# EyePoint, Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [EyePoint, Inc.](/companies/eypt.md) (CIK 1314102)
- Form: 10-Q
- Filed: 2023-11-03
- Accepted by EDGAR: Nov 3, 2023, 15:47 ET
- Period: 2023-09-30
- Accession: 0000950170-23-058775
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1314102/000095017023058775/eypt-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1314102/000095017023058775/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $15.2m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $32.0m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Research and development | 3 months, 2023-07-01 to 2023-09-30 | $17.4m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2023-01-01 to 2023-09-30 | $46.7m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$14.4m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | −$58.7m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $0 | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $1.2m | us-gaap:InterestExpense |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | −$12.6m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | −$56.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.33 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | −$1.50 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.33 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | −$1.50 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 38,341,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 37,804,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $25.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $2.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-09-30 | $133.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $150.2m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $160.0m | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $63.9m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $101.4m | us-gaap:Liabilities |
| Long-term debt | at 2023-09-30 | $0 | us-gaap:LongTermDebtNoncurrent |
| Short-term borrowings | at 2023-09-30 | $0 | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2023-09-30 | $58.6m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 38,960 characters.

### 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:

- the potential for EYP-1901, as an investigational sustained delivery intravitreal treatment deploying an erodible Durasert E insert of vorolanib, a selective and patented tyrosine kinase inhibitor (TKI) targeting wet age-related macular degeneration (wet AMD), non-proliferative diabetic retinopathy (NPDR) and diabetic macular edema (DME);
- our expectations regarding the timing and outcome of our ongoing Phase 2 clinical trials for EYP-1901 for the treatment of wet AMD, and NPDR;
- our expectations regarding the timing and clinical development of our product candidates, including EYP-1901 and EYP-2301;
- our strategic alliances with other companies;
- our ability to manufacture YUTIQ, EYP-1901 or any future products or product candidates, in sufficient quantities and quality;
- our belief that our cash, cash equivalents, and investments in marketable securities of $136.0 million at September 30, 2023 will fund our operating plan into 2025 under current expectations regarding the timing and outcomes of our Phase 2 clinical trials for EYP-1901;
- our ability to obtain additional capital in sufficient amounts and on terms acceptable to us, and the consequences of failing to do so;
- our future expenses and capital expenditures;
- our expectations regarding the timing and results of the subpoena from the U.S. Attorney’s Office for the District of Massachusetts seeking production of documents related to sales, marketing and promotional practices (DOJ Subpoena), including as pertain to DEXYCU;
- our expectations regarding our ability to obtain and adequately maintain sufficient intellectual property protection for EYP-1901 and any future products or product candidates, and to avoid claims of infringement of third-party intellectual property rights;
- the extent to which our business, clinical studies, the medical community and the global economy will continue to be materially and adversely impacted by the effects of the COVID-19 pandemic (the Pandemic), or by other pandemics, epidemics or outbreaks;
- the potential to receive future payments from Alimera pursuant to our May 2023 sale and license agreement with Alimera;
- our expectation that we will continue to incur significant expenses and that our operating losses and our net cash outflows to fund operations will continue for the foreseeable future; and
- the effect of legal and regulatory developments.

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:

- our ability to realize the anticipated operational benefits and future cash flow from the May 2023 sale of YUTIQ® to Alimera Sciences, Inc. (Alimera);
- the sufficiency of our existing cash resources into 2025;
- our access to needed capital;
- our ability to manufacture YUTIQ in sufficient quantities pursuant to our commercial supply agreements with Alimera and Ocumension Therapeutics (Ocumension);
- the effectiveness and timeliness of our preclinical studies and clinical trials, and the usefulness of the data;
- our expectations regarding the timing and clinical development of our product candidates, including EYP-1901 and EYP-2301, and the potential for EYP-1901 as a sustained delivery treatment for serious eye diseases, including wet AMD, NPDR and DME;
- fluctuations in our operating results;
- the duration, scope and outcome of any governmental inquiries or investigations;
- the extent to which the Pandemic impacts our business, the medical community and the global economy;
- the success of current and future license and collaboration agreements, including our agreements with Alimera, Ocumension, Equinox Science, LLC (Equinox) and Betta Pharmaceuticals Co., Ltd. (Betta);
- our dependence on contract research organizations, vendors and investigators;
- effects of competition and other developments affecting sales of products;
- market acceptance of our products;
- protection of intellectual property and avoiding intellectual property infringement;
- product liability; and
- other factors described in our filings with the SEC.

