UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from _______ to _______
COMMISSION FILE NUMBER
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
There were
EYEPOINT PHARMACEUTICALS, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
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Page |
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Item 1. |
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Condensed Consolidated Balance Sheets – September 30, 2023 and December 31, 2022 |
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3 |
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4 |
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5 |
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Condensed Consolidated Statements of Cash Flows – Nine months ended September 30, 2023 and 2022 |
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7 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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22 |
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Item 3. |
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32 |
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Item 4. |
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32 |
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Item 1. |
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33 |
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Item 1A. |
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33 |
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Item 2. |
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34 |
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Item 3. |
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34 |
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Item 4. |
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34 |
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Item 5. |
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34 |
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Item 6. |
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35 |
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37 |
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Certifications |
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2
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements
EYEPOINT PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands except share data)
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September 30, |
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December 31, |
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2023 |
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2022 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Marketable securities |
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Accounts and other receivables, net |
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Prepaid expenses and other current assets |
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Inventory |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use assets |
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Restricted cash |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders' equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Deferred revenue |
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Short-term borrowings |
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Other current liabilities |
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Total current liabilities |
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Long-term debt |
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Deferred revenue – noncurrent |
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Operating lease liabilities – noncurrent |
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Other long-term liabilities |
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Total liabilities |
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Stockholders' equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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( |
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Accumulated other comprehensive income |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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See notes to condensed consolidated financial statements.
3
EYEPOINT PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(In thousands except per share data)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2023 |
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2022 |
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2023 |
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2022 |
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Revenues: |
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Product sales, net |
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$ |
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$ |
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$ |
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$ |
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License and collaboration agreements |
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Royalty income |
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Total revenues |
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Operating expenses: |
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Cost of sales, excluding amortization of acquired |
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Research and development |
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Sales and marketing |
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General and administrative |
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Amortization of acquired intangible assets |
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Total operating expenses |
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Loss from operations |
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( |
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( |
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( |
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( |
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Other income (expense): |
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Interest and other income, net |
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Interest expense |
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( |
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( |
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Loss on extinguishment of debt |
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( |
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( |
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Total other income (expense), net |
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( |
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( |
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Net loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Net loss per share – basic and diluted |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Weighted average shares outstanding – basic and diluted |
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Net loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Other comprehensive (loss) gain: |
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Unrealized (loss) gain on available-for-sale |
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( |
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( |
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Comprehensive loss |
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$ |
( |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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See notes to condensed consolidated financial statements.
4
EYEPOINT PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
(In thousands except share data)
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Common Stock |
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Additional |
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Accumulated |
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Total |
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Number of |
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Par Value |
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Paid-In |
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Accumulated |
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Comprehensive |
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Stockholders’ |
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Balance at July 1, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Other comprehensive gain |
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— |
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— |
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— |
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— |
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Employee stock purchase plan |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Balance at September 30, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Balance at July 1, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Other comprehensive loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Issuance of stock, net of issue costs |
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— |
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— |
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Employee stock purchase plan |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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Vesting of stock units |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Balance at September 30, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Common Stock |
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Additional |
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Accumulated |
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Total |
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Number of |
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Par Value |
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Paid-In |
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Accumulated |
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Comprehensive |
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Stockholders’ |
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Balance at January 1, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Other comprehensive loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Issuance of stock, net of issue costs |
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— |
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— |
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— |
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— |
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Employee stock purchase plan |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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Vesting of stock units |
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— |
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( |
) |
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— |
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— |
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( |
) |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Balance at September 30, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Balance at January 1, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Other comprehensive gain |
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— |
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— |
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— |
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— |
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Issuance of stock, net of issue costs |
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— |
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— |
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Employee stock purchase plan |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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Vesting of stock units |
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— |
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( |
) |
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— |
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— |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Balance at September 30, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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See notes to condensed consolidated financial statements.
5
EYEPOINT PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
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Nine Months Ended |
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September 30, |
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|||||
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2023 |
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2022 |
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Cash flows from operating activities: |
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Net loss |
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$ |
( |
) |
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$ |
( |
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Adjustments to reconcile net loss to cash flows used in |
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Amortization of intangible assets |
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Depreciation of property and equipment |
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Amortization of debt discount and premium and discount on |
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( |
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( |
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Provision for excess and obsolete inventory |
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Loss on extinguishment of debt |
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Stock-based compensation |
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Changes in operating assets and liabilities: |
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Accounts receivable and other current assets |
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( |
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Inventory |
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( |
) |
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Accounts payable and accrued expenses |
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Right-of-use assets and operating lease liabilities |
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( |
) |
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Deferred revenue |
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( |
) |
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Net cash provided by (used in) operating activities |
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( |
) |
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Cash flows from investing activities: |
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Purchases of marketable securities |
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( |
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( |
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Sales and maturities of marketable securities |
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Purchases of property and equipment |
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( |
) |
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( |
) |
Net cash provided by (used in) investing activities |
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( |
) |
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Cash flows from financing activities: |
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Proceeds from issuance of stock |
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Proceeds from issuance of long-term debt |
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Payment of equity and debt issue costs |
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( |
) |
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( |
) |
Payment of long-term debt |
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( |
) |
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( |
) |
Payment of extinguishment of debt costs |
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( |
) |
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( |
) |
Borrowings under revolving facility |
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|
|
|
|
|
||
Repayment under revolving facility |
|
|
( |
) |
|
|
( |
) |
Net settlement of stock units to satisfy statutory tax withholding |
|
|
( |
) |
|
|
( |
) |
Proceeds from exercise of stock options and employee stock purchase plan |
|
|
|
|
|
|
||
Principal payments on finance lease obligations |
|
|
( |
) |
|
|
( |
) |
Net cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
|
|
|
|
( |
) |
|
Cash, cash equivalents and restricted cash at beginning of period |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash at end of period |
|
$ |
|
|
$ |
|
||
Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Restricted cash |
|
|
|
|
|
|
||
Total cash, cash equivalents and restricted cash at end of period |
|
$ |
|
|
$ |
|
||
Supplemental cash flow information: |
|
|
|
|
|
|
||
Cash interest paid |
|
$ |
|
|
$ |
|
||
Supplemental disclosure of non-cash investing and financing activities: |
|
|
|
|
|
|
||
Accrued term loan exit fee |
|
$ |
|
|
$ |
|
||
Stock issuance costs |
|
$ |
|
|
$ |
|
||
See notes to condensed consolidated financial statements.
6
EYEPOINT PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The accompanying condensed consolidated financial statements of EyePoint Pharmaceuticals, Inc., a Delaware corporation (together with its subsidiaries, the Company), as of September 30, 2023 and for the three and nine months ended September 30, 2023 and 2022 are unaudited. Certain information in the footnote disclosures of these financial statements has been condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission. These financial statements should be read in conjunction with the Company’s audited consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. In the opinion of management, these statements have been prepared on the same basis as the audited consolidated financial statements as of and for the year ended December 31, 2022, and include all adjustments, consisting only of normal recurring adjustments, that are necessary for the fair presentation of the Company’s financial position, results of operations, comprehensive loss and cash flows for the periods indicated. The preparation of financial statements in accordance with United States (U.S.) generally accepted accounting principles requires management to make assumptions and estimates that affect, among other things, (i) reported amounts of assets and liabilities; (ii) disclosure of contingent assets and liabilities at the date of the consolidated financial statements; and (iii) reported amounts of revenues and expenses during the reporting period. The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the entire 2023 fiscal year or any future period.
The Company is committed to developing and commercializing therapeutics to help improve the lives of patients with serious eye disorders. The Company’s pipeline leverages its proprietary erodible DURASERT E™ technology (Durasert E) for sustained intraocular drug delivery including EYP-1901, an investigational intravitreal treatment delivering vorolanib, currently in Phase 2 clinical trials for wet age-related macular degeneration (wet AMD), the leading cause of vision loss among people 50 years of age and older in the United States and non-proliferative diabetic retinopathy (NPDR), a largely untreated disease due to limitations of available therapies. The Company is also advancing EYP-2301 into pre-clinical development delivering razuprotafib in Durasert E for the potential treatment of diabetic eye diseases.
In May 2023, the Company granted an exclusive license and rights to its YUTIQ® (fluocinolone acetonide intravitreal implant) 0.18 mg (YUTIQ) product to Alimera Sciences, Inc. (Alimera) for $
The Company plans to identify and advance additional product candidates through clinical and regulatory development for its pipeline. This may be accomplished through internal discovery efforts, research collaborations and/or in-licensing arrangements with partner molecules and potential acquisitions of additional products, product candidates or technologies.
