UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from _______ to _______
COMMISSION FILE NUMBER
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
There were
EYEPOINT PHARMACEUTICALS, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
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Page |
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Item 1. |
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Condensed Consolidated Balance Sheets – September 30, 2022 and December 31, 2021 |
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3 |
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4 |
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5 |
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Condensed Consolidated Statements of Cash Flows – nine months ended September 30, 2022 and 2021 |
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6 |
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7 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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25 |
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Item 3. |
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36 |
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Item 4. |
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36 |
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Item 1. |
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37 |
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Item 1A. |
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37 |
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Item 2. |
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40 |
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Item 3. |
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40 |
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Item 4. |
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40 |
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Item 5. |
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40 |
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Item 6. |
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41 |
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43 |
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Certifications |
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2
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements
EYEPOINT PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands except share data)
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September 30, |
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December 31, |
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2022 |
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2021 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Marketable securities |
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Accounts and other receivables, net |
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Prepaid expenses and other current assets |
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Inventory |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use assets |
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Intangible assets, net |
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Restricted cash |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders' equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Deferred revenue |
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Short-term borrowings |
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Other current liabilities |
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Total current liabilities |
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Long-term debt |
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Deferred revenue - noncurrent |
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Operating lease liabilities - noncurrent |
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Other long-term liabilities |
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Total liabilities |
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Stockholders' equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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( |
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Accumulated other comprehensive income |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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See notes to condensed consolidated financial statements.
3
EYEPOINT PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(In thousands except per share data)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2022 |
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2021 |
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2022 |
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2021 |
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Revenues: |
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Product sales, net |
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$ |
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$ |
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$ |
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$ |
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License and collaboration agreements |
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Royalty income |
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Total revenues |
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Operating expenses: |
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Cost of sales, excluding amortization of acquired intangible assets |
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Research and development |
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Sales and marketing |
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General and administrative |
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Amortization of acquired intangible assets |
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Total operating expenses |
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Loss from operations |
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( |
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( |
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( |
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( |
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Other income (expense): |
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Interest and other income, net |
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Interest expense |
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( |
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( |
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( |
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( |
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Gain (loss) on extinguishment of debt |
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( |
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Total other expense, net |
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( |
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( |
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( |
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Net loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Net loss per share - basic and diluted |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Weighted average shares outstanding - basic and diluted |
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Net loss |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Other comprehensive loss: |
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Unrealized gain (loss) on available-for-sale |
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( |
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Comprehensive loss |
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$ |
( |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
See notes to condensed consolidated financial statements.
4
EYEPOINT PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
(In thousands except share data)
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Common Stock |
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Additional |
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Accumulated |
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Total |
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Number of |
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Par Value |
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Paid-In |
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Accumulated |
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Comprehensive |
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Stockholders’ |
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Balance at July 1, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Issuance of stock, net of issue costs |
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— |
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— |
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— |
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— |
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Employee stock purchase plan |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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Vesting of stock units |
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— |
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( |
) |
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— |
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— |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Balance at September 30, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Balance at July 1, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Net loss |
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— |
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— |
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— |
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( |
) |
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( |
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Other comprehensive loss |
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— |
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— |
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— |
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— |
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Issuance of stock, net of issue costs |
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— |
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— |
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— |
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— |
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— |
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Employee stock purchase plan |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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Vesting of stock units |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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Balance at September 30, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Common Stock |
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Additional |
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Accumulated |
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Total |
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Number of |
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Par Value |
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Paid-In |
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Accumulated |
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Comprehensive |
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Stockholders’ |
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Balance at January 1, 2021 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Issuance of stock, net of issue costs |
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— |
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— |
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Employee stock purchase plan |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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Vesting of stock units |
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— |
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( |
) |
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— |
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— |
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( |
) |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Balance at September 30, 2021 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Balance at January 1, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Other comprehensive loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Issuance of stock, net of issue costs |
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— |
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— |
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— |
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— |
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Employee stock purchase plan |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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Vesting of stock units |
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— |
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( |
) |
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— |
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— |
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( |
) |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Balance at September 30, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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See notes to condensed consolidated financial statements.
5
EYEPOINT PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
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Nine Months Ended |
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September 30, |
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|||||
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2022 |
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2021 |
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Cash flows from operating activities: |
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Net loss |
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$ |
( |
) |
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$ |
( |
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Adjustments to reconcile net loss to cash flows used in |
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Amortization of intangible assets |
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Depreciation of property and equipment |
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Amortization of debt discount and premium and discount on available-for-sale marketable securities |
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( |
) |
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(Gain) loss on extinguishment of debt |
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( |
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Stock-based compensation |
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Changes in operating assets and liabilities: |
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Accounts receivable and other current assets |
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( |
) |
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( |
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Inventory |
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Accounts payable and accrued expenses |
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Right-of-use assets and operating lease liabilities |
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( |
) |
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Deferred revenue |
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( |
) |
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( |
) |
Net cash used in operating activities |
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( |
) |
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( |
) |
Cash flows from investing activities: |
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Purchases of marketable securities |
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( |
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Sales and maturities of marketable securities |
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Purchases of property and equipment |
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( |
) |
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( |
) |
Net cash used in investing activities |
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( |
) |
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( |
) |
Cash flows from financing activities: |
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Proceeds from issuance of stock |
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Proceeds from issuance of long-term debt |
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Payment of equity and debt issue costs |
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( |
) |
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Payment of long-term debt |
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( |
) |
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Payment of extinguishment of debt costs |
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( |
) |
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Borrowings under revolving facility |
|
|
|
|
|
|
||
Repayment under revolving facility |
|
|
( |
) |
|
|
|
|
Net settlement of stock units to satisfy statutory tax withholding |
|
|
( |
) |
|
|
( |
) |
Proceeds from exercise of stock options |
|
|
|
|
|
|
||
Principal payments on finance lease obligations |
|
|
( |
) |
|
|
( |
) |
Net cash (used in) provided by financing activities |
|
|
( |
) |
|
|
|
|
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
|
( |
) |
|
|
|
|
Cash, cash equivalents and restricted cash at beginning of period |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash at end of period |
|
$ |
|
|
$ |
|
||
Supplemental cash flow information: |
|
|
|
|
|
|
||
Cash interest paid |
|
$ |
|
|
$ |
|
||
Supplemental disclosure of non-cash investing and financing activities: |
|
|
|
|
|
|
||
Accrued term loan exit fee |
|
$ |
|
|
$ |
|
||
Payments forgiven under paycheck protection program loan |
|
$ |
|
|
$ |
|
||
See notes to condensed consolidated financial statements.
6
EYEPOINT PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The accompanying condensed consolidated financial statements of EyePoint Pharmaceuticals, Inc., a Delaware corporation (together with its subsidiaries, the “Company”), as of September 30, 2022 and for the three and nine months ended September 30, 2022 and 2021 are unaudited. Certain information in the footnote disclosures of these financial statements has been condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission. These financial statements should be read in conjunction with the Company’s audited consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. In the opinion of management, these statements have been prepared on the same basis as the audited consolidated financial statements as of and for the year ended December 31, 2021, and include all adjustments, consisting only of normal recurring adjustments, that are necessary for the fair presentation of the Company’s financial position, results of operations, comprehensive loss and cash flows for the periods indicated. The preparation of financial statements in accordance with United States (“U.S.”) generally accepted accounting principles requires management to make assumptions and estimates that affect, among other things, (i) reported amounts of assets and liabilities; (ii) disclosure of contingent assets and liabilities at the date of the consolidated financial statements; and (iii) reported amounts of revenues and expenses during the reporting period. The results of operations for the three months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the entire fiscal year or any future period.
The Company is a pharmaceutical company committed to developing and commercializing innovative therapeutics to help improve the lives of patients with serious eye disorders. The Company’s pipeline leverages its proprietary Durasert® technology for sustained intraocular drug delivery including EYP-1901, an investigational sustained delivery anti-VEGF treatment currently in Phase 2 clinical trials for wet age-related macular degeneration (“wet AMD”), the leading cause of vision loss among people 50 years of age and older in the United States and non-proliferative diabetic retinopathy. The Company also has
The Company plans to identify and advance additional pipeline product candidates through clinical and regulatory development. This may be accomplished through internal discovery efforts, research collaborations and/or in-licensing arrangements with partner molecules and potential acquisitions of additional ophthalmic products, product candidates or technologies that complement the Company’s current product portfolio.
Effects of the COVID-19 Coronavirus Pandemic
The ongoing COVID-19 coronavirus pandemic (the “Pandemic”) has had a material and adverse impact on the Company’s business. The duration and full extent to which the Pandemic impacts the Company’s business, revenues, financial condition and cash flows depend on future developments that are highly uncertain, subject to change and are difficult to predict, including new information that may emerge concerning the Pandemic, and may cause intermittent or prolonged periods of reduced patient services at the Company’s customers’ facilities, which may negatively affect customer demand. The Company’s revenues, financial condition and cash flows may be adversely affected in the future as well. The Company is continuously monitoring the Pandemic and its potential effect on the Company’s financial position, results of operations and cash flows. This uncertainty could have an impact in future periods on certain estimates used in the preparation of the Company’s periodic financial results, including reserves for variable consideration related to product sales, realizability of certain receivables, assessment for excess or obsolete inventory and impairment of long-lived assets. Uncertainty around the extent and length of time of the Pandemic, and any future related financial impact cannot be reasonably estimated at this time.
Liquidity
The Company had cash, cash equivalents and investments in marketable securities of $
7
of the Company’s clinical trials for EYP-1901, additional investments in research and development programs, the success of ongoing commercialization efforts for YUTIQ and DEXYCU, the actual costs of these ongoing commercialization efforts, competing technological and market developments and the costs of any strategic acquisitions and/or development of complementary business opportunities.
Recently Adopted and Recently Issued Accounting Pronouncements
New accounting pronouncements are issued periodically by the Financial Accounting Standards Board and are adopted by the Company as of the specified effective dates. The Company believes that recently issued and adopted pronouncements will not have a material impact on the Company’s financial position, results of operations and cash flows or do not apply to the Company’s operations.
Revenue Recognition
Revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, Revenue from Contracts with Customers (“ASC 606”), the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within the contract, determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Sales, value-add and other taxes collected on behalf of third parties are excluded from revenue.
Product sales, net — The Company sells YUTIQ and DEXYCU to a limited number of specialty distributors and specialty pharmacies (collectively the “Distributors”) in the U.S., with whom the Company has entered into formal agreements, for delivery to physician practices for YUTIQ and to hospital outpatient departments and ambulatory surgical centers ("ASCs") for DEXYCU. The Company recognizes revenue on sales of its products when Distributors obtain control of the products, which occurs at a point in time, typically upon delivery. In addition to agreements with Distributors, the Company also enters into arrangements with healthcare providers, ASCs and payors that provide for government mandated and/or privately negotiated rebates, chargebacks and discounts with respect to the purchase of the Company’s products from Distributors.
