EyePoint Pharmaceuticals, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Unaudited results. The company develops and commercializes ophthalmic therapies; commercial products are YUTIQ and DEXYCU, with investigational candidate EYP-1901.
Financial performance and position
Amounts below are in millions of dollars, except per-share data.
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Total revenue | $11.6 | $9.0 | $20.9 | $16.3 |
| Net product sales | $11.3 | $8.7 | $20.3 | $15.5 |
| Operating expenses | $30.8 | $20.0 | $58.4 | $38.3 |
| Operating loss | $(19.2) | $(11.0) | $(37.5) | $(21.9) |
| Net loss | $(19.4) | $(10.0) | $(40.4) | $(22.3) |
| Net loss per share | $(0.52) | $(0.35) | $(1.08) | $(0.83) |
| Cash used in operating activities | Not provided quarterly | $(39.3) | $(25.6) |
- Q2 product sales rose 30% year over year. YUTIQ sales were $7.4 million, up from $4.2 million; DEXYCU sales were $3.9 million, down from $4.6 million. Six-month product sales increased 31%: YUTIQ was $12.0 million versus $7.2 million, while DEXYCU was $8.3 million versus $8.3 million.
- Q2 research and development expense increased 132% to $13.0 million, and general and administrative expense increased 65% to $8.6 million. Management attributed the increases mainly to expanded staffing, stock-based compensation, and EYP-1901 clinical and trial start-up costs.
- At June 30, cash and cash equivalents were $82.1 million and marketable securities were $89.0 million, totaling $171.2 million in cash, equivalents and investments. Current assets were $205.9 million; current liabilities were $33.4 million. Stockholders’ equity was $151.4 million and accumulated deficit was $609.5 million.
- Debt included $10.5 million of short-term borrowings and $29.2 million of long-term debt. The SVB facilities comprise a $30 million term loan and a revolving facility of up to $15 million, subject to eligible-receivables borrowing limits. The term loan matures January 2027; scheduled principal installments begin February 2024. Substantially all assets other than intellectual property secure the facilities.
- Product gross margin is not stated as a reported metric. Cost of sales excluding acquired-intangible amortization was $1.7 million in Q2 and $3.5 million for the six months; acquired-intangible amortization was $0.6 million and $1.2 million, respectively.
Material changes and unusual items
- Revenue increased, led by YUTIQ, while the company’s losses widened as operating expenses—especially R&D and G&A—grew faster than sales. Q2 net loss increased 94% year over year.
- For the six months, investing cash outflow was $56.5 million, primarily reflecting purchases of marketable securities, partly offset by sales and maturities. Financing cash flow was a net use of $0.7 million, including refinancing of the CRG debt with SVB facilities. In 2021, financing had provided $108.4 million, mainly from an equity offering.
- In March 2022, the company repaid the CRG loan using SVB financing. The repayment resulted in a $1.6 million loss on extinguishment of debt in the first half; comparative 2021 results included a $2.1 million gain related to debt extinguishment.
- The company recorded a $2.9 million out-of-period increase to lease right-of-use assets and lease liabilities in Q2, relating to a lease amendment from Q1. It stated the adjustment had no effect on the statements of operations or cash flows.
- Stock-based compensation was $7.6 million for the first half, versus $2.2 million in 2021.
Outlook, commentary and risks
- Management said $171.2 million of cash, equivalents and marketable securities, together with expected product-sale cash inflows, was expected to fund its operating plan into the second half of 2024, based on current assumptions about EYP-1901 Phase 2 trials. The filing also notes continued losses, limited recurring cash inflows, and that product revenue is not expected to fund near-term operations on its own.
- In July 2022, the first patient was dosed in the EYP-1901 Phase 2 DAVIO2 wet-AMD trial; topline data was expected in the second half of 2023. These are post-quarter developments. The company also reported positive 12-month Phase 1 DAVIO data in July, while noting increased supplemental anti-VEGF use later in follow-up.
- CMS’s July 2022 proposed 2023 payment rule would end DEXYCU’s separate Medicare pass-through payment after December 31, 2022 if finalized as proposed. Management warned this could significantly reduce DEXYCU revenue and impair its $21.5 million net intangible asset. The rule was still under review at filing; no financial-statement adjustment was recorded.
- The FDA’s updated requirements for combination drug/device products prompted the company to pause enrollment in the YUTIQ 50 trial while it evaluates whether the program can resume; management expects additional trials and materially higher program costs.
- The company reported that Q2 physician demand for YUTIQ units was 43% above Q1; DEXYCU ASC demand was flat. It cautioned that COVID-19 effects, clinical-trial timing and outcomes, commercialization, reimbursement, competition, manufacturing, and access to additional capital could affect results and cash needs.
- The SVB loan has quarterly product-revenue covenants, with a cash-and-cash-burn alternative if revenue thresholds are not met. Routine legal proceedings were reported as not expected to have a material effect. Disclosure controls were assessed as effective; no material changes in internal control over financial reporting were reported.
Most important facts for investors to verify
- Whether CMS’s final 2023 rule removes DEXYCU’s separate pass-through reimbursement, and the resulting effect on demand, revenue, cash flows, and intangible-asset valuation.
- Whether YUTIQ sales growth can offset weaker DEXYCU sales and ongoing operating expense growth.
- Progress, cost, timing, and clinical results for EYP-1901 trials, including DAVIO2 and the planned NPDR and DME programs.
- Cash use and runway against management’s second-half 2024 operating-plan estimate, including SVB covenant compliance and financing needs.
- Whether the YUTIQ 50 program resumes and what additional FDA-required trials would cost.
- Potential exposure to COVID-related demand disruption, reimbursement changes, and changes in product-sales reserves or receivables estimates.