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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2023
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to ______________________
COMMISSION FILE NUMBER: 001-38365
EYENOVIA, INC.
(Exact name of Registrant as Specified in Its Charter)
DELAWARE
(State or Other Jurisdiction of
Incorporation or Organization)
295 Madison Avenue, Suite 2400
NEW YORK, NY
(Address of Principal Executive Offices)
47-1178401
(I.R.S. Employer
Identification No.)
10017
(Zip Code)
Registrant’s telephone number, including area code: (833) 393-6684
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.0001 Par Value
Trading Symbol(s)
EYEN
Name of each exchange on which registered
The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: none
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
Non-accelerated filer ☒
Accelerated filer ☐
Smaller reporting company ☒
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any news or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section
404(b) of the Sarbanes-Oxley Act (15 U.S.C 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to
previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive
officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
Auditor PCAOB ID Number: 688
Auditor Name: Marcum LLP
Auditor Location: New York, NY
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as of June 30, 2023
(based on the closing price of $2.37 on June 30, 2023, the last trading day of the registrant’s most recently completed second fiscal quarter), was approximately $88.0 million. Common stock held
by each officer and director and by each person known to the registrant who owned 10% or more of the outstanding common stock have been excluded in that such persons may be deemed to be
affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
The number of outstanding shares of the registrant’s common stock was 47,386,349 as of March 15, 2024.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s proxy statement for its 2024 Annual Meeting of Stockholders currently scheduled to be held on June 12, 2024 are incorporated by reference into Part III hereof.
Table of Contents
Eyenovia, Inc.
Form 10-K
For Year Ended December 31, 2023
TABLE OF CONTENTS
PART I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 1C. Cybersecurity
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
PART IV
Item 15. Exhibits, Financial Statement Schedules
Item 16. Form 10-K Summary
Signatures
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
PART I
This Annual Report on Form 10-K contains “forward-looking statements” that involve risks and uncertainties, as well as
assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied
by such forward-looking statements. The statements contained in this Annual Report on Form 10-K that are not purely historical are
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or Securities Act, and Section
21E of the Securities Exchange Act of 1934, as amended, or Exchange Act. Such forward-looking statements include our estimates
regarding expenses, future revenue, capital requirements and our need for additional financing and other financial items; any statements
of the plans, strategies and objectives of management for future operations; any statements about the advantages of our product
candidates and platform technology; estimates regarding the potential market opportunity for our product candidates and platform
technology; statements regarding our clinical trials; factors that may affect our operating results; statements about our ability to establish
and maintain intellectual property rights; statements about our ability to retain key personnel and hire necessary employees and
appropriately staff our operations; statements related to future capital expenditures; statements related to future economic conditions or
performance; and other matters that do not relate strictly to historical facts or statements of assumptions underlying any of the foregoing.
Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,”
“continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “will,” “plan,” “project,” “seek,” “should,” “target,” “would,” and
similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and
assumptions of our management based on information currently available to management. Such forward-looking statements are subject
to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from
future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in the section titled “Summary Risk Factors” described below and “Risk Factors” included
in Item 1A of Part I of this Annual Report on Form 10-K, and the risks discussed in our other U.S. Securities and Exchange Commission,
or SEC, filings. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we
undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
As used in this report, the terms “Eyenovia, Inc.,” “Eyenovia,” “Company,” “company,” “we,” “us,” and “our” mean
Eyenovia, Inc. and its subsidiaries unless the context indicates otherwise.
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Summary Risk Factors
Some of the factors that could materially and adversely affect our financial condition, results of operations, cash flow, the
market price of shares of our common stock or our prospects include, but are not limited to, the following. You should read this summary
together with the more detailed description of each risk factor contained in Item 1A “Risk Factors” in this Annual Report on Form 10-K.
Risks Related to Our Financial Position and Need for Additional Capital
● We might not be able to continue as a going concern, which would likely cause our stockholders to lose most or all of their
investment.
● We will need to raise additional capital in order to continue developing our product candidates and to manufacture and
commercialize them and Mydcombi and clobetasol propionate ophthalmic suspension 0.05% (“clobetasol propionate”),
currently our only FDA-approved commercial products.
● We have incurred operating losses since our inception. We expect to continue to incur losses for the foreseeable future and
might never achieve or maintain profitability.
● Our relatively short operating history may make it difficult for investors to evaluate the success of our business to date and
to assess our future viability.
Risks Related to Development and Commercialization of Our Products and Product Candidates
● Our ability to achieve profitability is highly dependent on the commercial success of Mydcombi and clobetasol propionate,
and to the extent Mydcombi and/or clobetasol propionate is not successful, our business, financial condition and results of
operations may be materially adversely affected and the price of our common stock may decline.
● We are dependent on our ability to successfully commercialize our products and our and our licensees’ ability to develop,
obtain marketing approval for and successfully commercialize our future product candidates.
● Delays in the commencement or completion of clinical testing of product candidates we are developing or may develop in
the future may occur and could result in significantly increased costs and longer timelines and could impact our ability to
ever become profitable.
● Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their
regulatory approval and limit the commercial profile of an approved label, and such side effects or other properties could
result in significant negative consequences following any marketing approval of any of our product candidates.
● We might not be able to develop any additional marketable products utilizing our technology and we might not be able to
identify and successfully implement an alternative product development strategy.
● If the market opportunities for our products and product candidates are smaller than we believe they are, our product
revenues may be adversely affected and our business may suffer.
● The commercial success of our products and product candidates will depend in large part on the degree of market
acceptance among ophthalmologists and optometrists, patients, patient advocacy groups, third-party payors and the medical
community.
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Risks Related to Regulatory Approval of Our Product Candidates and Other Legal Compliance Matters
● The regulatory approval processes of the U.S. Food and Drug Administration, or FDA, and comparable foreign authorities
are lengthy, time-consuming and inherently unpredictable. If we are not able to obtain required regulatory approval for any
of our current or future product candidates, our business may be materially and adversely affected.
● If we receive regulatory approval for any of our current or future product candidates, we will be subject to ongoing
regulatory obligations and continued regulatory review, which may result in significant additional expense. Additionally,
our product candidates, if approved, could be subject to post-market study requirements, marketing and labeling
restrictions, and even recall or market withdrawal if unanticipated safety issues are discovered following approval. In
addition, we may be subject to penalties or other enforcement action if we fail to comply with regulatory requirements.
Risks Related to Our Business Operations and Managing Growth
● We are highly dependent on the services of our senior management team, including our Chief Executive Officer, and if we
are not able to retain these members of our management team or recruit and retain additional management, clinical,
scientific and sales personnel, our business will be harmed.
● We have limited corporate infrastructure and may experience difficulties in managing growth.
Risks Related to Our Dependence on Third Parties
● We rely on third parties to conduct, supervise, and monitor our clinical trials and perform some of our research and
preclinical studies. If these third parties do not satisfactorily carry out their contractual duties or fail to meet expected
deadlines, our development programs may be delayed or subject to increased costs, each of which may have an adverse
effect on our business and prospects.
● We may encounter delays in the manufacturing of the second generation Optejet device, including as a result of our
reliance on third parties for manufacturing activities, and this may cause delays in the commercialization of our products
and our product candidatess. Any such delays would increase the risk that we will not have sufficient quantities of our
product candidates or such quantities at an acceptable cost, which could delay, prevent or impair our development and
commercialization efforts.
● If we, our service providers or our third-party manufacturers fail to comply with environmental, health and safety laws and
regulations, we could become subject to fines or penalties or incur costs that could harm our business.
Risks Related to Our Intellectual Property and Potential Litigation
● Our success depends on our ability to protect our intellectual property and proprietary technology.
● Our patents covering our proprietary technology may be subject to challenge, narrowing, circumvention and invalidation
by third parties.
● We cannot be sure that we were the first to make the technologies claimed in our patents or patent applications or that we
were the first to file for patent protection.
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● The patent application process is subject to numerous risks and there can be no assurance that we will be successful in
obtaining patents for which we have applied.
● Obtaining and maintaining patent protection of our technologies depends on compliance with various procedural, document
submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could
be reduced or eliminated for non-compliance with these requirements.
● We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be
expensive, time consuming and unsuccessful.
● If we fail to comply with our obligations under our existing and any future intellectual property licenses with third parties,
we could lose license rights that are important to our business.
Risks Related to Ownership of Our Common Stock
● A significant portion of our total outstanding shares may be sold into the market in the near future, which could cause the
market price of our common stock to drop significantly, even if our business is performing well.
● The price of our common stock has been, and may continue to be, volatile and may fluctuate substantially, which could
result in substantial losses for purchasers of our common stock.
● We have broad discretion in the use of our cash, including the net proceeds from our financings, and might not use them
effectively.
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Item 1. Business.
Corporate Information
We were organized as a corporation under the laws of the State of Florida on March 12, 2014 under the name “PGP Holdings
V, Inc.” On May 5, 2014, we changed our name to Eyenovia, Inc. On October 6, 2014, we reincorporated in the State of Delaware by
merging into Eyenovia, Inc., a Delaware corporation. Our principal executive office is located at 295 Madison Avenue, Suite 2400, New
York, NY 10017, and our phone number is (833) 393-6684. Our website is www.eyenovia.com. Information contained on, or that can be
accessed through, our website is not incorporated by reference into this report, and you should not consider information on our website to
be part of this report.
Overview
We are an ophthalmic technology company commercializing Mydcombi™ (tropicamide and phenylephrine HCL ophthalmic
spray) for inducing mydriasis for routine diagnostic procedures and in conditions where short term pupil dilation is desired, preparing for
the commercialization of clobetasol propionate ophthalmic suspension 0.05% (“clobetasol propionate”), for the treatment of post-
operative inflammation and pain following ocular surgery, and developing the Optejet® delivery system both for use in combination with
our own drug-device therapeutic programs and for out-licensing for use in combination with therapeutics for additional indications. Our
aim is to improve the delivery of topical ophthalmic medication through the ergonomic design of the Optejet which facilitates ease-of-
use and delivery of a more physiologically appropriate medication volume, with the goal to reduce side effects and improve tolerability,
and introduce digital health technology to improve therapy compliance and ultimately medical outcomes.
The ergonomic and functional design of the Optejet allows for horizontal drug delivery and eliminates the need to tilt the head
back or the manual dexterity to squeeze a bottle to administer medications. Drug is delivered in a microscopic array of droplets faster
than the blink reflex to help ensure instillation success. The precise delivery of a low-volume columnar spray by the Optejet device
minimizes contamination risk with a non-protruding nozzle and self-closing shutter. In clinical trials, the Optejet has demonstrated that
its targeted delivery achieves a high rate of successful administration, with 98% of sprays being accurately delivered upon first attempt
compared to the established rate reported with traditional eye drops of ~ 50%.
A more physiologically appropriate volume of medication in the range of seven to nine microliters is delivered by the Optejet,
which is approximately one - fifth of the 35 to 50 microliter dose typically delivered in a single eye drop. Lower volume of medication
exposes the ocular surface to less active ingredient and preservatives, potentially reducing ocular stress and surface damage and
improving tolerability. The lower volume also minimizes the potential for drug to enter systemic circulation, with the goal of avoiding
some common side effects that are related to overdosing of the eye.
We are developing versions of the Optejet with on-board digital technology that records the date and time of each use. These
data may be used to provide reminders via Bluetooth to smart devices and to allow healthcare practioners to monitor usage. This
information can then be used by practitioners and health care systems to measure treatment compliance and improve medical decision
making. In this way, the Optejet could serve as an extension of the physician’s office by providing information that is not currently
possible to collect except through the use of diaries.
Our drug-device product line includes Mydcombi (tropicamide and phenylephrine HCL ophthalmic spray), clobetasol
propionate, and therapeutic programs MicroPine (atropine ophthalmic spray) and MicroLine (pilocarpine ophthalmic spray). MicroPine
is our first-in-class topical therapy for the treatment of progressive myopia, a disease associated with pathologic axial elongation of the
eye and sclero-retinal stretching. In the United States, myopia is estimated to affect approximately 25 million children, with up to five
million considered to be at high risk for progressive myopia. In February 2019, the FDA accepted our Investigational New Drug
application (“IND”) to initiate the CHAPERONE study to reduce the progression of myopia in children. The first patient was enrolled in
the CHAPERONE study in June 2019.
On October 9, 2020, we entered into a license agreement (the “Bausch License Agreement”) with Bausch + Lomb (“B+L”),
pursuant to which B+L had the rights to develop and commercialize MicroPine in the United States and Canada. Under the terms of the
Bausch License Agreement, we received an upfront payment of $10.0 million and we were eligible to receive up to a total of $35.0
million in additional payments, based on the achievement of certain regulatory and launch-based milestones. B+L also agreed to pay
royalties to Eyenovia on a tiered basis (ranging from mid-single digit to mid-teen percentages) on gross profits from sales of MicroPine
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in the United States and Canada, subject to certain adjustments. Under the terms of the Bausch License Agreement, B+L assumed
sponsorship of the IND as well as ownership and the costs related to the ongoing CHAPERONE study.
On January 12, 2024, we entered into a subsequent agreement with B+L to repatriate our rights to MicroPine and take control of
the CHAPERONE study. In this agreement, we agreed to pay B+L $2 million in cash and an additional $3 million in common stock upon
successful transfer of the regulatory documents and study elements to Eyenovia. We also agreed to pay B+L a 2% royalty on net sales
once MicroPine is commercialized in the United States, assuming receipt of regulatory approvals. We believe that this new arrangement
is in our and our shareholders’ best interests, as it may substantially increase the value of the asset significantly through potential
improvements in the conduct of the study, including a planned interim analysis of the data in late 2024.
We have also successfully expanded our manufacturing capabilities through a partnership with Coastline International, Inc.
located in Tijuana, Mexico, as well as the construction of our new manufacturing facility in Reno, Nevada and the construction of our
own fill and finish facility in Redwood City, California. We have received FDA clearance for using both Coastline International and our
Redwood City facility for the production of Mydcombi cartridges, and FDA clearance for using our Reno facility for the production of
technical elements such as the base unit for the Optejet device.
MicroLine is our investigational pharmacologic treatment for presbyopia, a non-preventable, age-related hardening of the lens,
which causes the gradual loss of the eye’s ability to focus on near objects and impairs near visual acuity. There are two FDA-approved
treatments for presbyopia which use pilocarpine, the same drug used in our investigational product. We have completed two Phase III
studies using our Optejet® device. In these studies, patients reported high satisfaction with using the device, and a strong preference over
using an eye dropper bottle. We released positive top-line results from VISION-2 in the fourth quarter of 2022. We are now planning to
meet with the FDA in mid-2024 to discuss a transition of the product to our new Gen-2 Optejet device, which has a significantly lower
cost to manufacture than the first generation device.
Mydcombi is our fixed combination formulation of tropicamide-phenylephrine for inducing mydriasis for diagnostic procedures
and in conditions where short term pupil dilation is desired. Mydcombi is a novel approach for the over 106 million office-based
comprehensive and diabetic eye exams and 7 million ocular surgeries performed every year in the United States. As the only FDA-
approved fixed combination of the two leading mydriatic agents in the United States and as an ophthalmic spray, Mydcombi may present
a number of benefits for ophthalmic surgical centers, optometric and ophthalmic offices and patients. Those benefits may include
improved cost-effectiveness in centers that employ single-use bottles for mydriasis, more efficient use of office time and resources, and
an overall improved doctor-patient experience. We are currently commercializing the product starting with a targeted launch and
continuing to expand during 2024, when we expect our ten sales representatives and internal manufacturing capabilities to come on-line.
On August 10, 2020, we entered into a license agreement with Arctic Vision (as amended on September 14, 2021, the “Arctic
Vision License Agreement”) pursuant to which Arctic Vision may develop and commercialize MicroPine, MicroLine and Mydcombi in
Greater China (mainland China, Hong Kong, Macau and Taiwan) and South Korea. Under the terms of the Arctic Vision License
Agreement, as amended, we received an upfront payment of $4.25 million before any payments to Senju Pharmaceutical Co., Ltd.
(“Senju”). In addition, we may receive up to a total of $37.7 million in additional payments, based on various development and
regulatory milestones, including the initiation of clinical research and approvals in Greater China and South Korea, and development
costs. Arctic Vision also will purchase its supply of MicroPine, MicroLine and Mydcombi from Eyenovia or, for such products not
supplied by Eyenovia, pay a mid-single digit percentage royalty on net sales of such products, subject to certain adjustments. We will pay
between 30 and 40 percent of such payments, royalties, or net proceeds of such supply to Senju pursuant to an exclusive license
agreement with Senju dated March 8, 2015, as amended (the “Senju License Agreement”).
In addition to our own development programs, on August 15, 2023, we entered into a license agreement (the “License”) with
Formosa Pharmaceuticals Inc. (“Formosa”), whereby we acquired the exclusive U.S. rights to commercialize any product related to a
novel formulation of clobetasol propionate, which was approved by the U.S. Food and Drug Administration (“FDA”) on March 4, 2024.
On March 13, 2024, the NDA for the product was transferred from Formosa to Eyenovia. The License will remain in effect for ten years
from the date of the first commercial sale of clobetasol propionate, unless earlier terminated. We paid Formosa an upfront payment in an
aggregate amount of $2,000,000 which consisted of (a) cash in the amount of $1,000,000 and (b) 487,805 shares of common stock
valued at $1,000,000. We also capitalized $122,945 of transaction costs in connection with the License. In addition, we must pay
Formosa up to $4 million upon the achievement of certain development milestones and up to $80 million upon the achievement of
certain sales milestones.
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We are in active discussions with manufacturers of existing and late-stage ophthalmic medications to explore whether
development with the Optejet technology can solve unmet medical and business needs. Some of those business needs could include
extension of exclusivity under the Optejet patents, improvement in a drug’s tolerability profile, or potential improvement in treatment
compliance.
The following summarizes our product pipeline and anticipated milestones:
Product or Product
Candidate
Mydcombi™
Clobetasol Propionate
MicroLine
MicroPine
Our Strategy
Indication
Pharmaceutical Mydriasis (Pupil Dilation)
Post Ocular Surgery Pain and Inflammation
Improvement in Near Vision (Presbyopia)
Pediatric Myopia Progression (Near-Sightedness)
Next Expected Milestones
Approved; Commercial Launch Underway
Approved; Commercial Launch Pending
Pre-NDA Meeting Mid-2024
Phase III CHAPERONE Ongoing; Planned
Phase III Interim Analysis Q4 2024
Our goal is to become a leading developer and provider of advanced ophthalmic therapies based upon our microdose array print
(MAP) platform technology and digital health platform for interactive patient care. These unique products would be commercialized by
us and/or our partners globally. The key elements of our strategy to achieve this goal are:
Establish a portfolio of first-in-class piezo-print micro-therapeutic products for multiple eye treatments through the 505(b)
(2) pathway with the FDA. We are focused on integrating our next-generation technology with therapeutic compounds already well
established in the topical treatment of ophthalmic indications. We believe that the 505(b)(2) registration pathway, which reduces
development risk compared to new molecular entity programs by working with known compounds with well-established safety and
efficacy profiles, will be available for our development pipeline. We believe our pipeline of patented micro-therapeutic product
candidates is highly differentiated by our improved tolerability and enhanced compliance profile and that our late-stage development
programs could lead to additional NDA submissions in novel indications where the products can have unique dosing and therapeutic
profiles. We believe that this could lead to favorable pricing and a reduced risk of generic competition.
Improve clinical outcomes and patient experiences while providing an improved tolerability profile with our microdose
therapeutics. We believe the Optejet will allow for high precision targeted microdosing for multiple eye treatments, while eliminating
ophthalmic over-dosing and reducing ocular exposure to toxic preservatives and pharmacologic ingredients compared to conventional
eye drop delivery mechanisms. Our clinical trials have demonstrated similar efficacy to eye drops, as well as improved side effect profile
and enhanced patient experience with the Optejet as compared to conventional eye drops.
Leverage our Optecare ™ technology to introduce and develop patient-specific compliance and treatment adherence
enhancement programs. The Optejet’s mobile e-health technology is designed to track when a patient administers treatments, allowing
physicians to monitor patient compliance more accurately. We believe this could enhance patient compliance and improve compliance
monitoring by empowering patients and physicians with access to dynamic, real-time monitoring and compliance data for a more
intelligent, informed and personalized therapeutic paradigm.
Develop next-generation targeted microdose treatments for other ophthalmic diseases independently or in collaboration with
third parties. The Optejet also may be suitable for new molecular entities and applications. Leveraging our existing platform technology,
we plan to continue developing, either independently or through strategic relationships with third parties, other product candidates for
various eye diseases that can be administered using the Optejet and additional applications for the Optejet.
Develop therapeutic solutions for ophthalmic conditions with high unmet needs and no approved therapy. We plan to target
chronic ophthalmic conditions with a high unmet medical need. By leveraging our piezo-print microdosing technology, we aim to reach
conditions where there are no approved drug therapies. For example, our MicroPine program involves a proprietary formulation of low-
dose atropine intended to slow myopia progression in the pediatric population. There are currently no commercially-available medical
therapies in the United States to treat this indication.
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Limitations of Conventional Eye Therapies
Our microdosing platform technology aims to address the following issues associated with conventional eye drop-based
therapies:
Dosing and ease of administration
Multiple third-party studies have confirmed challenges with administering conventional eye drops, which include overdosing,
poor compliance, imprecise dosing, variability in drop size, and difficulty with self-administration. One study in patients who were
experienced in using eye drops and undergoing treatment for glaucoma for at least six months documented that nine out of ten patients
were unable to administer treatment correctly at the end of the six-month study. Patients on average administered almost twice the
necessary number of drops with a mean number of drops instilled at 1.8 (+/1 1.2) and one patient administered up to eight drops at one
time. In addition, approximately 75% of patients risked bottle contamination or potential ocular trauma by having the eye drop container
touch their eyes. Another larger study in 139 patients demonstrated that the proportion of patients able to correctly administer their eye
drops was only 22%–30%. Similarly, other studies have demonstrated that the vast majority of patients either overdose or do not
administer the required therapy to the eye correctly, which may lead to additional side effects or lack of efficacy.
Side effects associated with conventional eye drop therapies
Topical eye therapies are administered using traditional eye drop pipette approaches. While average tear volume of the eye is 6–
8 µL, current eye drop therapies can involve administration of 30–50 µL of liquid containing preservatives and pharmaceutical
ingredients. Thus, traditional drops can severely overdose the eye, which, depending on the ingredients, can be associated with ocular
side effects including hyperemia, or increased blood flow to the eye, redness, discomfort, stinging, blurred vision, burning, itching,
excessive tearing, eye pain, iris pigment changes, foreign body sensation, pigment discoloration, periorbital dermatitis and sunken eye.
For some topical medications, there also can be cardiovascular side effects such as changes in heart rate and arrhythmia that are caused
when medications are absorbed into the circulation system from overdosing both through conjunctiva absorption and when drugs flow
into the nose through the naso-lacrimal duct and are absorbed into the systemic circulation or swallowed. For example, phenylephrine
can cause cardiovascular adverse reactions including an increase in blood pressure, syncope, myocardial infarction, tachycardia,
arrhythmia and subarachnoid hemorrhage. Severe respiratory reactions and cardiac reactions, including death due to bronchospasm in
patients with asthma, and rarely death in association with cardiac failure, have been reported following systemic or ophthalmic
administration of timolol maleate.
Mydcombi contains tropicamide and phenylephrine. However, as demonstrated in our two Phase III studies for this product
candidate, patients administering Mydcombi reported few ocular adverse events and no systemic adverse events when they administered
our microdosed product candidate. Compared with historical data for traditional eye drops, Mydcombi appeared to be much better
tolerated, with low systemic absorption of phenylephrine alone.
With the Optejet platform technology, we believe that the known adverse event profile of pilocarpine, including headaches, also
may be moderated to make MicroLine the preferred choice for presbyopia over other potential pilocarpine drop options. The same is true
with MicroPine, where we believe that microdosing may result in a better tolerated product for children using topical ophthalmic
atropine.
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Our Solution: The Optejet
Gen-1
Gen-2
In Use
The Optejet dispenser delivers doses of approximately 7-9 µL, directly coating the corneal surface where 80% of intraocular
drug penetration occurs. We believe that microdosing may reduce drug and toxic preservative exposure by more than 75%, thus reducing
ocular irritation, and resulting in potentially gentler treatments without compromising the desired clinical effect.
We believe that we are one of the only companies with clinical stage technology for targeted microdosing of ophthalmic
investigational therapies having fully completed the Phase III clinical studies needed and made an NDA submission. The Optejet is based
on MAP, which is also used for pixel-sharp high-precision inkjet printing. The technology is optimized for and applied in ophthalmic
delivery to achieve microdosing that can be many times more precise than conventional eye droppers. In addition, our smart, electronic
system provides the capability to track when patients administer their medications and deliver this information to patients and physicians
via Bluetooth connectivity. Thus, physicians can make decisions regarding therapeutic regimens with knowledge of patient compliance.
The FDA has determined that our Optejet products are treated as combination drug/device products, with CDER as the lead
reviewing center. As such, we do not anticipate needing separate FDA approval for the Optejet dispenser alone.
Microdose administration of topical ophthalmic drugs with the Optejet has been tested in preclinical models and clinical trials
and shown to provide many advantages over administrations of eye drops. Key advantages of the Optejet include:
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Dose reduction: Our microdose delivery technology is designed to achieve precise volumetric control at the microliter level to
deliver approximately 8 µL, which is the physiologic capacity of the tear film. This compares favorably to the volume of an eye drop
(30–50 µL), which can result in overdosing, ocular toxicity and systemic leaching into the plasma.
Targeted dose instillation: The Optejet allows for targeted delivery to the ocular surface and cornea, avoiding the conjunctival
cul-de-sac. The micro-jet spray created by the piezo-electric vibrations is columnated and focused to provide accurate delivery to the
corneal surface where the majority of ocular penetration occurs. Additionally, the Optejet is designed with an LED targeting mechanism
to facilitate proper positioning and objective alignment, thus increasing the likelihood of successful dose delivery.
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Speed of delivery: Our piezo-print technology is similar to high-precision ink-jet printing. Unlike a simple aerosolized
mechanism, the Optejet is designed with ejection control that creates a fast and targeted micro-jet delivery. Solution is dispensed to the
ocular surface in less time than the average involuntary blink reflex from the time the first droplet hits the corneal surface to the
completion of dose delivery.
Smart electronics: A key feature of the Optejet is the embedded electronic, Bluetooth enabled Optecare system, which we
believe is the first intelligent electronic delivery system for ophthalmic therapies. Our electronic functions are designed to enable patients
and physicians to track when doses are administered. We believe this technology will improve compliance and chronic disease
management by empowering patients and physicians with access to dynamic, real time monitoring and compliance data for a more
intelligent and personalized therapeutic paradigm. Recent changes in payment codes may now provide a way for healthcare providers to
bill for this important service.
Clinical Trial Results
We have an established platform for microdose administration of ophthalmic solutions. Our preclinical and clinical studies
suggest that a microdose of approximately 8 µL of medication results in clinical efficacy comparable to that of traditional eye drops, with
the advantages of fewer ocular side effects and less systemic exposure. We can use our platform technology with either new or existing
molecular entities. We have chosen the latter path for our initial pipeline product candidates.
Prior to initiation of our Phase III clinical studies, we conducted multiple preclinical and early phase studies to validate our
piezo-print microdose delivery platform. Data from a canine model of glaucoma demonstrated more than 40% IOP lowering effect at
microdose of 8–9 µL latanoprost. Another independent microdose study published in the Journal of Investigative Ophthalmology and
Visual Science in 2014 further demonstrated that 3 µL microdose with timolol 0.5% can reduce systemic plasma levels of the drug by a
factor of 17.
Diurnal IOP Lowering Effect of a Microdose of Latanoprost Delivered by Pipette vs. Piezo-Print Dispenser in a Canine Model
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IOP Lowering Effect of Micro-Therapeutic Dose of Latanoprost in Canine Model
The Phase II EYN-1601 clinical trial compared the mydriatic effect of phenylephrine 10% microdosed (~7 µL in volume) with
the Optejet (EYN) to phenylephrine 10% (PE 10%) and phenylephrine 2.5% (PE 2.5%) eye drops (each ~32 µL in volume) in 24 eyes.
At 75-minute peak dilation, our microdose provided similar mydriatic results (at approximately 1/4 of the dose exposure) to the 10%
phenylephrine drops, and superior activity compared to 2.5% phenylephrine drops.
Shown below is mean pupil diameter change from baseline for the 24 eyes studied. The asterisk at t=75 min indicates EYN is
statistically better than PE 2.5% (p=0.009).
PUPIL DIAMETER, INCREASE FROM BASELINE, MM
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This study was also informative with regard to systemic drug exposure of these topical treatments. As shown below, microdosed
phenylephrine 10% (EYN1) demonstrated 35–40% lower plasma levels as compared with phenylephrine 10% eye drops (PE 10%).
As shown in the table below, there were also fewer ocular adverse events in the microdosed group (EYN) suggesting an
improvement in tolerability as compared to 10% phenylephrine eye drops (PE 10%).
OCULAR ADVERSE EVENTS BY TREATMENT
Adverse Event Description
Ocular blurriness
Ocular burning/stinging/irritation
Ocular dryness
Subtotal by Treatment Group
PE 10%
EYN
(Eyedrops) (PE 10% microdose)
0
1
0
1
1
4
2
7
The EYE-103 study investigated a combination of phenylephrine and tropicamide microdose treatment administered using the
Optejet compared to conventional eye drops in 102 subjects (204 eyes). In this study, microdosing produced equivalent pupil dilation to
eye drops and 91% of participants preferred medication administration with the Optejet versus eye drops (6% preferred eye drops, while
3% expressed no preference [p < 0.0001]). On a scale of 1 to 10, with 10 being most favorable, general satisfaction scores were higher
with Optejet administration versus eye drops (9.8 ± 0.6 for Optejet vs 5.8 ± 3.0 for eye drops). Ocular comfort scores were nearly two
times better with the Optejet than with eye drops.
In 2018, Eyenovia completed a third early phase trial (EYN-POC-PG-21) to extend the findings of the two previous trials
evaluating Optejet administration of mydriatic agents. This study was a single-center, open-label, prospective, crossover design
evaluating the usability, patient tolerability, and proof-of-concept of microdose administration of commercial latanoprost 0.005% using
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the Optejet. Thirty healthy volunteer subjects (60 eyes) were evaluated for eligibility and consented to study participation. Subsequently,
at each of three treatment visits, IOP was measured in the morning. Afterwards, on Treatment Days 1 and 2, a single 8-µL microdose of
latanoprost 0.005% ophthalmic solution was administered to each eye using the Optejet. On the morning of Treatment Day 3, each
subject received 2 × 8-µL Optejet microdoses (administered approximately 5 minutes apart) in one eye and the other eye received a
single eye drop of latanoprost 0.005% ophthalmic solution. For each treatment day, IOP was measured 1, 7, 12, and 24 hours after
receiving medication and a mean diurnal IOP was calculated from the four readings. As shown below, mean IOP after medication
administration on Days 1 and 2 was lowered by 25.0% and 28.7%, respectively.
Mean bilateral IOP and percent change in IOP in eyes dosed using the Optejet through
Treatment Day 2 (N = 29 pairs of eyes from 29 evaluable subjects)
As shown below, on Day 3, mean IOP was 35.5% lower than baseline for eyes receiving microdose latanoprost 0.005% using
the Optejet, and 35.0% lower than baseline for eyes receiving a single drop of latanoprost 0.005%.
IOP AT DAY 3 (N=29 EYES OF 29 SUBJECTS PER TREATMENT)
No clinically significant changes were noted in slit lamp observations (including hyperemia) for any subjects who received
study treatment and no adverse events were reported. Subjects reported no-to-negligible ocular discomfort after medication
administration using the Optejet.
Investigator-administered medication using the Optejet was evaluated in 60 eyes (1 spray/eye) on Days 1 and 2, and in 30 eyes
(2 sprays/eye) on Day 3. Optejet administration was successful on the first attempt in 172 of the 180 cases (96%). Subject head
movement and/or blinking and investigator proficiency with Optejet use resulted in the need for additional administration in the
remaining 4% of cases, the majority of which (6/8) occurred on Day 1. Administration success was achieved on the first attempt on all
Day 3 cases. There were no reports of unintentional overdosing, tear fluid overflow, or the dispenser nozzle touching the eye.
In a separate evaluation, subjects were trained on Optejet self-administration with sterile water and then asked to demonstrate
Optejet use in each eye during the afternoon of each treatment day. By the afternoon of Day 3, qualified Eyenovia representatives judged
that almost 90% of subjects were able to demonstrate accurate self-administration using the Optejet.
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This study demonstrated Optejet medication administration to be easy to perform, safe, and comfortable to study subjects.
Additionally, Optejet microdose administration of 0.005% latanoprost resulted in mean IOP reduction similar to reported literature for
use of latanoprost 0.005% ophthalmic solution administered as traditional eye drops.
Based on the results of these studies further validating microdose delivery of ophthalmic medication, we initiated Phase III
programs in mydriasis in late 2018, progressive myopia in 2019, and presbyopia in 2020.
Our Product and Product Candidates
Eyenovia currently has two FDA-approved products, Mydcombi and clobetasol propionate, and two research programs:
MicroLine (for presbyopia) and MicroPine (for progressive myopia).
Mydcombi
Mydcombi is the only FDA-approved fixed combination of the two leading pupil dilation drugs, tropicamide and phenylephrine,
delivered with our Optejet technology. The product is indicted to induce mydriasis (pupil dilation) for routine diagnostic procedures and
in conditions where short term pupil dilation is desired. There are approximately 106 million estimated office-based comprehensive and
diabetic eye exams and seven million ophthalmic surgical dilations performed every year in the United States. The benefits of Mydcombi
include effective, reliable dilation with low risk of cross-contamination as compared with eye dropper bottles, ease of use for technicians
and doctors, and good tolerability for patients. We believe the market for Mydcombi exceeds $250 million in the United States alone.
Background of Mydriasis and Market Opportunity
There are an estimated 106 million topical mydriatic applications performed every year as a required part of the comprehensive
dilated eye exam and standard retina fundoscopy for diabetic retinopathy screening, macular degeneration evaluation, glaucoma optic
disc evaluation and many other back-of-the-eye conditions. There are an additional estimated four million applications for ocular surgery.
Most optometrist and ophthalmologist offices maintain bottles of both phenylephrine and tropicamide eyedrops and use the drops in
combination. Each bottle is used on multiple patients, which carries a risk of contamination and ocular infection. The bottles are
purchased directly from suppliers and are not subject to insurance reimbursement. Our combination therapy allows the purchase of one
product for eye dilation. Additionally, the Optejet does not come in direct contact with the eye, thus minimizing the risk of infection.
Most dilated eye exams require the sequential administration of two separate topical pharmacologic agents/drops (tropicamide,
followed by phenylephrine). All current mydriatic formulations use conventional macrodose drop delivery (30–50 µL), which can
significantly overdose the ocular surface whose physiologic capacity is only 6–8 µL. Studies demonstrate that standard macrodosed
pharmacologic dilation is associated with significant ocular discomfort and mild-moderate eye pain. On the standard visual analogue
scale for pain, such discomfort can exceed the levels of pain associated with a flu vaccine subcutaneous injection. Additionally, there are
systemic safety concerns with mydriatic macrodosing for retinopathy of prematurity retinal screening and pediatric dilated eye exams.
Studies comparing microdosed phenylephrine and cyclopentolate to traditional eye drops (30–50 µL drop size) in premature babies and
in full-term infants have shown equivalent pupil dilation with drop sizes ranging from 5–8 µL while reducing systemic levels by more
than 50%.
Pharmacologic mydriasis: dilated pupil after application
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Efficacy and Safety
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The above diagram represents the pooled data (MIST-1 and MIST-2) from the approved labeling for Mydcombi. The graph
summarizes pupil diameter over time. Vertical bars show 95% confidence interval for the mean at each point. Smooth curves are based
on 8 degrees of freedom (df) generalized additive model (GAM) smooth through time, adjusting for baseline pupil diameter. Confidence
intervals are not adjusted for correlation.
Mydcombi (TR-PH) was statistically and clinically superior to its components (TR – tropicamide, PH – phenylephrine) as well
as placebo at all timepoints post-dosing. By twenty minutes post-dosing, the mean pupil dilation was above 6mm, more than sufficient
for a thorough clinical examination.
All adverse events were transient and mild and occurred in fewer than 2% of patients.
Commercial Plans
We plan to hire a ten-person sales team, managed by two experienced sales directors, to promote Mydcombi directly to
institutions and key ophthalmic and optometric offices. We have obtained wholesale licenses nation-wide and will be handling
distribution internally to maintain control over the product and help ensure a good experience for this novel technology. Ordering and
reordering will be managed on-line at EyenoviaRx.com.
Clobetasol Propionate
We have licensed this topical ocular steroid from Formosa Pharmaceuticals and will have commercial rights to this product
within the United States. The product was approved by the FDA on March 4, 2024. This unique post-ocular surgery steroid is the first
product developed using Formosa’s proprietary APNT nanoparticle formulation platform, which reduces an active pharmaceutical
ingredient’s particle size with high uniformity and purity, thereby allowing penetration to relevant compartments in the eye, and
ultimately enhancing bioavailability.
Clobetasol propionate will be the first new steroid in this market in over 15 years, and one of the few that is dosed twice-daily
(instead of up to 4 times daily) without the need to taper dosing over a 14 day course of therapy. With 7 million ocular surgeries
conducted annually in the United States, we estimate the market opportunity for this product to be over $200 million.
In clinical studies, clobetasol propionate was very effective, with approximately 90% of patients experiencing zero pain towards
the end of therapy. Adverse events were few and mild, including 1% of patients experiencing elevated intraocular pressure, which may
have been related to the surgery itself.
We plan to leverage our Mydcombi sales team to also cover promotion of this new, differentiated eye drop, with an anticipated
launch in the second half of 2024.
MicroLine
MicroLine is our proprietary microdosed version of pilocarpine, a well-understood ophthalmic medication that can dose-
dependently induce miosis, or a contraction of the pupil. It is a direct acting cholinergic parasympathomimetic agent that stimulates
muscarinic acetylcholine receptors present on smooth muscles, including those in the iris and ciliary body. As a result, pilocarpine causes
contraction of the iris sphincter muscle, which causes miosis.
Reducing pupil size with pilocarpine has been shown to improve near visual acuity in individuals who have presbyopia. In one
clinical study, subjects aged 45‒50 years who bilaterally self-administered both pilocarpine 1% and diclofenac 0.1% eyedrops every six
hours during the day for up to five years reported good improvement in near vision without compromising distance vision. Thus,
pilocarpine’s miotic effect may be useful in treating the increasingly compromised near vision that parallels the development of
presbyopia.
Background of Presbyopia and Market Opportunity
Presbyopia is the gradual decrease in the ability of the eye’s natural lens to accommodate in near vision, resulting in a loss of
focus on near objects. In general, onset is around age 40 and is almost universal in adults over the age of 60. In the United States, there
are approximately 113 million people with presbyopia; 53 million of them are between the ages of 40 and 55.
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For many people, presbyopia is among the first overt signs of aging. There are psychological factors accompanying the use of
spectacles and bifocals for the first time, as well as situational inconvenience for either not being able to see well or having to use a
vision aiding device. With MicroLine, we plan to introduce a pharmaceutical option for improving near vision that can work as a
companion to spectacles, for when patients wish not to use their reading glasses. Our market research indicates the highest interest in the
product concept among people aged 40 to 55 years who otherwise have normal vision and household income in the top half of the
country, representing a potential market of approximately 18 million people.
Phase III Clinical Development Programs
We are evaluating whether topical ocular microdosing of pilocarpine using the Optejet dispenser in presbyopic individuals can
effectively improve near vision without compromising distance vision and without causing the undesirable side effects of traditionally
administered pilocarpine. Our initial Phase III Study, VISION-1, showed that pilocarpine 2% provided a statistically superior
improvement in functional near vision and an acceptable safety profile in presbyopic subjects with baseline distance-corrected near
visual acuity better than 20/80. Our second Phase III study, VISION-2 evaluated the safety, tolerability, and efficacy of Optejet-
administered microdosing of pilocarpine 2% as an ophthalmic spray versus placebo.
MicroPine
A key therapeutic program for Eyenovia is our first-in-class topical treatment for pediatric progressive myopia, a disease
reaching epidemic proportions according to the American Academy of Ophthlmology.
Background of Progressive Myopia and Market Opportunity
Myopia is an ocular disorder that results in blurry vision when looking at distant objects. This happens when the eyeball is too
long or corneal curvature is too steep causing light entering the eye to be incorrectly focused. Myopia is one of the most common
refractive errors seen in children. Myopia that is present in young children tends to increase through the school years. As myopia
progresses, so does the risk of retinal detachment, cataracts, myopia maculopathy and even blindness. It is estimated that over 25 million
children in the United States suffer from progressive myopia, with approximately 5 million children being at high risk.
Progressive Myopia with Retinal Atrophy Changes
While currently there are no FDA-approved therapies for myopia progression, there is growing evidence of the therapeutic
benefit of topical atropine ophthalmic solution, an anticholinergic agent used for pupil dilation and treatment of lazy eye, as a treatment
to slow progression. Academic groups have demonstrated that low dose atropine solution reduces myopia progression 60-70%, with
sustained effect through three years. A recent therapeutic evidence assessment and review by the American Academy of Ophthalmology,
indicates Level 1 (highest) evidence of efficacy for low dose atropine for reduction of progressive myopia (Ophthalmology
2017;124:1857-1866; Ophthalmology 2016; 123(2) 391:399). While atropine 1% ophthalmic solution is FDA-approved and
commercially available in the United States for pupil dilation and treatment of lazy eye, commonly reported side effects such as burning
and stinging during drop administration, and blurred vision and light sensitivity associated with its use make it undesirable for the
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treatment of progressive myopia in the pediatric population, thus impeding the drug’s clinical utility and adoption for myopia
progression.
Our MicroPine program involves the development of a micro-formulation (dilute and low volume) of atropine ophthalmic
solution for reduction of myopia progression in children. Delivered with the Optejet dispenser, the product is also intended to make use
of the Optejet’s Optecare system to assist with compliance and adherence. The potential market opportunity for MicroPine in the United
States alone may be $1.2 billion, according to third party analysts.
Phase III Clinical Development Program
The FDA accepted Eyenovia’s IND to initiate our single Phase III registration trial of MicroPine (the CHAPERONE study) to
reduce the progression of myopia in children. Eyenovia enrolled its first patient in the CHAPERONE study in June 2019. The trial is a
U.S.-based, multi-center, randomized, double-masked study enrolling more than 400 children and adolescents. Participants will be
equally randomized to receive nightly treatment with either of two MicroPine treatment concentrations or a placebo control arm. The
primary assessment of efficacy is based on reduction in myopia progression after 3 years of medication use.
We expect that over half of the intended enrollment of CHAPERONE will have reached the three-year efficacy endpoint in late
2024. At that time, we plan to discuss an interim analysis with the FDA to determine if there is a more efficient pathway towards
approval for the product.
