EyePoint Pharmaceuticals, Inc. — FY 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing; it does not provide a complete standalone fourth-quarter income statement. Dollar amounts below are in millions unless stated otherwise.
Business context
EyePoint develops and commercializes sustained-delivery treatments for serious eye disorders using its Durasert technology. Its marketed products were YUTIQ, for chronic non-infectious posterior-segment uveitis, and DEXYCU, for inflammation following ocular surgery. EYP-1901, a sustained-delivery vorolanib candidate, was in Phase 2 trials for wet AMD and NPDR; a Phase 2 DME trial was anticipated in late 2023 or early 2024.
Financial performance and liquidity
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Total revenue | $41.4 | $36.9 | +12% |
| Product sales, net | $39.9 | $35.3 | +13% |
| Operating expenses | $141.0 | $92.2 | +53% |
| Loss from operations | $(99.6) | $(55.3) | Loss increased |
| Net loss | $(102.3) | $(58.4) | Loss increased 75% |
| Net loss per share | $(2.74) | $(2.03) | |
| Net cash used in operating activities | $(65.0) | $(50.1) | Cash use increased |
- Product mix: YUTIQ net sales rose to $28.3 million from $17.0 million; DEXYCU sales fell to $11.6 million from $18.4 million.
- Margins: Cost of sales excluding acquired-intangible amortization was $8.3 million; amortization was $2.1 million. Revenue less these costs implies approximately $31.0 million gross profit and a 75% gross margin, before the separate $20.7 million DEXYCU impairment.
- Expense drivers: R&D rose 74% to $49.6 million, mainly from EYP-1901 Phase 2 activity and increased personnel. G&A rose 36% to $34.8 million, including organizational expansion and professional services. Sales and marketing declined 7% to $25.5 million.
- Cash and liquidity: Cash, cash equivalents and marketable securities totaled $144.6 million at year-end, down from $211.6 million. Current assets were $172.8 million and current liabilities $34.5 million. Management projected funding for its operating plan into the second half of 2024, assuming planned clinical timing and anticipated product-sale cash inflows; it also said additional capital will likely be needed.
- Debt: Year-end short-term borrowings were $10.5 million and long-term debt was $29.3 million. The SVB facilities included a $30 million term loan and a revolving facility of up to $15 million; term-loan principal amortization begins February 2024, with maturity January 2027. The loan is secured by substantially all assets other than intellectual property.
Material changes, outlook and risks
- CMS ended separate pass-through reimbursement for DEXYCU effective January 1, 2023, bundling payment with the underlying procedure. EyePoint expected a significant revenue impact, ended its ImprimisRx commercial alliance at year-end, and reduced DEXYCU promotion. The reimbursement change led to a $20.7 million impairment of the DEXYCU intangible asset and inventory-related charges.
- YUTIQ demand improved during 2022; fourth-quarter distributor purchases were up 11% from the third quarter. DEXYCU fourth-quarter demand was down 70% from the prior quarter, which the company attributed to the reimbursement change.
- Management anticipated DAVIO 2 top-line Phase 2 wet AMD data in the fourth quarter of 2023 and continued the PAVIA Phase 2 NPDR trial. The filing cautions that clinical results, timing, regulatory approval and commercial adoption are uncertain.
- In August 2022, the company received a subpoena from the U.S. Attorney’s Office for the District of Massachusetts concerning sales, marketing and promotional practices, including DEXYCU. EyePoint said it was cooperating; duration, scope, outcome and potential financial impact were not predictable.
- A March 2023 amendment to the SVB loan requires the company to maintain unrestricted, unencumbered cash and cash equivalents equal to the greater of $50 million or six-month cash burn. Failure to comply could trigger default and accelerated repayment.
- Other significant risks include continuing operating losses and future financing needs, dependence on EYP-1901 and third-party vorolanib supply, clinical-trial and manufacturing risks, reimbursement and competition, and the COVID-19 pandemic’s uncertain effects. The filing also notes a September 2021 FDA inspection Form 483 at the YUTIQ facility; the facility’s OAI status had not been resolved as of the filing.
- The company reported effective disclosure controls and internal control over financial reporting as of December 31, 2022. The auditor issued an unqualified opinion on the financial statements and identified accrued and prepaid clinical-trial expenses as a critical audit matter.
Important facts for investors to verify
- Whether the projected cash runway remains achievable given operating cash use, clinical-trial spending, commercial sales and the post-amendment cash covenant.
- DAVIO 2 and PAVIA enrollment, readout timing, safety and efficacy results, and any changes to EYP-1901 development plans.
- The scale and persistence of DEXYCU sales declines following loss of separate reimbursement, and whether YUTIQ growth can offset them.
- Any developments, costs or potential actions arising from the DOJ subpoena, and the final status of the FDA’s 2021 inspection observations.
- Debt outstanding, revolving-facility availability, covenant compliance and future financing or dilution needs.