Liquidity
The Company had cash, cash equivalents and investments in marketable securities of $
7
Recently Adopted and Recently Issued Accounting Pronouncements
New accounting pronouncements are issued periodically by the Financial Accounting Standards Board and are adopted by the Company as of the specified effective dates. The Company believes that recently issued and adopted pronouncements will not have a material impact on the Company’s financial position, results of operations and cash flows or do not apply to the Company’s operations.
Revenue Recognition
Revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, Revenue from Contracts with Customers (ASC 606), the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within the contract, determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Sales, value-add and other taxes collected on behalf of third parties are excluded from revenue.
Product sales, net — The Company sold YUTIQ and DEXYCU primarily to a limited number of specialty distributors and specialty pharmacies (collectively the Distributors) in the U.S., with whom the Company had entered into formal agreements, for delivery to physician practices for YUTIQ and to hospital outpatient departments and ambulatory surgical centers (ASCs) for DEXYCU. The Company recognized revenue on sales of its products when Distributors obtained control of the products, which occurred at a point in time, typically upon delivery. In addition to agreements with Distributors, the Company also entered arrangements with healthcare providers, ASCs and payors that provided for government mandated and/or privately negotiated rebates, chargebacks and discounts with respect to the purchase of the Company’s products from Distributors.
Reserves for variable consideration — Product sales were recorded at the wholesale acquisition costs, net of applicable reserves for variable consideration. Components of variable consideration included trade discounts and allowances, provider chargebacks and discounts, payor rebates, product returns and other allowances that were offered within contracts between the Company and its Distributors, payors and other contracted purchasers relating to the Company’s product sales. These reserves, as detailed below, were based on the amounts earned, or to be claimed on the related sales, and were classified either as reductions of product revenue and accounts receivable or a current liability, depending on how the amount was to be settled. Overall, these reserves reflected the Company’s best estimates of the amount of consideration to which it was entitled based on the terms of the respective underlying contracts. The actual amounts of consideration ultimately received may differ from the Company’s estimates. If actual results in the future vary from the estimates, the Company adjusts product revenue and earnings in the period such variances become known.
Distribution fees — The Company compensated its Distributors for services explicitly stated in the Company’s contracts and were recorded as a reduction of revenue in the period the related product sale was recognized.
Provider chargebacks and discounts — Chargebacks were discounts that represented the estimated obligations resulting from contractual commitments to sell products at prices lower than the list prices charged to the Company’s Distributors. These Distributors charged the Company for the difference between what they paid for the product and the Company’s contracted selling price. These reserves were established in the same period that the related revenue was recognized, resulting in a reduction of product revenue and the establishment of a current liability. Reserves for chargebacks consisted of amounts that the Company expected to pay for units that remained in the distribution channel inventories at each reporting period-end that the Company expected to be sold under a contracted selling price, and chargebacks that Distributors had claimed, but for which the Company had not yet settled.
8
Government rebates — The Company was subject to discount obligations under state Medicaid programs and Medicare. These reserves were recorded in the same period the related revenue was recognized, resulting in a reduction of product revenue and the establishment of a current liability which was included in accrued expenses and other current liabilities on the condensed consolidated balance sheets. The Company’s liability for these rebates consisted of invoices received for claims from prior quarters that had not been paid or for which an invoice had not yet been received, estimates of claims for the current quarter, and estimated future claims that would be made for product that had been recognized as revenue, but which remained in the distribution channel inventories at the end of each reporting period.
Payor rebates — The Company contracted with certain private payor organizations, primarily insurance companies, for the payment of rebates with respect to utilization of its products. The Company estimated these rebates and records such estimates in the same period the related revenue was recognized, resulting in a reduction of product revenue and the establishment of a current liability.
Co-Payment assistance — The Company offered co-payment assistance to commercially insured patients meeting certain eligibility requirements. The calculation of the accrual for co-pay assistance was based on an estimate of claims and the cost per claim that the Company expected to receive associated with product that had been recognized as revenue.
Product returns — The Company generally offered a limited right of return based on its returned goods policy, which included damaged product and remaining shelf life. The Company estimated the amount of its product sales that may be returned and recorded this estimate as a reduction of revenue in the period the related product revenue was recognized, as well as reductions to trade receivables, net on the condensed consolidated balance sheets.
License and collaboration agreement revenue — The Company analyzes each element of its license and collaboration arrangements to determine the appropriate revenue recognition. The terms of the license agreement may include payment to the Company of non-refundable upfront license fees, milestone payments if specified objectives are achieved, and/or royalties on product sales. The Company recognizes revenue from upfront payments at a point in time, typically upon fulfilling the delivery of the associated intellectual property to the customer. For licenses that are combined with other promises, the Company determines whether the combined performance obligation is satisfied over time or at a point in time, when (or as) the associated performance obligation in the contract is satisfied.
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price based on the estimated relative standalone selling prices of the promised products or services underlying each performance obligation. The Company determines standalone selling prices based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.
The Company recognizes sales-based milestone payments as revenue upon the achievement of the cumulative sales amount specified in the contract in accordance with ASC 606-10-55-65. For those milestone payments which are contingent on the occurrence of particular future events, the Company determines that these need to be considered for inclusion in the calculation of total consideration from the contract as a component of variable consideration using the most-likely amount method. As such, the Company assesses each milestone to determine the probability and substance behind achieving each milestone. Given the inherent uncertainty associated with these future events, the Company will not recognize revenue from such milestones until there is a high probability of occurrence, which typically occurs near or upon achievement of the event.
When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. Applying the practical expedient in paragraph 606-10-32-18, the Company does not assess whether a significant financing component exists if the period between when the Company performs its obligations under the contract and when the customer pays is one year or less. None of the Company’s contracts contained a significant financing component as of September 30, 2023.
Royalties — The Company recognizes revenue from license arrangements with its commercial partners’ net sales of products. Such revenues are included as royalty income. In accordance with ASC 606-10-55-65, royalties are recognized when the subsequent sale of the commercial partner’s products occurs. The Company’s commercial partners are obligated to report their net product sales and the resulting royalty due to the Company typically within 60-days from the end of each quarter. Based on historical product sales, royalty receipts and other relevant information, the Company recognizes royalty income each quarter and subsequently determines a true-up when it receives royalty reports and payment from its commercial partners. Historically, these true-up adjustments have been immaterial.
9
Sale of Future Royalties — The Company has sold its rights to receive certain royalties on product sales. In the circumstance where the Company has sold its rights to future royalties under a royalty purchase agreement (RPA) and also maintains limited continuing involvement in the arrangement (but not significant continuing involvement in the generation of the cash flows that are due to the purchaser), the Company defers recognition of the proceeds it receives for the sale of royalty streams and recognizes such unearned revenue as revenue under the units-of-revenue method over the life of the underlying license agreement. Under the units-of-revenue method, amortization for a reporting period is calculated by computing a ratio of the proceeds received from the purchaser to the total payments expected to be made to the purchaser over the term of the agreement, and then applying that ratio to the period’s cash payment.
Estimating the total payments expected to be received by the purchaser over the term of such arrangements requires management to use subjective estimates and assumptions. Changes to the Company’s estimate of the payments expected to be made to the purchaser over the term of such arrangements could have a material effect on the amount of revenues recognized in any particular period.
Research Collaborations — The Company recognizes revenue over the term of the statements of work under any funded research collaborations. Revenue recognition for consideration, if any, related to a license option right is assessed based on the terms of any such future license agreement or is otherwise recognized at the completion of the research collaborations.
Please refer to Note 3 for further details on the license and collaboration agreements into which the Company has entered and corresponding amounts of revenue recognized during the current and prior year periods.
Cost of sales, excluding amortization of acquired intangible assets — Cost of sales, excluding amortization of acquired intangible assets, consist of costs associated with the manufacture of YUTIQ and DEXYCU, certain period costs for DEXYCU product revenue, product shipping and, as applicable, royalty expense. The inventory costs for YUTIQ include purchases of various components, the active pharmaceutical ingredient (API) and direct labor and overhead for the product manufactured in the Company’s Watertown, Massachusetts facility. The inventory costs for DEXYCU include purchased components, the API and third-party manufacturing and assembly.
