EyePoint, Inc 10-Q for FY2024 Q3
EyePoint, Inc. (EYPT)
About this 10-Q
EyePoint, Inc filed this 10-Q on November 7, 2024, covering the quarter ended September 30, 2024 (FY2024 Q3).
Headline figures
Quarter ended September 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $10.52M
- down 30.8% from $15.2M a year earlier
- Net loss
- $29.36M
- compared with a net loss of $12.61M a year earlier
- Diluted EPS
- -$0.54
- compared with -$0.33 a year earlier
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) |
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(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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Item 1. |
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Condensed Consolidated Balance Sheets – September 30, 2024 and December 31, 2023 |
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4 |
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Condensed Consolidated Statements of Cash Flows – Nine months ended September 30, 2024 and 2023 |
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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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Item 3. |
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30 |
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Item 4. |
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30 |
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Item 1. |
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31 |
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Item 1A. |
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31 |
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Item 2. |
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33 |
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Item 3. |
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33 |
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Item 4. |
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33 |
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Item 5. |
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33 |
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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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2024 |
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2023 |
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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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Other assets |
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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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Other current liabilities |
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Total current liabilities |
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Deferred revenue – noncurrent |
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Operating lease liabilities – noncurrent |
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Other noncurrent 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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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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2024 |
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2023 |
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2024 |
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2023 |
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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 |
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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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Total operating expenses |
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Loss from operations |
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Other (expense) income: |
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Interest and other income, net |
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Interest expense |
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Loss on extinguishment of debt |
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Total other income, net |
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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: |
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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 common shares outstanding: |
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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 gain (loss): |
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Unrealized gain (loss) on available-for-sale |
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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, 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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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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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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Balance at July 1, 2024 |
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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, 2024 |
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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, 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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Balance at January 1, 2024 |
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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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Cashless exercise of warrants |
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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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Vesting of stock units |
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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, 2024 |
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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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|||||
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September 30, |
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|||||
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2024 |
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2023 |
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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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Depreciation and amortization |
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Amortization of debt discount and premium and discount on |
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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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Other 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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( |
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Right-of-use assets and operating lease liabilities |
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Deferred revenue |
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( |
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Other noncurrent liabilities |
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Net cash (used in) provided by operating activities |
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( |
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|
Cash flows from investing activities: |
|
|
|
|
|
|
||
Purchases of marketable securities |
|
|
( |
) |
|
|
( |
) |
Sales and maturities of marketable securities |
|
|
|
|
|
|
||
Purchases of property and equipment |
|
|
( |
) |
|
|
( |
) |
Net cash (used in) provided by investing activities |
|
|
( |
) |
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
||
Proceeds from issuance of stock |
|
|
|
|
|
|
||
Payment of equity issue costs |
|
|
( |
) |
|
|
( |
) |
Payment of long-term debt |
|
|
|
|
|
( |
) |
|
Payment of extinguishment of debt costs |
|
|
|
|
|
( |
) |
|
Borrowings under revolving facility |
|
|
|
|
|
|
||
Repayment under revolving facility |
|
|
|
|
|
( |
) |
|
Net settlement of stock units to satisfy statutory tax withholding |
|
|
( |
) |
|
|
( |
) |
Proceeds from exercise of stock options |
|
|
|
|
|
|
||
Principal payments on finance lease obligations |
|
|
( |
) |
|
|
( |
) |
Net cash provided by (used in) financing activities |
|
|
|
|
|
( |
) |
|
Net (decrease) increase 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: |
|
|
|
|
|
|
||
Lease liability arising from obtaining right-of-use assets |
|
$ |
|
|
$ |
|
||
Property and equipment additions in accounts payable and accrued expenses |
|
$ |
|
|
$ |
|
||
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, 2024 and for the three and nine months ended September 30, 2024 and 2023 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, 2023. 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, 2023, 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, 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, 2024 are not necessarily indicative of the results that may be expected for the entire 2024 fiscal year or any future period.
The Company is committed to developing and commercializing innovative therapeutics to help improve the lives of patients with serious retinal diseases. The Company’s pipeline leverages its proprietary bioerodible Durasert E™ technology (Durasert E™) for sustained intraocular drug delivery. The Company’s lead product candidate, DURAVYU™, f/k/a EYP-1901, is an investigational sustained delivery treatment for anti-vascular endothelial growth factor (anti-VEGF) mediated retinal diseases combining vorolanib, a selective and patent-protected tyrosine kinase inhibitor with Durasert E™. DURAVYU™ is currently in Phase 3 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 a Phase 2 clinical trial for diabetic macular edema (DME). The Company is also advancing EYP-2301, a promising TIE-2 agonist, razuprotafib, formulated in Durasert E™ to potentially improve outcomes in serious retinal diseases.
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 and potential acquisitions of additional products, product candidates or technologies.
Liquidity
The Company had cash, cash equivalents and investments in marketable securities of $
The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2023, and notes thereto, which are included in the Company’s Annual Report on Form 10-K that was filed with the Securities and Exchange Commission, or the SEC, on March 8, 2024, or the 2023 Form 10-K. Since the date of those financial statements, there have been no material changes to the Company's significant accounting policies.
7
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 — Effective January 2023, commercial sales of DEXYCU® were no longer supported by the Company, remaining available only through specialty distributors. Effective May 2023, YUTIQ® has been and continues to be sold under commercial supply agreements with Alimera Sciences, Inc. (Alimera) and Ocumension Therapeutics (Ocumension). On September 16, 2024, ANI Pharmaceuticals, Inc. (ANI) announced the completion of the acquisition of Alimera. The acquisition does not impact the terms of the commercial supply agreements (see Note 3).
Prior to the above dates, the Company sold YUTIQ® and DEXYCU® 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 into arrangements with healthcare providers, ASCs, and payors that provided for government mandated and/or privately negotiated rebates, chargebacks, and discounts with respect to their 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 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 these estimates, which would affect 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.
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 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.
8
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 recorded 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.
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, 2024.
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.
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.
9
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 — Cost of sales 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 and nine months ended September 30, 2024 and 2023, DEXYCU® product revenue-based royalty expense as a component of cost of sales was immaterial.
