Earnings Call Transcript
EyePoint, Inc. (EYPT)
Earnings Call Transcript - EYPT Q2 2020
Operator, Operator
Good morning. My name is Josh, and I’ll be your conference operator today. At this time, I would like to welcome everyone to the EyePoint Pharmaceuticals Second Quarter 2020 Financial Results Conference Call. There will be a question-and-answer session to follow at the completion of the prepared remarks. Please be advised that this call is being recorded at the company’s request. I would now like to turn the call over to George Elston, Chief Financial Officer of EyePoint Pharmaceuticals.
George Elston, CFO
Thank you. And thank you all for joining us on today’s conference call to discuss EyePoint Pharmaceuticals second quarter 2020 financial results and recent corporate developments. With me today is Nancy Lurker, President and Chief Executive Officer; Dr. Jay Duker, Chief Strategic Scientific Officer; and Scott Jones, Chief Commercial Officer. Nancy will begin with a review of recent corporate updates, including our new commercial alliance with ImprimisRx that we announced yesterday. Dr. Duker will then discuss pipeline developments for EYP-1901 and YUTIQ50, our six-month treatment for posterior segment uveitis. Then Scott will comment on recent progress made on our commercial activities and I will close with commentary on the second quarter 2020 financial results. We will then open up the call for your questions where we will be joined by Dr. Dario Paggiarino, Senior Vice President and Chief Medical Officer. Earlier this morning, we issued a press release detailing our financial results, as well as commercial and operational developments. A copy of the release can be found in the Investor Relations tab on the corporate website. Before we begin our formal comments, I’ll remind you that various remarks we will make today constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. These include statements about our future expectations, clinical developments and regulatory matters and timelines, the potential success of our products and product candidates, financial projections and our plans and prospects. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of our most recent annual report on Form 10-K, which is on file with the SEC and in other filings that we may make with the SEC in the future. Any forward-looking statements represent our views as of today only. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligations to do so even if our views change. Therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to today. I will now turn the call over to Nancy Lurker, President and Chief Executive Officer of EyePoint Pharmaceuticals.
Nancy Lurker, CEO
Thank you, George. Good morning, everyone, and thank you for joining us. Our team has done a great job managing the business and balance sheet during the COVID-19 pandemic. We continue to put the safety of patients, physicians and our employees as a top priority, while we produce our innovative drugs, DEXYCU and YUTIQ, move our R&D pipeline forward and continue to call on physicians. I’m very proud of what we’ve been able to accomplish and the high level of commitment, professionalism and productivity that our EyePoint colleagues have delivered despite the pandemic. While COVID-19 regulations and changes to normal operations have altered our approach in engaging with the ocular disease community, we were encouraged to see the resumption of operations at ambulatory surgical centers and uveitis specialist offices during the quarter and in those U.S. regions where stay-at-home orders have been eased. As a result, we reported total net revenues of $4.1 million, of which net product revenue was $3.7 million, $2.9 million for YUTIQ and $800,000 for DEXYCU for the second quarter. Supported by improving customer demand for both products beginning in late May, as cataract surgeries resumed and physician office visits increased. These results are encouraging, and we continue to actively monitor COVID-19 cases across the U.S. to ensure we are complying with health and safety guidelines while continuing to call on our valued customers and providing much-needed access to our ocular products. While we cannot predict how patients, physicians and ASCs will respond to COVID-19 case trends in the coming months, we were pleased to see an increasing return of customer demand month-over-month for both products during Q2 compared to the significant declines in demand we experienced in late Q1 through early Q2. Yesterday, we announced an exciting new commercial alliance with ImprimisRx for the joint promotion of DEXYCU in the United States. ImprimisRx is a well-established company in the cataract surgery market. This alliance will substantially expand the reach of this important and innovative product using the ImprimisRx commercial organization, in addition to our efforts at EyePoint. We believe ImprimisRx is the ideal partner to expand the commercialization of DEXYCU, as we are able to leverage their existing infrastructure and relationships with ophthalmologists, hospitals and ASCs. ImprimisRx will initially focus on converting their established customers that are currently using Tri-Moxi, a combination injectable product that contains triamcinolone acetonide, a well-known steroid plus moxifloxacin, another known antibiotic to DEXYCU. These surgery centers and physicians already have experience using injectable steroids post-cataract surgery as an alternative to some of the eyedrops they would otherwise prescribe for their patients. We believe these customers may be