Reserves for variable consideration — Product sales are recorded at the wholesale acquisition costs, net of applicable reserves for variable consideration. Components of variable consideration include trade discounts and allowances, provider chargebacks and discounts, payor rebates, product returns and other allowances that are offered within contracts between the Company and its Distributors, payors and other contracted purchasers relating to the Company’s product sales. These reserves, as detailed below, are based on the amounts earned, or to be claimed on the related sales, and are classified either as reductions of product revenue and accounts receivable or a current liability, depending on how the amount is to be settled. Overall, these reserves reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the respective underlying contracts. Actual amounts of consideration ultimately received may differ from the Company’s estimates. If actual results in the future vary from the estimates, the Company adjusts product revenue and earnings in the period such variances become known.
Distribution fees — The Company compensates its Distributors for services explicitly stated in the Company’s contracts and are recorded as a reduction of revenue in the period the related product sale is recognized.
Provider chargebacks and discounts — Chargebacks are discounts that represent the estimated obligations resulting from contractual commitments to sell products at prices lower than the list prices charged to the Company’s Distributors. These Distributors charge the Company for the difference between what they pay for the product and the Company’s contracted selling price. These reserves are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability. Reserves for chargebacks consist of amounts that the Company expects to pay for units that remain in the distribution channel inventories at each reporting period-end that the Company expects will be sold under a contracted selling price, and chargebacks that Distributors have claimed, but for which the Company has not yet settled.
8
Government rebates — The Company is subject to discount obligations under state Medicaid programs and Medicare. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included in accrued expenses and other current liabilities on the condensed consolidated balance sheets. The Company’s liability for these rebates consists of invoices received for claims from prior quarters that have not been paid or for which an invoice has not yet been received, estimates of claims for the current quarter, and estimated future claims that will be made for product that has been recognized as revenue, but which remains in the distribution channel inventories at the end of each reporting period.
Payor rebates — The Company contracts with certain private payor organizations, primarily insurance companies, for the payment of rebates with respect to utilization of its products. The Company estimates these rebates and records such estimates in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability.
Co-Payment assistance — The Company offers co-payment assistance to commercially insured patients meeting certain eligibility requirements. The calculation of the accrual for co-pay assistance is based on an estimate of claims and the cost per claim that the Company expects to receive associated with product that has been recognized as revenue.
Product returns — The Company generally offers a limited right of return based on its returned goods policy, which includes damaged product and remaining shelf life. The Company estimates the amount of its product sales that may be returned and records this estimate as a reduction of revenue in the period the related product revenue is recognized, as well as reductions to trade receivables, net on the condensed consolidated balance sheets.
License and collaboration agreement revenue — The Company analyzes each element of its license and collaboration arrangements to determine the appropriate revenue recognition. The terms of the license agreement may include payment to the Company of non-refundable up-front license fees, milestone payments if specified objectives are achieved, and/or royalties on product sales. The Company recognizes revenue from upfront payments at a point in time, typically upon fulfilling the delivery of the associated intellectual property to the customer.
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price based on the estimated relative standalone selling prices of the promised products or services underlying each performance obligation. The Company determines standalone selling prices based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.
The Company recognizes sales-based milestone payments as revenue upon the achievement of the cumulative sales amount specified in the contract in accordance with ASC 606-10-55-65. For those milestone payments which are contingent on the occurrence of particular future events, the Company determines that these need to be considered for inclusion in the calculation of total consideration from the contract as a component of variable consideration using the most-likely amount method. As such, the Company assesses each milestone to determine the probability and substance behind achieving each milestone. Given the inherent uncertainty associated with these future events, the Company will not recognize revenue from such milestones until there is a high probability of occurrence, which typically occurs near or upon achievement of the event.
When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. Applying the practical expedient in paragraph 606-10-32-18, the Company does not assess whether a significant financing component exists if the period between when the Company performs its obligations under the contract and when the customer pays is one year or less. None of the Company’s contracts contained a significant financing component as of September 30, 2022.
Royalties — The Company recognizes revenue from license arrangements with its commercial partners’ net sales of products. Such revenues are included as royalty income. In accordance with ASC 606-10-55-65, royalties are recognized when the subsequent sale of the commercial partner’s products occurs. The Company’s commercial partners are obligated to report their net product sales and the resulting royalty due to the Company typically within 60-days from the end of each quarter. Based on historical product sales, royalty receipts and other relevant information, the Company recognizes royalty income each quarter and subsequently determines a true-up when it receives royalty reports and payment from its commercial partners. Historically, these true-up adjustments have been immaterial.
9
Sale of Future Royalties — The Company has sold its rights to receive certain royalties on product sales. In the circumstance where the Company has sold its rights to future royalties under a royalty purchase agreement and also maintains limited continuing involvement in the arrangement (but not significant continuing involvement in the generation of the cash flows that are due to the purchaser), the Company defers recognition of the proceeds it receives for the sale of royalty streams and recognizes such unearned revenue as revenue under the units-of-revenue method over the life of the underlying license agreement. Under the units-of-revenue method, amortization for a reporting period is calculated by computing a ratio of the proceeds received from the purchaser to the total payments expected to be made to the purchaser over the term of the agreement, and then applying that ratio to the period’s cash payment.
Estimating the total payments expected to be received by the purchaser over the term of such arrangements requires management to use subjective estimates and assumptions. Changes to the Company’s estimate of the payments expected to be made to the purchaser over the term of such arrangements could have a material effect on the amount of revenues recognized in any particular period.
Research Collaborations — The Company recognizes revenue over the term of the statements of work under any funded research collaborations. Revenue recognition for consideration, if any, related to a license option right is assessed based on the terms of any such future license agreement or is otherwise recognized at the completion of the research collaborations.
Please refer to Note 3 for further details on the license and collaboration agreements into which the Company has entered and corresponding amounts of revenue recognized during the current and prior year periods.
Cost of sales, excluding amortization of acquired intangible assets — Cost of sales, excluding amortization of acquired intangible assets, consist of costs associated with the manufacture of YUTIQ and DEXYCU, certain period costs, product shipping and, as applicable, royalty expense. The inventory costs for YUTIQ include purchases of various components, the active pharmaceutical ingredient (“API”) and internal labor and overhead for the product manufactured in the Company’s Watertown, MA facility. The inventory costs for DEXYCU include purchased components, the API and third-party manufacturing and assembly.
For the three months ended September 30, 2022 and 2021, the Company accrued DEXYCU product revenue-based royalty expense of $
Product Revenue Reserves and Allowances
The Company’s product revenues have been primarily from sales of YUTIQ and DEXYCU in the U.S.
Net product revenues by product for the three and nine months ended September 30, 2022 and 2021 were as follows (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
YUTIQ (A) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
DEXYCU (B) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total product sales, net |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
10
The following table summarizes activity in each of the product revenue allowance and reserve categories for the nine months ended September 30, 2022 and 2021 (in thousands):
|
|
Chargebacks, |
|
|
Government |
|
|
|
|
|
|
|
||||
|
|
and Fees |
|
|
Rebates |
|
|
Returns |
|
|
Total |
|
||||
Beginning balance at January 1, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Provision related to sales in the current year |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjustments related to prior period sales |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Deductions applied and payments made |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Ending balance at September 30, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Chargebacks, |
|
|
Government |
|
|
|
|
|
|
|
||||
|
|
and Fees |
|
|
Rebates |
|
|
Returns |
|
|
Total |
|
||||
Beginning balance at January 1, 2021 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Provision related to sales in the current year |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjustments related to prior period sales |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Deductions applied and payments made |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Ending balance at September 30, 2021 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Returns are recorded as a reduction of accounts receivable on the condensed consolidated balance sheets. Chargebacks, discounts and fees and rebates are recorded as a component of accrued expenses on the condensed consolidated balance sheets (See Note 6).
License and Collaboration Agreements and Royalty Income
SWK Royalty Purchase Agreement
On December 17, 2020, the Company entered into a royalty purchase agreement (the “RPA”) with SWK Funding LLC (“SWK”). Under the RPA, the Company sold its right to receive royalty payments on future sales of products subject to a licensing and development agreement, as amended, with Alimera Sciences, Inc. (“Alimera”) (the “Amended Alimera Agreement”) for an upfront cash payment of $
The Company’s ongoing efforts under the Amended Alimera Agreement will consist of continuing to maintain and enforce its patents as well as providing safety data and regulatory support as necessary. None of these obligations require significant efforts on the part of the Company with respect to the generation of sales in the market. The Company will only be required to expend more extensive efforts if litigation were to arise that requires the Company to protect its patents rights pursuant to the terms of the Amended Alimera Agreement. Historically, such a defense has not been required. Similarly, regulatory support and safety data is only provided on an ad-hoc basis depending on the regulatory requests, which has been minimal historically. It remains Alimera’s sole responsibility to manufacture, actively market and promote the products under the Amended Alimera Agreement to generate the sales, which ultimately generate the royalties to be paid to SWK.
The Company classified the proceeds received from SWK as deferred revenue, to be recognized as revenue under the units-of-revenue method over the life of the RPA because of the Company’s limited continuing involvement in the Amended Alimera Agreement. SWK has no recourse, and the Company assumes no credit risk in event that Alimera fails to make a royalty payment. The Company must only forward all material correspondence from Alimera to SWK, including royalty reports, notices and any other correspondence with respect to royalties to SWK. SWK has the right to audit and inspect the books and records pertaining to net sales and royalties under the Amended Alimera Agreement. Neither the Company nor SWK has the unilateral ability to cancel the agreement. There is no cap or limitation on the royalties to be received by SWK in the future and its return will reflect all royalties
11
paid by Alimera. Because the transaction was structured as a non-cancellable sale, the Company does not have significant continuing involvement in the generation of the cash flows due to SWK and there is no limitation on the rates of return to SWK, the Company recorded the total proceeds of $
The Company recognized $
Ocumension Therapeutics
In November 2018, the Company entered into an exclusive license agreement with Ocumension Therapeutics (“Ocumension”) for the development and commercialization of its three-year micro insert using the Durasert technology for the treatment of posterior segment uveitis of the eye (YUTIQ in the U.S.) in Mainland China, Hong Kong, Macau and Taiwan. The Company received a one-time upfront payment of $
The Company was required to provide a fixed number of hours of technical assistance support to Ocumension at no cost. This support has been completed and no future performance obligation exists. Ocumension is responsible for all development, regulatory and commercial costs, including any additional technical assistance requested. Ocumension has a first right of negotiation for an additional exclusive license to the Company’s shorter-duration line extension candidate for this indication.