Recently Adopted and Recently Issued Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07—Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU was issued to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This ASU applies to all public entities that are required to report segment information in accordance with Topic 280, Segment Reporting. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted and the standard should be applied retrospectively. ASU 2023-07 will be effective for the Company for the annual period of its fiscal year ending December 31, 2024. The Company does not anticipate the adoption of this ASU will have a material impact on its consolidated financial statement disclosures.
In December 2023, the FASB issued ASU 2023-09—Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU was issued to address investor requests for more transparency about income tax information through improvements to income tax disclosure primarily related to the rate reconciliation and income taxes paid information, and to improve the effectiveness of income tax disclosures. This ASU is effective for public entities for annual periods beginning after December 15, 2024. Early adoption is permitted. ASU 2023-09 will be effective for the Company in the first quarter of its fiscal year ending December 31, 2025. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statement disclosures.
Product Revenue Reserves and Allowances
From January 1, 2023 through May 17, 2023 (the date the Company entered into the product rights agreement (PRA) with ANI (formerly Alimera), pursuant to which the Company granted an exclusive license and rights to its YUTIQ® (fluocinolone acetonide intravitreal implant) 0.18 mg (YUTIQ®) product to ANI, the Company’s product revenues were primarily from sales of YUTIQ® in the U.S.
For the three and nine months ended September 30, 2024, the Company’s product revenues were primarily from the Company’s existing commercial supply agreements with ANI and Ocumension. For the three and nine months ended September 30, 2024, the Company’s product revenues were made up of $
10
The following table summarizes activity in each of the product revenue allowance and reserve categories for the nine months ended September 30, 2024 and 2023 (in thousands):
|
|
Chargebacks, |
|
|
Government |
|
|
|
|
|
|
|
||||
|
|
and Fees |
|
|
Rebates |
|
|
Returns |
|
|
Total |
|
||||
Beginning balance at January 1, 2024 |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|||
Provision related to sales in the current year |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Adjustments related to prior period sales |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Deductions applied and payments made |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Ending Balance at September 30, 2024 |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
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, 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
Eyebiotech Limited
On May 17, 2024, the Company entered into a license agreement (the Eyebio License Agreement) with Eyebiotech Limited (Eyebio). Under this agreement, the Company granted Eyebio a non-exclusive, sublicensable, assignable license to certain patent rights to make, have made, use, offer to sell, sell, import, and export licensed products for therapeutic ophthalmological uses worldwide.
In consideration for the rights granted, Eyebio made a one-time upfront payment of $
The Company classified the cash proceeds of the $
During the nine months ended September 30, 2024, the Company recorded $
On July 12, 2024, Merck & Co., Inc. announced the completion of the acquisition of Eyebio. Eyebio is now a wholly-owned subsidiary of Merck & Co., Inc. The acquisition does not materially impact the terms of the Eyebio License Agreement.
ANI Product Rights Agreement and Commercial Supply Agreement
On
Additionally, pursuant to the PRA, the Company transferred and assigned to ANI certain assets (the Transferred Assets) and certain contracts with third parties related to YUTIQ®, including the new drug application for YUTIQ® (collectively, the Asset
11
Transfer). Pursuant to the PRA, ANI paid the Company a $
On the Closing Date, the Company and ANI 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 ANI agreed-upon quantities of YUTIQ® necessary for ANI to commercialize YUTIQ® in the United States at certain cost plus amounts, subject to adjustments and potential extensions and terminations set forth in the CSA (the Supply Transaction and together with the License and the Asset Transfer, the Transaction).
The Company classified the cash proceeds of the $
Revenue from sales of product supply to ANI under the CSA was $
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 ANI (the Amended ANI Agreement) for an upfront cash payment of $
Ocumension Therapeutics
Pursuant to license agreements and Memorandum of Understanding signed with the Company, Ocumension has:
12
During the nine months ended September 30, 2024 and 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 10). 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, DURAVYU™, an investigational sustained delivery treatment for anti-VEGF-mediated retinal diseases combining vorolanib, a selective and patent-protected tyrosine kinase inhibitor (TKI) with Durasert E™ (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.
Revenue from license and collaboration revenue or royalty income for the three and nine months ended September 30, 2024 and 2023 related to this agreement was immaterial.
13
Prepaid expenses and other current assets consisted of the following (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
Prepaid expenses |
|
$ |
|
|
$ |
|
||
Prepaid clinical |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total prepaid expenses and other current assets |
|
$ |
|
|
$ |
|
||
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, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Personnel costs |
|
$ |
|
|
$ |
|
||
Clinical trial costs |
|
|
|
|
|
|
||
Professional fees |
|
|
|
|
|
|
||
Sales chargebacks, rebates and other revenue reserves |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total accrued expenses |
|
$ |
|
|
$ |
|
||
On January 23, 2023, the Company entered into a lease agreement (Northbridge Lease) for its new standalone commercial manufacturing facility, including office and lab space located at 600 Commerce Drive, Northbridge, Massachusetts. The new
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.
14
As of September 30, 2024 the weighted average remaining term of the Company’s operating leases was
Supplemental balance sheet information related to operating leases as of September 30, 2024 and December 31, 2023 are as follows (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
|
$ |
|
|
$ |
|
|||
Operating lease liabilities – noncurrent portion |
|
|
|
|
|
|
||
Total operating lease liabilities |
|
$ |
|
|
$ |
|
||
The elements of lease expense were as follows (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Lease expense included in: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Variable lease costs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total lease expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Cash paid for amounts included in the measurement of operating lease liabilities was $
The Company’s total future minimum lease payments under non-cancellable leases at September 30, 2024 were as follows (in thousands):
|
|
Operating Leases |
|
|
Remainder of 2024 |
|
$ |
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
Thereafter |
|
|
|
|
Total lease payments |
|
$ |
|
|
Less imputed interest |
|
|
( |
) |
Total |
|
$ |
|
|
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, 2024, the Company sold
15
Warrants to Purchase Common Shares
Pursuant to a credit agreement, the Company issued a warrant to SWK to purchase (i)
In January 2024, SWK exercised their warrants in full via cashless exercise resulting in the net share issuance of
The Company issued
As of September 30, 2024,
Equity Incentive Plan
Prior to June 20, 2024, the Company had authorized the issuance of
The 2023 Long-Term Incentive Plan (the “2023 Plan”), approved by the Company’s stockholders on
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 any equity incentive plans, the grants are subject to and governed by the terms and conditions of the applicable 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, 2024:
|
|
Number of |
|
|
Weighted |
|
|
Weighted |
|
|
Aggregate |
|
||||
|
|
|
|
|
|
|
|
(in years) |
|
|
(in thousands) |
|
||||
Outstanding at January 1, 2024 |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Expired |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Outstanding at September 30, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Exercisable at September 30, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
The Company's stock options generally vest over
16
In determining the grant date fair value of option awards during the nine months ended September 30, 2024, 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, 2024 (in thousands except per share amount):
|
|
Nine Months |
|
|
|
|
Ended |
|
|
|
|
September 30, 2024 |
|
|
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
The following table provides a reconciliation of RSU activity under the 2016 Plan and the 2023 Plan for the nine months ended September 30, 2024:
|
|
Number of Restricted Stock Units |
|
|
Weighted Average Grant Date Fair Value |
|
||
Nonvested at January 1, 2024 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Nonvested at September 30, 2024 |
|
|
|
|
$ |
|
||
At September 30, 2024, 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, 2024, the compensation expense from ESPP shares was approximately $
17
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 |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Compensation expense included in: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Sales and marketing |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
During the three and nine months ended September 30, 2024, the Company modified certain stock options and restricted stock awards in connection with the resignation of board members and terminations of executives resulting in a reduction of expense of $
At September 30, 2024, 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).