especially well positioned to move toward an FDA-approved injectable treatment like DEXYCU with its ease of use, solid efficacy and an established safety profile. In addition, the FDA recently published a Notice of Intent which could impact the availability of several bulk compounded products such as ketorolac, a non-steroidal anti-inflammatory often used for pain and edema post-cataract surgery, and moxifloxacin, an antibiotic often used to prevent infections post-cataract surgery, offers a list of approved drugs to be used in bulk compounding. As a result, at some point in the future, should these rules be finalized and take effect, we expect that drugs such as Tri-Moxi and others like it, including compounded eyedrops that contain these drugs, may no longer be widely available for sale or distribution by large compounding pharmacies. We believe that this partnership with ImprimisRx will be mutually beneficial for both companies. And Scott Jones, our Chief Commercial Officer, will provide further insight on this important alliance and our commercial performance later in the call. Finally, we’ve remained focused on managing our balance sheet. With the structural changes we announced in April and significant cost reductions we have implemented, as well as our current expectations for our commercial business and possible transactions or anticipated financing activities, we believe our current cash runway can fund our operating plan into 2021. In regard to our pipeline development, our preclinical good laboratory practice, or GLP, toxicology study for EYP-1901 remains on schedule. EYP-1901 combines our bioerodible Durasert technology with vorolanib, an anti-vascular endothelial growth factor, or anti-VEGF molecule, and it’s been advanced as a potential six-month sustained treatment for wet age-related macular degeneration or wet AMD. With potential expansion into other retinal diseases that are very attractive market opportunities, with approximately $18 billion in retinal disease global sales and over $6 billion in the U.S. alone. We are excited about the potential for EYP-1901 as there is a significant need for extended treatments for patients to avoid frequent, often monthly eye injections for the rest of their lives. Further providing extended delivery treatments for ocular diseases presents many difficulties, including migration and inflammation, and many drug candidates have failed in the clinic due to problems with their drug delivery technology. Our non-erodible Durasert technology has a proven track record with four FDA-approved products including YUTIQ, delivering thousands of implants to patients’ eyes over the years with an excellent safety profile. We believe that combining our bioerodible Durasert with the anti-VEGF vorolanib, a molecule that has been tested through Phase 2 trials in humans as an oral therapy and has demonstrated efficacy in wet AMD, represents an exciting product candidate for EyePoint. And we were also very pleased to welcome Dr. Jay Duker as our Chief Strategic Scientific Officer to lead the strategic advancement of EYP-1901, YUTIQ50, as well as our other research and development and new pipeline expansion opportunities under evaluation. Dr. Duker is a well-renowned leader in the retinal disease space and ophthalmology drug development entrepreneur and has previously served as a member of our Board of Directors since 2016. We were honored to welcome him to our internal team to provide his expertise on the important growth areas of our pipeline. I will now turn the call over to Dr. Duker with additional commentary on our pipeline products. Jay?
Dr. Jay Duker, Chief Strategic Scientific Officer
Thank you, Nancy, and good morning to all. I joined EyePoint’s Board of Directors back in 2016 because I believed in the broad therapeutic potential of the validated research technology for the delivery of medications to the eye. Nancy and the team have since built an integrated commercial and clinical development organization that is well-positioned for future growth, driven by both our Durasert technology as well as our Verisome technology, which is used in DEXYCU. Durasert is designed to deliver a variety of potential medications in a controlled sustained release fashion to the posterior segment of the eye. Durasert has broad application across a wide variety of retinal disease indications, including wet AMD. Wet AMD is a progressive debilitating disease and despite several FDA-approved medications, it remains a leading cause of blindness. This is primarily due to the relatively short duration of action of these anti-VEGF class of medications, which therefore necessitates a long-term burden on patients, families, providers, and the healthcare system. As an exciting potential alternative, EYP-1901 uses our established Durasert technology, which is the delivery system for four FDA-approved sustained-release systemic products, including our own YUTIQ, and has the potential to provide six months sustained delivery of vorolanib, an anti-VEGF TKI or tyrosine kinase inhibitor molecule in EYP-1901. Vorolanib has established efficacy signals observed in two prior human trials in wet AMD as an orally delivered agent. Data from the Phase 2 trial of oral vorolanib conducted by Tyrogenex for the treatment of wet AMD were recently published in the British Journal of Ophthalmology and demonstrated non-inferiority in visual acuity compared to oral placebo. The three oral vorolanib dose levels studied also demonstrated a decreased intravitreal anti-VEGF injection burden and a longer time to