# EyePoint, Inc.: Form 10-Q for the period ended Mar 31, 2024

- Company: [EyePoint, Inc.](/companies/eypt.md) (CIK 1314102)
- Form: 10-Q
- Filed: 2024-05-09
- Accepted by EDGAR: May 9, 2024, 10:12 ET
- Period: 2024-03-31
- Accession: 0000950170-24-056380
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1314102/000095017024056380/eypt-20240331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1314102/000095017024056380/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-01-01 to 2024-03-31 | $11.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-01-01 to 2024-03-31 | $759.0k | us-gaap:CostOfGoodsAndServicesSold |
| Research and development | 3 months, 2024-01-01 to 2024-03-31 | $30.1m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2024-01-01 to 2024-03-31 | −$33.3m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-01-01 to 2024-03-31 | $0 | us-gaap:InterestExpense |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | −$29.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-01-01 to 2024-03-31 | −$0.55 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | −$0.55 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-01-01 to 2024-03-31 | 52,913 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-01-01 to 2024-03-31 | −$31.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-01-01 to 2024-03-31 | $1.2m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-03-31 | $271.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-03-31 | $317.7m | us-gaap:AssetsCurrent |
| Total assets | at 2024-03-31 | $329.2m | us-gaap:Assets |
| Current liabilities | at 2024-03-31 | $62.6m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-03-31 | $79.3m | us-gaap:Liabilities |
| Shareholders' equity | at 2024-03-31 | $249.9m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 24,433 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 DURAVYU™, as an investigational sustained delivery intravitreal treatment deploying a bioerodible 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 and planned clinical trials for DURAVYU™ for the treatment of wet AMD, NPDR, and DME;
- our expectations regarding the timing and clinical development of our other product candidates, including EYP-2301, a TIE-2 agonist, razuprotafib, formulated in Durasert E™ to potentially improve outcomes in serious retinal diseases;
- our strategic alliances with other companies;
- our belief that our cash, cash equivalents, and investments in marketable securities of $299.3 million at March 31, 2024, will provide a cash runway into 2026 through topline data for the DURAVYU™ Phase 3 pivotal trials in wet AMD;
- 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 August 2022 subpoena from the U.S. Attorney’s Office for the District of Massachusetts (DOJ) seeking production of documents related to sales, marketing and promotional practices (DOJ Subpoena), including as pertain to DEXYCU®;
- our ability to manufacture DURAVYU™ or any other products or product candidates, in sufficient quantities and quality;
- our expectations regarding our ability to obtain and adequately maintain sufficient intellectual property protection for DURAVYU™ and any other products or product candidates, and to avoid claims of infringement of third-party intellectual property rights;
- the effect of legal and regulatory developments; and,
- 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.

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:

- the effectiveness and timeliness of our clinical trials, and the usefulness of the data;
- the sufficiency of our existing cash resources into 2026 through topline data for the DURAVYU™ Phase 3 pivotal trials in wet AMD;
- our access to needed capital;
- fluctuations in our operating results;
- the duration, scope and outcome of any governmental inquiries or investigations;
- the success of current and future license and collaboration agreements, including our agreements with Alimera Sciences, Inc. (Alimera), Betta Pharmaceuticals Co., Ltd. (Betta), Equinox Science, LLC (Equinox) and Ocumension Therapeutics (Ocumension);
- our dependence on contract research organizations, vendors and investigators;
- our ability to manufacture clinical and commercial supply of our products and product candidates;
- the extent to which the global economic conditions, uncertainty caused by geopolitical violence and unrest and public health crises impact our business, the medical community, and the global economy;
- market acceptance of our product candidates, if approved;
- 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, 2023, as supplemented by the risks set forth under Item 1A of this Quarterly Report on Form 10-Q, 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.