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.
For the three and nine months ended September 30, 2024, the Company recorded $
18
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, 2024 |
|
|||||||||||||||||||||
|
|
Carrying |
|
|
Gross |
|
|
Gross |
|
|
Fair Value |
|
|
Cash |
|
|
Marketable Securities |
|
||||||
Level 1: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Money market funds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Subtotal |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Level 2: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commercial paper |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
U.S. Treasury securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
U.S. Agency securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Subtotal |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
|
|
December 31, 2023 |
|
|||||||||||||||||||||
|
|
Carrying |
|
|
Gross |
|
|
Gross |
|
|
Fair Value |
|
|
Cash |
|
|
Marketable Securities |
|
||||||
Level 1: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Money market funds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Subtotal |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Level 2: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commercial paper |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
U.S. Treasury securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
U.S. Agency securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||||
Subtotal |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Total |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||
At September 30, 2024 and December 31, 2023, a total 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.
19
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 operations, 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, 2024 and 2023 as their inclusion would be anti-dilutive.
Potential common stock equivalents excluded from the calculation of diluted earnings per share because the effect would have been anti-dilutive were as follows:
|
|
As of September 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Stock options |
|
|
|
|
|
|
||
ESPP |
|
|
|
|
|
|
||
Warrants |
|
|
|
|
|
|
||
Restricted stock units |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
On May 17, 2024, the Company executed the Eyebio License Agreement with Eyebio. The Chief Executive Officer (David Guyer) and Chief Scientific Officer (Anthony Adamis) of Eyebio were members of the Company’s board of directors when the agreement was executed. During the nine months ended September 30, 2024, the Company recorded $
On December 18, 2023, the Company entered into a consulting agreement with Dr. John Landis who also serves as the Company's Chair of the Science Committee and a member of the board of directors. Pursuant to the terms of the consulting agreement, Dr. Landis was entitled to receive an annual compensation payment of up to $
Nancy S. Lurker, the former Chief Executive Officer and Executive Vice Chair of the Company and current Vice Chair of the Board is a member of the board of directors of Altasciences, the parent company of Calvert Laboratories, Inc. (Calvert Labs), an entity with which the Company conducts business. The Company recorded $
20
analytical services provided by Altasciences for the three and nine months ended September 30, 2024, respectively. Additionally, the Company recorded of $
On October 31, 2024, the Company completed an underwritten public offering with gross proceeds of $
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, 2023, as supplemented by the risks set forth under Item 1A of this Quarterly Report on Form 10-Q, 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.
EYEPOINT®, DEXYCU®, YUTIQ®, DURASERT®, DURAVYU®, DELIVERING INNOVATION TO THE EYE®, and WITH AN EYE ON PATIENTS® are our trademarks. Retisert® and Vitrasert® are Bausch & Lomb’s trademarks. YUTIQ® is licensed to ANI Pharmaceuticals, Inc. and Ocumension Therapeutics in their respective territories. ILUVIEN® is ANI Pharmaceuticals, Inc.’s trademark. 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 retinal diseases. Our pipeline leverages our proprietary bioerodible Durasert E™ technology for sustained intraocular drug delivery. The Company’s lead product candidate, DURAVYU™, is an investigational sustained delivery treatment for anti-vascular endothelial growth factor (anti-VEGF) -mediated retinal diseases combining vorolanib, a selective and patent-protected tyrosine kinase inhibitor with bioerodible Durasert E™. DURAVYU™ is presently in Phase 3 clinical trials as a sustained delivery treatment 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 in Phase 2 clinical trial for diabetic macular edema (DME).
Recent Developments
R&D Highlights
23
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, 2023, 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.