Our Technology
The Optejet dispenser comes in two parts:
● the base contains the electronic components which enable generation of control signals designed to ensure consistent,
accurate columnated arrays of micro-droplets, as well as dose tracking via Bluetooth connectivity; and
● the disposable cartridge which contains the drug formulation in a primary drug container, targeted dosing system and
piezo-driven ejector nozzle, and may contain up to 90 binocular doses.
For administration of our product candidates, the office or patient receives both the base and the disposable cartridge. For refills,
the office or patient receives only the disposable cartridge. Doses are delivered by attaching the cartridge to the base, pressing an
activation button which loads a single drug dose, then, holding it between one and two inches from the eye while looking directly into an
illuminated circle, pressing a second button to emit the micro-droplet delivered medication. The micro-droplets are emitted in a
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quickly repeating array, that in aggregate form a directed mist. Solution is dispensed to the ocular surface in less than 100 milliseconds
between the time the first droplet hits the corneal surface to the completion of dose delivery, which is faster than the average involuntary
blink response time. The patient feels a mild, wet sensation on the eye. Several acute clinical trials have been performed to date that
demonstrate the Optejet’s usability. As a precise and quick-delivered microdose, it does not drip down the face or drain down the naso-
lacrimal duct, thereby minimizing delivery of extra product or preservatives to the eye. The rechargeable base has intelligent power
management and precision designed circuitry that maximizes battery life allowing for infrequent recharging, while providing consistent
dose delivery over the life of each cartridge.
Our system is based on piezo-driven printer technology, which is also used for high-precision ink jet printing. In ink jet printing,
piezo technology enables ink to be sprayed with precision to form letters and numbers on paper. Our patented system takes aspects of
piezo-driven printer technology, and applies it to the delivery of therapeutics to the eye.
Sales and Marketing
We are building a sales and distribution organization that will be staged to match with our planned product launches and size of
the opportunities. We have hired and plan to deploy ten sales representatives and two national sales directors who will focus on the
promotion of Mydcombi as well as clobetasol propionate. We have also built the infrastructure to act as a wholesaler for Mydcombi, and
will be partnering with an online pharmacy for the launch of clobetasol propionate. Our management team and directors, which are
leading the commercialization planning of our lead product candidates in the United States, have substantial experience in the
commercialization of ophthalmic therapeutics.
Mydcombi is a cash-pay pharmaceutical supply, administered and purchased by clinics and doctors for in-office use. The cost of
the product is folded into the established reimbursement for the comprehensive eye exam and thus lends itself to a single specialty-
pharmacy distribution model without the need for formulary negotiations and contracting at the managed care level. As such, we estimate
Mydcombi sales and marketing costs will be significantly below that of a conventional prescription-based pharmaceutical product. As a
highly differentiated product with meaningful benefits for both providers and patients, we anticipate fast adoption, especially because
part of our strategy is to maintain good economics for the practice. Lastly, we believe that we can be successful with a limited in-person
sales force as we are not aware of any active competition in this space.
Clobetasol propionate is our second product for commercialization. Like Mydcombi, clobetasol will also be “cash-pay,”
negating the need for infrastructure focused on managed care reimbursement. Clobetasol will be sold in two ways: (1) prescribed by
ocular surgeons to patients through an online pharmacy, and (2) purchased directly from Eyenovia by offices who sell the medication
directly to their patients as part of their overall fee.
MicroLine, if approved, would again be “cash-pay”. If we decide to pursue approval, and receive approval, for this product, we
would expand our sales force in the United States and focus on promotion in the optometrist office. We also plan to leverage the
experience that these offices have had with Mydcombi to speed acceptance and prescribing of MicroLine to appropriate patients.
MicroPine is our fourth expected product for commercialization. MicroPine is planned to be launched as a reimbursed product,
similar to glaucoma medications, where formulatory position is obtained through negotiations with payers. We would make use of our
planned sales force calling on optometrists, many who have a specialty in treating pediatric progressive myopia.
Manufacturing
For clinical supply, Eyenovia relies on internal manufacturing capabilities along with third-party contract manufacturing
organizations (CMOs) to produce the Optejet® cartridges and bases. In order to streamline our manufacturing process and reduce costs,
Eyenovia has invested in two of its own facilities, one in Redwood City, CA that was recently FDA-approved for Mydcombi cartridge
production, and one in Reno, NV that has recently been FDA-approved for ejector and base unit manufacturing. We also use a CMO,
Coastline International in Mexico, for production of certain subassemblies as well as a CMO for the production of our drug substances.
We are currently developing and manufacturing the second generation of our device, and we expect our strategy for moving from the first
to the second generation device to be the subject of an FDA meeting this summer. Assuming we come to an agreement with the FDA to
demonstrate comparability between the two devices, this should provide a path for Eyenovia to introduce the second generation platform
to the commercial market in 2026.
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Competition
The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and
a strong emphasis on proprietary products. While we believe that our technologies, knowledge, experience and scientific resources
provide us with competitive advantages, we face potential competition from many different sources. Any product candidates that we
successfully develop and commercialize may also compete with existing therapies and new therapies that may become available in the
future.
Our potential competitors include large pharmaceutical and biotechnology companies, and specialty pharmaceutical and generic
or biosimilar drug companies. Many of our competitors have significantly greater financial and human resources and expertise in
research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing
approved products than we do. Smaller and other early stage companies may also prove to be significant competitors, particularly
through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining
qualified scientific and management personnel, establishing clinical trial sites and patient enrollment for clinical trials, as well as in
acquiring products, product candidates or other technologies that we may target to in-license or acquire in pursuit of our updated business
plan.
For Mydcombi, we are not aware of any micro-therapeutics nor of any existing FDA-approved tropicamide-phenylephrine
topical fixed combination products even in standard macrodose. There are competitive macrodose drop formulations of individual
therapeutics for mydriasis such as tropicamide and phenylephrine marketed by companies such as Akorn, Alcon and others, as well as
pharmacies that compound the combination on an individual basis for physicians.
For clobetasol propionate, there are several steroid options in this field, but we are not aware of any product with the
combination of dosing, efficacy and safety attributes that our product will have. Additionally, we believe our “value pricing” approach,
where patients can expect to pay a fixed amount regardless of their insurance coverage or status, will further differentiate us in this
market.
For MicroLine, Allergan has launched Vuity, a pilocarpine eye drop for the treatment of presbyopia. Along with Allergan, there
are other pharmaceutical companies developing therapies for presbyopia, none of which makes use of microdosing technology or deliver
medication as a spray.
For MicroPine, we are not aware of any FDA-approved drugs to slow the progression of myopia. There are other versions of
traditional eye drop atropine under development by other pharmaceutical companies for this indication. There also are versions of
compounded topical atropine that have not been tested for their safety or efficacy that are dispensed on an individual basis to patients.
Intellectual Property
Our success may depend on our ability to obtain, maintain and enforce our proprietary rights related to our products and other
technologies. We must also operate without infringing the valid, proprietary rights of others while preventing others from infringing our
proprietary rights. We will seek to protect our proprietary position by, among other methods, filing U.S. and foreign patent applications.
We may also rely on trade secrets and know-how for some proprietary methods, methods of manufacture, and systems and devices. We
continue innovating our technologies, and will file appropriate U.S. and foreign patent applications for our future innovations.
We are currently engaged in an appeal taken from three inter partes review (“IPR”) proceedings successfully challenging the
validity of certain patents owned by Sydnexis, Inc. The Patent Trial and Appeal Board instituted IPR2022-00384, filed by Eyenovia on
December 29, 2021 and challenging claims in U.S. Patent No. 10,842,787; and IPR2022-00414 and IPR2022-00415, both filed by
Eyenovia on January 7, 2022, and challenging claims in U.S. Patent Nos. 10,940,145 and 10,888,557, respectively. All three IPR
proceedings were instituted and then consolidated for trial. On July 13, 2023, the Board determined in a final written decision that all
claims across the three challenged Sydnexis patents were unpatentable. Sydnexis subsequently appealed to the U.S. Court of Appeals for
the Federal Circuit, and briefing is currently in progress, with a decision anticipated in 2025.
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Patents
As of December 31, 2023, we owned seventeen U.S. issued and allowed utility patents or design patents, and ten pending U.S.
patent applications, as well as 97 issued foreign patents, and 26 pending foreign patent applications, and one pending international PCT
application.
Patent coverage within the portfolio includes issued and pending patent applications related to the following devices and
methods:
● A piezoelectric device configured to generate an ejected stream of droplets is the subject of one patent family. The device
ejects droplets having an average ejected droplet diameter greater than 20 microns and an average initial droplet ejecting
velocity between 0.5 m/s and 10 m/s. Furthermore, the stream of droplets is generated with low entrained airflow so that at
least 75% of the mass is deposited on the eye. U.S. patents for these devices are expected to expire in 2031.
● A method of delivering a medicament or solution to an eye with a piezo-ejector device is the subject of another patent
family. The method involves delivering an average droplet size of 20 microns to 100 microns in diameter with an average
initial droplet ejecting velocity between 1 m/s and 10 m/s to the eye. About 85% to 100% of the ejected mass of droplets is
deposited on the eye. U.S. patents for these methods are expected to expire in 2031.
● A device having a piezo-ejector that generates a directed stream of droplets through specially shaped openings in the piezo-
ejector is the subject of still another patent family. The openings provide laminar flow through the openings. Laminar flow
is provided by shaping the openings with a gradual slope change so that an external entry radius has a circular shape which
reduces airflow while providing laminar flow through the openings. U.S. patents related to these devices are expected to
expire in 2033.
● A piezo-electric ejector device having a microcontroller which auto-tunes the ejector mechanism is the subject of another
patent family. The device generates at least one cycle in a range of drive signal frequencies and obtains time-energy
product feedback from a decay signal emitted by the actuator. U.S. patents related to these devices are expected to expire in
2033.
● A method of monitoring the treatment of ophthalmic subjects by capturing images of the eye is the subject of another
patent family. Images of the eye are taken which are sufficient to obtain information about the diagnosis or health of the
eye. The data is stored and analyzed to monitor treatment. U.S. patents related to this method are expected to expire in
2031.
● A fluid ejector having a fluid loading plate in parallel arrangement with an ejector mechanism is the subject of patent
family patented in Europe. The fluid loading plate forms a capillary separation with the ejector mechanism to generate
capillary fluid flow. The fluid loading plate is also attached to the reservoir (at a fluid reservoir interface) and to the ejector
mechanism (at an ejector mechanism interface) and may have one or more fluid channels from the fluid reservoir interface
to the ejector mechanism interface. The ejector produces a stream of droplets having a droplet diameter greater than 15
microns with the stream having low entrained airflow so that the pressure of the stream will be substantially imperceptible.
The expiry of any patent depends upon the legal term for patents in that particular country. In the United States, the patent term
is generally 20 years from the earliest claimed filing date of a non-provisional patent application. In the United States, a patent’s term
may be lengthened by patent term adjustment which compensates a patentee for administrative delays by the United States Patent and
Trademark Office, or the USPTO, in examining and granting a patent. A patent term may also be shortened if a patent is terminally
disclaimed over another patent or application.
The Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Act, permits a patent term
extension of up to five years beyond the expiration date of a U.S. patent as partial compensation for the length of time the drug is under
regulatory review while the patent is in force.
A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product
approval, only one patent applicable to each regulatory review period may be extended and only those claims covering the approved
drug, a method for using it or a method for manufacturing it may be extended. We cannot provide any assurance that any patent term
extension with respect to any U.S. patent will be obtained and, if obtained, the duration of such extension. Similar patent term
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extension/reduction provisions are available in the European Union and other jurisdictions. In the future, if and when our product
candidates receive approval by the FDA or foreign regulatory authorities, we will apply for patent term extensions on issued patents
covering our products to the extent available under the applicable law, depending upon the length of any such clinical trials for any
product and other factors. The expiration dates referred to above are without regard to potential patent term extension or other market
exclusivity that may be available to us. However, we cannot provide any assurances that any such patent term extension of a foreign
patent will be obtained and, if obtained, the duration of such extension.
In Asia, we have been granted a patent in each of China and South Korea and two patents in Japan that describe a piezoelectric
device configured to generate an ejected stream of droplets with a particular droplet diameter and ejection velocity. We also have seven
additional patents granted in China, five additional patents granted in Japan, and four patents granted in Singapore, all related to aspects
of the piezoelectric device and methods of using the device.
Trademarks
Our product candidates are marketed under trademarks and service marks that are owned by us. The following words are
trademarks in our Company’s trademark portfolio and are the subject of either registration, or application for registration, in the United
States: APERSURETM, EYENOVIA®, OPTEJET®, EYELATOVATM, EYETANOTM, MYDCOMBITM.
In addition to the trademarks noted above, we will file trademark applications for new trademarks registrations to protect our
market positions in the United States and other jurisdictions on an ongoing basis.
Proprietary Technology
In addition to patents, we may rely on trade secrets and proprietary know-how to protect our technology. We endeavor to protect
our proprietary technology and processes in the appropriate manner to maintain their secrecy including confidentiality agreements when
dealing with third parties. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical
security of our premises and physical and electronic security of our information technology systems. We also require invention
assignment agreements with our employees, consultants, and contractors.
Government Regulation and Product Approvals
Government authorities in the United States, at federal, state and local levels, and in other countries and jurisdictions, including
the European Union, extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval,
packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, post-approval monitoring and reporting, and
import and export of pharmaceutical products. The processes for obtaining regulatory approvals in the United States and in foreign
countries and jurisdictions, along with subsequent compliance with applicable statutes and regulations and other regulatory authorities,
require the expenditure of substantial time and financial resources.
U.S. Government Regulation
In the United States, the FDA regulates drug, biological, device and combination products under the Food, Drug, and Cosmetic
Act, or FDCA, and implementing regulations. The process of obtaining regulatory approvals and the subsequent compliance with
appropriate federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources.
The failure to comply with applicable requirements under the FDCA and other applicable laws at any time during the product
development process, approval process or after approval may subject an applicant and/or sponsor to a variety of administrative or judicial
sanctions, including refusal by the FDA to approve pending applications, withdrawal of an approval, imposition of a clinical hold,
issuance of warning letters and other types of letters, voluntary product recalls, product seizures, total or partial suspension of production
or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement of profits, or civil or criminal investigations
and penalties brought by the FDA and the Department of Justice or other governmental entities.
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FDA Regulation of Prescription Drugs
An applicant seeking approval to market and distribute a new drug product in the United States must typically undertake the
following:
● completion of nonclinical studies, which may include laboratory testing, animal studies and formulation studies in
compliance with the FDA’s good laboratory practice, or GLP, regulations;
● submission to the FDA of an IND which must take effect before human clinical trials may begin;
● approval by an institutional review board, or IRB, an independent committee charged with protecting the rights and welfare
of human research subjects participating in clinical trials, before each clinical trial site may initiate clinical trial enrollment;
● performance of adequate and well-controlled human clinical trial(s) in accordance with good clinical practice, or GCP,
regulations to establish the safety and efficacy of the proposed drug product for each indication;
● preparation and submission to the FDA of an NDA;
● review of the product by an FDA advisory committee, where appropriate or if applicable;
● satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the product, or
components thereof, are produced to assess compliance with current good manufacturing practice, or cGMP, requirements
and to assure that the facilities, methods and controls are adequate to preserve the product’s identity, strength, quality and
purity;
● satisfactory completion of FDA audits of selected clinical trial sites to assure compliance with GCP requirements and the
integrity of the clinical data;
● payment of user fees, with few exceptions, and securing FDA approval of the NDA; and
● compliance with any post-approval requirements, including Risk Evaluation and Mitigation Strategies, or REMS, and post-
approval studies required by the FDA.
Preclinical Testing
Preclinical, or nonclinical, testing include laboratory evaluation of the purity and stability of the manufactured drug substance or
active pharmaceutical ingredient and the formulated drug or drug product, and generally include in vitro and animal studies to assess the
toxicity, safety and activity of the drug for initial testing in humans and to establish a rationale for therapeutic use. The conduct of
preclinical studies is subject to federal regulations and requirements, including GLP regulations. The Consolidated Appropriations Act
for 2023, signed into law on December 29, 2022, (P.L. 117-328) amended the FDCA and the Public Health Service Act to specify that
nonclinical testing for drugs and biologics may, but is not required to, include in vivo animal testing. According to the amended language,
a sponsor may fulfill nonclinical testing requirements by completing various in vitro assays (e.g., cell-based assays, organ chips, or
microphysiological systems), in silico studies (i.e., computer modeling), other human or nonhuman biology-based tests (e.g.,
bioprinting), or in vivo animal tests.
The results of the nonclinical tests, together with manufacturing information, analytical data, any available clinical data or
literature and plans for clinical trials, among other things, are submitted to the FDA as part of an IND. Some long-term preclinical
testing, such as animal tests of reproductive adverse events and carcinogenicity, may continue after the IND is submitted.
The IND and IRB Processes
An IND is an exemption from the FDCA that allows an unapproved drug to be shipped in interstate commerce for use in an
investigational clinical trial and a request for FDA authorization to administer an investigational drug to humans. Such authorization
must be secured prior to interstate shipment and administration of any new drug that is not the subject of an approved NDA. In support
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of a request for an IND, applicants must submit a protocol for each clinical trial and any subsequent protocol amendments must be
submitted to the FDA as part of the IND. In addition, the results of the nonclinical tests, together with manufacturing information,
analytical data, any available clinical data or literature and plans for clinical trials, among other things, are submitted to the FDA as part
of an IND. The FDA requires a 30-day waiting period after receiving an IND before the corresponding clinical trial may begin. This
waiting period is designed to allow the FDA to review the IND to determine whether human research subjects may be exposed to
unreasonable health risks. At any time during this 30-day period, the FDA may raise concerns or questions about the conduct of the
clinical trials as outlined in the IND and impose a clinical hold. In this case, the IND sponsor and the FDA must resolve any outstanding
concerns before clinical trials can begin.
Following commencement of a clinical trial under an IND, the FDA may also place a clinical hold or partial clinical hold on that
clinical trial at any time. A clinical hold is an order issued by the FDA to the sponsor to delay a proposed clinical investigation or to
suspend an ongoing investigation. A partial clinical hold is a delay or suspension of only part of the clinical work requested under the
IND. For example, a specific protocol or part of a protocol is not allowed to proceed, while other protocols may do so. No more than
30 days after imposition of a clinical hold or partial clinical hold, the FDA will provide the sponsor a written explanation of the basis for
the hold. Following issuance of a clinical hold or partial clinical hold, an investigation may only resume after the FDA has notified the
sponsor that the investigation may proceed. The FDA will base that determination on information provided by the sponsor correcting the
deficiencies previously cited or otherwise satisfying the FDA that the investigation can proceed.
In addition to the foregoing IND requirements, an IRB representing each institution participating in the clinical trial must review
and approve the plan for any clinical trial before it commences at that institution, and the IRB must conduct continuing review and
reapprove the study at least annually. The IRB must review and approve, among other things, the study protocol and informed consent
information to be provided to study subjects. An IRB must operate in compliance with FDA regulations. An IRB can suspend or
terminate approval of a clinical trial at its institution, or an institution it represents, if the clinical trial is not being conducted in
accordance with the IRB’s requirements or if the product candidate has been associated with unexpected serious harm to patients.
A sponsor may choose, but is not required, to conduct a foreign clinical study under an IND. When a foreign clinical study is
conducted under an IND, all FDA IND requirements must be met unless waived. When the foreign clinical study is not conducted under
an IND, the sponsor must ensure that the study complies with FDA certain regulatory requirements in order to use the study as support
for an IND or application for marketing approval. In particular, such studies must be conducted in accordance with GCP, including
review and approval by an independent ethics committee, or IEC, and informed consent from subjects, and must meet other clinical trial
requirements, such as sufficient patient population size and statistical powering. The FDA must be able to validate the data through an
onsite inspection, if deemed necessary by the FDA.
Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the trial sponsor,
known as a data safety monitoring board or committee. This group provides authorization for whether or not a clinical trial may move
forward at designated check points based on access that only the group maintains to available data from the study. Suspension or
termination of development during any phase of clinical trials can occur if it is determined that the participants or patients are being
exposed to an unacceptable health risk. Other reasons for suspension or termination may be made by the clinical trial sponsor based on
evolving business objectives and/or competitive climate.
Information about certain clinical trials, including details of the protocol and eventually study results, also must be submitted
within specific timeframes to the National Institutes of Health for public dissemination on the ClinicalTrials.gov data registry.
Information related to the product, patient population, phase of investigation, study sites and investigators and other aspects of the
clinical trial is made public as part of the registration of the clinical trial. Sponsors are also obligated to disclose the results of their
clinical trials after completion. Disclosure of the results of these trials can be delayed in some cases for up to two years after the date of
completion of the trial. Failure to timely register a covered clinical study or to submit study results as provided for in the law can give
rise to civil monetary penalties and may prevent the non-compliant party from receiving future grant funds from the federal government.
The NIH’s Final Rule on ClinicalTrials.gov registration and reporting requirements became effective in 2017, and the government has
brought enforcement actions against non-compliant clinical trial sponsors.
Human Clinical Trials in Support of an NDA
Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified
investigators in accordance with GCP requirements, which include, among other things, the requirement that all research subjects
provide their informed consent in writing before their participation in any clinical trial. Clinical trials are conducted in accordance with
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written study protocols detailing, among other things, study objectives, participant inclusion and exclusion criteria, the parameters to be
used in monitoring safety and the effectiveness criteria to be evaluated. A protocol for each phase of a clinical trial and any subsequent
protocol amendments must be submitted to the FDA as part of the IND.
Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined:
● Phase I. The product candidate is initially introduced into healthy human subjects or, in certain indications such as cancer,
patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution,
excretion and, if possible, to gain an early indication of its effectiveness and to determine optimal dosage.
● Phase II. The product candidate is administered to a limited patient population to identify possible adverse effects and
safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage
tolerance and optimal dosage.
● Phase III. The product candidate is administered to an expanded patient population, generally at geographically dispersed
clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate the efficacy and safety of
the product for approval, to establish the overall risk-benefit profile of the product and to provide adequate information for
the labeling of the product.
Post-approval trials, sometimes referred to as Phase IV clinical trials, may be conducted after initial marketing approval. These
trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication, particularly for long-
term safety follow up. In certain instances, the FDA may mandate the performance of Phase IV clinical trials as a condition of approval
of an NDA.
In the Consolidated Appropriations Act for 2023, Congress amended the FDCA to require sponsors of a Phase III clinical trial,
or other “pivotal study” of a new drug to support marketing authorization, to submit a diversity action plan for such clinical trial. The
action plan must include the sponsor’s diversity goals for enrollment, as well as a rationale for the goals and a description of how the
sponsor will meet them. A sponsor must submit a diversity action plan to FDA by the time the sponsor submits the trial protocol to the
agency for review. The FDA may grant a waiver for some or all of the requirements for a diversity action plan. It is unknown at this time
how the diversity action plan may affect Phase III trial planning and timing or what specific information FDA will expect in such plans,
but if FDA objects to a sponsor’s diversity action plan and requires the sponsor to amend the plan or take other actions, it may delay trial
initiation. Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if
serious adverse events occur. In addition, IND safety reports must be submitted to the FDA for any of the following: serious and
unexpected suspected adverse reactions; findings from other studies or animal or in vitro testing that suggest a significant risk in humans
exposed to the drug; and any clinically important increase in the case of a serious suspected adverse reaction over that listed in the
protocol or investigator brochure. Phase I, Phase II and Phase III clinical trials might not be completed successfully within any specified
period, or at all. Furthermore, the FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including
a finding that the research subjects are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval
of a clinical trial at its institution, or an institution it represents, if the clinical trial is not being conducted in accordance with the IRB’s
requirements or if the drug has been associated with unexpected serious harm to patients. The FDA will typically inspect one or more
clinical sites to assure compliance with GCP and the integrity of the clinical data submitted.
Concurrent with clinical trials, companies often complete additional animal studies and must also develop additional
information about the chemistry and physical characteristics of the drug as well as finalize a process for manufacturing the product in
commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing
quality batches of the drug candidate and, among other things, must develop methods for testing the identity, strength, quality, and purity
of the final drug. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate
that the drug candidate does not undergo unacceptable deterioration over its shelf life.
Traditional and Section 505(b)(2) NDAs
NDAs for most new drug products are based on two adequate and well-controlled, or pivotal, clinical trials that must contain
substantial evidence of the safety and efficacy of the proposed new product. These applications are submitted under Section 505(b)(1) of
the FDCA. The FDA is, however, authorized to approve an alternative type of NDA under Section 505(b)(2) of the FDCA. This type of
application allows the applicant to rely, in part, on the FDA’s previous findings of safety and efficacy for a drug product previously
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approved under an NDA, published literature, or a combination of both. Specifically, Section 505(b)(2) permits the filing of an NDA
where at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the
applicant has not obtained a right of reference. If the 505(b)(2) applicant can establish that reliance on studies conducted for a
previously-approved product or FDA’s previous findings regarding safety or effectiveness is appropriate, the applicant may eliminate the
need to conduct certain pre-clinical studies or clinical trials of the new product. Thus, Section 505(b)(2) often provides an alternate and
potentially more expeditious pathway to FDA approval via NDA for new or improved formulations or new uses of previously approved
products.
Unlike the abbreviated new drug, or ANDA, pathway used by developers of generic versions of innovator drugs, which does not
allow applicants to submit new clinical data other than bioavailability or bioequivalence data, the 505(b)(2) NDA pathway does not
preclude the possibility that a follow-on applicant would need to conduct additional clinical trials or nonclinical studies; for example, a
505(b)(2) applicant may be seeking approval to market a new dosage form of a previously approved drug or for the treatment of a
different patient population, which would require new clinical data to demonstrate safety or effectiveness. The FDA will generally
require companies to perform additional studies to support any differences from the previously approved product, called a listed drug.
The FDA may then approve the new drug candidate for all or some of the label indications for which the listed drug has been approved,
or for any new indication sought by the 505(b)(2) applicant, as applicable. Accordingly, a 505(b)(2) NDA is subject to the same patent
certification requirements as an ANDA with respect to the previously-approved drug being referenced, and it may be eligible for the
three-year period of marketing exclusivity based on the submission of new clinical data that are essential to the approval of the new
505(b)(2) drug product. For more information, see section below entitled Hatch-Waxman Act and Marketing Exclusivity.
Submission of an NDA to the FDA
Assuming successful completion of required clinical testing and other requirements, the results of the preclinical studies and
clinical trials, together with detailed information relating to the product’s chemistry, manufacture, controls and proposed labeling, among
other things, are submitted to the FDA as part of an NDA requesting approval to market the product for one or more indications. Under
federal law, the submission of most NDAs is subject to a substantial user fee. The sponsor of an approved NDA is also subject to an
annual prescription drug program fee. Certain exceptions and waivers are available for some of these fees, such as an exception from the
application fee for drugs with orphan designation and a waiver for certain small businesses submitting their first human drug applications
for review. Eyenovia is currently eligible for a waiver of the application fees under the small business provisions.
The FDA conducts a preliminary review of an NDA within 60 days of its receipt and informs the sponsor by the 74th day after
the FDA’s receipt of the submission to determine whether the application is sufficiently complete to permit substantive review. The FDA
may request additional information rather than accept an NDA for filing. In this event, the application must be resubmitted with the
additional information. The resubmitted application is also subject to review before the FDA accepts it for filing. Once the submission is
accepted for filing, the FDA begins an in-depth substantive review. Under the goals and policies agreed to by the FDA under the
Prescription Drug User Fee Act, or PDUFA, the FDA has agreed to certain performance goals in the review process of NDAs. For most
applications involving new molecular entities, the FDA has 10 months from the date of filing in which to complete its initial review of a
standard application and respond to the applicant, and six months from the date of filing for an application with “priority review.” Even if
the NDA is filed by the FDA, however, companies cannot be sure that any approval will be granted on a timely basis, if at all. Moreover,
the FDA does not always meet its PDUFA goal dates, and the review process for both standard and priority new drug applications may
be extended by the FDA for various reasons, including for three additional months to consider new information or clarification provided
by the applicant to address an outstanding deficiency identified by the FDA following the original submission.
Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is or will be manufactured.
These pre-approval inspections may cover all facilities associated with an NDA submission, including drug component manufacturing
(such as active pharmaceutical ingredients), finished drug product manufacturing, and control testing laboratories. The FDA will not
approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements
and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA, the
FDA will typically inspect one or more clinical sites to assure compliance with GCP.
The FDA may refer an application for a novel drug product to an advisory committee. Typically, an advisory committee is a
panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as
to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory
committee, but it considers such recommendations carefully when making decisions.
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Fast Track, Breakthrough Therapy and Priority Review Designations
The FDA is authorized to designate certain products for expedited review if they are intended to address an unmet medical need
in the treatment of a serious or life-threatening disease or condition. These programs are fast track designation, breakthrough therapy
designation and priority review designation.
Specifically, the FDA may designate a product for fast track review if it is intended, whether alone or in combination with one
or more other drugs, for the treatment of a serious or life-threatening disease or condition, and it demonstrates the potential to address
unmet medical need by providing a therapy where none exists or a therapy that may be potentially superior to existing therapy based on
efficacy or safety factors. For fast track products, sponsors may have more frequent interactions with the FDA and the FDA may initiate
review of sections of a fast track product’s NDA before the application is complete. This rolling review may be available if the FDA
determines, after preliminary evaluation of clinical data submitted by the sponsor, that a fast track product may be effective. The sponsor
must also provide, and the FDA must approve, a schedule for the submission of the remaining information and the sponsor must pay
applicable user fees. However, the FDA’s time period goal for reviewing a fast track application does not begin until the last section of
the NDA is submitted. In addition, the fast track designation may be withdrawn by the FDA if the FDA believes that the designation is
no longer supported by data emerging in the clinical trial process.
The FDA may grant breakthrough therapy designation to a drug or biologic meeting certain statutory criteria upon a request
made by the IND sponsor. A product may be designated as a breakthrough therapy if it is intended, either alone or in combination with
one or more other drugs, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the
product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as
substantial treatment effects observed early in clinical development. The FDA may take certain actions with respect to breakthrough
therapies, including holding meetings with the sponsor throughout the development process; providing timely advice to the product
sponsor regarding development and approval; involving more senior staff in the review process; assigning a cross-disciplinary project
lead for the review team; and taking other steps to design the clinical trials in an efficient manner. In addition, breakthrough therapies are
eligible for accelerated approval of their respective marketing applications.
The FDA may designate a product for priority review if it is a drug that treats a serious condition and, if approved, would
provide a significant improvement in safety or effectiveness. The FDA determines at the time that the marketing application is submitted,
on a case- by-case basis, whether the proposed drug represents a significant improvement when compared with other available therapies.
Significant improvement may be illustrated by evidence of increased effectiveness in the treatment of a condition, elimination or
substantial reduction of a treatment-limiting drug reaction, documented enhancement of patient compliance that may lead to
improvement in serious outcomes, or evidence of safety and effectiveness in a new subpopulation. A priority designation is intended to
direct overall attention and resources to the evaluation of such applications, and to shorten the FDA’s goal for taking action on a
marketing application from 10 months to six months for an new molecular entity NDA from the date of filing.
Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the
conditions for qualification or decide that the time period for FDA review or approval will not be shortened. Furthermore, fast track
designation, breakthrough therapy designation, and priority review do not change the scientific or medical standards for approval or the
quality of evidence necessary to support approval but may expedite the development or review process.
Accelerated Approval Pathway
The FDA may grant accelerated approval to a drug for a serious or life-threatening condition that provides meaningful
therapeutic advantage to patients over existing treatments based upon a determination from well-controlled clinical trials that the drug
has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit. The FDA may also grant accelerated approval
for such a drug or biologic when the product has an effect on an intermediate clinical endpoint that can be measured earlier than an effect
on irreversible morbidity or mortality, or IMM, and that is reasonably likely to predict an effect on irreversible morbidity or mortality or
other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative
treatments. Drugs granted accelerated approval must meet the same statutory standards for safety and effectiveness as those granted
traditional approval.
The accelerated approval pathway is usually contingent on a sponsor’s agreement to conduct, in a diligent manner, additional
post-approval confirmatory studies to verify and describe the drug’s clinical benefit. As a result, a drug candidate approved on this basis
is subject to rigorous post-marketing compliance requirements, including the completion of Phase IV or post-approval clinical trials to
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confirm the effect on the clinical endpoint. Failure to conduct required post-approval studies, or confirm a clinical benefit during post-
marketing studies, would allow the FDA to withdraw the drug from the market on an expedited basis. As part of the Consolidated
Appropriations Act for 2023, Congress provided FDA additional statutory authority to mitigate potential risks to patients from continued
marketing of ineffective drugs previously granted accelerated approval. Under the act’s amendments to the FDCA, FDA may require the
sponsor of a product granted accelerated approval to have a confirmatory trial underway prior to approval. The sponsor must also submit
progress reports on a confirmatory trial every six months until the trial is complete, and such reports are published on FDA’s website.
The amendments also give FDA the option of using expedited procedures to withdraw product approval if the sponsor’s confirmatory
trial fails to verify the claimed clinical benefits of the product.
All promotional materials for drug candidates approved under accelerated regulations are subject to prior review by the FDA.
The FDA’s Decision on an NDA
The FDA reviews an NDA to determine, among other things, whether a product is safe and effective for its intended use and
whether its manufacturing is cGMP-compliant to assure and preserve the product’s identity, strength, quality and purity. The approval
process is lengthy and often difficult, and the FDA may refuse to approve an NDA if the applicable regulatory criteria are not satisfied or
may require additional clinical or other data and information. On the basis of the FDA’s evaluation of the NDA and accompanying
information, including the results of the inspection of the manufacturing facilities, the FDA may issue an approval letter or a CRL. An
approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A CRL
indicates that the review cycle of the application is complete and the application will not be approved in its present form. A CRL
generally outlines the deficiencies in the submission and may require substantial additional testing or information in order for the FDA to
reconsider the application. If and when those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA,
the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the
type of information included. Even with submission of this additional information, the FDA ultimately may decide that the application
does not satisfy the regulatory criteria for approval.
If the FDA approves a product, it may limit the approved indications for use for the product, require that contraindications,
warnings or precautions be included in the product labeling, require that post-approval studies, including Phase IV clinical trials, be
conducted to further assess the drug’s safety after approval, require testing and surveillance programs to monitor the product after
commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms, which can
materially affect the potential market and profitability of the product. The FDA may prevent or limit further marketing of a product based
on the results of post-market studies or surveillance programs. The FDA may also require an applicant to develop a REMS as a condition
of approval to ensure that the benefits of the product outweigh its risks and to assure its safe use. REMS use risk minimization strategies
beyond the professional labeling to ensure that the benefits of the product outweigh the potential risks. To determine whether a REMS is
needed, the FDA will consider the size of the population likely to use the product, seriousness of the disease, expected benefit of the
product, expected duration of treatment, seriousness of known or potential adverse events, and whether the product is a new molecular
entity. REMS can include medication guides, physician communication plans for healthcare professionals, and elements to assure safe
use, or ETASU. ETASU may include, but are not limited to, special training or certification for prescribing or dispensing, dispensing
only under certain circumstances, special monitoring, and the use of patient registries. The FDA may require a REMS before approval or
post-approval if it becomes aware of a serious risk associated with use of the product. If the FDA concludes a REMS is needed as a
condition of approval, the sponsor must submit a proposed REMS during the application review process; the FDA will not approve the
NDA without an approved REMS, if required. The requirement for a REMS can materially affect the potential market and profitability of
a product. After approval, many types of changes to the approved product, such as adding new indications, manufacturing changes and
additional labeling claims, are subject to further testing requirements and FDA review and approval.
Post-Approval Requirements for Prescription Drugs
Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA,
including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising
and promotion and reporting of adverse experiences with the product. After approval, most changes to the approved product, such as
adding new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing, annual
program fee requirements for any marketed products, as well as new application fees for supplemental applications with clinical data.
In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to
register their establishments with the FDA and state agencies, and are subject to periodic announced or unannounced inspections by
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the FDA and these state agencies for compliance with cGMP requirements. Changes to the manufacturing process are strictly regulated
and often require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any
deviations from cGMP and impose reporting and documentation requirements upon the sponsor and any third-party manufacturers that
the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and
quality control to maintain cGMP compliance.
Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is
not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a
product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with
regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market
studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other
potential consequences include, among other things:
● restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or
product recalls;
● fines, warning letters or holds on post-approval clinical trials;
● refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product
approvals;
● product seizure or detention, or refusal to permit the import or export of products; or
● injunctions or the imposition of civil or criminal penalties.
The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market, and we
must comply with the FDA’s advertising and promotion requirements, such as those related to direct-to-consumer advertising, industry-
sponsored scientific and educational activities, and promotional activities involving the internet, as well as the prohibition on promoting
products for uses or in patient populations that are not described in the product’s approved labeling (known as “off-label use”). Drugs
may be promoted only for the approved indications and in accordance with the provisions of the approved label. Although physicians
may prescribe legally available products for off-label uses, manufacturers may not market or promote such uses. The FDA and other
agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have
improperly promoted off-label uses may be subject to significant liability.
In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, or
PDMA, which regulates the distribution of drugs and drug samples at the federal level, and sets minimum standards for the registration
and regulation of drug distributors by the states. Both the PDMA and state laws limit the distribution of prescription pharmaceutical
product samples and impose requirements to ensure accountability in distribution. Furthermore, the Drug Supply Chain Security Act, or
DSCSA, was enacted with the aim of building an electronic system to identify and trace certain prescription drugs distributed in the
United States, including most biological products. The DSCSA mandates phased-in and resource-intensive obligations for
pharmaceutical manufacturers, wholesale distributors, and dispensers over a 10-year period that is expected to culminate in
November 2023. From time to time, new legislation and regulations may be implemented that could significantly change the statutory
provisions governing the approval, manufacturing and marketing of products regulated by the FDA. For example, FDA released
proposed regulations in February 2022 to amend the national standards for licensing of wholesale drug distributors by the states;
establish new minimum standards for state licensing third-party logistics providers; and create a federal system for licensure for use in
the absence of a State program, each of which is mandated by the DSCSA. It is impossible to predict whether further legislative or
regulatory changes will be enacted, or FDA regulations, guidance or interpretations changed or what the impact of such changes, if any,
may be.
Abbreviated New Drug Applications for Generic Drugs
In 1984, with passage of the Drug Price Competition and Patent Term Restoration Act, informally known as the Hatch-Waxman
Act, that established an abbreviated regulatory scheme authorizing the FDA to approve generic drugs based on an innovator or
“reference” product, Congress also enacted Section 505(b)(2) of the FDCA, which provides a hybrid pathway combining features of a
traditional NDA and a generic drug application. To obtain approval of a generic drug, an applicant must submit an abbreviated new drug
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application, or ANDA, to the agency. In support of such applications, a generic manufacturer may rely on the preclinical and clinical
testing previously conducted for a drug product previously approved under an NDA, known as the reference-listed drug, or RLD.
Specifically, in order for an ANDA to be approved, the FDA must find that the generic version is identical to the RLD with
respect to the active ingredients, the route of administration, the dosage form, and the strength of the drug. At the same time, the FDA
must also determine that the generic drug is “bioequivalent” to the innovator drug. Under the statute, a generic drug is bioequivalent to
an RLD if “the rate and extent of absorption of the drug do not show a significant difference from the rate and extent of absorption of the
listed drug.”
Upon approval of an ANDA, the FDA indicates whether the generic product is “therapeutically equivalent” to the RLD in its
publication Approved Drug Products with Therapeutic Equivalence Evaluations, also referred to as the Orange Book. Clinicians and
pharmacists consider a therapeutic equivalent generic drug to be fully substitutable for the RLD. In addition, by operation of certain state
laws and numerous health insurance programs, the FDA’s designation of therapeutic equivalence often results in substitution of the
generic drug without the knowledge or consent of either the prescribing clinicians or patient.
In contrast, Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes
from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference. A Section 505(b)
(2) applicant may eliminate the need to conduct certain preclinical or clinical studies, if it can establish that reliance on studies conducted
for a previously-approved product is scientifically appropriate.
In addition, under the Hatch-Waxman Amendments, the FDA might not approve an ANDA or 505(b)(2) NDA until any
applicable period of non-patent exclusivity for the RLD has expired. These market exclusivity provisions under the FDCA also can delay
the submission or the approval of certain applications. The FDCA provides a period of five years of non-patent data exclusivity for a new
drug containing a new chemical entity. For the purposes of this provision, a new chemical entity, or NCE, is a drug that contains no
active moiety that has previously been approved by the FDA in any other NDA. An active moiety is the molecule or ion responsible for
the physiological or pharmacological action of the drug substance. In cases where such NCE exclusivity has been granted, an ANDA or
505(b)(2) NDA may not be filed with the FDA until the expiration of five years unless the submission is accompanied by a Paragraph IV
certification, in which case the applicant may submit its application four years following the original product approval.
The FDCA also provides for a period of three years of exclusivity for an ANDA, 505(b)(2) NDA or supplement thereto if one or
more new clinical investigations, other than bioavailability or bioequivalence studies, that were conducted by or for the applicant are
deemed by the FDA to be essential to the approval of the application. This three-year exclusivity period often protects changes to a
previously approved drug product, such as a new dosage form, route of administration, combination or indication. The three-year
exclusivity covers only the conditions of use associated with the new clinical investigations and does not prohibit the FDA from
approving follow-on applications for drugs containing the original active agent. Five-year and three-year exclusivity also will not delay
the submission or approval of a traditional NDA filed under Section 505(b)(1) of the FDCA. However, an applicant submitting a
traditional NDA would be required to either conduct or obtain a right of reference to all of the preclinical studies and adequate and well-
controlled clinical trials necessary to demonstrate safety and effectiveness.
Hatch-Waxman Patent Certification and the 30-Month Stay
Upon approval of an NDA or a supplement thereto, NDA sponsors are required to list with the FDA each patent with claims that
cover the applicant’s product or an approved method of using the product. Each of the patents listed by the NDA sponsor is published in
the Orange Book. When an ANDA applicant files its application with the FDA, the applicant is required to certify to the FDA concerning
any patents listed for the reference product in the Orange Book, except for patents covering methods of use for which the ANDA
applicant is not seeking approval. To the extent that the Section 505(b)(2) NDA applicant is relying on studies conducted for an already
approved product, the applicant is required to certify to the FDA concerning any patents listed for the approved product in the Orange
Book to the same extent that an ANDA applicant would.
Specifically, the applicant must certify with respect to each patent that:
I.
the required patent information has not been filed by the original applicant;
II.
the listed patent has expired;
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III. the listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or
IV.
the listed patent is invalid, unenforceable or will not be infringed by the manufacture, use or sale of the new product.
