EyePoint Pharmaceuticals, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended March 31, 2018; filed May 10, 2018. Although the request metadata says “2017 Q3,” this filing reports fiscal 2018 third-quarter results. The company was formerly pSivida Corp.
Business context and reporting period
EyePoint is a specialty biopharmaceutical company developing and commercializing ophthalmic products. FDA-approved DEXYCU was acquired with Icon Bioscience on March 28, 2018; the company planned a U.S. launch in the first half of 2019. YUTIQ’s NDA was accepted on March 19, 2018, with an FDA action date of November 5, 2018. The company anticipated a U.S. launch in the first half of 2019 if approved.
Financial results and liquidity
| Metric | Three months ended March 31 | Nine months ended March 31 |
|---|---|---|
| Revenue, 2018 / 2017 | $0.928m / $0.590m | $2.246m / $6.838m |
| Operating expenses, 2018 / 2017 | $5.606m / $5.750m | $18.738m / $19.278m |
| Operating loss, 2018 / 2017 | $4.678m / $5.160m | $16.492m / $12.440m |
| Net loss, 2018 / 2017 | $6.978m / $5.140m | $18.743m / $12.369m |
| Basic and diluted loss per share, 2018 / 2017 | $0.15 / $0.15 | $0.43 / $0.36 |
| Cash used in operating activities | — | $15.826m / $16.038m |
Revenue, expenses, and loss figures are presented in U.S. dollars. Quarterly revenue rose 57% year over year, while nine-month revenue declined 67%, chiefly because the prior-year period included $5.6 million of deferred Pfizer revenue recognized upon termination of that agreement. Nine-month royalty income increased 54% to $1.121 million, primarily from Alimera royalties; research and development costs rose 7% to $11.413 million, while general and administrative costs fell 15% to $7.325 million.
At March 31, 2018, cash and cash equivalents were $16.346 million, total assets $50.158 million, and total liabilities $41.960 million. Current assets of $17.675 million were below current liabilities of $21.215 million, a $3.540 million working-capital deficit. The balance sheet showed $12.850 million of long-term debt; the company reported $15 million principal outstanding under its term loan. Stockholders’ equity was $8.198 million. Cash declined $0.552 million from June 30, 2017.
Financing cash flow was $30.405 million, including equity and debt proceeds; investing cash outflow was $15.135 million, mostly for the Icon acquisition. The company reported a $2.325 million noncash loss from remeasurement of derivative liabilities. No gross-margin figure was reported; commercial product sales had not yet begun.
Material changes, outlook, and risks
- Icon acquisition: The company paid $15 million at closing and recorded a $31.973 million DEXYCU intangible asset. Potential additional obligations include a $15 million payment upon first U.S. commercial sale, sales milestones of up to $95 million, and sales- and partnering-revenue earn-outs.
- Debt and equity financing: A $15 million senior secured loan was issued, with up to $5 million additional borrowing available subject to a minimum capital raise. Interest is three-month LIBOR, subject to a 1.5% floor, plus 10.50%; the loan matures March 27, 2023 and includes a 6% exit fee. A further equity transaction of approximately $25.5 million, consisting of shares and warrants, required stockholder approval.
- Going concern: Management said available cash and expected collaboration receipts were expected to fund current and planned operations only through approximately the third quarter of calendar 2018. The filing states that recurring cash needs 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 statements.
- Management outlook: Fiscal 2018 R&D expense was expected to increase approximately 10%–15% versus fiscal 2017, reflecting pre-commercialization, manufacturing, quality, medical-affairs, and regulatory costs. Management also expected higher fourth-quarter G&A expense.
- Key execution and commercial risks: YUTIQ approval and launch remain uncertain; DEXYCU commercialization depends on manufacturing readiness, market acceptance, reimbursement and Medicare coding. The company also faces financing and dilution risk, loan covenants and secured-creditor remedies, milestone/earn-out payments, competition, product safety and regulatory risks, and reliance on collaborators including Alimera.
- Other items: The company reported no material change in internal control over financial reporting and no material off-balance-sheet arrangements. Routine legal proceedings were not expected by management to have a material effect.
Important facts for investors to verify
- Whether stockholders approved and the company completed the proposed approximately $25.5 million second-tranche financing, and whether the conditions for the additional $5 million loan advance were met.
- Actual cash runway, subsequent financing, and any updated going-concern disclosures.
- YUTIQ’s FDA decision and any changes to approval timing, labeling, or launch plans.
- DEXYCU launch timing, manufacturing and reimbursement readiness, including applicable Medicare coding and coverage.
- Cash and accounting treatment of Icon-related milestone and earn-out obligations, the derivative liabilities, and the company’s loan covenants and repayment terms.