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, 2022 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.

DEXYCU®, DURASERT® and DURASERT E™ are our trademarks. Retisert® and Vitrasert® are Bausch & Lomb’s trademarks. ILUVIEN® is Alimera’s trademark. YUTIQ® was assigned to Alimera in certain jurisdictions pursuant to the product rights agreement (PRA) and licensed to Ocumension in other jurisdictions pursuant to the license agreement with Ocumension in November 2018. Verisome® is a trademark owned by Ramscor, Inc. and exclusively licensed to us. The reports we file or furnish with the SEC, including this Quarterly Report on Form 10-Q, also contain trademarks, trade names and service marks of other companies, which are the property of their respective owners.

### Our Business

### Overview

We are a company committed to developing and commercializing innovative therapeutics to help improve the lives of patients with serious eye disorders. Our pipeline leverages our proprietary bioerodible DURASERT E™ technology for sustained intraocular drug delivery including EYP-1901, an investigational treatment delivering vorolanib 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 are also advancing EYP-2301 into pre-clinical development delivering razuprotafib in Durasert E for the potential treatment of diabetic eye diseases.

### Recent Developments

- In October 2023, we announced the appointment of Stuart Duty to the Company’s Board of Directors. Mr. Duty is an experienced financial executive with over 30 years of experience in finance and investment banking. Mr. Duty has focused primarily on biotechnology and specialty pharmaceuticals clients for much of his career, advising senior executives and boards on a range of financing activities and strategic transactions.
- In October 2023, we announced the promotion of George Elston, our Chief Financial Officer, to Executive Vice President.
- In July 2023, we announced the appointment of Jay S. Duker, M.D. as President and Chief Executive Officer (CEO). Dr. Duker has transitioned from his most recent role as President and Chief Operating Officer (COO). Dr. Duker was also appointed to the Board of Directors of the Company (Board), effective July 10, 2023. Nancy S. Lurker has transitioned to the role of Executive Vice Chair from the position of CEO. Ms. Lurker was also appointed to serve as Vice Chair of the Board.
- In May 2023, we entered into a definitive agreement pursuant to which we granted an exclusive license and rights to YUTIQ to Alimera. Under the terms of the agreement, Alimera received global rights to YUTIQ outside of China, Hong Kong, Taiwan, Macau and Southeast Asia, where YUTIQ is exclusively licensed to Ocumension and we will continue to receive royalties from Ocumension for its YUTIQ sales. In exchange for the rights granted to Alimera under the agreement, we received a $75 million upfront cash payment at closing and will receive an additional $7.5 million in equal quarterly installments in 2024. In addition, commencing in 2025, we will receive a low to mid double-digit royalty on Alimera’s related U.S. net sales above defined thresholds for the calendar years 2025-2028.
- In May 2023, we received confirmation from the FDA that the September 2021 inspection of our Watertown, MA facility has been classified as Voluntary Action Indicated (VAI) and is no longer considered Official Action Indicated (OAI). A VAI classification means that the agency is not prepared to take or recommend further regulatory action.