If a Paragraph I or II certification is filed, the FDA may make approval of the application effective immediately upon
completion of its review. If a Paragraph III certification is filed, the approval may be made effective on the patent expiration date
specified in the application, although a tentative approval may be issued before that time. If an application contains a Paragraph IV
certification, a series of events will be triggered, the outcome of which will determine the effective date of approval of the ANDA or
505(b)(2) application.
A certification that the new product will not infringe the already approved product’s listed patents or that such patents are
invalid or unenforceable is called a Paragraph IV certification.
If the follow-on applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the
Paragraph IV certification to the NDA and patent holders once the follow-on application in question has been accepted for filing by the
FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV
certification. The filing of a patent infringement lawsuit within 45 days after the receipt of a Paragraph IV certification automatically
prevents the FDA from approving the ANDA or 505(b)(2) NDA until the earlier of 30 months after the receipt of the Paragraph IV
notice, expiration of the patent, or a decision in the infringement case that is favorable to the ANDA or 505(b)(2) applicant.
Alternatively, if the listed patent holder does not file a patent infringement lawsuit within the required 45-day period, the follow-on
applicant’s ANDA or 505(b)(2) NDA will not be subject to the 30-month stay.
Pediatric Studies and Exclusivity
Under the Pediatric Research Equity Act, or PREA, amendments to the FDCA, an NDA or supplement thereto must contain
data that are adequate to assess the safety and effectiveness of the drug product for the claimed indications in all relevant pediatric
subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective.
With enactment of the Food and Drug Administration Safety and Innovation Act, or FDASIA, in 2012, PREA was made permanent and
sponsors are required to submit pediatric study plans to the FDA prior to the assessment data. In particular, a sponsor that is planning to
submit a marketing application for a product that includes a new active ingredient, new indication, new dosage form, new dosing
regimen or new route of administration submit an initial Pediatric Study Plan, or PSP, within 60 days of an end-of-Phase II meeting or, if
there is no such meeting, as early as practicable before the initiation of the Phase III or Phase II/III study. The initial PSP must contain an
outline of the proposed pediatric study or studies the applicant plans to conduct, including study objectives and design, age groups,
relevant endpoints and statistical approach, or a justification for not including such detailed information and any request for a deferral of
pediatric assessments or a full or partial waiver of the requirement to provide data from pediatric studies along with supporting
information. The FDA and the sponsor must reach an agreement on the PSP. A sponsor can submit amendments to an agreed-upon initial
PSP at any time if changes to the pediatric plan need to be considered based on data collected from preclinical studies, early phase
clinical trials and/or other clinical development programs.
The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data
until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements. The law now requires
the FDA to send a PREA Non-Compliance letter to sponsors who have failed to submit their pediatric assessments required under PREA,
have failed to seek or obtain a deferral or deferral extension or have failed to request approval for a required pediatric formulation. It
further requires the FDA to publicly post the PREA Non-Compliance letter and sponsor’s response. Unless otherwise required by
regulation, the pediatric data requirements do not apply to products with orphan designation, although FDA has recently taken steps to
limit what it considers abuse of this statutory exemption in PREA by announcing that it does not intend to grant any additional orphan
drug designations for rare pediatric subpopulations of what is otherwise a common disease.
In addition, pediatric exclusivity is another type of non-patent marketing exclusivity in the United States that, if granted,
provides for the attachment of an additional six months of marketing protection to the term of any existing regulatory exclusivity, or
listed patents. This six-month exclusivity may be granted if an NDA sponsor submits pediatric data that fairly respond to a Written
Request from the FDA for such data. The data do not need to show the product to be effective in the pediatric population studied; rather,
if the clinical trial is deemed to fairly respond to the FDA’s request, the additional protection is granted. If reports of requested pediatric
studies are submitted to and accepted by the FDA within the statutory time limits, whatever statutory or regulatory periods of exclusivity
or patent protection cover the product are extended by six months, including orphan drug exclusivity. This is not a patent term extension,
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but it effectively extends the regulatory period during which the FDA cannot approve another application. The FDA’s issuance of a
Written Request does not require the sponsor to undertake the described studies.
Patent Term Restoration and Extension
A patent claiming a new drug product may be eligible for a limited patent term extension under the Hatch-Waxman
Amendments, which permits a patent restoration of up to five years for patent term lost during product development and the FDA
regulatory review. The restoration period granted is typically one-half the time between the effective date of an IND and the submission
date of an NDA, plus the time between the submission date of an NDA and the ultimate approval date. Patent term restoration cannot be
used to extend the remaining term of a patent past a total of 14 years from the product’s approval date. Only one patent applicable to an
approved drug product is eligible for the extension, and the application for the extension must be submitted prior to the expiration of the
patent in question. A patent that covers multiple drugs for which approval is sought can only be extended in connection with one of the
approvals. The USPTO reviews and approves the application for any patent term extension or restoration in consultation with the FDA.
We cannot provide any assurance that any patent term extension with respect to any U.S. patent will be obtained and, if obtained, the
duration of such extension, in connection with any of our product candidates.
FDA Regulation of Medical Devices
Medical devices are strictly regulated by the FDA in the United States. Under the FDCA a medical device is defined as “an
instrument, apparatus, implement, machine, contrivance, implant, -in vitro- reagent, or other similar or related article, including a
component, part or accessory which is, among other things: intended for use in the diagnosis of disease or other conditions, or in the
cure, mitigation, treatment, or prevention of disease, in man or other animals; or intended to affect the structure or any function of the
body of man or other animals, and which does not achieve its primary intended purposes through chemical action within or on the body
of man or other animals and which is not dependent upon being metabolized for the achievement of any of its primary intended
purposes.” This definition provides a clear distinction between a medical device and other FDA regulated products such as drugs. If the
primary intended use of a medical product is achieved through chemical action or by being metabolized by the body, the product is a
drug or biologic. If not, it is generally a medical device.
Unless an exemption applies, a new medical device may not be marketed in the United States unless and until it has been
cleared through the premarket notification, or 510(k) process or approved by the FDA pursuant to a premarket approval application, or
PMA. The information that must be submitted to the FDA in order to obtain clearance or approval to market a new medical device varies
depending on how the medical device is classified by the FDA. Medical devices are classified into one of three classes on the basis of the
controls deemed by the FDA to be necessary to reasonably ensure their safety and effectiveness.
Class I devices are those low risk devices for which reasonable assurance of safety and effectiveness can be provided by
adherence to the FDA’s general controls for medical devices, which include applicable portions of the FDA’s Quality System Regulation,
or QSR; facility registration and product listing; reporting of adverse medical events and malfunctions; and appropriate, truthful and non-
misleading labeling, advertising and promotional materials. Most Class I devices are exempt from premarket regulation; however, some
Class I devices require premarket clearance by the FDA through the 510(k) process.
Class II devices are moderate risk devices and are subject to the FDA’s general controls, and any other special controls, such as
performance standards, post-market surveillance, and FDA guidelines, deemed necessary by the FDA to provide reasonable assurance of
the devices’ safety and effectiveness. Premarket review and clearance by the FDA for most Class II devices is accomplished through the
510(k) process, although some Class II devices are exempt from the 510(k) requirements. To obtain 510(k) clearance, a sponsor must
submit to the FDA a premarket notification demonstrating that the device is substantially equivalent to a device that is already legally
marketed in the United States and for which a PMA is not required (i.e., a Class II device), including any device that was reclassified
from Class III to Class I or II.The device to which the sponsor’s device is compared for the purpose of determining substantial
equivalence is called a “predicate device.” The FDA’s goal is to make a substantial equivalence determination within 90 days of FDA’s
receipt of the 510(k) application, but it often takes longer if the FDA requests additional information. Most 510(k)s do not require
supporting data from clinical trials, but the FDA may request such data for certain devices. After a device receives 510(k) clearance, any
modification that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, requires
a new clearance or possibly a pre-market approval. Premarket notifications are subject to user fees unless a specific exemption applies.
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Class III devices are deemed by the FDA to pose the greatest risk to patients, such as those for which reasonable assurance of
the device’s safety and effectiveness cannot be assured solely by the general controls and special controls described above, and especially
devices that are life-sustaining, life-supporting or implanted. All Class III devices must be reviewed and approved by the FDA through
the PMA process. A PMA must be supported by extensive data including, but not limited to, technical, nonclinical testing, clinical trials,
manufacturing and labeling to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device for its intended use. After
a PMA is sufficiently complete, the FDA will accept the application for filing and begin an in-depth review of the submitted information.
By statute, the FDA has 180 days to review the accepted application, although review of the application generally can take between one
and three years. During this review period, the FDA may request additional information or clarification of information already provided.
Also during the review period, an advisory panel of experts from outside the FDA may be convened to review and evaluate the
application and provide recommendations to the FDA as to the approvability of the device. Although the FDA is not bound by the
advisory panel decision, it considers such recommendations when making final decisions on approval. In addition, the FDA will conduct
a preapproval inspection of the manufacturing facility to ensure compliance with the QSR. New PMA applications or PMA application
supplements are also required for product modifications that affect the safety and efficacy of the device. PMA (and supplemental PMAs)
are subject to significantly higher user fees than are 510(k) premarket notifications.
Medical device types that the FDA has not previously classified as Class I, II or III are automatically classified into Class III
regardless of the level of risk they ultimately pose to patients and/or users. The Food and Drug Administration Modernization Act of
1997 established a new route to market for low to moderate risk medical devices that are automatically placed into Class III due to the
absence of a predicate device, called the “Request for Evaluation of Automatic Class III Designation,” or the De Novo classification
procedure. This procedure allows a manufacturer whose novel device is automatically classified into Class III to request that the FDA
determine that the initial classification of its medical device is actually Class I or Class II based on a benefit-risk analysis demonstrating
the device actually presents low or moderate risk, rather than requiring the submission and approval of a PMA application. Under the
most recent FDA premarket review goals, FDA will attempt to issue a decision on most De Novo classification requests within 150 days
of receipt. If the manufacturer seeks reclassification into Class II, the manufacturer must include a draft proposal for special controls that
are necessary to provide a reasonable assurance of the safety and effectiveness of the medical device. In addition, the FDA may reject the
reclassification petition if it identifies a legally marketed predicate device that would be appropriate for a 510(k) or determines that the
device is not low to moderate risk or that general controls would be inadequate to control the risks and special controls cannot be
developed. De Novo reclassification requests are also subject to user fees, unless a specific exemption applies.
Post-Marketing Restrictions and Enforcement
After a device is placed on the market, numerous regulatory requirements apply. These include, but are not limited to:
● submitting and updating establishment registration and device listings with the FDA;
● compliance with the QSR, which requires manufacturers to follow stringent design, testing, control, documentation, record
maintenance, including maintenance of complaint and related investigation files, and other quality assurance controls
during the manufacturing process;
● announced or unannounced routine or for-cause device facility inspections by the FDA, which may include our suppliers’
facilities; and
● labeling regulations, which prohibit the promotion of products for uncleared or unapproved (or “off-label”) uses and
impose other restrictions relating to promotional activities;
● corrections and removal reporting regulations, which require that manufacturers report to the FDA field corrections or
removals if undertaken to reduce a risk to health posed by a device or to remedy a violation of the FDCA that may present
a risk to health; and
● post-market surveillance regulations, which apply to certain Class II or III devices when necessary to protect the public
health or to provide additional safety and effectiveness data for the device.
Under the FDA medical device reporting, or MDR, regulations, medical device manufacturers are required to report to the FDA
information that a device has or may have caused or contributed to a death or serious injury or has malfunctioned in a way that would
likely cause or contribute to death or serious injury if the malfunction of the device or a similar device of such manufacturer were to
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recur. The decision to file an MDR involves a judgment by the manufacturer. If the FDA disagrees with the manufacturer’s
determination, the FDA can take enforcement action.
The MDR requirements also extend to healthcare facilities that use medical devices in providing care to patients, or “device user
facilities,” which include hospitals, ambulatory surgical facilities, nursing homes, outpatient diagnostic facilities, or outpatient treatment
facilities, but not physician offices. A device user facility must report any device-related death to both the FDA and the device
manufacturer, or any device-related serious injury to the manufacturer (or, if the manufacturer is unknown, to the FDA) within 10 days of
the event. Device user facilities are not required to report device malfunctions that would likely cause or contribute to death or serious
injury if the malfunction were to recur but may voluntarily report such malfunctions through MedWatch, the FDA’s Safety Information
and Adverse Event Reporting Program.
Additionally, the FDA has the authority to require the recall of commercialized products in the event of material deficiencies or
defects in design or manufacture. The authority to require a recall must be based on an FDA finding that there is reasonable probability
that the device would cause serious adverse health consequences or death. Manufacturers may, under their own initiative, recall a product
if any distributed devices fail to meet established specifications, are otherwise misbranded or adulterated, or if any other material
deficiency is found. The FDA requires that certain classifications of recalls be reported to the FDA within ten working days after the
recall is initiated.
The failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include
any of the following sanctions:
● warning letters, fines, injunctions or civil penalties;
● recalls, detentions or seizures of products;
● operating restrictions;
● delays in the introduction of products into the market;
● total or partial suspension of production;
● delay or refusal of the FDA or other regulators to grant 510(k) clearance or PMA approvals of new products;
● withdrawals of 510(k) clearance or PMA approvals; or
● in the most serious cases, criminal prosecution.
To ensure compliance with regulatory requirements, medical device manufacturers are subject to market surveillance and
periodic, pre-scheduled and unannounced inspections by the FDA, and these inspections may include the manufacturing facilities of
subcontractors.
FDA Regulation of Combination Products
A combination product is a product composed of a combination of two or more FDA-regulated product constituent parts or
products, e.g., drug-device or biologic-device. Such products often raise regulatory, policy and review management challenges because
they integrate constituent parts that are regulated under different types of regulatory requirements and by different FDA Centers, namely,
the Center for Drug Evaluation and Research, or CDER, the Center for Devices and Radiological Health, or CDRH, or the Center for
Biologics Evaluation and Research, or CBER. Differences in regulatory pathways for each constituent part can impact the regulatory
processes for all aspects of product development and management, including preclinical testing, clinical investigation, marketing
applications, manufacturing and quality control, adverse event reporting, promotion and advertising, and post-approval modifications.
Specifically, under regulations issued by the FDA, a combination product may be:
● a product comprised of two or more regulated constituent parts that are physically, chemically, or otherwise combined or
mixed and produced as a single entity;
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● two or more separate products packaged together in a single package or as a unit and comprised of drug and device
products;
● a drug or device packaged separately that according to its investigational plan or proposed labeling is intended for use only
with an approved individually specified drug or device where both are required to achieve the intended use, indication, or
effect and where upon approval of the proposed product the labeling of the approved product would need to be changed,
e.g., to reflect a change in intended use, dosage form, strength, route of administration, or significant change in dose; or
● any investigational drug or device packaged separately that according to its proposed labeling is for use only with another
individually specified investigational drug, device, or biological product where both are required to achieve the intended
use, indication, or effect.
The FDA’s Office of Combination Products, or OCP, was established to provide prompt determination of the FDA Center with
primary jurisdiction over the review and regulation of a combination product; ensure timely and effective premarket review by
overseeing the timeliness of and coordinating reviews involving more than one center; ensure consistent and appropriate post-market
regulation; resolve disputes regarding review timeliness; and review/revise agreements, guidance and practices specific to the assignment
of combination products.
OCP determines which Center will have primary jurisdiction for the combination product, referred to as the Lead Center, based
on the combination product’s “primary mode of action,” or PMOA. A mode of action is the means by which a product achieves an
intended therapeutic effect or action. The PMOA is the mode of action that provides the most important therapeutic action of the
combination product, or the mode of action expected to make the greatest contribution to the overall intended therapeutic effects of the
combination product. The Lead Center has primary responsibility for the review and regulation of a combination product; however a
second Center is often involved in the review process, especially to provide input regarding the “secondary” component(s). In most
instances, the Lead Center applies its usual regulatory pathway. For example, a drug-device combination product assigned to CDER will
typically be reviewed through an NDA, while a drug-device combination product assigned to CDRH is typically reviewed through a
510(k), PMA, or De Novo classification request.
Often it is difficult for OCP to determine with reasonable certainty the most important therapeutic action of the combination
product. In those difficult cases, OCP will consider consistency with other combination products raising similar types of safety and
effectiveness questions, or which Center has the most expertise to evaluate the most significant safety and effectiveness questions raised
by the combination product. A sponsor may use a voluntary formal process, known as a Request for Designation, when the product
classification is unclear or in dispute, to obtain a binding decision as to which Center will regulate the combination product. If the
sponsor objects to that decision, the sponsor may request that OCP reconsider its decision.
Combination products are subject to FDA user fees based on the type of application submitted for the product’s premarket
approval or clearance. For example, a combination product for which an NDA is submitted is subject to the NDA fee under PDUFA.
Likewise, a combination product for which a PMA is submitted is subject to the PMA fee under the Medical Device User Fee and
Modernization Act.
Since a combination product incorporates two or more constituent parts that have different regulatory requirements, a
combination product manufacturer must comply with all cGMP and QSR requirements that apply to each constituent part. The FDA has
issued a combination product cGMP regulation, along with final guidance, describing two approaches a combination product
manufacturer may follow to demonstrate compliance. Under these two options, the manufacturer demonstrates compliance with: (1) All
cGMP regulations applicable to each separate regulated constituent part included in the combination product; or (2) either the drug
cGMP or the QSR, as well as with specified provisions from the other of these two sets of requirements (also called the “streamlined
approach”).
FDA has stated that our Mydcombi product candidate is a drug-device combination product with a drug PMOA, and thus will
be reviewed through an NDA by CDER as the Lead Center with consulting review on the device component provided by CDRH. The
QSR will apply to all manufacturing of our device components and we may be subject to additional QSR requirements applicable to
medical devices, such as management responsibility, design controls, purchasing controls, and corrective and preventive action.
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Review and Approval of Drug Products in China and South Korea (Arctic Vision)
In order to market any product outside of the United States, a company must also comply with numerous and varying regulatory
requirements of other countries and jurisdictions regarding quality, safety and efficacy and governing, among other things, clinical trials,
marketing authorization, commercial sales and distribution of products. Whether or not it obtains FDA approval for a product, the
company would need to obtain the necessary approvals by the comparable foreign regulatory authorities before it can commence clinical
trials or marketing of the product in those countries or jurisdictions. The approval process ultimately varies between countries and
jurisdictions and can involve additional product testing and additional administrative review periods. The time required to obtain
approval in other countries and jurisdictions might differ from and be longer than that required to obtain FDA approval. Regulatory
approval in one country or jurisdiction does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory
approval in one country or jurisdiction may negatively impact the regulatory process in others.
Procedures Governing Approval of Drug Products in China
The National Medical Products Administration (NMPA) is the main regulatory authority responsible for drug registration,
review, and approval in China. NMPA’s Drug Evaluation Center (CDE) is responsible for the review of drug clinical trial applications
and drug marketing authorization applications for overseas manufactured drugs. After completing the pre-clinical studies and clinical
trials supporting the drug registration, the applicant submits the drug marketing authorization application according to the applicable
requirements. After the formal examination of the application materials, acceptance will be given if they meet the requirements.
Pharmaceutical, medical, and other technical personnel of the CDE review the accepted drug marketing authorization applications. After
a comprehensive review they issue a registration certificate of approval for the subject drug. The validity period of the drug registration
certificate is five years. During the validity period the marketing authorization holder is responsible for the safety, effectiveness, and
quality control of the approved drug and applies for drug re-registration six months prior to the expiration of the validity period.
Procedures Governing Approval of Drug Products in Korea
The Ministry of Food and Drug Safety (MFDS) is the main regulatory authority responsible for drug registration, review, and
approval in South Korea. Under the MFDS, the Pharmaceutical Safety Bureau, and the National Institute of Food and Drug Safety
Evaluation (NIFDS) are responsible for the review, approval, and regulation of pharmaceutical products. Pharmaceuticals that require
data submission must submit safety and efficacy data for evaluation before receiving approval. This includes drug products that have new
effectiveness, composition, or route of administration. The applicant will prepare the application dossier for drug approval. Submit the
application to MFDS Management Division for Drug Approval & Review. The MFDS then conducts an initial assessment of the
application, generates a report outlining the application dossier, and submits it to the MFDS Drug & Evaluation Department. The Drug &
Evaluation department conducts a review of, among other things, the results of the initial assessment, technology, safety & efficacy data,
product standards, clinical trial data, good manufacturing practice (GMP) data, Drug Master File (DMF) data, impacts on intrinsic
(genetic) factors, and extrinsic (factors). If no further documentation or supplementary data is required, the MFDS issues the applicant a
Certificate of Approval.
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Pharmaceutical Coverage, Pricing and Reimbursement
Our Mydcombi, MicroLine and clobetasol propionate product candidates are intended as “cash pay” and therefore are not likely
subject to the significant uncertainty that exists as to the coverage and reimbursement status of products approved by the FDA and other
government authorities. The sales of MicroPine, however, would likely depend in part on the extent to which third-party payors,
including government health programs in the United States such as Medicare and Medicaid, commercial health insurers and managed
care organizations, provide coverage, and establish adequate reimbursement levels for, such products. The process for determining
whether a payor will provide coverage for a product may be separate from the process for setting the price or reimbursement rate that the
payor will pay for the product once coverage is approved. Third-party payors are increasingly challenging the prices charged, examining
the medical necessity, and reviewing the cost-effectiveness of medical products and services and imposing controls to manage costs.
Third-party payors may limit coverage to specific products on an approved list, or formulary, which might not include all of the approved
products for a particular indication.
In the United States and markets in other countries, patients who are prescribed treatments for their conditions and providers
performing the prescribed services generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Patients
and healthcare providers are unlikely to use our products unless third-party payor coverage is provided and reimbursement by such payor
is adequate to cover a significant portion of the cost of our products. Significant uncertainty exists as to the coverage and reimbursement
status of products approved by the FDA and other comparable government authorities. Thus, even if a product candidate is approved,
sales of the product will depend, in part, on the extent to which third-party payors, including government health programs in the United
States such as Medicare and Medicaid, commercial health insurers and managed care organizations, provide coverage, and establish
adequate reimbursement levels for the product.
In the United States, no uniform policy of coverage and reimbursement for drug products exists among third-party payors.
Therefore, coverage and reimbursement for drug products can differ significantly from payor to payor. The process for determining
whether a payor will provide coverage for a product may be separate from the process for setting the price or reimbursement rate that the
payor will pay for the product once coverage is approved. Third-party payors are increasingly challenging the prices charged, examining
the medical necessity, and reviewing the cost-effectiveness of medical products and services and imposing controls to manage costs.
Third-party payors may limit coverage to specific products on an approved list, or formulary, which might not include all of the approved
products for a particular indication. Moreover, for products administered under the supervision of a physician, obtaining coverage and
adequate reimbursement may be particularly difficult because of the higher prices often associated with such drugs. Additionally,
separate reimbursement for the product itself may or may not be available. Instead, the hospital or administering physician may be
reimbursed only for providing the treatment or procedure in which our product is used.
In order to secure coverage and reimbursement for any product that might be approved for sale, a company may need to conduct
expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of the product, in addition to
the costs required to obtain FDA or other comparable regulatory approvals. Obtaining coverage and reimbursement approval of a product
from a government or other third-party payor is a time-consuming and costly process that could require us to provide to each payor
supporting scientific, clinical and cost-effectiveness data for the use of our products on a payor-by-payor basis, with no assurance that
coverage and adequate reimbursement will be obtained. Nonetheless, product candidates might not be considered medically necessary or
cost effective. A decision by a third-party payor not to cover a product could reduce physician utilization once the product is approved
and have a material adverse effect on sales, our operations and financial condition. Additionally, a payor’s decision to provide coverage
for a drug product does not imply that an adequate reimbursement rate will be approved. Further, one payor’s determination to provide
coverage for a drug product does not assure that other payors will also provide coverage for the drug product. Third-party reimbursement
might not be sufficient to maintain price levels high enough to realize an appropriate return on investment in product development.
In addition, prices for drugs may be reduced by mandatory discounts or rebates required by federal healthcare programs or
discounts and rebates requested by private payors. Any future relaxation of laws that presently restrict imports of drugs from countries
where they may be sold at lower prices than in the United States may also impact the pricing of drugs. It is difficult to predict how
Medicare coverage and reimbursement policies will be applied to products for which the company receives marketing approval in the
future and coverage and reimbursement under different federal healthcare programs is not always consistent. Further, private payors
often follow the coverage and reimbursement policies established under Medicare. If reimbursement is not available or is available only
at limited levels, we may not be able to successfully commercialize our products for which we receive marketing approval.
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The containment of healthcare costs also has become a priority of federal, state and foreign governments and the prices of drugs
have been a focus in this effort. Governments have shown significant interest in implementing cost-containment programs, including
price controls, restrictions on reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-
containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit a
company’s revenue generated from the sale of any approved products. Coverage policies and third-party reimbursement rates may
change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which a company or its
collaborators receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
Outside the United States, ensuring adequate coverage and payment for our product candidates will face challenges. Pricing of
prescription pharmaceuticals is subject to governmental control in many countries. Pricing negotiations with governmental authorities
can extend well beyond the receipt of regulatory marketing approval for a product and may require us to conduct a clinical trial that
compares the cost effectiveness of our product candidates or products to other available therapies. The conduct of such a clinical trial
could be expensive and result in delays in our commercialization efforts.
Healthcare Law and Regulation
Healthcare providers, physicians and third-party payors play a primary role in the recommendation and prescription of drug
products that are granted marketing approval. Arrangements with healthcare providers, pharmacists, consultants, third-party payors and
customers are subject to broadly applicable healthcare laws and regulations that may constrain our business and/or financial
arrangements. Applicable federal and state healthcare laws and regulations include without limitation the following:
● the federal Anti-Kickback Statute, or AKS, which prohibits persons and entities from knowingly and willfully soliciting,
offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, if one purpose of the remuneration
is to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or
service, for which payment may be made, in whole or in part, under a federal healthcare program such as Medicare and
Medicaid. A person or entity does not need to have actual knowledge of the AKS or specific intent to violate it to have
committed a violation. In addition, the government may assert that a claim including items or services resulting from a
violation of the AKS constitutes a false or fraudulent claim for purposes of the FCA or federal civil money penalties
statute;
● the federal civil and criminal false claims laws, including the civil False Claims Act, and civil monetary penalties laws,
which prohibit individuals or entities from, among other things, knowingly presenting, or causing to be presented, false or
fraudulent claims for payment to, or approval by Medicare, Medicaid, or other federal healthcare programs, knowingly
making, using or causing to be made or used a false record or statement material to a false or fraudulent claim or an
obligation to pay or transmit money to the federal government, or knowingly concealing or knowingly and improperly
avoiding or decreasing or concealing an obligation to pay money to the federal government. Manufacturers can be held
liable under the False Claims Act even when they do not submit claims directly to government payers if they are deemed to
“cause” the submission of false or fraudulent claims. The False Claims Act also permits a private individual acting as a
“whistleblower” to bring actions on behalf of the federal government alleging violations of the False Claims Act and to
share in any monetary recovery;
● the anti-inducement law, which prohibits, among other things, the offering or giving of remuneration, which includes,
without limitation, any transfer of items or services for free or for less than fair market value (with limited exceptions), to a
Medicare or Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary’s selection of
a particular supplier of items or services reimbursable by a federal or state governmental program;
● the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created additional federal
criminal laws that prohibit, among other things, knowingly and willingly executing, or attempting to execute, a scheme to
defraud any healthcare benefit program or making false statements relating to healthcare matters;
● HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing
regulations, also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy,
security and transmission of individually identifiable health information;
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● the federal transparency requirements known as the federal Physician Payments Sunshine Act, under the Patient Protection
and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or the Affordable
Care Act, which requires manufacturers of drugs, devices, biologics and medical supplies to report to the Department of
Health and Human Services information related to payments and other transfers of value to physicians, certain advanced
non-physician healthcare practitioners, and teaching hospitals or to entities or individuals at the request of, or designated on
behalf of, the physicians, advanced healthcare practitioners and teaching hospitals as well as certain ownership and
investment interests held by physicians and their immediate family members; and
● analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to
sales or marketing arrangements and claims involving healthcare items or services that are reimbursed by non-
governmental third-party payors, including private insurers.
The majority of states also have statutes or regulations similar to the aforementioned federal laws, some of which are broader in
scope and apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the
payor. Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines
and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report
information related to payments to clinicians and other healthcare providers or marketing expenditures. Some states and local
jurisdictions require the registration of pharmaceutical sales representatives. State and foreign laws also govern the privacy and security
of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by
HIPAA, thus complicating compliance efforts.
Because of the breadth of these laws and the narrowness of their exceptions and safe harbors, it is possible that business
activities can be subject to challenge under one or more of such laws. The scope and enforcement of each of these laws is uncertain and
subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and
regulations. Federal and state enforcement bodies have recently increased their scrutiny of interactions between healthcare companies
and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare
industry.
Ensuring that business arrangements with third parties comply with applicable healthcare laws and regulations is costly and time
consuming. If business operations are found to be in violation of any of the laws described above or any other applicable governmental
regulations a pharmaceutical manufacturer may be subject to penalties, including civil, criminal and administrative penalties, damages,
fines, disgorgement, individual imprisonment, exclusion from participation in governmental funded healthcare programs, such as
Medicare and Medicaid, contractual damages, reputational harm, diminished profits and future earnings, additional reporting obligations
and oversight if subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws,
and curtailment or restructuring of operations, any of which could adversely affect a pharmaceutical manufacturer’s ability to operate its
business and the results of its operations.
Changes in the Healthcare Marketplace
The United States and some foreign jurisdictions are considering enacting or have enacted a number of additional legislative and
regulatory proposals to change the healthcare system in ways that could affect our ability to sell our product candidates profitably, if
approved. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we
are not able to maintain regulatory compliance, we may lose any marketing approval that we otherwise may have obtained and we may
not achieve or sustain profitability, which would adversely affect our business, prospects, financial condition and results of operations.
In addition, the containment of healthcare costs has become a priority of federal and state governments and the prices of
therapeutics have been a focus in this effort. The U.S. government, state legislatures and foreign governments also have shown
significant interest in implementing cost-containment programs to limit the growth of government-paid healthcare costs, including price
controls, restrictions on reimbursement, and requirements for substitution of generic products for branded prescription drugs,
respectively. In recent years, the U.S. Congress has considered reductions in Medicare reimbursement levels for drugs administered by
physicians. The Centers for Medicare and Medicaid Services, CMS, the agency that administers the Medicare and Medicaid programs,
also has authority to revise reimbursement rates and to implement coverage restrictions for some drugs. Cost reduction initiatives and
changes in coverage implemented through legislation or regulation could decrease utilization of and reimbursement for any approved
products we may market in the future. While Medicare regulations apply only to drug benefits for Medicare beneficiaries, private payors
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often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates. Therefore, any reduction in
reimbursement that results from federal legislation or regulation may result in a similar reduction in payments from private payors.
In March 2010, the United States Congress enacted the Affordable Care Act, which, among other things, included changes to
the coverage and payment for products under government health-care programs. The Affordable Care Act included provisions of
importance to our potential product candidate that:
● created an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs
products, apportioned among these entities according to their market share in certain government healthcare programs;
● expanded eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to
certain individuals with income at or below 138% of the federal poverty level, thereby potentially increasing a
manufacturer’s Medicaid rebate liability;
● expanded manufacturers’ rebate liability under the Medicaid Drug Rebate Program by increasing the minimum rebate for
both branded and generic drugs and revising the definition of “average manufacturer price,” or AMP, for calculating and
reporting Medicaid drug rebates on outpatient prescription drug prices;
● addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are
calculated for drugs that are inhaled, infused, instilled, implanted or injected;
● expanded the types of entities eligible for the 340B drug discount program;
● established the Medicare Part D coverage gap discount program by requiring manufacturers to provide point-of-sale-
discounts off the negotiated price of applicable brand drugs to eligible beneficiaries during their coverage gap period as a
condition for the manufacturers’ outpatient drugs to be covered under Medicare Part D; and
● created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative
clinical effectiveness research, along with funding for such research.
Following several years of litigation in the federal courts, in June 2021, the U.S. Supreme Court upheld the Affordable Care Act
when it dismissed a legal challenge to the Affordable Care Act’s constitutionality. Further legislative and regulatory changes under the
Affordable Care Act remain possible, although it is unknown what form any such changes or any law would take, and how or whether it
may affect the pharmaceutical and medical device industries as a whole or our business in the future. We expect that changes or additions
to the Affordable Care Act, the Medicare and Medicaid programs and changes stemming from other healthcare reform measures,
especially with regard to healthcare access, financing or other legislation in individual states, could have a material adverse effect on the
healthcare industry in the United States.The Biden Administration has indicated that lowering prescription drug prices is a priority. For
example, in July 2021, President Biden issued a sweeping executive order on promoting competition in the American economy that
includes several mandates pertaining to the pharmaceutical and healthcare insurance industries,and called on HHS to release a
comprehensive plan to combat high prescription drug prices. The drug pricing plan released by HHS in September 2021 in response to
the executive order makes clear that the Biden Administration supports aggressive action to address rising drug prices, including
allowing HHS to negotiate the cost of Medicare Part B and D drugs. It is unclear how other healthcare reform measures of the Biden
administration will impact healthcare laws and regulations or our business.
Other legislative changes have been proposed and adopted since passage of the ACA that affect healthcare expenditures. These
changes include aggregate reductions to Medicare payments to providers of up to 2% per fiscal year pursuant to the Budget Control Act
of 2011, which began in 2013 and was extended by the Consolidated Appropriations Act for 2023, and will remain in effect through
2032 unless additional Congressional action is taken.
There has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed
products, which has resulted in several Congressional inquiries, presidential executive orders and proposed and enacted federal and state
legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and
manufacturer patient programs and reform government program reimbursement methodologies for pharmaceutical products. Government
authorities and other third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for
particular medical products and services, implementing reductions in Medicare and other healthcare funding and
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applying new payment methodologies. In addition to the sweeping reforms contained in the ACA, other legislative changes have been
proposed and adopted in the United States that may affect healthcare expenditures. For example, the 2020 Consolidated Appropriations
Act (P.L. 116-94) included a piece of bipartisan legislation called the Creating and Restoring Equal Access to Equivalent Samples Act, or
the CREATES Act. The CREATES Act aims to address the concern articulated by both the FDA and others in the industry that some
brand manufacturers have improperly restricted the distribution of their products, including by invoking the existence of a REMS
program for certain products, to deny generic product developers access to samples of brand products. Because generic product
developers need samples to conduct certain comparative testing required by the FDA, some have attributed the inability to timely obtain
samples as a cause of delay in the entry of generic products. To remedy this concern, the CREATES Act establishes a private cause of
action that permits a generic product developer to sue the brand manufacturer to compel it to furnish the necessary samples on
“commercially reasonable, market-based terms.” Whether and how generic product developments will use this new pathway, as well as
the likely outcome of any legal challenges to provisions of the CREATES Act, remain highly uncertain and its potential effects on our
future commercial products are unknown.
More recently, in August 2022, President Biden signed into the law the Inflation Reduction Act of 2022, or the IRA. Among
other things, the IRA has multiple provisions that may impact the prices of drug products that are both sold into the Medicare program
and throughout the United States. Starting in 2023, a manufacturer of a drug or biological product covered by Medicare Parts B or D
must pay a rebate to the federal government if the drug product’s price increases faster than the rate of inflation. This calculation is made
on a drug product by drug product basis and the amount of the rebate owed to the federal government is directly dependent on the
volume of a drug product that is paid for by Medicare Parts B or D. Additionally, starting in payment year 2026, CMS will negotiate drug
prices annually for a select number of single-source Part D drugs without generic or biosimilar competition. CMS will also negotiate
drug prices for a select number of Part B drugs starting for payment year 2028. If a drug product is selected by CMS for negotiation, it is
expected that the revenue generated from such drug will decrease.
At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control
pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access
and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries
and bulk purchasing. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to
determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs.
These measures could reduce the ultimate demand for our products, once approved, or put pressure on our product pricing. Further, in
December 2020, the U.S. Supreme Court held unanimously that federal law does not preempt the states’ ability to regulate pharmacy
benefit managers, or PBMs, and other members of the healthcare and pharmaceutical supply chain, an important decision that may lead
to further and more aggressive efforts by states in this area. The Federal Trade Commission in mid-2022 also launched sweeping
investigations into the practices of the PBM industry that could lead to additional federal and state legislative or regulatory proposals
targeting such entities’ operations, pharmacy networks, or financial arrangements. Significant efforts to change the PBM industry as it
currently exists in the United States may affect the entire pharmaceutical supply chain and the business of other stakeholders, including
pharmaceutical developers like us. We expect that federal, state and local governments in the United States, as well as foreign
governments, will continue to consider legislation directed at lowering the total cost of healthcare. The implementation of cost
containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or
commercialize any product that is ultimately approved, if approved. We cannot predict the likelihood, nature or extent of government
regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad.
Human Capital Resources
As of March 15, 2024, we had 57 total employees. All 57 are full-time employees and there are no part-time employees. We
also engage various consultants and contractors.
We consider our relations with our employees to be good. To successfully commercialize our product candidates, we must be
able to attract and retain highly skilled personnel. We anticipate hiring additional employees during 2024. We continually evaluate the
business need and opportunity and balance in-house expertise and capacity with outsourced expertise and capacity. Currently, we
outsource substantial clinical trial work to clinical research organizations and manufacturing to contract manufacturers.
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We believe that our future success largely depends upon our continued ability to attract and retain highly skilled employees.
Biotechnology and pharmaceutical companies both large and small compete for a limited number qualified applicants to fill specialized
positions. To attract qualified applicants, we offer a total rewards package potentially consisting of base salary and cash target bonus, a
comprehensive benefit package and equity compensation. Bonus opportunity and equity compensation increase as a percentage of total
compensation based on level of responsibility. Actual bonus payout is based on performance.
Much of our success is rooted in the diversity of our teams and our commitment to inclusion. We value diversity at all levels.
We believe that our business benefits from the different perspectives a diverse workforce brings, and we pride ourselves on having a
strong, inclusive and positive culture based on our shared mission and values.
Information About Our Directors and Executive Officers
Name
Tsontcho Ianchulev, M.D., M.P.H.
Michael Geltzeiler
Rachel Jacobson
Charles Mather
Ram Palanki, Pharm.D.
Ellen Strahlman, M.D., MHSc
Michael Rowe
John Gandolfo
Bren Kern
Available Information
Position
Chairman and Director of Eyenovia
Director of Eyenovia
Director of Eyenovia and President of the Drone Racing League (DRL)
Director of Eyenovia
Director of Eyenovia and Executive Vice President of Commercial Strategy & Operations
at REGENXBIO Inc.
Director of Eyenovia
Chief Executive Officer and Director of Eyenovia
Chief Financial Officer and Secretary of Eyenovia
Chief Operating Officer of Eyenovia
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those
reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, are available free of charge on our website at
www.eyenovia.com as soon as reasonably practicable after electronically filing or furnishing such material to the SEC. The SEC
maintains a website (www.sec.gov) that includes our reports, proxy statements and other information.
Item 1A. Risk Factors.
Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, as well as
the other information in this report, including our financial statements and the related notes and “Management’s Discussion and
Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our common stock. The occurrence of
any of the events or developments described below could harm our business, financial condition, results of operations and growth
prospects. In such an event, the market price of our common stock could decline and you might lose all or part of your investment.
RISKS RELATED TO OUR FINANCIAL POSITION AND NEED FOR ADDITIONAL CAPITAL
We might not be able to continue as a going concern, which would likely cause our stockholders to lose most or all of their
investment.
Our audited financial statements for the year ended December 31, 2023 were prepared under the assumption that we would
continue as a going concern. However, we have concluded that there is substantial doubt about our ability to continue as a going concern,
therefore our independent registered public accounting firm included a “going concern” explanatory paragraph in its report on our
financial statements for the year ended December 31, 2023, indicating that, without additional sources of funding, our cash at December
31, 2023 is not sufficient for us to operate as a going concern for a period of at least one year from the date that the financial statements
included in this Annual Report on Form 10-K are issued. Management’s plans concerning these matters, including our need to raise
additional capital, are described in Note 2 – Summary of Significant Accounting Policies – Liquidity and Going Concern of our financial
statements included within this Annual Report on Form 10-K. However, management cannot assure you that our plans to raise additional
capital will be successful. If we cannot continue as a viable entity, our stockholders would likely lose most or all of their investment in
us.
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We will need to raise additional capital in order to continue developing our product candidates and to manufacture and
commercialize them as well as Mydcombi and clobetasol propionate, currently our only FDA-approved commercial products. Such
funding might not be available on acceptable terms, or at all. Failure to obtain this necessary capital may force us to delay, limit or
terminate certain of our product development and commercialization efforts or to continue operations.
We require substantial additional funding to continue our research and development activities. We also need substantial funding
to advance manufacturing and commercialization, and fund our operating expenses and other activities into next year. If additional
capital is not available when needed, including because of general market conditions, we may need to significantly scale back or
reprioritize our research and development activities, manufacturing and commercialization plans, and potentially even cease our
operations.
We will require substantial funds to discover, develop, protect and conduct research and development for our product
candidates, including preclinical testing for future product candidates and clinical trials of any of our product candidates, and to
manufacture and market any products that are or may be approved for commercial sale. Even if we are successful in raising additional
capital, such funds may prove to be insufficient for these activities. Our financing needs may change substantially because of research
and development, manufacturing and commercialization-related costs, competition, clinical trials and costs arising from additional
regulatory approvals. We might not succeed in raising needed additional funds. The timing of our need for additional funds will depend
on a number of factors, which factors are difficult to predict or may be outside of our control, including:
● the resources, time and costs required to initiate and complete research and development, to initiate and complete
preclinical studies and clinical trials and to obtain regulatory approvals for our product candidates;
● progress in our research and development programs;
● the timing, receipt and amount of milestone, royalty and other payments from any current or future collaborators, if any;
and
● costs necessary to protect our intellectual property.
If our estimates and predictions relating to any of these factors are incorrect, we may need to modify our operating plan.
Additional funds might not be available to us on acceptable terms, or at all, when needed.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to
our technologies.
Until such time as we can generate substantial product revenues, as to which we can make no assurance, we intend to finance
our cash needs through equity offerings, debt financings, government and/or other third-party grants or other third-party funding,
marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements. To the extent that we
raise additional capital through the sale of equity or convertible debt securities, our investors’ ownership interest will be diluted. Debt
financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as
incurring additional debt, making capital expenditures or declaring dividends. If we are unable to obtain funding on a timely basis, we
may be required to significantly curtail one or more clinical research or development programs or delay manufacturing and
commercialization plans, which would adversely impact potential revenues, results of operations and our financial condition.
If we raise additional capital through future collaborations, strategic alliances or third-party licensing arrangements, we may
have to relinquish valuable rights to our intellectual property, future revenue streams, research programs, Mydcombi, clobetasol
propionate or product candidates, or grant licenses on terms that might not be favorable to us.
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The terms of our Loan and Security Agreement with Avenue Capital Management II, L.P. and the lenders listed therein require us to
meet certain operating covenants and place restrictions on our operating and financial flexibility. If we raise additional capital
through debt financing, the terms of any new debt could further restrict our ability to operate our business.