For the three months ended September 30, 2023 and 2022, the Company accrued DEXYCU product revenue-based royalty expense of $
Product Revenue Reserves and Allowances
From January 1, 2023 through May 17, 2023 (the date the Company entered into the product rights agreement with Alimera), the Company’s product revenues were primarily from sales of YUTIQ in the U.S. For the three months ended September 30, 2023, the Company’s product revenues were primarily from the Company’s existing commercial supply agreements with Alimera. For the three and nine months ended September 30, 2022, the Company’s product revenues were made up of $
The following table summarizes activity in each of the product revenue allowance and reserve categories for the nine months ended September 30, 2023 and 2022 (in thousands):
10
|
|
Chargebacks, |
|
|
Government |
|
|
|
|
|
|
|
||||
|
|
and Fees |
|
|
Rebates |
|
|
Returns |
|
|
Total |
|
||||
Beginning balance at January 1, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Provision related to sales in the current year |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjustments related to prior period sales |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Deductions applied and payments made |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Ending balance at September 30, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Chargebacks, |
|
|
Government |
|
|
|
|
|
|
|
||||
|
|
and Fees |
|
|
Rebates |
|
|
Returns |
|
|
Total |
|
||||
Beginning balance at January 1, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Provision related to sales in the current year |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjustments related to prior period sales |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deductions applied and payments made |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Ending balance at September 30, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Returns are recorded as a reduction of accounts receivable on the condensed consolidated balance sheets. Chargebacks, discounts and fees and rebates are recorded as a component of accrued expenses on the condensed consolidated balance sheets (See Note 6).
License and Collaboration Agreements and Royalty Income
Alimera Product Rights Agreement and Commercial Supply Agreement
On
Additionally, pursuant to the PRA, the Company transferred and assigned to Alimera certain assets (the Transferred Assets) and certain contracts with third parties related to YUTIQ, including the new drug application #210331 for YUTIQ (collectively, the Asset Transfer). The Transferred Assets consist primarily of agreements and internally developed intangible assets which have
On the Closing Date, the Company and Alimera also entered into a commercial supply agreement (CSA), pursuant to which, during the term of the PRA, the Company agreed to manufacture and exclusively supply to Alimera agreed-upon quantities of YUTIQ necessary for Alimera to commercialize YUTIQ in the United States at certain cost plus amounts, subject to adjustments set forth in the CSA (the Supply Transaction and together with the License and the Asset Transfer, the Transaction). The initial term of the CSA is
11
In addition, the Company entered into a transition services agreement (TSA) under which the Company agreed to provide agreed upon transition services to Alimera, on a cost-plus pricing arrangement for up to six months following the closing of the Transaction. As part of the TSA, the Company agreed to fulfill Alimera sales orders for YUTIQ in the United States, to the extent requested by Alimera, during the period up to six months following the Closing Date, to the Company’s third-party customers on behalf of Alimera, including by invoicing for YUTIQ and receiving payments for such invoiced YUTIQ for fulfilling Alimera sales orders of YUTIQ and remit such payments to Alimera (See Note 6) (the Sales Services). The Sales Services were completed as of September 30, 2023.
The Company classified the cash proceeds of the $
During the three and nine months ended September 30, 2023, the Company recognized $
SWK Royalty Purchase Agreement
Pursuant to a royalty purchase agreement (RPA) with SWK Funding LLC (SWK), the Company sold its right to receive royalty payments on future sales of products subject to a licensing and development agreement, as amended, with Alimera (the Amended Alimera Agreement) for an upfront cash payment of $
Ocumension Therapeutics
Pursuant to license agreements and a Memorandum of Understanding signed with the Company, Ocumension has:
The Chief Executive Officer of Ocumension is a member of the Company's board of directors.
12
During the three and nine months ended September 30, 2023, the Company recognized $
Exclusive License Agreement with Betta Pharmaceuticals, Co., Ltd.
On May 2, 2022, the Company entered into an exclusive license agreement (the Betta License Agreement) with Betta Pharmaceuticals Co., Ltd. (Betta), an affiliate of Equinox Sciences, LLC (Equinox) (see Note 11). Under the Betta License Agreement, the Company granted to Betta an exclusive, sublicensable, royalty-bearing license under certain of the Company’s intellectual property to develop, use (but not make or have made), sell, offer for sale and import the Company’s product candidate, EYP-1901, an investigational sustained delivery intravitreal anti-VEGF treatment that combines an erodible formulation of the Company’s proprietary sustained-release technology with the compound vorolanib (the Licensed Product), in the field of ophthalmology (the Betta Field) in the greater area of China, including China, the Hong Kong Special Administrative Region, the Macau Special Administrative Region, and Taiwan (the Betta Territory). The Company retained rights under the Company’s intellectual property to, among other things, conduct clinical trials on the Licensed Product in the Betta Field in the Betta Territory.
In consideration for the rights granted by the Company, Betta agreed to pay the Company tiered, mid-to-high single-digit royalties based upon annual net sales of Licensed Products in the Betta Territory. The royalties are payable on a Licensed Product-by-Licensed Product and region-by-region basis commencing on the first commercial sale of a Licensed Product in a region and continuing until the later of (i) the date that is twelve (12) years after first commercial sale of such Licensed Product in such region, and (ii) the first day of the month following the month in which a generic product corresponding to such Licensed Product is launched in the relevant region. The royalty rate is subject to reduction under certain circumstances, including when there is no valid claim of a licensed patent that covers a Licensed Product in a particular region.
Betta is responsible for all costs relating to development, registration, manufacturing, marketing, advertising, promotional, launch and sales activities in connection with the Licensed Products in the Betta Field in the Betta Territory. Betta is required to use commercially reasonable efforts to develop, seek regulatory approval for, and commercialize at least one Licensed Product in the Betta Field in the Betta Territory. The Betta License Agreement also requires Betta to achieve certain diligence milestones relating to regulatory filings, patient dosing and regulatory approval by certain specified deadlines set forth in the Betta License Agreement, subject to certain exceptions and extensions as set forth in the Betta License Agreement. Betta’s development activities will be conducted pursuant to a development plan subject to periodic updates. In the event that the Company conducts a global registrational clinical trial for a Licensed Product in the Betta Field, Betta will have the right to participate in such clinical trial by including clinical trial sites in the Betta Territory in accordance with the terms of the Betta License Agreement. The Company has also agreed to provide certain technology transfer and other support services to Betta subject to certain conditions and limitations set forth in the Betta License Agreement.
The Company recorded
Prepaid expenses and other current assets consisted of the following (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
Prepaid expenses |
|
$ |
|
|
$ |
|
||
Prepaid clinical trials |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total prepaid expenses and other current assets |
|
$ |
|
|
$ |
|
||
13
Inventory consisted of the following (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
Raw materials |
|
$ |
|
|
$ |
|
||
Work in process |
|
|
|
|
|
|
||
Finished goods |
|
|
|
|
|
|
||
Total inventory |
|
$ |
|
|
$ |
|
||
Accrued expenses consisted of the following (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Personnel costs |
|
$ |
|
|
$ |
|
||
Clinical trial costs |
|
|
|
|
|
|
||
Due to Alimera (see Note 3) |
|
|
|
|
|
|
||
Professional fees |
|
|
|
|
|
|
||
Sales chargebacks, rebates and other revenue reserves |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total accrued expenses |
|
$ |
|
|
$ |
|
||
On
The lease for the New Premises commenced during the third quarter of 2022. The Company occupied the New Premises when the landlord substantially completed its construction for the space, after which the Company’s obligation to pay base rent began. The Company recognized an increase of $
The Company previously provided a cash-collateralized $
On January 23, 2023, the Company entered into a lease agreement for its new standalone manufacturing facility, including office and lab space located at 600 Commerce Drive, Northbridge, Massachusetts. The new leased premises will consist of approximately
14
which the Company estimates will total approximately $
Since the Company elected to account for each lease component and its associated non-lease components as a single combined component, all contract consideration was allocated to the respective lease components. The expected lease terms include non-cancellable lease periods. Renewal option periods have not been included in the determination of the lease terms as they are not deemed reasonably certain of exercise. Variable lease payments, such as common area maintenance, real estate taxes and property insurance are not included in the determination of the lease’s ROU asset or lease liability.