EYEPOINT®, DEXYCU®, YUTIQ®, DURASERT®, DELIVERING INNOVATION TO THE EYE® and WITH AN EYE ON PATIENTS® are our trademarks. Retisert® and Vitrasert® are Bausch & Lomb’s trademarks. YUTIQ® is licensed to Alimera Sciences and Ocumension Therapeutics in their respective territories. ILUVIEN® is Alimera Sciences Inc.’s trademark. 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 retinal diseases. Our pipeline leverages our proprietary Durasert E™ technology for sustained intraocular drug delivery. The Company’s lead product candidate, DURAVYU™, is an investigational sustained delivery treatment for anti-vascular endothelial growth factor (anti-VEGF) -mediated retinal diseases combining vorolanib, a selective and patent-protected tyrosine kinase inhibitor with Durasert E™. DURAVYU™ is presently in Phase 2 clinical trials as a sustained delivery treatment 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, non-proliferative diabetic retinopathy (NPDR), and diabetic macular edema (DME). We expect to initiate pivotal Phase 3 clinical trials in wet AMD in the second half of 2024.

### Recent Developments

- In May 2024, we announced topline results of our Phase 2 PAVIA clinical trial evaluating DURAVYU™ (vorolanib intravitreal insert), previously known as EYP-1901, in patients with non-proliferative diabetic retinopathy (NPDR). The data demonstrated that DURAVYU™ has a biologic effect in patients with NPDR with a favorable safety and tolerability profile, however the trial did not meet the pre-specified primary endpoint. We plan to provide an update on the path forward for DURAVYU™ as a potential treatment in NPDR following a review of the full 12-month data.
- On April 23, 2024, an end of Phase 2 meeting was held with the Food and Drug Administration (FDA) to discuss our proposed phase 3 (pivotal) clinical program for wet AMD indication. Final meeting minutes from the FDA are pending.
- In March 2024, we announced the appointment of Ramiro Ribeiro, M.D., Ph.D. as Chief Medical Officer. Dr. Ribeiro is a trained retinal specialist and joins EyePoint from Apellis Pharmaceuticals, where he served as Vice President, Head of Clinical Development.

### R&D Highlights

- In February 2024, we announced results from new subgroup analyses from the Phase 2 DAVIO 2 clinical trial of DURAVYU™. The presented analyses of the data reveal: in the sub-group of patients who were supplement-free up to 6 months, the DURAVYU™ groups demonstrated numerical superiority in change in BCVA along with strong anatomic control compared to the aflibercept control group. This result confirms that the positive topline data from the Phase 2 DAVIO 2 trial were driven by DURAVYU™ and not by study eyes requiring supplemental injection; visual and anatomical outcomes were not meaningfully influenced by differences in patient baseline BCVA, duration of wet AMD diagnosis, or historical treatment burden; and DURAVYU™ outcomes are consistent and durable in a range of wet AMD patient types.

### 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, 2023, 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 March 31, 2024 Compared to Three Months Ended March 31, 2023:

| Revenues: | Three Months Ended March 31, 2024 | 2023 | Change Amounts% |  |
| --- | ---: | ---: | ---: | ---: |
| Product sales, net | $658 | $7,394 | $(6,736) | -91% |
| License and collaboration agreements | 10,563 | 34 | 10,529 | 30968% |
| Royalty income | 463 | 255 | 208 | 82% |
| Total revenues | 11,684 | 7,683 | 4,001 | 52% |
| Operating expenses: |  |  |  |  |
| Cost of sales | 759 | 640 | 119 | 19% |
| Research and development | 30,139 | 13,618 | 16,521 | 121% |
| Sales and marketing | 6 | 5,737 | (5,731) | -100% |
| General and administrative | 14,101 | 9,242 | 4,859 | 53% |
| Total operating expenses | 45,005 | 29,237 | 15,768 | 54% |
| Loss from operations | (33,321) | (21,554) | (11,767) | 55% |
| Other income (expense): |  |  |  |  |
| Interest and other income, net | 4,037 | 1,202 | 2,835 | 236% |
| Interest expense | — | (812) | 812 | -100% |
| Total other income (expense), net | 4,037 | 390 | 3,647 | 935% |
| Net loss | $(29,284) | $(21,164) | $(8,120) | 38% |
| Net loss per share - basic and diluted | $(0.55) | $(0.56) | $0.01 | -2% |
| Weighted average shares outstanding - basic and diluted | 52,913 | 37,486 | 15,427 | 41% |
| Net loss | $(29,284) | $(21,164) | $(8,120) | 38% |

### 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 $6.7 million, or 91%, to $0.7 million for the three months ended March 31, 2024 compared to $7.4 million for the three months ended March 31, 2023. This decrease was driven by the agreement that granted license and rights to YUTIQ® to Alimera in May 2023. For the three months ended March 31, 2024, product sales, net were primarily from the sales of product supply under the existing commercial supply agreement (CSA) with Alimera.