On November 22, 2022, we entered into a Loan and Security Agreement with Avenue Capital Management II, L.P. and related
entities (together, “Avenue”) (the “Loan and Security Agreement”) that is secured by a lien on all of our assets. The Loan and Security
Agreement contains customary affirmative and negative covenants and events of default. Affirmative covenants include, among others,
covenants requiring us to protect and maintain our intellectual property and comply with all applicable laws, deliver certain financial
reports and maintain insurance coverage. Negative covenants include, among others, covenants restricting us from transferring any part
of our business or intellectual property, incurring additional indebtedness, engaging in mergers or acquisitions, repurchasing shares,
paying dividends or making other distributions, making investments, and creating other liens on our assets, including our intellectual
property, in each case subject to customary exceptions. If we raise any additional debt financing, the terms of such additional debt could
further restrict our operating and financial flexibility. These restrictions may include, among other things, limitations on the incurrence of
additional debt and specific restrictions on the use of our assets, as well as prohibitions on our ability to create liens, pay dividends,
redeem capital stock or make investments. If we default under the terms of the Loan and Security Agreement or any future debt facility,
Avenue may accelerate all of our repayment obligations and take control of our pledged assets, potentially requiring us to renegotiate our
agreement on terms less favorable to us or to immediately cease operations. Further, if we were to be liquidated, Avenue’s right to
repayment would be senior to the rights of the holders of our common stock. Avenue could declare an event of default upon the
occurrence of any event that could reasonably be expected to result in what they interpret as a material adverse effect as defined under
the Loan and Security Agreement. Any declaration by Avenue of an event of default could significantly harm our business and prospects
and could cause the price of our common stock to decline.
We have incurred operating losses since our inception. We expect to continue to incur losses for the foreseeable future and might
never achieve or maintain profitability.
We have incurred net losses of approximately $145.5 million since inception, have not generated any significant product sales
revenue and have not achieved profitable operations. Our net losses were approximately $27.3 million and $28.0 million for the years
ended December 31, 2023 and 2022, respectively. We expect to continue to incur substantial losses in future periods while we continue to
test and prepare our product candidates for the market. It could be a year or more, if ever, before we achieve profitability. The net losses
we incur may fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses will increase substantially
if, and as, we:
● continue the ongoing development of our product candidates;
● seek marketing approvals for our current and future product candidates that successfully complete clinical trials;
● continue to develop a sales, marketing and distribution infrastructure to commercialize Mydcombi, clobetasol propionate
and any other product candidate for which we may obtain marketing approval;
● develop, maintain, expand and protect our intellectual property portfolio;
● implement additional operational, financial and management systems;
● attract, hire and retain additional administrative, clinical, regulatory and scientific personnel; and
● initiate preclinical studies and clinical trials for any additional product candidates that we may pursue in the future.
Even if we are able to generate substantial revenues from the sale of our potential products, we might not become profitable and
may need to obtain additional funding to continue operations. If we fail to become profitable or are unable to sustain profitability on a
continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce our operations. Even if we
do achieve profitability, we might not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and
remain profitable would decrease the value of our company and could impair our ability to raise capital, expand our business or continue
our operations. In addition, because of the numerous risks and uncertainties associated with product development, we are unable to
predict the timing or amount of increased expenses, or when, or if, we will be able to achieve or maintain profitability.
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Our relatively short operating history may make it difficult for investors to evaluate the success of our business to date and to assess
our future viability.
We commenced active operations in 2014, and our operations to date have been primarily limited to organizing and staffing our
company, business planning, raising capital and developing our product candidates. We have entered into licensing agreements with
Arctic Vision, for the development and commercialization of MicroPine, MicroLine and MydcombiTM in Greater China and South
Korea, and Senju, for the development and commercialization of MicroPine, MicroLine and Mydcombi in Asia (other than Greater
China and South Korea). Other than FDA approval of Mydcombi and clobetasol propionate, we have not yet demonstrated our ability to
obtain marketing approval, manufacture a commercial scale product or arrange for a third party to do so on our behalf, or conduct sales
and marketing activities necessary for successful product commercialization. We will need to transition from a company with a product
development focus to a company capable of supporting commercial and manufacturing activities in the near future. We might not be
successful in such a transition. In addition, we may encounter unforeseen expenses, difficulties, complications, delays and other known
and unknown factors during such transition. Consequently, any predictions about our future success or viability might not be as accurate
as they could be if we had a longer operating history.
If we are unable to use carryforward tax losses or benefit from favorable tax legislation to reduce our taxes, our business, results of
operations and financial condition may be adversely affected.
We have incurred significant net operating losses since our inception in July 2014. As of December 31, 2023, we had federal net
operating loss carry-forwards of approximately $104.3 million, of which approximately $10.8 million will expire at various dates from
2034 to 2037 for federal purposes. If we are unable to use carryforward tax losses to reduce our future taxable basis for corporate tax
purposes, our business, results of operations and financial condition may be adversely affected.
Net operating loss and tax credit carry-forwards are subject to review and possible adjustment by the Internal Revenue Service
and state tax authorities and may become subject to an annual limitation in the event of certain cumulative changes in the ownership
interest of significant stockholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal
Revenue Code of 1986, as amended, as well as similar state provisions. This could limit the amount of tax attributes that can be utilized
annually to offset future taxable income or tax liabilities.
The federal and state income tax returns are generally subject to tax examinations. To the extent we have tax attribute
carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service
or state tax authorities to the extent utilized in a future period. Any unfavorable tax adjustment could have a significant impact on our
results of operations and future cash flows. Furthermore, if the United States government decides to eliminate, or reduce the scope or the
rate of any tax benefit, either of which it could decide to do at any time, our results of operations could be adversely affected.
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RISKS RELATED TO DEVELOPMENT AND COMMERCIALIZATION OF OUR PRODUCT AND PRODUCT
CANDIDATES
Our ability to achieve profitability is highly dependent on the commercial success of Mydcombi and clobetasol propionate, and to the
extent Mydcombi and clobetasol propionate are not successful, our business, financial condition and results of operations may be
materially adversely affected and the price of our common stock may decline.
Mydcombi and clobetasol propionate are currently our only products that have been approved by FDA for commercial sale in the U.S.
For the year ended December 31, 2023, we recorded net sales of Mydcombi of $3,787. Revenues from sales of Mydcombi have not been
sufficient to fund our operations fully in prior periods and we cannot provide assurance that revenues from Mydcombi sales will be
sufficient to fund our operations fully in the future. We will need to generate substantially more product revenue from Mydcombi and/or
clobetasol propionate generate other revenue such as through sales of future approved products to achieve and sustain profitability. We
may be unable to sustain or increase revenues generated from Mydcombi product sales for a number of reasons, including:
● pricing, coverage and reimbursement policies of government and private payers such as Medicare, Medicaid, the U.S.
Department of Veterans Affairs, group purchasing organizations, insurance companies, health maintenance organizations and
other plan administrators;
● a lack of acceptance by physicians, patients and other members of the healthcare community;
● interruptions in supply of Mydcombi from our contract manufacturing partners;
● the availability, relative price and efficacy of Mydcombi as compared to alternative treatment options or branded, compounded
or generic competing products;
● an unknown safety risk;
● the failure to enter into and maintain acceptable partnering arrangements for marketing and distribution of Mydcombi outside of
the U.S.; and
● changed or increased regulatory restrictions in the U.S., E.U. and/or other foreign territories.
We are dependent on our ability to successfully commercialize our product Mydcombi and clobetasol propionate, and our ability to
develop, obtain marketing approval for and successfully commercialize MicroPine, MicroLine, and any future product candidates. If
we are unable to develop, obtain marketing approval for and/or successfully commercialize our products and product candidates,
either alone or through a collaboration, or experience significant delays in doing so, our business could be materially harmed.
Apart from Mydcombi and clobetasol propionate, we currently have no products approved for sale and have invested a
significant portion of our efforts and financial resources in the development of MicroPine for pediatric progressive myopia and
MicroLine for presbyopia. Our prospects are substantially dependent on our and our licensees abilities to develop, obtain marketing
approval for and successfully commercialize Mydcombi and clobetasol propionate and these product candidates.
The success of our product candidates will depend on, among other things, our ability to successfully complete clinical trials of
each product candidate. Although we have completed multiple Phase II and III studies for our product candidates, including the MIST-1
and MIST-2 Phase III trials for Mydcombi, and the VISION-1 and VISION-2 Phase III trials for MicroLine, the clinical trial process is
uncertain, and failure of one or more clinical trials can occur at any stage of testing.
In addition to the successful completion of clinical trials, the success of our product candidates will also depend on several other
factors, including the following:
● receipt of marketing approvals from the FDA or other applicable regulatory authorities;
● establishment of supply arrangements with third-party raw materials suppliers and manufacturers;
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● establishment of arrangements with third-party manufacturers to obtain finished drug products that are appropriately
packaged for sale;
● the performance of our future collaborators for one or more of our product candidates, if any;
● the extent of any required post-marketing approval commitments to applicable regulatory authorities;
● obtaining and maintaining patent, trade secret protection and regulatory exclusivity, both in the United States and
internationally;
● protection of our rights in our intellectual property portfolio;
● launch of commercial sales if and when our product candidates are approved;
● a continued acceptable safety profile of our product candidates following any marketing approval;
● commercial acceptance, if and when approved, by patients, the medical community and third-party payors;
● establishing and maintaining pricing sufficient to realize a meaningful return on our investment; and
● competition with other products.
If we are unable to develop, obtain marketing approval for or successfully commercialize our MicroPine and MicroLine product
candidates, either alone or through a collaboration, or experience significant delays in doing so, our business could be materially harmed.
Delays in the commencement or completion of clinical testing of product candidates we are developing or may develop in the future
may occur and could result in significantly increased costs and longer timelines and could impact our ability to ever become
profitable.
The tests and clinical trials of product candidates we develop may not commence, progress or be completed as expected, and
delays could significantly impact our product development costs and timelines, as well as a product candidate’s market potential, if
ultimately approved. The timing of initiation, conduct and completion of clinical trials and other testing of our product candidates may
vary dramatically due to factors within and outside of our control and is difficult to predict accurately. We may make statements
regarding anticipated timing for commencement, completion of enrollment, and/or availability of results from our clinical studies, but
those statements are predictions based on a number of significant assumptions and the actual timing of achievement of development
milestones may differ materially from our predictions for a variety of reasons.
Commencement of planned clinical studies may be delayed if we do not secure adequate capital. In addition to lack of adequate
capital, commencement and/or completion of these studies may be delayed, terminated or suspended as a result of the occurrence of any
of a number of other factors, including the need to obtain authorizations from the FDA and the institutional review boards, or IRBs, of
prospective clinical study sites, delayed or inadequate supply of our product candidates or other clinical trial material, slower than
expected rates of patient recruitment or enrollment, other factors described below, and unforeseen events.
The commencement of clinical trials of our product candidates can be delayed for many reasons, including delays in:
● obtaining required funding;
● obtaining guidance or authorizations from the FDA or foreign regulatory authorities;
● finalizing the trial design as a result of discussions with the FDA, other regulatory authorities or prospective clinical trial
investigators or sites;
● reaching agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites;
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● obtaining sufficient quantities of our product candidates and other clinical trial material; or
● obtaining IRB approval to conduct a clinical trial at a prospective site.
In addition, once a clinical trial has begun, it may experience unanticipated delays or be suspended or terminated by us, an IRB,
the FDA or other regulatory authorities due to several factors, all of which could impact our, or our licensees’, ability to complete clinical
trials in a timely and cost-efficient manner, including:
● lack of adequate funding;
● failure to conduct the clinical trial in accordance with regulatory or IRB requirements;
● slower than expected rates of subject recruitment and enrollment;
● higher than anticipated participant drop-out rates;
● failure of clinical trial subjects to use the product as directed or to report data as per trial protocols;
● inspection of the clinical trial operations or clinical trial site by the FDA or other regulatory authorities resulting in the
imposition of a clinical hold;
● failure to achieve certain efficacy and/or safety standards;
● subjects experiencing severe side effects or other adverse events related to the investigational treatment;
● delayed or insufficient supply of clinical trial material or inadequate quality of such materials;
● failure of our CROs or other third-party contractors to meet their contractual obligations to us in a timely manner, or at all;
or
● delays in quality control/quality assurance procedures necessary for study database lock and analysis of unblinded data.
Significant clinical trial delays also could jeopardize our ability to meet obligations under agreements under which we license
our rights to our product candidates, allow other companies to bring competitive products to market before we do, shorten any period of
market exclusivity we may otherwise have under our patent rights, and weaken our negotiating position in discussions with potential
collaborators, any of which could impair our ability to successfully commercialize our product candidates, if ultimately approved. Any
significant delays in commencement or completion of clinical trials of our product candidates, or the suspension or termination of a
clinical trial, could materially harm our business, financial condition and results of operations.
We or our licensees may experience delays or difficulties in the enrollment and/or retention of patients in clinical trials, which could
delay or prevent our receipt of necessary regulatory approvals.
Successful and timely completion of clinical trials will require that we or our licensees sponsoring trials for our product
candidates enroll a sufficient number of subjects. Subject enrollment, which is an important factor in the timing of clinical trials, is
affected by many factors, including the size and nature of the patient population and competition for patients eligible for our clinical
trials with competitors which may have ongoing clinical trials for product candidates that are under development to treat the same
indications as one or more of our product candidates, or approved products for the conditions for which we are developing our product
candidates.
Trials may be subject to delays as a result of subject enrollment taking longer than anticipated or subject withdrawal. We may
not be able to initiate or continue clinical trials for our product candidates if we are unable to locate and enroll a sufficient number of
eligible patients to participate in these trials as required by the FDA or comparable foreign regulatory authorities. We cannot predict
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how successful we or our licensees will be at enrolling subjects in future clinical trials. Subject enrollment is affected by other factors
including:
● the severity and difficulty of diagnosing the disease under investigation;
● the eligibility and exclusion criteria for the trial in question;
● the size of the patient population and process for identifying patients;
● our ability to recruit clinical trial investigators with the appropriate competencies and experience;
● the design of the trial protocol;
● the perceived risks and benefits of the product candidate in the trial in relation to other available therapies, including any
new products that may be approved for the indications we are investigating;
● the availability of competing commercially available therapies and other competing therapeutic candidates’ clinical trials
for the disease or condition under investigation;
● the willingness of patients to be enrolled in our clinical trials;
● the risk that subjects enrolled in clinical trials will drop out of our trials before completion;
● our ability to obtain and maintain clinical trial subject informed consents
● the efforts to facilitate timely enrollment in clinical trials;
● potential disruptions caused by geopolitical events such as the ongoing war between Russia and Ukraine or between Israel
and Hamas;
● the patient referral practices of physicians;
● the ability to monitor subjects adequately during and after treatment; and
● the proximity and availability of clinical trial sites for prospective subjects.
Inability to enroll a sufficient number of subjects for clinical trials would result in significant delays and could require us to
abandon one or more clinical trials altogether. Enrollment delays in these clinical trials may result in increased development costs for our
product candidates, which would cause the value of our company to decline and limit our ability to obtain additional financing.
Furthermore, we rely on CROs and clinical trial sites to ensure the proper and timely conduct of our clinical trials and we have limited
influence over their performance.
Interim “top-line” and preliminary results from our clinical trials that we announce or publish from time to time may change as
more patient data become available and are subject to audit and verification procedures that could result in material changes in the
final data.
From time to time, we may publish interim top-line or preliminary results from our clinical trials. Interim results from clinical
trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment
continues and more patient data become available. We also make assumptions, estimations, calculations and conclusions as part of our
analyses of data, and we may not have received or had the opportunity to fully evaluate all data. Preliminary or top-line results also
remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data
we previously published. As a result, interim and preliminary data that we report may differ from future results of the same trials, or
different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated, and should
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be viewed with caution until the final data are available. Differences between preliminary or interim data and final data could be material
and could significantly harm our business prospects and may cause the trading price of our common stock to fluctuate significantly.
Furthermore, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations,
conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular
program, the approvability or commercialization of the particular product candidate or therapeutic product, if any, and us in general. The
information we choose to publicly disclose regarding a particular nonclinical study or clinical trial is based on what is typically extensive
information, and you or others may not agree with what we determine is the material or otherwise appropriate information to include in
our disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect to future decisions,
conclusions, views, activities or otherwise regarding a particular therapeutic product, if any, product candidate or our business. If the
preliminary, interim and topline data that we report differ from actual results, or if others, including regulatory authorities, disagree with
the conclusions reached, our ability to obtain approval for, and commercialize, our product candidates may be harmed, which could harm
our business, operating results, prospects or financial condition.
The FDA or comparable foreign regulatory authorities may disagree with our regulatory plans and we may fail to obtain regulatory
approval of our product candidates.
Our clinical trial results may not support regulatory approval of our product candidates. The results of nonclinical studies and
clinical trials may not be predictive of the results of later-stage clinical trials, and product candidates in later stages of clinical trials may
fail to show the desired safety and efficacy despite having progressed through nonclinical studies and initial clinical trials. In addition,
our product candidates could fail to receive regulatory approval for many reasons, including the following:
● the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials;
● the population studied in the clinical program may not be sufficiently broad or representative to assure safety in the full
population for which we seek approval;
● we may be unable to demonstrate that our product candidates’ risk-benefit ratios for their proposed indications are
acceptable;
● the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign
regulatory authorities for approval;
● the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from nonclinical studies
or clinical trials;
● the data collected from clinical trials of our product candidates may not be sufficient to the satisfaction of the FDA or
comparable foreign regulatory authorities to support the submission of an application for marketing authorization to FDA
or comparable foreign regulatory authorities;
● the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes, our own
manufacturing facilities, or a third-party manufacturer’s facilities with which we contract for clinical and commercial
supplies; and
● the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a
manner rendering our clinical data insufficient for approval.
Failure to obtain regulatory approval to market any of our product candidates would significantly harm our business, results of
operations, and prospects.
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Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory
approval and limit the commercial profile of an approved label, and such side effects or other properties could result in significant
negative consequences following any marketing approval of any of our product candidates.
Undesirable side effects caused by any of our product candidates could cause us, our licensing partners, if any, or regulatory
authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval
by the FDA or other comparable foreign regulatory authority. Results of the clinical trials could reveal a high and unacceptable severity
and prevalence of side effects or risks associated with a product candidate’s use. In such an event, our trials could be suspended or
terminated and the regulatory authorities could order us to cease further development of or deny approval of our product candidates for
any or all targeted indications. The drug-related side effects could affect patient recruitment or the ability of enrolled subjects to complete
the trial or result in potential product liability claims. Any of these occurrences may harm our business, financial condition and prospects
significantly.
Additionally, if undesirable side effects of our products are identified following marketing approval, a number of potentially
significant negative consequences could result, including:
● marketing of such product may be suspended;
● a product recall or product withdrawal;
● regulatory authorities may withdraw or limit their approvals of such product or may require additional warnings on the
label;
● the requirement to develop a REMS for each product or, if a strategy is already in place, to incorporate additional
requirements under the REMS, or to develop a similar strategy as required by a comparable foreign regulatory authority;
● the requirement to conduct additional post-market studies; and
● being sued and held liable for harm caused to subjects or patients.
Consequently, our reputation and business operations may suffer.
In addition, adverse side effects caused by any therapeutics that may be similar in nature to our product candidates could delay
or prevent regulatory approval of our product candidates, limit the commercial profile of an approved label for our product candidates, or
result in significant negative consequences for our product candidates following marketing approval.
Any of these events could prevent the achievement or maintaining of market acceptance of the particular product or product
candidate, if approved, and could significantly harm our business, results of operations and prospects.
We might not be able to develop any additional marketable products utilizing our technology and we might not be able to identify and
successfully implement an alternative product development strategy.
The approach we have adopted to discover and develop product candidates is new and may never lead to marketable products
other than Mydcombi and clobetasol propionate. We have concentrated our efforts on developing therapeutic product candidates utilizing
new advanced technology for drug delivery. To our knowledge, no person or company has developed any therapeutic product utilizing
the same technology and no such ophthalmic micro-therapeutic product other than Mydcombi and clobetasol propionate has been
approved for marketing to date. We are leading a new field of ophthalmic micro-therapeutic research and development and the scientific
discoveries that form the basis for our efforts to develop products are relatively new. The scientific evidence to support the feasibility of
developing such products and treatments based on these discoveries is limited. Our focus solely on developing products utilizing our
proprietary technology, as opposed to more traditional technology, increases the risks associated with investing in our stock. If we are
unsuccessful in developing product candidates utilizing our technology or finding additional applications for our technology, we may be
required to change the scope and direction of our product development activities. If we are not able to identify and successfully
implement an alternative product development strategy, our business may fail.
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If the market opportunities for Mydcombi and clobetasol propionate and our product candidates are smaller than we believe they are,
our product revenues may be adversely affected and our business may suffer.
We are currently focusing efforts on commercializing our Mydcombi and clobetasol propionate products, and we have licensed
commercialization rights to Mydcombi as well as MicroPine and MicroLine in Greater China (mainland China, Hong Kong, Macau and
Taiwan) and South Korea to Arctic Vision (with Senju retaining such licensed rights in the rest of Asia). Our understanding of both the
number of people who have needs for our products, as well as the subset of people who have the potential to benefit from our product
and product candidates in varying countries, are based on estimates in published literature. While we believe these estimates are
reasonable, they may prove to be incorrect and new studies may reduce the estimated incidence or prevalence of mydriasis, progressive
myopia and presbyopia. The number of patients in the United States and elsewhere may turn out to be lower than expected or these
patients might not be otherwise amenable to our product or product candidates or may become increasingly difficult to identify and
access, all of which would adversely affect our business, financial condition, results of operations and prospects.
The commercial success of Mydcombi and clobetasol propionate and our product candidates will depend in large part on the degree
of market acceptance among ophthalmologists and optometrists, patients, patient advocacy groups, third-party payors and the
medical community.
There can be no assurance that Mydcombi and clobetasol propionate will achieve commercial success or market acceptance and,
even if we receive regulatory approval to market our product candidates, our product candidates might not gain market acceptance upon
their commercial introduction, both of which could prevent us from becoming profitable.
We may have difficulties convincing the medical community, third-party payors and consumers to accept and use Mydcombi,
clobetasol propionate and any of our product candidates that may be approved for commercialization in the future. Other factors that we
believe will affect market acceptance of Mydcombi, clobetasol propionate and our product candidates, if approved, include:
● the timing of our receipt of any marketing approvals, the terms of any approvals and the countries in which approvals are
obtained;
● safety, efficacy and ease of administration of Mydcombi, clobetasol propionate or our product candidates;
● the success of physician education programs;
● the availability of any government and third-party payor reimbursement;
● the pricing of Mydcombi, clobetasol propionate or our product candidates, particularly as compared to alternative treatment
methods and medications;
● the extent to which alternative treatment methods and medications are more readily available as compared to the
availability of Mydcombi, clobetasol propionate or any product candidates that we may develop in the future; and
● the prevalence and severity of any adverse effects.
Our licensing partners may fail to use commercially reasonable efforts to commercialize certain of our products.
Our licensing partners are contractually obligated to use commercially reasonable efforts in the commercialization of the
products for which they have negotiated a license. Uncovering that one or more of our partners is not using commercially reasonable
efforts could take time to discover and time to remedy, during which the sales of our products candidates could be lower than we expect.
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We face competition in an environment of rapid technological change and the possibility that our competitors may achieve regulatory
approval before us or develop therapies that are more advanced or effective than ours, may adversely affect our financial condition
and our, or our licensees’, ability to successfully market or commercialize our product candidates.
The specialty pharma market is highly competitive. If we or our licensees are unable to compete effectively with any existing
products, new treatment methods and new technologies, we may be unable to commercialize our current or any future therapeutic
products.
The specialty pharma market is subject to rapid technological change and is significantly affected by existing rival products and
medical procedures, new product introductions and the market activities of other participants. Pharmaceutical and biotechnology
companies, academic institutions, governmental agencies and other public and private research organizations may pursue the research
and development of technologies, drugs or other therapeutic products for the treatment of some or all of the diseases or conditions we are
targeting. We may also face competition from products which have already been approved and accepted by the medical community for
the treatment of these same indications.
As a result of any of the foregoing factors, our competitors may develop or commercialize products with significant advantages
over any therapeutic products that we may develop. If our competitors are more successful in commercializing their products than we
are, their success could adversely affect our competitive position and harm our business prospects.
If we fail to establish and maintain effective manufacturing and distribution processes our business may be adversely affected.
We have limited resources for the manufacturing, sales, marketing and distribution of drug products. To achieve commercial
success for Mydcombi, clobetasol propionate and the product candidates for which we may in the future obtain marketing approval, we
will need to establish and maintain an adequate sales force, and additional manufacturing, marketing and distribution capabilities, either
ourselves or through collaborations or other arrangements with third parties. We received FDA approval for our primary Mydcombi
manufacturing facility in February 2024, which we believe will allow us to expand and continue to build our manufacturing operations.
However, we may encounter delays in the manufacturing process for Mydcombi that could delay the process of commercialization of the
product, which could have a material negative effect on our revenues.
In addition, failure to secure contracts with manufacturers, wholesalers, retailers, or specialty pharmacies could negatively
impact the production and distribution of our potential products, and failure to coordinate financial systems could negatively impact our
ability to accurately report product revenue. If we are unable to effectively establish and manage the manufacturing and distribution
process, the commercial launch and sales of our potential products may be delayed or severely compromised and our results of
operations may be harmed.
We are exposed to the risk of claims seeking monetary damages by individuals and the risk of investigations by regulatory authorities,
which could cause us to incur substantial liabilities and to limit commercialization of any products that we develop.
We are exposed to the risk of claims seeking monetary damages being filed against us for loss or harm suffered by participants
of our clinical trials or for loss or harm suffered by users of Mydcombi, clobetasol propionate or any of our drug products that may
receive approval for commercialization in the future. In either event, the FDA or the regulatory authorities of other countries or regions
may commence investigations of the safety and effectiveness of any such clinical trial or commercialized drug, the manufacturing
processes and facilities or marketing programs utilized in respect of any such clinical trial or drug. Such investigations may result in
mandatory or voluntary recalls of any commercialized drug or other significant enforcement action such as limiting the indications for
which any such drug may be used, or suspension or withdrawal of approval for any such drug. Investigations by the FDA or any other
regulatory authority in other countries or regions also could delay or prevent the completion of any of our other clinical development
programs.
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Product liability lawsuits against us could divert our resources and could cause us to incur substantial liabilities and to limit
commercialization of any products that we develop.
We face an inherent risk of product liability exposure related to the use of Mydcombi, clobetasol propionate and our product
candidates that we develop in human clinical trials. If we cannot successfully defend ourselves against claims that our product candidates
or products caused injuries, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:
● decreased demand for Mydcombi, clobetasol propionate or any product candidates or products that we develop;
● injury to our reputation and significant negative media attention;
● withdrawal of clinical trial participants;
● significant costs to defend the related litigation;
● substantial monetary awards to clinical trial participants or patients;
● loss of revenue;
● reduced time and attention of our management to pursue our business strategy; and
● the inability to commercialize any future products that we develop.
Our insurance policies might not fully cover the risk of loss associated with our operations. We may need to increase our
insurance coverage as we commercialize Mydcombi and clobetasol propionate and expand or undertake new our clinical trials for
existing and future product candidates. Insurance coverage is increasingly expensive. We might not be able to maintain insurance
coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. In the event that we are required to pay
damages for any such claim, we may be forced to seek bankruptcy or to liquidate because our asset and revenue base may be insufficient
to satisfy the payment of damages and any insurance that we have obtained or may obtain for product or clinical trial liability might not
provide sufficient coverage against potential liabilities.
We may not be able to successfully commercialize Mydcombi, clobetasol propionate and our product candidates, if approved, due to
unfavorable pricing regulations or third-party coverage and reimbursement policies, which could make it difficult for us to sell
Mydcombi, clobetasol propionate or our product candidates profitably.
Obtaining coverage and reimbursement approval for a product from a government or other third-party payor is a time-
consuming and costly process, with uncertain results, that could require us to provide supporting scientific, clinical and cost effectiveness
data for the use of our products to the payor. There may be significant delays in obtaining such coverage and reimbursement for newly
approved products, and coverage may not be available, or may be more limited than the purposes for which the product is approved by
the FDA or other comparable foreign regulatory authorities. Moreover, eligibility for coverage and reimbursement does not imply that a
product will be paid for in all cases or at a rate that covers our costs, including research, development, intellectual property, manufacture,
sale and distribution expenses. Interim reimbursement levels for new products, if applicable, may also not be sufficient to cover our costs
and may not be made permanent. Reimbursement rates may vary according to the use of the product and the clinical setting in which it is
used, may be based on reimbursement levels already set for lower cost products and may be incorporated into existing payments for
other services. Net prices for products may be reduced by mandatory discounts or rebates required by government healthcare programs
or private payors, by any future laws limiting drug prices and by any future relaxation of laws that presently restrict imports of product
from countries where they may be sold at lower prices than in the United States.
There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the United
States, there is no uniform policy among third-party payors for coverage and reimbursement. Third-party payors often rely upon
Medicare coverage policy and payment limitations in setting reimbursement policies, but also have their own methods and approval
process apart from Medicare coverage and reimbursement determinations. Therefore, one third-party payor’s determination to provide
coverage for a product does not assure that other payors will also provide coverage for the product.
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Coverage and reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor’s
determination that use of a product is:
● a covered benefit under its health plan;
● safe, effective and medically necessary;
● appropriate for the specific patient;
● cost-effective; and
● neither experimental nor investigational.
We cannot be sure that reimbursement will be available for Mydcombi, clobetasol propionate or any product that we may
commercialize in the future and, if coverage and reimbursement are available, what the level of reimbursement will be. Our inability to
promptly obtain coverage and adequate reimbursement rates from both government-funded and private payors for any approved products
that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize
products and our overall financial condition.
Reimbursement may impact the demand for, and the price of, any product for which we obtain marketing approval. Even if we
obtain coverage for a given product by a third-party payor, the resulting reimbursement payment rates may not be adequate or may
require co-payments that patients find unacceptably high. Patients who are prescribed medications for the treatment of their conditions,
and their prescribing physicians, generally rely on third-party payors to reimburse all or part of the costs associated with those
medications. Patients are unlikely to use our products unless coverage is provided and reimbursement is adequate to cover all or a
significant portion of the cost of our products. Therefore, coverage and adequate reimbursement are critical to a new product’s
acceptance. Coverage decisions may depend upon clinical and economic standards that disfavor new products when more established or
lower cost therapeutic alternatives are already available or subsequently become available.
For products administered by or under the supervision of a physician, obtaining coverage and adequate reimbursement may be
particularly difficult because of the higher prices often associated with such drugs. Additionally, separate reimbursement for the product
itself may or may not be available. Instead, the hospital or administering physician may be reimbursed only for providing the treatment
or procedure in which our product is used. Further, from time to time, the Centers for Medicare & Medicaid Services, or CMS, the
federal agency responsible for administering the Medicare program, revises the reimbursement amounts paid to health care providers,
including the Medicare Physician Fee Schedule and Hospital Outpatient Prospective Payment System, which may result in reduced
Medicare payments.
We expect to experience pricing pressures in connection with the sale of any of our product candidates due to the trend toward
managed healthcare, the increasing influence of health maintenance organizations, and additional legislative changes. The downward
pressure on healthcare costs in general, particularly prescription medicines, medical devices and surgical procedures and other
treatments, has become very intense. As a result, increasingly high barriers are being erected to the successful commercialization of new
products. Further, the adoption and implementation of any future governmental cost containment or other health reform initiative may
result in additional downward pressure on the price that we may receive for any approved product.
We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or
administrative action in the United States or any other jurisdiction. If we, or any third parties we may engage are slow or unable to adapt
to changes in existing requirements or the adoption of new requirements or policies, or if we or such third parties are not able to maintain
regulatory compliance, our product candidates may lose any regulatory approval that may have been obtained and we may not achieve or
sustain profitability.
If the regulatory authorities in such jurisdictions set prices or make reimbursement criteria that are not commercially attractive
for us or our collaborators, our revenues and the potential profitability of our products in those countries would be negatively affected.
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RISKS RELATED TO REGULATORY APPROVAL OF OUR PRODUCT CANDIDATES AND OTHER LEGAL
COMPLIANCE MATTERS
The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time-consuming and inherently
unpredictable. If we are not able to obtain required regulatory approval for any of our current or future product candidates, our
business may be materially and adversely affected.
The time required to obtain approval or other marketing authorizations by the FDA and comparable foreign authorities is
unpredictable, and it typically takes many years following the commencement of clinical trials and depends upon numerous factors,
including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations, and the type and amount of
clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary
among jurisdictions. We have not obtained regulatory approval for any product candidate, and it is possible that we may never obtain
regulatory approval for any product candidates we may seek to develop in the future. Neither we nor any current or future collaborator is
permitted to market any drug or drug-led combination product candidate in the United States until FDA approval of an NDA is obtained,
and we cannot market such a product candidate in any other country until we obtain regulatory authorization as required under the laws
of such country.
Prior to obtaining approval to commercialize any biologic product candidate in the United States or abroad, we must
demonstrate with substantial evidence from well-controlled clinical trials, and to the satisfaction of the FDA or other foreign regulatory
agencies, that such product candidates are safe and effective for their intended uses. Results from nonclinical or preclinical studies and
clinical trials may be interpreted differently by different regulatory agencies. Even if we believe the nonclinical or clinical data for
MicroPine and MicroLine are promising, such data may be insufficient to support approval by the FDA and other regulatory authorities.
The FDA may also require us to conduct additional nonclinical studies or clinical trials for our products either prior to or after approval,
or it may object to elements of our clinical development programs. This could result in substantial additional costs or delays in the
development of our product candidates.
Our product candidates could fail to receive regulatory approval for many reasons, including the following:
● the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials;
● we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product
candidate is safe and effective for its proposed indication;
● the results of our clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign
regulatory authorities for approval;
● the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from nonclinical studies
or clinical trials;
● we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;
● the FDA or comparable foreign regulatory authorities may fail to approve our manufacturing processes or facilities of
third-party suppliers with which we contract for clinical and commercial supplies of our product candidates; and
● the approval policies or regulations of the FDA or comparable foreign authorities may significantly change in a manner
rendering our clinical data insufficient for approval.
Of the large number of product candidates developed by pharmaceutical manufacturers, only a small percentage successfully
complete the FDA or foreign regulatory approval processes and are commercialized. The lengthy approval and marketing authorization
process as well as the unpredictability of future clinical trial results may result in our failing to obtain regulatory approval and marketing
authorization to market MicroPine, MicroLine, or any of our future product candidates, which would significantly harm our business,
financial condition, results of operations and prospects.
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We have invested a significant portion of our time and financial resources in the development of our product candidates. Our
business is dependent on our ability to successfully complete nonclinical and clinical development of, obtain regulatory approval for,
and, if approved, successfully commercialize such product candidates in a timely manner.
Even if we receive approval of an NDA or foreign marketing application for MicroPine, MicroLine or any future product
candidates, the FDA or the applicable foreign regulatory agency may grant approval or other marketing authorization contingent on the
performance of costly additional clinical trials, including post-marketing clinical trials. The FDA or the applicable foreign regulatory
agency also may approve or authorize for marketing a product candidate for a more limited indication or patient population than we
originally request or may not approve or authorize the labeling that we believe is necessary or desirable for the successful
commercialization of a product candidate. Any delay in obtaining, or inability to obtain, applicable regulatory approval or other
marketing authorization would delay or prevent commercialization of that product candidate and would materially adversely impact our
business and prospects.
In addition, the FDA and other regulatory authorities may change their policies, issue additional regulations or revise existing
regulations, or take other actions, which may prevent or delay approval of our future product candidates on a timely basis. Such policy or
regulatory changes could impose additional requirements upon us that could delay our ability to obtain approvals, increase the costs of
compliance or restrict our ability to maintain any marketing authorizations we may have obtained.
MicroPine and MicroLine may be considered drug/device combinations and the process for obtaining regulatory approval in the
United States will require compliance with complex procedures because concordance between two centers of the FDA (CDRH and
CDER) is necessary for approval of combination products.
We anticipate that our product candidates in development, MicroPine and MicroLine, will be considered drug/device
combination products because, like Mydcombi, they are also pre-filled or co-packaged ophthalmic drug dispenser products intended for
use only with the Optejet dispenser. In October 2021, we received a CRL from the FDA, which in part informed us that pre-filled or co-
packaged ophthalmic drug dispenser products like Mydcombi have been reclassified as drug-device combination products. If MicroPine
or MicroLine are not also designated as drug-device combination products, or if either CDER or CDRH were to institute additional
requirements for the approval of MicroPine or MicroLine, we could be required to complete clinical studies with more patients and over
longer periods of time than is currently anticipated. This would significantly increase the anticipated cost and timeline to completion of
MicroPine or MicroLine’s development and require us to raise additional funds. The FDA may determine that the results of our
completed clinical trials are not sufficiently robust or convincing and require additional clinical and/or nonclinical studies prior to
approval of MicroPine or MicroLine. The impact of either a change in the lead FDA review center or the imposition of additional,
currently unanticipated requirements for approval could be significant to us and have a material adverse effect on the prospects for
developing MicroPine or MicroLine, as well as on our business and our financial condition.
If we receive regulatory approval for any of our current or future product candidates, we will be subject to ongoing regulatory
obligations and continued regulatory review, which may result in significant additional expense. Additionally, our product
candidates, if approved, could be subject to post-market study requirements, marketing and labeling restrictions, and even recall or
market withdrawal if unanticipated safety issues are discovered following approval. In addition, we may be subject to penalties or
other enforcement action if we fail to comply with regulatory requirements.
If the FDA or a comparable foreign regulatory authority approves any of our current or future product candidates, the
manufacturing processes, labeling, packaging, distribution, storage, advertising, promotion, import, export, recordkeeping, monitoring,
and reporting of our product will be subject to extensive and ongoing regulatory requirements. These requirements include submissions
of safety and other post-marketing information and reports, establishment registration and listing, as well as continued compliance with
cGMPs and GCP requirements for any clinical trials that we conduct post-approval. Any regulatory approvals that we receive for our
product candidates may also be subject to limitations on the approved indicated uses for which the product may be marketed or to the
conditions of approval, or contain requirements for potentially costly post-marketing studies, including Phase IV clinical trials, and
surveillance to monitor the safety and efficacy of the product.
The FDA may require a REMS in order to approve our product candidates, which could entail requirements for a medication
guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries
and other risk minimization tools. Later discovery of previously unknown problems with a product, including adverse events of
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unanticipated severity or frequency, or with our third - party manufacturers or manufacturing processes, or failure to comply with
regulatory requirements, may result in, among other things:
● restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market, or voluntary or
mandatory product recalls;
● revision to the labeling, including limitations on approved uses or the addition of additional warnings, contraindications or
other safety information, including boxed warnings;
● mandated modification of promotional materials and labeling and the issuance of corrective information;
● imposition of a REMS, which may include distribution or use restrictions;
● requirements to conduct additional post-market clinical trials to assess the safety of the product;
● fines, warning letters or other regulatory enforcement action;
● refusal by the FDA to approve pending applications or supplements to approved applications filed by us;
● suspension, limitation, or withdrawal of marketing approvals;
● suspension of any of our ongoing clinical trials;
● product seizure or detention, or refusal to permit the import or export of products;
● consent decrees, corporate integrity agreements, debarment, or exclusion from federal health care programs; and
● injunctions or the imposition of civil or criminal penalties;
Any government investigation of alleged violations of law would be expected to require us to expend significant time and
resources in response and could generate adverse publicity. Any failure to comply with ongoing regulatory requirements may
significantly and adversely affect our ability to develop and commercialize our products and our value and operating results would be
adversely affected.
In addition, the FDA’s and other comparable foreign regulatory authorities’ policies may change and additional government
regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. If we are slow or unable to
adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory
compliance, we may lose any marketing approval that we may have obtained, which would adversely affect our business, prospects and
ability to achieve or sustain profitability.
If we obtain FDA approval for any of our current or future product candidates in the United States, and although we have obtained
FDA approval for Mydcombi and clobetasol propionate in the United States, we may never obtain approval for or commercialize
Mydcombi, clobetasol propionate or any of our current or future product candidates in any other jurisdiction, which would limit our
ability to realize their full market potential.
In order to market any products in any particular jurisdiction, we must establish and comply with numerous and varying
regulatory requirements on a country-by-country basis regarding safety and efficacy. Obtaining and maintaining regulatory approval of
our product candidates in one jurisdiction does not guarantee that we will be able to obtain or maintain regulatory approval in any other
jurisdiction, while a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory
approval process in other jurisdictions. For example, approval by the FDA in the United States does not ensure approval by regulatory
authorities in other countries or jurisdictions. However, the failure to obtain approval in one jurisdiction may negatively impact our
ability to obtain approval elsewhere.
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Drug product approval procedures vary among jurisdictions and can involve requirements and administrative review periods
different from, and greater than, those in the United States, including additional preclinical studies or clinical trials as clinical trials
conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. Seeking foreign regulatory approval
could result in difficulties and increased costs for us and require additional preclinical studies or clinical trials which could be costly and
time consuming. In many jurisdictions, a product candidate must be approved for reimbursement before it can be approved for sale in
that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval.
Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of our products in
those countries. Other than Mydcombi and clobetasol propionate in the United States, we do not have any product candidates approved
for sale in any jurisdiction, including in international markets, and we do not have experience in obtaining regulatory approval in
international markets. If we fail to comply with regulatory requirements in international markets or to obtain and maintain required
approvals, or if regulatory approvals in international markets are delayed, our target market will be reduced and our ability to realize the
full market potential of any product we develop will be unrealized.
Regulatory approval by the FDA or comparable foreign regulatory authorities is limited to those specific indications and conditions
for which approval has been granted, and we may be subject to substantial fines, criminal penalties, injunctions, or other
enforcement actions if we are determined to be promoting the use of our products for unapproved or “off-label” uses, or in a manner
inconsistent with the approved labeling, resulting in damage to our reputation and business.
We must comply with requirements concerning advertising and promotion for Mydcombi, clobetasol propionate and any
product candidates for which we obtain marketing approval in the future. Promotional communications with respect to therapeutics are
subject to a variety of legal and regulatory restrictions and continuing review by the FDA or comparable foreign regulatory and
governmental authorities, Department of Justice, Office of Inspector General for the U.S. Department of Health and Human Services,
state attorneys general, members of Congress, and the public. When the FDA or comparable foreign regulatory authorities grant
regulatory approval for a product candidate, the regulatory approval is limited to those specific uses and indications for which a product
is approved. If we are not able to obtain FDA or comparable foreign regulatory authority approval for desired uses or indications for our
current product candidates and any future product candidates, we may not market or promote them for those indications and uses,
referred to as off-label uses, and our business, financial condition, results of operations, stock price and prospects will be materially
harmed. We also must sufficiently substantiate any claims that we make for our products, including claims comparing our products to
other companies’ products, which may require additional nonclinical studies or clinical trials, and must abide by the FDA or a
comparable foreign regulatory or governmental authority’s strict requirements regarding the content of promotion and advertising.