In August 2019, the Company received a $
In January 2020, the Company entered into an exclusive license agreement with Ocumension for the development and commercialization in Mainland China, Hong Kong, Macau and Taiwan of DEXYCU for the treatment of post-operative inflammation following ocular surgery. Pursuant to the terms of the license agreement, the Company received upfront payments of $
In August 2020, the Company entered into a Memorandum of Understanding, pursuant to which, the Company received a one-time non-refundable payment of $
12
the treatment of posterior segment uveitis of the eye; and (ii) $
Other than a fixed number of hours of technical assistance support to be provided at no cost by the Company, Ocumension is responsible for all development, regulatory and commercial costs, including any additional technical assistance requested. All technical assistance was provided during 2020. The Chief Executive Officer of Ocumension became a director of the Company starting December 31, 2020, pursuant to a Share Purchase Agreement pursuant to which the Company sold to Ocumension
During the three and nine months ended September 30, 2022, in addition to $
Exclusive License Agreement with Betta Pharmaceuticals, Co., Ltd.
On May 2, 2022, the Company entered into an Exclusive License Agreement (the “Betta License Agreement”) with Betta Pharmaceuticals Co., Ltd. (“Betta”), an affiliate of Equinox Sciences, LLC (“Equinox”) (see Note 11). Under the Betta License Agreement, the Company granted to Betta an exclusive, sublicensable, royalty-bearing license under certain of the Company’s intellectual property to develop, use (but not make or have made), sell, offer for sale and import the Company’s product candidate, EYP-1901, an investigational sustained delivery intravitreal anti-VEGF treatment that combines a bioerodible formulation of the Company’s proprietary sustained-release technology with the compound vorolanib (the “Licensed Product”), in the field of ophthalmology (the “Betta Field”) in the Greater Area of China, including China, the Hong Kong Special Administrative Region, the Macau Special Administrative Region, and Taiwan (the “Betta Territory”). The Company retained rights under the Company’s intellectual property to, among other things, conduct clinical trials on the Licensed Product in the Betta Field in the Betta Territory.
In consideration for the rights granted by the Company, Betta agreed to pay the Company tiered, mid-to-high single-digit royalties based upon annual net sales of Licensed Products in the Betta Territory. The royalties are payable on a Licensed Product-by-Licensed Product and region-by-region basis commencing on the first commercial sale of a Licensed Product in a region and continuing until the later of (i) the date that is twelve (12) years after first commercial sale of such Licensed Product in such region, and (ii) the first day of the month following the month in which a generic product corresponding to such Licensed Product is launched in the relevant region. The royalty rate is subject to reduction under certain circumstances, including when there is no valid claim of a licensed patent that covers a Licensed Product in a particular region.
Betta is responsible for all costs relating to development, registration, manufacturing, marketing, advertising, promotional, launch and sales activities in connection with the Licensed Products in the Betta Field in the Betta Territory. Betta is required to use commercially reasonable efforts to develop, seek regulatory approval for, and commercialize at least one Licensed Product in the Betta Field in the Betta Territory. The Betta License Agreement also requires Betta to achieve certain diligence milestones relating to regulatory filings, patient dosing and regulatory approval by certain specified deadlines set forth in the Betta License Agreement, subject to certain exceptions and extensions as set forth in the Betta License Agreement. Betta’s development activities will be conducted pursuant to a development plan subject to periodic updates. In the event that the Company conducts a global registrational clinical trial for a Licensed Product in the Betta Field, Betta will have the right to participate in such clinical trial by including clinical trial sites in the Betta Territory in accordance with the terms of the Betta License Agreement. The Company has also agreed to provide certain technology transfer and other support services to Betta subject to certain conditions and limitations set forth in the Betta License Agreement.
13
Research Collaborations
The Company from time to time enters into agreements to evaluate the potential use of its technologies for sustained release of third-party partner drug candidates. Consideration received is generally recognized as revenue over the term of the research collaborations. Revenue recognition for consideration, if any, related to a license option right is assessed based on the terms of any such future license agreement or is otherwise recognized at the completion of the research collaborations.
Inventory consisted of the following (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
Raw materials |
|
$ |
|
|
$ |
|
||
Work in process |
|
|
|
|
|
|
||
Finished goods |
|
|
|
|
|
|
||
Total inventory |
|
$ |
|
|
$ |
|
||
The reconciliation of intangible assets for the nine months ended September 30, 2022 and 2021 (in thousands) was as follows:
|
|
September 30, |
|
|
September 30, |
|
||
|
|
2022 |
|
|
2021 |
|
||
Patented technologies |
|
|
|
|
|
|
||
Gross carrying amount at beginning of period |
|
$ |
|
|
$ |
|
||
Gross carrying amount at end of period |
|
|
|
|
|
|
||
Accumulated amortization at beginning of period |
|
|
( |
) |
|
|
( |
) |
Amortization expense |
|
|
( |
) |
|
|
( |
) |
Accumulated amortization at end of period |
|
|
( |
) |
|
|
( |
) |
Net book value at end of period |
|
$ |
|
|
$ |
|
||
The Company amortizes intangible assets with finite lives on a straight-line basis over their respective estimated useful lives of
In connection with the Company’s acquisition of Icon Bioscience, Inc., the initial purchase price was attributed to the DEXYCU product intangible asset. This finite-lived intangible asset is being amortized on a straight-line basis over its expected remaining useful life of
DEXYCU Pass-Through Payment Status
On November 1, 2022, the Center for Medicare & Medicaid Services (“CMS”) published in the Federal Register the calendar year (CY) 2023 Medicare Hospital Outpatient Prospective Payment System and ASC Payment System Final Rule (“Final Rule”). The Final Rule terminated the pass-through related separate payment for DEXYCU, which will no longer be separately reimbursed by Medicare as of January 1, 2023, when furnished in hospital outpatient departments and ASC settings. The Final Rule will reduce the amount of Medicare reimbursement provided to the Company’s DEXYCU customers and may result in a significant reduction in the Company’s DEXYCU product revenues (see Note 3). Furthermore, the reduction in the Company’s DEXYCU product revenues is expected to result in a material impairment of the Company’s net intangible asset related to DEXYCU which has a carrying value of $
The Company is evaluating the impact of the Final Rule on its operations, cash flows, intangible asset and its DEXYCU inventory balances. The Company expects that it will record a charge in the fourth quarter related to the impairment of the DEXYCU intangible asset and for excess inventory as a result of the Final Rule. No adjustments have been made to the Company’s September 30, 2022 financial statements as a result of the Final Rule.
14
Accrued expenses consisted of the following at September 30, 2022 and December 31, 2021 (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2022 |
|
|
2021 |
|
||
Personnel costs |
|
$ |
|
|
$ |
|
||
Clinical trial costs |
|
|
|
|
|
|
||
Professional fees |
|
|
|
|
|
|
||
Sales chargebacks, rebates and other revenue reserves |
|
|
|
|
|
|
||
Commissions due to DEXYCU commercial partner |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
On May 17, 2018, the Company amended the lease for its headquarters in Watertown, Massachusetts. The original
On March 8, 2022, the Company further amended the lease (i) to extend the term to
The lease for the New Premises commenced during the third quarter of 2022. The Company occupied the New Premises when the landlord substantially completed its construction for the space, after which the Company’s obligation to pay base rent began. The Company recognized an increase of $
The Company previously provided a cash-collateralized $
The Company identified and assessed the following significant assumptions in recognizing its ROU assets and corresponding lease liabilities:
15
As of September 30, 2022, the weighted average remaining term of the Company’s operating leases was
Supplemental balance sheet information related to operating leases as of September 30, 2022 and December 31, 2021 are as follows (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2022 |
|
|
2021 |
|
||
|
$ |
|
|
$ |
|
|||
Operating lease liabilities – noncurrent portion |
|
|
|
|
|
|
||
Total operating lease liabilities |
|
$ |
|
|
$ |
|
||
Operating lease expense recognized related to ROU assets was $
The Company is a party to
Supplemental balance sheet information related to the finance lease as of September 30, 2022 and December 31, 2021 are as follows (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2022 |
|
|
2021 |
|
||
Property and equipment, at cost |
|
$ |
|
|
$ |
|
||
Accumulated amortization |
|
|
( |
) |
|
|
( |
) |
Property and equipment, net |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
– finance lease current portion |
|
$ |
|
|
$ |
|
||
|
|
— |
|
|
|
|
||
Total finance lease liabilities |
|
$ |
|
|
$ |
|
||
The components of finance lease expense recognized during the three and nine months ended September 30, 2022 were amortization expense of $
As of September 30, 2022, the weighted average remaining term of the Company’s finance leases was
16
The Company’s total future minimum lease payments under non-cancellable leases at September 30, 2022 were as follows (in thousands):
|
|
Operating Leases |
|
|
Finance Leases |
|
||
Remainder of 2022 |
|
$ |
|
|
$ |
|
||
2023 |
|
|
|
|
|
|
||
2024 |
|
|
|
|
|
|
||
2025 |
|
|
|
|
|
|
||
2026 |
|
|
|
|
|
|
||
Thereafter |
|
|
|
|
|
|
||
Total lease payments |
|
$ |
|
|
$ |
|
||
Less imputed interest |
|
|
( |
) |
|
|
( |
) |
Total |
|
$ |
|
|
$ |
|
||
CRG Term Loan Agreement
On
The total debt discount related to the CRG Initial Advance was approximately $
The total debt discount related to the CRG Second Advance was approximately $
The CRG Loan was originally scheduled to mature on
On March 9, 2022, the Company repaid the remaining CRG Loan balance totaling $
SVB Loan Agreement
On March 9, 2022 (the “SVB Closing Date”), the Company entered into a loan and security agreement (the “SVB Loan Agreement”) with Silicon Valley Bank (“SVB”) providing for (i) a senior secured term loan facility of $
17
The loans under the Credit Facilities are due and payable on
The repayment of all unpaid principal and accrued interest under the Credit Facilities may be accelerated upon consummation of a specified change of control transaction or the occurrence of certain other events of default (as specified in the SVB Loan Agreement). Subject to certain exceptions, the Company is also required to make mandatory prepayments of outstanding loans under the Credit Facilities with the proceeds of assets sales and insurance proceeds, which amounts in the case of the Revolving Facility, subject to the conditions set forth in the SVB Loan Agreement, may be re-borrowed. All voluntary and mandatory prepayments of the Term Facility are subject to the payment of prepayment premiums as follows: (i) if prepayment occurs on or prior to the first anniversary of the SVB Closing Date, an amount equal to
The obligations of the Company under the SVB Loan Agreement are secured by a pledge of substantially all of the Company’s assets, excluding intellectual property. Certain of the Company’s future subsidiaries will be required to become co-borrowers under the SVB Loan Agreement or guarantee the obligations of the Company under the SVB Loan Agreement. In addition, such subsidiaries will be required to pledge substantially all of their assets, excluding intellectual property, to secure the obligations of the Company under the SVB Loan Agreement.