### R&D Highlights

- In September 2023, we disclosed the advancement of pipeline program EYP-2301 into pre-clinical development. EYP-2301 delivers razuprotafib, a small molecule inhibitor of vascular endothelial protein tyrosine phosphatase (VE-PTP) with potential vasculature stabilizing activity, utilizing Durasert E.
- In September 2023 we announced positive interim masked safety data for our lead product candidate EYP-1901 from the ongoing Phase 2 PAVIA trial evaluating EYP-1901 as a potential nine-month treatment for moderate to severe NPDR, and DAVIO 2 trial as a potential six-month maintenance treatment for wet AMD. All treatment arms in the PAVIA trial have reached at least three-months post-dosing follow-up as of September 1, 2023. Approximately 170 patients have received EYP-1901 with a minimum of three months of follow-up post injection from the ongoing Phase 2 PAVIA and DAVIO 2 clinical trials and the completed DAVIO 1 trial with no reported drug-related ocular severe adverse events (SAEs) and no reported drug-related systemic SAEs.
- In July 2023 we presented the interim safety and patient demographics of the DAVIO 2 clinical trial in wet AMD at the OIS Retina Innovation Summit in July. As of July 1, 2023, there were no reported drug related ocular serious adverse events (SAEs) or drug related systemic SAEs. An analysis of the reported patient demographics suggests that Phase 2 DAVIO 2 patients have, on average, better starting visual acuity and less central subfield thickness than the Phase 1 DAVIO cohort.
- In June 2023, we completed enrollment in the Phase 2 PAVIA clinical trial evaluating EYP-1901 as a potential nine-month treatment for moderate to severe non-proliferative diabetic retinopathy (NPDR). The trial enrolled 77 patients randomly assigned to one of two doses of EYP-1901 (approximately 2 mg or 3 mg), or to the control group receiving a sham injection. EYP-1901 is delivered with a single intravitreal injection in the physician's office. The primary efficacy endpoint of the trial is improvement of at least two diabetic retinopathy severity scale (DRSS) levels as of week 36 after the EYP-1901 injection. Secondary endpoints include reduction in vision-threatening complications, occurrence of diabetic macular edema and/or proliferative disease, retinal ischemia/nonperfusion and safety.
- In March 2023, we completed enrollment in the Phase 2 "Durasert® and Vorolanib in Ophthalmology 2" (DAVIO 2) clinical trial evaluating EYP-1901 as a potential six-month maintenance treatment for wet AMD. The trial enrolled a total of 160 patients. All patients were previously treated with a standard-of-care anti-VEGF therapy and were randomly assigned to one of two doses of EYP-1901 or to an aflibercept on-label control.
- Phase 2 PAVIA clinical trial evaluating EYP-1901 in non-proliferative diabetic retinopathy (NPDR) enrollment completion is expected in 2Q 2023, versus 4Q 2023, due to accelerated enrollment and trial size reduction to a minimum of 60 patients based on body of evidence and proof of concept for vorolanib in DAVIO 1 and ongoing DAVIO 2 trial in wet AMD.
- In February 2023, we entered into a research collaboration with Rallybio to evaluate sustained delivery of their inhibitor of complement component 5 (C5) using our proprietary Durasert technology for sustained intraocular drug delivery. The initial focus will be on geographic atrophy, an advanced form of age-related macular degeneration that leads to irreversible vision loss.

### 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, 2022, 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.

### Results of Operations

### Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022:

| Revenues: | Three Months Ended September 30, 2023 | 2022 | Change Amounts% |  |
| --- | ---: | ---: | ---: | ---: |
| Product sales, net | $816 | $9,720 | $(8,904) | -92% |
| License and collaboration agreements | 14,137 | 52 | 14,085 | 27087% |
| Royalty income | 249 | 240 | 9 | 4% |
| Total revenues | 15,202 | 10,012 | 5,190 | 52% |
| Operating expenses: |  |  |  |  |
| Cost of sales, excluding amortization of acquired intangible assets | 1,202 | 1,405 | (203) | -14% |
| Research and development | 17,363 | 11,162 | 6,201 | 56% |
| Sales and marketing | 479 | 6,016 | (5,537) | -92% |
| General and administrative | 10,556 | 9,212 | 1,344 | 15% |
| Amortization of acquired intangible assets | — | 615 | (615) | -100% |
| Total operating expenses | 29,600 | 28,410 | 1,190 | 4% |
| Loss from operations | (14,398) | (18,398) | 4,000 | -22% |
| Other income (expense): |  |  |  |  |
| Interest and other income, net | 1,786 | 640 | 1,146 | 179% |
| Interest expense | — | (662) | 662 | -100% |
| Loss on extinguishment of debt | — | — | — | 0% |
| Total other income (expense), net | 1,786 | (22) | 1,808 | -8218% |
| Net loss | $(12,612) | $(18,420) | $5,808 | -32% |
| Net loss per share - basic and diluted | $(0.33) | $(0.49) | $0.16 | -33% |
| Weighted average shares outstanding - basic and diluted | 38,341 | 37,338 | 1,003 | 3% |
| Net loss | $(12,612) | $(18,420) | $5,808 | -32% |