While physicians may choose to prescribe products for uses that are not described in the product’s labeling and for uses that
differ from those tested in clinical trials and approved by the regulatory authorities, we and any third parties engaged on our behalf are
prohibited from marketing and promoting the products for indications and uses that are not specifically approved by the FDA or
comparable foreign regulatory authorities. Regulatory authorities in the United States generally do not restrict or regulate the behavior of
physicians in their choice of treatment within the practice of medicine. Regulatory authorities do, however, restrict communications by
pharmaceutical companies concerning off-label use.
If we are found to have impermissibly promoted Mydcombi, clobetasol propionate or any of our current product candidates and
any future product candidates, we may become subject to significant liability and government sanctions or enforcement actions. The
FDA and other agencies actively enforce the laws and regulations regarding product promotion, particularly those prohibiting the
promotion of off-label uses, and a company that is found to have improperly promoted a product may be subject to significant sanctions.
The federal government has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined
several companies from engaging in off-label promotion. The FDA has also requested that companies enter into consent decrees or
permanent injunctions under which specified promotional conduct is changed or curtailed.
In the United States, engaging in the impermissible promotion of Mydcombi or clobetasol propionate or, for our product
candidates, following approval, for off-label uses can also subject us to false claims and other litigation under federal and state statutes.
These include fraud and abuse and consumer protection laws, which can lead to civil and criminal penalties and fines, agreements with
governmental authorities that materially restrict the manner in which we promote or distribute therapeutic products and conduct our
business. These restrictions could include corporate integrity agreements, suspension or exclusion from participation in federal and state
healthcare programs, and suspension and debarment from government contracts and refusal of orders under existing government
contracts. These False Claims Act lawsuits against manufacturers of drugs and biologics have increased significantly in volume and
breadth, leading to several substantial civil and criminal settlements pertaining to certain sales practices and promoting products for off-
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label uses. In addition, False Claims Act lawsuits may expose manufacturers to follow-on claims by private payors based on fraudulent
marketing practices. This growth in litigation has increased the risk that a pharmaceutical company will have to defend a false claim
action, pay settlement fines or restitution, as well as criminal and civil penalties, agree to comply with burdensome reporting and
compliance obligations, and be excluded from Medicare, Medicaid, or other federal and state healthcare programs. If we do not lawfully
promote our approved products we may become subject to such litigation and, if we do not successfully defend against such actions,
those actions may have a material adverse effect on our business, financial condition, results of operations, stock price and prospects.
In the United States, the promotion of pharmaceutical products are subject to additional FDA requirements and restrictions on
promotional statements. If the FDA determines that our promotional activities violate its regulations and policies pertaining to product
promotion, it could request that we modify our promotional materials or subject us to regulatory or other enforcement actions, including
issuance of warning letters or untitled letters, suspension or withdrawal of an approved product from the market, requests for recalls,
payment of civil fines, disgorgement of money, imposition of operating restrictions, injunctions or criminal prosecution, and other
enforcement actions. Similarly, industry codes in foreign jurisdictions may prohibit companies from engaging in certain promotional
activities and regulatory agencies in various countries may enforce violations of such codes with civil penalties. If we become subject to
regulatory and enforcement actions our business, financial condition, results of operations, stock price and prospects will be materially
harmed.
Furthermore, the use of our products for indications other than those approved by the FDA or comparable foreign regulatory
authorities may not effectively treat such conditions. Any such off-label use of our product candidates could harm our reputation in the
marketplace among physicians and patients. There may also be increased risk of injury to patients if physicians attempt to use our
products for these uses for which they are not approved, which could lead to product liability suits that that might require significant
financial and management resources and that could harm our reputation.
Our relationships with customers, health care providers, physicians, prescribers, purchasers, third-party payors, charitable
organizations and patients are subject to applicable anti-kickback, fraud and abuse and other health care laws and regulations,
which expose us to potential criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and
future earnings.
As a result of our commercialization of Mydcombi, we are (and upon commercialization of our product candidates, will
continue to be) subject to additional health care statutory and regulatory requirements and oversight by federal and state governments in
the United States as well as foreign governments in the jurisdictions in which we conduct our business. Health care providers, physicians
and third-party payors in the United States and elsewhere play a primary role in the recommendation and prescription of
biopharmaceutical products. Arrangements with third-party payors and customers can expose biopharmaceutical manufacturers to
broadly applicable fraud and abuse and other health care laws and regulations, including, without limitation, the federal Anti-Kickback
Statute, or the AKS, and the FCA, which may constrain the business or financial arrangements and relationships through which such
companies sell, market and distribute biopharmaceutical products. In particular, the research of our product candidates, as well as the
promotion, sales and marketing of health care items and services, as well as certain business arrangements in the health care industry, are
subject to extensive laws designed to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may
restrict or prohibit a wide range of pricing, discounting, marketing and promotion, structuring and commission(s), certain customer
incentive programs and other business arrangements generally. Activities subject to these laws also involve the improper use of
information obtained in the course of patient recruitment for clinical trials.
The health care laws that may affect us include: the federal fraud and abuse laws, including the AKS; false claims and civil
monetary penalties laws, including the False Claims Act and Civil Monetary Penalties Law; federal data privacy and security laws,
including HIPAA, as amended by HITECH; and the federal Physician Payments Sunshine Act which requires us to report to CMS
annually any transfers of value made to physicians (defined broadly to include doctors, dentists, optometrists, podiatrists, chiropractors,
and other advanced practice health care professionals), certain non-physician health care practitioners and teaching hospitals as well as
ownership and investment interests held by physicians and their immediate family members. In addition, many states have similar laws
and regulations that may differ from each other and federal law in significant ways, thus complicating compliance efforts. Moreover,
several states require biopharmaceutical companies to comply with the biopharmaceutical industry’s voluntary compliance guidelines
and the relevant compliance guidance promulgated by the federal government and may require manufacturers to report information
related to payments and other transfers of value to physicians and other health care providers or marketing expenditures. Additionally,
some state and local laws require the registration of biopharmaceutical sales representatives in the jurisdiction.
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The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of health
care reform, especially in light of the lack of applicable precedent and regulations. Ensuring business arrangements comply with
applicable health care laws, as well as responding to possible investigations by government authorities, can be time- and resource-
consuming and can divert a company’s attention from other aspects of its business.
It is possible that governmental and enforcement authorities will conclude that our business practices may not comply with
current or future statutes, regulations or case law interpreting applicable fraud and abuse or other health care laws and regulations. If any
such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a
significant impact on our business, including the imposition of significant civil, criminal and administrative penalties, damages, fines,
disgorgement, imprisonment, reputational harm, possible exclusion from participation in federal and state funded health care programs,
contractual damages and the curtailment or restricting of our operations, as well as additional reporting obligations and oversight if we
become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws. Further,
if any of the physicians or other health care providers or entities with whom we expect to do business is found not to be in compliance
with applicable laws, they may be subject to significant criminal, civil or administrative sanctions, including exclusions from government
funded health care programs. Any action for violation of these laws, even if successfully defended, could cause a biopharmaceutical
manufacturer to incur significant legal expenses and divert management’s attention from the operation of the business. Therefore, even if
we are successful in defending against any such actions that may be brought against us, our business may be impaired. Prohibitions or
restrictions on sales or withdrawal of future marketed products could materially affect business in an adverse way.
Healthcare legislative reform measures may have a material adverse effect on our financial condition or results of operations.
In the United States, there have been and continue to be a number of legislative initiatives to contain healthcare costs. For
example, in March 2010, the Patient Protection and Affordable Care Act, or the ACA, was passed. The ACA was a sweeping law
intended to broaden access to health insurance, reduce or constrain the growth of health care spending, enhance remedies against fraud
and abuse, add new transparency requirements for health care and health insurance industries, impose new taxes and fees on the health
industry and impose additional health policy reforms. As another example, the 2021 Consolidated Appropriations Act, which was signed
into law on December 27, 2020, incorporated extensive health care provisions and amendments to existing laws, including a requirement
that all manufacturers of drugs and biological products covered under Medicare Part B report the product’s average sales price to the
Department of Health and Human Services, or HHS, as of January 1, 2022, as well as several changes to the statutes governing FDA’s
drug and biologic programs.
Since its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA, and as a result, certain
sections of the ACA have not been fully implemented or have been effectively repealed through Executive Orders and/or executive
agency actions. However, following several years of litigation in the federal courts, in June 2021, the U.S. Supreme Court upheld the
ACA when it dismissed a legal challenge to the ACA’s constitutionality. Further legislative and regulatory changes under the ACA
remain possible, but it is unknown what form any such changes or any law would take, and how or whether it may affect the
biopharmaceutical industry as a whole or our business in the future. We expect that changes or additions to the ACA, the Medicare and
Medicaid programs, such as changes stemming from other healthcare reform measures, especially with regard to healthcare access,
financing or other legislation in individual states, could have a material adverse effect on the health care industry in the United States.
Further, over the past several years there has been heightened governmental scrutiny over the manner in which
biopharmaceutical manufacturers set prices for their marketed products, which has resulted in several U.S. Congressional inquiries and
proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review
the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for
drug products. The probability of success of these newly announced policies, many of which have been subjected to legal challenge in
the federal court system, and their potential impact on the U.S. prescription drug marketplace is unknown. There are likely to be
continued political and legal challenges associated with implementing these reforms as they are currently envisioned. For example, in
July 2021, President Biden issued a sweeping executive order on promoting competition in the American economy that includes several
mandates pertaining to the pharmaceutical and health care insurance industries, and called on HHS to release a comprehensive plan to
combat high prescription drug prices. The drug pricing plan released by HHS in September 2021 in response to the executive order
makes clear that the Biden Administration supports aggressive action to address rising drug prices, including allowing HHS to negotiate
the cost of Medicare Part B and D drugs, but such significant changes will require either new legislation to be passed by Congress or
time-consuming administrative actions. Accordingly, there remains a large amount of uncertainty regarding the federal government’s
approach to making pharmaceutical treatment costs more affordable for patients.
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In August 2022, President Biden signed into the law the Inflation Reduction Act of 2022, or the IRA. Among other things, the
IRA has multiple provisions that may impact the prices of drug products that are both sold into the Medicare program and throughout the
United States. Starting in 2023, a manufacturer of a drug or biological product covered by Medicare Parts B or D must pay a rebate to the
federal government if the product’s price increases faster than the rate of inflation. This calculation is made on a drug product by drug
product basis and the amount of the rebate owed to the federal government is directly dependent on the volume of a drug product that is
paid for by Medicare Parts B or D. Additionally, starting in payment year 2026, CMS will negotiate drug prices annually for a select
number of single source Part D drugs without generic or biosimilar competition. CMS will also negotiate drug prices for a select number
of Part B drugs starting for payment year 2028. If a drug product is selected by CMS for negotiation, it is expected that the revenue
generated from such drug will decrease. The effect of the Inflation Reduction Act of 2022 on our business and the healthcare industry in
general is not yet known. There remains a large amount of uncertainty regarding the federal government’s approach to making
pharmaceutical treatment costs more affordable for patients.
At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control
pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain
product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from
other countries and bulk purchasing. For example, California requires pharmaceutical manufacturers to notify certain purchasers,
including health insurers and government health plans at least 60 days before any scheduled increase in the wholesale acquisition cost, or
WAC, of their product if the increase exceeds 16%, and further requires pharmaceutical manufacturers to explain whether a change or
improvement in the product necessitates such an increase. Similarly, Vermont requires pharmaceutical manufacturers to disclose price
information on certain prescription drugs, and to provide notification to the state if introducing a new drug with a WAC in excess of the
Medicare Part D specialty drug threshold. In December 2020, the U.S. Supreme Court also held unanimously that federal law does not
preempt the states’ ability to regulate pharmaceutical benefit managers, or PBMs, and other members of the healthcare and
pharmaceutical supply chain, an important decision that may lead to further and more aggressive efforts by states in this area. The
Federal Trade Commission in mid-2022 also launched sweeping investigations into the practices of the PBM industry that could lead to
additional federal and state legislative or regulatory proposals targeting such entities’ operations, pharmacy networks, or financial
arrangements. Significant efforts to change the PBM industry as it currently exists in the United States may affect the entire
pharmaceutical supply chain and the business of other stakeholders, including biopharmaceutical developers like us. Legally mandated
price controls on payment amounts by third-party payors or other restrictions could harm our business, results of operations, financial
condition and prospects. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to
determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs.
This could reduce the ultimate demand for our product candidates, if approved, or put pressure on our product pricing, which could
negatively affect our business, results of operations, financial condition and prospects.
We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or
administrative or executive action. We expect that additional federal and state health care reform measures will be adopted in the future,
any of which could limit the amounts that federal and state governments will pay for health care products and services, which could
result in limited coverage and reimbursement and reduced demand for our products, once approved, or additional pricing pressures.
We are subject to anti-corruption laws, as well as export control laws, customs laws, sanctions laws and other laws governing our
operations. If we fail to comply with these laws, we could be subject to civil or criminal penalties, other remedial measures and legal
expenses, be precluded from developing manufacturing and selling products outside the United States or be required to develop and
implement costly compliance programs, which could adversely affect our business, results of operations and financial condition.
We are subject to anti-corruption laws, as well as export control laws, customs laws, sanctions laws and other laws governing
our operations. If we fail to comply with these laws, we could be subject to civil or criminal penalties, other remedial measures and legal
expenses, be precluded from developing manufacturing and selling products outside the United States or be required to develop and
implement costly compliance programs, which could adversely affect our business, results of operations and financial condition.
Our operations are subject to anti-corruption laws, including the United States Foreign Corrupt Practices Act, or FCPA, and the
United Kingdom Bribery Act 2010, or Bribery Act, which apply wherever we do business around the world. We may also become
subject to local anti-corruption laws in countries where we may do business in the future, such as Canada’s Corruption of Foreign Public
Officials Act, the Criminal Law and Anti-unfair Competition Law of the People’s Republic of China, the Hong Kong Prevention of
Bribery Ordinance, and the Act on Preventing Bribery of Foreign Public Officials in International Business Transactions, or OECD Anti-
Bribery Convention, enacted by the Organisation for Economic Co-operation and Development, and adopted by South Korea along with
more than 40 other countries, and which is designed to criminalize bribery of public officials in connection with international
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business transactions. The Bribery Act, FCPA, the OECD Anti-Bribery Convention, and similar international treaties and various
countries’ local anti-corruption laws, referred to as Anti-Corruption Laws, generally prohibit us, our officers, and our employees and
intermediaries from bribing, being bribed or making other prohibited payments to government officials or other persons to obtain or
retain business or gain some other business advantage. Compliance with the FCPA, for example, is expensive and difficult, particularly in
countries in which corruption is a recognized problem. In addition, the FCPA presents particular challenges in the pharmaceutical
industry, because, in many countries, hospitals are operated by the government, and doctors and other hospital employees are considered
foreign officials. Certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper
payments to government officials and have led to FCPA enforcement actions.
We may in the future operate in jurisdictions that pose a high risk of potential violations of Anti-Corruption Laws, and we may
participate in collaborations and relationships with third parties whose actions could potentially subject us to liability under Anti-
Corruption Laws. In addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our international
operations might be subject or the manner in which existing laws might be administered or interpreted. As we expand our operations
outside of the United States, we will need to dedicate additional resources to comply with numerous laws and regulations in each
jurisdiction in which we plan to operate.
We are also subject to other laws and regulations governing our potential international operations, including regulations
administered by the governments of the United Kingdom and the United States, and authorities in the European Union, including
applicable export control regulations, economic sanctions on countries and persons, customs requirements and currency exchange
regulations, collectively referred to as the Trade Control laws. In addition, various laws, regulations and executive orders also restrict the
use and dissemination outside of the United States, or the sharing with certain non-United States nationals, of information classified for
national security purposes, as well as certain products and technical data relating to those products. If we expand our presence outside of
the United States, it will require us to dedicate additional resources to comply with these laws, and these laws may preclude us from
developing, manufacturing, or selling certain products and product candidates outside of the United States, which could limit our growth
potential and increase our development costs.
We might not be completely effective in ensuring our compliance with all applicable Anti-Corruption Laws or other legal
requirements, including Trade Control laws. If we are not in compliance with Anti-Corruption Laws or Trade Control laws, we may be
subject to criminal and civil penalties, disgorgement and other sanctions and remedial measures, and legal expenses, which could have an
adverse impact on our business, financial condition, results of operations and liquidity. The SEC also may suspend or bar issuers from
trading securities on United States exchanges for violations of the FCPA’s accounting provisions. Any investigation of any potential
violations of Anti-Corruption Laws or Trade Control laws by U.K., U.S. or other authorities could also have an adverse impact on our
reputation, our business, results of operations and financial condition.
Inadequate funding for the FDA, the SEC and other government agencies could hinder their ability to hire and retain key leadership
and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise
prevent those agencies from performing normal business functions on which the operation of our business may rely, which could
negatively impact our business.
The ability of the FDA to review and approve new products can be affected by a variety of factors, including government
budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and
policy changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of the
SEC and other government agencies on which our operations may rely, including those that fund research and development activities is
subject to the political process, which is inherently fluid and unpredictable.
Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by
necessary government agencies, which would adversely affect our business. For example, over the last several years, the U.S.
government has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical
FDA, SEC and other government employees and stop critical activities. The coronavirus pandemic has also adversely affected the
operations of necessary government agencies. If a prolonged government shutdown occurs, it could significantly impact the ability of the
FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Further,
future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly
capitalize and continue our operations. In addition, competing demands from other companies or issues can affect the timeliness for
which the FDA can review and process our regulatory submissions.
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RISKS RELATED TO OUR BUSINESS OPERATIONS AND MANAGING GROWTH
We are highly dependent on the services of our senior management team, including our Chief Executive Officer, and if we are not
able to retain these members of our management team or recruit and retain additional management, clinical, scientific and sales
personnel, our business will be harmed.
We are highly dependent on our senior management team, including our Chief Executive Officer. The employment agreements
we have with our executive officers do not prevent such persons from terminating their employment with us at any time. The loss of the
services of any of these persons could impede the achievement of our research, development and commercialization objectives.
In addition, we are dependent on our continued ability to attract, retain and motivate highly qualified additional management,
clinical, scientific, and sales personnel. If we are not able to retain our management and to attract, on acceptable terms, additional
qualified personnel necessary for the continued development of our business and commercialization of our product candidates, we might
not be able to sustain our operations or grow.
We might not be able to attract or retain qualified personnel in the future due to the intense competition for qualified personnel
among biotechnology, pharmaceutical and other businesses. Many of the other medical technology companies that we compete against
for qualified personnel and consultants have greater financial and other resources, different risk profiles and a longer history in the
industry than we do. They also may provide more diverse opportunities and better chances for career advancement. Some of these
characteristics may be more appealing to high-quality candidates and consultants than what we have to offer. If we are unable to continue
to attract, retain and motivate high-quality personnel and consultants to accomplish our business objectives, the rate and success at which
we can discover and develop drug candidates and our business will be limited and we may experience constraints on our development
objectives.
Our future performance will also depend, in part, on our ability to successfully integrate newly hired executive officers into our
management team and our ability to develop an effective working relationship among senior management.
We have limited corporate infrastructure and may experience difficulties in managing growth.
As of March 15, 2024, we had only 57 full time employees and we rely on third-party contractors for the provision of
professional and other services. As our development and commercialization plans and strategies develop, we expect to need additional
managerial, operational, sales, marketing, financial, legal and other resources. Our management may need to divert a disproportionate
amount of its attention away from our day-to-day operations and devote a substantial amount of time to managing these growth activities.
We might not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure,
operational inefficiencies, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Our
expected growth could require significant capital expenditures and may divert financial resources from other projects, such as the
development of our current and potential future drug candidates. If our management is unable to effectively manage our growth, our
expenses may increase more than expected, our ability to generate and grow revenue could be reduced and we might not be able to
implement our business strategy. Our future financial performance, our ability to successfully commercialize Mydcombi, clobetasol
propionate and our drug candidates, develop a scalable infrastructure and compete effectively will depend, in part, on our ability to
effectively manage any future growth.
We rely upon information technology and any failure, inadequacy, interruption or security lapse of that technology, including any
cyber security incidents, could harm our ability to operate our business effectively.
In the ordinary course of our business, we collect and store sensitive data and intellectual property and proprietary business
information owned or controlled by ourselves or our customers. This data encompasses a wide variety of business-critical information
including research and development information, operational information, commercial information, and business and financial
information. We face four primary risks relative to protecting this critical information: loss of access; inappropriate disclosure;
inappropriate modification; and inadequate monitoring of our controls over the first three risks.
The secure processing, storage, maintenance, and transmission of this critical information is vital to our operations and business
strategy, and we devote significant resources to protecting such information. Although we take measures to protect sensitive information
from unauthorized access or disclosure, our information technology and infrastructure may be vulnerable to attacks by hackers or
viruses, breaches, interruptions due to employee error, malfeasance, faulty password management, lapses in compliance with privacy and
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security mandates, or other disruptions. The risk of a security breach or disruption, particularly through cyber-attack or cyber intrusion,
including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and
sophistication of attempted attacks and intrusions from around the world have increased. Our IT networks and related systems are
essential to the operation of our business and our ability to perform day-to-day operations.. For example, the loss of clinical trial data
from completed or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase
our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of or damage to our
data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and further
development of our product candidates could be delayed. Although we make efforts to maintain the security and integrity of these types
of IT networks and related systems, and we have implemented various measures to manage the risk of a security breach or disruption,
there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would
not be successful or damaging. Our information technology systems may have vulnerabilities, and we may not have the resources or
technical sophistication to anticipate or prevent rapidly evolving types of cyberattacks, such as ransomware attacks. A significant cyber
incident, including system failure, security breach, disruption by malware or other damage, could interrupt or delay our operations, result
in a violation of applicable cybersecurity and privacy and other laws, damage our reputation, cause a loss of customers or expose
sensitive customer data, or give rise to monetary fines and other penalties, which could be significant.
Any such breach or interruption could compromise our networks and the information stored there could be accessed by
unauthorized parties, publicly disclosed, lost, or stolen. Third parties may attempt to fraudulently induce employees or other persons into
disclosing usernames, passwords or other sensitive information, which may in turn be used to access our information systems, commit
identity theft or carry out other unauthorized or illegal activities. Any such breach could compromise our networks and the information
stored there could be accessed, publicly disclosed, lost or stolen. We engage third-party vendors and service providers to store and
otherwise process some of our data, including sensitive and personal information. Our vendors and service providers may also be the
targets of the risks described above, including cyberattacks, malicious software, phishing schemes, and fraud. Our ability to monitor our
vendors and service providers’ data security is limited, and, in any event, third parties may be able to circumvent those security
measures, resulting in the unauthorized access to, misuse, disclosure, loss or destruction of our data, including sensitive and personal
information, and disruption of our or third-party service providers’ systems. We and our third-party service providers may face
difficulties in identifying, or promptly responding to, potential security breaches and other instances of unauthorized access to, or
disclosure or other loss of, information. Any hacking or other attack on our or our third-party service providers’ or vendors’ systems, and
any unauthorized access to, or disclosure or other loss of, information suffered by us or our third-party service providers or vendors, or
the perception that any of these have occurred, could result in legal claims or proceedings, loss of intellectual property, liability under
laws that protect the privacy of personal information, negative publicity, disruption of our operations and damage to our reputation,
which could divert our management’s attention from the operation of our business and materially and adversely affect our business,
revenues and competitive position. Moreover, we may need to increase our efforts to train our personnel to detect and defend against
cyber- or phishing-attacks, which are becoming more sophisticated and frequent, and we may need to implement additional protective
measures to reduce the risk of potential security breaches, which could cause us to incur significant additional expenses.
Any such security breach or interruption, as well as any action by us or our employees or contractors that might be inconsistent
with the rapidly evolving data privacy and security laws and regulations applicable within the United States and elsewhere where we
conduct business, could result in enforcement actions by U.S. states, the U.S. federal government or foreign governments, liability or
sanctions under data privacy laws that protect personally identifiable information, regulatory penalties, other legal proceedings such as
but not limited to private litigation, the incurrence of significant remediation costs, disruptions to our development programs, business
operations and collaborations, diversion of management efforts and damage to our reputation, which could harm our business and
operations. Because of the rapidly moving nature of technology and the increasing sophistication of cybersecurity threats, our measures
to prevent, respond to and minimize such risks may be unsuccessful.
In addition, our insurance may be insufficient to cover our losses resulting from cyber-attacks, breaches, or other interruptions,
and any incidents may result in loss of, or increased costs of, such insurance. The successful assertion of one or more large claims against
us that exceed available insurance coverage, the occurrence of changes in our insurance policies, including premium increases or the
imposition of large deductible or co-insurance requirements, or denials of coverage, could have a material adverse effect on our business,
including our financial condition, results of operations and reputation.
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Our employees, principal investigators, consultants and commercial partners may engage in misconduct or other improper activities,
including non-compliance with regulatory standards and requirements and insider trading.
We are exposed to the risk of fraud or other misconduct by our employees, principal investigators, consultants and commercial
partners. Misconduct by these parties could include intentional failures to comply with the regulations of the FDA and other comparable
foreign regulatory authorities, provide accurate information to the FDA and other comparable foreign regulatory authorities, comply with
healthcare fraud and abuse laws and regulations in the United States and in other jurisdictions, report financial information or data
accurately or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry
are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices.
These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission,
customer incentive programs and other business arrangements. Such misconduct could also involve the improper use of information
obtained in the course of clinical trials, which could result in regulatory sanctions and cause serious harm to our reputation. It is not
always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be
effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or
lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us those actions
could have a significant impact on our business, including the imposition of significant civil, criminal and administrative penalties,
damages, fines, disgorgement, imprisonment, exclusion from government funded healthcare programs, such as Medicare and Medicaid,
contractual damages, reputational harm, diminished profits and future earnings, additional reporting obligations and oversight if subject
to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, and the curtailment or
restructuring of our operations.
RISKS RELATED TO OUR DEPENDENCE ON THIRD PARTIES
We rely on third parties to conduct, supervise, and monitor our clinical trials and perform some of our research and preclinical
studies. If these third parties do not satisfactorily carry out their contractual duties or fail to meet expected deadlines, our
development programs may be delayed or subject to increased costs, each of which may have an adverse effect on our business and
prospects.
We do not have the ability to conduct all aspects of our preclinical testing or clinical trials ourselves. As a result, we are and
expect to remain dependent on third parties to conduct our current and future preclinical studies and clinical trials. CROs that manage our
preclinical studies and clinical trials as well as clinical investigators, including in investigator-initiated clinical trials, and consultants play
a significant role in the conduct of our preclinical studies and clinical trials and the subsequent collection and analysis of data. The timing
of the initiation and completion of these studies and trials will therefore be partially controlled by such third parties and may result in
delays to our development programs. Nevertheless, we are responsible for ensuring that each of our preclinical studies and clinical trials
is conducted in accordance with the applicable protocol, legal requirements, and scientific standards, and our reliance on the CROs and
other third parties does not relieve us of our regulatory responsibilities. We and our CROs are required to comply with GLP and GCP
requirements, which are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities for all of our
product candidates in clinical development. Regulatory authorities enforce these GLP and GCP requirements through periodic
inspections of preclinical study sites, trial sponsors, clinical trial investigators and clinical trial sites. If we or any of our CROs or clinical
trial sites, including clinical trial sites in investigator-initiated clinical trials, fail to comply with applicable GLP or GCP requirements,
the data generated in our preclinical studies and clinical trials may be deemed unreliable, and the FDA or comparable foreign regulatory
authorities may require us to perform additional preclinical or clinical trials before approving our marketing applications. In addition, our
clinical trials must be conducted with product produced under cGMP regulations. Our failure to comply with these regulations may
require us to stop and/or repeat clinical trials, which would delay the marketing approval process. We also are required to register
ongoing clinical trials and post the results of completed clinical trials on a government-sponsored database, clinicaltrials.gov, within
specified timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.
There is no guarantee that any such CROs, clinical trial investigators or other third parties on which we rely will devote
adequate time and resources to our development activities or perform as contractually required. If any of these third parties fails to meet
expected deadlines, adhere to our clinical protocols or comply with applicable regulatory requirements, otherwise performs in a
substandard manner, or terminates its engagement with us, the timelines for our development programs may be extended or delayed or
our development activities may be suspended or terminated. If any of our clinical trial sites terminates for any reason, we may experience
the loss of follow-up information on subjects enrolled in such clinical trials unless we are able to transfer those subjects to another
qualified clinical trial site, which may be difficult or impossible. In addition, clinical trial investigators for our clinical trials or
investigator-initiated clinical trials may serve as scientific advisors or consultants to us from time to time and may receive cash or equity
compensation in connection with such services. If these relationships and any related compensation result in perceived or actual conflicts
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of interest, or the FDA or any comparable foreign regulatory authority concludes that the financial relationship may have affected the
interpretation of the trial, the integrity of the data generated at the applicable clinical trial site may be questioned and the utility of the
clinical trial itself may be jeopardized, which could result in the delay or rejection of any marketing application we submit by the FDA or
any comparable foreign regulatory authority. Any such delay or rejection could prevent us from commercializing our product candidates.
If any of our relationships with these third parties terminate, we may not be able to enter into arrangements with alternative third
parties on commercially reasonable terms, or at all. Further, under certain circumstances, these third parties may terminate their
agreements with us upon prior written notice. Entering into arrangements with alternative CROs, clinical trial investigators or other third
parties involves additional cost and requires management focus and time, in addition to requiring a transition period when a new CRO,
clinical trial investigator or other third party begins work. If third parties do not successfully carry out their contractual duties or
obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain are
compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, any clinical trials such
third parties are associated with may be extended, delayed or terminated, and we may not be able to obtain marketing approval for or
successfully commercialize our product candidates. As a result, we believe that our financial results and the commercial prospects for our
product candidates in the subject indication would be harmed, our costs could increase and our ability to generate revenue could be
delayed.
Furthermore, any CROs we contract with or clinical investigators that conduct investigator-initiated studies involving our
product candidates may also have relationships with other entities, some of which may be our competitors. If these third parties do not
successfully carry out their contractual duties, meet expected deadlines or conduct the clinical trials in accordance with regulatory
requirements or the corresponding protocols, as applicable, we will not be able to obtain, or may be delayed in obtaining, marketing
approvals for our product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our
products.
We may encounter delays in the manufacturing of the second generation Optejet device, including as a result of our reliance on third
parties for manufacturing activities, and this may cause delays in the commercialization of our products and our product candidatess.
Any such delays would increase the risk that we will not have sufficient quantities of our product candidates or such quantities at an
acceptable cost, which could delay, prevent or impair our development and commercialization efforts.
We do not currently operate and might not be able to timely implement adequate internal manufacturing facilities for all of the
components necessary for commercial production of Mydcombi. If we are unable to establish adequate manufacturing processes
internally or to reach and maintain agreements with third parties to help us with manufacturing, our commercialization activities would
be delayed. Reliance on third-party providers may expose us to more risk than if we were to manufacture our product candidates
ourselves. We do not control the manufacturing processes of the third-party suppliers we contract with and are dependent on those third
parties for the production of components of our product candidates in accordance with relevant applicable regulations, such as cGMP,
which includes, among other things, quality control, quality assurance and the maintenance of records and documentation. In complying
with the manufacturing regulations of the FDA and other comparable foreign regulatory authorities, we and our third-party suppliers
must spend significant time, money and effort in the areas of design and development, testing, production, record-keeping and quality
control to assure that the products meet applicable specifications and other regulatory requirements. If either we or our third-party
suppliers fail to comply with these requirements, we may be subject to regulatory enforcement action, including the seizure of products
and shutting down of production.
We do not currently have any agreements with third-party suppliers for the long-term commercial supply of components for
Mydcombi. We may be unable to conclude agreements for commercial supply with a sufficient number of suppliers or may be unable to
do so on acceptable terms. If we are unable to reach acceptable agreements with a sufficient number of suppliers of materials, our
commercialization activities will be delayed and our ability to implement our business plan will be compromised.
Our manufacturing process is complicated and expensive and it requires months of advance planning. We rely on a limited
number of manufacturers for our current supply of Mydcombi for commercialization. If we were unable to acquire the necessary amount
of deliverables to meet market demand, our ability to commercialize could be delayed substantially.
Additionally, we do not currently operate and might not be able to timely implement adequate internal manufacturing facilities
for all of the components necessary for clinical or commercial production of our product candidates. In addition, we rely on, and expect
to continue to rely on, a number of third parties for the supply of parts, formulations, active pharmaceutical ingredients, and other
materials required for our research and development activities. If we are unable to establish adequate manufacturing processes internally
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or to reach and maintain agreements with third parties to help us, our research and development, manufacturing, and commercialization
activities would be delayed.
We rely on third parties to provide the materials required for our research and development activities. Reliance on third-party
providers may expose us to more risk than if we were to manufacture our product candidates ourselves. We do not control the
manufacturing processes of the third-party suppliers we contract with and are dependent on those third parties for the production of
components of our product candidates in accordance with relevant applicable regulations, such as cGMP, which includes, among other
things, quality control, quality assurance and the maintenance of records and documentation. In complying with the manufacturing
regulations of the FDA and other comparable foreign regulatory authorities, we and our third-party suppliers must spend significant time,
money and effort in the areas of design and development, testing, production, record-keeping and quality control to assure that the
products meet applicable specifications and other regulatory requirements. If either we or our third-party suppliers fail to comply with
these requirements, we may be subject to regulatory enforcement action, including the seizure of products and shutting down of
production.
We do not currently have any agreements with third-party suppliers for the long-term commercial supply of components for our
product candidates. We may be unable to conclude agreements for commercial supply with a sufficient number of suppliers or may be
unable to do so on acceptable terms. If we are unable to reach acceptable agreements with a sufficient number of suppliers of materials,
our research and development activities will be delayed and our ability to implement our business plan will be compromised.
Our manufacturing process is complicated and expensive and it requires months of advance planning. We rely on a limited
number of manufacturers for our current supply of product candidates and may need to rely on them extensively for adequate supply of
our products during commercialization. If we were unable to acquire the necessary amount of deliverables to complete our clinical trials
and ultimately commercialize our products, our progress could be delayed substantially.
Even if we are able to establish and maintain agreements with third-party manufacturers, reliance on third-party manufacturers
entails additional risks, including:
● reliance on the third party for regulatory, compliance and quality assurance;
● the possible breach of the manufacturing agreement by the third party;
● the possible misappropriation of our proprietary information, including our trade secrets and know-how; and
● the possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us.
We or our third-party suppliers may encounter shortages in the raw materials or active pharmaceutical ingredients necessary to
produce Mydcombi in sufficient quantities for commercialization or to meet an increase in demand, or, for our unapproved clinical
products, our clinical trials, as a result of capacity constraints or delays or disruptions in the market for the raw materials or active
pharmaceutical ingredients, including shortages caused by the purchase of such raw materials or active pharmaceutical ingredients by our
competitors or others. The failure by us or our third-party suppliers to obtain the raw materials or active pharmaceutical ingredients
necessary to manufacture sufficient quantities of Mydcombi and our product candidates may have a material adverse effect on our
business.
Our third-party suppliers may be subject to inspection and approval by regulatory authorities. Our third-party suppliers may not
be able to comply with cGMP regulations or similar regulatory requirements outside of the United States. Our failure, or the failure of
our third-party suppliers, to comply with applicable regulations could result in regulatory actions, such as the issuance of FDA Form 483
notices of observations, warning letters or sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties,
delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of Mydcombi and product candidates or drugs,
operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our products. If any of
our third-party suppliers fails to comply with cGMP or other applicable manufacturing regulations, our ability to develop and
commercialize Mydcombi and our product candidates could suffer significant interruptions.
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Any disruption, such as a fire, natural hazards or vandalism at our third-party suppliers could significantly interrupt our
manufacturing capability. We currently do not have alternative production plans in place or disaster-recovery facilities available. In case
of a disruption, we will have to establish alternative component supply sources. This would require substantial capital on our part, which
we may not be able to obtain on commercially acceptable terms or at all. Additionally, we would likely experience months of
manufacturing delays as we build facilities or locate alternative suppliers and seek and obtain necessary regulatory approvals. If this
occurs, we will be unable to satisfy manufacturing needs on a timely basis, if at all. If changes to third-party suppliers occur, then there
also may be changes to manufacturing processes inherent in the setup of new operations for our product candidates and any products that
may obtain approval in the future. Any such changes could require the conduct of bridging studies before we can use any materials
produced at new facilities or under new processes in clinical trials or, for any products reaching approval, in our commercial supply.
Further, business interruption insurance may not adequately compensate us for any losses that may occur and we would have to bear the
additional cost of any disruption, such as loss of potential sales of Mydcombi. For these reasons, a significant disruptive event of any
third-party suppliers could have drastic consequences, including placing our financial stability at risk.
Mydcombi, clobetasol propionate and our product candidates and any drugs that we may develop may compete with other
product candidates and drugs for access to manufacturing facilities. There are no assurances we would be able to enter into similar
commercial arrangements with other manufacturers that operate under cGMP regulations and other applicable regulatory requirements
and that might be capable of manufacturing for us. Any performance failure on the part of our existing or future suppliers could delay
clinical development or marketing approval.
If we were to experience an unexpected loss of supply of or if any supplier were unable to meet our clinical or commercial
demand for Mydcombi, clobetasol propionate or any of our product candidates, we could experience delays in our planned clinical
studies or commercialization. For example, the COVID-19 pandemic may impact our ability to procure sufficient supplies for the
development of our current and future product candidates, and the extent of such impacts will depend on the severity and duration of the
spread of the virus and the actions undertaken to contain COVID-19 or treat its effects. We could be unable to find alternative suppliers
of acceptable quality and experience that can produce and supply appropriate volumes at an acceptable cost or on favorable terms.
Moreover, our suppliers are often subject to strict manufacturing requirements and rigorous testing requirements, which could limit or
delay production. The long transition periods necessary to switch manufacturers and suppliers, if necessary, would significantly delay
commercialization of Mydcombi, clobetasol propionate and any other product candidates that reach approval, and our clinical trials,
which would materially adversely affect our business, financial condition and results of operation.
If we, our service providers or our third-party manufacturers fail to comply with environmental, health and safety laws and
regulations, we could become subject to fines or penalties or incur costs that could harm our business.
If we, our service providers, or any third-party manufacturers fail to comply with laws regulating the protection of the
environment and health and human safety, we could be subject to enforcement actions and our business prospects could be adversely
affected.
Our commercialization and research and development activities, and the research and development activities of our service
providers and third-party manufacturers, may involve the use of hazardous materials and chemicals or the maintenance of various
flammable and toxic chemicals. Failure to adequately handle and dispose of these materials could lead to liabilities for resulting
damages, which could be substantial. We also may be subject to numerous environmental, health and workplace safety laws and
regulations, including those governing laboratory procedures, exposure to blood-home pathogens and the handling of bio-hazardous
materials.
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If we, our service providers, or any third-party manufacturers fail to comply with applicable federal, state or foreign laws or
regulations, we could be subject to enforcement actions, which could adversely affect our ability to develop, market and sell our product
candidates successfully and could harm our reputation and lead to reduced acceptance of our product candidates. These enforcement
actions may include:
● restrictions on, or prohibitions against, marketing our products or our product candidates;
● restrictions on importation of our products or our product candidates;
● suspension of review or refusal to approve new or pending applications;
● suspension or withdrawal of product approvals;
● product seizures;
● injunctions; and
● civil and criminal penalties and fines.
RISKS RELATED TO OUR INTELLECTUAL PROPERTY AND POTENTIAL LITIGATION
Our success depends on our ability to protect our intellectual property and proprietary technology.
Our success depends in large part on our ability to obtain and maintain patent, trade secret and other intellectual property
protection in the United States and other countries with respect to our proprietary product candidates. If we do not adequately protect our
intellectual property rights, competitors may be able to erode, negate or preempt any competitive advantage we may have, which could
harm our business and ability to achieve profitability. To protect our proprietary position, we file patent applications in the United States
and abroad related to our novel product candidates that are important to our business. The patent application and approval process is
expensive and time-consuming and we might not be able to file and prosecute all necessary or desirable patent applications at a
reasonable cost or in a timely manner.
If the scope of the patent protection we obtain is not sufficiently broad, we might not be able to prevent others from developing
and commercializing technology and products similar or identical to ours. The degree of patent protection we require to successfully
compete in the marketplace may be unavailable or severely limited in some cases and might not adequately protect our rights or permit
us to gain or keep any competitive advantage. Although we enter into non-disclosure and confidentiality agreements with parties who
have access to confidential or patentable aspects of our research and development output, such as our employees, contractors and other
third parties, any of these parties may breach the agreements and disclose such output before a patent application is filed, thereby
jeopardizing our ability to seek patent protection. In addition, publications of discoveries in the scientific literature often lag behind the
actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after
filing, or in some cases not at all. Therefore, we cannot be certain that we were the first to make the inventions claimed in our patents or
pending patent applications, or that we were the first to file for patent protection of such inventions.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and
factual questions, and has been the subject of much litigation in recent years. As a result, the issuance, scope, validity, enforceability, and
commercial value of our patent rights may be uncertain. Our pending and future patent applications might not result in patents being
issued which protect our technology or product candidates or which effectively prevent others from commercializing competitive
technologies and product candidates. In addition, the coverage claimed in a patent application can be significantly reduced before the
patent is issued, and its scope can be reinterpreted after issuance. Even if our patent applications issue as patents, they might not issue in
a form that will provide us with any meaningful protection, prevent competitors or other third parties from competing with us, or
otherwise provide us with any competitive advantage. In addition, changes in either the patent laws or interpretation of the patent laws in
the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection. In addition, the
laws of foreign countries might not protect our rights to the same extent or in the same manner as the laws of the United States. For
example, patent laws in various jurisdictions, including significant commercial markets such as Europe, restrict the patentability of
methods of treatment of the human body more than United States law does.
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Some of our future patents and patent applications may be co-owned with third parties. If we are unable to obtain an exclusive
license to any such third-party co-owners’ interest in such patents or patent applications, such co-owners may be able to license their
rights to other third parties, including our competitors, and our competitors could market competing products and technology. In
addition, we would need the cooperation of any such co-owners of our patents in order to enforce such patents against third parties, and
such cooperation might not be provided to us. Furthermore, we, or any future partners, collaborators, or licensees, may fail to identify
patentable aspects of inventions made in the course of development and commercialization activities before it is too late to obtain patent
protection on them. Therefore, we may miss potential opportunities to strengthen our patent position. Any of the foregoing could have a
material adverse effect on our business, financial condition, results of operations, and prospects.
Our patents covering our proprietary technology may be subject to challenge, narrowing, circumvention and invalidation by third
parties.