As of September 30, 2023, the weighted average remaining term of the Company’s operating leases was
Supplemental balance sheet information related to operating leases as of September 30, 2023 and December 31, 2022 are as follows (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
|
$ |
|
|
$ |
|
|||
Operating lease liabilities – noncurrent portion |
|
|
|
|
|
|
||
Total operating lease liabilities |
|
$ |
|
|
$ |
|
||
Operating lease expense recognized related to ROU assets was $
The Company’s total future minimum lease payments under non-cancellable leases at September 30, 2023 were as follows (in thousands):
|
|
Operating Leases |
|
|
Remainder of 2023 |
|
$ |
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
Thereafter |
|
|
|
|
Total lease payments |
|
$ |
|
|
Less imputed interest |
|
|
( |
) |
Total |
|
$ |
|
|
15
SVB Loan Agreement
The Company's loans (SVB Loan) under an agreement (the SVB Loan Agreement) with First Citizens BancShares (First Citizens), as successor to Silicon Valley Bank (SVB), as lender (the Lender), were originally due and payable on
On
ATM Facility
In August 2020, the Company entered into an at-the-market facility (the ATM Facility) with Cantor Fitzgerald & Co (Cantor). Pursuant to the ATM Facility, the Company may, at its option, offer and sell shares of its common stock from time to time, through or to Cantor, acting as sales agent. The Company will pay Cantor a commission of
During the three and nine months ended September 30, 2023, the Company sold
During the three and nine months ended September 30, 2022, the Company did
Warrants to Purchase Common Shares
Pursuant to a credit agreement, the Company issued a warrant to SWK to purchase (i)
Equity Incentive Plan
Prior to June 20, 2023, the Company had authorized the issuance of
At the Company’s Annual Meeting of Stockholders held on
16
Starting March 2022, the Company granted non-statutory stock options to new employees as inducement awards to enter into employment with the Company. The grants were approved by the Compensation Committee of the Board of Directors and awarded in accordance with Nasdaq Listing Rule 5635(c)(4). Although not awarded under the 2023 Plan or the 2016 Plan, the grants are subject to and governed by the terms and conditions of the plan in effect at the time of the grant.
Stock Options
The following table provides a reconciliation of stock option activity under the Company’s equity incentive plan and for inducement awards for the nine months ended September 30, 2023:
|
|
Number of |
|
|
Weighted |
|
|
Weighted |
|
|
Aggregate |
|
||||
|
|
|
|
|
|
|
|
(in years) |
|
|
(in thousands) |
|
||||
Outstanding at January 1, 2023 |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Expired |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Outstanding at September 30, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Exercisable at September 30, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
The Company's stock options generally vest over
In determining the grant date fair value of option awards during the nine months ended September 30, 2023, the Company applied the Black-Scholes option pricing model based on the following key assumptions:
Option life (in years) |
|
|
Stock volatility |
|
|
Risk-free interest rate |
|
|
Expected dividends |
|
The following table summarizes information about employee, non-executive director and external consultant stock options for the nine months ended September 30, 2023 (in thousands except per share amount):
|
|
Nine Months |
|
|
|
|
Ended |
|
|
|
|
September 30, 2023 |
|
|
Weighted average grant date fair value per share |
|
$ |
|
|
Total cash received from exercise of stock options |
|
|
|
|
Total intrinsic value of stock options exercised |
|
|
|
|
Time-Vested Restricted Stock Units
Time-vested restricted stock units (RSUs) issued to date under the 2016 Plan and the 2023 Plan generally vest on a ratable annual basis over
17
The following table provides a reconciliation of RSU activity under the 2016 Plan and the 2023 Plan for the nine months ended September 30, 2023:
|
|
Number of Restricted Stock Units |
|
|
Weighted Average Grant Date Fair Value |
|
||
Nonvested at January 1, 2023 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Nonvested at September 30, 2023 |
|
|
|
|
$ |
|
||
At September 30, 2023, the weighted average remaining vesting term of the RSUs was
Employee Stock Purchase Plan
The Company’s Employee Stock Purchase Plan (the ESPP) allows qualified participants to purchase the Company’s common stock twice a year at
The Company estimated the fair value of the option component of the ESPP shares at the date of grant using a Black-Scholes valuation model. During the three and nine months ended September 30, 2023 and 2022, the compensation expense from ESPP shares was immaterial.
Stock-Based Compensation Expense
The Company’s condensed consolidated statements of comprehensive loss included total compensation expense from stock-based payment awards as follows (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Compensation expense included in: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Sales and marketing |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
At September 30, 2023, there was approximately $
Equinox Science, LLC
In February 2020, the Company entered into an Exclusive License Agreement (the Equinox License Agreement) with Equinox, pursuant to which Equinox granted the Company an 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 age-related macular degeneration, diabetic retinopathy and retinal vein occlusion using the Company’s proprietary localized delivery technologies (the Original Field), in each case, throughout the world except China, Hong Kong, Taiwan and Macau (the Company Territory).
18
In consideration for the rights granted by Equinox, the Company (i) made a one time, non-refundable, non-creditable upfront cash payment of $
The Company also agreed to pay Equinox tiered royalties based upon annual net sales of licensed products in the Company Territory. The royalties are payable with respect to a licensed product in a particular country in the Company Territory on a country-by-country and licensed product-by-licensed product basis until the later of (i) twelve years after the first commercial sale of such licensed product in such country and (ii) the first day of the month following the month in which a generic product corresponding to such licensed product is launched in such country. The royalty rates range from the high-single digits to low-double digits depending on the level of annual net sales. The royalty rates are subject to reduction during certain periods when there is no valid patent claim that covers a licensed product in a particular country.
On May 2, 2022, concurrent with the Company entering into the Betta License Agreement (see Note 3), the Company entered into Amendment #1 to the Equinox License Agreement, pursuant to which the Original Field was expanded to cover the prevention or treatment of ophthalmology indications using the Company’s proprietary localized delivery technologies, and certain conforming changes were made to the Equinox License Agreement in connection therewith.
Fiscal Year 2023 Restructuring Plan
On
The Company expects the implementation of the Restructuring Plan will be substantially completed by the end of fiscal year 2023. The charges that the Company expects to incur in connection with the Restructuring Plan are subject to a number of assumptions, and actual results may differ materially. The Company may also incur additional costs not currently contemplated due to events that may occur as a result of, or that are associated with, the Restructuring Plan.
The following table summarizes the restructuring activities related to the Plan for the nine months ended September 30, 2023 (in thousands):
|
|
Employee Severance and Benefits |
|
|
Total |
|
||
Beginning balance at January 1, 2023 |
|
|
|
|
|
|
||
Restructuring charges |
|
|
|
|
|
|
||
Cash payments |
|
|
( |
) |
|
|
( |
) |
Ending balance at September 30, 2023 |
|
$ |
|
|
$ |
|
||
19
The following tables summarize the Company’s assets by significant categories carried at fair value measured on a recurring basis by valuation hierarchy (in thousands):
|
|
September 30, 2023 |
|
|||||||||||||||||||||
|
|
Carrying |
|
|
Gross |
|
|
Gross |
|
|
Fair Value |
|
|
Cash |
|
|
Marketable Securities |
|
||||||
Level 1: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Money market funds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Subtotal |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Level 2: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
U.S. Treasury securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Subtotal |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
|
|
December 31, 2022 |
|
|||||||||||||||||||||
|
|
Carrying |
|
|
Gross |
|
|
Gross |
|
|
Fair Value |
|
|
Cash |
|
|
Marketable Securities |
|
||||||
Level 1: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Money market funds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Subtotal |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Level 2: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commercial paper |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
U.S. Treasury securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||||
Subtotal |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Total |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||
At September 30, 2023 a total of $
At December 31, 2022, a total of $
Marketable securities consist of investments with an original or remaining maturity of greater than three months but less than one year at the date of purchase. The Company had investments of $
The Company’s cash equivalents and marketable securities are classified within Level 1 or Level 2 on the basis of valuations using quoted market prices or alternative pricing sources and models utilizing market observable inputs, respectively. The marketable securities have been valued on the basis of valuations provided by third-party pricing services, as derived from such services’ pricing models. Inputs to the models may include, but are not limited to, reported trades, executable bid and ask prices, broker/dealer quotations, prices or yields of securities with similar characteristics, benchmark curves or information pertaining to the issuer, as well as industry and economic events. The pricing services may use a matrix approach, which considers information regarding securities with similar characteristics to determine the valuation for a security, and have been classified as Level 2.
The carrying amounts of accounts receivable, accounts payable and accrued expenses approximate fair value because of their short-term maturity.
20
Legal Proceedings
The Company is subject to various routine legal proceedings and claims incidental to its business, which management believes will not have a material effect on the Company’s financial position, results of operations or cash flows.