### Product Sales, Net

Product sales, net represents the gross sales of YUTIQ and DEXYCU less provisions for product sales allowances. Product sales, net decreased by $8.9 million, or 92%, to $816,000 for the three months ended September 30, 2023 compared to $9.7 million for the three months ended September 30, 2022. This decrease was driven by the agreement that granted license and rights to YUTIQ to Alimera in May 2023 and de minimis DEXYCU sales in 2023 due to the loss of pass-through reimbursement as of January 1, 2023. For the three months ended September 30, 2023, product sales, net were primarily from the sales of product supply under the existing commercial supply agreement (CSA) with Alimera.

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 ambulatory surgical centers (ASCs) from our specialty distributors.

### License and Collaboration Agreement

License and collaboration agreement revenues were $14.1 million for the three months ended September 30, 2023 compared to $52,000 for the three months ended September 30, 2022. This increase was related to the recognition of a portion of deferred revenue related to the agreement to license YUTIQ product rights to Alimera, as well as invoices to Alimera as part of the transition services agreement with Alimera.

### Royalty Income

Royalty income increased by $9,000, or 4%, to $249,000 for the three months ended September 30, 2023 compared to $240,000 for the three months ended September 30, 2022. The increase was attributable to higher non-cash Alimera royalties payable to SWK Funding LLC (SWK).

### Cost of Sales, Excluding Amortization of Acquired Intangible Assets

Cost of sales, excluding amortization of acquired intangible assets, decreased by $203,000, or 14%, to $1.2 million for the three months ended September 30, 2023 from $1.4 million for the three months ended September 30, 2022. This decrease was primarily due to lower sales volume to Alimera compared to commercial sales in the year prior, partially offset by additional distribution costs passed back to Alimera as part of the transition services agreement. Revenue related to these costs passed back to Alimera are included in license and collaboration revenues.

### Research and Development

Research and development expenses increased by $6.2 million, or 56%, to $17.4 million for the three months ended September 30, 2023 from $11.2 million for the same period in the prior year. This increase was attributable primarily to (i) $4.4 million in increased clinical trial costs, related to the ongoing Phase 2 DAVIO2 and PAVIA clinical trials for EYP-1901, and (ii) $1.8 million in higher personnel expense to support clinical trial activity and product development.

### Sales and Marketing

Sales and marketing expenses decreased by $5.5 million, or 92%, to $479,000 for the three months ended September 30, 2023 from $6.0 million for the same period in the prior year. This decrease was primarily driven by (i) reduced YUTIQ promotion of $4.7 million due to the agreement that granted license and rights to YUTIQ to Alimera in Q2 2023, (ii) the discontinuation of promotional activities for DEXYCU in 2023 of $771,000, and (iii) $65,000 of sales related expenses.

### General and Administrative

General and administrative expenses increased by $1.3 million, or 15%, to $10.6 million for the three months ended September 30, 2023 from $9.2 million for the same period in the prior year. This increase was primarily attributable to (i) $1.5 million in personnel and related expenses, including an increase of $677,000 in stock-based compensation, driven by an increase in personnel, a (ii) $562,000 increase in professional fees, partially offset by a (i) $769,000 decrease in other administrative expenses.

### Amortization of Acquired Intangible Assets

Amortization of acquired intangible assets totaled $615,000 for the three months ended September 30, 2022. This amount was attributable to the DEXYCU product intangible asset that resulted from the Icon acquisition (Icon Acquisition). There was no amortization for the three months ended September 30, 2023 due to the impairment of the DEXYCU intangible asset in Q4 2022.

### Interest (Expense) Income

Interest income from investments in marketable securities and institutional money market funds increased by $1.1 million, or 179%, to $1.8 million for the three months ended September 30, 2023 compared to $640,000 in the prior year quarter. This increase was due primarily to an increase in cash invested in marketable securities and higher interest rates in the current calendar quarter.

There was no interest expense in the three months ended September 30, 2023 due to the repayment of the SVB loan on May 17, 2023. Interest expense for the three months ended September 30, 2022 was $662,000.

### Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022:

| Revenues: | Nine Months Ended September 30, 2023 | 2022 | Change Amounts% |  |
| --- | ---: | ---: | ---: | ---: |
| Product sales, net | $13,483 | $30,048 | $(16,565) | -55% |
| License and collaboration agreements | 17,768 | 160 | 17,608 | 11005% |
| Royalty income | 739 | 663 | 76 | 11% |
| Total revenues | 31,990 | 30,871 | 1,119 | 4% |
| Operating expenses: |  |  |  |  |
| Cost of sales, excluding amortization of acquired intangible assets | 3,634 | 4,916 | (1,282) | -26% |
| Research and development | 46,711 | 34,099 | 12,612 | 37% |
| Sales and marketing | 11,504 | 19,592 | (8,088) | -41% |
| General and administrative | 28,854 | 26,321 | 2,533 | 10% |
| Amortization of acquired intangible assets | — | 1,845 | (1,845) | -100% |
| Total operating expenses | 90,703 | 86,773 | 3,930 | 5% |
| Loss from operations | (58,713) | (55,902) | (2,811) | 5% |
| Other income (expense): |  |  |  |  |
| Interest and other income, net | 4,611 | 1,067 | 3,544 | 332% |
| Interest expense | (1,247) | (2,408) | 1,161 | -48% |
| Gain (loss) on extinguishment of debt | (1,347) | (1,559) | 212 | -14% |
| Total other income (expense), net | 2,017 | (2,900) | 4,917 | -170% |
| Net loss | $(56,696) | $(58,802) | $2,106 | -4% |
| Net loss per share - basic and diluted | $(1.50) | $(1.58) | $0.08 | -5% |
| Weighted average shares outstanding - basic and diluted | 37,804 | 37,305 | 499 | 1% |
| Net loss | $(56,696) | $(58,802) | $2,106 | -4% |

### Product Sales, Net

Product sales, net represents the gross sales of YUTIQ and DEXYCU less provisions for product sales allowances. Product sales, net decreased by $16.6 million, or 55%, to $13.5 million for the nine months ended September 30, 2023 compared to $30.0 million for the nine months ended September 30, 2022. This decrease was driven by the agreement that granted license and rights to YUTIQ to Alimera in May 2023 and de minimis DEXYCU sales in 2023 due to the loss of pass-through reimbursement as of January 1, 2023. For the nine months ended September 30, 2023, the revenue from net product sales totaled $1.2 million was recognized from sales of product supply to Alimera under the CSA.

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.

### License and Collaboration Agreement

License and collaboration agreement revenues increased by $17.6 million, to $17.8 million for the nine months ended September 30, 2023 compared to $160,000 for the nine months ended September 30, 2022. This increase was related to deferred revenue recognized as the performance obligations under the Alimera supply agreement have been fulfilled.

### Royalty Income

Royalty income increased by $76,000, or 11%, to $739,000 for the nine months ended September 30, 2023 compared to $663,000 for the nine months ended September 30, 2022. The increase was attributable to higher 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 $1.3 million, or 26%, to $3.6 million for the nine months ended September 30, 2023 from $4.9 million for the nine months ended September 30, 2022. This decrease was primarily attributable to reduced revenue driven by a significant reduction in DEXYCU sales due to the loss of pass-through reimbursement as of January 1, 2023, as well as the transfer of YUTIQ to Alimera on May 17, 2023, and associated costs for costs of goods, royalties, and distribution fees, partially offset by a $533,000 inventory reserve for DEXYCU finished goods and components. These decreases were partially offset by additional distribution costs passed back to Alimera as part of the transition services agreement. Revenue related to these costs passed back to Alimera are included in license and collaboration revenues.

### Research and Development

Research and development expenses increased by $12.6 million, or 37%, to $46.7 million for the nine months ended September 30, 2023 from $34.1 million for the same period in the prior year. This increase was attributable primarily to (i) $11.4 million in increased clinical trial costs, related to the ongoing Phase 2 DAVIO2 and PAVIA clinical trials, (ii) $1.8 million of increased personnel related costs for investment in new employees across the research and clinical organizations, and (iii) $1.5 million increased facility costs related to additional personnel. These increases were partially offset by a decrease of $2.1 million in clinical manufacturing cost.