Any of our patents may be challenged, narrowed, circumvented, or invalidated by third parties. The issuance of a patent is not
conclusive as to its inventorship, scope, validity, or enforceability, and our patents may be challenged in the courts or patent offices in the
United States and abroad. We may be subject to a third party preissuance submission of prior art to the USPTO or become involved in
opposition, derivation, revocation, reexamination, post-grant and inter partes review, or interference proceedings challenging our patent
rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of,
or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without
payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights. Moreover,
we may have to participate in interference proceedings declared by the USPTO to determine priority of invention or in post-grant
challenge proceedings, such as oppositions in a foreign patent office, that challenge priority of invention or other features of patentability.
Such challenges may result in loss of patent rights, loss of exclusivity, or in patent claims being narrowed, invalidated, or held
unenforceable, which could limit our ability to stop others from using or commercializing similar or identical technology and products,
or limit the duration of the patent protection of our technology and product candidates. Such proceedings also may result in substantial
cost and require significant time from our scientists and management, even if the eventual outcome is favorable to us.
In addition, our competitors and other third parties may be able to circumvent our patents by developing similar or alternative
technologies or products in a non-infringing manner. For example, a third party may develop a competitive therapy that provides benefits
similar to our product candidates but that uses a technology that falls outside the scope of our patent protection. Our competitors may
also seek approval to market generic versions of any approved products and in connection with seeking such approval may claim that our
patents are invalid, unenforceable or not infringed. In these circumstances, we may need to defend or assert our patents, or both,
including by filing lawsuits alleging patent infringement. In any of these types of proceedings, a court or other agency with jurisdiction
may find our patents invalid or unenforceable, or that our competitors are competing in a non-infringing manner. Thus, even if we have
valid and enforceable patents, these patents still might not provide protection against competing products or processes sufficient to
achieve our business objectives. If the patent protection provided by the patents and patent applications we hold or pursue with respect to
our product candidates is not sufficiently broad to impede such competition, our ability to successfully commercialize our product
candidates could be negatively affected, which could have a material adverse effect on our business, financial condition, results of
operations, and prospects.
We cannot be sure that we were the first to make the technologies claimed in our patents or patent applications or that we were the
first to file for patent protection.
Assuming the other requirements for patentability are met, currently, the first to file a patent application is generally entitled to
the patent. However, prior to March 16, 2013, in the United States, the first to invent was entitled to the patent. Publications of
discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other
jurisdictions are not published until 18 months after filing, or in some cases not at all. Therefore, we cannot be certain that we were the
first to make the inventions claimed in our patents or pending patent applications, or that we were the first to file for patent protection of
such inventions. Similarly, we cannot be certain that parties from whom we may license or purchase patent rights were the first to make
relevant claimed inventions or were the first to file for patent protection for them. If third parties have filed patent applications on
inventions claimed in our patents or applications on or before March 15, 2013, an interference proceeding in the United States can be
initiated by such third parties to determine the first to invent any of the subject matter covered by the patent claims of our applications. If
third parties have filed such applications after March 15, 2013, a derivation proceeding in the United States can be initiated by such third
parties to determine whether our invention was derived from theirs.
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The patent application process is subject to numerous risks and there can be no assurance that we will be successful in obtaining
patents for which we have applied.
Pending patent applications cannot be enforced against third parties practicing the technology claimed in such applications
unless and until a patent issues from such applications. The patent application process is subject to numerous risks and uncertainties, and
there can be no assurance that we or any of our future development partners will be successful in protecting our product candidates by
obtaining and defending patents. These risks and uncertainties include the following:
● the USPTO and various foreign governmental patent agencies require compliance with a number of procedural,
documentary, fee payment and other provisions during the patent process. There are situations in which noncompliance can
result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the
relevant jurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have
been the case;
● the coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be
reinterpreted after issuance;
● patent applications might not result in any patents being issued;
● patents that may be issued or in-licensed may be challenged, invalidated, modified, revoked, circumvented, narrowed,
found to be unenforceable or otherwise might not provide any competitive advantage;
● our competitors, many of whom have substantially greater resources and many of whom have made significant investments
in competing technologies, may seek or may have already obtained patents that will limit, interfere with or eliminate our
ability to make, use, and sell our potential product candidates;
● there may be significant pressure on the U.S. government and international governmental bodies to limit the scope of
patent protection both inside and outside the United States for disease treatments that prove successful, as a matter of
public policy regarding worldwide health concerns; and
● countries other than the United States may have patent laws less favorable to patentees than those upheld by United States
courts, allowing foreign competitors a better opportunity to create, develop and market competing product candidates.
Any of the foregoing events could have a material adverse effect on our business, financial condition, results of operations, and
prospects.
It is difficult and costly to protect our intellectual property and our proprietary technologies, and we might not be able to ensure their
protection.
Our commercial success will depend in part on obtaining and maintaining patent protection and trade secret protection for the
composition, use and structure of our products and product candidates, the methods used to manufacture them, the related therapeutic
targets and associated methods of treatment as well as on successfully defending these patents against potential third-party challenges.
Our ability to protect our products and product candidates from unauthorized making, using, selling, offering to sell or importing by third
parties is dependent on the extent to which we have rights under valid and enforceable patents that cover these activities.
The ultimate determination by the USPTO or by a court or other trier of fact in the United States, or corresponding foreign
national patent offices or courts, on whether a claim meets all requirements of patentability cannot be assured. Although we have
conducted searches for third-party publications, patents and other information that may affect the patentability of claims in our various
patent applications and patents, we cannot be certain that all relevant information has been identified. Accordingly, we cannot predict the
breadth of claims that may be allowed or enforced in our patents or patent applications, in our licensed patents or patent applications or
in third-party patents.
We cannot provide assurances that any of our patent applications will be found to be patentable, including over our own prior art
patents, or will issue as patents. Neither can we make assurances as to the scope of any claims that may issue from our pending and
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future patent applications nor to the outcome of any proceedings by any potential third parties that could challenge the patentability,
validity or enforceability of our patents and patent applications in the United States or foreign jurisdictions. Any such challenge, if
successful, could limit patent protection for our products and product candidates and/or materially harm our business.
The degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection and
might not adequately protect our rights or permit us to gain or keep our competitive advantage. For example:
● we might not be able to generate sufficient data to support full patent applications that protect the entire breadth of
developments in one or more of our programs;
● it is possible that one or more of our pending patent applications will not become an issued patent or, if issued, that the
patent(s) will be insufficient to protect our technology, provide us with a basis for commercially viable products or provide
us with any competitive advantages;
● if our pending applications issue as patents, they may be challenged by third parties as not infringed, invalid or
unenforceable under United States or foreign laws; or
● if issued, the patents under which we hold rights might not be valid or enforceable.
In addition, to the extent that we are unable to obtain and maintain patent protection for one of our products or product
candidates or in the event that such patent protection expires, it may no longer be cost-effective to extend our portfolio by pursuing
additional development of a product or product candidate for follow-on indications. Any of the foregoing could have a material adverse
effect on our business, financial condition, results of operations, and prospects.
Obtaining and maintaining patent protection of our technologies depends on compliance with various procedural, document
submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be
reduced or eliminated for non-compliance with these requirements.
Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and applications are
required to be paid to the USPTO and various governmental patent agencies outside of the United States in several stages over the
lifetime of the patents and applications. The USPTO and various non- U.S. governmental patent agencies require compliance with a
number of procedural, documentary, fee payment and other similar provisions during the patent application process and after a patent has
issued. There are situations in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in
partial or complete loss of patent rights in the relevant jurisdiction. Under the terms of some of our licenses or future licenses, we may
not have the ability to maintain or prosecute patents in the portfolio, and must therefore rely on third parties to comply with these
requirements. Failure by us or our licensors to maintain protection of our patent portfolio could have a material adverse effect on our
business, financial condition, results of operations, and prospects.
In addition, it is possible that defects of form in the preparation or filing of our patents or patent applications may exist, or may
arise in the future, for example with respect to proper priority claims, inventorship, claim scope, or requests for patent term adjustments.
If we fail to establish, maintain or protect such patents and other intellectual property rights, such rights may be reduced or eliminated. If
any of our present or future partners, collaborators, licensees, or licensors, are not fully cooperative or disagree with us as to the
prosecution, maintenance or enforcement of any patent rights, such patent rights could be compromised. If there are material defects in
the form, preparation, prosecution, or enforcement of our patents or patent applications, such patents may be invalid and/or
unenforceable, and such applications may never result in valid, enforceable patents. Any of these outcomes could impair our ability to
prevent competition from third parties, which may have a material adverse effect on our business, financial condition, results of
operations, and prospects.
Patent terms may be inadequate to protect our competitive position on our products for an adequate amount of time and if we do not
obtain protection under the Hatch-Waxman Amendments and similar non- U.S. legislation for extending the term of patents covering
each of our product candidates, our business may be materially harmed.
Patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed.
Various extensions may be available, however, the life of a patent, and the protection it affords, is limited. Given the amount of time
required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire
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before or shortly after such candidates are commercialized. As a result, our patent portfolio might not provide us with adequate and
continuing patent protection sufficient to exclude others from commercializing products similar to our product candidates.
Depending upon the timing, duration and conditions of FDA marketing approval of our product candidates, one or more of our
U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of
1984, referred to as the Hatch-Waxman Amendments, and similar legislation in the European Union. The Hatch-Waxman Amendments
permit a patent term extension of up to five years for a patent covering an approved product as compensation for effective patent term
lost during product development and the FDA regulatory review process. A patent term extension cannot extend the remaining term of a
patent beyond a total of 14 years from the date of product approval, only one patent may be extended and only those claims covering the
approved drug, a method for using it, or a method for manufacturing it may be extended. However, we might not receive an extension if
we fail to apply within applicable deadlines, fail to apply prior to expiration of relevant patents or otherwise fail to satisfy applicable
requirements. Moreover, the length of the extension could be less than we request. If we are unable to obtain patent term extension or the
term of any such extension is less than we request, the period during which we can enforce our patent rights for that product will be
shortened and our competitors may obtain approval to market competing products sooner. As a result, our revenue from applicable
products could be reduced and could have a material adverse effect on our business, financial condition, results of operations, and
prospects.
Changes to the patent law in the United States or other jurisdictions could diminish the value of patents in general, thereby impairing
our ability to protect our products.
Our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the
biopharmaceutical industry involves both technological and legal complexity and is therefore costly, time consuming and inherently
uncertain. The Leahy-Smith America Invents Act, or the America Invents Act, reformed U.S. patent law in part by changing the U.S.
patent system from a “first to invent” system to a “first inventor to file” system, expanding the definition of prior art, and developing a
post-grant review system. This legislation changed U.S. patent law in a way that may weaken our ability to obtain patent protection in the
United States for those applications filed after March 16, 2013.
Further, the America Invents Act created new procedures to challenge the validity of issued patents in the United States,
including post-grant review and inter partes review proceedings, which some third parties have been using to cause the cancellation of
selected or all claims of issued patents of competitors. For a patent with an effective filing date of March 16, 2013 or later, a petition for
post-grant review can be filed by a third party in a nine-month window from issuance of the patent. A petition for inter partes review can
be filed immediately following the issuance of a patent if the patent has an effective filing date prior to March 16, 2013. A petition for
inter partes review can be filed after the nine-month period for filing a post-grant review petition has expired for a patent with an
effective filing date of March 16, 2013 or later. Post-grant review proceedings can be brought on any ground of invalidity, whereas inter
partes review proceedings can only raise an invalidity challenge based on published prior art and patents. These adversarial actions at the
USPTO review patent claims without the presumption of validity afforded to U.S. patents in lawsuits in U.S. federal courts, and use a
lower burden of proof than used in litigation in U.S. federal courts. Therefore, it is generally considered easier for a competitor or third
party to have a U.S. patent invalidated in a USPTO post-grant review or inter partes review proceeding than invalidated in a litigation in
a U.S. federal court. If any of our patents are challenged by a third party in such a USPTO proceeding, there is no guarantee that we, our
licensors or collaborators will be successful in defending the patent, which would result in a loss of the challenged patent right to us.
In addition, court rulings in cases such as Association for Molecular Pathology v. Myriad Genetics, Inc., BRCA1- & BRCA2-
Based Hereditary Cancer Test Patent Litigation, Promega Corp. v. Life Technologies Corp. and Abbvie Deutschland GmbH v. Janssen
Biotech, Inc. have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in
certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of
events has created uncertainty with respect to the value of patents once obtained. Depending on future actions by the U.S. Congress, the
U.S. courts, the USPTO and the relevant law-making bodies in other countries, the laws and regulations governing patents could change
in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might
obtain in the future. Any changes to patent law in the United States or other jurisdictions that impairs our ability to protect our product
candidates could have a material adverse effect on our business, financial condition, results of operations, and prospects.
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We might not be able to enforce our intellectual property rights throughout the world.
Filing, prosecuting, enforcing and defending patents on our product candidates in all countries throughout the world would be
prohibitively expensive, and our intellectual property rights in some foreign countries can be less extensive than those in the United
States. The requirements for patentability may differ in certain countries, particularly in developing countries; thus, even in countries
where we do pursue patent protection, there can be no assurance that any patents will issue with claims that cover our products.
Moreover, our ability to protect and enforce our intellectual property rights may be adversely affected by unforeseen changes in
foreign intellectual property laws. Many companies have encountered significant problems in protecting and defending intellectual
property rights in certain foreign jurisdictions. The legal systems of some countries, including India, China and other developing
countries, do not favor the enforcement of patents and other intellectual property rights. This could make it difficult for us to stop the
infringement of our patents or the misappropriation of our other intellectual property rights. For example, many foreign countries have
compulsory licensing laws under which a patent owner must grant licenses to third parties. Consequently, we might not be able to
prevent third parties from practicing our inventions in certain foreign countries. Competitors may use our technologies in jurisdictions
where we have not obtained patent protection to develop and market their own products and, further, may export otherwise infringing
products to territories where we have patent protection, if our ability to enforce our patents to stop infringing activities is inadequate.
These products may compete with our products, and our patents or other intellectual property rights might not be effective or sufficient to
prevent them from competing.
Agreements through which we license patent rights might not give us sufficient rights to permit us to pursue enforcement of our
licensed patents or defense of any claims asserting the invalidity of these patents (or control of enforcement or defense) of such patent
rights in all relevant jurisdictions as requirements may vary.
Proceedings to enforce our patent rights in foreign jurisdictions, whether or not successful, could result in substantial costs and
divert our efforts and resources from other aspects of our business. Moreover, such proceedings could put our patents at risk of being
invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims
against us. We might not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, might not be
commercially meaningful. Furthermore, while we intend to protect our intellectual property rights in major markets for our products, we
cannot ensure that we will be able to initiate or maintain similar efforts in all jurisdictions in which we may wish to market our products.
Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate. Any of the foregoing could have
a material adverse effect on our business, financial condition, results of operations, and prospects.
If we are sued for infringing, misappropriating, or otherwise violating intellectual property rights of third parties, such litigation
could be costly and time consuming and could prevent or delay us from developing or commercializing our product candidates.
Our commercial success depends, in part, on our ability to develop, manufacture, market and sell our product candidates without
infringing, misappropriating, or otherwise violating the intellectual property and other proprietary rights of third parties. Third parties
may have U.S. and non-U.S. issued patents and pending patent applications relating to compounds, methods of manufacturing
compounds and/or methods of use for the treatment of the disease indications for which we are developing our product candidates that
may cover our product candidates or approach to complement inhibition. If any third-party patents or patent applications are found to
cover our product candidates or their methods of use or manufacture, or our approach to complement inhibition, we might not be free to
manufacture or market our product candidates as planned without obtaining a license, which might not be available on commercially
reasonable terms, or at all.
There is a substantial amount of intellectual property litigation in the biotechnology and pharmaceutical industries, and we may
become party to, or threatened with, litigation or other adversarial proceedings regarding intellectual property rights with respect to our
product candidates, including interference and post-grant proceedings before the USPTO. There may be third-party patents or patent
applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the composition, use or
manufacture of our product candidates. We cannot guarantee that any of our patent searches or analyses including, but not limited to, the
identification of relevant patents, the scope of patent claims or the expiration of relevant patents are complete or thorough, nor can we be
certain that we have identified each and every patent and pending application in the United States and abroad that is relevant to or
necessary for the commercialization of our product candidates in any jurisdiction. Because patent applications can take many years to
issue, there may be currently pending patent applications which may later result in issued patents that our product candidates may be
accused of infringing. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon
these patents. Accordingly, third parties may assert infringement claims against us based on intellectual property rights that exist now
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or arise in the future. The outcome of intellectual property litigation is subject to uncertainties that cannot be adequately quantified in
advance. The pharmaceutical and biotechnology industries have produced a significant number of patents, and it might not always be
clear to industry participants, including us, which patents cover various types of products or methods of use or manufacture. The scope of
protection afforded by a patent is subject to interpretation by the courts, and the interpretation is not always uniform. If we are sued for
patent infringement, we would need to demonstrate that our product candidates, products or methods either do not infringe the patent
claims of the relevant patent or that the patent claims are invalid or unenforceable, and we might not be able to do this. Proving invalidity
is difficult. For example, in the United States, proving invalidity requires a showing of clear and convincing evidence to overcome the
presumption of validity enjoyed by issued patents. Even if we are successful in these proceedings, we may incur substantial costs and the
time and attention of our management and scientific personnel could be diverted in pursuing these proceedings, which could significantly
harm our business and operating results. In addition, we might not have sufficient resources to bring these actions to a successful
conclusion. Further, the outcome of intellectual property litigation is subject to uncertainties that cannot be adequately quantified in
advance, including the demeanor and credibility of witnesses and the identity of any adverse party. This is especially true in intellectual
property cases that may turn on the testimony of experts as to technical facts upon which experts may reasonably disagree.
If we are found to infringe, misappropriate, or otherwise violate a third party’s intellectual property rights, we could be forced,
including by court order, to cease developing, manufacturing or commercializing the infringing product candidate or product.
Alternatively, we may be required to obtain a license from such third party in order to use the infringing technology and continue
developing, manufacturing or marketing the infringing product candidate or product. However, we might not be able to obtain any
required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby
giving our competitors access to the same technologies licensed to us; alternatively or additionally it could include terms that impede or
destroy our ability to compete successfully in the commercial marketplace. In addition, we could be found liable for monetary damages,
including treble damages and attorneys’ fees if we are found to have willfully infringed a patent. A finding of infringement could prevent
us from commercializing our product candidates or force us to cease some of our business operations, which could harm our business.
Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on
our business. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, and
prospects.
We may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property, or
claiming ownership of what we regard as our own intellectual property and proprietary technology.
Many of our current and former employees and our licensors’ current and former employees, including our senior management,
were previously employed at universities or at other biotechnology or pharmaceutical companies, including some which may be
competitors or potential competitors. Although we try to ensure that our employees do not use the proprietary information or know-how
of others in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual property,
including trade secrets or other proprietary information, of any such third party. Litigation may be necessary to defend against such
claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property
rights or personnel or sustain damages. Such intellectual property rights could be awarded to a third party, and we could be required to
obtain a license from such third party to commercialize our technology or products. Such a license might not be available on
commercially reasonable terms or at all. Even if we are successful in defending against such claims, litigation could result in substantial
costs and be a distraction to management.
In addition, while we typically require our employees, consultants and contractors who may be involved in the development of
intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an
agreement with each party who in fact develops intellectual property that we regard as our own, which may result in claims by or against
us related to the ownership of such intellectual property. If we fail in prosecuting or defending any such claims, in addition to paying
monetary damages, we may lose valuable intellectual property rights. Even if we are successful in prosecuting or defending against such
claims, litigation could result in substantial costs and be a distraction to our senior management and scientific personnel. Any of the
foregoing could have a material adverse effect on our business, financial condition, results of operations, and prospects.
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We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time
consuming and unsuccessful.
Competitors may infringe, misappropriate, or otherwise violate our patents, trademarks, copyrights or other intellectual
property. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time
consuming and divert the time and attention of our management and scientific personnel. Any claims we assert against perceived
infringers could provoke these parties to assert counterclaims against us alleging that we infringe their patents, in addition to
counterclaims asserting that our patents are invalid or unenforceable, or both. In any patent infringement proceeding, there is a risk that a
court will decide that a patent of ours is invalid or unenforceable, in whole or in part, and that we do not have the right to stop the other
party from using the invention at issue. There is also a risk that, even if the validity of such patents is upheld, the court will construe the
patent’s claims narrowly or decide that we do not have the right to stop the other party from using the invention at issue on the grounds
that our patent claims do not cover the invention. An adverse outcome in a litigation or proceeding involving one or more of our patents
could limit our ability to assert those patents against those parties or other competitors, and may curtail or preclude our ability to exclude
third parties from making and selling similar or competitive products. Similarly, if we assert trademark infringement claims, a court may
determine that the marks we have asserted are invalid or unenforceable, or that the party against whom we have asserted trademark
infringement has superior rights to the marks in question. In this case, we could ultimately be forced to cease use of such trademarks.
Further, the outcome of intellectual property litigation is subject to uncertainties that cannot be adequately quantified in
advance, including the demeanor and credibility of witnesses and the identity of any adverse party. This is especially true in intellectual
property cases that may turn on the testimony of experts as to technical facts upon which experts may reasonably disagree.
Even if we establish infringement, the court may decide not to grant an injunction against further infringing activity and instead
award only monetary damages, which might not be an adequate remedy. Furthermore, because of the substantial amount of discovery
required in connection with intellectual property litigation, there is a risk that some of our confidential information could be
compromised by disclosure during litigation. There could also be public announcements of the results of hearings, motions or other
interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could adversely affect the
price of our common stock. Moreover, there can be no assurance that we will have sufficient financial or other resources to file and
pursue such infringement claims, which typically last for years before they are concluded. Even if we ultimately prevail in such claims,
the monetary cost of such litigation and the diversion of the attention of our management and scientific personnel could outweigh any
benefit we receive as a result of the proceedings. Any such litigation could have a material adverse effect on our business, financial
condition, results of operations, and prospects.
If we fail to comply with our obligations under our existing and any future intellectual property licenses with third parties, we could
lose license rights that are important to our business.
We may be reliant upon licenses to certain patent rights and proprietary technology form third parties that are important or
necessary to the development of our product candidates. These and other licenses might not provide exclusive rights to use such
intellectual property and technology in all relevant fields of use and in all territories in which we may wish to develop or commercialize
our technology and products in the future. As a result, we might not be able to prevent competitors from developing and commercializing
competitive products in territories included in all of our licenses. Our licensors may have relied on third party consultants or
collaborators or funds from third parties such that our licensors are not the sole and exclusive owners of the patents we in-license. This
could have a material adverse effect on our competitive position, business, financial conditions, results of operations and prospects.
In addition, the agreements under which we license patent rights might not give us control over patent prosecution or
maintenance, so that we might not be able to control which claims or arguments are presented and might not be able to secure, maintain,
or successfully enforce necessary or desirable patent protection from those patent rights. We cannot be certain that patent prosecution and
maintenance activities by our licensors will be conducted in compliance with applicable laws and regulations or will result in valid and
enforceable patents. Even if we are permitted to pursue such enforcement or defense, we will require the cooperation of our licensors,
and cannot guarantee that we would receive it and on what terms. We cannot be certain that our licensors will allocate sufficient
resources or prioritize their or our enforcement of such patents or defense of such claims to protect our interests in any licensed patents.
If we cannot obtain patent protection, or enforce existing or future patents against third parties, it could have a material adverse effect on
our business, financial condition, results of operations, and prospects.
Further, the agreements under which we currently license intellectual property or technology to or from third parties are
complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract
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interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property
or technology, or increase what we believe to be our financial or other obligations under the relevant agreement, either of which could
have a material adverse effect on our business, financial conditions, results of operations, and prospects. Moreover, if disputes over
intellectual property that we license prevent or impair our ability to maintain our licensing arrangements on commercially acceptable
terms, we may be unable to successfully develop and commercialize the affected product candidates, which could have a material
adverse effect on our business, financial conditions, results of operations, and prospects. Disputes may arise regarding intellectual
property subject to a licensing agreement, including:
● the scope of rights granted under the license agreement and other interpretation-related issues;
● the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the
licensing agreement;
● the sublicensing of patent and other rights under current and any future collaborative development relationships;
● our diligence obligations under any license agreement and what activities satisfy such obligations;
● the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property
by our license counterparties and us and our partners; and
● the priority of invention of patented technology.
In spite of our efforts, our license counterparties might conclude that we have materially breached our license agreements and
might therefore terminate the license agreements, which may remove our ability to develop and commercialize the product candidates
and technology covered by these license agreements. If any in-licenses are terminated, competitors would have the freedom to seek
regulatory approval of, and to market, products identical to ours. It is possible that we may be unable to obtain any additional licenses
that we require at a reasonable cost or on reasonable terms, if at all. In that event, we may be required to expend significant time and
resources to redesign our product candidates, technology, or the methods for manufacturing them or to develop or license replacement
technology, all of which might not be feasible on a technical or commercial basis. If we are unable to do so, we may be unable to develop
or commercialize the affected product candidates, which could harm our business, financial condition, results of operations, and
prospects significantly. Any of these events could have a material adverse effect on our competitive position, business, financial
conditions, results of operations, and prospects.
If we are unable to protect the confidentiality of our trade secrets, the value of our technology could be negatively impacted and our
business would be harmed.
In addition to the protection afforded by patents, we also rely on trade secret protection for certain aspects of our intellectual
property. However, trade secrets are difficult to protect. We seek to protect these trade secrets, in part, by entering into non-disclosure and
confidentiality agreements with parties who have access to them, such as our employees, consultants, independent contractors, advisors,
contract manufacturers, suppliers and other third parties. We also enter into confidentiality and invention or patent assignment
agreements with employees and certain consultants. Any party with whom we have executed such an agreement may breach that
agreement and disclose our proprietary information, including our trade secrets, and we might not be able to obtain adequate remedies
for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-
consuming, and the outcome is unpredictable. Additionally, if the steps taken to maintain our trade secrets are deemed inadequate, we
may have insufficient recourse against third parties for misappropriating the trade secret. Further, if any of our trade secrets were to be
lawfully obtained or independently developed by a competitor, we would have no right to prevent such third party, or those to whom they
communicate such technology or information, from using that technology or information to compete with us. If any of our trade secrets
were to be disclosed to or independently developed by a competitor, it could have a material adverse effect on our business, financial
condition, results of operations, and prospects.
If our trademarks and trade names are not adequately protected, then we might not be able to build name recognition in our marks of
interest and our business may be adversely affected.
Our trademarks or trade names, including Optejet®, may be challenged, infringed, circumvented or declared generic or
determined to be infringing on other marks. We rely on both registration and common law protection for our trademarks. We might not
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be able to protect our rights to these trademarks and trade names or may be forced to stop using these names, which we need for name
recognition by potential partners or customers in our markets of interest. During trademark registration proceedings, we may receive
rejections. Although we would be given an opportunity to respond to those rejections, we may be unable to overcome such rejections. In
addition, in the USPTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose
pending trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against
our trademarks, and our trademarks might not survive such proceedings. If we are unable to establish name recognition based on our
trademarks and trade names, we might not be able to compete effectively and our business may be adversely affected.
RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK
A significant portion of our total outstanding shares may be sold into the market in the near future, which could cause the market
price of our common stock to drop significantly, even if our business is performing well.
Sales of a substantial number of shares of our common stock in the public market could occur at any time, subject to certain
restrictions. These sales, or the perception in the market that holders of a large number of shares intend to sell shares, could reduce the
market price of our common stock. As of March 15, 2024, we had 47,386,349 shares of common stock outstanding, 10,926,554 shares of
common stock issuable upon exercise of warrants, 6,154,595 shares of our common stock issuable upon exercise of options, 2,327,747 of
shares issuable upon the conversion of convertible debt, 241,764 shares of common stock issuable upon the vesting and/or delivery of
restricted stock units and $3.0 million in shares of common stock issuable to Bausch Health Companies Inc. upon achievement of certain
regulatory milestones.
The price of our common stock has been, and may continue to be, volatile and may fluctuate substantially, which could result in
substantial losses for purchasers of our common stock.
The stock market historically has experienced extreme price and volume fluctuations, such as those seen in 2023. As a result of
this volatility, you might not be able to sell your common stock at or above the price at which you purchase it. From our IPO in January
2018 through March 15, 2024, the per share trading price of our common stock has been as high as $10.74 and as low as $1.05. The per
share trading price of our common stock might continue to fluctuate significantly in response to various factors, some of which are
beyond our control. These factors include:
● general economic, industry and market conditions, including as a result of the coronavirus pandemic and geopolitical
events such as the ongoing war between Russia and Ukraine or between Israel and Hamas;
● our ability to successfully manufacture and commercialize Mydcombi and clobetasol propionate;
● our ability to successfully conduct clinical trials, submit NDAs and gain marketing approval for our product candidates;
● results of clinical trials of our product candidates or those of our competitors;
● the success of competitive products or technologies;
● commencing, maintaining, or terminating of licensing agreements and other collaborations;
● regulatory or legal developments in the United States and other countries;
● developments or disputes concerning patent applications, issued patents or other proprietary rights;
● the recruitment or departure of key personnel;
● the level of expenses related to any of our product candidates or clinical development programs;
● the results of our efforts to discover, develop, acquire or in-license additional product candidates;
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● actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities
analysts;
● our inability to obtain or delays in obtaining adequate product supply for any approved product or inability to do so at
acceptable prices;
● disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain
patent protection for our technologies;
● significant lawsuits, including patent or stockholder litigation;
● variations in our financial results or those of companies that are perceived to be similar to us;
● changes in the structure of healthcare payment systems;
● market conditions in the pharmaceutical and biotechnology sectors; and
● the other factors described in this “Risk Factors” section.
We have broad discretion in the use of our cash, including the net proceeds from our financings, and might not use them effectively.
Our management will have broad discretion in the application of our cash, including the net proceeds from our financing
transactions, and could spend our cash in ways that do not improve our results of operations or enhance the value of our common stock.
The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect
on our business, cause the price of our common stock to decline and delay the development of our product candidates. Pending their use,
we may invest our cash, including the net proceeds from our financings, in a manner that does not produce income or that loses value.
Our business is subject to changing regulations regarding corporate governance, disclosure controls, internal control over financial
reporting, and other compliance areas that will increase both our costs and the risk of noncompliance.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002, or the
Sarbanes-Oxley Act, the Dodd-Frank Act, and the rules and regulations of our stock exchange. The requirements of these rules and
regulations will increase our legal, accounting, and financial compliance costs, will make some activities more difficult, time-consuming,
and costly, and may also place undue strain on our personnel, systems, and resources.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and
internal control over financial reporting. Commencing with our fiscal year ending December 31, 2018, we performed system and process
evaluation and testing of our internal control over financial reporting so that management could report on the effectiveness of our internal
control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Our compliance with Section 404 of the
Sarbanes-Oxley Act requires that we incur substantial accounting expense and expend significant management efforts. Prior to our IPO,
we had never been required to test our internal controls within a specified period.
We are required to disclose changes made to our internal control and procedures on a quarterly basis. However, our independent
registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial
reporting pursuant to Section 404 of the Sarbanes-Oxley Act until we are no longer a “smaller reporting company” as defined in the
rules of the SEC. If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, the
market price of our stock could decline and we could be subject to sanctions or investigations by the stock exchange on which our
common stock is listed, the SEC, or other regulatory authorities, which would require additional financial and management resources.
We may be adversely affected by the effects of inflation.
Inflation has the potential to adversely affect our liquidity, business, financial condition and results of operations by increasing
our overall cost structure. The existence of inflation in the economy has resulted in, and may continue to result in, higher interest rates
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and capital costs, shipping costs, supply shortages, increased costs of labor, weakening exchange rates and other similar effects. Recently,
inflation has increased throughout the U.S. economy. Inflation can adversely affect us by increasing the costs of clinical trials and
research, the development of our product candidates, administration and other costs of doing business. We may experience increases in
the prices of labor and other costs of doing business. In an inflationary environment, cost increases may outpace our expectations,
causing us to use our cash and other liquid assets faster than forecasted. If this happens, we may need to raise additional capital to fund
our operations, which may not be available in sufficient amounts or on reasonable terms, if at all, sooner than expected.
Failure to develop and maintain adequate financial controls could cause us to have material weaknesses, which could adversely
affect our operations and financial position.
An internal control system, no matter how well-designed, cannot provide absolute assurance that misstatements due to error or
fraud will not occur or that all control issues and instances of fraud will be detected. If we are not able to comply with the requirements
of Section 404 of the Sarbanes-Oxley Act in a timely manner, or if we are unable to maintain proper and effective internal controls, we
might not be able to produce timely and accurate financial statements. If that were to happen, the market price of our stock could decline
and we could be subject to sanctions or investigations by the stock exchange on which our common stock is listed, the SEC, or other
regulatory authorities.
Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement,
could harm our operating results or cause us to fail to meet our reporting obligations. Any failure to implement and maintain effective
internal controls also could adversely affect the results of periodic management evaluations regarding the effectiveness of our internal
control over financial reporting that we are required to include in our periodic reports filed with the SEC under Section 404 of the
Sarbanes-Oxley Act. Ineffective disclosure controls and procedures or internal control over financial reporting could also cause investors
to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our
common stock. Implementing any appropriate changes to our internal controls may require specific compliance training of our directors,
officers, and employees, entail substantial costs in order to modify our existing accounting systems, and take a significant period of time
to complete. Such changes may not be effective, however, in maintaining the adequacy of our internal controls, and any failure to
maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating
costs and could materially impair our ability to operate our business. In the event that we are not able to demonstrate compliance with
Section 404 of the Sarbanes-Oxley Act in a timely manner, that our internal controls are perceived as inadequate, or that we are unable to
produce timely or accurate financial statements, investors may lose confidence in our operating results and our stock price could decline.
We are an “smaller reporting company” and the reduced disclosure requirements applicable to smaller reporting companies may
make our common stock less attractive to investors.
We are considered a “smaller reporting company” under Rule 12b-2 of the Exchange Act. We are therefore entitled to rely on
certain reduced disclosure requirements, such as an exemption from providing selected financial data and executive compensation
information. These exemptions and reduced disclosures in our SEC filings due to our status as a smaller reporting company also mean
our auditors are not required to review our internal control over financial reporting and may make it harder for investors to analyze our
results of operations and financial prospects. We cannot predict if investors will find our common stock less attractive because we may
rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market
for our common stock and our common stock prices may be more volatile. We will remain a smaller reporting company until our public
float exceeds $250 million as of the last business day of our most recently completed second quarter if our annual revenues are $100
million or more as of our most recently completed fiscal year, or until our public float exceeds $700 million as of the last business day of
our most recently completed second quarter if our annual revenues are less than $100 million as of our most recently completed fiscal
year.
Provisions in our corporate charter documents and under Delaware law could make an acquisition of us, which may be beneficial to
our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.
Provisions in our certificate of incorporation, and our bylaws may discourage, delay or prevent a merger, acquisition or other
change in control of us that stockholders may consider favorable, including transactions in which you might otherwise receive a premium
for your shares. These provisions also could limit the price that investors might be willing to pay in the future for shares of our common
stock, thereby depressing the market price of our common stock. In addition, because our Board of Directors is responsible for
appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace
or remove
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our current management by making it more difficult for stockholders to replace members of our Board. Among other things, these
provisions:
● allow the authorized number of our directors to be changed only by resolution adopted by a majority of our Board;
● limit the manner in which stockholders can remove directors from the Board, as may be permitted by law;
● establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and
nominations to our Board;
● limit who may call stockholder meetings;
● authorize our Board to issue preferred stock without stockholder approval, which could be used to institute a stockholder
rights plan, or so-called “poison pill,” that would work to dilute the stock ownership of a potential hostile acquirer,
effectively preventing acquisitions that have not been approved by our Board; and
● require all stockholder action to take place at duly called stockholder meetings and disallow the ability of our stockholders
to act by majority written consent.
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General
Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with
us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting
stock, unless the merger or combination is approved in a prescribed manner.
Our certificate of incorporation provides that the Court of Chancery of the State of Delaware is, to the fullest extent permitted by law,
the sole and exclusive forum for substantially all disputes between us and our stockholders. These choice of forum provisions could
limit the ability of stockholders to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Unless we consent to the selection of an alternative forum, our certificate of incorporation provides that the Court of Chancery
of the State of Delaware, or the Court of Chancery, will be, to the fullest extent permitted by law, the sole and exclusive forum for any
derivative action or proceeding brought on our behalf; any action asserting a claim of breach of fiduciary duty owed by any of our
directors, officers or other employees or agent to the Company or our stockholders; any action asserting a claim against us arising
pursuant to the Delaware General Corporation Law, or DGCL, or our certificate of incorporation or bylaws; any action to enforce or
determine the validity of our certificate of incorporation or bylaws; or any action asserting a claim against us that is governed by the
internal affairs doctrine. Since the choice of forum provisions are only applicable to “the fullest extent permitted by law,” as provided in
our certificate of incorporation, the provisions do not designate the Court of Chancery as the exclusive forum for any derivative action or
other claim for which the applicable statute creates exclusive jurisdiction in another forum. As such, the choice of forum provisions do
not apply to any actions arising under the Securities Act of 1933, as amended, or the Exchange Act.
These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for
disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers
and other employees. Alternatively, if a court were to find the choice of forum provisions contained in our certificate of incorporation to
be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions,
which could materially adversely affect our business, financial condition and operating results.
Because we do not anticipate paying any cash dividends on our common stock in the foreseeable future, capital appreciation, if any,
will be your sole source of gain.
We have never declared or paid cash dividends on our common stock. We currently intend to retain all of our future earnings, if
any, to finance the growth and development of our business. In addition, the terms of any future debt agreements may preclude us from
paying dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable
future.
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If securities analysts do not continue to publish research or reports about our business or if they publish negative evaluations of our
stock, the price of our stock could decline.
The trading market for our common stock will rely, in part, on the research and reports that industry or financial analysts publish
about us or our business. If securities analysts do not continue coverage of us, the trading price of our stock could decrease. Additionally,
if one or more of the analysts covering our business downgrade their evaluations of our stock, the price of our stock could decline. If one
or more of these analysts cease to cover our stock, we could lose visibility in the market for our stock, which in turn could cause our
stock price to decline.
Item 1B. Unresolved Staff Comments.
Smaller reporting companies such as us are not required to provide the information required by this Item.
Item 1C. Cybersecurity.
Information technology is important to our business operations, and we are committed to protecting the privacy, security and
integrity of the data we use in our business, as well as our employee and clinical data. The Company has a comprehensive cybersecurity
program in place for assessing, identifying and managing cybersecurity risks that is designed to protect its systems and data from
unauthorized access, use or other security impact. This program is integrated into the Company’s overall Enterprise Risk Management
and Resiliency process.
We continuously monitor and update our information technology networks and infrastructure to prevent, detect, address and
mitigate risks associated with unauthorized access, misuse, computer viruses and other events that could have a security impact. We
invest in industry standard security technology to protect the Company’s data and business processes against risk of cybersecurity
incidents. Our data security management program includes identity, trust, vulnerability and threat management business processes, as
well as adoption of standard data protection policies.
In terms of governance and oversight, the following is in place to enhance transparency and accountability in cybersecurity
management:
Responsibility Assignment:
● The Company’s Chief Operating Officer (COO) assumes a pivotal role in overseeing the cybersecurity risk
management program. The COO collaborates with business leaders on the matters of cybersecurity across the
Company.
Board Oversight:
● Cybersecurity risks fall within the purview of the Audit Committee and, ultimately, the Board of Directors. Regular
oversight and reviews occur at established intervals. The Audit Committee engages in discussions with the COO and
Company management at least once a year, covering various aspects of cybersecurity risk management, including
recent developments, evolving standards, vulnerability assessments, and the threat environment.
We measure our data security effectiveness by benchmarking against industry-accepted methods and we work to remediate any
significant findings. We maintain and routinely test backup systems and disaster recovery and also have processes in place to prevent
disruptions resulting from our implementation of new software and systems.
We have a comprehensive incident response plan to address cybersecurity incidents. Our incident response plan includes
procedures for identifying, containing and responding to cybersecurity incidents and is subject to regular review and assessment to
ensure that it is effective in protecting our information technology. To date, we believe that our cybersecurity program has been effective
in protecting the confidentiality, integrity, and availability of its information; however, the Company cannot guarantee that its
cybersecurity program will be successful in preventing all cybersecurity incidents. Further, we currently maintain a cyber insurance
policy that provides coverage for security breaches; however, such insurance may not be sufficient in type or amount to cover us against
claims related to security breaches, cyber-attacks and other related breaches.
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We engage external parties, including consultants, computer security firms and risk management and governance experts, to
enhance our cybersecurity oversight. In order to oversee and identify risks from cybersecurity threats associated with our use of third-
party service providers, we also have a third-party risk management program designed to help protect against the misuse of information
technology by third parties and business partners, which includes certification of our major technology suppliers and any outsourced
services through accepted security certification standards.
While we are regularly subject to cybersecurity attacks, ransomware and other security breaches, we have not experienced any
material cybersecurity incidents or a series of related unauthorized occurrences for the year ended December 31, 2023. We do not believe
that there are currently any known risks from cybersecurity threats that are reasonably likely to materially affect us or our business
strategy, results of operations or financial condition.
Item 2. Properties.
Our principal executive offices are located in approximately 3,800 square feet of office space in New York City, NY. In addition,
we lease approximately 12,000 square feet of office space in Reno, Nevada where we perform certain of our research and development
activities. We also lease approximately 6,700 square feet for an operational commercial manufacturing facility in Redwood City,
California and 4,600 square feet of office space in Laguna Hills, California for clinical, medical affairs and the commercial team offices.
We believe that our existing facilities are adequate to meet our current needs, and that suitable additional alternative spaces will
be available in the future on commercially reasonable terms.
Item 3. Legal Proceedings.
We are not currently a party to any material legal proceedings. From time to time, we may become involved in legal
proceedings arising in the ordinary course of our business. Regardless of outcome, litigation can have an adverse impact on us due to
defense and settlement costs, diversion of management resources, negative publicity, reputational harm and other factors.
Item 4. Mine Safety Disclosures.
Not applicable.
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Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
PART II
Market for Common Equity
Our common stock trades on the Nasdaq Capital Market under the symbol “EYEN.”
Based upon information furnished by our transfer agent, at March 15, 2024, we had approximately 36 holders of record of our
common stock.
Dividend Policy
We have never declared dividends on our equity securities, and currently do not plan to declare dividends on shares of our
common stock in the foreseeable future. We expect to retain our future earnings, if any, for use in the operation and expansion of our
business. Subject to the foregoing, the payment of cash dividends in the future, if any, will be at the discretion of our Board of Directors
and will depend upon such factors as earnings levels, capital requirements, our overall financial condition and any other factors deemed
relevant by our Board.
Securities Authorized for Issuance under Equity Compensation Plans
See Item 12 of this report for disclosure regarding securities authorized for issuance under equity compensation plans required
by Item 201(d) of Regulation S-K.
