Business Context and Reporting Period
The provided Form 10-Q identifies the registrant as EyeGate Pharmaceuticals, Inc., not Kiora Pharmaceuticals, Inc. It covers the quarter and six months ended June 30, 2016, and was filed August 10, 2016. EyeGate was a clinical-stage ophthalmic pharmaceutical company developing the EGP-437 product and EyeGate II iontophoretic delivery system, together with Jade Therapeutics’ CMHA-S-based ophthalmic products.
Effective March 7, 2016, EyeGate acquired Jade Therapeutics, expanding its preclinical ophthalmic pipeline. The financial statements are unaudited and prepared under U.S. GAAP.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2016 | Six Months Ended June 30, 2016 | Comparable Prior Period |
|---|---|---|---|
| Collaboration revenue | $234,600 | $234,600 | $0 |
| Research and development expense | $2.482 million | $3.396 million | $0.604 million / $0.926 million |
| General and administrative expense | $1.579 million | $3.108 million | $0.939 million / $1.722 million |
| Total operating expenses | $4.061 million | $6.503 million | $1.544 million / $2.648 million |
| Net loss attributable to common stockholders | $3.823 million | $6.266 million | $1.541 million / $12.570 million |
| Basic and diluted loss per share | $0.46 | $0.77 | $0.24 / $2.57 |
| Cash used in operating activities | Not separately provided | $4.029 million | $2.741 million |
The company had no meaningful gross margin because it generated limited collaboration revenue while incurring substantial research and development costs. The six-month operating loss was approximately $6.269 million before other income, versus approximately $2.648 million in the prior-year period.
- Cash and cash equivalents were $8.026 million at June 30, 2016, compared with $8.394 million at December 31, 2015.
- Total assets were $12.783 million, including $3.912 million of in-process research and development acquired with Jade.
- Current assets were $8.776 million versus current liabilities of $5.105 million, implying current coverage of approximately 1.7 times.
- Total liabilities were $6.315 million, including $1.210 million of contingent consideration related to the Jade acquisition.
- The company reported no indebtedness other than ordinary-course trade and accounts payable.
- Cash provided by financing activities was $3.501 million, primarily from the June 30 registered direct offering.
- Common shares outstanding increased to 8,951,883 from 7,657,287 at December 31, 2015. Series A preferred stock convertible into approximately 1.179 million common shares was outstanding at June 30, 2016.
Material Changes Versus the Prior Comparable Period
- Six-month collaboration revenue increased from zero to $234,600, reflecting Jade-related U.S. government grant activity.
- Six-month research and development expense increased $2.470 million, primarily because of accelerated Phase 3 anterior uveitis activities, the Phase 1b/2a post-cataract trial, EyeGate OBG development, and CMHA-S pipeline work.
- Six-month general and administrative expense increased $1.386 million because of expanded operations, personnel, public-company costs, and the Jade acquisition.
- Six-month operating cash burn increased to $4.029 million from $2.741 million.
- Net loss attributable to common stockholders improved from $12.570 million to $6.266 million, principally because the prior-year period included an $8.222 million deemed dividend on preferred stock and approximately $1.920 million of interest expense.
- EyeGate completed the Jade acquisition for an estimated purchase price of $3.820 million, including stock consideration, assumed liabilities, and contingent consideration.
- On June 30, 2016, the company raised approximately $3.4 million net through an offering of common stock, Series A preferred stock, and warrants. The company also issued 871,000 warrants with a $3.50 exercise price.
Guidance, Outlook, Risks, and Unusual Items
- Management expected the June 30 cash balance to fund planned operations for approximately 9 to 12 months, subject to changes in spending.
- The company stated that substantial additional capital would be required through equity or debt financing, licensing transactions, collaborations, or grants. Management stated that these conditions raised substantial doubt about the company’s ability to continue as a going concern.
- Management expected operating losses and research and development expenses to increase as clinical programs and product development advance.
- EyeGate expected to initiate a clinical trial for EyeGate OBG by the end of 2016. The filing states that FDA guidance indicated a successful confirmatory Phase 3 trial for EGP-437 could support an NDA filing when combined with prior Phase 3 data.
- Under the Valeant agreement, EyeGate had received an aggregate $2.515 million in upfront and milestone payments as of June 30, 2016 and expected an additional $855,000 payment in the third quarter of 2016. The agreement provides for potential milestone payments of up to $32.5 million plus royalties, subject to achievement and other conditions.
- The Jade acquisition included a contingent cash earn-out of $2.164 million if a Jade product receives FDA marketing approval. The balance sheet recorded $1.210 million of contingent consideration.
- Contractual obligations totaled $2.773 million, including $2.367 million of purchase obligations principally related to a clinical research organization, $316,582 of operating leases, and $90,000 of licensing obligations.
- The company had no material legal proceedings and reported no material changes to previously disclosed risk factors. Internal controls were considered effective, but integration of Jade materially affected or was reasonably likely to materially affect internal control over financial reporting.
- After quarter-end, 819 Series A preferred shares were converted into 364,000 common shares on August 1, 2016.
Most Important Facts for Investors to Verify
- Confirm the issuer identity: the supplied filing is for EyeGate Pharmaceuticals, Inc., while the request metadata names Kiora Pharmaceuticals, Inc.
- Verify the company’s ability to raise capital before its projected 9-to-12-month cash runway expires and assess the stated going-concern uncertainty.
- Track enrollment, results, regulatory status, and funding requirements for the EGP-437 Phase 3 and post-cataract trials and the planned EyeGate OBG trial.
- Review dilution from preferred-stock conversions, outstanding warrants, stock options, and any future offerings under the $100 million shelf registration statement.
- Assess the probability and timing of Valeant milestone payments, the expected $855,000 payment, and any future royalties.
- Evaluate the Jade acquisition’s contingent consideration, in-process research and development valuation, and integration of Jade’s controls and operations.