The SVB Loan Agreement contains affirmative and negative covenants customary for financings of this type, including limitations on the Company and its subsidiaries’ abilities, among other things, to incur additional debt, grant or permit additional liens, make investments and acquisitions, merge or consolidate with others, dispose of assets, pay dividends and distributions, enter into affiliate transactions and change its line of business, in each case, subject to certain exceptions. In addition, the SVB Loan Agreement contains the following quarterly financial covenants requiring the Company to maintain either:
Amortization of debt discount under the SVB Loan Agreement totaled $
18
The Company’s scheduled principal payments for debt at September 30, 2022 were as follows (in thousands):
Remainder of 2022 |
|
|
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
Equity Financings
Common Stock Offering
In February 2021, the Company sold
There were
ATM Facility
In August 2020, the Company entered into an at-the-market facility (the “ATM Facility”) with Cantor Fitzgerald & Co (“Cantor”). Pursuant to the ATM Facility, the Company may, at its option, offer and sell shares of its common stock from time to time, through or to Cantor, acting as sales agent. The Company will pay Cantor a commission of
During the three and nine months ended September 30, 2022, the Company did
During the three months ended September 30, 2021, the Company did
Warrants to Purchase Common Shares
The following table provides a reconciliation of fixed price warrants to purchase shares of the Company’s common stock for the nine months ended September 30, 2022 and 2021:
|
|
Nine Months Ended September 30, 2022 |
|
|||||||||||||
|
|
2022 |
|
|
2021 |
|
||||||||||
|
|
|
|
|
Weighted |
|
|
|
|
|
Weighted |
|
||||
|
|
|
|
|
Average |
|
|
|
|
|
Average |
|
||||
|
|
Number of |
|
|
Exercise |
|
|
Number of |
|
|
Exercise |
|
||||
|
|
Warrants |
|
|
Price |
|
|
Warrants |
|
|
Price |
|
||||
Balance at beginning of period |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Balance and exercisable at end of period |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Pursuant to a credit agreement, the Company issued a warrant to SWK Funding LLC to purchase (i)
19
Equity Incentive Plan
The 2016 Long-Term Incentive Plan (the “2016 Plan”), approved by the Company’s stockholders on December 12, 2016 (the “Adoption Date”), provides for the issuance of up to
The Company also granted non-statutory stock options to new employees as inducement awards to enter into employment with the Company. The grants were approved by the Compensation Committee of the Board of Directors and awarded in accordance with Nasdaq Listing Rule 5635(c)(4). Although not awarded under the 2016 Plan or the 2008 Plan, the grants are subject to and governed by the terms and conditions of the 2016 Plan or 2008 Plan, as applicable.
Stock Options
The following table provides a reconciliation of stock option activity under the Company’s equity incentive plans and for inducement awards for the nine months ended September 30, 2022:
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
||||
|
|
|
|
|
Weighted |
|
|
Average |
|
|
|
|
||||
|
|
|
|
|
Average |
|
|
Remaining |
|
|
Aggregate |
|
||||
|
|
Number |
|
|
Exercise |
|
|
Contractual |
|
|
Intrinsic |
|
||||
|
|
of Options |
|
|
Price |
|
|
Life |
|
|
Value |
|
||||
|
|
|
|
|
|
|
|
(in years) |
|
|
(in thousands) |
|
||||
Outstanding at January 1, 2022 |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Expired |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Outstanding at September 30, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Exercisable at September 30, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
The Company has granted stock options with 25% of the option vesting after
In determining the grant date fair value of option awards during the nine months ended September 30, 2022, the Company applied the Black-Scholes option pricing model based on the following key assumptions:
Option life (in years) |
|
|
Stock volatility |
|
|
Risk-free interest rate |
|
|
Expected dividends |
|
20
The following table summarizes information about employee, non-executive director and external consultant stock options for the nine months ended September 30, 2022 (in thousands except per share amount):
|
|
Nine Months |
|
|
|
|
Ended |
|
|
|
|
September 30, 2022 |
|
|
Weighted average grant date fair value per share |
|
$ |
|
|
Total cash received from exercise of stock options |
|
|
|
|
Total intrinsic value of stock options exercised |
|
|
|
|
Time-Vested Restricted Stock Units
Time-vested restricted stock units (“RSUs”) issued to date under the 2016 Plan generally vest on a ratable annual basis over
The following table provides a reconciliation of RSU activity under the 2016 Plan for the nine months ended September 30, 2022:
|
|
|
|
|
Weighted |
|
||
|
|
Number of |
|
|
Average |
|
||
|
|
Restricted |
|
|
Grant Date |
|
||
|
|
Stock Units |
|
|
Fair Value |
|
||
Nonvested at January 1, 2022 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Nonvested at September 30, 2022 |
|
|
|
|
$ |
|
||
At September 30, 2022, the weighted average remaining vesting term of the RSUs was
Employee Stock Purchase Plan
On June 25, 2019, the Company’s stockholders approved the adoption of the EyePoint Pharmaceuticals, Inc. 2019 Employee Stock Purchase Plan (the “ESPP”) and authorized up to
The Company estimated the fair value of the option component of the ESPP shares at the date of grant using a Black-Scholes valuation model. During the three and nine months ended September 30, 2022, the compensation expense from ESPP shares was approximately $
21
Stock-Based Compensation Expense
The Company’s consolidated statements of comprehensive loss included total compensation expense from stock-based payment awards for the three and nine months ended September 30, 2022 and 2021, respectively, as follows (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Compensation expense included in: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Sales and marketing |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
At September 30, 2022, there was approximately $
Equinox Science, LLC
In February 2020, the Company entered into an Exclusive License Agreement (the “Equinox License Agreement”) with Equinox, pursuant to which Equinox granted the Company an exclusive, sublicensable, royalty-bearing right and license to certain patents and other Equinox intellectual property to research, develop, make, have made, use, sell, offer for sale and import the compound vorolanib and any pharmaceutical products comprising the compound for local delivery to the eye for the prevention or treatment of age-related macular degeneration, diabetic retinopathy and retinal vein occlusion using the Company’s proprietary localized delivery technologies (the “Original Field”), in each case, throughout the world except China, Hong Kong, Taiwan and Macau (the “Company Territory”).
In consideration for the rights granted by Equinox, the Company (i) made a one time, non-refundable, non-creditable upfront cash payment of $
The Company also agreed to pay Equinox tiered royalties based upon annual net sales of licensed products in the Company Territory. The royalties are payable with respect to a licensed product in a particular country in the Company Territory on a country-by-country and licensed product-by-licensed product basis until the later of (i) twelve years after the first commercial sale of such licensed product in such country and (ii) the first day of the month following the month in which a generic product corresponding to such licensed product is launched in such country. The royalty rates range from the high-single digits to low-double digits depending on the level of annual net sales. The royalty rates are subject to reduction during certain periods when there is no valid patent claim that covers a licensed product in a particular country.
On May 2, 2022, concurrent with the Company entering into the Betta License Agreement, the Company entered into Amendment #1 to the Equinox License Agreement, pursuant to which the Original Field was expanded to cover the prevention or treatment of ophthalmology indications using the Company’s proprietary localized delivery technologies and certain conforming changes were made to the Equinox License Agreement in connection therewith.
22
The following tables summarize the Company’s assets by significant categories carried at fair value measured on a recurring basis at September 30, 2022 and December 31, 2021 by valuation hierarchy (in thousands):
|
|
September 30, 2022 |
|
|||||||||||||||||||||
|
|
Carrying |
|
|
Gross |
|
|
Gross |
|
|
Fair Value |
|
|
Cash |
|
|
Marketable Securities |
|
||||||
Level 1: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Money market funds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Subtotal |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Level 2: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commercial paper |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
U.S. treasury securities |
|
|
|
|
|
|
|
|
( |
) |
|
$ |
|
|
|
|
|
$ |
|
|||||
Subtotal |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Total |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||
|
|
December 31, 2021 |
|
|||||||||||||||||||||
|
|
Carrying |
|
|
Gross |
|
|
Gross |
|
|
Fair Value |
|
|
Cash |
|
|
Marketable Securities |
|
||||||
Level 1: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Money market funds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Subtotal |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Level 2: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commercial paper |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Subtotal |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
At September 30, 2022, substantially all of the Company’s interest-bearing cash equivalent balances, were concentrated in one U.S. Government institutional money market fund that had investments consisting primarily of U.S. Government Agency debt, U.S. Treasury Repurchase Agreements and U.S. Government Agency Repurchase Agreements. Generally, these deposits may be redeemed upon demand and, therefore, the Company believes they have minimal risk. Marketable securities consist of investments with an original or remaining maturity of greater than three months but less than one year at the date of purchase. The Company had investments of $
At December 31, 2021, a total of $
The Company’s cash equivalents and marketable securities are classified within Level 1 or Level 2 on the basis of valuations using quoted market prices or alternative pricing sources and models utilizing market observable inputs, respectively. The marketable securities have been valued on the basis of valuations provided by third-party pricing services, as derived from such services’ pricing models. Inputs to the models may include, but are not limited to, reported trades, executable bid and ask prices, broker/dealer quotations, prices or yields of securities with similar characteristics, benchmark curves or information pertaining to the issuer, as well as industry and economic events. The pricing services may use a matrix approach, which considers information regarding securities with similar characteristics to determine the valuation for a security, and have been classified as Level 2.
The carrying amounts of accounts receivable, accounts payable and accrued expenses approximate fair value because of their short-term maturity.
The carrying amounts of the short-term borrowings and long-term debt under the Company’s SVB Loan Agreement approximate the estimated fair value. These borrowings under the Credit Facilities have a variable interest rate structure and are classified within Level 2 of the fair value hierarchy.
23
Legal Proceedings
The Company is subject to various routine legal proceedings and claims incidental to its business, which management believes will not have a material effect on the Company’s financial position, results of operations or cash flows.
U.S. Department of Justice Subpoena
In August 2022, the Company received a subpoena from the U.S. Attorney’s Office for the District of Massachusetts seeking production of documents related to sales, marketing and promotional practices, including as pertain to DEXYCU® (“DOJ Investigation”). The Company is cooperating fully with the government in connection with this matter. At this time, the Company is unable to predict the duration, scope or outcome of this matter or whether it could have a material impact on the Company’s financial condition, results of operation or cash flow.
Basic net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. For periods in which the Company reports net income, diluted net income per share is determined by adding to the basic weighted average number of common shares outstanding the total number of dilutive common equivalent shares using the treasury stock method, unless the effect is anti-dilutive. Potentially dilutive shares were not included in the calculation of diluted net loss per share for each of the three and nine months ended September 30, 2022 and 2021 as their inclusion would be anti-dilutive.
Potential common stock equivalents excluded from the calculation of diluted earnings per share because the effect would have been anti-dilutive were as follows:
|
|
Nine Months Ended |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Stock options |
|
|
|
|
|
|
||
ESPP |
|
|
|
|
|
|
||
Warrants |
|
|
|
|
|
|
||
Restricted stock units |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
24
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Note Regarding Forward-Looking Statements
Various statements made in this Quarterly Report on Form 10-Q are forward-looking and involve risks and uncertainties. All statements that address activities, events or developments that we intend, expect or believe may occur in the future are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements give our current expectations or forecasts of future events and are not statements of historical or current facts. These statements include, among others, statements about:
Forward-looking statements also include statements other than statements of current or historical fact, including, without limitation, all statements related to any expectations of revenues, expenses, cash flows, earnings or losses from operations, cash required to maintain current and planned operations, capital or other financial items; any statements of the plans, strategies and objectives of management for future operations; any plans or expectations with respect to product research, development and commercialization, including regulatory approvals; any other statements of expectations, plans, intentions or beliefs; and any statements of assumptions underlying any of the foregoing. We often, although not always, identify forward-looking statements by using words or phrases such as “likely”, “expect”, “intend”, “anticipate”, “believe”, “estimate”, “plan”, “project”, “forecast” and “outlook”.