U.S. Department of Justice Subpoena
In August 2022, the Company received a subpoena from the U.S. Attorney’s Office for the District of Massachusetts seeking production of documents related to sales, marketing and promotional practices, including as pertain to DEXYCU® (DOJ Investigation). The Company is cooperating fully with the government in connection with this matter. At this time, the Company is unable to predict the duration, scope or outcome of this matter or whether it could have a material impact on the Company's financial condition, results of operation or cash flow.
Basic net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. For periods in which the Company reports net income, diluted net income per share is determined by adding to the basic weighted average number of common shares outstanding the total number of dilutive common equivalent shares using the treasury stock method, unless the effect is anti-dilutive. Potentially dilutive shares were not included in the calculation of diluted net loss per share for each of the three and nine months ended September 30, 2023 and 2022 as their inclusion would be anti-dilutive.
The Company issued
Potential common stock equivalents excluded from the calculation of diluted earnings per share because the effect would have been anti-dilutive were as follows:
|
|
September 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Stock options |
|
|
|
|
|
|
||
ESPP |
|
|
|
|
|
|
||
Warrants |
|
|
|
|
|
|
||
Restricted stock units |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
The former Chief Executive Officer and current Executive Vice Chair of the Board of Directors of the Company (the Board), joined the Board of Directors of Altasciences Company Inc. (Altasciences) in April 2021. In May 2021, Altasciences acquired Calvert Laboratories, Inc. (Calvert Labs), an entity with which the Company conducts business. The Company recorded $
21
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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:
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:
22
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 December 31, 2022 describe major risks to our business, and you should read and interpret any forward-looking statements together with these risks. A variety of factors, including these risks, could cause our actual results and other expectations to differ materially from the anticipated results or other expectations expressed, anticipated or implied in our forward-looking statements. Should known or unknown risks materialize, or should underlying assumptions prove inaccurate, actual results could differ materially from past results and those anticipated, estimated or projected in the forward-looking statements. You should bear this in mind as you consider any forward-looking statements.
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.
DEXYCU®, DURASERT® and DURASERT E™ are our trademarks. Retisert® and Vitrasert® are Bausch & Lomb’s trademarks. ILUVIEN® is Alimera’s trademark. YUTIQ® was assigned to Alimera in certain jurisdictions pursuant to the product rights agreement (PRA) and licensed to Ocumension in other jurisdictions pursuant to the license agreement with Ocumension in November 2018. Verisome® is a trademark owned by Ramscor, Inc. and exclusively licensed to us. The reports we file or furnish with the SEC, including this Quarterly Report on Form 10-Q, also contain trademarks, trade names and service marks of other companies, which are the property of their respective owners.
Our Business
Overview
We are a company committed to developing and commercializing innovative therapeutics to help improve the lives of patients with serious eye disorders. Our pipeline leverages our proprietary bioerodible DURASERT E™ technology for sustained intraocular drug delivery including EYP-1901, an investigational treatment delivering vorolanib currently in Phase 2 clinical trials for wet AMD, the leading cause of vision loss among people 50 years of age and older in the United States, and NPDR. We are also advancing EYP-2301 into pre-clinical development delivering razuprotafib in Durasert E for the potential treatment of diabetic eye diseases.
Recent Developments
23
R&D Highlights
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 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 December 31, 2022, we set forth our critical accounting policies and estimates, which included revenue recognition, reserves for variable consideration associated with our commercial revenue and recognition of expense in outsourced clinical trial agreements. See Note 2 of the notes to our unaudited condensed consolidated financial statements contained in this quarterly report on Form 10-Q for a description of our accounting policies and estimates for reserves for variable consideration related to product sales.
24
Results of Operations
Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022:
|
|
Three Months Ended |
|
|
|
|
||||||||||
|
|
September 30, |
|
|
Change |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
Amounts |
|
|
% |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Product sales, net |
|
$ |
816 |
|
|
$ |
9,720 |
|
|
$ |
(8,904 |
) |
|
|
-92 |
% |
License and collaboration agreements |
|
|
14,137 |
|
|
|
52 |
|
|
|
14,085 |
|
|
|
27087 |
% |
Royalty income |
|
|
249 |
|
|
|
240 |
|
|
|
9 |
|
|
|
4 |
% |
Total revenues |
|
|
15,202 |
|
|
|
10,012 |
|
|
|
5,190 |
|
|
|
52 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of sales, excluding amortization of acquired intangible assets |
|
|
1,202 |
|
|
|
1,405 |
|
|
|
(203 |
) |
|
|
-14 |
% |
Research and development |
|
|
17,363 |
|
|
|
11,162 |
|
|
|
6,201 |
|
|
|
56 |
% |
Sales and marketing |
|
|
479 |
|
|
|
6,016 |
|
|
|
(5,537 |
) |
|
|
-92 |
% |
General and administrative |
|
|
10,556 |
|
|
|
9,212 |
|
|
|
1,344 |
|
|
|
15 |
% |
Amortization of acquired intangible assets |
|
|
— |
|
|
|
615 |
|
|
|
(615 |
) |
|
|
-100 |
% |
Total operating expenses |
|
|
29,600 |
|
|
|
28,410 |
|
|
|
1,190 |
|
|
|
4 |
% |
Loss from operations |
|
|
(14,398 |
) |
|
|
(18,398 |
) |
|
|
4,000 |
|
|
|
-22 |
% |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest and other income, net |
|
|
1,786 |
|
|
|
640 |
|
|
|
1,146 |
|
|
|
179 |
% |
Interest expense |
|
|
— |
|
|
|
(662 |
) |
|
|
662 |
|
|
|
-100 |
% |
Loss on extinguishment of debt |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0 |
% |
Total other income (expense), net |
|
|
1,786 |
|
|
|
(22 |
) |
|
|
1,808 |
|
|
|
-8218 |
% |
Net loss |
|
$ |
(12,612 |
) |
|
$ |
(18,420 |
) |
|
$ |
5,808 |
|
|
|
-32 |
% |
Net loss per share - basic and diluted |
|
$ |
(0.33 |
) |
|
$ |
(0.49 |
) |
|
$ |
0.16 |
|
|
|
-33 |
% |
Weighted average shares outstanding - basic and diluted |
|
|
38,341 |
|
|
|
37,338 |
|
|
|
1,003 |
|
|
|
3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
(12,612 |
) |
|
$ |
(18,420 |
) |
|
$ |
5,808 |
|
|
|
-32 |
% |
Product Sales, Net
Product sales, net represents the gross sales of YUTIQ and DEXYCU less provisions for product sales allowances. Product sales, net decreased by $8.9 million, or 92%, to $816,000 for the three months ended September 30, 2023 compared to $9.7 million for the three months ended September 30, 2022. This decrease was driven by the agreement that granted license and rights to YUTIQ to Alimera in May 2023 and de minimis DEXYCU sales in 2023 due to the loss of pass-through reimbursement as of January 1, 2023. For the three months ended September 30, 2023, product sales, net were primarily from the sales of product supply under the existing commercial supply agreement (CSA) with Alimera.
Customer demand has a direct impact on product orders from our specialty distributors that we record as net product sales. Net product revenue represents product purchased by our distributors whereas customer demand represents purchases of product by physician practices and ambulatory surgical centers (ASCs) from our specialty distributors.
License and Collaboration Agreement
License and collaboration agreement revenues were $14.1 million for the three months ended September 30, 2023 compared to $52,000 for the three months ended September 30, 2022. This increase was related to the recognition of a portion of deferred revenue related to the agreement to license YUTIQ product rights to Alimera, as well as invoices to Alimera as part of the transition services agreement with Alimera.
25
Royalty Income
Royalty income increased by $9,000, or 4%, to $249,000 for the three months ended September 30, 2023 compared to $240,000 for the three months ended September 30, 2022. The increase was attributable to higher non-cash Alimera royalties payable to SWK Funding LLC (SWK).
Cost of Sales, Excluding Amortization of Acquired Intangible Assets
Cost of sales, excluding amortization of acquired intangible assets, decreased by $203,000, or 14%, to $1.2 million for the three months ended September 30, 2023 from $1.4 million for the three months ended September 30, 2022. This decrease was primarily due to lower sales volume to Alimera compared to commercial sales in the year prior, partially offset by additional distribution costs passed back to Alimera as part of the transition services agreement. Revenue related to these costs passed back to Alimera are included in license and collaboration revenues.
