EyePoint Pharmaceuticals(US:EYPT)2022-03-13 16:00Part I Business EyePoint Pharmaceuticals develops and commercializes eye disorder therapeutics using Durasert® technology, with lead candidate EYP-1901 and commercial products YUTIQ® and DEXYCU®, though COVID-19 has impacted revenues Overview and Strategy The company's strategy focuses on advancing pipeline candidates EYP-1901 and YUTIQ 50, growing commercial product revenues, and leveraging its Durasert and Verisome technologies - Key strategic elements include: - Advancing EYP-1901 through clinical development for wet AMD, DR, and RVO - Advancing YUTIQ 50 for chronic non-infectious uveitis - Growing commercial revenues for YUTIQ and DEXYCU in the U.S - Leveraging Durasert and Verisome technologies through collaborations and out-licenses34 Our Pipeline and Commercial Products The company's portfolio features lead candidate EYP-1901 in Phase 1/2, commercial products YUTIQ and DEXYCU, and YUTIQ 50 in Phase 3, all leveraging Durasert technology Product and Pipeline Status | Program | Indication | Stage | | :--- | :--- | :--- | | Pipeline | | | | EYP-1901 | Wet AMD | Phase 1/2 | | EYP-1901 | Diabetic Retinopathy (DR) | Preclinical | | EYP-1901 | Retinal Vein Occlusion (RVO) | Preclinical | | YUTIQ 50 | Posterior Segment Uveitis | Phase 3 | | Commercial | | | | YUTIQ® | Posterior Segment Uveitis | Approved | | DEXYCU® | Post-Operative Inflammation | Approved | - EYP-1901, the lead product candidate, combines the bioerodible Durasert technology with vorolanib, a TKI, for a potential six-month sustained delivery treatment for wet AMD. Positive interim six-month data from the Phase 1 DAVIO trial was reported in November 2021, with a Phase 2 trial anticipated to start in Q3 2022264359 - YUTIQ is a three-year implant for chronic non-infectious uveitis, while DEXYCU is a single-dose treatment for post-operative inflammation. Effective January 1, 2022, commercial partner ImprimisRx assumed all sales and marketing for DEXYCU272881 Manufacturing, Sales, and Distribution The company manufactures YUTIQ in-house and outsources DEXYCU production, utilizing Key Account Managers for YUTIQ and a partnership with ImprimisRx for DEXYCU sales and distribution - YUTIQ is manufactured in-house at the company's Watertown, MA facility, while DEXYCU manufacturing is outsourced to a contract manufacturing organization (CMO)8889 - As of February 28, 2022, 19 Key Account Managers sell YUTIQ. Effective January 1, 2022, ImprimisRx assumed all sales and marketing responsibilities for DEXYCU in the U.S91 - Both YUTIQ and DEXYCU have been granted permanent J-codes by CMS for reimbursement. DEXYCU's pass-through status, which provides for separate reimbursement, was extended through December 31, 20228295 Intellectual Property and Competition The company protects its technology with patents for YUTIQ (2027), DEXYCU (2034), and EYP-1901 (2037-2041), operating in a highly competitive eye disease treatment market Key Product Patent Expirations | Product/Candidate | U.S. Patent Expiration | | :--- | :--- | | YUTIQ® | At least August 2027 | | DEXYCU® | At least 2034 | | EYP-1901 (vorolanib compound) | September 2037 | | EYP-1901 (product) | Potentially until 2041 (if application issues) | - Competition in the wet AMD space includes established anti-VEGF biologics like EYLEA and LUCENTIS, as well as newer long-acting treatments and delivery systems from companies like Kodiak Sciences, Graybug Vision, and REGENXBIO116117118 - Competitors for YUTIQ in posterior segment uveitis include Allergan's OZURDEX® and AbbVie's HUMIRA®. DEXYCU competes with topical treatments like Kala Pharmaceuticals' INVELTYS™ and Ocular Therapeutix's DEXTENZA®123124128129 Government Regulation The company faces extensive FDA regulation across product development and post-market activities, alongside complex healthcare laws, pricing programs, fraud and abuse statutes, and data privacy regulations - The FDA drug approval process requires extensive pre-clinical and clinical trials (Phase 1, 2, and 3) to demonstrate safety and efficacy before an NDA can be submitted and approved134136139 - Post-approval, the company must adhere to cGMP for manufacturing, QSR for drug-device combination products, and strict regulations on advertising and promotion153154155 - Sales and reimbursement are significantly impacted by U.S. healthcare reform (ACA) and government pricing programs, including the Medicaid Drug Rebate Program and the 340B drug pricing program, which require substantial discounts and rebates184194195 - The company's relationships with healthcare providers and payors are governed by federal and state anti-kickback, fraud, and abuse laws, as well as data privacy laws like HIPAA in the U.S. and GDPR in the EU219222231 - The company's core business revolves around its proprietary Durasert® technology for sustained intraocular drug delivery, with two commercial products (YUTIQ®, DEXYCU®) and a lead pipeline candidate (EYP-1901)2324 - The COVID-19 pandemic has had a material adverse impact on the business, significantly affecting cash flows from revenues due to the reduction in physician office visits for YUTIQ and the closure of ambulatory surgery centers for DEXYCU3133 Risk Factors The company faces significant risks including financial losses, capital needs, clinical trial uncertainties for EYP-1901, commercialization challenges for YUTIQ and DEXYCU, intellectual property protection, and reliance on third-party partners Risks Related To Our Financial Position and our Capital Resources The company faces ongoing losses, requires additional capital, is impacted by COVID-19, and must comply with credit facility covenants and manage DEXYCU acquisition payment obligations - The company has a history of significant losses, with a net loss of $58.4 million in 2021 and an accumulated deficit of $569.1 million as of December 31, 2021240 - Cash, cash equivalents, and investments of $211.6 million at year-end 2021, along with product sales, are expected to fund operations into the second half of 2024. However, the company will likely need to raise additional capital237 - The company entered into a new loan agreement with Silicon Valley Bank in March 2022 which contains financial covenants, including minimum product revenue levels for YUTIQ and DEXYCU or a minimum cash balance253256 Risks Related To The Regulatory Approval And Clinical Development Of Our Product Candidates The company's success hinges on early-stage EYP-1901 development, facing inherent clinical trial uncertainties, potential delays, and risks of failing to demonstrate safety and efficacy - The company's success is highly dependent on its lead product candidate, EYP-1901, which is still in the early stages of development and faces the significant risks and uncertainties of clinical trials275296 - Clinical trials are subject to numerous risks that can cause delays or failure, including difficulty enrolling patients, adverse side effects, and failure to demonstrate safety and efficacy277291 - Success in early-stage clinical trials does not ensure success in later-stage trials, and data is subject to varying interpretations by regulatory authorities like the FDA285288 Risks Related To The Commercialization Of Our Products And Product Candidates Commercial success for YUTIQ and DEXYCU is uncertain due to market acceptance, reimbursement challenges (especially DEXYCU's pass-through status), intense competition, and regulatory risks - A critical risk for DEXYCU is the potential loss of its Medicare Part B pass-through status after December 31, 2022. If payment for DEXYCU becomes bundled with the cataract procedure, it would materially decrease revenues305316 - The company must comply with complex government pricing programs (Medicaid, 340B). Failure to comply with reporting and payment obligations could lead to significant penalties, sanctions, and fines317321 - The company faces extensive ongoing FDA regulatory requirements for its approved products, including post-approval studies for DEXYCU under the Pediatric Research Equity Act (PREA)323324 Risks Related To Our Intellectual Property Commercial success relies on robust intellectual property protection, but the patent process is uncertain, vulnerable to challenges, and may lead to costly infringement litigation - The company's ability to protect its products from competition is highly dependent on obtaining and maintaining patent protection, which is an uncertain, complex, and expensive process368371 - The company may face lawsuits from third parties alleging patent infringement, which could be costly and force the company to cease commercialization or obtain licenses on unfavorable terms387390 - Changes in U.S. or foreign patent law, such as the America Invents Act (AIA), could weaken the company's ability to enforce its patents395396 Risks Related To Our Reliance On Third Parties The company heavily relies on third parties for EYP-1901 development (Equinox), DEXYCU commercialization (ImprimisRx), and manufacturing/clinical trials, posing significant operational risks - The development and commercialization of EYP-1901 depend on a license and API supply agreement with Equinox Science. Termination of this agreement would materially harm the business412414 - The company relies on its commercial alliance partner, ImprimisRx, for all sales and marketing of DEXYCU. Any failure in this partnership could materially reduce DEXYCU sales415418 - The company depends on contract manufacturing organizations (CMOs) for DEXYCU supply and contract research organizations (CROs) for clinical trials. Issues with these third parties could impair supply and delay development419434 Properties The company leases its primary 21,649 sq ft Watertown, MA facility for office, lab, and manufacturing, with an extended lease to 2028 and planned expansion - The company's principal facility is leased space in Watertown, MA, which includes office, lab, and manufacturing operations. The lease was recently amended to extend the term to 2028 and expand the office space474 Legal Proceedings The SEC concluded its investigation into the company on May 4, 2021, and does not intend to recommend an enforcement action - On May 4, 2021, the SEC Division of Enforcement concluded its investigation and does not intend to recommend an enforcement action against the company478 Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on the Nasdaq Global Market under "EYPT", with approximately 76 holders of record as of March 4, 2022 - The company's common stock trades on the Nasdaq Global Market under the symbol "EYPT"482 Management's Discussion and Analysis of Financial Condition and Results of Operations In 2021, net product sales grew 70% to $35.3 million, but total revenues increased only 7% to $36.9 million due to lower collaboration revenue, resulting in a $58.4 million net loss Results of Operations (2021 vs. 2020) | Metric | 2021 (in thousands) | 2020 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Product sales, net | $35,312 | $20,831 | 70% | | Total revenues | $36,939 | $34,437 | 7% | | Research and development | $28,500 | $17,424 | 64% | | Total operating expenses | $92,215 | $71,727 | 29% | | Loss from operations | ($55,276) | ($37,290) | 48% | | Net loss | ($58,417) | ($45,394) | (29)% | - Net product sales increased by $14.5 million (70%) in 2021, driven by a return of customer demand for YUTIQ and DEXYCU as pandemic-related restrictions eased523 - Research and development expenses increased by $11.1 million (64%) in 2021, primarily due to clinical costs for the EYP-1901 Phase 1 trial and the YUTIQ 50 Phase 3 trial, as well as increased personnel expenses528 - The company ended 2021 with $211.6 million in cash, cash equivalents, and marketable securities, which is expected to fund operations into the second half of 2024543 Controls and Procedures Management concluded that disclosure controls and procedures, along with internal control over financial reporting, were effective at a reasonable assurance level as of December 31, 2021 - Management concluded that as of December 31, 2021, the company's disclosure controls and procedures were effective at the reasonable assurance level559 - Based on an assessment using the COSO framework, management concluded that the company's internal control over financial reporting was effective as of December 31, 2021562 Other Information On March 9, 2022, the company refinanced its debt with a new $45 million credit facility from Silicon Valley Bank and amended its Watertown, MA lease to extend the term and expand space - On March 9, 2022, the company refinanced its debt by entering into a new $45 million credit facility with Silicon Valley Bank and terminating its previous agreement with CRG Servicing LLC564577 - On March 8, 2022, the company amended its Watertown, MA lease to extend the term to May 31, 2028 for its lab/manufacturing space and to rent an additional 11,999 square feet of office space579 Part III Directors, Executive Officers, and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the company's 2022 annual meeting proxy statement Executive Compensation Executive compensation information is incorporated by reference from the company's 2022 Proxy Statement Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership and related stockholder matters information is incorporated by reference from the company's 2022 Proxy Statement Certain Relationships and Related Transactions, and Director Independence Information on certain relationships, related transactions, and director independence is incorporated by reference from the company's 2022 Proxy Statement Principal Accounting Fees and Services Principal accounting fees and services information is incorporated by reference from the company's 2022 Proxy Statement Part IV Exhibits and Financial Statement Schedules This section presents the audited consolidated financial statements for 2021 and 2020, with Deloitte & Touche LLP identifying estimation of clinical trial expenses as a critical audit matter Consolidated Balance Sheet Highlights (as of Dec 31, 2021) | Account | Amount (in thousands) | | :--- | :--- | | Cash, cash equivalents, and marketable securities | $211,558 | | Total Assets | $263,372 | | Long-term debt | $36,562 | | Total Liabilities | $78,992 | | Total Stockholders' Equity | $184,380 | Consolidated Statement of Cash Flows Highlights (Year ended Dec 31, 2021) | Cash Flow Activity | Amount (in thousands) | | :--- | :--- | | Net cash used in operating activities | ($50,097) | | Net cash used in investing activities | ($33,121) | | Net cash provided by financing activities | $216,902 | - The independent auditor, Deloitte & Touche LLP, identified prepaid and accrued clinical trial expenses as a critical audit matter due to the significant management judgment required to estimate the stage of completion and costs incurred for research activities621622