The following are some of the factors that could cause actual results to differ materially from the anticipated results or other expectations expressed, anticipated or implied in our forward-looking statements:
25
We cannot guarantee that the results and other expectations expressed, anticipated or implied in any forward-looking statement will be realized. The risks set forth under Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 describe major risks to our business, and you should read and interpret any forward-looking statements together with these risks. A variety of factors, including these risks, could cause our actual results and other expectations to differ materially from the anticipated results or other expectations expressed, anticipated or implied in our forward-looking statements. Should known or unknown risks materialize, or should underlying assumptions prove inaccurate, actual results could differ materially from past results and those anticipated, estimated or projected in the forward-looking statements. You should bear this in mind as you consider any forward-looking statements.
Our forward-looking statements speak only as of the dates on which they are made. We do not undertake any obligation to publicly update or revise our forward-looking statements even if experience or future changes makes it clear that any projected results expressed or implied in such statements will not be realized.
Our Business
Overview
We are a pharmaceutical company committed to developing and commercializing innovative therapeutics to help improve the lives of patients with serious eye disorders. Our pipeline leverages our proprietary Durasert® technology for sustained intraocular drug delivery including EYP-1901, an investigational sustained delivery intravitreal anti-VEGF treatment currently in Phase 2 clinical trials for wet AMD, the leading cause of vision loss among people 50 years of age and older in the United States, and NPDR. We also have two commercial products: YUTIQ®, a once every three-year treatment for posterior segment uveitis, and DEXYCU®, a single dose treatment for postoperative inflammation following ocular surgery.
Recent Developments
26
R&D Highlights
27
Critical Accounting Policies and Estimates
The preparation of consolidated financial statements in conformity with GAAP requires that we make certain estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. We base our estimates, judgments and assumptions on historical experience, anticipated results and trends, and on various other factors that we believe are reasonable under the circumstances at the time. By their nature, these estimates, judgments and assumptions are subject to an inherent degree of uncertainty. Actual results may differ from our estimates under different assumptions or conditions. In our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, we set forth our critical accounting policies and estimates, which included revenue recognition, reserves for variable consideration associated with our commercial revenue and recognition of expense in outsourced clinical trial agreements. See Note 2 of the notes to our unaudited condensed consolidated financial statements contained in this quarterly report on Form 10-Q for a description of our accounting policies and estimates for reserves for variable consideration related to product sales.
28
Results of Operations
Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021:
|
|
Three Months Ended |
|
|
|
|
||||||||||
|
|
September 30, |
|
|
Change |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
Amounts |
|
|
% |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Product sales, net |
|
$ |
9,720 |
|
|
$ |
8,587 |
|
|
$ |
1,133 |
|
|
|
13 |
% |
License and collaboration agreements |
|
|
52 |
|
|
|
159 |
|
|
|
(107 |
) |
|
|
-67 |
% |
Royalty income |
|
|
240 |
|
|
|
313 |
|
|
|
(73 |
) |
|
|
-23 |
% |
Total revenues |
|
|
10,012 |
|
|
|
9,059 |
|
|
|
953 |
|
|
|
11 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of sales, excluding amortization of acquired intangible assets |
|
|
1,405 |
|
|
|
1,825 |
|
|
|
(420 |
) |
|
|
-23 |
% |
Research and development |
|
|
11,162 |
|
|
|
8,498 |
|
|
|
2,664 |
|
|
|
31 |
% |
Sales and marketing |
|
|
6,016 |
|
|
|
7,374 |
|
|
|
(1,358 |
) |
|
|
-18 |
% |
General and administrative |
|
|
9,212 |
|
|
|
6,060 |
|
|
|
3,152 |
|
|
|
52 |
% |
Amortization of acquired intangible assets |
|
|
615 |
|
|
|
615 |
|
|
|
— |
|
|
|
0 |
% |
Total operating expenses |
|
|
28,410 |
|
|
|
24,372 |
|
|
|
4,038 |
|
|
|
17 |
% |
Loss from operations |
|
|
(18,398 |
) |
|
|
(15,313 |
) |
|
|
(3,085 |
) |
|
|
20 |
% |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest and other income, net |
|
|
640 |
|
|
|
6 |
|
|
|
634 |
|
|
|
10567 |
% |
Interest expense |
|
|
(662 |
) |
|
|
(1,388 |
) |
|
|
726 |
|
|
|
-52 |
% |
Gain (loss) on extinguishment of debt |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0 |
% |
Total other income (expense), net |
|
|
(22 |
) |
|
|
(1,382 |
) |
|
|
1,360 |
|
|
|
-98 |
% |
Net loss |
|
$ |
(18,420 |
) |
|
$ |
(16,695 |
) |
|
$ |
(1,725 |
) |
|
|
10 |
% |
Net loss per share - basic and diluted |
|
$ |
(0.49 |
) |
|
$ |
(0.58 |
) |
|
$ |
0.09 |
|
|
|
-16 |
% |
Weighted average shares outstanding - basic and diluted |
|
|
37,338 |
|
|
|
28,766 |
|
|
|
8,572 |
|
|
|
30 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
(18,420 |
) |
|
$ |
(16,695 |
) |
|
$ |
(1,725 |
) |
|
|
10 |
% |
Product Sales, Net
Product sales, net represents the gross sales of YUTIQ and DEXYCU less provisions for product sales allowances. Product sales, net increased by $1.1 million, or 13%, to $9.7 million for the three months ended September 30, 2022 compared to $8.6 million for the three months ended September 30, 2021. Customer demand has a direct impact on product orders from our specialty distributors that we record as net product sales. Net product revenue represents product purchased by our distributors whereas customer demand represents purchases of product by physician practices and ASCs from our specialty distributors. The progression of the Pandemic and its effects on our business and operations remain uncertain at this time. Depending on future developments that are uncertain and difficult to predict, including new information that may emerge concerning the Pandemic, our customer demand may be adversely affected in the future.
License and Collaboration Agreement
License and collaboration agreement revenues decreased by $107,000, or 67%, to $52,000 for the three months ended September 30, 2022 compared to $159,000 for the three months ended September 30, 2021. The decrease was primarily due to the reduction of revenue from Ocumension by $69,000 for the three months ended September 30, 2022.
Royalty Income
Royalty income decreased by $73,000, or 23%, to $240,000 for the three months ended September 30, 2022 compared to $313,000 for the three months ended September 30, 2021. The decrease was attributable to higher non-cash Alimera royalties payable to SWK.
29
Cost of Sales, Excluding Amortization of Acquired Intangible Assets
Cost of sales, excluding amortization of acquired intangible assets, decreased by $420,000, or 23%, to $1.4 million for the three months ended September 30, 2022 from $1.8 million for the three months ended September 30, 2021. This decrease was primarily attributable to decreased costs associated with lower costs of goods, royalties, and distribution fees due to product mix.
Research and Development
Research and development expenses increased by $2.7 million, or 31%, to $11.2 million for the three months ended September 30, 2022 from $8.5 million for the same period in the prior year. This increase was attributable primarily to (i) $1.9 million of personnel related costs for investment in new employees across the research and clinical organizations, including $558,000 of stock based compensation, and (ii) $1.0 million in increased clinical trial costs, primarily related to the completion of our EYP-1901 Phase 1 DAVIO clinical trial and initiation costs for Phase 2 DAVIO2 and PAVIA clinical trials. These increases were partially offset by $203,000 in lower early stage research and development expense.
Sales and Marketing
Sales and marketing expenses decreased by $1.4 million, or 18%, to $6.0 million for the three months ended September 30, 2022 from $7.4 million for the same period in the prior year. This decrease was primarily attributable to lower DEXYCU promotional activities related to the transition to our commercial partner, ImprimisRx, including (i) a $637,000 decrease in DEXYCU marketing and promotional expense, (ii) a $415,000 decrease in DEXYCU personnel expense, (iii) a $179,000 decrease of commission due to our commercial partner for DEXYCU, and (iv) a $129,000 decrease in other marketing and related expenses not specific to DEXYCU.
General and Administrative
General and administrative expenses increased by $3.2 million, or 52%, to $9.2 million for the three months ended September 30, 2022 from $6.1 million for the same period in the prior year. This increase was attributable primarily to (i) $1.6 million in personnel expense, including $228,000 of stock-based compensation, for organizational expansion across executive, Finance, HR, and IT functions, (ii) $876,000 in legal, consulting, insurance, and other professional services, (iii) $328,000 of IT and systems related expense, and (iv) $378,000 of other expense.
Amortization of Acquired Intangible Assets
Amortization of acquired intangible assets totaled $615,000 for both the three months ended September 30, 2022 as well as the same period in the prior year. This amount was attributable to the DEXYCU product intangible asset that resulted from the Icon Acquisition (see Note 5).
Interest (Expense) Income
Interest expense totaled $662,000 for the three months ended September 30, 2022. We incurred lower interest expense due to the conversion of debt from the CRG Loan to the SVB Loan, which carries a lower interest rate. Interest expense in the three months ended September 30, 2021 was $1.4 million.
Interest income from amounts invested in marketable securities and institutional money market funds increased to $640,000 for the three months ended September 30, 2022 compared to $6,000 in the prior year quarter, due primarily to an increase in cash invested in marketable securities in the current year.