first treatment as compared to placebo. A small portion of patients in each vorolanib dosing group did not require another anti-VEGF injection after initiation of oral therapy. I’ll note that this trial was prematurely stopped due to gastrointestinal and hepatobiliary toxicity signals. However, no significant ocular adverse events were observed during the trial. We believe that placing vorolanib in our bioerodible Durasert technology to locally deliver the drug to the posterior segment via zero-order kinetics can be comparable or even improve results observed for the oral delivery of vorolanib without the systemic toxicities associated with oral anti-VEGF treatments. Durasert has also demonstrated its safety in thousands of patients, and the bioerodible construct has no new excipients from the non-erodible construct. Preclinical studies of EYP-1901 administered into the eye have shown promising anti-VEGF activity with no serious safety issues observed to date. We believe that Durasert regulatory and clinical history is a critically important differentiator for EYP-1901, which may substantially reduce the risk of this development program. We anticipate filing an investigational new drug application or IND with the U.S. Food and Drug Administration later this year, with a Phase 1 clinical trial to follow shortly afterwards. The wet AMD market represents our first disease area and the commercial prospects for EYP-1901 are compelling, as we believe it has potential to be a disruptive and beneficial product option for both patients and physicians. EYP-1901 also has potential indications for the treatment of diabetic retinopathy, diabetic macular edema, and retinal vein obstruction that we anticipate pursuing in the future. In parallel to this exciting development program, I look forward to working with the dedicated team at EyePoint to bring YUTIQ50 into the clinic and assess additional pipeline expansion opportunities through our Durasert and Verisome technologies, along with potential product and technology in-licensing. We look forward to keeping you updated on these items as we progress them forward and into the clinic. I’ll now turn the call over to Scott Jones for the commercial update. Scott?
Scott Jones, Chief Commercial Officer
Thank you, Jay, and welcome aboard. As Nancy mentioned at the beginning of the call, we’re very pleased to announce our new commercial alliance for the joint promotion of DEXYCU. The Imprimis team shares our excitement and strong belief in the potential of DEXYCU, and we’re delighted to have their team help accelerate product growth and adoption. ImprimisRx will market DEXYCU as a top priority product and will focus its attention and resources on converting customers previously purchasing Tri-Moxi. They will begin deploying their experienced sales specialists and inside sales team immediately while the EyePoint team retains responsibility for our sales and marketing teams, pricing, manufacturing, and contracting. This complementary combination positions DEXYCU for accelerated growth, bringing its many benefits to more physicians and patients. Together we hope to transition the cataract markets from Tri-Moxi to DEXYCU and further grow to replace the burdensome steroid eyedrop regimen. ImprimisRx will be driven by our shared success and is entitled to receive a commission on the incremental DEXYCU sales that exceed predefined volumes. We look forward to working with the ImprimisRx team for the advancement of DEXYCU. Now for our own progress during the second quarter, we were pleased to see reopenings and the resumption of operations at ASCs and uveitis specialists in select regions across the country. While most are not yet operating at full capacity, many are back to over half capacity. During the quarter, public health authorities and government agencies including the Center for Medicare and Medicaid Services issued recommendations for the reopening of healthcare systems and the resumption of non-essential elective surgeries, including cataract surgery, in areas with low or stable incidents of COVID-19. While reopening schedules varied by state, our key account managers were able to resume in-person visits in regions subject to more advanced opening phases. We do not know how patients, physicians, and clinics will respond to the resurgence of COVID-19 that is now occurring, though we have not yet seen an appreciable decline in orders. Customer demand for DEXYCU representatives units purchased by ASCs from the company’s distributors was down approximately 40% over Q1 with 2,096 units in Q2. June, however, represented the second highest customer demand volume month of 2020 for DEXYCU, with 1,592 units ordered in that month alone. DEXYCU has been particularly appreciated during the COVID-19 pandemic as it delivers an extended duration therapeutic treatment from a single injection, thus reducing the frequency of in-person physician follow-up visits and limiting contact with the patient’s face and eyes. This compares to steroid eyedrop treatment regimens, which can result in poor compliance, frequent face touching, and ultimately, a need for in-person visits. It is important to note that the majority of patients having cataract surgery are of an older age and are considered to be at higher risk for COVID-19. So a dropless treatment option is becoming more of a priority. Data from our ongoing retrospective study of real-world use of DEXYCU that were presented at ASCRS Virtual Meeting echoed this feedback with the physician survey giving the product high marks and product