24
Results of Operations
Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023:
|
|
Three Months Ended |
|
|
|
|
||||||||||
|
|
September 30, |
|
|
Change |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amounts |
|
|
% |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Product sales, net |
|
$ |
664 |
|
|
$ |
816 |
|
|
$ |
(152 |
) |
|
|
-19 |
% |
License and collaboration agreements |
|
|
9,561 |
|
|
|
14,137 |
|
|
|
(4,576 |
) |
|
|
-32 |
% |
Royalty income |
|
|
299 |
|
|
|
249 |
|
|
|
50 |
|
|
|
20 |
% |
Total revenues |
|
|
10,524 |
|
|
|
15,202 |
|
|
|
(4,678 |
) |
|
|
-31 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of sales |
|
|
736 |
|
|
|
1,202 |
|
|
|
(466 |
) |
|
|
-39 |
% |
Research and development |
|
|
29,542 |
|
|
|
17,363 |
|
|
|
12,179 |
|
|
|
70 |
% |
Sales and marketing |
|
|
24 |
|
|
|
479 |
|
|
|
(455 |
) |
|
|
-95 |
% |
General and administrative |
|
|
12,970 |
|
|
|
10,556 |
|
|
|
2,414 |
|
|
|
23 |
% |
Total operating expenses |
|
|
43,272 |
|
|
|
29,600 |
|
|
|
13,672 |
|
|
|
46 |
% |
Loss from operations |
|
|
(32,748 |
) |
|
|
(14,398 |
) |
|
|
(18,350 |
) |
|
|
127 |
% |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest and other income, net |
|
|
3,387 |
|
|
|
1,786 |
|
|
|
1,601 |
|
|
|
90 |
% |
Interest expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
- |
|
|
Loss on extinguishment of debt |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
- |
|
|
Total other income, net |
|
|
3,387 |
|
|
|
1,786 |
|
|
|
1,601 |
|
|
|
90 |
% |
Net loss |
|
$ |
(29,361 |
) |
|
$ |
(12,612 |
) |
|
$ |
(16,749 |
) |
|
|
133 |
% |
Net loss per share - basic and diluted |
|
$ |
(0.54 |
) |
|
$ |
(0.33 |
) |
|
$ |
(0.21 |
) |
|
|
64 |
% |
Weighted average shares outstanding - basic and diluted |
|
|
54,449 |
|
|
|
38,341 |
|
|
|
16,108 |
|
|
|
42 |
% |
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 $0.2 million, or 19%, to $0.7 million for the three months ended September 30, 2024 compared to the same period the prior year. This decrease was driven by lower sales of YUTIQ® product supply to ANI. For the three months ended September 30, 2024, product sales, net included $0.7 million of product supply under the existing commercial supply agreement (CSA) with ANI.
License and Collaboration Agreement
License and collaboration agreement revenue decreased by $4.6 million, or 32%, to $9.6 million for the three months ended September 30, 2024 compared to the same period the prior year. This decrease was due to lower recognition of deferred revenue related to the agreement to license YUTIQ® product rights to ANI due to lower product sales to ANI.
Royalty Income
Royalty income increased by less than $0.1 million, or 20%, to $0.3 million for the three months ended September 30, 2024 compared to the same period the prior year. The increase was attributable to higher non-cash Alimera royalties payable to SWK Funding LLC.
Cost of Sales, Excluding Amortization of Acquired Intangible Assets
Cost of sales decreased by $0.5 million, or 39%, to $0.7 million for the three months ended September 30, 2024 compared to the same period the prior year. This decrease was primarily due to lower commercial product sales year over year.
25
Research and Development
Research and development expenses increased by $12.2 million, or 70%, to $29.5 million for the three months ended September 30, 2024 compared to the same period the prior year. This increase was attributable primarily to (i) $4.0 million in increased clinical trial costs related to the initiation of DURAVYU™ in Phase 3 clinical trials (LUGANO and LUCIA) for wet AMD, (ii) $3.8 million higher personnel expense to support clinical trial activity and product development, including $2.1 million of non-cash stock compensation, (iii) $1.4 million higher clinical trial material expense to be used in phase 3 clinical trials for wet AMD, (iv) $1.3 million in higher professional services, (v) $1.0 million higher facility and IT expenses, and (vi) $0.7 million in other R&D expenses. We anticipate an increase in future periods of clinical trials expenses due to our continuing Phase 3 clinical trials.
Sales and Marketing
Sales and marketing expenses decreased by $0.5 million, or 95%, for the three months ended September 30, 2024 compared to the same period the prior year. This decrease was driven by discontinued YUTIQ® promotion due to the agreement that granted YUTIQ® license and rights to ANI in the second quarter of 2023 and the Company's exit from the commercial business.
General and Administrative
General and administrative expenses increased by $2.4 million, or 23%, to $13.0 million for the three months ended September 30, 2024 compared to the same period the prior year. This increase was primarily attributable to $1.8 million in stock-based compensation and $0.8 million in personnel costs, partially offset by lower legal and other administrative expenses.
Interest (Expense) Income
Interest income from investments in marketable securities and institutional money market funds increased by $1.6 million, or 90%, to $3.4 million for the three months ended September 30, 2024 compared to the same period the prior year. This increase was due primarily to an increase in cash and marketable securities on hand.
26
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023:
|
|
|
|
|
|
|
||||||||||
|
|
Nine months ended September 30, |
|
|
Change |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amounts |
|
|
% |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Product sales, net |
|
$ |
2,390 |
|
|
$ |
13,483 |
|
|
$ |
(11,093 |
) |
|
|
-82 |
% |
License and collaboration agreements |
|
|
27,906 |
|
|
|
17,768 |
|
|
|
10,138 |
|
|
|
57 |
% |
Royalty income |
|
|
1,389 |
|
|
|
739 |
|
|
|
650 |
|
|
|
88 |
% |
Total revenues |
|
|
31,685 |
|
|
|
31,990 |
|
|
|
(305 |
) |
|
|
-1 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of sales, excluding amortization of acquired intangible assets |
|
|
2,896 |
|
|
|
3,634 |
|
|
|
(738 |
) |
|
|
-20 |
% |
Research and development |
|
|
89,554 |
|
|
|
46,711 |
|
|
|
42,843 |
|
|
|
92 |
% |
Sales and marketing |
|
|
80 |
|
|
|
11,504 |
|
|
|
(11,424 |
) |
|
|
-99 |
% |
General and administrative |
|
|
39,770 |
|
|
|
28,854 |
|
|
|
10,916 |
|
|
|
38 |
% |
Total operating expenses |
|
|
132,300 |
|
|
|
90,703 |
|
|
|
41,597 |
|
|
|
46 |
% |
Loss from operations |
|
|
(100,615 |
) |
|
|
(58,713 |
) |
|
|
(41,902 |
) |
|
|
71 |
% |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest and other income, net |
|
|
11,144 |
|
|
|
4,611 |
|
|
|
6,533 |
|
|
|
142 |
% |
Interest expense |
|
|
— |
|
|
|
(1,247 |
) |
|
|
1,247 |
|
|
|
-100 |
% |
Gain (loss) on extinguishment of debt |
|
|
— |
|
|
|
(1,347 |
) |
|
|
1,347 |
|
|
|
-100 |
% |
Total other income, net |
|
|
11,144 |
|
|
|
2,017 |
|
|
|
9,127 |
|
|
|
453 |
% |
Net loss before income taxes |
|
$ |
(89,471 |
) |
|
$ |
(56,696 |
) |
|
$ |
(32,775 |
) |
|
|
58 |
% |
Net loss per share - basic and diluted |
|
$ |
(1.67 |
) |
|
$ |
(1.50 |
) |
|
$ |
(0.17 |
) |
|
|
11 |
% |
Weighted average shares outstanding - basic and diluted |
|
|
53,526 |
|
|
|
37,804 |
|
|
|
15,722 |
|
|
|
42 |
% |
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 $11.1 million, or 82%, to $2.4 million for the nine months ended September 30, 2024 compared to the same period the prior year. This decrease was driven by the agreement that granted license and rights to YUTIQ® to ANI in May 2023 as the Company exited its commercial business. For the nine months ended September 30, 2024, product sales, net were primarily from the sales of product supply under the existing commercial supply agreement (CSA) with ANI of $1.9 million, as well as $0.5 million of product supply to Ocumension.
