Business Context and Reporting Period
EyeGate Pharmaceuticals, Inc. filed this unaudited Form 10-Q for the quarter ended March 31, 2020. The filing identifies the registrant as EyeGate Pharmaceuticals, Inc. (Nasdaq: EYEG), although the request metadata identifies Kiora Pharmaceuticals, Inc.; this entity discrepancy should be verified.
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 reported positive topline data for its PRK pivotal study and planned to file a de novo application with the FDA during 2020. It also planned FDA discussions in the second half of 2020 regarding a potential pivotal study for punctate epitheliopathies.
Financial Metrics
| Metric | Q1 2020 | Q1 2019 | Change |
|---|---|---|---|
| Collaboration revenue | $0 | $2.686 million | $(2.686) million |
| Research and development expense | $0.938 million | $0.721 million | +$0.217 million |
| General and administrative expense | $1.033 million | $1.136 million | $(0.103) million |
| Total operating expenses | $1.971 million | $1.857 million | +$0.113 million |
| Operating loss | $(1.971) million | $0.829 million operating income | $(2.799) million |
| Other income, net | $18,444 | $42,169 | $(23,725) |
| Net income (loss) | $(1.952) million | $0.871 million | $(2.823) million |
| Basic net income (loss) per share | $(0.43) | $0.30 | Not comparable due to loss |
| Net cash used in operating activities | $(2.400) million | $(2.147) million | $(0.254) million |
Revenue was zero in Q1 2020, so gross and operating margins are not meaningful. The company remained pre-commercial and loss-making, with an accumulated deficit of $102.199 million at March 31, 2020.
- Cash and cash equivalents were $5.878 million at March 31, 2020, compared with $3.777 million at December 31, 2019. Including restricted cash, total cash was $5.923 million.
- The increase in cash primarily reflected $4.501 million of net proceeds from a January 3, 2020 registered direct offering, partly offset by operating cash use.
- Total assets were $12.187 million and total liabilities were $2.870 million at March 31, 2020.
- The company reported no indebtedness other than ordinary-course trade payables and capital financing obligations. Contingent consideration was $1.710 million and lease liabilities were $145,064.
- Stockholders’ equity was $9.318 million, compared with $6.622 million at December 31, 2019.
- Common shares outstanding increased to 4,626,755 from 4,077,755, primarily reflecting the January offering and equity awards.
Material Changes Versus the Prior Comparable Period
- Collaboration revenue fell to zero from $2.686 million. The 2019 amount resulted from recognizing deferred revenue after Bausch Health Companies voluntarily terminated two license agreements; no further revenue was expected under those agreements.
- Research and development expense increased 30%, primarily due to increased OBG clinical activities and the expiration of a prepaid research-vendor agreement.
- General and administrative expense decreased 9%, primarily due to lower personnel-related costs, partly offset by higher professional fees and corporate costs.
- The company moved from net income of $0.871 million to a net loss of $1.952 million.
- Operating cash use increased from $2.147 million to $2.400 million.
- The January 2020 registered direct offering provided approximately $4.5 million of net proceeds.
- Leases for the Waltham headquarters and Salt Lake City facility were extended during the first quarter, resulting in additional right-of-use assets and lease liabilities.
Guidance, Outlook, Risks and Unusual Items
Management stated that cash on hand at March 31, 2020 was expected to fund planned operations through December 31, 2020. The company also stated that additional financing will be required to continue development, potentially through equity or debt financings, licensing arrangements, collaborations or government grants. No committed external funding source was available, and management warned that financing may not be available on acceptable terms or at all.
Recurring losses and negative operating cash flows led management to conclude that substantial doubt exists regarding the company’s ability to continue as a going concern. The financial statements contain no adjustments that might be required if the company cannot continue as a going concern.
- Management expected continued significant expenses and increasing operating losses as OBG advances through regulatory and clinical development.
- The company was evaluating the potential effects of COVID-19 on clinical-trial timelines and costs. Disclosed risks included enrollment delays, site and staffing disruptions, supply-chain interruptions, manufacturing and shipping delays, and delays in FDA or other regulatory interactions.
- Further development of the legacy EGP-437 platform was on hold after Bausch Health terminated the related license agreements in March 2019.
- Contractual obligations totaled $439,712, consisting of $149,712 of lease obligations and $290,000 of licensing commitments, subject to the filing’s stated exclusions.
- The company had approximately 2.862 million outstanding warrants, 237,695 stock options and 852,500 common shares issuable upon conversion of Series C preferred stock, creating potential dilution.
- The company reported no material off-balance-sheet arrangements and no legal proceedings as of March 31, 2020.
- Disclosure controls and procedures were assessed as effective, with no material changes in internal control over financial reporting during the quarter.
Most Important Facts for Investors to Verify
- Confirm the correct issuer: the filing is for EyeGate Pharmaceuticals, Inc. (EYEG), not Kiora Pharmaceuticals, Inc.
- Verify the timing and cost impact of the planned OBG de novo FDA submission and the proposed FDA interaction regarding the punctate-epitheliopathy indication.
- Assess whether the $5.878 million of unrestricted cash was sufficient beyond the stated December 31, 2020 runway and whether subsequent financing was completed.
- Monitor COVID-19-related effects on clinical enrollment, trial execution, manufacturing, supply availability and FDA timelines.
- Evaluate the going-concern disclosure and the likelihood, terms and dilution implications of future equity, debt, licensing or grant financing.
- Confirm that no recurring collaboration revenue is expected from the terminated Bausch Health agreements.
- Review warrant, option and preferred-stock conversion terms when assessing fully diluted share count and potential future dilution.