### License and Collaboration Agreement

License and collaboration agreement revenues were $10.6 million for the three months ended March 31, 2024. This activity was related to the recognition of a portion of deferred revenue related to the agreement to license YUTIQ® product rights to Alimera.

### Royalty Income

Royalty income increased by $0.2 million, or 82%, to $0.5 million for the three months ended March 31, 2024 compared to $0.3 million for the three months ended March 31, 2023. The increase was attributable to Ocumension Therapeutics royalties from YUTIQ® product sales in China.

### Cost of Sales

Cost of sales, increased by $0.1 million, or 19%, to $0.8 million for the three months ended March 31, 2024 from $0.6 million for the three months ended March 31, 2023. This increase was primarily due to higher sales volume to Alimera compared to commercial sales in the year prior, as well as 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 $16.5 million, or 121%, to $30.1 million for the three months ended March 31, 2024 from $13.6 million for the same period in the prior year. This increase was attributable primarily to (i) $5.6 million associated with non-cash equity award modifications expense, (ii) $4.2 million in increased clinical trial costs related to DURAVYU™ in Phase 2 clinical trials for wet AMD (DAVIO2), NPDR (PAVIA), and DME (VERONA), (iii) $2.4 million in higher clinical trial material expense (iv) $2.0 million higher personnel expense to support clinical trial activity and product development, including non-cash stock compensation, (v) $1.5 million in severance related expense, and (vi) $1.0 million in higher other R&D expenses.

### Sales and Marketing

Sales and marketing expenses decreased by $5.7 million, or 100%, for the three months ended March 31, 2024 from $5.7 million for the same period in the prior year. This decrease was driven by discontinued YUTIQ® promotion due to the agreement that granted YUITQ® license and rights to Alimera in Q2 2023 and the Company's exit from the commercial business.

### General and Administrative

General and administrative expenses increased by $4.9 million, or 53%, to $14.1 million for the three months ended March 31, 2024 from $9.2 million for the same period in the prior year. This increase was primarily attributable to $3.5 million in stock-based compensation and $1.3 million in personnel costs.

### Interest (Expense) Income

Interest income from investments in marketable securities and institutional money market funds increased by $2.8 million, or 236%, to $4.0 million for the three months ended March 31, 2024 compared to $1.2 million in the prior year quarter. This increase was due primarily to an increase in cash and marketable securities and higher interest rates in the current calendar quarter.

There was no interest expense in the three months ended March 31, 2024 due to the repayment of the loan under the loan and security agreement with Silicon Valley Bank (SVB Loan Agreement) on May 17, 2023. Interest expense for the three months ended March 31, 2023 was $0.8 million.

### Liquidity and Capital Resources

We have had a history of operating losses and an absence of significant recurring cash inflows from revenue, and at March 31, 2024 we had a total accumulated deficit of $771.4 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

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 then terminated, and all security interests and other liens granted to or held by the Lender were terminated and released.

During the three months ended March 31, 2024, we did not sell any shares of our common stock under our at-the-market offering facility.

### Future Funding Requirements

At March 31, 2024, we had cash, cash equivalents, and investments in marketable securities of $299.3 million. We expect that our cash and investments in marketable securities will enable us to fund our current operating plan through topline data for the planned Phase 3 wet AMD pivotal trials into 2026. 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 DURAVYU™ and 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 scope, progress, results, and costs of clinical trials of DURAVYU™, as a sustained delivery intravitreal treatment for wet AMD, NPDR, and DME

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

3\. the duration, scope and outcome of the DOJ Subpoena 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; and

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

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: | Three Months Ended March 31, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Net loss | $(29,284) | $(21,164) | $(8,120) |
| Changes in operating assets and liabilities | (14,314) | 1,418 | (15,732) |
| Other adjustments to reconcile net loss to cash flows from operating activities: | 12,427 | 2,911 | 9,516 |
| Net cash (used in) provided by operating activities | $(31,171) | $(16,835) | $(14,336) |
| Net cash (used in) provided by investing activities | $20,806 | $32,086 | $(11,280) |
| Net cash (used in) provided by financing activities | $115 | $(5,119) | $5,234 |

