EyePoint Pharmaceuticals, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Financial statements are unaudited. EyePoint develops and commercializes ophthalmic therapies using its Durasert drug-delivery technology. Its marketed products are YUTIQ and DEXYCU; EYP-1901 is an investigational sustained-delivery anti-VEGF candidate.
Financial results and liquidity
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Total revenue | $9.3 million | $7.3 million; up 27% |
| Net product sales | $9.0 million | $6.8 million; up 32% |
| Operating expenses | $27.6 million | $18.3 million; up 51% |
| Operating loss | $18.3 million | $10.9 million |
| Net loss | $21.0 million | $12.3 million |
| Basic and diluted loss per share | $0.56 | $0.50 |
| Cash used in operating activities | $20.2 million | $15.1 million |
- YUTIQ sales were $4.6 million, up from $3.0 million; DEXYCU sales were $4.4 million, up from $3.8 million.
- Cost of sales excluding acquired-intangible amortization was $1.8 million. The corresponding implied product gross margin was approximately 80%, versus approximately 80% in Q1 2021.
- At March 31, cash and cash equivalents were $101.5 million and marketable securities were $89.2 million, totaling $190.8 million. Total current assets were $219.6 million and current liabilities were $32.0 million.
- Debt was approximately $39.6 million: $10.5 million of short-term borrowings and $29.1 million of long-term debt. In March, EyePoint refinanced its CRG loan with SVB facilities: a $30 million term loan and a revolving facility of up to $15 million, of which approximately $11.5 million was drawn at closing. The CRG repayment generated a $1.6 million extinguishment loss.
- Investing activities used $56.4 million, principally reflecting net purchases of marketable securities. Financing activities used $0.4 million net after the debt refinancing and related payments. Cash, cash equivalents and restricted cash declined $77.0 million during the quarter.
Changes versus the prior-year quarter
- Revenue growth reflected higher product sales; management cited increased cataract surgeries and reopened ambulatory surgery centers. Management reported YUTIQ customer demand was flat versus Q4 2021, while DEXYCU demand was up approximately 7%.
- R&D increased 82% to $9.9 million, mainly from added personnel and EYP-1901 clinical and trial-preparation costs. Sales and marketing rose 18% to $6.7 million, and general and administrative expense rose 67% to $8.5 million, including organizational expansion, stock compensation and professional fees.
- The net loss widened by $8.7 million. The increase in expenses outweighed revenue growth; the quarter also included the $1.6 million debt-extinguishment loss.
- Stock-based compensation was $3.5 million, compared with $1.0 million. The company issued no shares under its ATM facility in Q1 2022; the prior-year period included substantial public-offering proceeds.
Outlook, developments and risks
- Management stated that cash, cash equivalents and marketable securities, together with anticipated product-sale cash inflows, were expected to fund the operating plan into the second half of 2024, based on current assumptions for EYP-1901 trials. The filing also notes that estimates and cash needs could change and that additional financing may be required.
- Management expected to initiate EYP-1901 Phase 2 trials for wet AMD in Q3 2022 and for non-proliferative diabetic retinopathy in the second half of 2022; initial wet AMD top-line data was anticipated in the second half of 2023. A DME Phase 2 trial was anticipated in Q1 2023.
- Interim Phase 1 DAVIO data reported by the company showed no dose-limiting toxicities or drug-related serious adverse events. After a single dose, 53% of patients had not required supplemental anti-VEGF treatment through six months and 41% through nine months. These are interim clinical findings, not proof of efficacy or approval.
- EyePoint paused enrollment in the YUTIQ 50 trial while assessing its path forward after updated FDA requirements were expected to require additional trials and materially increase program costs.
- The SVB loan has quarterly product-revenue covenants, with 2022 minimums ranging from approximately $7.8 million to $11.5 million, or an alternative cash-and-cash-burn requirement if revenue thresholds are not met. Debt is secured by substantially all company assets other than intellectual property and includes customary restrictions and potential prepayment premiums.
- DEXYCU Medicare Part B pass-through coverage was scheduled to expire December 31, 2022 unless extended. The company also cited COVID-19-related uncertainty, clinical-trial execution, product commercialization and manufacturing, competition, intellectual-property and financing risks.
- After quarter-end, on May 2, 2022, EyePoint licensed EYP-1901 development and commercialization rights in China, Hong Kong, Macau and Taiwan to Betta Pharmaceuticals for tiered mid-to-high single-digit royalties. Betta is responsible for regional development and commercialization costs. The filing does not disclose an upfront payment or milestone amounts for this agreement.
- Management said routine legal proceedings were not expected to have a material effect, reported no material changes to previously disclosed risk factors, and concluded disclosure controls were effective.
Key facts for investors to verify
- Whether product demand and net sales meet the SVB quarterly covenant thresholds, and the consequences if they do not.
- Cash runway assumptions against actual operating burn, trial costs and commercial cash generation; the filing’s outlook depends on planned trial timing and anticipated sales.
- Progress, safety and efficacy results, enrollment and costs for EYP-1901 trials, and whether the YUTIQ 50 program resumes.
- DEXYCU reimbursement and sales trends, including any extension of Medicare pass-through coverage, and YUTIQ demand after annual deductible resets.
- Terms and execution of the Betta collaboration, including development milestones, supply arrangements and royalty potential.
- The reported weighted-average basic and diluted shares outstanding of 37.3 million versus 34.0 million common shares outstanding at March 31; investors may wish to verify the share-count presentation in the underlying filing.