Filing summary
Entity and period: The supplied filing is for pSivida Corp. and subsidiaries, not a registrant named Eyepoint, Inc. It is a Form 10-Q for the quarter ended March 31, 2015 (fiscal 2015 third quarter), with nine-month results from July 1, 2014 through March 31, 2015. This differs from the request metadata identifying 2014 Q3. Amounts below are in U.S. dollars; financial statement amounts are converted from thousands to millions where appropriate.
Business context
pSivida develops sustained-release drug delivery products, principally for eye diseases. Its lead development candidate, Medidur, is in Phase III trials for posterior uveitis. ILUVIEN for diabetic macular edema (DME) is licensed to Alimera Sciences; U.S. sales began in late February 2015. The filing states that Alimera is responsible for commercializing ILUVIEN and pSivida receives a share of defined net profits or certain sublicense payments.
Financial performance and position
| Metric | Three months ended March 31, 2015 | Three months ended March 31, 2014 | Nine months ended March 31, 2015 | Nine months ended March 31, 2014 |
|---|---|---|---|---|
| Total revenue | $0.328 million | $1.992 million | $26.156 million | $3.181 million |
| Operating expenses | $5.380 million | $4.211 million | $14.535 million | $12.659 million |
| Operating income (loss) | $(5.052) million | $(2.219) million | $11.621 million | $(9.478) million |
| Net income (loss) | $(4.998) million | $(2.187) million | $11.493 million | $(9.388) million |
| Basic earnings (loss) per share | $(0.17) | $(0.08) | $0.39 | $(0.35) |
| Net cash from (used in) operating activities | Not presented by quarter | $13.303 million | $(7.886) million |
Cash and liquidity: At March 31, 2015, cash and cash equivalents were $23.007 million and marketable securities were $8.651 million, totaling $31.658 million in cash, equivalents and securities. Total current assets were $33.077 million; current liabilities were $2.218 million. Total liabilities were $7.855 million, including $5.619 million of deferred revenue. The filing reports no borrowings or line-of-credit facilities. Management estimated that available resources would fund current and planned operations, including both Medidur trials, into calendar 2017; that estimate excluded potential ILUVIEN net-profit receipts.
Cash flow and other items: Nine-month investing cash use was $5.848 million, primarily reflecting net purchases of marketable securities; financing cash provided was $0.235 million, primarily from option exercises. The comparable prior-year financing inflow was $19.058 million, including equity offering and at-the-market proceeds. The filing reports no material off-balance-sheet arrangements. Gross margin is not separately presented, and the filing does not provide a clear value for it.
Material changes versus prior comparable periods
- Quarterly revenue fell 84% to $0.328 million, primarily because the prior-year quarter included $1.5 million of contingent consideration from a completed feasibility agreement. Quarterly royalty income also declined 31% to $0.218 million.
- Quarterly R&D expense increased 47% to $3.339 million, primarily due to higher contract research organization costs for Medidur. The quarterly net loss widened to $4.998 million.
- Nine-month revenue rose to $26.156 million, mainly because pSivida recognized a $25.0 million milestone following FDA approval of ILUVIEN in September 2014. The milestone was received in October 2014 and makes the year-to-date profit comparison non-recurring and not representative of underlying operating performance.
- Nine-month R&D expense rose 22% to $8.890 million, primarily reflecting Medidur clinical-trial costs, personnel expenses and preclinical studies. Royalty income declined 22% to $0.801 million.
- Cash and marketable securities increased from $18.278 million at June 30, 2014 to $31.658 million at March 31, 2015, largely reflecting receipt of the FDA milestone. Stockholders’ equity increased to $27.847 million from $14.924 million.
Outlook, management commentary and key risks
- Medidur: The FDA had indicated it would accept a future NDA, subject to trial results, based on the ongoing Phase III trial, a second Phase III trial with a six-month primary endpoint, and data referenced from ILUVIEN trials. The first Medidur trial enrolled 129 patients; the final 12-month follow-up was scheduled for March 2016, with top-line data expected in the second calendar quarter of 2016. The second trial was planned to recruit up to 150 patients in India. Management anticipated an NDA filing in the first half of 2017, but emphasized that timing and approval depend on clinical results and regulatory review.
- ILUVIEN: pSivida received $31,000 of ILUVIEN net profits in the quarter and $43,000 in the nine-month period. Management could not predict whether or when future sales would generate additional net-profit payments. Commercial results depend on Alimera’s execution, market acceptance, pricing, reimbursement, supply and financing.
- Funding and profitability: The company reported a history of operating losses and an accumulated deficit of $265.5 million. Management expected quarterly operating cash outflows until product or collaboration revenues become sufficient. Future capital needs may depend on ILUVIEN receipts, Medidur development costs and other programs. The existing ATM facility had up to $10.7 million available, but any equity financing could dilute shareholders; financing availability and terms were uncertain.
- Other key risks: Clinical-trial failure or delay, FDA rejection or additional requirements, fluocinolone acetonide-related eye side effects, declining Retisert royalties, dependence on licensees, competition, manufacturing or supply problems, intellectual-property challenges, and possible impairment of the remaining $2.1 million of intangible assets. Management said routine legal proceedings were not expected to have a material effect.
Most important facts for investors to verify
- Confirm the correct issuer and period: the supplied filing identifies pSivida Corp. and the quarter ended March 31, 2015, not Eyepoint, Inc. or 2014 Q3.
- Separate the $25.0 million one-time ILUVIEN approval milestone from recurring revenue and assess underlying cash burn and funding needs.
- Track Medidur trial enrollment, results, FDA requirements and the timing of any NDA filing; the stated first-half 2017 target was conditional, not guaranteed.
- Monitor Alimera’s ILUVIEN commercialization, reimbursement and sales, and the resulting net-profit payments to pSivida.
- Review the cash runway assumptions, remaining ATM capacity, potential dilution and whether Retisert royalties or other collaboration income continue to decline.