EyePoint Pharmaceuticals, Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Financial statements are unaudited; amounts below are in U.S. dollars unless noted.
Business context
EyePoint develops and commercializes eye-disease treatments using its sustained-delivery technologies. Its commercial products are YUTIQ for chronic non-infectious posterior uveitis and DEXYCU for post-operative ocular inflammation. Its pipeline includes EYP-1901, being evaluated for wet AMD, and YUTIQ 50, a potential twice-yearly uveitis treatment.
Financial results and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Total revenue | $9.0 million | $4.1 million | $16.3 million | $11.6 million |
| Net product sales | $8.7 million | $3.7 million | $15.5 million | $8.4 million |
| Operating loss | $11.0 million | $11.2 million | $21.9 million | $22.6 million |
| Net loss | $10.0 million | $13.0 million | $22.3 million | $26.1 million |
| Net loss per share | $0.35 | $1.04 | $0.83 | $2.17 |
- Q2 product sales comprised YUTIQ revenue of $4.2 million and DEXYCU revenue of $4.6 million. For the six months, the respective amounts were $7.2 million and $8.3 million.
- Reported product cost of sales, excluding acquired-intangible amortization, was $1.9 million in Q2 and $3.3 million for the six months. This implies product gross margins of approximately 78% and 79%, respectively, on that basis.
- Cash and cash equivalents were $127.6 million at June 30, 2021, versus $44.9 million at December 31, 2020. Current assets were $151.8 million and current liabilities $16.3 million. Accumulated deficit was $533.0 million.
- Six-month operating cash use was $25.6 million, investing cash use $0.03 million, and financing cash inflow $108.4 million. Financing inflows principally reflected the February public offering.
- Long-term debt on the balance sheet was $36.2 million. The CRG term loan carries 12.5% annual interest and matures December 31, 2023; the company described outstanding principal and exit-fee obligations of approximately $40.5 million. The $2.0 million PPP loan was forgiven, producing a $2.1 million gain on debt extinguishment in Q2.
Material changes versus comparable periods
- Product sales rose 136% in Q2 and 85% for the first half, as demand recovered from pandemic-related disruption in 2020 and restrictions on surgeries and office visits eased.
- Six-month total revenue increased 41%, but license and collaboration revenue fell 79% and royalty income fell 69%. The comparisons reflect a prior-year Ocumension DEXYCU license payment and the sale of future Alimera royalties to SWK.
- Operating expenses rose 31% in Q2 and 12% for the first half. Higher R&D reflected EYP-1901 trial and personnel costs; first-half sales and marketing expense declined, in part following a reduction in DEXYCU sales personnel.
- Net loss narrowed year over year, with Q2 results also benefiting from PPP loan forgiveness. Loss from operations remained substantial.
- In February 2021, EyePoint sold 10.465 million shares in a public offering for gross proceeds of approximately $115.1 million. Shares outstanding increased to 28.75 million at June 30, from 18.14 million at year-end.
Outlook, commentary and risks
- Management stated that cash and expected product-sale inflows were expected to fund the operating plan through December 31, 2022, subject to assumptions about EYP-1901 trial progress and planned Phase 2 initiation. The filing also cautions that future funding needs depend on commercialization, clinical spending and other factors; no assurance of additional financing is given.
- Management expected initial EYP-1901 Phase 1 DAVIO data in Q4 2021; enrollment was completed in May 2021. The company expected to initiate the YUTIQ 50 Phase 3 study by year-end 2021. These are forward-looking expectations, not reported outcomes.
- COVID-19 continued to adversely affect revenue, financial condition and cash flows; future effects and demand were uncertain. The company reported no supply-chain disruptions to YUTIQ or DEXYCU during the period.
- The CRG loan’s 2021 minimum product-revenue covenant was reduced to $25 million; the 2022 covenant remained $90 million. Covenant noncompliance could trigger default and acceleration, although the company reported no default here.
- DEXYCU Medicare pass-through coverage was scheduled to expire March 31, 2022. A proposed nine-month extension and a new Category III CPT code were announced after quarter-end; both reimbursement developments remained subject to implementation or final action.
- After quarter-end, the company reported positive 30-day safety observations from DAVIO; these preliminary observations do not establish efficacy or longer-term safety. The SEC Division of Enforcement informed the company in May 2021 that it did not intend to recommend an enforcement action based on the information then available.
- Management reported effective disclosure controls and no material changes in internal control over financial reporting during the quarter. It reported no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Whether YUTIQ and DEXYCU demand and revenue can grow sufficiently to meet the $25 million 2021 and $90 million 2022 CRG revenue covenants.
- Cash burn and the assumptions supporting management’s operating-plan runway through December 2022, including clinical-trial costs and commercial performance.
- DAVIO data timing and full trial results, and progress and timing for YUTIQ 50 Phase 3.
- Final Medicare reimbursement treatment for DEXYCU, including the proposed pass-through extension and the practical effect of the new CPT code.
- CRG debt terms, interest burden, maturity and covenant compliance; also distinguish balance-sheet debt from the filing’s broader principal-and-exit-fee figures.
- Product-reserve estimates, pandemic-related demand uncertainty, and potential further equity issuance and dilution.