Recent Sales of Unregistered Securities
None.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Item 6. [Reserved]
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation
The following discussion and analysis is based on, and should be read in conjunction with our financial statements for the years
ended December 31, 2023 and 2022, which are included elsewhere in this Annual Report on Form 10-K. This Management’s Discussion
and Analysis of Financial Condition and Results of Operations contains statements that are forward-looking. These statements are based
on current expectations and assumptions that are subject to risk, uncertainties and other factors. These statements are often identified by
the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” or “continue,” and similar
expressions or variations. Actual results could differ materially because of the factors discussed in “Risk Factors” elsewhere in this
Annual Report on Form 10-K, and other factors that we have not identified.
Overview
We are an ophthalmic technology company commercializing Mydcombi™ (tropicamide and phenylephrine HCL ophthalmic
spray) for inducing mydriasis for routine diagnostic procedures and in conditions where short term pupil dilation is desired, and
clobetasol propionate ophthalmic suspension, for the treatment of post-operative pain and inflammation following ocular surgery, and
developing the Optejet® delivery system both for use in combination with our own drug-device therapeutic programs and for out-
licensing for use in combination with therapeutics for additional indications. Our aim is to improve the delivery of topical ophthalmic
medication through the ergonomic design of the Optejet which facilitates ease-of-use and delivery of more physiologically appropriate
medication volume, with the goal to reduce side effects and improve tolerability, and introduce digital health technology to improve
therapy compliance and ultimately medical outcomes.
The ergonomic and functional design of the Optejet allows for horizontal drug delivery and eliminates the need to tilt the head
back or the manual dexterity to squeeze a bottle, to administer medications. Drug is delivered in a microscopic array of droplets faster
than the blink reflex to help ensure instillation success. The precise delivery of a low-volume columnar spray by the Optejet device
minimizes contamination risk with a non-protruding nozzle and self-closing shutter. In clinical trials, the Optejet has demonstrated that
its targeted delivery achieves a high rate of successful administration, with 98% of sprays being accurately delivered upon first attempt
compared to the established rate reported with traditional eye drops of ~ 50%.
A more physiologically appropriate volume of medication in the range of seven to nine microliters is delivered by the Optejet,
which is approximately one-fifth of the 35 to 50 microliter dose typically delivered in a single eye drop. Lower volume of medication
exposes the ocular surface to less active ingredient and preservatives, potentially reducing ocular stress and surface damage and
improving tolerability. The lower volume also minimizes the potential for drug to enter systemic circulation, with the goal of avoiding
some common side effects that are related to overdosing of the eye.
We are developing versions of the Optejet with on-board digital technology that records the date and time of each use. These
data may be used to provide reminders via Bluetooth to smart devices and to allow healthcare practioners to monitor usage. This
information can then be used by practitioners and health care systems to measure treatment compliance and improve medical decision
making. In this way, the Optejet could serve as an extension of the physician’s office by providing information that is not currently
possible to collect except through the use of diaries.
Our drug-device product line includes Mydcombi (tropicamide and phenylephrine HCL ophthalmic spray) and therapeutic
programs MicroPine (atropine ophthalmic spray) and MicroLine (pilocarpine ophthalmic spray). MicroPine is our first-in-class topical
therapy for the treatment of progressive myopia, a disease associated with pathologic axial elongation of the eye and sclero-retinal
stretching. In the United States, myopia is estimated to affect approximately 25 million children, with up to five million considered to be
at high risk for progressive myopia. In February 2019, the FDA accepted our IND to initiate the CHAPERONE study to reduce the
progression of myopia in children. The first patient was enrolled in the CHAPERONE study in June 2019.
On October 9, 2020, we entered into a license agreement with B+L, pursuant to which B+L had the rights to develop and
commercialize MicroPine in the United States and Canada. Under the terms of the Bausch License Agreement, we received an upfront
payment of $10.0 million and were eligible to receive up to a total of $35.0 million in additional payments, based on the achievement of
certain regulatory and launch-based milestones. B+L also agreed to pay royalties to Eyenovia on a tiered basis (ranging from mid-single
digit to mid-teen percentages) on gross profits from sales of MicroPine in the United States and Canada, subject to certain
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adjustments. Under the terms of the Bausch License Agreement, B+L assumed sponsorship of the IND as well as ownership and the
costs related to the ongoing CHAPERONE study.
On January 12, 2024, we entered into a subsequent agreement with B+L to repatriate our rights to MicroPine and take control of
the CHAPERONE study. In this agreement, we agreed to pay B+L $2 million in cash and an additional $3 million in common stock upon
successful transfer of the regulatory documents and study elements to Eyenovia. We also agreed to pay B+L a 2% royalty on net sales
once MicroPine is commercialized in the United States, assuming receipt of regulatory approvals. We believe that this new arrangement
is in our and our shareholders’ best interests, as it may substantially increase the value of the asset through potential improvements in the
conduct of the study, including a planned interim analysis of the data in late 2024.
We have also successfully expanded our manufacturing capabilities through a partnership with Coastline International, Inc.
located in Tijuana, Mexico, as well as the construction of our new manufacturing facility in Reno, Nevada and the construction of our
own fill and finish facility in Redwood City, California. We have received FDA clearance for using both Coastline International and our
Redwood City facility for the production of Mydcombi cartridges, and FDA clearance for using our Reno facility for the production of
technical elements such as the base unit for the Optejet device.
MicroLine is our investigational pharmacologic treatment for presbyopia, a non-preventable, age-related hardening of the lens,
which causes the gradual loss of the eye’s ability to focus on near objects and impairs near visual acuity. There are two FDA-approved
treatments for presbyopia which use pilocarpine, the same drug used in our investigational product. We have completed two Phase III
studies using our Optejet® device. In these studies, patients reported high satisfaction with using the device and a strong preference over
using an eye dropper bottle. We released positive top-line results from VISION-2 in the fourth quarter of 2022. We are planning to meet
with the FDA in mid-2024 to discuss a transition of the product into our new Gen-2 Optejet device, which has a significantly lower cost
to manufacture than the first generation device.
Mydcombi is the only FDA-approved fixed combination of the two leading mydriatic agents, tropicamide and phenylephrine in
the United States and our first FDA-approved product. As an ophthalmic spray delivered with Optejet technology, Mydcombi may
present a number of benefits for ophthalmic surgical centers, optometric and ophthalmic offices and patients. Those benefits may include
improved cost-effectiveness in centers that employ single-use bottles for mydriasis, more efficient use of office time and resources, and
an overall improved doctor-patient experience. We have begun the commercialization of Mydcombi, with the first commercial sale of the
product occurring on August 3, 2023 as part of a targeted launch, and are planning to expand our launch with the onboarding of ten sales
representatives in early 2024. We received FDA approval for our primary Mydcombi manufacturing facility in February 2024, which we
believe will allow us to expand and continue to build our manufacturing operations.
On August 10, 2020, we entered into a license agreement with Arctic Vision pursuant to which Arctic Vision may develop and
commercialize MicroPine, MicroLine and Mydcombi in Greater China (mainland China, Hong Kong, Macau and Taiwan) and South
Korea. Under the terms of the Arctic Vision License Agreement, as amended, we received an upfront payment of $4.25 million before
any payments to Senju. In addition, we may receive up to a total of $37.7 million in additional payments, based on various development
and regulatory milestones, including the initiation of clinical research and approvals in Greater China and South Korea, and development
costs. Arctic Vision also will purchase its supply of MicroPine, MicroLine and Mydcombi from Eyenovia or, for such products not
supplied by Eyenovia, pay a mid-single digit percentage royalty on net sales of such products, subject to certain adjustments. We will pay
between 30 and 40 percent of such payments, royalties, or net proceeds of such supply to Senju pursuant to the Senju License
Agreement.
We are in active discussions with manufacturers of existing and late-stage ophthalmic medications to explore whether
development with the Optejet technology can solve unmet medical and business needs. Some of those business needs could include
extension of exclusivity under the Optejet patents, improvement in a drug’s tolerability profile, or potential improvement in treatment
compliance.
On August 15, 2023, we entered into a license agreement with Formosa, whereby we acquired the exclusive U.S. rights to
commercialize any product related to a novel formulation of clobetasol propionate ophthalmic suspension 0.05% (the “Licensed
Product”), which was approved by the FDA, for post-operative inflammation and pain after ocular surgery, on March 4, 2024. The
License will remain in effect for ten years from the date of the first commercial sale of a Licensed Product, unless earlier terminated.
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We paid Formosa an upfront payment in an aggregate amount of $2,000,000 which consisted of (a) cash in the amount of $1,000,000 and
(b) 487,805 shares of common stock valued at $1,000,000. We also capitalized $122,945 of transaction costs in connection with the
License. In addition, we must pay Formosa up to $4 million upon the achievement of certain development milestones and up to $80
million upon the achievement of certain sales milestones.
Historically, we have financed our operations principally through equity offerings. We have also generated cash through
licensing arrangements and our credit facilities with Leerink Partners and Avenue. However, based upon our current operating plan, there
is substantial doubt about our ability to continue as a going concern for at least one year from the date that our financial statements were
issued. Our ability to continue as a going concern depends on our ability to complete additional licensing or business development
transactions or raise additional capital through the sale of equity or debt securities to support our future operations. If we are unable to
secure additional capital, we may be required to curtail our research and development initiatives and/or take additional measures to
reduce costs.
Our net losses were $27.3 million and $28.0 million for the years ended December 31, 2023 and 2022. As of December 31,
2023, we had working capital and an accumulated deficit of approximately $11.2 million and $145.5 million, respectively.
Financial Overview
Revenue and Cost of Revenue
Revenue is earned from the sale of our product, Mydcombi. The first commercial sale of the product occurred on August 3,
2023 as part of a targeted launch.
Cost of sales consisted of the cost of the production of the Mydcombi ophthalmic spray that was sold.
Research and Development Expenses
Research and development expenses are incurred in connection with the research and development of our microdose
therapeutics and consist primarily of contract service expenses. Given where we are in our life cycle, we do not separately track research
and development expenses by project. Our research and development expenses consist of:
● direct clinical and non-clinical expenses, which include expenses incurred under agreements with contract research
organizations, contract manufacturing organizations, and costs associated with preclinical activities, development activities
and regulatory activities;
● personnel-related expenses, which include expenses related to consulting agreements with individuals that have since
entered into employment agreements with us as well as salaries and other compensation of employees that is attributable to
research and development activities; and
● facilities and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, marketing,
insurance and other supplies used in research and development activities.
We expense research and development costs as incurred. We record costs for some development activities, such as clinical trials,
based on an evaluation of the progress to completion of specific tasks using data such as subject enrollment, clinical site activations or
other information our vendors provide to us.
We expect that our research and development expenses will increase with the continuation of the aforementioned initiatives.
General and Administrative Expenses
General and administrative expenses consist primarily of payroll and related expenses, legal and other professional services,
insurance expense, and non-cash stock-based compensation expense. We anticipate that our general and administrative expenses will
increase in the future as we increase our headcount to support our continued research and development and the potential
commercialization of our product candidates.
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Results of Operations
Year Ended December 31, 2023 Compared with Year Ended December 31, 2022
Revenue and Cost of Revenue
Revenue for the year ended December 31, 2023 totaled $3,787, which was offset by cost of revenues of $3,787. We expect to
generate flat gross margins (after writing inventories down to net realizable value) during the early stages of the commercialization
process for Mydcombi until such time as we can roll out our second generation Optejet device and scale up production.
No revenue was earned or recognized during the year ended December 31, 2022.
Research and Development Expenses
Research and development expenses for the year ended December 31, 2023 totaled $13.0 million, a decrease of $0.4 million, or
3%, as compared to $13.4 million recorded for the year ended December 31, 2022. Research and development expenses consisted of the
following:
Personnel-related expenses
Supplies and materials
Non-cash stock-based compensation expenses
Direct clinical and non-clinical expenses
Facilities expenses
Depreciation expense
Other expenses
Total research and development expenses
For the Year Ended
December 31,
2023
$ 6,869,585
1,762,676
839,038
714,995
1,442,001
776,479
571,058
$ 12,975,832
2022
$ 6,070,577
920,319
1,809,305
2,817,085
994,069
301,205
466,120
$ 13,378,680
The increase in personnel-related expenses was primarily due to new staff additions made throughout 2023 and higher payroll
tax expense due to us no longer being eligible for R&D payroll tax credits in 2023, compared to $0.3 million in 2022. The increase in
supplies and materials was primarily due to an increase in dispenser parts and materials. The decrease in non-cash stock-based
compensation expenses was primarily due to the ending of the amortization period for older grants. The decrease in direct clinical and
non-clinical expenses was primarily due to the VISION-2 study being concluded in 2022, B+L taking over responsibility for the
MicroPine clinical process and the decrease in the use of external consultants. The increase in facilities expenses was primarily due to
costs related to the new Reno facility. The increase in depreciation expense was primarily due to increased equipment purchases.
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General and Administrative Expenses
General and administrative expenses for the year ended December 31, 2023 totaled $12.4 million, a decrease of $1.1 million, or
8%, as compared to $13.5 million recorded for the year ended December 31, 2022. General and administrative expenses consisted of the
following:
Salaries and benefits
Professional fees
Stock-based compensation
Other
Sales and marketing
Insurance expense
Director fees and expense
Facilities expense
For the Year Ended
December 31,
2023
$ 3,964,522
2,738,539
1,658,852
1,221,425
1,097,402
933,284
415,326
401,265
$ 12,430,614
2022
$ 3,842,993
3,427,450
1,956,062
1,260,729
1,203,767
1,061,505
398,125
382,204
$ 13,532,835
The decrease in professional fees was primarily due to reduced costs for legal activity, as well as reduced recruiting expenses for
2022 director searches. The decrease in non-cash stock-based compensation expenses was primarily due to the ending of the amortization
period for older equity grants.
Other Income (Expense)
Other income (expense) for the year ended December 31, 2023 totaled approximately $1.9 million of net other expense, an
increase of $0.8 million, as compared to $1.1 million of net other expense for the year ended December 31, 2022. Net other expense for
the year ended December 31, 2023 primarily consisted of approximately $2.4 million of interest expense related to the Avenue loan and
$0.4 million for the potential replacement cost for returned products, primarily offset by $0.2 million of income from the sale of clinical
supplies and $0.7 million of interest income, mainly from Treasury bills. Net other expense for the year ended December 31, 2022
primarily consisted of approximately $1.4 million of interest expense related to the SVB loan and the Avenue loan, primarily offset by
$0.2 million of income from the sale of clinical supplies and $0.1 million of interest income.
Liquidity and Going Concern
We measure our liquidity in a number of ways, including the following:
Cash and Cash Equivalents
Working Capital
Notes Payable (Gross)
Cash Flow
December 31,
2023
$ 14,849,057
2022
$ 22,863,520
$ 11,176,336
$ 23,130,178
$ 15,637,500
$ 10,425,000
Since inception, we have experienced negative cash flows from operations and our operations have primarily been funded by
proceeds received in equity and debt financings. At December 31, 2023, our accumulated deficit since inception was approximately
$145.5 million.
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Our operating needs include the planned costs to operate our business, including amounts required to fund working capital and
capital expenditures. Our future capital requirements and the adequacy of our available funds will depend on many factors, including our
ability to successfully commercialize our products and services. During the years ended December 31, 2023 and 2022, our sources and
uses of cash were as follows:
Net cash used in operating activities for the year ended December 31, 2023 was approximately $23.8 million, which includes
cash used to fund a net loss of $27.3 million, reduced by $1.4 million of net cash used by changes in the levels of operating assets and
liabilities, offset by $4.9 million of non-cash expenses. Net cash used in operating activities for the year ended December 31, 2022 was
approximately $25.1 million, which includes cash used to fund a net loss of $28.0 million, reduced by $2.3 million of net cash used by
changes in the levels of operating assets and liabilities, offset by $5.2 million of net non-cash expenses.
Net cash used in investing activities for the year ended December 31, 2023 was approximately $4.0 million, which includes $2.9
million attributable to purchases of property and equipment and $1.1 million attributable to the license agreement with Formosa. Net
cash used in investing activities for the year ended December 31, 2022 was approximately $0.9 million which was attributable to
purchases of property and equipment.
Net cash provided by financing activities for the year ended December 31, 2023 totaled approximately $19.8 million, which was
primarily attributable to $10.9 million of net proceeds from the sale of common stock and warrants from a registered direct offering, $4.6
million of net proceeds from the sale of common stock and warrants in our at-the-market offering pursuant to the Sales Agreement with
SVB Securities LLC and $4.9 million of net proceeds from the credit facility with Avenue, offset by $0.6 million from the repayment of
notes payable. Net cash provided by financing activities for the year ended December 31, 2022 totaled approximately $21.5 million,
which was primarily attributable to $14.9 million of net proceeds from the sale of common stock and warrants from a registered direct
offering, $5.3 million of net proceeds from the sale of common stock and warrants in our at-the-market offering pursuant to the Sales
Agreement with SVB Securities LLC, or SVB Securities (formerly known as SVB Leerink LLC), and $9.5 million of net proceeds from
the credit facility with Avenue, offset by $8.2 million from the repayment of notes payable.
Contractual Obligations and Commitments
During the next twelve months we have commitments to pay (a) $3.7 million to settle our December 31, 2023 accounts payable,
accrued expenses and other current liabilities, (b) $0.5 million relating to our non-cancelable operating lease commitments; (c) $1.0
million of potential executive severance pay; and (d) $5.8 million of gross payments due under our notes payable and convertible notes
payable (if not previously converted).
After twelve months we have commitments to pay (a) an additional $1.3 million relating to our non-cancelable operating lease
commitments, and $9.8 million of gross payments due in connection with notes payable and convertible notes payable (if not previously
converted).
Avenue Loan and Security Agreement
As presented in Note 7 – Notes Payable and Convertible Notes Payable, on November 22, 2022, we entered into the Loan and
Security Agreement with Avenue, for an aggregate principal amount of up to $15,000,000. The initial tranche of the Loan and Security
Agreement was $10,000,000. Up to $5,000,000 of the principal amount outstanding may be converted at the option of the Lender into
shares of our common stock at a conversion price of $2.148 per share, subject to typical anti-dilution adjustments. On May 22, 2023,
pursuant to the Loan and Security Agreement, we received an additional tranche of non-convertible debt funding in the amount of
$5,000,000. The Avenue loan bears interest at an annual rate equal to the greater of (A) 7.0% and (B) the prime rate as reported in The
Wall Street Journal plus 4.45%. The Avenue loan maturity date is November 1, 2025. The additional funding triggered the extension of
the interest-only period from the original 12 months to 18 months (through May 2024) for the entire outstanding balance due under the
Loan and Security Agreement (initial and additional tranches). Following the interest-only period, we will make equal monthly payments
of principal until the maturity date, plus interest. We must also make a final payment equal to 4.25% of the initial and additional tranches,
amounting to a premium of $637,500 on the aggregate borrowing. If we prepay the Avenue loan, it will be required to pay a prepayment
fee of 2% if the Avenue loan is prepaid during the second year and 1% if the Avenue loan is repaid during the third year.
The Avenue loan requires us to make and maintain representations and warranties and other agreements that are customary in
loan agreements of this type. The Avenue loan is secured by all of our assets globally, including intellectual property. The Avenue loan
also contains customary events of default, including non-payment of principal or interest, violations of covenants, bankruptcy and
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material judgments. Upon the occurrence of an event of default, all interest and principal will be accelerated and immediately become
due and payable. In addition, Avenue will have the right to exercise any other right or remedy provided by applicable law.
Going Concern
As of December 31, 2023, we had cash and cash equivalents of approximately $14.8 million and an accumulated deficit of
approximately $145.5 million. For the years ended December 31, 2023 and 2022, we incurred net losses of approximately $27.3 million
and $28.0 million, respectively, and used cash in operations of approximately $23.8 million and $25.1 million, respectively. We do not
have recurring revenue and have not yet achieved profitability. We expect to continue to incur cash outflows from operations. We expect
that our research and development and general and administrative expenses will continue to increase and, as a result, we will eventually
need to generate significant product revenues to achieve profitability. These circumstances raise substantial doubt about our ability to
continue as a going concern for at least one year from the date that these financial statements are issued. Implementation of our plans and
our ability to continue as a going concern will depend upon our ability to generate sufficient recurring revenues or our ability to raise
further capital, through the sale of additional equity or debt securities or otherwise, to support our future operations.
Our operating needs include the planned costs to operate our business, including amounts required to fund working capital and
capital expenditures. Our future capital requirements and the adequacy of our available funds will depend on many factors, including our
ability to successfully commercialize our products and services, competing technological and market developments, and the need to enter
into collaborations with other companies or acquire other companies or technologies to enhance or complement our product and service
offerings. If we are unable to generate sufficient recurring revenues or secure additional capital, we may be required to curtail our
research and development initiatives and take additional measures to reduce costs in order to conserve our cash.
Risks and Uncertainties
The continuing worldwide implications of the war between Russia and Ukraine remain difficult to predict at this time. The
imposition of sanctions on Russia by the United States and other countries and counter sanctions by Russia, and the resulting economic
impacts on oil prices and other materials and goods, could affect the price of materials used in the manufacture of our product candidates.
If the price of materials used in the manufacturing of our product candidates increase, that would adversely affect our business and the
results of our operations.
Critical Accounting Estimates
We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles, which
require our management to make estimates that affect the reported amounts of assets, liabilities and disclosures of contingent assets and
liabilities at the balance sheet dates, as well as the reported amounts of revenues and expenses during the reporting periods. To the extent
that there are material differences between these estimates and actual results, our financial condition or results of operations would be
affected. We base our estimates on our own historical experience and other assumptions that we believe are reasonable after taking
account of our circumstances and expectations for the future based on available information. We evaluate these estimates on an ongoing
basis.
We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that
were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur
from period to period or use of different estimates that we reasonably could have used in the current period, would have a material
impact on our financial condition or results of operations. There are items within our financial statements that require estimation but are
not deemed critical, as defined above.
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Critical Accounting Policies
The following is not intended to be a comprehensive list of all of our accounting policies or estimates. Our accounting policies
are more fully described in Note 2 – Summary of Significant Accounting Policies, in our financial statements included at the end of this
Annual Report. The following represent our most critical accounting policies:
Use of Estimates
Preparation of financial statements in conformity with accounting principles generally accepted in the United States of America,
or U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial
statements and the amounts disclosed in the related notes to the financial statements. We base our estimates and judgments on historical
experience and on various other assumptions that it believes are reasonable under the circumstances. The amounts of assets and liabilities
reported in our balance sheets and the amounts of expenses reported for each of the periods presented are affected by estimates and
assumptions, which are used for, but not limited to, fair value calculations for equity securities, establishment of valuation allowances for
deferred tax assets, revenue recognition, the recoverability and useful lives of long-lived assets, the realization of inventories and
deferred clinical supply costs, the recovery of deferred costs and the deferral of revenues. Certain of our estimates could be affected by
external conditions, including those unique to us and general economic conditions. It is reasonably possible that actual results could
differ from those estimates.
Impairment of Long-lived Assets
We review for the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying
amount of an asset might not be recoverable. An impairment would be recognized when estimated future cash flows expected to result
from the use of the asset and its eventual disposition are less than its carrying amount.
Stock-Based Compensation
We measure the cost of services received in exchange for an award of equity instruments based on the fair value of the award.
The fair value of the award is measured on the grant date and the fair value amount is then recognized over the period during which
services are required to be provided in exchange for the award, usually the vesting period. Upon the exercise of an option, the Company
issues new shares of common stock out of the shares reserved for issuance under its equity plans.
Operating Leases
We adopted the Accounting Standards Update, or ASU 2016-02,“Leases (Topic 842)” as of December 31, 2022, effective
January 1, 2022. We lease our facilities under non-cancellable operating leases. We evaluate the nature of each lease at the inception of
an arrangement to determine whether it is an operating or financing lease and recognizes the ROU asset and lease liabilities based on the
present value of future minimum lease payments over the expected lease term. We recognize a liability to make lease payments, the
“lease liability”, and an asset representing the right to use the underlying asset during the lease term, the “right-of-use asset”. The lease
liability is measured at the present value of the remaining lease payments, discounted at our incremental borrowing rate. Our leases do
not generally contain an implicit interest rate and therefore the we use the incremental borrowing rate it would expect to pay to borrow
on a similar collateralized basis over a similar term in order to determine the present value of its lease payments. The right-of-use asset is
measured at the amount of the lease liability adjusted for the remaining balance of any lease incentives received, any cumulative prepaid
or accrued rent if the lease payments are uneven throughout the lease term, any unamortized initial direct costs, and any impairment of
the right-of-use-asset. Operating lease expense consists of a single lease cost calculated so that the remaining cost of the lease is allocated
over the remaining lease term on a straight-line basis, variable lease payments not included in the lease liability, and any impairment of
the right-of-use asset.
Recently Issued Accounting Standards
Our recently issued accounting standards are included in Note 2 – Summary of Significant Accounting Policies of our financial
statements included within this Annual Report on Form 10-K.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
As a smaller reporting company, we are not required to provide the information required by this Item.
Item 8. Financial Statements and Supplementary Data.
See the financial statements included at the end of this report beginning on page F-1.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
Not applicable.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Annual Report on Form 10-K, we carried out an evaluation, under the supervision
and with the participation of our management, including our principal executive officer and principal financial and accounting officer, of
the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the
Securities Exchange Act of 1934, as amended, or the Exchange Act.
In designing and evaluating our disclosure controls and procedures, management recognizes that any disclosure controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control
objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that
management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Based on their evaluation, our principal executive officer and principal financial and accounting officer concluded that, as of
December 31, 2023, our disclosure controls and procedures were designed to, and were effective to, provide assurance at a reasonable
level that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and
communicated to our management, including our principal executive officer and principal financial and accounting officer, as
appropriate, to allow timely decisions regarding required disclosures as of December 31, 2023.
Management’s Report on Internal Control over Financial Reporting
Our management, including our principal executive officer and principal financial and accounting officer, is responsible for
establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Our internal control
over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and
expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a
material effect on the financial statements.
Under the supervision and with the participation of our management, including our principal executive officer and principal
financial and accounting officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of
December 31, 2023, based on the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO) (2013 Framework). Based on this evaluation under the 2013 Framework, our principal executive
officer and principal financial and accounting officer have concluded that our internal control over financial reporting was effective as of
December 31, 2023.
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Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting that occurred during the quarter ended December 31,
2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Attestation Report of Registered Public Accounting Firm
This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm
due to an exemption for non-accelerated filers.
Item 9B. Other Information.
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
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Item 10. Directors, Executive Officers, and Corporate Governance.
PART III
Information required by this Item concerning our directors is incorporated by reference from the sections captioned “Election of
Directors” and “Corporate Governance Matters” contained in our proxy statement related to the 2024 Annual Meeting of Stockholders
currently scheduled to be held on June 12, 2024, or 2024 Proxy Statement, which we intend to file with the SEC within 120 days of the
end of our fiscal year pursuant to General Instruction G(3) of Form 10-K.
The information required by this Item concerning our Audit Committee is incorporated by reference from the section captioned
“Corporate Governance Matters—Board Committees—Audit Committee” contained in our 2024 Proxy Statement.
We have adopted a code of business conduct and ethics relating to the conduct of our business by all of our employees,
executive officers, and directors. The policy is posted on our website, www.eyenovia.com.
The information required by this Item concerning our executive officers is incorporated by reference from the section captioned
“Executive Officers” contained in our 2024 Proxy Statement.
The information required by this Item concerning compliance with Section 16(a) of the Exchange Act is incorporated by
reference from the section of our 2024 Proxy Statement captioned “Delinquent Section 16(a) Reports.”
Item 11. Executive Compensation.
The information required by this Item is incorporated by reference to the information under the sections captioned “Executive
Compensation,” and “Director Compensation” in our 2024 Proxy Statement.
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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table provides information as of December 31, 2023 about our common stock that may be issued upon the
exercise of options, warrants and rights under all of our existing equity compensation plans (including individual arrangements):
Equity Compensation Plan Information
Plan Category
Equity compensation plans approved by security holders
2014 Equity Incentive Plan, as amended
Amended and Restated 2018 Omnibus Stock Incentive Plan
Equity compensation plans not approved by security holders
Total
Weighted-
Number of securities
to be issued upon
exercise of
outstanding options,
warrants, and rights
average
exercise price
of outstanding
options,
warrants and
rights
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a)
851,610
4,696,531
$
—
$
5,548,141
3.13
3.17
—
3.17
182,625
1,871,784
—
2,054,409
The other information required by this Item is incorporated by reference to the information under the section captioned
“Security Ownership of Certain Beneficial Owners and Management” contained in our 2024 Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this Item is incorporated by reference to the information under the section captioned “Certain
Relationships and Related-Party Transactions” and “Corporate Governance Matters” in our 2024 Proxy Statement.
Item 14. Principal Accounting Fees and Services.
The information required by this Item is incorporated by reference to the information under the section captioned “Audit
Committee Report” in the proxy statement for the 2024 Annual Meeting of Stockholders.
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PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a) List of documents filed as part of this report:
1. Financial Statements:
The financial statements of the Company and the related reports of the Company’s independent registered public
accounting firm thereon have been filed under Item 8 hereof.
2. Financial Statement Schedules:
None.
3. Exhibits Index
The following is a list of exhibits filed as part of this Annual Report on Form 10-K:
Exhibit
Number
3.1
3.1.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
Incorporated by Reference from Filings as Noted Below (Unless
Otherwise Indicated)
Form
8-K
File No.
001-38365
Exhibit
3.1
Filing Date
January 29, 2018
8-K
001-38365
3.1.1
June 14, 2018
Exhibit Description
Third Amended and Restated Certificate of
Incorporation
Certificate of Amendment to the Third
Amended and Restated Certificate of
Incorporation
Second Amended and Restated Bylaws
Description of Securities
Form of Class A Warrant Issued on March
24, 2020
Form of Class B Warrant Issued on March
24, 2020
Form of Warrant Issued on May 7, 2021
8-K
10-K
8-K
8-K
8-K
001-38365
001-38365
001-38365
001-38365
001-38365
Form of Pre-Funded Warrant Issued on
March 7, 2022
8-K/A
001-38365
Form of Warrant Issued on March 7, 2022
8-K/A
001-38365
Form of Warrant Issued on August 29,
2023
Form of Warrant issued on August 29,
2023
8-K
8-K
99
001-38365
001-38365
4.2
August 29, 2023
3.1
4.1
4.1
4.2
4.1
4.1
4.2
4.1
February 7, 2022
March 31, 2023
March 25, 2020
March 25, 2020
May 10, 2021
March 9, 2022
March 9, 2022
August 29, 2023
Table of Contents
10.1
10.1.1#
10.1.2#
10.2*
10.3*
10.4*
10.5*
10.6
10.7*
10.8*
10.9
10.10
10.11*
10.12*
10.13*
Exclusive License Agreement, dated March
18, 2015, between Eyenovia, Inc. and Senju
Pharmaceutical Co., Ltd.
Amendment to the Exclusive License
Agreement by and between Eyenovia, Inc.
and Senju Pharmaceutical Co., Ltd., dated
April 8, 2020
Letter Agreement by and between
Eyenovia, Inc. and Senju Pharmaceutical
Co., Ltd., dated August 10, 2020
Master Consulting Services Agreement,
dated November 4, 2014, between
Eyenovia, Inc. and Private Medical Equity,
Inc.
Executive Employment Agreement, dated
February 15, 2019, by and between the
Company and Tsontcho Ianchulev
Executive Employment Agreement, dated
February 15, 2019, by and between the
Company and John Gandolfo
Executive Employment Agreement, dated
February 15, 2019, by and between the
Company and John Gandolfo
Form of Nondisclosure, Assignment of
Inventions and Noncompetition Agreement
Eyenovia, Inc. 2014 Equity Incentive Plan,
as amended
Form of Nonqualified Stock Option
Agreement
Registration Rights Agreement, dated
March 23, 2020, between Eyenovia, Inc.
and the investors named therein
Promissory Note and Agreement dated
May 3, 2020
Eyenovia, Inc. Amended and Restated 2018
Omnibus Stock Incentive Plan
Form of Notice of Stock Option Grant and
Award Agreement
Form of Restricted Stock Award
Agreement
S-1
333-222162
10.1
December 19,
2017
10-Q
001-38365
10.24
August 14, 2020
10-Q
001-38365
10.27
August 14, 2020
S-1
333-222162
10.10
December 19,
2017
8-K
001-38365
10.16
8-K
001-38365
10.17
8-K
001-38365
10.19
February 19,
2019
February 19,
2019
February 19,
2019
February 19,
2019
001-38365
10.21
333-233278
10.14
August 14, 2019
333-233278
10.15
August 14, 2019
001-38365
10.23
March 25, 2020
001-38365
10.24
May 8, 2020
001-38365
10.1
June 17, 2022
001-38365
10.14
June 14, 2018
001-38365
10.15
June 14, 2018
8-K
S-8
S-8
8-K
8-K
8-K
8-K
8-K
100
Table of Contents
10.14#
10.15#
10.16*
10.17#
10.18#
10.19
10.20
10.21
10.22
10.23
10.24
10.25
License Agreement by and between
Eyenovia, Inc. and Arctic Vision (Hong
Kong) Limited, dated August 10, 2020
License Agreement by and between
Eyenovia, Inc. and Bausch Health Ireland
Limited, dated October 9, 2020
First Amendment to Executive
Employment Agreement, dated February 1,
2021, by and between the Company and
Michael M. Rowe
Loan and Security Agreement, by and
between Eyenovia, Inc. and Silicon Valley
Bank, dated May 7, 2021
First Amendment to Loan and Security
Agreement, by and between Eyenovia, Inc.
and Silicon Valley Bank, dated September
29, 2021
Waiver Agreement, by and between
Eyenovia, Inc. and Silicon Valley Bank,
dated November 30, 2021
Sales Agreement, by and between
Eyenovia, Inc. and SVB Leerink LLC,
dated December 14, 2021
Securities Purchase Agreement by and
between Eyenovia, Inc. and Armistice
Capital Master Fund Ltd., dated March 3,
2022
Addendum to Executive Employment
Agreement, dated March 10, 2022, by and
between the Company and Tsontcho
Ianchulev
Addendum to Executive Employment
Agreement, dated March 10, 2022, by and
between the Company and John Gandolfo
Addendum to Executive Employment
Agreement, dated March 10, 2022, by and
between the Company and Michael Rowe
Third Amendment to Loan and Security
Agreement, dated as of May 6, 2022, by
and between Eyenovia, Inc. and Silicon
Valley Bank.
10-Q
001-38365
10.28
August 14, 2020
8-K
001-38365
10.1
October 13, 2020
8-K
001-38365
10.1
February 3, 2021
8-K
001-38365
10.1
May 10, 2021
10-Q
001-38365
10.3
8-K
001-38365
10.1
S-3
333-261638
1.2
November 12,
2021
December 3,
2021
December 14,
2021
8-K
001-38365
10.1
March 7, 2022
10-K
001-38365
10.23
March 30, 2022
10-K
001-38365
10.24
March 30, 2022
10-K
001-38365
10.25
March 30, 2022
8-K
001-38365
10.1
May 15, 2022
101
Table of Contents
10.26*#
Employment Agreement, dated July 26,
2022, by and between Eyenovia, Inc, and
Michael Rowe
10-Q
001-38365
10.2
August 11, 2022
10.27*
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35#
10.36
10.37
Executive Chair Agreement, dated August
1, 2022, by and between, Eyenovia, Inc.
and Tsontcho Ianchulev
Non-Employee Director Compensation
Policy, as amended
Loan and Security Agreement, dated
November 22, 2022, by among Eyenovia,
Inc., Avenue Capital Management II, L.P.,
Avenue Venture Opportunities Fund, L.P.
and Avenue Venture Opportunities Fund II,
L.P.
Supplement to the Loan and Security
Agreement, dated November 22, 2022, by
among Eyenovia, Inc., Avenue Capital
Management II, L.P., Avenue Venture
Opportunities Fund, L.P. and Avenue
Venture Opportunities Fund II, L.P.
Subscription Agreement, dated November
22, 2022, by and among Eyenovia, Inc.,
Avenue Venture Opportunities Fund, L.P.
and Avenue Venture Opportunities Fund II,
L.P.
Employment Agreement, dated December
19, 2022, by and between Eyenovia, Inc.
and Bren Kern
10-Q
001-38365
10.3
August 11, 2022
10-Q
001-38365
10.1
November 14,
2022
10-K
001-38365
10.30
March 31, 2023
10-K
001-38365
10.31
March 31, 2023
10-K
001-38365
10.32
March 31, 2023
10-K
001-38365
10.33
March 31, 2023
Form of Restricted Stock Unit Agreement
10-K/A
001-38365
10.34
May 1,2023
Eyenovia, Inc. Amended and Restated
2018 Omnibus Stock Incentive Plan, as
Amended
License Agreement, dated August 15,
2023, by and between Eyenovia, Inc.
and Formosa Pharmaceuticals, Inc.
Securities Purchase Agreement, dated
August 24, 2023
Warrant Amendment Agreement, dated
August 24, 2023
8-K
001-38365
10.1
June 27, 2023
10-Q
001-38365
10.1
November 13,
2023
001-38365
10.1
August 29, 2023
001-38365
10.2
August 29, 2023
8-K
8-K
102
Table of Contents
10.38#
Mutual Termination and Reassignment,
dated January 12, 2024, by and between
Eyenovia, Inc and Bausch + Lomb Ireland
Limited
23.1
31.1
31.2
32.1
32.2
97.1
101
Consent of Marcum LLP
Certification of the Principal Executive
Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
Certification of the Principal Financial
Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
Certification of the Principal Executive
Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Certification of the Principal Financial
Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Policy Relating to Recovery of Erroneously
Awarded Compensation
Inline interactive data files pursuant to Rule
405 of Regulation S-T: (i) Balance Sheets
as of December 31, 2022 and 2021; (ii)
Statements of Operations for the Years
Ended December 31, 2022 and 2021; (iii)
Statements of Changes in Stockholders’
Equity for the Years Ended December 31,
2022 and 2021; (iv) Statements of Cash
Flows for the Years Ended December 31,
2022 and 2021; and (v) Notes to Financial
Statements
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
Filed herewith
Filed herewith
Filed herewith
Filed herewith
Filed herewith
Filed herewith
Filed herewith
Filed herewith
104
Cover Page Interactive Data File - the cover
page XBRL tags are embedded within the
Inline XBRL document contained in
Exhibit 101
--
--
--
Filed herewith
* Management contract or other compensatory plan.
# Certain confidential portions of this Exhibit were omitted by means of marking such portions with brackets (“[***]”) because the
identified confidential portions (i) are not material and (ii) are the type of information that the Company treats as private or
confidential.
Item 16. Form 10-K Summary.
None.
103
Table of Contents
Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: March 18, 2024
EYENOVIA, INC.
By: /s/ Michael Rowe
Michael Rowe
Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
Signature
/s/ Michael Rowe
Michael Rowe
/s/ John Gandolfo
John Gandolfo
/s/ Tsontcho Ianchulev
Tsontcho Ianchulev
/s/ Rachel Jacobson
Rachel Jacobson
/s/ Charles E. Mather IV
Charles E. Mather IV
/s/ Ram Palanki
Ram Palanki
/s/ Ellen Strahlman
Ellen Strahlman
/s/ Michael Geltzeiler
Michael Geltzeiler
Date
March 18, 2024
March 18, 2024
March 18, 2024
March 18, 2024
March 18, 2024
March 18, 2024
March 18, 2024
March 18, 2024
Title
Chief Executive Officer
(Principal Executive Officer) and Director
Chief Financial Officer
(Principal Financial and Accounting Officer)
Director
Director
Director
Director
Director
Director
104
Table of Contents
EYENOVIA, INC.
INDEX TO FINANCIAL STATEMENTS
Years Ended December 31, 2023 and 2022
Report of Independent Registered Public Accounting Firm (PCAOB ID: 688)
Balance Sheets as of December 31, 2023 and 2022
Statements of Operations for the Years Ended December 31, 2023 and 2022
Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2023 and 2022
Statements of Cash Flows for the Years Ended December 31, 2023 and 2022
Notes to Financial Statements
F-1
Page
Number
F-2
F-4
F-5
F-6
F-7
F-9
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of Eyenovia, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Eyenovia, Inc. (the “Company”) as of December 31, 2023 and 2022,
the related statements of operations, changes stockholders’ equity and cash flows for each of the two years in the period
ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the
financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023
and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31,
2023, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.
As more fully described in Note 2, the Company has incurred significant losses and needs to raise additional funds to meet
its obligations and sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as
a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion
on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether
due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control
over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial
reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over
financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of
the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or
required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the
financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that
there are no critical audit matters.
/s/ Marcum LLP
F-2
Table of Contents
Marcum LLP
We have served as the Company’s auditor since 2017.
New York, NY
March 18, 2024
F-3
EYENOVIA, INC.
Balance Sheets
Table of Contents
Assets
Current Assets
Cash and cash equivalents
Inventories
Deferred clinical supply costs
License fee and expense reimbursements receivable
Security deposits, current
Prepaid expenses and other current assets
Total Current Assets
Property and equipment, net
Security deposits, non-current
Intangible assets
Operating lease right-of-use asset
Equipment deposits
Total Assets
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable
Accrued compensation
Accrued expenses and other current liabilities
Operating lease liabilities - current portion
Notes payable - current portion, net of debt discount of $503,914 and $33,885 as of December 31, 2023 and 2022,
respectively
Convertible notes payable - current portion, net of debt discount of $0 and $33,885 as of December 31, 2023 and
2022, respectively
Total Current Liabilities
Operating lease liabilities - non-current portion
Notes payable - non-current portion, net of debt discount of $448,367 and $813,229 as of December 31, 2023 and 2022,
respectively
Convertible notes payable - non-current portion, net of debt discount of $398,569 and $813,229 as of December 31, 2023
and 2022, respectively
Total Liabilities
Commitments and contingencies (Note 9)
Stockholders' Equity:
$
$
$
December 31,
2023
2022
$
$
$
14,849,057
109,798
4,256,793
123,833
1,506
1,365,731
20,706,718
3,374,384
197,168
2,122,945
1,666,718
711,441
28,779,374
1,753,172
1,658,613
287,928
501,250
5,329,419
—
22,863,520
—
2,284,931
1,183,786
119,550
1,190,719
27,642,506
1,295,115
80,874
—
1,291,592
726,326
31,036,413
1,428,283
1,747,191
503,076
484,882
174,448
174,448
9,530,382
4,512,328
1,292,667
907,644
4,355,800
4,190,938
4,601,431
4,190,938
19,780,280
13,801,848
Preferred stock, $0.0001 par value, 6,000,000 shares authorized;
0 shares issued and outstanding as of December 31, 2023 and 2022
Common stock, $0.0001 par value, 90,000,000 shares authorized; 45,553,026 and 36,668,980 shares issued and
outstanding as of December 31, 2023 and 2022, respectively
Additional paid-in capital
Accumulated deficit
Total Stockholders’ Equity
4,555
154,486,098
(145,491,559)
3,667
135,461,361
(118,230,463)
8,999,094
17,234,565
Total Liabilities and Stockholders’ Equity
$
28,779,374
$
31,036,413
The accompanying notes are an integral part of these financial statements.