### Sales and Marketing

Sales and marketing expenses decreased by $8.1 million, or 41%, to $11.5 million for the nine months ended September 30, 2023 from $19.6 million for the same period in the prior year. This decrease was primarily driven by (i) reduced YUTIQ activities of $4.5 million due to the agreement that granted license and rights to YUTIQ to Alimera in Q2 2023, (ii) discontinuation of promotional activities for DEXYCU in 2023 of $3.3 million, and (iii) $323,000 of other marketing activities. These reductions were offset by a one-time charge in Q2 2023 of $940,000 for restructuring resulting from the sale of the YUTIQ franchise.

### General and Administrative

General and administrative expenses increased by $2.5 million, or 10%, to $28.9 million for the nine months ended September 30, 2023 from $26.3 million for the same period in the prior year. This increase was attributable primarily to a (i) $2.5 million increase in professional fees, and a (ii) $1.2 million increase in personnel and related expenses, including a $88,000 decrease of stock-based compensation. These increases were partially offset by a $1.2 million decrease in other administrative costs.

### Amortization of Acquired Intangible Assets

Amortization of acquired intangible assets totaled $1.8 million for the nine months ended September 30, 2022. This amount was attributable to the DEXYCU product intangible asset that resulted from the Icon Acquisition. There was no amortization for the nine months ended September 30, 2023 due to the write-off of the DEXYCU intangible asset in Q4 2022.

### Interest (Expense) Income

Interest income from investments in marketable securities and institutional money market funds increased $3.5 million, to $4.6 million for the nine months ended September 30, 2023 compared to $1.1 million for the same period in the prior year. This increase was due primarily to an increase in cash invested in marketable securities and increased interest rates in the current calendar year.

Interest expense decreased $1.2 million, or 48%, to $1.2 million for the nine months ended September 30, 2023, compared to $2.4 million for the same period in the prior year. We incurred lower interest expense primarily due to the repayment of the SVB loan on May 17, 2023.

### 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, 2023 we had a total accumulated deficit of $728.0 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.

### Financing Activities

Our loans (SVB Loan) under an agreement (the SVB Loan Agreement) with First Citizens BancShares (First Citizens), as successor to Silicon Valley Bank (SVB), as lender (the Lender), were originally due and payable on January 1, 2027. The loans bore interest that was payable monthly in arrears at a per annum rate 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. Commencing on February 1, 2024, we were scheduled to begin repaying the principal of the term facility in 36 consecutive equal monthly installments. At maturity or if earlier prepaid, we were also required to pay an exit fee equal to 2.00% of the aggregate principal amount of the term facility.

On May 17, 2023, we utilized a portion of the Upfront Payment from the Alimera PRA (see Note 3) and repaid in full all outstanding amounts under the SVB Loan Agreement. The SVB Loan Agreement was terminated, and all security interests and other liens granted to or held by the Lender were terminated and released. This payment included (i) the remaining $30.0 million principal portion of the SVB Loan, (ii) a $600,000, representing a prepayment fee equal to 2.00% of the aggregate principal amount of the term facility, (iii) a $600,000 exit fee, (iv) accrued and unpaid interest of $139,000 through the pay-off date, and (v) $155,000, representing in the aggregate a statement fee, termination fee and unused credit line fee under the revolving facility. As a result of the early repayment of the SVB Loan, we recorded a loss on extinguishment of debt of $1.4 million for the three months ended June 30, 2023 related to the write-off of the remaining balance of unamortized debt discount. For the three and nine months ended September 30, 2023, there are no remaining obligations related to the SVB Loan.

During the three and nine months ended September 30, 2023, we sold 902,769 shares of our common stock (Common Stock) utilizing our at-the-market facility (ATM) at a weighted average price of $11.05 per share for net proceeds of approximately $9.6 million.