Research and Development
Research and development expenses increased by $6.2 million, or 56%, to $17.4 million for the three months ended September 30, 2023 from $11.2 million for the same period in the prior year. This increase was attributable primarily to (i) $4.4 million in increased clinical trial costs, related to the ongoing Phase 2 DAVIO2 and PAVIA clinical trials for EYP-1901, and (ii) $1.8 million in higher personnel expense to support clinical trial activity and product development.
Sales and Marketing
Sales and marketing expenses decreased by $5.5 million, or 92%, to $479,000 for the three months ended September 30, 2023 from $6.0 million for the same period in the prior year. This decrease was primarily driven by (i) reduced YUTIQ promotion of $4.7 million due to the agreement that granted license and rights to YUTIQ to Alimera in Q2 2023, (ii) the discontinuation of promotional activities for DEXYCU in 2023 of $771,000, and (iii) $65,000 of sales related expenses.
General and Administrative
General and administrative expenses increased by $1.3 million, or 15%, to $10.6 million for the three months ended September 30, 2023 from $9.2 million for the same period in the prior year. This increase was primarily attributable to (i) $1.5 million in personnel and related expenses, including an increase of $677,000 in stock-based compensation, driven by an increase in personnel, a (ii) $562,000 increase in professional fees, partially offset by a (i) $769,000 decrease in other administrative expenses.
Amortization of Acquired Intangible Assets
Amortization of acquired intangible assets totaled $615,000 for the three months ended September 30, 2022. This amount was attributable to the DEXYCU product intangible asset that resulted from the Icon acquisition (Icon Acquisition). There was no amortization for the three months ended September 30, 2023 due to the impairment of the DEXYCU intangible asset in Q4 2022.
Interest (Expense) Income
Interest income from investments in marketable securities and institutional money market funds increased by $1.1 million, or 179%, to $1.8 million for the three months ended September 30, 2023 compared to $640,000 in the prior year quarter. This increase was due primarily to an increase in cash invested in marketable securities and higher interest rates in the current calendar quarter.
There was no interest expense in the three months ended September 30, 2023 due to the repayment of the SVB loan on May 17, 2023. Interest expense for the three months ended September 30, 2022 was $662,000.
26
Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022:
|
|
|
|
|
|
|
||||||||||
|
|
Nine Months Ended September 30, |
|
|
Change |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
Amounts |
|
|
% |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Product sales, net |
|
$ |
13,483 |
|
|
$ |
30,048 |
|
|
$ |
(16,565 |
) |
|
|
-55 |
% |
License and collaboration agreements |
|
|
17,768 |
|
|
|
160 |
|
|
|
17,608 |
|
|
|
11005 |
% |
Royalty income |
|
|
739 |
|
|
|
663 |
|
|
|
76 |
|
|
|
11 |
% |
Total revenues |
|
|
31,990 |
|
|
|
30,871 |
|
|
|
1,119 |
|
|
|
4 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of sales, excluding amortization of acquired intangible assets |
|
|
3,634 |
|
|
|
4,916 |
|
|
|
(1,282 |
) |
|
|
-26 |
% |
Research and development |
|
|
46,711 |
|
|
|
34,099 |
|
|
|
12,612 |
|
|
|
37 |
% |
Sales and marketing |
|
|
11,504 |
|
|
|
19,592 |
|
|
|
(8,088 |
) |
|
|
-41 |
% |
General and administrative |
|
|
28,854 |
|
|
|
26,321 |
|
|
|
2,533 |
|
|
|
10 |
% |
Amortization of acquired intangible assets |
|
|
— |
|
|
|
1,845 |
|
|
|
(1,845 |
) |
|
|
-100 |
% |
Total operating expenses |
|
|
90,703 |
|
|
|
86,773 |
|
|
|
3,930 |
|
|
|
5 |
% |
Loss from operations |
|
|
(58,713 |
) |
|
|
(55,902 |
) |
|
|
(2,811 |
) |
|
|
5 |
% |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest and other income, net |
|
|
4,611 |
|
|
|
1,067 |
|
|
|
3,544 |
|
|
|
332 |
% |
Interest expense |
|
|
(1,247 |
) |
|
|
(2,408 |
) |
|
|
1,161 |
|
|
|
-48 |
% |
Gain (loss) on extinguishment of debt |
|
|
(1,347 |
) |
|
|
(1,559 |
) |
|
|
212 |
|
|
|
-14 |
% |
Total other income (expense), net |
|
|
2,017 |
|
|
|
(2,900 |
) |
|
|
4,917 |
|
|
|
-170 |
% |
Net loss |
|
$ |
(56,696 |
) |
|
$ |
(58,802 |
) |
|
$ |
2,106 |
|
|
|
-4 |
% |
Net loss per share - basic and diluted |
|
$ |
(1.50 |
) |
|
$ |
(1.58 |
) |
|
$ |
0.08 |
|
|
|
-5 |
% |
Weighted average shares outstanding - basic and diluted |
|
|
37,804 |
|
|
|
37,305 |
|
|
|
499 |
|
|
|
1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
(56,696 |
) |
|
$ |
(58,802 |
) |
|
$ |
2,106 |
|
|
|
-4 |
% |
Product Sales, Net
Product sales, net represents the gross sales of YUTIQ and DEXYCU less provisions for product sales allowances. Product sales, net decreased by $16.6 million, or 55%, to $13.5 million for the nine months ended September 30, 2023 compared to $30.0 million for the nine months ended September 30, 2022. This decrease was driven by the agreement that granted license and rights to YUTIQ to Alimera in May 2023 and de minimis DEXYCU sales in 2023 due to the loss of pass-through reimbursement as of January 1, 2023. For the nine months ended September 30, 2023, the revenue from net product sales totaled $1.2 million was recognized from sales of product supply to Alimera under the CSA.
Customer demand has a direct impact on product orders from our specialty distributors that we record as net product sales. Net product revenue represents product purchased by our distributors whereas customer demand represents purchases of product by physician practices and ASCs from our specialty distributors.
License and Collaboration Agreement
License and collaboration agreement revenues increased by $17.6 million, to $17.8 million for the nine months ended September 30, 2023 compared to $160,000 for the nine months ended September 30, 2022. This increase was related to deferred revenue recognized as the performance obligations under the Alimera supply agreement have been fulfilled.
27
Royalty Income
Royalty income increased by $76,000, or 11%, to $739,000 for the nine months ended September 30, 2023 compared to $663,000 for the nine months ended September 30, 2022. The increase was attributable to higher non-cash Alimera royalties payable to SWK.
Cost of Sales, Excluding Amortization of Acquired Intangible Assets
Cost of sales, excluding amortization of acquired intangible assets, decreased by $1.3 million, or 26%, to $3.6 million for the nine months ended September 30, 2023 from $4.9 million for the nine months ended September 30, 2022. This decrease was primarily attributable to reduced revenue driven by a significant reduction in DEXYCU sales due to the loss of pass-through reimbursement as of January 1, 2023, as well as the transfer of YUTIQ to Alimera on May 17, 2023, and associated costs for costs of goods, royalties, and distribution fees, partially offset by a $533,000 inventory reserve for DEXYCU finished goods and components. These decreases were partially offset by additional distribution costs passed back to Alimera as part of the transition services agreement. Revenue related to these costs passed back to Alimera are included in license and collaboration revenues.
Research and Development
Research and development expenses increased by $12.6 million, or 37%, to $46.7 million for the nine months ended September 30, 2023 from $34.1 million for the same period in the prior year. This increase was attributable primarily to (i) $11.4 million in increased clinical trial costs, related to the ongoing Phase 2 DAVIO2 and PAVIA clinical trials, (ii) $1.8 million of increased personnel related costs for investment in new employees across the research and clinical organizations, and (iii) $1.5 million increased facility costs related to additional personnel. These increases were partially offset by a decrease of $2.1 million in clinical manufacturing cost.
Sales and Marketing
Sales and marketing expenses decreased by $8.1 million, or 41%, to $11.5 million for the nine months ended September 30, 2023 from $19.6 million for the same period in the prior year. This decrease was primarily driven by (i) reduced YUTIQ activities of $4.5 million due to the agreement that granted license and rights to YUTIQ to Alimera in Q2 2023, (ii) discontinuation of promotional activities for DEXYCU in 2023 of $3.3 million, and (iii) $323,000 of other marketing activities. These reductions were offset by a one-time charge in Q2 2023 of $940,000 for restructuring resulting from the sale of the YUTIQ franchise.
