Business Context and Reporting Period
This unaudited Form 10-Q covers the quarter and six months ended June 30, 2017. The filing identifies the registrant as EyeGate Pharmaceuticals, Inc.; this differs from the requested company name, Kiora Pharmaceuticals, Inc., and should be verified.
EyeGate was a clinical-stage ophthalmic pharmaceutical company developing the EGP-437 iontophoretic drug-delivery product and CMHA-S-based products, including EyeGate OBG. The company had not generated significant product revenue or achieved profitability.
Financial Performance and Liquidity
| Metric | Three Months Ended June 30, 2017 | Six Months Ended June 30, 2017 | Comparable 2016 Period |
|---|---|---|---|
| Collaboration revenue | $148,290 | $332,822 | $234,600 / $234,600 |
| Research and development expense | $2.262 million | $4.077 million | $2.482 million / $3.396 million |
| General and administrative expense | $1.213 million | $2.502 million | $1.579 million / $3.108 million |
| Total operating expenses | $3.475 million | $6.579 million | $4.061 million / $6.503 million |
| Net loss | $3.327 million | $6.247 million | $3.823 million / $6.266 million |
| Basic and diluted loss per share | $0.28 | $0.55 | $0.46 / $0.77 |
The implied net loss margin was approximately negative 2,244% for the quarter and negative 1,877% for the six-month period, reflecting minimal revenue relative to development spending.
- Cash and cash equivalents were $11.763 million at June 30, 2017, compared with $3.635 million at December 31, 2016.
- Operating cash use was $2.497 million for the six months, versus $4.029 million in the prior-year period.
- Financing activities provided $10.624 million, primarily from equity offerings, compared with $3.501 million in 2016.
- Deferred revenue was $8.861 million, including amounts received under the Valeant agreements but not yet recognized as revenue.
- Total liabilities were $13.744 million, including $1.210 million of contingent consideration and $1.526 million of deferred tax liabilities. Capital lease obligations totaled approximately $22,000.
- Accumulated deficit was $84.845 million at June 30, 2017.
Material Changes Versus the Prior Comparable Period
- Second-quarter revenue decreased $86,310, or approximately 37%, primarily reflecting lower government-grant collaboration revenue.
- Six-month revenue increased $98,222, or approximately 42%, following the Jade acquisition and related grant activity.
- Second-quarter R&D expense decreased $219,341, primarily because of lower activity in the anterior uveitis Phase 3 program, partly offset by increased post-cataract, EyeGate OBG and personnel-related activity.
- Six-month R&D expense increased $681,687 as activity increased for the post-cataract trial, EyeGate OBG and other development programs.
- General and administrative expense declined $366,264 for the quarter and $605,898 for the six months, primarily because of lower corporate, professional and acquisition-related costs.
- The company completed a June 14, 2017 public offering generating approximately $8.8 million of net proceeds. The offering included 5,336,667 common shares, Series B preferred stock convertible into common shares, and warrants to purchase 6,666,667 common shares.
- Common shares outstanding increased to 17,204,778 from 10,130,883 at December 31, 2016. Outstanding warrants increased to 9,519,403, creating substantial potential dilution.
- The company regained compliance with Nasdaq’s minimum stockholders’ equity requirement following the June offering.
Guidance, Outlook, Risks and Unusual Items
- Management expected to have sufficient cash to fund planned operations for approximately nine months from June 30, 2017, based on cash on hand and expected receipts.
- The company stated that recurring losses and expected future funding needs created substantial doubt about its ability to continue as a going concern. Additional equity, debt, licensing, collaboration or grant funding would be required to continue development.
- Management expected to initiate an EyeGate OBG trial in the third quarter of 2017, report initial data in the fourth quarter of 2017, and potentially file de novo 510(k) and CE mark applications in the third quarter of 2018, subject to successful trials and regulatory review.
- A Phase 2b EGP-437 trial for post-cataract inflammation and pain was expected to begin in the third quarter of 2017, with top-line data expected by year-end 2017. The ongoing anterior uveitis Phase 3 trial was expected to report data in the first quarter of 2018.
- The new Valeant agreement provided a $4.0 million upfront payment and potential milestone payments of approximately $99.0 million. A $636,000 milestone payment received during the second quarter was recorded as deferred revenue, not current revenue.
- Government grants of approximately $221,000 remained to be funded through 2017.
- Contractual obligations totaled approximately $2.447 million, including $2.007 million of purchase obligations related to Phase 3 clinical research services.
- The filing reported no material changes to previously disclosed risk factors and no current legal proceedings. Clinical, regulatory, financing, dilution, revenue-recognition and going-concern risks remain material.
Investor Verification Priorities
- Verify the registrant and period because the provided metadata names Kiora Pharmaceuticals while the filing names EyeGate Pharmaceuticals, Inc.
- Reconcile the $8.861 million deferred revenue balance with cash received under the Valeant agreements and the timing of future revenue recognition.
- Assess the approximately nine-month cash runway against planned clinical-trial spending and the company’s stated need for additional capital.
- Review potential dilution from 9.519 million warrants, 1.842 million employee options and convertible Series B preferred stock.
- Validate clinical-trial enrollment, regulatory milestones and the assumptions supporting the projected 2017–2018 development timetable.
- Review the going-concern disclosure, contractual purchase obligations and the company’s ability to obtain financing on acceptable terms.