30
Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021:
|
|
Nine Months Ended |
|
|
|
|
||||||||||
|
|
September 30, |
|
|
Change |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
Amounts |
|
|
% |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Product sales, net |
|
$ |
30,048 |
|
|
$ |
24,127 |
|
|
$ |
5,921 |
|
|
|
25 |
% |
License and collaboration agreements |
|
|
160 |
|
|
|
594 |
|
|
|
(434 |
) |
|
|
-73 |
% |
Royalty income |
|
|
663 |
|
|
|
674 |
|
|
|
(11 |
) |
|
|
-2 |
% |
Total revenues |
|
|
30,871 |
|
|
|
25,395 |
|
|
|
5,476 |
|
|
|
22 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of sales, excluding amortization of acquired intangible assets |
|
|
4,916 |
|
|
|
5,144 |
|
|
|
(228 |
) |
|
|
-4 |
% |
Research and development |
|
|
34,099 |
|
|
|
19,582 |
|
|
|
14,517 |
|
|
|
74 |
% |
Sales and marketing |
|
|
19,592 |
|
|
|
19,692 |
|
|
|
(100 |
) |
|
|
-1 |
% |
General and administrative |
|
|
26,321 |
|
|
|
16,358 |
|
|
|
9,963 |
|
|
|
61 |
% |
Amortization of acquired intangible assets |
|
|
1,845 |
|
|
|
1,845 |
|
|
|
— |
|
|
|
0 |
% |
Total operating expenses |
|
|
86,773 |
|
|
|
62,621 |
|
|
|
24,152 |
|
|
|
39 |
% |
Loss from operations |
|
|
(55,902 |
) |
|
|
(37,226 |
) |
|
|
(18,676 |
) |
|
|
50 |
% |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest and other income, net |
|
|
1,067 |
|
|
|
286 |
|
|
|
781 |
|
|
|
273 |
% |
Interest expense |
|
|
(2,408 |
) |
|
|
(4,110 |
) |
|
|
1,702 |
|
|
|
-41 |
% |
Gain (loss) on extinguishment of debt |
|
|
(1,559 |
) |
|
|
2,065 |
|
|
|
(3,624 |
) |
|
|
-175 |
% |
Total other income (expense), net |
|
|
(2,900 |
) |
|
|
(1,759 |
) |
|
|
(1,141 |
) |
|
|
65 |
% |
Net loss |
|
$ |
(58,802 |
) |
|
$ |
(38,985 |
) |
|
$ |
(19,817 |
) |
|
|
51 |
% |
Product Sales, Net
Product sales, net represents the gross sales of YUTIQ and DEXYCU less provisions for product sales allowances. Product sales, net increased by $5.9 million, or 25%, to $30.0 million for the nine months ended September 30, 2022 compared to $24.1 million for the nine months ended September 30, 2021. The increase was driven by increases in cataract surgeries, re-opening of ASCs, and ongoing sales efforts. Customer demand has a direct impact on product orders from our specialty distributors that we record as net product sales. Net product revenue represents product purchased by our distributors whereas customer demand represents purchases of product by physician practices and ASCs from our distributors. The progression of the Pandemic and its effects on our business and operations remain uncertain at this time. Depending on future developments that are uncertain and difficult to predict, including new information that may emerge concerning the Pandemic, our customer demand may be adversely affected in the future. The impact of the termination of pass-through related separate payment status for DEXYCU will materially decrease our revenues from sales of DEXYCU.
License and Collaboration Agreement
License and collaboration agreement revenues decreased by $434,000, or 73%, to $160,000 for the nine months ended September 30, 2022 compared to $594,000 for the nine months ended September 30, 2021. The decrease was primarily due to the reduction of revenue from Ocumension by $322,000 for the nine months ended September 30, 2022.
Royalty Income
Royalty income decreased by $11,000, or 2%, to $663,000 for the nine months ended September 30, 2022 compared to $674,000 for the nine months ended September 30, 2021. The decrease was attributable to lower non-cash Alimera royalties payable to SWK.
Cost of Sales, Excluding Amortization of Acquired Intangible Assets
Cost of sales, excluding amortization of acquired intangible assets, decreased by $228,000, or 4%, to $4.9 million for the nine months ended September 30, 2022 from $5.1 million for the nine months ended September 30, 2021. This decrease was primarily attributable to decreased costs associated with lower costs of goods, royalties, and distribution fees due to product mix.
31
Research and Development
Research and development expenses increased by $14.5 million, or 74%, to $34.1 million for the nine months ended September 30, 2022 from $19.6 million for the same period in the prior year. This increase was attributable primarily to (i) $8.8 million of personnel related costs for investment in new employees across the research and clinical organizations, including $3.5 million of stock-based compensation, and (ii) $4.7 million in increased clinical costs, primarily related to the completion of our EYP-1901 Phase 1 DAVIO clinical trial and initiation of Phase 2 DAVIO2 and PAVIA clinical trials, and $1.1 million of other research and development activities.
Sales and Marketing
Sales and marketing expenses decreased by $100,000, or 1%, to $19.6 million for the nine months ended September 30, 2022 from $19.7 million for the same period in the prior year. This decrease was primarily attributable to lower DEXYCU promotional activities related to the transition to our commercial partner, ImprimisRx, including (i) a $683,000 decrease in DEXYCU personnel expense, and (ii) a $589,000 decrease in DEXYCU marketing expense. These decreases were partially offset by (i) a $1.0 million increase in commission due to our commercial partner for DEXYCU, and (ii) a $204,000 increase in other promotional and related expenses.
General and Administrative
General and administrative expenses increased by $10.0 million, or 61%, to $26.3 million for the nine months ended September 30, 2022 from $16.4 million for the same period in the prior year. This increase was attributable primarily to (i) $6.4 million in personnel expense, including $2.3 million of stock-based compensation, for organizational expansion across executive, Finance, HR, and IT functions, (ii) $2.0 million in consulting, legal, and other professional services, (iii) $867,000 in facilities and IT expenses, and (iv) $683,000 in other miscellaneous administrative expenses.
Amortization of Acquired Intangible Assets
Amortization of acquired intangible assets totaled $1.8 million for both the nine months ended September 30, 2022 as well as the same period in the prior year. This amount was attributable to the DEXYCU product intangible asset that resulted from the Icon Acquisition (see Note 5).
Extinguishment of Debt (Expense) Income
Loss on extinguishment of debt for the nine months ended September 30, 2022 was for the early repayment of the CRG Loan resulting in a $1.6 million write-off of the remaining balance of unamortized debt discount.
Gain on extinguishment of debt for the nine months ended September 30, 2021 was for forgiveness by the SBA of our PPP Loan, which consisted of approximately (i) $2.0 million of principal and (ii) $24,000 of interest in 2021.
Interest (Expense) Income
Interest expense totaled $2.4 million for the nine months ended September 30, 2022. We incurred lower interest expense due to the conversion of debt from the CRG Loan to the SVB Loan, which carries a lower interest rate. Interest expense in the nine months ended September 30, 2021 was $4.1 million.
Interest income from investments in marketable securities and institutional money market funds increased to $1.1 million for the nine months ended September 30, 2022 compared to $286,000 in the prior year quarter, due primarily to higher cash balances invested in marketable securities in the current year.
Liquidity and Capital Resources
We have had a history of operating losses and an absence of significant recurring cash inflows from revenue, and at September 30, 2022 we had a total accumulated deficit of $627.9 million. Our operations have been financed primarily from sales of our equity securities, issuance of debt and a combination of license fees, milestone payments, royalty income and other fees received from collaboration partners. In the first quarter of 2019, we commenced the U.S. launch of our first two commercial products, YUTIQ and DEXYCU. However, we have not received sufficient revenues from our product sales to fund operations and we do not expect revenues from our product sales to generate sufficient funding to sustain our operations in the near-term.
32
Financing Activities
During the nine months ended September 30, 2021, we recorded net proceeds of $107.9 million from the issuance of shares of our common stock (“Common Stock”) in an underwritten public offering (see Note 9). We also sold shares of our Common Stock under our at-the-market facility during the nine months ended September 30, 2021 and recorded net proceeds of approximately $499,000. During the nine months ended September 30, 2022, we did not sell any shares of our common stock under the at-the-market facility but the program remains available for use.
On March 9, 2022 (the “SVB Closing Date”), we entered into a loan and security agreement (the “SVB Loan Agreement”) with Silicon Valley Bank (“SVB”) providing for (i) a senior secured term loan facility of $30.0 million (the “Term Facility”) and (ii) a senior secured revolving credit facility of up to $15.0 million (the “Revolving Facility” and together with the Term Facility, the “Credit Facilities”). The maximum amount available for borrowing at any time under the Revolving Facility is limited to a borrowing base valuation of our eligible accounts receivable. On the SVB Closing Date, $30.0 million of the Term Facility and $11.5 million of the Revolving Facility, were advanced, to pay off the CRG Loan, including the accrued interest through that date.
The loans under the Credit Facilities are due and payable on January 1, 2027 (the “SVB Maturity Date”). The Credit Facilities bear interest that is payable monthly in arrears at a per annum rate (subject to increase during an event of default) equal to (i) with respect to the Term Facility, the greater of (x) the Wall Street Journal prime rate plus 2.25% and (y) 5.50% and (ii) with respect to the Revolving Facility, the Wall Street Journal Prime Rate. An unused commitment fee of 0.25% per annum applies to unutilized borrowing capacity under the Revolving Facility. Commencing on February 1, 2024, we are required to repay the principal of the Term Facility in 36 consecutive equal monthly installments. At maturity or if earlier prepaid, we will also be required to pay an exit fee equal to 2.00% of the aggregate principal amount of the Term Facility.
The repayment of all unpaid principal and accrued interest under the Credit Facilities may be accelerated upon consummation of a specified change of control transaction or the occurrence of certain other events of default (as specified in the SVB Loan Agreement). Subject to certain exceptions, we are also required to make mandatory prepayments of outstanding loans under the Credit Facilities with the proceeds of asset sales and insurance proceeds, which amounts in the case of the Revolving Facility, subject to the conditions set forth in the SVB Loan Agreement, may be re-borrowed. In addition, we may make a voluntary prepayment of the SVB Loan, in whole but not in part, at any time. All mandatory and voluntary prepayments of the Term Facility are subject to the payment of prepayment premiums as follows: (i) if prepayment occurs on or prior to March 9, 2023, 3% of the aggregate outstanding principal amount of the Term Facility being prepaid, (ii) if prepayment occurs after March 9, 2023 but on or prior to March 9, 2024, an amount equal to 2% of the aggregate outstanding principal amount of the Term Facility being prepaid, (iii) if prepayment occurs after March 9, 2024 but on or prior to March 9, 2025, an amount equal to 1% of the aggregate outstanding principal amount of the Term Facility being prepaid, and (iv) if prepayment occurs after March 9, 2025 but prior to January 1, 2027, an amount equal to 0.5% of the aggregate outstanding principal amount of the Term Facility being prepaid. We may voluntarily terminate the Revolving Facility at any time, subject to the payment of a termination fee as follows: (i) if such termination occurs on or prior to March 9, 2023, an amount equal to 3.0% of the Revolving Facility and (ii) if such termination occurs after March 9, 2023, 1.0% of the Revolving Facility.
Certain of our future subsidiaries will be required to become co-borrowers under the SVB Loan Agreement or guarantee the obligations of ours under the SVB Loan Agreement. Our obligations under the SVB Loan Agreement and the guarantee of such obligations are secured by a pledge of substantially all of our and such subsidiaries’ assets, excluding intellectual property.
The SVB Loan Agreement contains affirmative and negative covenants customary for financings of this type, including limitations on our and our subsidiaries’ abilities, among other things, to incur additional debt, grant or permit additional liens, make investments and acquisitions, merge or consolidate with others, dispose of assets, pay dividends and distributions, enter into affiliate transactions and change its line of business, in each case, subject to certain exceptions. In addition, the SVB Loan Agreement contains the following quarterly financial covenants requiring the Company to maintain either:
33
Future Funding Requirements
At September 30, 2022, we had cash, cash equivalents, and marketable securities of $157.3 million. We expect that our cash and cash equivalents combined with anticipated net cash inflows from net product sales will fund our operating plan into the second half of 2024, under current expectations regarding the timing and outcomes of our Phase 2 clinical trials for EYP-1901 for the treatment of wet AMD, NPDR, and DME. Due to the difficulty and uncertainty associated with the design and implementation of clinical trials, we will continue to assess our cash and cash equivalents and future funding requirements. However, there is no assurance that additional funding will be achieved and that we will succeed in our future operations.