satisfaction, ease of use, and efficacy compared to topical steroids and patient satisfaction. We will also continue to execute on our goal of securing additional volume-based agreements with ASCs and integrated healthcare networks to expand access for patients. These conversations are now being conducted virtually and in-person, and we hope to continue to drive these conversations forward in the coming months. Turning to YUTIQ for chronic non-infectious uveitis affecting the posterior segment of the eye, while some uveitis and retina specialist offices remain partially opened during the COVID-19 restrictions beginning in March, we did see an increase in overall office reopenings beginning in May. Customer demand for YUTIQ represented as units purchased by physicians from the company’s distributors was down approximately 20% versus Q1 with 428 units in Q2. The reduction was driven by decreased patient office visits due to COVID-19 restrictions. Physicians and patients continue to provide positive feedback on the product, especially during the COVID-19 pandemic, due to its ability to deliver a consistent, sustained micro doses steroid 24 hours a day for up to three years. YUTIQ can potentially reduce the frequency of patient office visits during the course of treatment, a real benefit during the COVID-19 pandemic in addition to providing steady and consistent anti-inflammatory control. Our YUTIQ commercial efforts are consisted of in-person and virtual engagements to continue to educate the greater uveitis community on the advantages of YUTIQ. Our medical affairs team continues to seek opportunities to highlight YUTIQ at medical meetings, which have all turned virtual including ASCRS and Argot. These presentations have focused on supportive results from the first Phase 3 study of YUTIQ and reinforce its long-term anti-inflammatory advocacy. To close, while we’re encouraged by the improving customer demand during the quarter for both products, continued growth will depend on the continued easing of restrictions in place surrounding the COVID-19 pandemic in various regions and the return of patients for these procedures. We’re actively monitoring the situation and continue to comply with all associated public health recommendations to ensure the safety of our patients, employees, physicians, and other healthcare providers. Given the unclear trajectory of the pandemic and governmental response, it’s difficult to project product demand and revenue for the coming periods. We will continue to move our efforts forward virtually and in person when able to bring our products to patients in need. And our exciting new ImprimisRx partnership promoting DEXYCU should help to grow customer awareness and demand for this highly innovative and much-needed cataract surgery product. I’d like to recognize and thank our commercial organization for their dedication and efforts through this daily changing market. I will now turn the call over to George for a review of the second quarter financials. George?
George Elston, CFO
Thank you, Scott. Throughout this pandemic, we have focused on preserving our capital and we will continue to monitor the impact of COVID-19 on our business. I will now turn to the financial results included in the press release that was issued this morning. For the three months ended June 30, 2020, total net revenue was $4.1 million, compared to $7.2 million for the three months ended June 30, 2019. Net product revenue for the three months ended June 30, 2020 was $3.7 million, with $2.9 million for YUTIQ and $800,000 for DEXYCU, compared to net product revenue for the three months ended June 30, 2019, which was $6.7 million generated by YUTIQ. Net product revenue reported in our financials represents products purchased by EyePoint’s distributors, whereas customer demand represents purchases of product by physician practices and ambulatory surgery centers from EyePoint’s distributors. Net revenue from royalties and collaborations for the three months ended June 30, 2020 totaled $416,000, compared to $505,000 in the corresponding quarter in 2019. Operating expenses for the three months ended June 30, 2020, decreased to $15.3 million from $17.4 million in the prior year period, due primarily to decreased sales and marketing costs from our previously announced restructuring, as well as lower R&D costs and overall spending management. Non-operating expense net for the three months ended June 30, 2020 totaled $1.8 million of net interest expense. Net loss for the three months ended June 30, 2020 was $13 million or $0.10 per share, compared to a net loss of $11.5 million or $0.11 per share for the prior year quarter. Cash and cash equivalents at June 30, 2020 totaled $22.8 million, compared to $22.2 million at December 31, 2019. We expect that our cash on hand and projected cash inflows from anticipated YUTIQ and DEXYCU product sales, licensing and research collaboration transactions along with additional anticipated financing activities confirm the company’s operating plan into 2021, given our current assumptions for the extent of the COVID-19 related closures in various regions across the U.S. Our careful management of cash should enable us to achieve some important catalysts, namely completion of the GLP Tox Study for EYP-1901 and its positive filing of the IND with the FDA. We continue to evaluate and pursue non-dilutive sources of capital such as additional ex-U.S. out-licensing opportunities for our commercial products and delivery technologies. I will now turn the call over to the operator for questions.
Operator, Operator
Thank you. Our first question comes from I-Eh Jen with Laidlaw & Co. You may proceed with your questions.
I-Eh Jen, Analyst
Good morning, and thank you for your questions. First, congratulations on the deal with Imprimis. How should we evaluate the P&L in terms of revenue recognition, and what are the costs associated with them selling a product for you?
Nancy Lurker, CEO
Hi. This is Nancy. Thank you for the question. Let me first address the cost and then I’ll have George discuss the P&L. From a cost perspective, our role is to provide them with selling materials, while they will cover all other costs. We will continue to oversee the contracting involved in all marketing aspects. Additionally, we will maintain our own field force, but they will handle all related costs for their field force and any internal expenses they manage. Our responsibility includes providing training and marketing materials, as well as managing distribution tracking. Now, I’ll turn it over to George for the P&L.
George Elston, CFO
Hi, I-Eh Jen. Good morning. Thanks for dialing in. Yeah. I think the way to think about this is going forward. So obviously, we just signed this agreement. So there is no impact in Q2. It’s something we’ll expect to come in later this year. But the way to think about it is, we still own the product, so we will book and record revenue. That’s really unchanged and any costs associated with the Imprimis activities will come in as a commission expense in sales and marketing. So the top line and gross margin will be reflected by that.
I-Eh Jen, Analyst
Okay. Great. That’s very helpful. And my next question is about YUTIQ, given the uncertainties going forward, but as you look at back to the second quarter and geographically could you sort of potentially break down in terms of, most of the sales in the region, which is already opened up more or has less infections versus the region that has some spikes. So, I mean, potentially use that as a way to sort of assess the potential sort of sales or usage in the total United States for the next, I guess, two quarters?
Nancy Lurker, CEO
Yeah. I’m going to have Scott answer that, but let me just make one comment. Look, it’s so difficult to project right now what’s going to happen with the COVID pandemic and we’re not going to be in the business of trying to project what’s going to happen by region with that pandemic. So, obviously, right now we’re not seeing additional elective surgery shutdowns, I think maybe Southern California might have recently, but it’s just too hard to predict and we’re not going to get in the business of trying to predict by region what could happen. So, Scott, you want to comment?
Scott Jones, Chief Commercial Officer
Sure and thanks for the question, I-Eh. I think what we’ve seen, it’s two separate aspects. One is relative to how much of an impact there has been related to COVID outbreaks in certain areas, obviously, in the Sun Belt and to an extent on the West Coast. We’re seeing that now. And that certainly is impacting the willingness of patients to go into practices and how many patients’ practices are able to see. The second aspect is related to the difference between teaching hospitals and private practice. In the uveitis sector, many of our uveitis specialists are in teaching hospitals, and teaching hospitals aren’t completely back to the same kind of patient volume as they were before. Obviously, they’re being much more conservative in terms of the allowance of the patient volume and how they’re managing that. So that is playing a role as well in terms of the number of uveitis patients that are being seen and treated at this point.
I-Eh Jen, Analyst
Okay. Great.
Nancy Lurker, CEO
Yeah. Thanks for your comment.
I-Eh Jen, Analyst
Thank you.
Nancy Lurker, CEO
So let me just add, that being said, we did not see the reduction in sales with YUTIQ, obviously, that we saw with DEXYCU. Because uveitis, and by the way, let me do a slight correction there. The elective surgeries don’t impact YUTIQ like it does DEXYCU. So, but because YUTIQ is treating a disease that is so serious, you just don’t see quite the reduction in treatment procedures that you certainly see in the cataract space.
I-Eh Jen, Analyst
Okay. Great. That’s very helpful. The last question is regarding Imprimis. Could you provide an idea of their representative size, particularly in the ocular space, as well as their current reach in various markets such as ASC and others?
Nancy Lurker, CEO
Yeah. So they have 30 sales representatives that will be deployed to promote DEXYCU in a first position and then they also have inside sales and we’re not going to disclose that exact number. So that is the current field force that they’re going to be deploying. And then, as we said, in our press release, Tri-Moxi is the main product they’re going to begin to work to convert and they have about 250,000 units of Tri-Moxi that they sell annually. Now, again, we do not expect nor are we in at all implying that will all get converted, nor are we projecting the percent that will get converted, but that is the base business that they will be targeting to execute for. The nice thing about it is that these Tri-Moxi physicians are used to injecting a steroid Tri-Moxi is triamcinolone, a steroid plus moxifloxacin and antibiotic, they’re used injecting a steroid drug post-cataract surgery, as opposed to using steroid eyedrops. So these doctors and ASCs are already familiar with injecting these drugs and giving patients that option, which we continue to believe is a very good option for patients to have and especially in this pandemic.
I-Eh Jen, Analyst
Okay. Great. That’s very helpful and congrats on having the deal and I look forward to seeing more updates on your 1901.
Nancy Lurker, CEO
Thank you.
Operator, Operator
Thank you. Our next question comes from Yi Chen with H.C. Wainwright. You may proceed with your question.
Yi Chen, Analyst
Thank you for taking my questions. Good morning. First question is, have you observed any changes in the inventory levels of YUTIQ and DEXYCU at distributors?
Nancy Lurker, CEO
I’m going to ask Scott to answer that question. But generally, we were not given giving distributor inventory levels. That’s not our policy. However, we do are now starting to disclose our customer demand levels. So that should give you a good sense for what’s the underlying demand for these products and then, obviously, our reported GAAP revenues. Scott, do you want to add anything?
Scott Jones, Chief Commercial Officer
Thank you, Nancy. I think what we’re seeing with the distributors is that they’re managing their inventory based on their normal inventory management and our contractual levels. We haven’t seen really a breakthrough that during COVID, obviously, now through the month of June where we’ve started to see an uptick in customer demand and that’s certainly driving additional inventory and inventory management. But typically the distributors are managing their inventory levels in a way similar to how they were before based on a certain number of days of inventory.
Yi Chen, Analyst
Okay. Thank you. Second question is, could you comment on what percentage of normal procedure volume are the ASCs currently operating at and how many more ASCs can Imprimis help DEXYCU reach?
Nancy Lurker, CEO
Scott, I’ll let you answer that.
Scott Jones, Chief Commercial Officer
It's a great question and I can't provide a simple answer. Regarding the cataract market, it varies by region. Some accounts are operating at 80% to 90% of their pre-COVID volume, while others, particularly in the Sun Belt, are still around 50%. Those numbers are improving, but they're not yet back to pre-COVID levels. The situation really depends on the specific account, the policies and procedures they have, and their regional context.
Nancy Lurker, CEO
And then the question about Imprimis and what we expect they could do. So, again, let me reiterate, we know we’ve not penetrated even 50% of the ASC market and particularly, as you know, when we downsized our DEXYCU field force in April, because of the pandemic, the ability of Imprimis to come in and go after their large number of ambulatory surgery accounts, we do believe will be very helpful. And let me just add again, so combined between our field force and theirs, we will have 40 CAMs. We have 10 and they have 30, plus they’re adding in their inside sales force as well. So, we are hopeful that when you add that kind of firepower, that we’ll see some impact on DEXYCU sales.
Yi Chen, Analyst
Got it. Thank you. My last question is related to the gross margin, which improved in the second quarter. Could you please comment on the trend going forward?
Nancy Lurker, CEO
Yeah. That’s George.
George Elston, CFO
The gross margin is clearly influenced by YUTIQ, which performed well in Q2 and has a higher margin. I believe this trend will continue to be more significant for the remainder of the year.
Operator, Operator
Thank you. Our next question comes from Andrew D’Silva with B. Riley FBR. You may proceed with your question.
Andrew D’Silva, Analyst
Good morning. Thank you for taking my questions. I have a couple of quick ones regarding the collaboration with Haro. How should we view your DEXYCU gross margins moving forward, as well as the Icon royalty? Additionally, will there be any impact on operating margins, or are you trying to clarify some aspects of revenue recognition? I understand that currently, you are not recognizing items on a net basis, but if they are taking over sales, will you be recognizing gross sales or net sales?
Nancy Lurker, CEO
George?
George Elston, CFO
Nancy, I can take that. This is George. Good morning. That's a great question. To summarize, EyePoint still controls that product, so we will record all revenues, and it will be shipped through our distributors. That remains the same. Haro is our partner in the field, and as Nancy mentioned, we are collaborating with their specific customers. Therefore, the orders will flow to our distributors, where we will recognize revenue as we have done historically. The margin percentage for the DEXYCU franchise should stay relatively unchanged. We still manage pricing, bundling, and so on. The expense related to Haro’s involvement will be listed under selling and marketing costs, as it will be recorded by us as a commission.
Andrew D’Silva, Analyst
Okay. And can you give us a range of what that could look like so that we can more accurately model that?
George Elston, CFO
We haven't shared that information yet, and I'm uncertain if it will be included in the agreement. Typically, in co-promotion agreements in the industry, sharing percentages range from 20% to 40% based on the specific molecule, and we fall within that range. However, we haven't provided specific guidance on this yet. We may offer an update in the future, but for now, it remains undisclosed.
Andrew D’Silva, Analyst
Okay. Fair enough. And can you discuss just the overlap that you have with ambulatory surgery centers or physicians? I think, Imprimis touched somewhere around 9,000 physicians fairly recently. How close was your legacy team to that number and then from a regional standpoint, what was the overlap or crossover like between the two organizations?
Nancy Lurker, CEO
Yeah. Andy, that information we’re not at liberty to disclose. And but let me say this, again, you can imagine that they’ve got broader reach than we do. They’ve been on the market a lot longer. They’ve got a more established field force and they’ve got a much larger base of business than we do. So suffice it to say that, we know that their reach and the number of accounts they have is larger than what we have and the percent that we overlap, we’re not going to disclose that.
Andrew D’Silva, Analyst
Okay. And can you give me just an update on your thoughts on pass-through status, obviously, a lot of disruption taking place due to pandemic. Would it be fair to assume there should be an extension? And I know what the whole thing would take place a maybe a couple of years back, they got that moved to five years. Is there a still talks with you getting the two-year extension on top of it?
Nancy Lurker, CEO
I’ll let Scott respond to that question, but I also want to mention that Scott has been spearheading an initiative on our behalf and is truly taking a leadership role in the ophthalmology industry regarding the pass-through extension. Scott, do you have anything to add?
Scott Jones, Chief Commercial Officer
Sure. Thanks for the question, Andy. There are currently three separate projects underway. The first involves extending the tolling period for the public health emergency, which essentially means pausing the timeline for pass-through during this emergency. There is legislation we anticipate will be included in the next stimulus package. Secondly, we are still pursuing a long-term extension to move from three years to five years. That effort continues as well. Lastly, we, along with others in the ophthalmology community, are seeking a new payment mechanism for these drugs. While these are longer-term projects, the immediate priority is the extension related to the public health emergency, and we expect to see progress on this front soon, potentially in the stimulus package.
Andrew D’Silva, Analyst
Okay. Great. And just last question for me just as it relates to 1901 and then I get this question from investors, is the largest benefit with the candidate in your opinion relative to the anti-VEGF MAB or antibody fragments that are on the market just adherence or is there actually an efficacy signal or benefit you’re expecting as well outside of just benefits that would come through adherence?
Nancy Lurker, CEO
For that question, I’m going to have Dr. Duker answer, our new Chief Scientific Strategy Officer. So, Jay.
Dr. Jay Duker, Chief Strategic Scientific Officer
It is possible that TKIs may have a better efficacy compared to the fabs, but we don't expect that to be our advantage. There are two key areas we can focus on. First is the order kinetics. By administering an anti-VEGF medication consistently over an extended timeframe at a stable level, particularly when blocking a receptor rather than the ligand, we anticipate at least equal efficacy, possibly more. However, measuring efficacy in VEGF-related diseases can be challenging. Ultimately, visual acuity is the primary concern for both patients and doctors. Reviewing the anti-VEGF studies shows that visual acuity data is often quite comparable across different medication classes for wet AMD. We are also concerned with side effects and how long a single injection will last, which is where we believe we stand out. We think we can provide an effective amount of the drug for six months with a single injection. While we do not expect improved visual acuity outcomes, we believe we can perform at least as well, and we feel our duration of action will exceed what is currently available in the market.
Andrew D’Silva, Analyst
Interesting. Yeah. It makes me kind of think about the new day clinical trial that your partner Alimera is doing with ILUVIEN right now relative to EYLEA, but there will be another conversation. I’ll take that offline. Good luck going forward?
Dr. Jay Duker, Chief Strategic Scientific Officer
Thank you.
Nancy Lurker, CEO
Thank you, Andy.
Operator, Operator
Thank you. Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.