Business Context and Reporting Period
This unaudited Form 10-Q covers EyeGate Pharmaceuticals, Inc. for the three months ended March 31, 2018. The source filing identifies the registrant as EyeGate Pharmaceuticals, Inc., while the request metadata identifies Kiora Pharmaceuticals, Inc.; this discrepancy should be verified.
EyeGate was a clinical-stage specialty pharmaceutical company developing ophthalmic products, including the EGP-437 combination drug/device product for ocular inflammation and pain and EyeGate OBG, a CMHA-S-based product for corneal epithelial defects. The company had not generated significant recurring product revenue and had incurred losses since inception.
Financial Performance and Position
| Metric | Q1 2018 | Q1 2017 | Change |
|---|---|---|---|
| Collaboration revenue | $1.096 million | $0.185 million | +$0.911 million |
| Research and development expense | $2.521 million | $1.815 million | +$0.706 million |
| General and administrative expense | $0.954 million | $1.289 million | -$0.335 million |
| Total operating expenses | $3.475 million | $3.104 million | +$0.371 million |
| Net loss | $2.379 million | $2.920 million | Loss narrowed by $0.540 million |
| Net loss per share | $0.14 | $0.28 | Improved; weighted-average shares increased |
| Net cash used in operating activities | $4.115 million | $0.019 million | Use increased by $4.096 million |
- Gross margin and product margin were not meaningful because revenue primarily consisted of collaboration and grant-related revenue.
- Cash and cash equivalents were $3.648 million at March 31, 2018, compared with $7.806 million at December 31, 2017. Including restricted cash, period-end cash was $3.693 million.
- Total assets were $11.166 million and total liabilities were $5.888 million at March 31, 2018. Stockholders’ equity was $5.278 million.
- The company reported no indebtedness other than ordinary-course trade payables and capital lease obligations. Capital lease obligations totaled approximately $13,000.
- Deferred revenue declined to $2.860 million from $12.314 million at year-end 2017, while unbilled revenue was $0.922 million.
Material Changes Versus the Prior Comparable Period
- Collaboration revenue increased primarily because Q1 2018 included Valeant milestone revenue, whereas Q1 2017 revenue primarily reflected U.S. government grants.
- R&D expense increased due mainly to clinical and related activities for EGP-437, including the Phase 3 anterior uveitis trial and chemistry, manufacturing and controls work.
- G&A expense decreased because of lower personnel-related costs and professional fees.
- Operating cash use increased substantially because of the operating loss, an increase in unbilled Valeant revenue, and reductions in accounts payable and accrued expenses. Q1 2017 benefited from a $4.0 million Valeant upfront payment.
- On January 1, 2018, adoption of ASC 606 using the modified retrospective method increased beginning accumulated deficit by approximately $9.5 million and materially reduced deferred revenue. The accounting change did not create cash proceeds.
- Weighted-average shares outstanding increased to 17.257 million from 10.456 million, while outstanding warrants and options represented potential additional dilution.
Guidance, Outlook, Risks and Unusual Items
- Management expected significant operating losses and expenses to continue as clinical development proceeds. It did not provide revenue or earnings guidance.
- Management expected top-line data from the ongoing Phase 3 anterior uveitis trial in Q3 2018 and believed a successful confirmatory trial could support an NDA filing in the first half of 2019.
- EyeGate OBG had completed a first-in-human trial. Management anticipated initiating pilot and moderate dry-eye trials in Q3 2018, subject to FDA IDE approvals.
- Results from the Phase 2b cataract-surgery trial did not achieve statistical significance for the co-primary endpoints, although EGP-437 showed higher success rates than vehicle at all time points. Management was evaluating next steps.
- The financial statements disclosed substantial doubt about the company’s ability to continue as a going concern because of recurring losses and negative cash flows.
- After quarter-end, on April 17, 2018, the company completed an offering of common stock, Series C convertible preferred stock and warrants, receiving approximately $10.1 million in net proceeds. Management stated that this financing was expected to fund planned operations for approximately 12 to 15 months, subject to spending levels and additional financing.
- The company remained dependent on future equity or debt financing, licensing transactions, collaborations and grants. Additional financing might be unavailable or dilutive.
- NASDAQ notified the company of noncompliance with the $1.00 minimum bid-price requirement, with an initial compliance deadline of September 17, 2018. Failure to regain compliance could lead to delisting and impair future capital raising.
- Contractual obligations totaled approximately $744,000, including leases, licensing commitments and purchase obligations. No material legal proceedings were reported.
Important Facts for Investors to Verify
- Confirm the issuer identity: the filing names EyeGate Pharmaceuticals, Inc., not Kiora Pharmaceuticals, Inc.
- Verify the impact, timing and terms of the April 17, 2018 financing, including conversion of Series C preferred stock and the 35.2 million warrants issued.
- Review the going-concern disclosure and whether subsequent financing extended the company’s cash runway as projected.
- Assess the clinical and regulatory status of EGP-437, including Phase 3 uveitis results, the cataract-trial outcome and the expected NDA timeline.
- Evaluate dilution from approximately 9.5 million warrants outstanding at quarter-end, 2.2 million options, and the substantial post-quarter-end warrant issuance.
- Review ASC 606 adoption effects on collaboration revenue, deferred revenue, unbilled revenue and accumulated deficit.