EyeGate Pharmaceuticals, Inc. — Form 10-Q Summary
Reporting period: Three and six months ended June 30, 2018; filed August 3, 2018. The supplied metadata identifies Kiora Pharmaceuticals, but the filing identifies the registrant as EyeGate Pharmaceuticals, Inc.
Business Context
EyeGate is a clinical-stage ophthalmic company developing EGP-437, a dexamethasone product delivered through its EyeGate II iontophoresis system, and CMHA-S-based products, including EyeGate OBG. The company has generated limited revenue, has never been profitable, and remains dependent on financing, licensing arrangements, grants, and potential milestone payments.
Financial Metrics
| Metric | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2018 | Comparable 2017 Period |
|---|---|---|---|
| Collaboration revenue | $0.242 million | $1.338 million | $0.148 million / $0.333 million |
| Research and development expense | $1.838 million | $4.359 million | $2.262 million / $4.077 million |
| General and administrative expense | $1.203 million | $2.157 million | $1.213 million / $2.502 million |
| Net loss | $2.780 million | $5.160 million | $3.327 million / $6.247 million |
| Net loss per share | $0.07 | $0.19 | $0.28 / $0.55 |
| Net cash used in operating activities | Not reported | $6.060 million | $2.497 million |
At June 30, 2018, cash and cash equivalents were $12.605 million, restricted cash was $45,000, total assets were $19.065 million, and total liabilities were $5.516 million. Stockholders’ equity was $13.548 million, compared with a deficit of $1.927 million at December 31, 2017. The company reported no material debt other than trade payables and capital lease obligations. Total current liabilities were $4.121 million, including $2.723 million of deferred revenue.
Net cash provided by financing activities was $10.857 million, consisting primarily of $10.109 million of net proceeds from an April 2018 equity offering and $0.754 million from warrant exercises. Outstanding warrants totaled 42.255 million at June 30, 2018, and preferred-stock conversions and equity issuance materially increased the potential share count.
Material Changes Versus Prior Period
- Six-month collaboration revenue increased by $1.005 million to $1.338 million, primarily from Valeant milestone-related revenue rather than government grants.
- Six-month net loss declined by $1.087 million, although research and development expense increased by $0.282 million because of higher EGP-437 Phase 3 and related CMC activity.
- Second-quarter R&D expense declined by $0.424 million, mainly because of lower post-cataract trial, EyeGate OBG CMC, and research activity.
- Adoption of ASC 606 on January 1, 2018 produced a $9.5 million cumulative increase to beginning accumulated deficit and materially reduced deferred revenue. Reported 2018 revenue and net loss benefited from the new recognition model; the filing states that $1.338 million of additional revenue was recognized in the first six months compared with the prior method.
- The April 2018 public offering generated approximately $10.1 million of net proceeds and included common stock, Series C preferred stock, and warrants exercisable at $0.32 per share.
Outlook, Risks, and Unusual Items
- Management expects to report top-line data from the Phase 3 uveitis trial in the third quarter of 2018 and believed a successful trial could support an NDA filing in the first half of 2019.
- EyeGate OBG had completed a first-in-human trial. The filing states that IDE approval and initiation of additional trials were expected in the third quarter of 2018.
- The Phase 2b cataract-surgery trial did not achieve statistically significant co-primary endpoints, although EGP-437 showed higher response rates than vehicle at all time points. Management was evaluating next steps.
- Management estimated that available cash and expected Valeant receipts would fund planned operations for approximately twelve months from June 30, 2018. The company expects additional equity, debt, licensing, collaboration, or grant financing will be required.
- The financial statements include a going-concern uncertainty because of recurring losses and negative operating cash flow. Additional financing may be unavailable or dilutive, and failure to obtain funding could delay, reduce, or terminate development programs.
- The company faced a Nasdaq bid-price deficiency notice requiring a common-stock closing bid price of at least $1.00 for the applicable compliance period. It had regained compliance with the stockholders’ equity requirement following the April offering.
- Contractual obligations totaled $0.863 million, including leases of $0.240 million, licensing obligations of $0.218 million, and CRO purchase obligations of $0.405 million.
- On July 10, 2018, after quarter-end, the company increased authorized common shares from 100 million to 120 million and increased shares available under its 2014 equity plan by 6 million.
Investor Verification Items
- Confirm the registrant identity, because the provided metadata names Kiora Pharmaceuticals while the filing names EyeGate Pharmaceuticals.
- Assess the effect of ASC 606 on reported revenue, deferred revenue, accumulated deficit, and comparability with 2017.
- Verify cash runway assumptions, expected Valeant receipts, and the timing and terms of future capital raises.
- Monitor Phase 3 uveitis results, the potential 2019 NDA filing, and the development path for EyeGate OBG.
- Evaluate dilution from 42.255 million outstanding warrants, 2.106 million options, and 12.788 million common shares underlying Series C preferred stock.
- Review Nasdaq minimum-bid compliance and any subsequent listing actions.