EyePoint Pharmaceuticals(EYPT) - 2021 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Unaudited Financial Statements Unaudited financial statements for Q3 2021 show significant cash and asset growth from equity financing, a revenue shift to product sales, and a widened net loss due to increased operating expenses Condensed Consolidated Balance Sheets | Balance Sheet Items (In thousands) | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $119,710 | $44,909 | | Total current assets | $141,775 | $63,118 | | Total assets | $168,251 | $91,717 | | Total current liabilities | $19,933 | $14,888 | | Long-term debt | $36,396 | $37,977 | | Total liabilities | $75,503 | $73,176 | | Total stockholders' equity | $92,748 | $18,541 | - The significant increase in cash and cash equivalents from $44.9 million to $119.7 million was primarily driven by proceeds from equity financing activities during the first nine months of 2021[7][204] Condensed Consolidated Statements of Comprehensive Loss | Metric (In thousands) | Q3 2021 | Q3 2020 | 9 Months 2021 | 9 Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Product sales, net | $8,587 | $5,758 | $24,127 | $14,151 | | License & collaboration revenue | $159 | $9,535 | $594 | $11,590 | | Total revenues | $9,059 | $15,695 | $25,395 | $27,306 | | R&D Expenses | $8,498 | $4,090 | $19,582 | $12,219 | | Total operating expenses | $24,372 | $17,652 | $62,621 | $51,859 | | Net loss | $(16,695) | $(3,801) | $(38,985) | $(29,925) | | Net loss per share | $(0.58) | $(0.30) | $(1.42) | $(2.44) | - The net loss for Q3 2021 widened significantly to $16.7 million from $3.8 million in Q3 2020, primarily due to a sharp decrease in high-margin license and collaboration revenue and a more than doubling of R&D expenses[11] Condensed Consolidated Statements of Cash Flows | Cash Flow Activity (In thousands) | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(33,429) | $(20,330) | | Net cash used in investing activities | $(156) | $(170) | | Net cash provided by financing activities | $108,386 | $27,012 | | Net increase in cash | $74,801 | $6,512 | - Financing activities provided $108.4 million in cash, primarily from the issuance of stock, which more than offset the $33.4 million cash used in operations, resulting in a substantial increase in the company's cash position[17][222] Notes to Condensed Consolidated Financial Statements - The company's lead product candidate is EYP-1901, a potential twice-yearly treatment for wet AMD, which is currently in a Phase 1 clinical trial (DAVIO)[20][22] - Commercial products include YUTIQ® for chronic non-infectious uveitis and DEXYCU® for postoperative inflammation following ocular surgery[20][24] - The company believes its cash and cash equivalents of $119.7 million as of September 30, 2021, are sufficient to fund operations for at least the next twelve months[30] - In June 2021, the company's $2.0 million Paycheck Protection Program (PPP) loan was fully forgiven by the SBA, resulting in a gain on extinguishment of debt of approximately $2.1 million[99] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes increased product sales to recovering demand, notes a total revenue decrease from a one-time license payment, and highlights rising R&D expenses, with liquidity bolstered by a $115.1 million public offering Business Overview and Recent Developments - Customer demand for YUTIQ and DEXYCU was negatively impacted by the COVID-19 pandemic but saw a modest return beginning in June 2020, which continued through 2021, although uncertainty remains due to new variants[161] - In February 2021, the company raised gross proceeds of approximately $115.1 million through an underwritten public offering of common stock[162] - The company completed enrollment in its Phase 1 DAVIO clinical trial for EYP-1901 for wet AMD in May 2021 and reported positive 3-month safety data in October 2021[171][172] Results of Operations Q3 2021 vs Q3 2020 Performance (in thousands USD) | Metric | Q3 2021 (in thousands USD) | Q3 2020 (in thousands USD) | Change $ (in thousands USD) | Change % | | :--- | :--- | :--- | :--- | :--- | | Product sales, net | $8,587 | $5,758 | $2,829 | 49% | | License & collaboration | $159 | $9,535 | $(9,376) | (98)% | | Total revenues | $9,059 | $15,695 | $(6,636) | (42)% | | R&D Expenses | $8,498 | $4,090 | $4,408 | 108% | | Net loss | $(16,695) | $(3,801) | $(12,894) | (339)% | Nine Months 2021 vs 2020 Performance (in thousands USD) | Metric | 9M 2021 (in thousands USD) | 9M 2020 (in thousands USD) | Change $ (in thousands USD) | Change % | | :--- | :--- | :--- | :--- | :--- | | Product sales, net | $24,127 | $14,151 | $9,976 | 70% | | License & collaboration | $594 | $11,590 | $(10,996) | (95)% | | Total revenues | $25,395 | $27,306 | $(1,911) | (7)% | | R&D Expenses | $19,582 | $12,219 | $7,363 | 60% | | Net loss | $(38,985) | $(29,925) | $(9,060) | (30)% | - The 108% increase in Q3 R&D expenses was primarily driven by $1.6 million in increased clinical costs for the EYP-1901 Phase 1 trial and planning for the YUTIQ 50 Phase 3 trial[182] Liquidity and Capital Resources - As of September 30, 2021, the company had cash and cash equivalents of $119.7 million, a significant increase from year-end 2020[204] - The company believes its current cash, combined with anticipated product sales, will fund its operating plan through December 31, 2022[211] - The company has a senior secured term loan with CRG, with an outstanding balance of approximately $40.5 million as of September 30, 2021. The loan includes financial covenants, such as maintaining liquidity above $5 million and meeting minimum annual product revenue targets, which were amended to $25 million for 2021[207][209][210] Item 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, the company is exempt from providing quantitative and qualitative disclosures about market risk - As a smaller reporting company, EyePoint Pharmaceuticals is exempt from the requirement to provide quantitative and qualitative disclosures about market risk[225] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2021, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of September 30, 2021, the company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective[226] - There were no changes in internal control over financial reporting during the quarter ended September 30, 2021, that materially affected, or are reasonably likely to materially affect, internal controls[227] PART II: OTHER INFORMATION Item 1. Legal Proceedings The SEC's Division of Enforcement concluded its investigation into the company without recommending enforcement action, and other routine legal proceedings are not expected to have a material financial effect - On May 4, 2021, the SEC Division of Enforcement informed the company that it had concluded its investigation and did not intend to recommend an enforcement action[231][148] Item 1A. Risk Factors No material changes to risk factors from the 2020 Annual Report, except for a new disclosure concerning customer concentration for the DEXYCU product - A new risk factor was added regarding customer concentration, stating that a significant amount of DEXYCU is sold to a limited number of customers, and the loss of one or more could have a material adverse effect[233] Other Items (Items 2, 3, 4, 5, 6) The company reported no unregistered equity sales, no defaults on senior securities, no mine safety disclosures, and no other material information, with Item 6 listing exhibits - The company reports 'None' for Unregistered Sales of Equity Securities, Defaults Upon Senior Securities, Mine Safety Disclosures, and Other Information[233][234][235]