Business Context and Reporting Period
This unaudited Form 10-Q covers the quarter and nine months ended September 30, 2020, filed November 9, 2020. The filing identifies the registrant as EyeGate Pharmaceuticals, Inc. (Nasdaq: EYEG), although the request metadata refers to Kiora Pharmaceuticals, Inc. EyeGate is a clinical-stage ophthalmic pharmaceutical company developing EyeGate Ocular Bandage Gel (OBG), a modified hyaluronic-acid eye drop for corneal wounds, defects and epitheliopathies.
- The company completed development of the OBG indication for photorefractive keratectomy wound healing following positive pivotal-study data in 2019 and planned to submit a de novo application to the FDA during 2020.
- Following positive exploratory data and a July 2020 FDA meeting, the company planned to initiate a pivotal punctate-epitheliopathy study in the first half of 2021.
- The legacy EGP-437 iontophoresis platform is no longer being developed, and the company does not plan to maintain related intellectual property rights.
Financial Results and Key Metrics
| Metric | Three Months Ended September 30 | Nine Months Ended September 30 |
|---|---|---|
| Collaboration revenue | $0 in 2020 and 2019 | $0 in 2020 versus $2.686 million in 2019 |
| Research and development expense | $985,880 versus $2.406 million | $2.555 million versus $3.892 million |
| General and administrative expense | $1.021 million versus $1.045 million | $3.144 million versus $3.287 million |
| Total operating expenses | $2.007 million versus $3.451 million | $5.699 million versus $7.178 million |
| Net loss | $2.007 million versus $3.428 million | $5.676 million versus $4.395 million |
| Net loss per share | $0.44 versus $1.15 | $1.25 versus $1.47 |
| Net cash used in operating activities | Not provided for the quarter | $5.608 million versus $5.567 million |
- There was no revenue in the first nine months of 2020. The $2.686 million of 2019 collaboration revenue resulted from recognition of deferred revenue after Bausch Health Companies terminated the related license agreements; no further revenue is expected from those agreements.
- Third-quarter R&D expense declined by $1.420 million, primarily because the OBG PRK pivotal study had been completed in 2019. Nine-month R&D expense declined by $1.336 million.
- Despite lower operating expenses, the nine-month net loss increased by $1.281 million because 2019 included $2.686 million of collaboration revenue.
- At September 30, 2020, unrestricted cash and cash equivalents were $2.931 million, restricted cash was $45,000, total assets were $9.245 million and stockholders’ equity was $5.961 million.
- Total liabilities were $3.284 million, including $1.710 million of contingent consideration, $365,364 of deferred tax liabilities and a $278,190 Paycheck Protection Program loan. The company reported no other indebtedness.
- Cash provided by financing activities was $4.780 million, consisting primarily of approximately $4.501 million in net proceeds from a January 2020 registered direct offering and $278,190 of PPP proceeds.
- Accumulated deficit was $105.923 million at September 30, 2020.
- Potential future dilution included 2.772 million warrants, 246,893 employee stock options and preferred stock convertible into 852,500 common shares.
Material Changes Versus the Prior Comparable Period
- Revenue fell to zero from $2.686 million for the nine-month period, reflecting the absence of the one-time recognition of Bausch Health deferred revenue in 2019.
- Operating expenses decreased 20.6% for the nine-month period, from $7.178 million to $5.699 million, primarily due to lower clinical activity and personnel-related costs.
- Operating cash use remained broadly unchanged at $5.608 million versus $5.567 million, while financing inflows increased substantially because of the equity offering and PPP loan.
- Common shares outstanding increased to 4,626,755 at September 30, 2020 from 4,077,755 at December 31, 2019, primarily reflecting the issuance of 500,000 shares in the January offering and 49,000 restricted shares.
- The company reduced authorized common shares from 120 million to 50 million in June 2020.
- The University of Miami license covering the legacy EyeGate II Delivery System was terminated effective October 7, 2020. The company also previously terminated its University of Utah license effective February 5, 2020.
Guidance, Outlook, Risks and Unusual Items
- Management expected significant expenses and operating losses to continue as OBG advances through clinical development and regulatory review. Commercial availability, if achieved, was not expected for several years.
- Based on cash held at September 30, 2020, management expected funding for planned operations only through January 31, 2021. The company stated that substantial additional capital would be required through equity or debt financing, licensing transactions, collaborations or grants.
- The filing states that recurring losses and negative operating cash flows create substantial doubt about the company’s ability to continue as a going concern. The financial statements contain no going-concern adjustments.
- The PPP loan bears 1.0% interest and would mature in May 2022 if not forgiven. Management believed the full balance would be forgiven, but the loan remained recorded until formal forgiveness.
- COVID-19 could delay or disrupt clinical trials, operations and access to capital. As of the filing date, management reported no material adverse effect on ongoing business operations.
- Key risks include FDA authorization, clinical-trial timing and results, manufacturing scale-up, dependence on additional financing, potential dilution, uncertain market acceptance, intellectual-property protection, contingent milestone obligations and the possibility that product candidates never achieve approval or generate revenue.
- Unusual items included $530,704 of stock-based compensation for the nine-month period and a $159,848 operating-cash-flow adjustment related to expiration of a prepaid agreement.
Investor Verification Priorities
- Verify the registrant identity: the supplied filing is for EyeGate Pharmaceuticals, Inc., not Kiora Pharmaceuticals, Inc.
- Verify whether the planned 2020 FDA de novo submission for OBG was completed and review its regulatory status.
- Verify the timing, design and funding of the planned OBG punctate-epitheliopathy pivotal trial.
- Assess post-September 30, 2020 financing activity and whether the company secured funding beyond the January 31, 2021 liquidity horizon.
- Confirm whether the $278,190 PPP loan was forgiven and identify any remaining repayment obligation.
- Review subsequent filings for changes to the going-concern assessment, clinical timelines, lease commitments and contingent consideration.
- Evaluate dilution from outstanding warrants, options, preferred-stock conversion rights and any subsequent equity issuance.