Actual cash requirements could differ from management’s projections due to many factors, including cash generation from sales of YUTIQ and DEXYCU, additional investments in research and development programs, clinical trial expenses for EYP-1901, competing technological and market developments and the costs of any strategic acquisitions and/or development of complementary business opportunities. In addition, the Pandemic has had, and may continue to have, a material and adverse impact on our business, including as a result of preventive and precautionary measures that we, other businesses, and governments are taking. Due to these impacts and measures, we have experienced and may continue to experience significant and unpredictable reductions in the demand for our commercial products as customers have shut down their facilities and non-essential surgical procedures have been postponed in an effort to promote social distancing and to redirect medical resources and priorities towards the treatment of COVID-19.
The amount of additional capital we will require will be influenced by many factors, including, but not limited to:
We do not know if additional capital will be available when needed or on terms favorable to us or our stockholders. Collaboration, licensing or other agreements may not be available on favorable terms, or at all. We do not know the extent to which we will receive funds from the commercialization of YUTIQ or DEXYCU. If we seek to sell our equity securities, we do not know whether and to what extent we will be able to do so, or on what terms. If available, additional equity financing may be dilutive to stockholders, debt financing may involve restrictive covenants or other unfavorable terms and dilute our existing stockholders’ equity, and funding through collaboration, licensing or other commercial agreements may be on unfavorable terms, including requiring us to relinquish rights to certain of our technologies or products. If adequate financing is not available if and when needed, we may delay, reduce the scope of, or eliminate research or development programs, independent commercialization of YUTIQ and DEXYCU, or other new products, if any, postpone or cancel the pursuit of product candidates, or otherwise significantly curtail our operations to reduce our cash requirements and extend our capital.
34
Our consolidated statements of historical cash flows are summarized as follows (in thousands):
|
|
Nine Months Ended |
|
|
|
|
||||||
|
|
September 30, |
|
|
|
|
||||||
|
|
2022 |
|
|
2021 |
|
|
Change |
|
|||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|||
Net loss |
|
$ |
(58,802 |
) |
|
$ |
(38,985 |
) |
|
$ |
(19,817 |
) |
Changes in operating assets and liabilities |
|
|
(7,883 |
) |
|
$ |
447 |
|
|
$ |
(8,330 |
) |
Other adjustments to reconcile net loss to cash flows from |
|
$ |
14,268 |
|
|
|
5,109 |
|
|
|
9,159 |
|
Net cash used in operating activities |
|
$ |
(52,417 |
) |
|
$ |
(33,429 |
) |
|
$ |
(18,988 |
) |
Net cash used in investing activities |
|
|
(50,182 |
) |
|
|
(156 |
) |
|
|
(50,026 |
) |
Net cash (used in) provided by financing activities |
|
|
(632 |
) |
|
|
108,386 |
|
|
|
(109,018 |
) |
Operating cash outflows for the nine months ended September 30, 2022 totaled $52.4 million, primarily due to our net loss of $58.8 million, reduced by $14.3 million of non-cash expenses, which included $10.8 million of stock-based compensation, $1.6 million of loss on extinguishment of debt, and $1.8 million of amortization of the DEXYCU finite-lived intangible asset. This was partially offset by increases of $7.9 million in changes in operating assets and liabilities, primarily in accounts receivable and other current assets.
Operating cash outflows for the nine months ended September 30, 2021 totaled $33.4 million, primarily due to our net loss of $39.0 million, reduced by $5.1 million of non-cash expenses, which included $4.6 million of stock-based compensation, $1.8 million of amortization of the DEXYCU finite-lived intangible asset, $462,000 of amortization of debt discount and a $2.1 million gain on extinguishment of debt from the forgiveness of our Paycheck Protection Program Loan.
For the nine months ended September 30, 2022, $48.6 million of net cash was used to purchase marketable securities, as well as $1.6 million for the purchase of property and equipment.
Net cash used in investing activities for the nine months ended September 30, 2021 consisted of $156,000 of purchases of property and equipment.
Net cash used in financing activities for the nine months ended September 30, 2022 totaled $632,000 and consisted of the following:
Net cash provided by financing activities for the nine months ended September 30, 2021 totaled $108.4 million and consisted of the following:
35
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and are not required to provide the information under this item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2022. The term “disclosure controls and procedures”, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure, particularly during the period in which this Quarterly Report on Form 10-Q was being prepared. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their desired objectives, and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of September 30, 2022, our principal executive officer and our principal financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
During the quarter ended September 30, 2022, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
36
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
We are subject to various routine legal proceedings and claims incidental to our business, which management believes will not have a material effect on our financial position, results of operations or cash flows.
In August 2022, the Company received a subpoena from the U.S. Attorney’s Office for the District of Massachusetts seeking production of documents related to sales, marketing and promotional practices, including as pertain to DEXYCU®. We are cooperating fully with the government in connection with this matter. At this time, the Company is unable to predict the duration, scope or outcome of this matter or whether it could have a material impact on the Company’s financial condition, results of operation or cash flow.
Item 1A. Risk Factors
This section augments and updates certain risk factors disclosed in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2021 (the “Annual Report”). The following risk factor supersedes the corresponding risks described in the Annual Report and should be read together with the other risk factors disclosed in the Annual Report. In addition to the other information in this Quarterly Report on Form 10-Q, all of the risk factors should be carefully considered in evaluating us and our common stock. Any of these risks, many of which are beyond our control, could materially and adversely affect our financial condition, results of operations or cash flows, or cause our actual results to differ materially from those projected in any forward-looking statements. We may also face other risks and uncertainties that are not presently known, are not currently believed to be material, or are not identified below because they are common to all businesses. Past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods. For more information, see “Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q.
We received a subpoena from the U.S. Attorney’s Office for the District of Massachusetts seeking production of documents related to sales, marketing and promotional practices, including as pertain to DEXYCU®. If the DOJ commences an action against us, the action could have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, we have expended and expect to continue to expend significant financial and managerial resources responding to the DOJ subpoena, which could also have a material adverse effect on our business, financial condition, results of operations and cash flows.
In August 2022, the Company received a subpoena from the U.S. Attorney’s Office for the District of Massachusetts seeking production of documents related to sales, marketing and promotional practices, including as pertain to DEXYCU®. We are cooperating fully with the government in connection with this matter. We cannot predict the outcome of the DOJ Investigation, and there can be no assurance that the DOJ will not commence an action against us, or as to what the ultimate outcome of any such DOJ Investigation might be. Under applicable law, the DOJ has the ability to impose sanctions on companies which are found to have violated the provisions of applicable laws, including, civil monetary penalties and other remedies. The resolution of any such enforcement action, should there be one, could have a material adverse effect on our business, financial condition, results of operations and cash flows. We have expended and expect to continue to expend significant financial and managerial resources responding to the DOJ subpoena, which could also have a material adverse effect on our business, financial condition, results of operations and cash flows.
Our products may continue to be impacted by additional unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, including DEXYCU pass-through status, which could harm our business.
The statutes and regulations that govern marketing approvals, pricing and reimbursement for new drug products vary widely from country to country. Some countries require approval of the sale price of a product before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay our commercial launch of the product, possibly for lengthy time periods, which could negatively impact the revenues we are able to generate from the sale of the product in that particular country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more of our products.
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Our success also depends in part on the extent to which coverage and reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers and other organizations. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, determine which medications they will cover and establish reimbursement levels. A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. Third-party payors also may seek additional clinical evidence, beyond the data required to obtain marketing approval, demonstrating clinical benefits and value in specific patient populations, before covering our products for those patients. We cannot be sure that coverage and reimbursement will be available for any product that we commercialize and, if reimbursement is available, what the level of reimbursement will be. Coverage and reimbursement may impact the demand for, or the price of, any product candidate for which we obtain marketing approval. If reimbursement is not available or is available only to limited levels, we may not be able to successfully commercialize any product candidate for which we obtain marketing approval. For example, under current Medicare Part B policy, payment to hospital outpatient departments and ASCs for drug and biological products furnished to patients as part of a surgical procedure is typically packaged into the payment for the associated procedure and thus not paid separately. Products granted pass-through status are excluded from this payment packaging policy and receive separate payment from the associated procedure for a period of three years. While DEXYCU had been granted pass-through status and has been receiving separate payment in these settings from Medicare, the CY 2023 Medicare Hospital OPPS and ASC Payment System Final Rule, which was issued November 1, 2022, terminated pass-through related separate payment for certain drugs, including DEXYCU, beyond its current expiration date of December 31, 2022. As of January 1, 2023, payment for DEXYCU will be packaged into the payment for the underlying procedure and no longer be reimbursed separately, which will materially decrease our revenues from sales of DEXYCU and correspondingly have a material adverse effect on our results of operations and financial condition.
There may be significant delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the purposes for which the drug is approved by the FDA or comparable foreign regulatory authorities. Moreover, eligibility for coverage and reimbursement does not imply that any drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacturing, selling and distribution costs. Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for other services. Net prices for products may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of products from countries where they may be sold at lower prices than in the U.S. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies. Our inability to promptly obtain coverage and profitable reimbursement rates from both government-funded and private payors for any approved products that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products, and our overall financial condition.
We participate in, and have certain price reporting obligations to, the Medicaid Drug Rebate Program. This program requires us to pay a rebate for each unit of drug reimbursed by Medicaid. The amount of the “basic” portion of the rebate for each product is set by law as the larger of: (i) 23.1% of quarterly average manufacturer price, or AMP, or (ii) the difference between quarterly AMP and the quarterly best price available from us to any commercial or non-governmental customer, or Best Price. AMP must be reported on a monthly and quarterly basis and Best Price is reported on a quarterly basis only. In addition, the rebate also includes the “additional” portion, which adjusts the overall rebate amount upward as an “inflation penalty” when the drug’s latest quarter’s AMP exceeds the drug’s AMP from the first full quarter of sales after launch, adjusted for increases in the Consumer Price Index-Urban. The upward adjustment in the rebate amount per unit is equal to the excess amount of the current AMP over the inflation-adjusted AMP from the first full quarter of sales. The rebate amount is computed each quarter based on our report to CMS of current quarterly AMP and Best Price for our drug. Rebates under the Medicaid Drug Rebate Program are currently capped at 100 percent of AMP, but that cap is set to be removed, effective January 1, 2024, which could increase our rebate liability. We are required to report revisions to AMP or Best Price within a period not to exceed 12 quarters from the quarter in which the data was originally due. Any such revisions could have the impact of increasing or decreasing our rebate liability for prior quarters, depending on the direction of the revision. The Affordable Care Act made significant changes to the Medicaid Drug Rebate Program, and CMS issued a final regulation, which became effective on April 1, 2016, to implement the changes to the Medicaid Drug Rebate program under the Affordable Care Act. On December 21, 2020, CMS issued a final regulation that modified existing Medicaid Drug Rebate Program regulations to permit reporting multiple Best Price figures with regard to value based purchasing arrangements (beginning in 2022) and provided definitions for “line extension,” “new formulation,” and related terms with the practical effect of expanding the scope of drugs considered to be line extensions (beginning in 2022). While the regulatory provisions that purported to affect the applicability of the AMP and Best Price exclusions of manufacturer-sponsored patient benefit programs in the context of pharmacy benefit manager “accumulator” programs were invalidated by a court, accumulator and other such programs may continue to negatively affect us in other ways.