25

Operating cash outflows for the three months ended March 31, 2024 totaled $31.2 million, primarily due to our net loss of $29.3 million reduced by $12.4 million of non-cash expenses, which included $12.7 million of stock-based compensation and $0.3 million for depreciation of property and equipment, partially offset by $0.6 million of amortization and accretion of marketable securities. This was partially offset by cash outflows related to changes in working capital of $14.3 million, including $8.8 million of deferred revenue related to the agreement to license YUTIQ® product rights to Alimera, and $5.5 million of other working capital changes.

Operating cash outflows for the three months ended March 31, 2023 totaled $16.8 million, primarily due to our net loss of $21.2 million, reduced by $2.9 million of non-cash expenses, which included $3.1 million of stock-based compensation, and $0.1 million for depreciation of property and equipment, partially offset by $0.2 million for the amortization of debt discount and premium and discount on available-for-sale marketable securities. Net loss was also reduced by cash inflows related to changes in operating assets and liabilities of $1.4 million primarily due to lower accounts receivable.

For the three months ended March 31, 2024, $22.0 million of net cash was provided by the sales of marketable securities, and $1.2 million was used for the purchase of property and equipment.

For the three months ended March 31, 2023, $32.6 million of net cash was provided by the sales of marketable securities, and $0.5 million was used for the purchase of property and equipment.

Net cash used in financing activities for the three months ended March 31, 2024 totaled $0.1 million and consisted of the following:

(i) $4.6 million provided by the exercise of stock options

(ii) $4.4 million used for the settlement of stock units to satisfy statutory tax withholding

(iii) $0.1 million used for payment of equity issue costs.

Net cash used in financing activities for the three months ended March 31, 2023 totaled $5.1 million and consisted of the following:

(i) $5.2 million used by lower borrowings of the revolving facility

(ii) $0.1 million net proceeds primarily from the exercise of stock options.

## 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, 2,162 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 March 31, 2024. 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 March 31, 2024, 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 March 31, 2024 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, 9,874 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, 2023 (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.

***We use our own facility for the manufacturing of YUTIQ® and rely on third party suppliers for key components, and any disruptions to our or our suppliers’ operations could adversely affect YUTIQ®’s commercial viability and our ability to supply YUTIQ® to Alimera.***

Pursuant to our agreements with our commercialization partners, we currently manufacture commercial supplies of YUTIQ® ourselves at our Watertown, MA facility and rely on third party suppliers for key components of YUTIQ®. We have, and will continue, to perform extensive audits of our suppliers, vendors and contract laboratories. The cGMP requirements govern, among other things, recordkeeping, production processes and controls, personnel and quality control. To ensure that we continue to meet these requirements, we have and will continue to expend significant time, money, and effort.

The commercial manufacture of medical products is complex and requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of medical products often encounter difficulties in production, particularly in scaling out and validating initial production and ensuring the absence of contamination. These problems include difficulties with production costs and yields, quality control, including stability of the product, quality assurance testing, operator error, shortages of qualified personnel, as well as compliance with strictly enforced federal, state, and foreign regulations. We cannot assure you that any issue relating to the manufacture of YUTIQ® will not occur in the future.

The FDA also may, at any time following approval of a product for sale, audit our manufacturing facilities. If any such inspection or audit identifies a failure to comply with applicable regulations or if a violation of our product specifications or applicable regulation occurs independent of such an inspection or audit, the FDA may issue a Form FDA-483 and/or an untitled or warning letter, or we or the FDA may require remedial measures that may be costly and/or time consuming for us to implement and that may include the temporary or permanent suspension of commercial sales, recalls, market withdrawals, seizures or the temporary or permanent closure of a facility. We recently received an FDA Form 483 at the conclusion of an FDA inspection of our facility in February 2024, which included certain observations, and a subsequent determination that our facility has been classified as Official Action Indicated (OAI), which could lead to an enforcement action or, if left unaddressed, negatively affect our manufacturing of YUTIQ®. We are currently in the process of addressing each of the FDA’s observations and we believe we can successfully address all of the observations by implementing required corrective and preventive actions.

***If our Contract Research Organizations (CROs), Contract Manufacturing Organizations (CMOs), Contract Development Manufacturing Organizations (CDMOs), vendors, and investigators do not successfully carry out their responsibilities or if we lose our relationships with them, our development efforts with respect to our product candidates could be delayed.***

We are dependent on CROs, CMOs, CDMOs, vendors, and investigators for pre-clinical testing and clinical trials related to our product development programs, including for DURAVYU™ and other product candidates. These parties are not our employees, and we cannot control the amount or timing of resources that they devote to our programs. If they do not timely fulfill their responsibilities or if their performance is inadequate, the development, and commercialization of our product candidates could be delayed.

The parties with which we contract for execution of clinical trials play a significant role in the conduct of the trials and the subsequent collection and analysis of data. Their failure to meet their obligations could adversely affect clinical development of our product candidates. In addition, if we or our CROs fail to comply with applicable current Good Clinical Practices (GCP), the clinical data generated in our clinical trials may be deemed unreliable and the Food and Drug Administration (FDA) may require us to perform additional clinical trials before approving any marketing applications. Upon inspection, the FDA may determine that our clinical trials did not comply with GCP.

Switching or adding additional CROs involves additional cost and requires management time and focus. Identifying, qualifying and managing performance of third-party service providers can be difficult, time-consuming and cause delays in our development programs. In addition, there is a natural transition period when a new CRO commences work and the new CRO may not provide the same type or level of services as the original provider. Though we carefully manage our relationships with our CROs, there can be no assurance that we will not encounter challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects. If any of our relationships with our CROs terminate, we may not be able to enter into arrangements with alternative CROs or to do so on commercially reasonable terms. As a result, delays may occur, which can materially impact our ability to meet our desired clinical development timelines.

Additionally, our CMOs may experience manufacturing difficulties due to resource constraints or as a result of labor disputes or unstable political environments. If our CMOs were to encounter any of these difficulties, our ability to provide our product candidate to patients in clinical trials, or to provide product for the treatment of patients once approved, would be jeopardized.

In addition, any facilities located outside the United States (U.S.) that are used by us or by our CMOs or CDMOs to manufacture, test, and optimize our product candidates will be subject to various regulatory requirements of the jurisdiction in which they are located and in addition be subject to trade laws and regulations of the U.S. that may restrict our ability to continue to utilize certain CMOs or CDMOs. Foreign CMOs or CDMOs may be subject to U.S. legislation or investigations, including the proposed BIOSECURE Act, sanctions, trade restrictions, and other foreign regulatory requirements, which could increase the cost or reduce the supply of material available to us, delay the procurement or supply of such material, delay or impact clinical trials, have an adverse effect on our clinical drug development efforts and could adversely affect our financial condition and business prospects. For example, we currently engage with WuXi Apptec (WuXi), to perform certain process development, manufacturing and testing associated with one of our product candidates, EYP-2301. WuXi has been identified as a U.S. national security threat in the proposed BIOSECURE Act, which, if enacted, or if alternatively implemented through executive or administrative action, could restrict WuXi’s business in the U.S. or the ability of businesses in the U.S. to conduct business with WuXi.

Moreover, if a foreign regulatory authority curtails operations at such foreign facilities of our CMOs or CDMOs, or if trade laws are adopted limiting our ability to use such CMO or CDMO facilities, we may need to find alternative facilities, which could negatively impact our clinical development timelines.

Because we have relied on third parties, our internal capacity to perform certain functions is limited. Outsourcing these functions involves risks that third parties may not perform to our standards, may not produce results in a timely manner or may fail to perform at all. In addition, the use of third-party service providers requires us to disclose our proprietary information to these parties, which could increase the risk that this information will be misappropriated. We currently have a small number of employees, which limits the internal resources we have available to identify and monitor our third-party providers. To the extent we are unable to identify and successfully manage the performance of third-party service providers in the future, our ability to advance our product candidates through clinical trials will be compromised. Though we carefully manage our relationships with our CROs, CMOs, and CDMOs, there can be no assurance that we will not encounter similar challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition, and prospects.

Filed May 9, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-056380. Last ingested by Listed: Oct 30, 2026, 11:47 ET. No prices; not investment advice.