EyeGate Pharmaceuticals, Inc. — Form 10-Q Summary
Reporting period: Three and six months ended June 30, 2019. The source filing identifies the registrant as EyeGate Pharmaceuticals, Inc. (Nasdaq: EYEG), although the request metadata names Kiora Pharmaceuticals. The financial statements are unaudited.
Business Context
EyeGate is a clinical-stage specialty pharmaceutical company developing ophthalmic products based on CMHA-S hydrogel technology and an iontophoresis drug-delivery platform. Its lead CMHA-S product, EyeGate Ocular Bandage Gel (OBG), was undergoing clinical development for post-PRK corneal re-epithelialization and punctate epitheliopathies. The company also continued evaluating strategic options for EGP-437 after clinical trials did not meet key statistical or non-inferiority objectives.
Financial Results and Position
| Metric | Three Months Ended June 30 | Six Months Ended June 30 | ||
|---|---|---|---|---|
| 2019 | 2018 | 2019 | 2018 | |
| Collaboration revenue | $0 | $0.242 million | $2.686 million | $1.338 million |
| Research and development expense | $0.764 million | $1.838 million | $1.485 million | $4.359 million |
| General and administrative expense | $1.106 million | $1.203 million | $2.242 million | $2.157 million |
| Total operating expenses | $1.870 million | $3.040 million | $3.727 million | $6.515 million |
| Net loss | $1.837 million | $2.780 million | $0.966 million | $5.160 million |
| Basic and diluted loss per share | $0.04 | $0.07 | $0.02 | $0.19 |
- Six-month operating loss was $1.041 million, compared with $5.177 million in the prior-year period. The six-month 2019 collaboration revenue primarily reflects recognition of $2.686 million of deferred revenue after Bausch Health Companies terminated two license agreements.
- Six-month net cash used in operating activities was $3.569 million, compared with $6.060 million in 2018. Financing activities provided $0.029 million in 2019, versus $10.857 million in 2018, primarily reflecting the absence of a comparable stock offering.
- Cash and cash equivalents were $4.465 million at June 30, 2019, down from $8.004 million at December 31, 2018. Including restricted cash, ending cash was $4.510 million.
- Total assets were $10.896 million and total liabilities were $2.424 million at June 30, 2019. Stockholders’ equity was $8.472 million; accumulated deficit was $94.117 million.
- The company reported no material debt other than ordinary-course payables and capital financing obligations. Non-current liabilities included $1.210 million of contingent consideration and $0.270 million of deferred tax liabilities.
- Operating margins are not economically representative because revenue was minimal and largely nonrecurring; the company remains pre-commercial and loss-making.
Material Changes Versus the Prior Comparable Period
- Second-quarter revenue declined to zero from $0.242 million, while six-month revenue increased by $1.348 million because deferred Bausch Health revenue was recognized following termination of the agreements.
- R&D expense declined by $1.074 million in the quarter and $2.873 million for the six-month period, primarily due to lower EGP-437 clinical activity, personnel costs, OBG manufacturing work and market research. These reductions were partly offset by initiation of the OBG PRK pivotal study.
- G&A expense decreased modestly in the quarter but increased $0.085 million for the six-month period, principally due to higher personnel-related costs.
- Net loss improved substantially year over year, but cash declined by $3.539 million during the first six months of 2019 because operating cash use was not offset by meaningful financing proceeds.
- The company adopted the new lease accounting standard on January 1, 2019, recording right-of-use assets and lease liabilities. June 30, 2019 right-of-use assets and lease liabilities were $0.110 million.
- Common shares outstanding increased to 45,675,737 at June 30, 2019 from 45,578,878 at December 31, 2018, primarily from warrant exercises and equity compensation activity.
Guidance, Outlook, Risks and Unusual Items
- Management expected available cash to fund planned operations only through October 31, 2019, subject to changes in spending. The filing states that recurring losses and negative cash flows create substantial doubt about the company’s ability to continue as a going concern.
- Additional capital is expected to be required through equity or debt financing, licensing transactions, collaborations and/or government grants. No committed external funding source existed, and management cautioned that financing may be unavailable or available only on unfavorable terms.
- A shelf registration statement covering up to $50.0 million of securities became effective on May 13, 2019, but the company provided no assurance that future offerings would succeed.
- Management expected continued operating losses and significant development expenses. OBG’s pivotal PRK study began in the second quarter, with topline data expected by year-end 2019. A follow-on punctate epitheliopathy trial had FDA authorization to begin in the third quarter, also with topline data expected by year-end.
- Bausch Health voluntarily terminated both EGP-437 license agreements effective March 14, 2019, returning the related rights to EyeGate. No further revenue was expected from those agreements.
- Nasdaq granted continued listing through September 16, 2019, conditioned on regaining compliance with the $1.00 minimum bid-price requirement. Failure to regain compliance could result in delisting.
- Outstanding potential dilution included approximately 40.744 million warrants, 2.777 million stock options and 12.788 million shares underlying Series C preferred stock.
- Contractual obligations totaled approximately $0.457 million, including $0.114 million of lease obligations and $0.343 million of licensing commitments. SentrX may also receive up to $4.75 million in future milestone payments under the OBG-related license.
- The company reported no material legal proceedings, no material changes to previously disclosed risk factors and no material off-balance-sheet arrangements.
Investor Verification Checklist
- Verify the registrant identity and ticker because the supplied metadata refers to Kiora Pharmaceuticals while the filing identifies EyeGate Pharmaceuticals, Inc. and EYEG.
- Assess the going-concern disclosure, cash runway and the company’s ability to secure financing after October 31, 2019.
- Confirm whether OBG clinical trials met expected year-end 2019 milestones and whether regulatory submissions followed.
- Review the status of Nasdaq minimum-bid-price compliance and any subsequent listing or delisting action.
- Separate the one-time $2.686 million Bausch Health revenue recognition from recurring or prospective product revenue.
- Evaluate the effect of outstanding warrants, options and convertible preferred stock on potential dilution and future financing capacity.