License and Collaboration Agreement
License and collaboration agreement revenue increased by $10.1 million, or 57%, to $27.9 million for the nine months ended September 30, 2024 compared to the same period the prior year. This increase was due to higher recognition of deferred revenue related to the agreement to license YUTIQ® product rights to ANI from 9 months of revenue in 2024 compared to a partial year in 2023.
Royalty Income
Royalty income increased by $0.7 million, or 88%, to $1.4 million for the nine months ended September 30, 2024 compared to the same period the prior year. The increase was primarily attributable to increased Ocumension Therapeutics royalties from YUTIQ® product sales in China.
Cost of Sales, Excluding Amortization of Acquired Intangible Assets
Cost of sales decreased by $0.7 million, or 20%, to $2.9 million for the nine months ended September 30, 2024 compared to the same period the prior year. This decrease was primarily due to lower commercial product sales year over year.
27
Research and Development
Research and development expenses increased by $42.8 million, or 92%, to $89.6 million for the nine months ended September 30, 2024 compared to the same period the prior year. This increase was attributable primarily to (i) $10.0 million higher personnel expense to support clinical trial activity and product development, including $5.7 million of non-cash stock compensation, (ii) $8.8 million in increased clinical trial costs related to DURAVYU™ in Phase 2 (DAVIO2) and Phase 3 (LUGANO and LUCIA) clinical trials for wet AMD, NPDR (PAVIA), and DME (VERONA), (iii) $5.7 million associated with non-cash equity award modifications expense, (iv) $5.0 million for a milestone payment due for completion of our Phase 2 wet AMD (DAVIO2) clinical trial, (v) $4.4 million in higher clinical trial material expense, (vi) $3.2 million higher DURAVYU™ non-clinical expenses, (vii) $1.5 million in higher facility costs, (viii) $1.6 million in severance related expense, and (ix) $2.5 million of other R&D expenses. We anticipate an increase in future periods of clinical trials expenses due to our continuing Phase 3 clinical trials.
Sales and Marketing
Sales and marketing expenses decreased by $11.4 million, or 99%, to $0.1 million for the nine months ended September 30, 2024 compared to the same period the prior year. This decrease was driven by discontinued YUTIQ® promotion due to the agreement that granted YUTIQ® license and rights to ANI in the second quarter of 2023 and the Company's exit from the commercial business. Expenses for the nine months ended September 30, 2024 included support for ongoing government reporting requirements.
General and Administrative
General and administrative expenses increased by $10.9 million, or 38%, to $39.8 million for the nine months ended September 30, 2024 compared to the same period the prior year. This increase was driven by (i) $9.2 million in stock-based compensation, (ii) $3.0 million in higher personnel costs, partially offset by $1.4 million in lower legal and other administrative expenses.
Interest (Expense) Income
Interest income from investments in marketable securities and institutional money market funds increased by $6.5 million, or 142%, to $11.1 million for the nine months ended September 30, 2024 compared to the same period the prior year. This increase was due primarily to an increase in cash and marketable securities and higher interest rates in the current year to date period.
There was no interest expense in the nine months ended September 30, 2024 due to the repayment of the loan under the loan and security agreement with Silicon Valley Bank (SVB Loan Agreement) on May 17, 2023. Interest expense for the nine months ended September 30, 2023 was $1.2 million.
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, 2024 we had a total accumulated deficit of $831.6 million. Our operations have been financed primarily from sales of our equity securities, issuance of debt and a combination of license fees, milestone payments, royalty income and other fees received from collaboration partners.
Financing Activities
During the nine months ended September 30, 2024, we sold 1,299,506 shares of our common stock under the ATM facility at a weighted average price of $9.36 per share for gross proceeds of approximately $12.2 million. Share issue costs, including sales agent commissions, totaled approximately $0.4 million.
Future Funding Requirements
At September 30, 2024, we had cash, cash equivalents, and investments in marketable securities of $253.8 million. We expect the cash, cash equivalents and investments on September 30, 2024, along with the net proceeds from the October $161.0 million equity financing will enable us to fund operations into 2027. 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,
28
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 DURAVYU™ and 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:
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, |
|
|
|
|
||||||
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|||
Net loss |
|
$ |
(89,471 |
) |
|
$ |
(56,696 |
) |
|
$ |
(32,775 |
) |
Changes in operating assets and liabilities |
|
|
(26,676 |
) |
|
|
71,155 |
|
|
|
(97,831 |
) |
Other adjustments to reconcile net loss to cash flows from |
|
|
25,770 |
|
|
|
10,525 |
|
|
|
15,245 |
|
Net cash (used in) provided by operating activities |
|
$ |
(90,377 |
) |
|
$ |
24,984 |
|
|
$ |
(115,361 |
) |
Net cash (used in) provided by investing activities |
|
$ |
(123,393 |
) |
|
$ |
43,833 |
|
|
$ |
(167,226 |
) |
Net cash provided by (used in) financing activities |
|
$ |
12,337 |
|
|
$ |
(31,415 |
) |
|
$ |
43,752 |
|
Operating cash outflows for the nine months ended September 30, 2024 totaled $90.4 million primarily due to our net loss of $89.5 million reduced by $25.8 million of non-cash expenses, which included $28.8 million of stock-based compensation, partially offset by $4.1 million for amortization of discount on available for sale of marketable securities. In addition, there was a change in working capital of $26.7 million, including $22.1 million of deferred revenue related to the agreement to license YUTIQ® product rights to ANI.
29
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, $0.7 million for the provision of excess and obsolete inventory, and less than $0.1 million 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 ANI, and $13.7 million of other working capital changes.