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Federal law also requires that any manufacturer that participates in the Medicaid Drug Rebate Program also participate in the Public Health Service’s 340B drug pricing program in order for federal funds to be available for the manufacturer’s drugs under Medicaid and Medicare Part B. The 340B drug pricing program, which is administered by the Health Resources and Services Administration, or HRSA, requires participating manufacturers to agree to charge statutorily-defined covered entities no more than the 340B “ceiling price” for the manufacturer’s covered outpatient drugs. These 340B covered entities include, but are not limited to, a variety of community health clinics and other entities that receive health services grants from the Public Health Service, as well as hospitals that serve a disproportionate share of low-income patients. The 340B ceiling price is calculated using a statutory formula, which is based on the AMP and rebate amount for the covered outpatient drug as calculated under the Medicaid Drug Rebate Program. Any changes to the definition of AMP and the Medicaid rebate amount under the Affordable Care Act or other legislation could affect our 340B ceiling price calculations and negatively impact our results of operations.
HRSA issued a final regulation regarding the calculation of the 340B ceiling price and the imposition of civil monetary penalties on manufacturers that knowingly and intentionally overcharge covered entities, which became effective on January 1, 2019. It is currently unclear how HRSA will apply its enforcement authority under this regulation. HRSA has also implemented a ceiling price reporting requirement related to the 340B program under which we are required to report 340B ceiling prices to HRSA on a quarterly basis, and HRSA then publishes that information to covered entities. Moreover, under a final regulation effective January 13, 2021, HRSA newly established an administrative dispute resolution (“ADR”) process for claims by covered entities that a manufacturer has engaged in overcharging, and by manufacturers that a covered entity violated the prohibitions against diversion or duplicate discounts. Such claims are to be resolved through an ADR panel of government officials rendering a decision that could be appealed only in federal court. An ADR proceeding could subject us to onerous procedural requirements and could result in additional liability. In addition, legislation may be introduced that, if passed, would further expand the 340B program to additional covered entities or would require participating manufacturers to agree to provide 340B discounted pricing on drugs used in an inpatient setting.
Federal law also requires that a company that participates in the Medicaid Drug Rebate program report average sales price, or ASP, information each quarter to CMS for certain categories of drugs that are paid under the Medicare Part B program. For calendar quarters beginning January 1, 2022, manufacturers are required to report the average sales price for certain drugs under the Medicare program regardless of whether they participate in the Medicaid Drug Rebate Program. Manufacturers calculate the ASP based on a statutorily defined formula as well as regulations and interpretations of the statute by CMS. CMS uses these submissions to determine payment rates for drugs under Medicare Part B. Starting in 2023, manufacturers must pay refunds to Medicare for single source drugs or biologicals, or biosimilar biological products, reimbursed under Medicare Part B and packaged in single-dose containers or single-use packages, for units of discarded drug reimbursed by Medicare Part B in excess of 10 percent of total allowed charges under Medicare Part B for that drug. Manufacturers that fail to pay refunds could be subject to civil monetary penalties of 125 percent of the refund amount.
Statutory or regulatory changes or CMS guidance could affect the pricing of our approved products, and could negatively affect our results of operations. On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022, or IRA, which, among other things, requires the U.S. Department of Health and Human Services Secretary to negotiate, with respect to Medicare units and subject to a specified cap, the price of a set number of certain high Medicare spend drugs and biologicals per year starting in 2026. Starting January 2023, the IRA establishes a Medicare Part B inflation rebate scheme, under which, generally speaking, manufacturers will owe rebates if the average sales price of a Part B drug increases faster than the pace of inflation. Failure to timely pay a Part B inflation rebate is subject to a civil monetary penalty. Further, starting October 2022, the IRA establishes a Medicare Part D inflation rebate scheme, under which, generally speaking, manufacturers will owe additional rebates if the AMP of a Part D drug increases faster than the pace of inflation. Failure to timely pay a Part D inflation rebate is subject to a civil monetary penalty. In addition, manufacturers are currently required to provide a 70% discount on brand name prescription drugs utilized by Medicare Part D beneficiaries when those beneficiaries are in the coverage gap phase of the Part D benefit design. The IRA sunsets the coverage gap discount program starting in 2025 and replaces it with a new manufacturer discount program and makes other reforms to the Part D benefit, which could increase our liability under Part D. These or any other public policy change could impact the market conditions for our products. We further expect continued scrutiny on government price reporting and pricing more generally from Congress, agencies, and other bodies.
In order to be eligible to have our products paid for with federal funds under the Medicaid and Medicare Part B programs and purchased by certain federal agencies and grantees, we must participate in the VA FSS pricing program. Under this program, we would be obligated to make our “innovator” drugs available for procurement on an FSS contract and charge a price to four federal agencies—VA, DoD, Public Health Service and U.S. Coast Guard—that is no higher than the statutory FCP. The FCP is based on the Non-FAMP, which we calculate and report to the VA on a quarterly and annual basis. We do not currently participate in the Tricare Retail Pharmacy program, under which we would need to pay quarterly rebates on utilization of innovator products that are dispensed through the Tricare Retail Pharmacy network to TRICARE beneficiaries. The rebates are calculated as the difference between the annual Non-FAMP and FCP. The requirements under the 340B, FSS, and TRICARE programs will impact gross-to-net revenue for
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our current products and any product candidates that are commercialized in the future and could adversely affect our business and operating results.
We are shipping YUTIQ directly to physician offices or clinics to be administered to patients. YUTIQ is being shipped to physician offices or clinics primarily through specialty pharmacies and distributors. Most prefer to buy the product directly through our select distributors under a “buy and bill” model. Physicians who may not be willing to purchase our products through a specialty distributor because they do not prefer the buy and bill method may prefer to have another entity called a specialty pharmacy ship them the product at no cost to the physician. The specialty pharmacy bills the health plan for our product directly and then ships the product to the physician such that no costs are incurred by the physician. We have obtained a permanent “J” code for YUTIQ which assists physicians and hospitals in their ability to bill all payer types for the product.
We are shipping DEXYCU to ASCs, or to hospital outpatient surgical centers through specialty pharmacies and distributors. DEXYCU is being reimbursed for Medicare Part B patients in these settings through a transitional pass-through related separate payment when billed under the drug’s “J” code. The Final Rule does not extend pass-through related separate payment for expiring drugs, and therefore, DEXYCU will no longer qualify for separate payment effective January 1, 2023, and will be subject to packaged payment rates, which will significantly limit our ability to gain utilization and subsequent revenues. In addition, in anticipation of the Final Rule, as a result of CY 2023 OPPS/ASC Proposed Rule, the Company entered into the Termination Agreement with ImprimisRx on October 7, 2022, pursuant to which ImprimisRx and the Company agreed to (a) continue to support the sales and marketing of DEXYCU through the fourth quarter of 2022, consistent with the ImprimisRx’s level of effort during the January through June 2022 period, (b) decrease the required minimum quarterly sales levels based on DEXYCU unit demand for the fourth quarter of 2022, and (c) terminate the Agreements effective January 1, 2023.
Our business may be negatively impacted by macroeconomic conditions.
Various Macroeconomic Factors could adversely affect our business and the results of our operations and financial condition, including changes in inflation, interest rates and overall economic conditions and uncertainties ("Macroeconomic Factors"). These Macroeconomic Factors have the potential to adversely affect our liquidity, business, financial condition and results of operations by increasing our overall cost structure. The existence of Macroeconomic Factors in the economy has resulted in, and may continue to result in, higher interest rates and capital costs, supply shortages, increased costs of labor, increased manufacturing costs and clinical trial costs, weakening exchange rates and other similar effects. As a result of these Macroeconomic Factors, we have experienced the increased costs of clinical trials and may continue to experience other cost increases. Although we may take measures to mitigate the impact of Macroeconomic Factors, if these measures are not effective, our business, financial condition, results of operations and liquidity could be materially adversely affected. Even if such measures are effective, there could be a difference between the timing of when these mitigating actions impact our results of operations and when the impact of these Macroeconomic Factors are incurred. If this happens, we may need to raise additional capital to fund our operations, which may not be available in sufficient amounts or on reasonable terms, if at all, sooner than expected.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.
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Item 6. Exhibits
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Incorporated by Reference to SEC Filing |
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Exhibit No. |
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Exhibit Description |
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Form |
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SEC Filing Date |
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Exhibit No. |
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3.1 |
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8-K12G3 |
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06/19/08 |
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3.1 |
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3.2 |
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Certificate of Amendment of the Certificate of Incorporation of pSivida Corp. |
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10-K |
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09/13/17 |
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3.2 |
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3.3 |
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8-K |
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04/02/18 |
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3.1 |
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3.4 |
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8-K |
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06/27/18 |
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3.1 |
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3.5 |
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10-K |
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09/18/18 |
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3.5 |
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3.6 |
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Amendment No. 1 to the By-Laws of EyePoint Pharmaceuticals, Inc. |
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8-K |
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11/06/18 |
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3.1 |
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3.7 |
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8-K |
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06/23/20 |
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3.1 |
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3.8 |
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8-K |
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12/08/20 |
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3.1 |
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4.1 |
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8-K12G3 |
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06/19/08 |
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4.1 |
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4.2 |
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Warrant to Purchase Common Stock of pSivida Corp., issued March 28, 2018, to SWK Funding, LLC |
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8-K |
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03/29/18 |
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4.1 |
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4.3 |
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8-K |
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03/29/18 |
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10.3 |
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4.4 |
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8-K |
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06/27/18 |
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10.1 |
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4.5 |
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8-K |
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11/19/21 |
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4.1 |
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31.1* |
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31.2* |
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32.1** |
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32.2** |
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101.INS |
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 |
Cover Page Interactive Data File (embedded within the inline XBRL document and included in Exhibit 101) |
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# Portions of this exhibit have been omitted in compliance with Item 601(b)(10) of Regulation S-K. The Company agrees to furnish a supplemental copy of the exhibit or any omitted schedule or similar attachment to the Securities and Exchange Commission upon request.
* Filed herewith
** Furnished herewith
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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EyePoint Pharmaceuticals, Inc. |
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Date: November 4, 2022 |
By: |
/s/ Nancy Lurker |
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Name: |
Nancy Lurker |
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Title: |
President and Chief Executive Officer (Principal Executive Officer) |
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Date: November 4, 2022 |
By: |
/s/ George O. Elston |
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Name: |
George O. Elston |
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Title: |
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
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