prepayment premiums as follows: (i) if prepayment occurs on or prior to
Certain of our future subsidiaries will be required to become co-borrowers under the SVB Loan Agreement or guarantee the obligations of ours under the SVB Loan Agreement. Our obligations under the SVB Loan Agreement and the guarantee of such obligations are secured by a pledge of substantially all of our and such subsidiaries' assets, excluding intellectual property.
The SVB Loan Agreement contains affirmative and negative covenants customary for financings of this type, including limitations on our and our subsidiaries' abilities, among other things, to incur additional debt, grant or permit additional liens, make investments and acquisitions, merge or consolidate with others, dispose of assets, pay dividends and distributions, enter into affiliate transactions and change its line of business, in each case, subject to certain exceptions. In addition, the SVB Loan Agreement contains the following quarterly financial covenants requiring the Company to maintain either:
•
minimum product revenue from YUTIQ® and DEXYCU® assessed on a quarterly basis commencing from the three-month period ending onMarch 31, 2022 through the SVB Maturity Date, with such minimum quarterly product revenue ranging from approximately$7.8 million to approximately$11.5 million in fiscal year 2022. Such minimum quarterly product revenue will be subject to incremental increases in fiscal year 2023 and will thereafter be such amounts as agreed upon between us and SVB based on certain agreed-upon factors commencing for the three-month period ending onMarch 31, 2024 and for each three-month period thereafter through the SVB Maturity Date; or • if we are unable to achieve the minimum quarterly product revenue level required as of the end of any three-month period, cash and cash equivalents in an amount equal to the greater of (i)$50,000,000 and (ii) our six-month Cash Burn (as defined in the SVB Loan Agreement).
Future Funding Requirements
At
Actual cash requirements could differ from management's projections due to many factors, including cash generation from sales of YUTIQ and DEXYCU, additional investments in research and development programs, clinical trial expenses for EYP-1901, competing technological and market developments and the costs of any strategic acquisitions and/or development of complementary business opportunities. In addition, the Pandemic has had, and may continue to have, a material and adverse impact on our business, including as a result of preventive and precautionary measures that we, other businesses, and governments are taking. Due to these impacts and measures, we have experienced and may continue to experience significant and unpredictable reductions in the demand
32
--------------------------------------------------------------------------------
for our commercial products as customers have shut down their facilities and non-essential surgical procedures have been postponed in an effort to promote social distancing and to redirect medical resources and priorities towards the treatment of COVID-19.
The amount of additional capital we will require will be influenced by many factors, including, but not limited to:
1.
the potential for EYP-1901, as a sustained delivery intravitreal anti-VEGF treatment for wet AMD, NPDR, and DME; 2. our expectations regarding the timing and clinical development of our product candidates, including EYP-1901; 3. the success of ourU.S. direct commercialization of YUTIQ and DEXYCU; 4. the cost of commercialization activities for YUTIQ and DEXYCU, including product manufacturing, marketing, sales and distribution; 5. the scheduledDecember 31, 2022 expiration of pass-through coverage under which DEXYCU is reimbursed for Medicare Part B patients; 6. whether and to what extent we internally fund, whether and when we initiate, and how we conduct additional pipeline product development programs; 7. payments we receive under any new collaboration agreements; 8. whether and when we are able to enter into strategic arrangements for our products or product candidates and the nature of those arrangements; 9. the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing any patent claims; 10. changes in our operating plan, resulting in increases or decreases in our need for capital; 11. our views on the availability, timing and desirability of raising capital; and 12. the extent to which our business could be adversely impacted by the effects of the Pandemic or by other pandemics, epidemics or outbreaks.
We do not know if additional capital will be available when needed or on terms favorable to us or our stockholders. Collaboration, licensing or other agreements may not be available on favorable terms, or at all. We do not know the extent to which we will receive funds from the commercialization of YUTIQ or DEXYCU. If we seek to sell our equity securities, we do not know whether and to what extent we will be able to do so, or on what terms. If available, additional equity financing may be dilutive to stockholders, debt financing may involve restrictive covenants or other unfavorable terms and dilute our existing stockholders' equity, and funding through collaboration, licensing or other commercial agreements may be on unfavorable terms, including requiring us to relinquish rights to certain of our technologies or products. If adequate financing is not available if and when needed, we may delay, reduce the scope of, or eliminate research or development programs, independent commercialization of YUTIQ and DEXYCU, or other new products, if any, postpone or cancel the pursuit of product candidates, or otherwise significantly curtail our operations to reduce our cash requirements and extend our capital.
Our consolidated statements of historical cash flows are summarized as follows (in thousands):
© Edgar Online, source