For the nine months ended September 30, 2024, $119.7 million of net cash was used for the purchase of marketable securities, and $3.7 million was used for the purchase of property and equipment.
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.
Net cash provided by financing activities for the nine months ended September 30, 2024 totaled $12.3 million and consisted of the following:
Net cash used in financing activities for the nine months ended September 30, 2023 totaled $31.4 million and consisted of the following:
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, 2024. 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, 2024, 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, 2024 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.
30
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 operations 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, 2023 (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.
We use our own facility for the manufacturing of YUTIQ® and rely on third party suppliers for key components, and any disruptions to our or our suppliers’ operations could adversely affect YUTIQ®’s commercial viability and our ability to supply YUTIQ® to ANI and Ocumension.
Pursuant to our agreements with our commercialization partners, we currently manufacture commercial supplies of YUTIQ® ourselves at our Watertown, MA facility and rely on third party suppliers for key components of YUTIQ®. We have, and will continue, to perform extensive audits of our suppliers, vendors, and contract laboratories. The cGMP requirements govern, among other things, recordkeeping, production processes, and controls, personnel, and quality control. To ensure that we continue to meet these requirements, we have and will continue to expend significant time, money, and effort.
The commercial manufacture of medical products is complex and requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of medical products often encounter difficulties in production, particularly in scaling up and validating initial production and ensuring the absence of contamination. These problems include difficulties with production costs and yields, quality control, including stability of the product, quality assurance testing, operator error, shortages of qualified personnel, as well as compliance with strictly enforced federal, state, and foreign regulations. We cannot assure you that any issue relating to the manufacture of YUTIQ® will not occur in the future.
The FDA also may, at any time following approval of a product for sale, audit our manufacturing facilities. If any such inspection or audit identifies a failure to comply with applicable regulations or if a violation of our product specifications or applicable regulation occurs independent of such an inspection or audit, the FDA may issue a Form FDA-483 and/or a warning letter, which may require remedial measures that may be costly and time consuming for us to implement and that may include the temporary or permanent suspension of commercial sales, recalls, market withdrawals, seizures or the temporary or permanent closure of a facility. In February 2024, we received an FDA Form-483 at the conclusion of an FDA inspection of our Watertown facility which included certain observations specifically related to the manufacturing of YUTIQ®, and a subsequent determination that our facility had been classified as Official Action Indicated (OAI), which could lead to an enforcement action or, if left un-addressed, negatively affect our manufacturing of YUTIQ®. We submitted written responses to the FDA in March 2024 and May 2024 addressing the FDA’s observations.
On July 12, 2024, we received a warning letter from the FDA (“Warning Letter”), citing alleged violations of current good manufacturing practice (CGMP) requirements in connection with the February 2024 FDA inspection at the Watertown facility and the associated February 2024 Form FDA-483, specifically related to the manufacturing of YUTIQ®. The Warning Letter does not represent a final FDA determination of compliance. The Warning Letter requires that we implement certain corrective and preventive actions, including improvements to the process by which we investigate unexplained discrepancies, the implementation of additional
31
written procedures for production and process control, and the adoption of additional control procedures to monitor the output and to validate the performance of manufacturing processes. Addressing FDA observations and advancing quality initiatives are key priorities for the Company, and the Company has implemented and plans to further implement improvements to strengthen quality and sustainable compliance. We responded to the FDA on August 1, 2024 and, based on current information, we believe the supply of YUTIQ® to patients should not be materially interrupted. However, if we are unable to remediate the findings to the FDA’s satisfaction, we may face additional consequences including an inability to satisfy our obligations under our supply agreements with ANI and Ocumension and possible FDA regulatory or legal actions. Notwithstanding, based on current information, we believe our other products in development, including DURAVYU™, are not impacted by this regulatory action.
If our Contract Research Organizations (CROs), Contract Manufacturing Organizations (CMOs), Contract Development Manufacturing Organizations (CDMOs), vendors, and investigators do not successfully carry out their responsibilities or if we lose our relationships with them, our development efforts with respect to our product candidates could be delayed.
We are dependent on CROs, CMOs, CDMOs, vendors, and investigators for pre-clinical testing and clinical trials related to our product development programs, including for DURAVYU™ and other product candidates. These parties are not our employees, and we cannot control the amount or timing of resources that they devote to our programs. If they do not timely fulfill their responsibilities or if their performance is inadequate, the development, and commercialization of our product candidates could be delayed.
The parties with which we contract for execution of clinical trials play a significant role in the conduct of the trials and the subsequent collection and analysis of data. Their failure to meet their obligations could adversely affect clinical development of our product candidates. In addition, if we or our CROs fail to comply with applicable current Good Clinical Practices (GCP), the clinical data generated in our clinical trials may be deemed unreliable and the Food and Drug Administration (FDA) may require us to perform additional clinical trials before approving any marketing applications. Upon inspection, the FDA may determine that our clinical trials did not comply with GCP.
Switching or adding additional CROs involves additional cost and requires management time and focus. Identifying, qualifying, and managing performance of third-party service providers can be difficult, time-consuming, and cause delays in our development programs. In addition, there is a natural transition period when a new CRO commences work and the new CRO may not provide the same type or level of services as the original provider. Though we carefully manage our relationships with our CROs, there can be no assurance that we will not encounter challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition, and prospects. If any of our relationships with our CROs terminate, we may not be able to enter into arrangements with alternative CROs or to do so on commercially reasonable terms. As a result, delays may occur, which can materially impact our ability to meet our desired clinical development timelines.
Additionally, our CMOs may experience manufacturing difficulties due to resource constraints or as a result of labor disputes or unstable political environments. If our CMOs were to encounter any of these difficulties, our ability to provide our product candidate to patients in clinical trials, or to provide product for the treatment of patients once approved, would be jeopardized.