General and Administrative
General and administrative expenses increased by $2.5 million, or 10%, to $28.9 million for the nine months ended September 30, 2023 from $26.3 million for the same period in the prior year. This increase was attributable primarily to a (i) $2.5 million increase in professional fees, and a (ii) $1.2 million increase in personnel and related expenses, including a $88,000 decrease of stock-based compensation. These increases were partially offset by a $1.2 million decrease in other administrative costs.
Amortization of Acquired Intangible Assets
Amortization of acquired intangible assets totaled $1.8 million for the nine months ended September 30, 2022. This amount was attributable to the DEXYCU product intangible asset that resulted from the Icon Acquisition. There was no amortization for the nine months ended September 30, 2023 due to the write-off of the DEXYCU intangible asset in Q4 2022.
Interest (Expense) Income
Interest income from investments in marketable securities and institutional money market funds increased $3.5 million, to $4.6 million for the nine months ended September 30, 2023 compared to $1.1 million for the same period in the prior year. This increase was due primarily to an increase in cash invested in marketable securities and increased interest rates in the current calendar year.
Interest expense decreased $1.2 million, or 48%, to $1.2 million for the nine months ended September 30, 2023, compared to $2.4 million for the same period in the prior year. We incurred lower interest expense primarily due to the repayment of the SVB loan on May 17, 2023.
Liquidity and Capital Resources
We have had a history of operating losses and an absence of significant recurring cash inflows from revenue, and at September 30, 2023 we had a total accumulated deficit of $728.0 million. Our operations have been financed primarily from sales of our equity
28
securities, issuance of debt and a combination of license fees, milestone payments, royalty income and other fees received from collaboration partners.
Financing Activities
Our loans (SVB Loan) under an agreement (the SVB Loan Agreement) with First Citizens BancShares (First Citizens), as successor to Silicon Valley Bank (SVB), as lender (the Lender), were originally due and payable on January 1, 2027. The loans bore interest that was payable monthly in arrears at a per annum rate equal to (i) with respect to the term facility, the greater of (x) the Wall Street Journal prime rate plus 2.25% and (y) 5.50% and (ii) with respect to the revolving facility, the Wall Street Journal Prime Rate. Commencing on February 1, 2024, we were scheduled to begin repaying the principal of the term facility in 36 consecutive equal monthly installments. At maturity or if earlier prepaid, we were also required to pay an exit fee equal to 2.00% of the aggregate principal amount of the term facility.
On May 17, 2023, we utilized a portion of the Upfront Payment from the Alimera PRA (see Note 3) and repaid in full all outstanding amounts under the SVB Loan Agreement. The SVB Loan Agreement was terminated, and all security interests and other liens granted to or held by the Lender were terminated and released. This payment included (i) the remaining $30.0 million principal portion of the SVB Loan, (ii) a $600,000, representing a prepayment fee equal to 2.00% of the aggregate principal amount of the term facility, (iii) a $600,000 exit fee, (iv) accrued and unpaid interest of $139,000 through the pay-off date, and (v) $155,000, representing in the aggregate a statement fee, termination fee and unused credit line fee under the revolving facility. As a result of the early repayment of the SVB Loan, we recorded a loss on extinguishment of debt of $1.4 million for the three months ended June 30, 2023 related to the write-off of the remaining balance of unamortized debt discount. For the three and nine months ended September 30, 2023, there are no remaining obligations related to the SVB Loan.
During the three and nine months ended September 30, 2023, we sold 902,769 shares of our common stock (Common Stock) utilizing our at-the-market facility (ATM) at a weighted average price of $11.05 per share for net proceeds of approximately $9.6 million.
Future Funding Requirements
At September 30, 2023, we had cash, cash equivalents, and investments in marketable securities of $136.0 million. We expect that our cash and cash equivalents and investments in marketable securities will fund our operating plan into 2025 under current expectations regarding the timing and outcomes of our Phase 2 clinical trials for EYP-1901 and our plans for EYP-2301. Due to the difficulty and uncertainty associated with the design and implementation of preclinical studies and clinical trials, we will continue to assess our cash and cash equivalents and future funding requirements. However, there is no assurance that additional funding will be achieved and that we will succeed in our future operations. We expect to continue to incur substantial additional operating losses for at least the next several years as we continue to develop our product candidates and seek marketing approval and, subject to obtaining such approval, the eventual commercialization of our product candidates. If we obtain marketing approval for any of our product candidates, we will incur significant sales, marketing and manufacturing expenses. We also expect to continue to incur significant costs to comply with corporate governance, internal controls and similar requirements associated with operating as a public reporting company.
Actual cash requirements could differ from management’s projections due to many factors including additional investments in research and development programs, clinical trial expenses for EYP-1901and EYP-2301, competing technological and market developments and the costs of any strategic acquisitions and/or development of complementary business opportunities.
The amount of additional capital we will require will be influenced by many factors, including, but not limited to:
29
We expect to seek additional funding to sustain our future operations and while we have successfully raised capital in the past, the ability to raise capital in future periods is not assured. 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. 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, 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):
|
|
Nine Months Ended |
|
|
|
|
||||||
|
|
September 30, |
|
|
|
|
||||||
|
|
2023 |
|
|
2022 |
|
|
Change |
|
|||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|||
Net loss |
|
$ |
(56,696 |
) |
|
$ |
(58,802 |
) |
|
$ |
2,106 |
|
Changes in operating assets and liabilities |
|
|
71,155 |
|
|
|
(7,883 |
) |
|
|
79,038 |
|
Other adjustments to reconcile net loss to cash flows from |
|
|
10,525 |
|
|
|
14,268 |
|
|
|
(3,743 |
) |
Net cash (used in) provided by operating activities |
|
$ |
24,984 |
|
|
$ |
(52,417 |
) |
|
$ |
77,401 |
|
Net cash (used in) provided by investing activities |
|
$ |
43,833 |
|
|
$ |
(50,182 |
) |
|
$ |
94,015 |
|
Net cash used in financing activities |
|
$ |
(31,415 |
) |
|
$ |
(632 |
) |
|
$ |
(30,783 |
) |
Operating cash inflows for the nine months ended September 30, 2023 totaled $25.0 million, primarily due to our net loss of $56.7 million reduced by $10.5 million of non-cash expenses, which included $8.5 million of stock-based compensation, $1.3 million of loss on extinguishment of debt, $693,000 for the provision of excess and obsolete inventory, and $18,000 of other non-cash charges. This was further offset by changes in working capital of $71.2 million, including $57.4 million of deferred revenue related to the agreement to license YUTIQ product rights to Alimera, and $13.7 million of other working capital changes.
Operating cash outflows for the nine months ended September 30, 2022 totaled $52.4 million, primarily due to our net loss of $58.8 million, reduced by $14.3 million of non-cash expenses, which included $10.8 million of stock-based compensation, $1.6 million of loss on extinguishment of debt, and $1.8 million of amortization of the DEXYCU finite-lived intangible asset. This was partially offset by increases of $7.9 million in changes in operating assets and liabilities, primarily in accounts receivable and other current assets.
For the nine months ended September 30, 2023, $46.4 million of net cash was provided by the sales of marketable securities, and $2.6 million was used for the purchase of property and equipment.
For the nine months ended September 30, 2022, $48.6 million of net cash was used to purchase marketable securities, as well as $1.6 million for the purchase of property and equipment.
Net cash used in financing activities for the nine months ended September 30, 2023 totaled $31.4 million and consisted of the following:
Net cash used in financing activities for the nine months ended September 30, 2022 totaled $632,000 and consisted of the following:
30
31
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and are not required to provide the information under this item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2023. The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure, particularly during the period in which this Quarterly Report on Form 10-Q was being prepared.
Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving its desired objectives, and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of September 30, 2023, our principal executive officer and principal financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended September 30, 2023 covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
32
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
We are subject to various routine legal proceedings and claims incidental to our business, which management believes will not have a material effect on our financial position, results of operations or cash flows.
We previously disclosed that in August 2022, we received a subpoena from the U.S. Attorney’s Office for the District of Massachusetts seeking production of documents related to sales, marketing and promotional practices, including as pertain to DEXYCU®. We are cooperating fully with the government in connection with this matter. At this time, we are unable to predict the duration, scope or outcome of this matter or whether it could have a material impact on our financial condition, results of operation or cash flow.
Item 1A. Risk Factors
This section augments and updates certain risk factors disclosed in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2022 (the Annual Report). The following risk factors should be read together with the other risk factors disclosed in the Annual Report. In addition to the other information in this Quarterly Report on Form 10-Q, all of the risk factors should be carefully considered in evaluating us and our common stock. Any of these risks, many of which are beyond our control, could materially and adversely affect our financial condition, results of operations or cash flows, or cause our actual results to differ materially from those projected in any forward-looking statements. We may also face other risks and uncertainties that are not presently known, are not currently believed to be material, or are not identified below because they are common to all businesses. Past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods. For more information, see “Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q.
The Company’s ability to access credit on favorable terms, if necessary, for the funding of the Company’s operations and capital projects may be limited due to changes in credit markets.
The credit markets and the financial services industry have been experiencing disruption characterized by the bankruptcy, failure, collapse or sale of various financial institutions, increased volatility in securities prices, diminished liquidity and credit availability and intervention from the U.S. and other governments. Continued concerns about the systemic impact of potential long-term or widespread downturn, energy costs, geopolitical issues, the availability and cost of credit, the global commercial and residential real estate markets and related mortgage markets and reduced consumer confidence have contributed to increased market volatility. The cost and availability of credit has been and may continue to be adversely affected by these conditions.
The Company’s receipt of maximum consideration in conjunction with its sale of YUTIQ® to Alimera Sciences, Inc. for $82.5 million cash plus royalties is dependent on Alimera’s effective sale and distribution of YUTIQ® outside of China, Hong Kong, Taiwan, Macau and Southeast Asia.
Pursuant to our PRA with Alimera, the Company agreed to grant to Alimera an exclusive and sublicensable right and license under the Company’s and its affiliates’ interest in certain of the Company’s and its affiliates’ intellectual property to develop, manufacture, sell, commercialize and otherwise exploit certain products, including YUTIQ® (fluocinolone acetonide intravitreal implant) 0.18 mg, for the treatment and prevention of uveitis in the entire world except Europe, the Middle East and Africa. Pursuant to the agreement, Alimera paid the Company an Upfront Payment of $75 million. Alimera is required to make four quarterly Guaranteed Payments (as defined in the PRA) to the Company totaling $7.5 million during 2024. Alimera is also required to pay royalties to the Company from 2025 to 2028 at a percentage of low-to-mid double digits of Alimera’s annual U.S. net sales of certain products (including YUTIQ) in excess of certain thresholds, beginning at $70 million in 2025, increasing annually thereafter (Royalties). Upon Alimera’s payment of the Upfront Payment and the Guaranteed Payments, the licenses and rights granted to Alimera will automatically become perpetual and irrevocable. We cannot predict what success, if any, Alimera may have with respect to sales of YUTIQ and, therefore, it is uncertain as to when we may receive the royalties and if we will receive any royalties at all. In the event Alimera fails to execute the effective sale and distribution of YUTIQ in the specified regions the royalties contemplated under the PRA could be adversely impacted in total, or in part, and our business could be harmed.
33
We may not be able to realize the anticipated benefits from the sale of our YUTIQ franchise to Alimera.
We may not be able to realize the anticipated benefits of the sale of YUTIQ to Alimera, including utilizing the proceeds from the sale primarily on the development of EYP-1901, positioning our business for long-term growth and maximizing stockholder value.
Our ability to realize the anticipated benefits of the sale and the success of the remaining company is subject to various risks and uncertainties. There is a possibility of adverse clinical and other developments in respect of EYP-1901, and we may not be able to successfully develop, obtain marketing approval for and commercialize EYP-1901. We may not utilize the proceeds from the sale to successfully develop EYP-1901 or any product candidate we develop in the future. We may experience difficulties or delays with developing EYP-1901. Further, we could spend the proceeds from the sale of our YUTIQ business in ways that do not improve our remaining business, financial condition or results of operations. Our failure to apply these funds effectively could have an adverse effect on our business, financial condition and results of operations.
In addition, our current and prospective employees may feel uncertain about their roles with us following the completion of the sale to Alimera, including as a result of the workforce reduction we announced in May 2023, which may have an adverse effect on our ability to attract or retain key management personnel or other key employees. If key employees depart, our business, financial condition and results of operations may be adversely impacted.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.
34
Item 6. Exhibits
|
|
|
|
Incorporated by Reference to SEC Filing |
||||
Exhibit No. |
|
Exhibit Description |
|
Form |
|
SEC Filing Date |
|
Exhibit No. |
|
|
|
|
|
|
|
|
|
2.1# |
|
|
8-K |
|
05/18/23 |
|
2.1 |
|
|
|
|
|
|
|
|
|
|
3.1 |
|
|
8-K12G3 |
|
06/19/08 |
|
3.1 |
|
|
|
|
|
|
|
|
|
|
3.2 |
|
Certificate of Amendment of the Certificate of Incorporation of pSivida Corp. |
|
10-K |
|
09/13/17 |
|
3.2 |
|
|
|
|
|
|
|
|
|
3.3 |
|
|
8-K |
|
04/02/18 |
|
3.1 |
|
|
|
|
|
|
|
|
|
|
3.4 |
|
|
8-K |
|
06/27/18 |
|
3.1 |
|
|
|
|
|
|
|
|
|
|
3.5 |
|
|
10-K |
|
09/18/18 |
|
3.5 |
|
|
|
|
|
|
|
|
|
|
3.6 |
|
Amendment No. 1 to the By-Laws of EyePoint Pharmaceuticals, Inc. |
|
8-K |
|
11/06/18 |
|
3.1 |
|
|
|
|
|
|
|
|
|
3.7 |
|
|
8-K |
|
06/23/20 |
|
3.1 |
|
|
|
|
|
|
|
|
|
|
3.8 |
|
|
8-K |
|
12/08/20 |
|
3.1 |
|
|
|
|
|
|
|
|
|
|
4.1 |
|
|
8-K12G3 |
|
06/19/08 |
|
4.1 |
|
|
|
|
|
|
|
|
|
|
4.2 |
|
Warrant to Purchase Common Stock of pSivida Corp., issued March 28, 2018, to SWK Funding, LLC |
|
8-K |
|
03/29/18 |
|
4.1 |
|
|
|
|
|
|
|
|
|
4.3 |
|
|
8-K |
|
03/29/18 |
|
10.3 |
|
|
|
|
|
|
|
|
|
|
4.4 |
|
|
8-K |
|
06/27/18 |
|
10.1 |
|
|
|
|
|
|
|
|
|
|
4.5 |
|
|
8-K |
|
11/19/21 |
|
4.1 |
|
|
|
|
|
|
|
|
|
|
10.1 |
|
|
8-K |
|
7/10/2023 |
|
10.1 |
|
|
|
|
|
|
|
|
|
|
10.2 |
|
|
8-K |
|
7/10/2023 |
|
10.2 |
|
|
|
|
|
|
|
|
|
|
31.1* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.2* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.1** |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
32.2** |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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101.INS |
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 |
Cover Page Interactive Data File (embedded within the inline XBRL document and included in Exhibit 101) |
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# Portions of this exhibit have been omitted in compliance with Item 601(b)(10) of Regulation S-K. The Company agrees to furnish a supplemental copy of the exhibit or any omitted schedule or similar attachment to the Securities and Exchange Commission upon request.
* Filed herewith
** Furnished herewith
36
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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EyePoint Pharmaceuticals, Inc. |
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Date: November 3, 2023 |
By: |
/s/ Jay S. Duker |
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Name: |
Jay S. Duker, M.D. |
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Title: |
President and Chief Executive Officer (Principal Executive Officer) |
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Date: November 3, 2023 |
By: |
/s/ George O. Elston |
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Name: |
George O. Elston |
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Title: |
Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
37
Exhibit 31.1
Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
CERTIFICATIONS
I, Jay S. Duker, certify that:
Date: November 3, 2023
/s/ Jay S. Duker |
Name: Jay S. Duker, M.D. |
Title: President and Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
CERTIFICATIONS
I, George O. Elston, certify that:
Date: November 3, 2023
/s/ George O. Elston |
Name: George O. Elston |
Title: Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
Exhibit 32.1
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
In connection with the Quarterly Report of EyePoint Pharmaceuticals, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jay S. Duker, President and Chief Executive Officer of the Company, certify that to the best of my knowledge:
Date: November 3, 2023
/s/ Jay S. Duker |
Name: Jay S. Duker, M.D. |
Title: President and Chief Executive Officer (Principal Executive Officer) |
Exhibit 32.2
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
In connection with the Quarterly Report of EyePoint Pharmaceuticals, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, George O. Elston, Executive Vice President and Chief Financial Officer of the Company, certify that to the best of my knowledge:
Date: November 3, 2023
/s/ George O. Elston |
Name: George O. Elston |
Title: Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |