Business context and reporting period
pSivida Corp. (the filing’s registrant name; the request identifies Eyepoint, Inc.) filed this unaudited Form 10-Q for the quarter and six months ended December 31, 2017, its fiscal 2018 second quarter. The company develops sustained-release drug-delivery products, primarily for chronic eye diseases. Its lead candidate, Durasert three-year uveitis, is intended to treat posterior-segment uveitis. The figures below are in U.S. dollars; financial statement amounts are in millions unless noted.
Financial performance and liquidity
| Metric | Three months ended Dec. 31, 2017 | Six months ended Dec. 31, 2017 |
|---|---|---|
| Revenue | $0.933 | $1.318 |
| Operating expenses | $6.741 | $13.132 |
| Operating loss | $(5.808) | $(11.814) |
| Net loss | $(5.782) | $(11.765) |
| Basic and diluted loss per share | $(0.13) | $(0.28) |
- Six-month operating cash use was $11.006 million, compared with $11.495 million in the prior-year period. Investing used $0.064 million; financing provided $7.044 million, primarily from the ATM share program.
- Cash and cash equivalents were $12.876 million at December 31, 2017, down from $16.898 million at June 30, 2017. Current assets were $13.645 million and current liabilities $4.250 million (about 3.2x current-asset coverage). Restricted cash of $0.150 million was separately reported.
- Total liabilities were $4.292 million; the company reported no borrowings or credit facilities. Stockholders’ equity was $9.905 million, and accumulated deficit was $322.585 million.
- Operating expenses exceeded revenue substantially; the filing does not present a useful positive operating margin.
Material changes versus prior comparable periods
- Quarterly revenue fell 84% year over year, to $0.933 million from $5.971 million. Six-month revenue fell 79%, to $1.318 million from $6.248 million. The main reason was a one-time $5.6 million revenue recognition in the prior-year quarter after Pfizer’s collaboration agreement terminated in December 2016.
- Quarterly R&D expense increased 35% to $4.269 million, principally reflecting Durasert clinical-development, NDA-related professional services, and U.S. personnel costs. Six-month R&D increased 10% to $8.088 million.
- G&A declined 15% for the quarter and 18% for the six months, partly because the prior-year periods included severance and management-transition costs.
- Six-month net loss widened to $11.765 million from $7.229 million. During the six months, the company issued 5.9 million shares under its ATM program for $7.3 million gross proceeds ($7.044 million net), increasing shares outstanding from 39.357 million at June 30 to 45.257 million at December 31.
- Alimera collaboration terms were amended in July 2017: profit sharing was converted to sales-based royalties, generally 2% initially, with higher rates scheduled from 2019 subject to specified terms. The company recorded $196,000 of Alimera sales-based royalties in the December quarter.
Outlook, risks, and unusual items
- The company filed a U.S. NDA for Durasert three-year uveitis in January 2018. It said the FDA generally notifies applicants within 60 days whether an NDA is accepted for review. Both Phase 3 trials met their primary six-month efficacy endpoint; reported efficacy significance and encouraging safety results continued through 12 months. FDA acceptance and approval were not assured.
- Management expected cash and anticipated receipts under existing collaborations to fund current and planned operations through approximately the second quarter of calendar 2018. The filing states that recurring cash use and the absence of a probable additional-capital source raise substantial doubt about the company’s ability to continue as a going concern for one year from issuance of the financial statements.
- Plans to extend funding included further equity financing through the ATM or other equity or debt financing, and potentially reducing or deferring expenses. The filing cautions that financing may not be available on acceptable terms and could dilute shareholders; no assurance was given that product commercialization would generate significant revenue.
- Management expected fiscal 2018 R&D expense to rise approximately 10%–15% versus fiscal 2017, mainly for pre-commercialization activities, manufacturing, quality assurance, medical affairs, and regulatory work.
- Other risks include regulatory and clinical outcomes, product manufacturing and commercialization, dependence on collaboration partners (including Alimera’s financial condition and execution), royalty variability, intellectual-property matters, and potential dilution. The company reported no material changes to the risk factors in its prior Form 10-K and no material legal proceedings; routine claims were not expected to have a material effect.
- In December 2017, the company and Hospital for Special Surgery reported positive Phase I safety and tolerability data for an implant being developed for pain associated with severe knee osteoarthritis. This was an early-stage study, not a commercial product.
Important facts for investors to verify
- Confirm the registrant identity and period: the supplied filing is for pSivida Corp., quarter ended December 31, 2017, rather than a filing naming Eyepoint, Inc.
- Check subsequent FDA action on the Durasert NDA, approval timing, and any additional clinical or regulatory requirements.
- Assess the company’s actual cash runway and financing completed after the filing, including ATM capacity, dilution, and any spending reductions.
- Review Alimera’s financial condition, ILUVIEN sales and royalty receipts, and the status of its European uveitis application.
- Reconcile the reported one-time Pfizer revenue in the prior-year comparison with recurring revenue and cash generation.