### Future Funding Requirements

At September 30, 2023, we had cash, cash equivalents, and investments in marketable securities of $136.0 million. We expect that our cash and cash equivalents and investments in marketable securities will fund our operating plan into 2025 under current expectations regarding the timing and outcomes of our Phase 2 clinical trials for EYP-1901 and our plans for EYP-2301. Due to the difficulty and uncertainty associated with the design and implementation of preclinical studies and 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. We expect to continue to incur substantial additional operating losses for at least the next several years as we continue to develop our product candidates and seek marketing approval and, subject to obtaining such approval, the eventual commercialization of our product candidates. If we obtain marketing approval for any of our product candidates, we will incur significant sales, marketing and manufacturing expenses. We also expect to continue to incur significant costs to comply with corporate governance, internal controls and similar requirements associated with operating as a public reporting company.

Actual cash requirements could differ from management’s projections due to many factors including additional investments in research and development programs, clinical trial expenses for EYP-1901and EYP-2301, competing technological and market developments and the costs of any strategic acquisitions and/or development of complementary business opportunities.

The amount of additional capital we will require will be influenced by many factors, including, but not limited to:

1\. the potential for EYP-1901, as a sustained delivery intravitreal anti-VEGF treatment for wet AMD, NPDR, and DME;

2\. our expectations regarding the timing and clinical development of our product candidates, including EYP-1901 and EYP-2301;

3\. the duration, scope and outcome of the DOJ Investigation and its impact on our financial condition, results of operations or cash flows;

4\. whether and to what extent we internally fund, whether and when we initiate, and how we conduct additional pipeline product development programs;

5\. payments we receive under any new collaboration agreements or payments expected from existing agreements;

6\. whether and when we are able to enter into strategic arrangements for our products or product candidates and the nature of those arrangements;

7\. the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing any patent claims;

8\. changes in our operating plan, resulting in increases or decreases in our need for capital;

9\. our views on the availability, timing and desirability of raising capital; and

10\. the extent to which our business could be adversely impacted by the effects of the Pandemic or by other pandemics, epidemics or outbreaks.

We expect to seek additional funding to sustain our future operations and while we have successfully raised capital in the past, the ability to raise capital in future periods is not assured. 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. 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, 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.

Our consolidated statements of historical cash flows are summarized as follows (in thousands):

| Cash flows from operating activities: | Nine Months Ended September 30, 2023 | 2022 | Change |
| --- | ---: | ---: | ---: |
| Net loss | $(56,696) | $(58,802) | $2,106 |
| Changes in operating assets and liabilities | 71,155 | (7,883) | 79,038 |
| Other adjustments to reconcile net loss to cash flows from operating activities: | 10,525 | 14,268 | (3,743) |
| Net cash (used in) provided by operating activities | $24,984 | $(52,417) | $77,401 |
| Net cash (used in) provided by investing activities | $43,833 | $(50,182) | $94,015 |
| Net cash used in financing activities | $(31,415) | $(632) | $(30,783) |

Operating cash inflows for the nine months ended September 30, 2023 totaled $25.0 million, primarily due to our net loss of $56.7 million reduced by $10.5 million of non-cash expenses, which included $8.5 million of stock-based compensation, $1.3 million of loss on extinguishment of debt, $693,000 for the provision of excess and obsolete inventory, and $18,000 of other non-cash charges. This was further offset by changes in working capital of $71.2 million, including $57.4 million of deferred revenue related to the agreement to license YUTIQ product rights to Alimera, and $13.7 million of other working capital changes.

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.

For the nine months ended September 30, 2023, $46.4 million of net cash was provided by the sales of marketable securities, and $2.6 million was used for the purchase of property and equipment.

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 financing activities for the nine months ended September 30, 2023 totaled $31.4 million and consisted of the following:

(i) $40.5 million used to pay off the SVB loan

(ii) $1.4 million used to extinguish debt costs related to the SVB loan

(iii) $9.6 million of net proceeds from the issuance of 902,769 shares of our Common Stock sold utilizing our ATM.

Net cash used in financing activities for the nine months ended September 30, 2022 totaled $632,000 and consisted of the following:

(i) $38.2 million used to pay off the CRG loan;

(ii) $2.3 million used to extinguish debt costs related to the CRG loan;

(iii) $30.0 million of proceeds from the issuance for long-term debt related to the SVB loan;

(iv) $10.5 million of net proceeds from the revolving facility

## Market risk

As filed, 176 characters.