In addition, any facilities located outside the United States (U.S.) that are used by us or by our CMOs or CDMOs to manufacture, test, and optimize our product candidates will be subject to various regulatory requirements of the jurisdiction in which they are located and in addition be subject to trade laws and regulations of the U.S. that may restrict our ability to continue to utilize certain CMOs or CDMOs. Foreign CMOs or CDMOs may be subject to U.S. legislation or investigations, including the proposed BIOSECURE Act, sanctions, trade restrictions, and other foreign regulatory requirements, which could increase the cost or reduce the supply of material available to us, delay the procurement or supply of such material, delay or impact clinical trials, have an adverse effect on our clinical drug development efforts and could adversely affect our financial condition and business prospects. For example, we currently engage with WuXi Apptec (WuXi), to perform certain process development, manufacturing, and testing associated with one of our product candidates, EYP-2301. WuXi has been identified as a U.S. national security threat in the proposed BIOSECURE Act, which, if enacted, or if alternatively implemented through executive or administrative action, could restrict WuXi’s business in the U.S. or the ability of businesses in the U.S. to conduct business with WuXi.
Moreover, if a foreign regulatory authority curtails operations at such foreign facilities of our CMOs or CDMOs, or if trade laws are adopted limiting our ability to use such CMO or CDMO facilities, we may need to find alternative facilities, which could negatively impact our clinical development timelines.
Because we have relied on third parties, our internal capacity to perform certain functions is limited. Outsourcing these functions involves risks that third parties may not perform to our standards, may not produce results in a timely manner or may fail to perform at all. In addition, the use of third-party service providers requires us to disclose our proprietary information to these parties,
32
which could increase the risk that this information will be misappropriated. We currently have a small number of employees, which limits the internal resources we have available to identify and monitor our third-party providers. To the extent we are unable to identify and successfully manage the performance of third-party service providers in the future, our ability to advance our product candidates through clinical trials will be compromised. Though we carefully manage our relationships with our CROs, CMOs, and CDMOs, there can be no assurance that we will not encounter similar challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition, and prospects.
Interim, top-line, initial and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to confirmation, audit and verification procedures that could result in material changes in the final data.
From time to time, we may publicly disclose interim, top-line, initial or preliminary data from our clinical trials, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data. For example, in October 2024, we announced preliminary results from our Phase 2 VERONA trial for DME. DURAVYU™ is still being studied in the Phase 2 VERONA trial for diabetic macular edema and topline data is expected in the first quarter of 2025. When reporting interim, top-line, initial or preliminary data from an ongoing trial, we may make assumptions, estimations, calculations and conclusions as part of our analyses of data, and may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the interim, top-line, initial or preliminary results that we report, including the preliminary results from our Phase 2 VERONA trial for DME, may differ from future results of the same trials, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Interim, top-line, initial and preliminary data from clinical trials are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Interim, top-line, initial and preliminary data also remain subject to audit and verification procedures that may result in the final data being materially different from the interim, top-line, initial or preliminary data we previously published. As a result, interim, top-line, initial and preliminary data, including the preliminary results from our Phase 2 VERONA trial for DME, should be viewed with caution until the final data are available. Adverse differences between interim, top-line, initial or preliminary data and final data could significantly harm our business prospects and may cause the price of our common stock to fluctuate or decline.
Further, regulatory agencies and others, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could adversely impact the potential of the particular program, the likelihood of obtaining regulatory approval of the particular product candidate, commercialization of any approved product and the business prospects of the company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is derived from information that is typically extensive, and you or others may not agree with what we determine is material or otherwise appropriate information to include in our disclosure.
If the interim, top-line, initial or preliminary data that we report differs from actual results, or if regulatory authorities or others, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, our product candidates may be significantly impaired, which could materially harm our business, operating results, prospects or financial condition.
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
(c)
Rule 10b5-1 Trading Arrangements
The Company permits officers and directors to adopt written trading plans, known as “Rule 10b5-1 trading arrangements”, as such term defined in Item 408(a) of Regulation S-K for the purchase or sale of the Company's securities, which are intended to satisfy
33
the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act. During the three months ended September 30, 2024, none of our executive officers and directors
34
Item 6. Exhibits
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Incorporated by Reference to SEC Filing |
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Exhibit No. |
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Exhibit Description |
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Form |
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SEC Filing Date |
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Exhibit No. |
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2.1# |
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8-K |
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05/18/23 |
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2.1 |
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3.1 |
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8-K12G3 |
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06/19/08 |
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3.1 |
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3.2 |
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Certificate of Amendment of the Certificate of Incorporation of pSivida Corp. |
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10-K |
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09/13/17 |
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3.2 |
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3.3 |
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8-K |
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04/02/18 |
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3.1 |
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3.4 |
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8-K |
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06/27/18 |
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3.1 |
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3.5 |
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10-K |
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09/18/18 |
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3.5 |
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3.6 |
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Amendment No. 1 to the By-Laws of EyePoint Pharmaceuticals, Inc. |
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8-K |
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11/06/18 |
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3.1 |
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3.7 |
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8-K |
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06/23/20 |
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3.1 |
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3.8 |
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8-K |
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12/08/20 |
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3.1 |
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4.1 |
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8-K12G3 |
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06/19/08 |
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4.1 |
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4.2 |
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8-K |
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11/19/21 |
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4.1 |
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10.1* |
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10.2*# |
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10.3+ |
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10-Q |
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08/08/2024 |
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10.3 |
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31.1* |
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31.2* |
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32.1** |
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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 |
104 |
Cover Page Interactive Data File (embedded within the inline XBRL document and included in Exhibit 101) |
35
# 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
+ Indicates management contract or compensatory arrangement.
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 7, 2024 |
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 7, 2024 |
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 10.1
FIRST AMENDMENT TO LEASE
This FIRST AMENDMENT TO LEASE (this “Amendment”) is dated as of September 30, 2024 (the “Effective Date”) by and between 600 CPK LLC, a Delaware limited liability company (“Lessor”), and EYEPOINT PHARMACEUTICALS US, INC., a Delaware corporation (“Lessee”).
WHEREAS, Lessor, successor in interest to V.E. Properties IX, LLC, and Lessee are parties to that certain Lease dated January 23, 2023 (together with this Amendment, collectively, the “Lease”), for the lease of certain premises known as Building 6 (“Building”) and located at 600 Commerce Drive, Northbridge, Massachusetts, as more particularly described in the Lease (the “Demised Premises”); and
WHEREAS, Lessor and Lessee wish to amend the Lease as provided herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, Lessor and Lessee hereby agree as follows.
AGREEMENT
[Signatures on the Following Page]
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the Effective Date stated above.
LESSEE: |
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LESSOR: |
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EYEPOINT PHARMACEUTICALS US, INC., |
600 CPK LLC, a Delaware limited liability company |
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a Delaware corporation |
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By: |
/s/ Ron Honig |
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By: |
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Ron Honig |
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Title: |
Chief Legal Officer |
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Title: |
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Trustees of Osterman Commerce Park Condominium |
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Osterman Management LLC |
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By: |
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The Trustees execute this Lease with the consent of all Unit Owners (as defined in the Declaration of Trust of Osterman Park Condominium Trust) for the purpose of acknowledging the appointment of Lessee as attorney in fact for Lessor and agree Lessee shall have the self-help rights as provided in Article V, Section 3(f) of this Lease. |
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Osterman Management LLC executes this Amendment for the purpose of guaranteeing all of the monetary and non-monetary obligations of Lessor relating to the Lessor Improvements set forth in this Lease until the date the Remaining Work is substantially complete, following which Osterman Management LLC shall have no continuing liability. |
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the Effective Date stated above.
LESSEE: |
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LESSOR: |
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EYEPOINT PHARMACEUTICALS US, INC., |
600 CPK LLC, a Delaware limited liability company |
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a Delaware corporation |
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By: |
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By: |
/s/ Thomas Keane |
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Name: |
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Name: |
Thomas Keane |
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Title: |
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Manager |
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Trustees of Osterman Commerce Park Condominium |
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Osterman Management LLC |
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Title: |
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The Trustees execute this Lease with the consent of all Unit Owners (as defined in the Declaration of Trust of Osterman Park Condominium Trust) for the purpose of acknowledging the appointment of Lessee as attorney in fact for Lessor and agree Lessee shall have the self-help rights as provided in Article V, Section 3(f) of this Lease. |
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Osterman Management LLC executes this Amendment for the purpose of guaranteeing all of the monetary and non-monetary obligations of Lessor relating to the Lessor Improvements set forth in this Lease until the date the Remaining Work is substantially complete, following which Osterman Management LLC shall have no continuing liability. |
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the Effective Date stated above.
LESSEE: |
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LESSOR: |
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EYEPOINT PHARMACEUTICALS US, INC., |
600 CPK LLC, a Delaware limited liability company |
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a Delaware corporation |
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By: |
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/s/ Thomas Keane |
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Name: |
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Name: |
Thomas Keane |
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Title: |
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Title: |
Manager |
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Trustees of Osterman Commerce Park Condominium |
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Osterman Management LLC |
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By: |
/s/ Tim Osterman |
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By: |
/s/ Tim Osterman |
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Name: |
Tim Osterman |
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Name: |
Tim Osterman |
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Title: |
Manager |
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Title: |
Manager |
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The Trustees execute this Lease with the consent of all Unit Owners (as defined in the Declaration of Trust of Osterman Park Condominium Trust) for the purpose of acknowledging the appointment of Lessee as attorney in fact for Lessor and agree Lessee shall have the self-help rights as provided in Article V, Section 3(f) of this Lease. |
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Osterman Management LLC executes this Amendment for the purpose of guaranteeing all of the monetary and non-monetary obligations of Lessor relating to the Lessor Improvements set forth in this Lease until the date the Remaining Work is substantially complete, following which Osterman Management LLC shall have no continuing liability. |
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Exhibit 10.2
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY “[***]”, HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
Memorandum of Understanding
This Memorandum of Understanding, (the “2024 MOU”), dated as of August 26, 2024 (“Effective Date”), is entered into by and between EyePoint Pharmaceuticals, Inc., a company organized and existing under the laws of the State of Delaware, United States of America (“EyePoint”), Ocumension Therapeutics, a company organized and existing under the laws of Cayman Islands (“Ocumension”). EyePoint and Ocumension are referred to herein individually as a “Party” and collectively as the “Parties”.
WHEREAS,
EyePoint and Ocumension have entered into an Exclusive License Agreement on November 2, 2018 (“LA”), as amended by a Memorandum of Understanding dated March 1, 2019 (“2019 MOU”) and a Memorandum of Understanding dated 18 August 2020 (“2020 MOU”) and a Supply and Quality Agreement on February 19, 2019 (“SQA”). According to the LA, EyePoint granted an exclusive license to Ocumension to enable Ocumension and its sublicensees, if any, to import, test, use, have used, register, sell, offer to sell, Develop and Commercialize the Product in the Field in the Territory during the Term of the LA.
The LA, the 2019 MOU, the 2020 MOU and the SQA are herein referred to collectively as the “Existing Agreements”.
The Parties are exploring both a short-term and long-term solution to address the growing demand for YUTIQ within the Territory, which includes (i) incremental production by EyePoint, with related costs and expenses proportionately borne by the Parties as a short-term solution, and (ii) as a long-term solution, EyePoint is willing to grant YUTIQ manufacturing rights to Ocumension, and to conduct a technology transfer to Ocumension that will help enable Ocumension to produce YUTIQ for its licensed markets. In the interest of time, the short-term and long-term solutions will be addressed separately.
NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which hereby is acknowledged, the Parties agree as follows:
MACROBUTTON DocID \\4151-7649-1860 v3
MACROBUTTON DocID \\4151-7649-1860 v3
Milestone# |
OcuMension Annual Sales Unit |
Milestone Payment (in USD) |
Milestone 1 |
[***] |
[***] |
Milestone 2 |
[***] |
[***] |
Milestone 3 |
[***] |
[***] |
Milestone 4 |
[***] |
[***] |
In the event that more than one Milestones are first achieved in the same Calendar Year, then Ocumension will pay to EyePoint each of the corresponding Milestone Payment(s) for each such Milestone that has been achieved in that Calendar Year.
IN WITNESS WHEREOF, each of the undersigned has executed this 2024 MOU as of the Effective Date set forth above.
EyePoint Pharmaceuticals, Inc. Ocumension Therapeutics
By: [***] By: [***]
[***] [***]
[***] [***]
MACROBUTTON DocID \\4151-7649-1860 v3
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 7, 2024
/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 7, 2024
/s/ George O. Elston |
Name: George O. Elston |
Title: Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
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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, 2024, 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 7, 2024
/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, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, George O. Elston, Chief Financial Officer of the Company, certify that to the best of my knowledge:
Date: November 7, 2024
/s/ George O. Elston |
Name: George O. Elston |
Title: Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |