Filing and reporting period
The supplied filing is pSivida Corp.’s unaudited Form 10-Q for the quarter ended March 31, 2016 (the third quarter of its fiscal year), not a 2015 Q3 filing for Eyepoint, Inc. The company develops sustained-release drug-delivery products, primarily for chronic eye diseases. Unless otherwise noted, amounts below are in U.S. dollars.
Business context and developments
Lead candidate Medidur, designed to provide three years of treatment for posterior uveitis, was in two Phase III trials. The company reported positive top-line results from the first trial in December 2015; enrollment in the second was ongoing. ILUVIEN, licensed to Alimera Sciences for diabetic macular edema, was marketed in the U.S. and three EU countries. pSivida also received royalties on Retisert sales from Bausch & Lomb.
Financial performance and position
| Metric | Three months ended Mar. 31, 2016 | Three months ended Mar. 31, 2015 | Nine months ended Mar. 31, 2016 | Nine months ended Mar. 31, 2015 |
|---|---|---|---|---|
| Revenue | $0.324m | $0.328m | $1.316m | $26.156m |
| Operating expenses | $5.420m | $5.380m | $16.634m | $14.535m |
| Operating income (loss) | $(5.096)m | $(5.052)m | $(15.318)m | $11.621m |
| Net income (loss) | $(5.041)m | $(4.998)m | $(15.160)m | $11.493m |
| Operating cash flow | Not presented for the quarter | $(11.969)m | $13.303m |
Quarterly revenue was nearly flat year over year; royalty income rose 26% to $274,000, while collaborative research and development revenue fell to $50,000. For the nine-month comparison, 2015 revenue and profit included a one-time $25.0 million ILUVIEN FDA-approval milestone; 2016 revenue was principally royalties and smaller collaboration-related amounts. Nine-month R&D expense increased 16% to $10.277 million, primarily due to Medidur development, and G&A increased 13% to $6.357 million. The filing does not provide a clearly stated gross margin.
At March 31, 2016, cash and cash equivalents were $24.867 million and marketable securities were $8.407 million, totaling $33.274 million in cash, equivalents and securities. Current assets were $34.278 million and current liabilities $3.968 million. Total liabilities were $9.612 million, including $5.584 million of deferred revenue; the company reported no borrowings or line of credit. Stockholders’ equity was $26.553 million and accumulated deficit was $285.826 million.
For the nine months, financing cash flow was $16.868 million, primarily from $16.510 million net proceeds from a January 2016 public offering. Cash increased by $5.746 million to $24.867 million. The company reported no material off-balance-sheet arrangements.
Changes, outlook and risks
Compared with the prior nine-month period, the company moved from net income to a net loss and from positive to negative operating cash flow, chiefly because the prior period included the $25.0 million milestone. The January 2016 offering issued 4.44 million shares for gross proceeds of $17.8 million and net proceeds of approximately $16.5 million, increasing the share count.
Management estimated that available capital and expected inflows under existing collaboration agreements would fund currently planned operations, including the Medidur trials, into the fourth quarter of calendar 2017. This estimate excluded potential ILUVIEN receipts. The company expected negative operating cash flow and had no assured source of future revenue; funding beyond that period would depend on collaboration receipts, new agreements and/or financing. Additional capital might be unavailable or dilutive, and inadequate funding could force reductions or delays to development programs.
Assuming favorable results from the second Medidur Phase III trial, management planned to file a U.S. NDA around mid-2017, using results from both trials and other supporting data. It planned to seek EU marketing approval based on the first trial. These plans were forward-looking and dependent on trial results and regulatory review. The filing also identifies risks involving ILUVIEN commercialization and reimbursement, Medidur safety and efficacy, regulatory requirements, financing needs, Retisert royalties, competition, intellectual property, and development of Tethadur. Management reported disclosure controls were effective and no material change in internal control; it stated there were no material changes to previously disclosed risk factors. Routine legal proceedings were not expected by management to have a material effect.
Important facts for investors to verify
- Confirm the filing identity and period: the document is for pSivida Corp. and the quarter ended March 31, 2016, despite the request metadata naming Eyepoint and 2015 Q3.
- Check subsequent Medidur Phase III results, regulatory filing plans, and the assumptions behind the projected funding runway.
- Track ILUVIEN sales, country-level profit sharing, and whether commercialization generates cash receipts for pSivida.
- Assess ongoing cash burn, funding requirements, potential dilution, and the impact of the January 2016 share offering.
- Distinguish recurring royalty and collaboration revenue from the nonrecurring $25.0 million milestone in the prior-year comparison.