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.

## Controls and procedures

As filed, 2,173 characters.

### Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2023. 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 an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, 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 its 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, 2023, our principal executive officer and 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

There were no changes in our internal control over financial reporting during the quarter ended September 30, 2023 covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 5,756 characters.

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, 2022 (the Annual Report). The following risk factors 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.

***The Company’s ability to access credit on favorable terms, if necessary, for the funding of the Company’s operations and capital projects may be limited due to changes in credit markets.***

The credit markets and the financial services industry have been experiencing disruption characterized by the bankruptcy, failure, collapse or sale of various financial institutions, increased volatility in securities prices, diminished liquidity and credit availability and intervention from the U.S. and other governments. Continued concerns about the systemic impact of potential long-term or widespread downturn, energy costs, geopolitical issues, the availability and cost of credit, the global commercial and residential real estate markets and related mortgage markets and reduced consumer confidence have contributed to increased market volatility. The cost and availability of credit has been and may continue to be adversely affected by these conditions.

***The Company’s receipt of maximum consideration in conjunction with its sale of YUTIQ® to Alimera Sciences, Inc. for $82.5 million cash plus royalties is dependent on Alimera’s effective sale and distribution of YUTIQ® outside of China, Hong Kong, Taiwan, Macau and Southeast Asia.***

Pursuant to our PRA with Alimera, the Company agreed to grant to Alimera an exclusive and sublicensable right and license under the Company’s and its affiliates’ interest in certain of the Company’s and its affiliates’ intellectual property to develop, manufacture, sell, commercialize and otherwise exploit certain products, including YUTIQ® (fluocinolone acetonide intravitreal implant) 0.18 mg, for the treatment and prevention of uveitis in the entire world except Europe, the Middle East and Africa. Pursuant to the agreement, Alimera paid the Company an Upfront Payment of $75 million. Alimera is required to make four quarterly Guaranteed Payments (as defined in the PRA) to the Company totaling $7.5 million during 2024. Alimera is also required to pay royalties to the Company from 2025 to 2028 at a percentage of low-to-mid double digits of Alimera’s annual U.S. net sales of certain products (including YUTIQ) in excess of certain thresholds, beginning at $70 million in 2025, increasing annually thereafter (Royalties). Upon Alimera’s payment of the Upfront Payment and the Guaranteed Payments, the licenses and rights granted to Alimera will automatically become perpetual and irrevocable. We cannot predict what success, if any, Alimera may have with respect to sales of YUTIQ and, therefore, it is uncertain as to when we may receive the royalties and if we will receive any royalties at all. In the event Alimera fails to execute the effective sale and distribution of YUTIQ in the specified regions the royalties contemplated under the PRA could be adversely impacted in total, or in part, and our business could be harmed.

***We may not be able to realize the anticipated benefits from the sale of our YUTIQ franchise to Alimera.***

We may not be able to realize the anticipated benefits of the sale of YUTIQ to Alimera, including utilizing the proceeds from the sale primarily on the development of EYP-1901, positioning our business for long-term growth and maximizing stockholder value.

Our ability to realize the anticipated benefits of the sale and the success of the remaining company is subject to various risks and uncertainties. There is a possibility of adverse clinical and other developments in respect of EYP-1901, and we may not be able to successfully develop, obtain marketing approval for and commercialize EYP-1901. We may not utilize the proceeds from the sale to successfully develop EYP-1901 or any product candidate we develop in the future. We may experience difficulties or delays with developing EYP-1901. Further, we could spend the proceeds from the sale of our YUTIQ business in ways that do not improve our remaining business, financial condition or results of operations. Our failure to apply these funds effectively could have an adverse effect on our business, financial condition and results of operations.

In addition, our current and prospective employees may feel uncertain about their roles with us following the completion of the sale to Alimera, including as a result of the workforce reduction we announced in May 2023, which may have an adverse effect on our ability to attract or retain key management personnel or other key employees. If key employees depart, our business, financial condition and results of operations may be adversely impacted.

Filed Nov 3, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-058775. Last ingested by Listed: Nov 4, 2026, 07:52 ET. No prices; not investment advice.