F-4
EYENOVIA, INC.
Statements of Operations
Table of Contents
Operating Income
Revenue
Cost of revenue
Gross Profit
Operating Expenses:
Research and development
General and administrative
Total Operating Expenses
Loss From Operations
Other (Expense) Income:
Other (expense) income , net
Interest expense
Interest income
Total Other Expense
Net Loss
Net Loss Per Share - Basic and Diluted
Shares Outstanding - Basic and Diluted
For the Years Ended
December 31,
2023
2022
$
$
3,787
(3,787)
—
—
—
—
12,975,832
12,430,614
25,406,446
13,378,680
13,532,835
26,911,515
(25,406,446)
(26,911,515)
(176,411)
(2,371,851)
693,612
(1,854,650)
197,090
(1,380,058)
83,326
(1,099,642)
$ (27,261,096)
$ (28,011,157)
$
(0.66)
$
(0.83)
41,032,970
33,649,747
The accompanying notes are an integral part of these financial statements.
F-5
Table of Contents
EYENOVIA, INC.
Statements of Changes in Stockholders’ Equity
For the Years Ended December 31, 2023 and 2022
Common Stock
Shares
Amount
Additional
Paid-In
Capital
Accumulated
Deficit
Total
Stockholders'
Equity
Balance - January 1, 2022
Issuance of common stock and warrants in direct offering [1]
Issuance of common stock in debt financing [2]
Origination costs related to equity in debt financing
Issuance of common stock in At the Market offering [3]
Exercise of pre-funded stock warrants
Stock-based compensation
Issuance of common stock related to vested restricted stock units
Net loss
Balance - December 31, 2022
Issuance of common stock and warrants in registered direct offering [4][8]
Issuance of common stock as consideration for licensing agreement [5]
Exercise of pre-funded stock warrants
Issuance of common stock in At the Market offering [6]
Cashless exercise of stock options
Exercise of stock options
Stock-based compensation
Issuance of common stock related to vested restricted stock units
Warrant modification - incremental value [7]
Warrant modification - in issuance costs for registered direct offering [8]
Net loss
Balance - December 31, 2023
$
28,426,616
3,000,000
547,807
—
2,716,061
1,870,130
—
108,366
—
36,668,980
4,198,633
487,805
2,252,979
1,866,147
20,749
10,000
—
47,733
—
—
—
45,553,026
$
2,844
300
54
—
271
187
—
11
—
$ 110,683,077
14,897,608
859,679
(44,375)
5,281,505
18,514
3,765,364
(11)
—
3,667
420
49
225
187
2
1
—
4
—
—
—
4,555
135,461,361
10,885,694
999,951
22,304
4,591,705
(2)
27,199
2,497,890
(4)
1,738,700
(1,738,700)
—
$ 154,486,098
$ (90,219,306)
—
—
—
—
—
—
—
(28,011,157)
(118,230,463)
—
—
—
—
—
—
—
—
—
—
(27,261,096)
$ (145,491,559)
$ 20,466,615
14,897,908
859,733
(44,375)
5,281,776
18,701
3,765,364
—
(28,011,157)
17,234,565
10,886,114
1,000,000
22,529
4,591,892
—
27,200
2,497,890
—
1,738,700
(1,738,700)
(27,261,096)
8,999,094
$
[1] Includes gross proceeds of $14,981,299 less total issuance costs of $83,391.
[2] Relative fair value of stock issued in connection with debt.
[3] Includes gross proceeds of $5,445,130 less total issuance costs of $163,354.
[4] Includes gross proceeds of $11,977,468 less total cash issuance costs of $1,091,354.
[5] Shares issued as partial consideration for License Agreement with Formosa Pharmaceuticals Inc.
[6] Includes gross proceeds of $4,733,909 less total issuance costs of $142,017.
[7] Warrant originally granted in the March 2022 offering was modified in connection with the registered direct offering.
[8] Warrant modification in connection with registered direct offering accounted for as a non-cash issuance cost of the registered direct
offering, but is presented on a separate line item for clarity.
The accompanying notes are an integral part of these financial statements.
F-6
Table of Contents
EYENOVIA, INC.
Statements of Cash Flows
Cash Flows From Operating Activities
Net loss
Adjustments to reconcile net loss to net cash
used in operating activities:
Stock-based compensation
Depreciation of property and equipment
Amortization of debt discount
Write-off of property and equipment
Write-down of inventories to net realizable value
Provision for clinical supplies to be returned
Non-cash rent expense
Changes in operating assets and liabilities:
Prepaid expenses and other current assets
License fee and expense reimbursements receivables
Deferred clinical supply costs
Inventories
Security and equipment deposits
Accounts payable
Accrued compensation
Accrued expenses and other current liabilities
Lease liabilities
Net Cash Used In Operating Activities
Cash Flows From Investing Activities
Purchases of property and equipment
Vendor deposits for property and equipment
Investment in intangible asset
Net Cash Used In Investing Activities
Cash Flows From Financing Activities
Proceeds from sale of common stock and warrants in direct offering [1][2]
Payment of offering issuance costs
Proceeds from sale of common stock in At the Market offering
Payment of issuance costs for At the Market offering
Proceeds from exercise of stock options
Proceeds from exercise of stock warrants
Proceeds from note payable and equity issued to Avenue
Payment of issuance costs for equity issued to Avenue
Payment of issuance costs for notes issued to Avenue
Repayments of notes payable
Net Cash Provided By Financing Activities
Net Decrease in Cash and Cash Equivalents
Cash and Cash Equivalents - Beginning of Year
Cash and Cash Equivalents - End of Year
For the Years Ended
December 31,
2023
2022
$
(27,261,096)
$
(28,011,157)
2,497,890
783,208
681,860
—
12,218
400,000
529,311
434,128
1,059,953
(2,271,862)
(122,016)
1,750
324,889
(88,578)
(315,148)
(503,046)
(23,836,539)
(2,847,592)
—
(1,122,945)
(3,970,537)
11,977,468
(1,091,354)
4,733,909
(142,017)
27,200
22,529
5,000,000
—
(125,982)
(609,140)
3,765,364
307,430
411,918
209,040
—
—
474,778
219,555
621,279
(2,284,931)
—
(81,389)
(185,821)
203,573
(342,643)
(412,478)
(25,105,482)
(540,360)
(334,385)
—
(874,745)
14,981,299
(83,391)
5,445,130
(163,354)
—
18,701
10,000,000
(46,836)
(469,320)
(8,175,332)
19,792,613
21,506,897
(8,014,463)
(4,473,330)
22,863,520
27,336,850
$
14,849,057
$
22,863,520
The accompanying notes are an integral part of these financial statements.
F-7
Table of Contents
EYENOVIA, INC.
Statements of Cash Flows, continued
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest
Supplemental Disclosure of Non-Cash Investing and Financing Activities
Purchase of insurance policy financed by note payable
Recognition of right-of-use asset for lease liability upon adoption of ASU 2016-02
Right-of-use assets obtained in exchange for lease liabilities
Right-of-use assets and lease liabilities recognized upon lease renewal
Vendor deposits applied to purchases of property and equipment
Original issue discount on notes payable
Warrant modification - incremental value
Issuance of common stock as consideration for licensing agreement
Cashless exercise of stock options
Common shares issued recorded as debt discount for Avenue Loan
Issuance of common stock related to vested restricted stock units
For the Years Ended
December 31,
2023
2022
$
$
$
$
$
$
$
$
$
$
$
$
1,690,548
609,140
$
$
— $
— $
904,437
14,885
212,500
1,738,700
1,000,000
2
$
$
$
$
$
$
315,550
675,332
618,906
1,186,098
—
—
—
—
—
—
— $
4
$
859,733
11
[1] For 2022, includes gross proceeds of $14,981,299, of which $5,741,299 is pre-funded warrants.
[2] For 2023, includes gross proceeds of $11,977,468, of which $4,168,011 is pre-funded warrants.
The accompanying notes are an integral part of these financial statements.
F-8
Table of Contents
EYENOVIA, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Note 1 – Business Organization and Nature of Operations
Eyenovia, Inc., (“Eyenovia”, or “the Company”), is an ophthalmic technology company developing the Optejet® delivery system for use
both in combination with its own drug-device therapeutic programs as well as out-licensing for additional indications. Eyenovia’s aim is
to improve the delivery of topical ophthalmic medication through ergonomic design that facilitates ease-of-use and delivery of more
physiologically appropriate medication volume, with the goal to reduce side effects and improve tolerability, and introduce digital health
technology to improve therapy compliance and ultimately medical outcomes. The ergonomic and functional design of the Optejet®
allows for horizontal drug delivery and eliminates the need to tilt the head back or the manual dexterity to squeeze a bottle to administer
medications. Drug is delivered in a microscopic array of droplets faster than the blink reflex to help ensure instillation success. The
precise delivery of a low-volume columnar spray by the Optejet® device minimizes contamination with a non-protruding nozzle and
self-closing shutter. In clinical trials, the Optejet® has demonstrated that its targeted delivery achieves a high rate of successful
administration, with 98% of sprays being accurately delivered upon first attempt compared to the established rate reported with
traditional eye drops of ~ 50%. A more physiologically appropriate volume of medication in the range of seven to nine microliters is
delivered by the Optejet, approximately one fifth of the 35 to 50 microliter dose typically delivered in a single eye drop. Lower volume
of medication exposes the ocular surface to less active ingredient and preservatives, potentially reducing ocular stress and surface
damage and improving tolerability. The lower volume also minimizes the potential for drug to enter systemic circulation, with the goal of
avoiding some common side effects that are related to overdosing of the eye. Versions of the Optejet are being developed with on-board
digital technology to provide reminders via Bluetooth to smart devices and date and time stamp device use. This information can then be
used by practitioners and health care systems to measure treatment compliance and improve medical decision making. In this way, the
Optejet could serve as an extension of the physician’s office by providing information that is not currently possible to collect except
through the use of diaries. To address unmet medical needs, the Company is developing the next generation of smart ophthalmic
therapeutics to target new indications or new combinations where there are currently no or few drug therapies approved by the U.S. Food
and Drug Administration, or FDA. The Company’s investigational products are classified by the FDA as drug-device combination
products with drug primary mode of action, meaning that the Center for Drug Evaluation and Research, or CDER, is designated as the
lead center with primary jurisdictional oversight. Accordingly, the product candidates are submitted to the FDA and CDER for premarket
review and approval under new drug applications, or NDAs.
Note 2 – Summary of Significant Accounting Policies
Liquidity and Going Concern
As of December 31, 2023, the Company had unrestricted cash and cash equivalents of approximately $14.8 million and an accumulated
deficit of approximately $145.5 million. For the years ended December 31, 2023 and 2022, the Company incurred net losses of
approximately $27.3 million and $28.0 million, respectively, and used cash in operations of approximately $23.8 million and $25.1
million, respectively. The Company does not have recurring revenue and has not yet achieved profitability. The Company expects to
continue to incur cash outflows from operations for the near future. The Company expects that its research and development and general
and administrative expenses will continue to increase and, as a result, it will eventually need to generate significant product revenues to
achieve profitability. These circumstances raise substantial doubt about the Company’s ability to continue as a going concern for at least
one year from the date that these financial statements are issued. Implementation of the Company’s plans and its ability to continue as a
going concern will depend upon the Company’s ability to generate sufficient recurring revenues or the Company’s ability to raise further
capital, through the sale of additional equity or debt securities or otherwise, to support its future operations.
The Company’s operating needs include the planned costs to operate its business, including amounts required to fund working capital
and capital expenditures. The Company’s future capital requirements and the adequacy of its available funds will depend on many
factors, including the Company’s ability to successfully commercialize its products and services, competing technological and market
developments, and the need to enter into collaborations with other companies, or acquire other companies or technologies to enhance or
complement its product and service offerings. If the Company is unable to generate sufficient recurring revenues or secure additional
capital, it may be required to curtail its research and development initiatives and take additional measures to reduce costs in order to
conserve its cash.
Table of Contents
Use of Estimates
EYENOVIA, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, or U.S.
GAAP, requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements
and the amounts disclosed in the related notes to the financial statements. The Company bases its estimates and judgments on historical
experience and on various other assumptions that it believes are reasonable under the circumstances. The amounts of assets and liabilities
reported in the Company’s balance sheets and the amounts of expenses reported for each of the periods presented are affected by
estimates and assumptions, which are used for, but not limited to, fair value calculations for equity securities, establishment of valuation
allowances for deferred tax assets, revenue recognition, the recoverability and useful lives of long-lived assets, the realization of
inventories and deferred clinical supply costs, the recovery of deferred costs and the deferral of revenues. Certain of the Company’s
estimates could be affected by external conditions, including those unique to the Company and general economic conditions. It is
reasonably possible that actual results could differ from those estimates.
See Note 2 - Summary of Significant Accounting Policies — Stock-Based Compensation for additional discussion of the use of estimates
in estimating the fair value of the Company’s common stock.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents in the
financial statements. As of December 31, 2023 and 2022, the Company had Treasury bills with original maturity dates of three months or
less in the amount of $5,450,118 and $0, respectively.
The Company has cash deposits in financial institutions that, at times, may be in excess of Federal Deposit Insurance Corporation
(“FDIC”) insurance limits. The Company has not experienced losses in such accounts and periodically evaluates the creditworthiness of
its financial institutions. As of December 31, 2023 and 2022, the Company had cash and cash equivalent balances in excess of FDIC
insurance limits of $14,243,870 and $22,613,520, respectively.
On March 10, 2023, Silicon Valley Bank (“SVB”), was closed by the California Department of Financial Protection and Innovation, and
the FDIC was appointed as receiver. The Company has deposit accounts at SVB. The standard deposit insurance amount is up to
$250,000 per depositor, per insured bank, for each account ownership category. As of December 31, 2023, the Company had
approximately $106,000 in deposit accounts at SVB.
Property and Equipment, Net
Property and equipment are stated at cost, net of accumulated depreciation, which is recorded commencing at the in-service date using
the straight-line method at rates sufficient to charge the cost of depreciable assets to operations over their estimated useful lives, which
range from 1 to 10 years. Leasehold improvements are amortized over the lesser of (a) the useful life of the asset; or (b) the remaining
lease term. Maintenance and repairs are charged to operations as incurred. The Company capitalizes costs attributable to the betterment
of property and equipment when such betterment extends the useful life of the assets. Vendor deposits toward the purchase of property
and equipment are reflected as equipment deposits on the accompanying balance sheets. The Company commences depreciation of assets
when they are placed in service.
Impairment of Long-lived Assets
The Company reviews for the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying
amount of an asset might not be recoverable. An impairment would be recognized when estimated future cash flows expected to result
from the use of the asset and its eventual disposition are less than its carrying amount. The Company did not record any impairment
losses during the years ended December 31, 2023 and 2022.
F-10
Table of Contents
Fair Value of Financial Instruments
EYENOVIA, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
The Company measures the fair value of financial assets and liabilities based on Accounting Standards Codification, or ASC Topic 820
“Fair Value Measurements and Disclosures”, or ASC 820, which defines fair value, establishes a framework for measuring fair value,
and expands disclosures about fair value measurements.
ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the
principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement
date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the
use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 — quoted prices in active markets for identical assets or liabilities;
Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable; and
Level 3 — inputs that are unobservable (for example, cash flow modeling inputs based on assumptions).
The carrying amounts of the Company’s financial instruments, such as cash and cash equivalents, restricted cash, accounts payable, and
notes payable approximate fair values due to the short-term nature or effective interest rates of these instruments.
Income Taxes
The Company is subject to Federal, New York State and City, and State of California income taxes and files tax returns in those
jurisdictions.
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of items that have been included or
excluded in the financial statements or tax returns. Deferred tax assets and liabilities are determined on the basis of the difference
between the tax basis of assets and liabilities and their respective financial reporting amounts, or temporary differences, at enacted tax
rates in effect for the years in which such temporary differences are expected to reverse.
The Company utilizes a recognition threshold and measurement process for financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return.
The Company’s policy is to classify assessments, if any, for tax-related interest as interest expense and penalties as general and
administrative expenses in the statements of operations.
Revenue Recognition
The Company’s revenues are generated primarily through research, development and commercialization agreements. The terms of such
agreements may contain multiple promised goods and services, which may include (i) licenses to its intellectual property, and (ii) in
certain cases, payment in connection with the manufacturing and delivery of clinical supply materials. Payments to the Company under
these arrangements typically include one or more of the following: non-refundable, upfront license fees; milestone payments; payments
for clinical product supply, and royalties on future product sales.
The Company analyzes its arrangements to assess whether such arrangements involve joint operating activities. For collaboration
arrangements that are deemed to be within the scope of ASC Topic 808, “Collaborative Arrangements”, or ASC 808, the Company
allocates the contract consideration between such joint operating activities and elements that are reflective of a vendor-customer
relationship and, therefore, within the scope of ASC Topic 606, “Revenue from Contracts with Customers”, or ASC 606. The Company’s
policy is to recognize amounts allocated to joint operating activities as a reduction in research and development expense.
F-11
Table of Contents
EYENOVIA, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Under ASC 606, the Company recognizes revenue when its customers obtain control of promised goods or services, in an amount that
reflects the consideration the Company expects to receive in exchange for those goods or services. To determine revenue recognition for
arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps:
●
●
●
●
●
Step 1: Identify the contract with the customer;
Step 2: Identify the performance obligations in the contract;
Step 3: Determine the transaction price;
Step 4: Allocate the transaction price to the performance obligations in the contract; and
Step 5: Recognize revenue when the company satisfies a performance obligation.
The Company recognizes revenue primarily from the following type of contract:
Product sales – Revenue is recognized at the point in time the customer obtains control of the goods and the Company satisfies its
performance obligation, which is generally at the time it ships the product to the customer.
The Company must make significant judgments in its revenue recognition process, including identifying performance obligations in the
contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each
performance obligation. Milestone payments represent variable consideration that will be recognized when the performance obligation is
achieved. Sales-based royalty payments derived from usage of intellectual property are recognized when those sales occur.
Arrangements that include rights to additional goods or services that are exercisable at a customer’s discretion are generally considered
discretionary purchase options. The Company assesses if these options provide a material right to the customer and if so, they are
considered performance obligations.
During 2020, the Company entered into a license agreement, or the Arctic Vision License Agreement, with Arctic Vision (Hong Kong)
Limited, or Arctic Vision, and a license agreement, or the Bausch License Agreement, with Bausch Health Companies, Inc., or Bausch +
Lomb. Each license has three revenue components:
an upfront license fee;
1)
2) milestone payments and
royalty payments.
3)
Arctic Vision License Agreement
On August 10, 2020, the Company entered into the Arctic Vision License Agreement pursuant to which Arctic Vision may develop and
commercialize MicroPine for the treatment of progressive myopia and MicroLine for the treatment of presbyopia in Greater China
(mainland China, Hong Kong, Macau and Taiwan) and South Korea. On September 14, 2021, the Company and Arctic Vision executed
Amendment 1 to the Arctic Vision License Agreement pursuant to which Arctic Vision may develop and commercialize MicroStat for
the treatment of mydriasis in Greater China and South Korea.
Milestone Payments
The Company may receive up to $37.7 million in milestone payments in connection with the Arctic Vision License Agreement, as
amended, based on various development and regulatory milestones, including the initiation of clinical research and regulatory approvals
in Greater China and South Korea, related to the filing of marketing authorization applications of approximately $13.2 million and the
receipt of regulatory approvals of approximately $24.5 million. The Company currently anticipates the remaining milestone related
performance obligations to be achieved between late 2024 and late 2025.
F-12
Table of Contents
Royalty Payments
EYENOVIA, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Arctic Vision also will purchase its supply of MicroPine, MicroLine and MicroStat from the Company or, for such products not supplied
by the Company, pay the Company a mid-single digit percentage royalty on net sales of such products, subject to certain adjustments. No
royalty payments were earned through December 31, 2023. The Company will pay a percentage in the range from 30% to 40% of such
payments, royalties, or net proceeds of such supply to Senju pursuant to the Senju License Agreement. See Note 10—Related Party
Transactions—Senju License Agreement for additional details.
Bausch License Agreements
On October 9, 2020, the Company entered into the Bausch License Agreement pursuant to which Bausch + Lomb may develop and
commercialize the Bausch Licensed Product in the Licensed Territory. Bausch + Lomb could terminate the Bausch License Agreement,
with respect to the Bausch Licensed Product to either country in the Licensed Territory, at any time for convenience upon 90 days’
written notice.
On January 12, 2024, the Company and Bausch + Lomb entered into a Letter Agreement (the “Letter Agreement”), pursuant to which
Eyenovia will reacquire the rights to the Bausch Licensed Product (see Note 13 – Subsequent Events). The terms of the agreement
include the transfer of the rights and certain assets relating to the Bausch Licensed Product from Bausch + Lomb to the Company in
exchange for cash and common stock consideration. In addition, under the terms of the Letter Agreement, the Company has also agreed
to pay Bausch + Lomb a low single-digit royalty on its net sales of the Bausch Licensed Product in the United States and Canada for a
period of ten years from the date of the first commercial sale by the Company (or its affiliates or licensees) of the Bausch Licensed
Product in the United States. Under the Letter Agreement, (i) the Company will re-acquire any and all licenses and other rights granted
by the Company to Bausch + Lomb under the original Bausch License Agreement, (ii) any and all licenses and other rights granted by
Bausch + Lomb to the Company under the License Agreement are terminated, other than as set forth in the Letter Agreement, and (iii)
other than as set forth in the Letter Agreement, Bausch + Lomb is released from all of their ongoing obligations under the License
Agreement, including development and commercialization obligations.
In connection with the entry into the Letter Agreement, the Company will issue Bausch + Lomb $ 3.0 million in shares of the Company’s
common stock, within ten business days of the completion of the Regulatory Transfers. Under the Letter Agreement, the Company has
also agreed to pay Bausch + Lomb an upfront payment of $ 2.0 million in cash.
Clinical Supply Arrangements
Bausch + Lomb and Arctic Vision had contracted with the Company to manufacture and supply them with the appropriate drug-device
combination products to conduct their clinical trials on a cost plus 10% mark-up basis. Based on the Letter Agreement with Bausch +
Lomb referenced above, the arrangement with Bausch + Lomb is terminated. The arrangement with Arctic Vision is still in place. The
Company’s licensing agreement with Arctic Vision represent collaborative arrangements and they are not a customer with respect to the
clinical supply arrangements. The Company’s policy is to (a) defer the materials and manufacturing costs in order to properly match
them up against the income from the clinical supply arrangements; and (b) report the net income from the clinical supply arrangements as
other income. Deferred clinical supply costs were $4.3 million and $2.3 million at December 31, 2023 and 2022, respectively. Net
income from the sale of clinical supplies was included in other income and amounted to $0.2 million for each of the years ended
December 31, 2023 and 2022, but a $0.4 million provision for possible product returns was also charged against the results for the year
ended December 31, 2023. This provision was for the cost to replace or rework the defective clinical supply product. See Note 9 –
Commitments and Contingencies – Clinical Supply Returns.
Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method. The cost of
inventory that is sold to third parties is included within cost of sales. The Company will periodically review for slow-moving, excess or
obsolete inventories.
F-13
Table of Contents
EYENOVIA, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Inventory is primarily comprised of drug-device combination products, which are available for commercial sale, as follows:
Finished goods
Work-in-process
Raw materials
Total inventory
Intangible Assets
December 31,
2023
30,683
—
79,115
109,798
$
$
The application of the guidance in ASC 805 (“Business Combinations”) on accounting for business combinations can differ significantly
depending on whether the acquired entity is considered a “business” or an “asset.” A determination of whether the transaction
represented an asset acquisition or a business combination must be made.
On August 15, 2023 (the “Effective Date”), the Company entered into a license agreement (the “License”) with Formosa
Pharmaceuticals Inc. (the “Licensor”), whereby the Company acquired the exclusive U.S. rights to commercialize any product related to
a novel formulation of clobetasol propionate ophthalmic suspension, 0.05%, which was approved by the FDA for ophthalmic use for
inflammation and pain after ocular surgery and supplemental disease indications, if any, associated with the New Drug Application for
the Licensed Product. The License will remain in effect for ten years from the date of the first commercial sale of a Licensed Product,
unless earlier terminated. The Company paid the Licensor the aggregate amount of $2,000,000 (the “Upfront Payment”), consisting of
(a) cash in the amount of $1,000,000 and (b) 487,805 shares of common stock valued at $1,000,000, which is included in Intangible
Assets on the accompanying balance sheet. In addition to the Upfront Payment, the Company also capitalized $122,945 of transaction
costs, which were primarily legal expenses. In addition, the Company must pay the Licensor up to $4 million upon the achievement of
certain development milestones and up to $80 million upon the achievement of certain sales milestones. The initial trigger for
development milestone payments is FDA approval of the Licensed Product. These contingent payments will be recorded when payment
becomes probable and estimable.
It was determined that the transaction represented an asset acquisition, rather than a business combination, because substantially all of the
fair value of the assets acquired is concentrated in a single identifiable asset. Consequently, the accounting is pursuant to the cost
accumulation model. The Upfront Payment has been capitalized as an intangible asset by the Company, and will be amortized over the
useful life of 10 years, beginning on the date of the first commercial sale of the Licensed Product.
Operating Leases
The Company adopted the Accounting Standards Update, or ASU 2016-02,“Leases (Topic 842)” as of December 31, 2022, effective
January 1, 2022. The Company leases its facilities under non-cancellable operating leases. The Company evaluates the nature of each
lease at the inception of an arrangement to determine whether it is an operating or financing lease and recognizes the right-of-use asset
and lease liabilities based on the present value of future minimum lease payments over the expected lease term. The Company recognizes
a liability to make lease payments, the “lease liability”, and an asset representing the right to use the underlying asset during the lease
term, the “right-of-use asset”. The lease liability is measured at the present value of the remaining lease payments, discounted at the
Company’s incremental borrowing rate. The Company’s leases do not generally contain an implicit interest rate and therefore the
Company uses the incremental borrowing rate it would expect to pay to borrow on a similar collateralized basis over a similar term in
order to determine the present value of its lease payments. The right-of-use asset is measured at the amount of the lease liability adjusted
for the remaining balance of any lease incentives received, any cumulative prepaid or accrued rent if the lease payments are uneven
throughout the lease term, any unamortized initial direct costs, and any impairment of the right-of-use-asset. Operating lease expense
consists of a single lease cost calculated so that the remaining cost of the lease is allocated over the remaining lease term on a straight-
line basis, variable lease payments not included in the lease liability, and any impairment of the right-of-use asset.
Research and Development
Research and development expenses are charged to operations as incurred. The Company records prepaid expenses on its balance sheet
for the payment of research and development expenses in advance of services being provided.
F-14
Table of Contents
EYENOVIA, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
The Company’s license agreements were determined to represent collaborative arrangements. Pursuant to these collaborative
arrangements, the licensee is required to reimburse the Company for certain research and development expenses. Providing research and
development activities in the context of a collaboration agreement is not an ordinary activity for the Company. Accordingly, the licensee
is not a customer with respect to the reimbursements and such payments are not subject to ASC 606 – Revenue Recognition. The
Company’s policy is to recognize the reimbursements as contra – research and development expense. The receivable for such payments,
plus other license payments, is included in “license fee and expense reimbursements receivable” on the accompanying balance sheets.
Stock-Based Compensation
The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the
award. The fair value of the award is measured on the grant date and the fair value amount is then recognized over the period during
which services are required to be provided in exchange for the award, usually the vesting period. Upon the exercise of an option, the
Company issues new shares of common stock out of the shares reserved for issuance under its equity plans. See Note 11 – Stockholders’
Equity – Stock Options for additional information related to estimating the fair value of stock options.
Net Loss Per Share of Common Stock
Basic net loss per share of common stock is computed by dividing net loss by the weighted average number of shares of common stock
outstanding during the period, plus fully vested shares that are subject to issuance for little or no monetary consideration. Diluted loss per
share reflects the potential dilution that could occur if securities or other instruments to issue common stock were exercised or converted
into common stock. The following table presents the computation of basic and diluted net loss per common share:
Numerator:
Net income (loss)
Net loss attributable to common stockholders
Denominator (weighted average quantities):
Common shares issued
Add: Prefunded warrants
Add: Undelivered vested restricted shares
Denominator for basic and diluted net loss per share
For the Years Ended
December 31,
2023
2022
$ (27,261,096) $ (28,011,157)
$ (27,261,096) $ (28,011,157)
39,907,873
1,042,033
83,064
41,032,970
33,252,644
333,037
64,066
33,649,747
Basic and diluted net loss per common share
$
(0.66) $
(0.83)
The following securities are excluded from the calculation of weighted average dilutive shares of common stock because their inclusion
would have been anti-dilutive:
Warrants
Options
Convertible notes
Restricted stock units
Total potentially dilutive shares
F-15
December 31,
2023
10,926,554
5,306,377
2,327,747
106,019
2022
6,087,845
5,380,553
—
172,800
18,666,697 11,641,198
Table of Contents
Subsequent Events
EYENOVIA, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
The Company has evaluated subsequent events through the date which the financial statements were issued. Based upon the evaluation,
the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in
the financial statements, except as disclosed.
Recently Issued Accounting Standards
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The
amendments in this update address investor requests for more transparency about income tax information through improvements to
income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This update also includes certain
other amendments to improve the effectiveness of income tax disclosures. The amendments in ASU 2023-09 are effective for fiscal years
beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this standard, but
does not expect it to have a material impact on its financial statements.
Recently Adopted Accounting Standards
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326)” and also issued subsequent
amendments to the initial guidance under ASU 2018-19, ASU 2019-04 and ASU 2019-05 (collectively, “Topic 326”). Topic 326 requires
the measurement and recognition of expected credit losses for financial assets held at amortized cost. This replaces the existing incurred
loss model with an expected loss model and requires the use of forward-looking information to calculate credit loss estimates. The
Company adopted ASU 2016-13 on January 1, 2023. The adoption of ASU 2016-13 did not have a material impact on the Company’s
financial position, results of operations or cash flows.
In August 2020, the FASB issued ASU 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20)” and “Derivatives
and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an
Entity’s Own Equity”, to clarify the accounting for certain financial instruments with characteristics of liabilities and equity. The
amendments in this update reduce the number of accounting models for convertible debt instruments and convertible preferred stock by
removing the cash conversion model and the beneficial conversion feature model. Limiting the accounting models will result in fewer
embedded conversion features being separately recognized from the host contract. Convertible instruments that continue to be subject to
separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet
the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt
instruments issued with substantial premiums for which the premiums are recorded as paid-in-capital. In addition, ASU 2020-06
improves disclosure requirements for convertible instruments and earnings-per-share guidance. ASU 2020-06 also revises the derivative
scope exception guidance to reduce form-over-substance-based accounting conclusions driven by remote contingent events. The
amendments in this update are effective for the Company in fiscal years beginning after December 15, 2023, and interim periods within
those fiscal years. Early adoption is permitted. The Company early adopted ASU 2020-06 effective January 1, 2023 which eliminates the
need to assess whether a beneficial conversion feature needs to be recognized upon the issuance of new convertible instruments. The
adoption of ASU 2020-06 did not have a material impact on the Company’s financial position, results of operations or cash flows.
F-16
Table of Contents
EYENOVIA, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Note 3 – Prepaid Expenses and Other Current Assets
As of December 31, 2023 and 2022, prepaid expenses and other current assets consisted of the following:
Payroll tax receivable
Prepaid research and development expenses
Prepaid insurance expenses
Prepaid conference expenses
Prepaid general and administrative expenses
Prepaid patent expenses
Prepaid rent and security deposit
Other
Total prepaid expenses and other current assets
Note 4 - Property and Equipment, Net
As of December 31, 2023 and 2022, property and equipment consisted of the following:
Equipment
Leasehold improvements
Less: accumulated depreciation and amortization
Property and equipment, net
Equipment not yet placed in service
December 31,
$
2023
500,684
421,056
167,338
123,556
85,938
48,409
18,750
—
$ 1,365,731
$
2022
660,891
2,521
201,082
97,743
87,982
38,796
74,959
26,745
$ 1,190,719
December 31,
2023
$ 3,038,651
1,754,779
4,793,430
(1,419,046)
$ 3,374,384
2022
$ 1,361,783
569,170
1,930,953
(635,838)
$ 1,295,115
$
711,441
$
726,326
Depreciation expense was $783,208 and $307,430 for the years ended December 31, 2023 and 2022, respectively, of which $776,479 and
$301,205, respectively, was included within research and development expenses and $6,729 and $6,225, respectively, was included in
general and administrative expenses in the accompanying statements of operations.
As of December 31, 2023 and 2022, the Company had $711,441 and $726,326 of outstanding deposits for equipment purchases, which
are presented as non-current assets on the balance sheet.
Note 5 – Accrued Compensation
As of December 31, 2023 and 2022, accrued compensation consisted of the following:
Accrued bonus expenses
Accrued payroll expenses
Total accrued compensation
December 31,
2023
$ 1,302,997
355,616
$ 1,658,613
2022
$ 1,447,643
299,548
$ 1,747,191
F-17
Table of Contents
EYENOVIA, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Note 6 – Accrued Expenses and Other Current Liabilities
As of December 31, 2023 and 2022, accrued expenses and other current liabilities consisted of the following:
December 31,
Accrued rework of clinical supply returns
Accrued research and development expenses
Accrued professional services
Credit card payable
Other
Accrued leasehold improvements
Total accrued expenses and other current liabilities
2022
2023
$ 100,000 $
89,872
63,028
27,193
7,835
—
$ 287,928
—
35,524
320,000
50,639
4,385
92,528
$ 503,076
Note 7 – Notes Payable and Convertible Notes Payable
As of December 31, 2023 and 2022, notes payable and convertible notes payable consisted of the following:
Current portion:
Avenue - Note payable
Avenue - Convertible note payable
Total current portion
Non-Current portion:
Avenue - Note payable
Avenue - Convertible note payable
Total non-current portion
BankDirect Capital Finance Loan
December 31, 2023
Notes Payable Debt Discount
Net
Notes Payable Debt Discount
Net
December 31, 2022
$ 5,833,333
—
$ 5,833,333
$ (503,914) $ 5,329,419
—
$ (503,914) $ 5,329,419
—
$
$
208,333
208,333
416,666
$
$
(33,885) $
(33,885)
(67,770) $
174,448
174,448
348,896
$ 4,804,167
5,000,000
$ 9,804,167
$ (448,367) $ 4,355,800
4,601,431
$ (846,936) $ 8,957,231
(398,569)
$ 5,004,167
5,004,167
$ 10,008,334
$
(813,229) $ 4,190,938
4,190,938
(813,229)
$ (1,626,458) $ 8,381,876
On February 24, 2022, the Company issued a note payable in the amount of $675,332 for the purchase of a directors and officers’
liability insurance policy. The note payable was payable in six monthly payments consisting of principal and interest amounting to
$113,628 for an aggregate amount of $681,768. The note accrued interest at a rate of 3.26% per year and matured on August 24, 2022.
The note payable was repaid in full during the year ended December 31, 2022. Interest expense was $6,436 for the year ended December
31, 2022.
On February 24, 2023, the Company issued a note payable in the amount of $609,140 for the purchase of a directors and officers’
liability insurance policy. The note accrued interest at a rate of 7.11% per year and matured on August 24, 2023. The D&O Loan was
payable in six monthly payments of $103,639 consisting of principal and interest. The note payable was repaid in full during the year
ended December 31, 2023. Interest expense was $12,694 for the year ended December 31, 2023.
Silicon Valley Bank Loan
On May 7, 2021, or the Effective Date, the Company entered into a Loan and Security Agreement, (the “Loan”), with Silicon Valley
Bank, or SVB, for an aggregate principal amount of up to $25.0 million. The initial tranche of the Loan, in the amount of $7.5 million
was received by the Company on May 7, 2021. In connection with the Loan, the Company issued warrants to SVB to purchase 91,884
shares of common stock at an exercise price per share equal to $4.76. The warrants are exercisable for a period of ten years from the date
of issuance. The maturity date of the Loan was May 1, 2025. The Loan indicated a prepayment fee of 2.0% of the principal balance
F-18
Table of Contents
EYENOVIA, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
made on or prior to the second anniversary of the Effective Date. The Loan also provided for a final payment in an amount equal to the
original aggregate principal amount of the Loan multiplied by 5.0%. On September 29, 2021, the Company and SVB executed the First
Amendment to the Loan and Security Agreement, (the “Amendment”). In accordance with the Amendment, the Company was required
to maintain a collateralized money market account in the amount of $7,875,000.
On November 4, 2022, the Company repaid the Loan in full. The full amount of the payment was $8,025,000, and included the principal
amount of the loan ($7,500,000), the final payment ($375,000)and a 2% prepayment fee ($150,000). The final payment and prepayment
fee were recorded as interest expense. The entire restricted cash account in the amount of $7,875,000 was used to make the substantial
amount of the payment. During the year ended December 31, 2022, the Company recorded interest expense relating to the Loan of
$1,174,736, including the amortization of debt discount of $349,632.
Avenue Ventures Loan
On November 22, 2022, the Company entered into a Loan and Security Agreement (the “Avenue Loan Agreement”) with Avenue
Venture Opportunities Fund, L.P., (“Avenue 1”), and Avenue Venture Opportunities Fund, L.P. II, (“Avenue 2”), and together with
Avenue, (the “Lender”), for an aggregate principal amount of up to $15,000,000 (the “Avenue Loan”). The initial tranche of the Avenue
Loan was $10,000,000, consisting of $4,000,000 from Avenue and $6,000,000 from Avenue 2. Up to $5,000,000 of the principal amount
outstanding may be converted at the option of the Lender into shares of the Company’s common stock at a conversion price of $2.148
per share, subject to typical anti-dilution adjustments. The Avenue Loan bears interest at an annual rate equal to the greater of (A) 7.0%
and (B) the prime rate as reported in The Wall Street Journal plus 4.45%. The Avenue Loan maturity date is November 1, 2025. The
Company was able to request an additional $5,000,000 of gross funding between April 1, 2023 and July 31, 2023, subject to agreed-upon
conditions. The Company must also make an incremental final payment equal to 4.25% of the aggregate funding, amounting to a
premium of $425,000 on the initial tranche. The Company will make monthly interest-only payments during the first twelve months of
the Avenue Loan, which could be increased to up to eighteen months upon the achievement of specified performance milestones.
Following the interest-only period, the Company will make equal monthly payments of principal and interest until the maturity date, plus
interest. If the Company prepays the Avenue Loan, it will be required to pay a prepayment fee of 3% if the Avenue Loan is prepaid
during the first year, 2% if the Avenue Loan is prepaid during the second year and 1% if the Avenue Loan is repaid during the third year.
On May 22, 2023, pursuant to the Loan and Security Agreement, the Company received an additional tranche of non-convertible debt
funding in the amount of $5,000,000. The Company paid approximately $126,000 of origination and legal fees connected to this debt
funding. The additional funding is subject to the same interest and maturity date as the initial tranche. The additional funding triggered
the extension of the interest-only payment period from the original 12 months to 18 months (through May 2024) for the entire
outstanding balance due under the Avenue Loan Agreement (initial and additional tranches). Following the interest-only period, the
Company will make equal monthly payments of principal until the maturity date, plus interest. The Company must also make a final
payment equal to 4.25% of the additional tranche, amounting to a premium of $212,500 on the additional tranche. The total final
payment on the aggregate borrowing is $637,500. If the Company prepays the Avenue Loan, it will be required to pay a prepayment fee
of 2% if the Avenue Loan is prepaid during the second year and 1% if the Avenue Loan is repaid during the third year.
The Avenue Loan requires the Company to make and maintain representations and warranties and other agreements that are customary in
loan agreements of this type. The Avenue Loan is secured by all of the Company’s assets, including intellectual property. The Avenue
Loan also contains customary events of default, including non-payment of principal or interest, violations of covenants, bankruptcy and
material judgments. Upon the occurrence of an event of default, all interest and principal immediately become due and payable. In
addition, Avenue will have the right to exercise any other right or remedy provided by applicable law.
The Company paid a portfolio management fee of 1% of the total commitment of $15,000,000, or $150,000 of cash on December 1,
2022. This has been accounted for as a component of debt discount.
F-19
Table of Contents
EYENOVIA, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
In connection with the Avenue Loan, the Company granted an aggregate of 547,807 shares of its common stock to the Lender. Based on
the Company’s stock price of $1.79 per share on the closing date, the shares have a gross value of $980,575 and a relative fair value of
$859,733. This is accounted for as a component of debt discount.
The following is a breakdown of the allocation of debt discount and origination costs:
Allocation of Debt Discount
Equity
Issuance
Costs
Final
Payment
$ 637,500
Equity
Issued
$ 447,391
— 412,342
—
—
Total Debt
Discount
$ 1,456,381
638,617
$ 637,500
$ 859,733
$ 2,094,997
$
—
—
— 44,375
$ 44,375
Non-Convertible Note
Convertible Note
Private Placement Shares
Total
Withheld From Proceeds:
Broker Fee
Legal Reimbursement
Total
Eyenovia Origination Costs:
Legal Fee
Avenue Management Fee
Total
Allocation %
Withheld
From
Proceeds
64.01 % $ 134,112
30.09 % 122,701
24,063
100.00 % $ 280,876
5.90 %
Eyenovia
Origination
Costs
$ 237,378
103,574
20,312
$ 361,264
$ 250,000
$
30,876
$ 280,876
$
86,264
$ 275,000
$ 361,264
The following is a summary of the Avenue loan at December 31, 2023:
December 31, 2023
Non-Convertible Convertible
Aggregate loan funding
Final payment
Less: Unamortized debt discount
Less: Current portion
Notes Payable, Non-Current
$ 10,000,000
637,500
10,637,500
(952,281)
9,685,219
(5,329,419)
$ 4,355,800
$ 5,000,000
—
5,000,000
(398,569)
4,601,431
—
$ 4,601,431
Total
$ 15,000,000
637,500
15,637,500
(1,350,850)
14,286,650
(5,329,419)
$ 8,957,231
During the years ended December 31, 2023 and 2022, the Company recorded interest expense relating to the Loan of $2,359,157 (which
includes $681,860 of amortization of debt discount) and $189,510 (which includes $62,286 of amortization of debt discount),
respectively.
F-20
Table of Contents
Note 8 – Income Taxes
EYENOVIA, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
The provision for income taxes consists of the following (expenses) benefits:
For The Years Ended
December 31,
2023
2022
Deferred tax (provision) benefit:
Federal
State and local
Change in valuation allowance
Provision for income taxes
$ 5,381,793 $ 5,879,362
(208,806)
5,670,556
(5,670,556)
—
(849,201)
4,532,592
(4,532,592)
— $
$
The provision for income taxes differs from the United States Federal statutory rate as follows:
Federal statutory rate
State tax rate, net of federal benefit
Permanent differences
Research & development tax credits
Prior period adjustments and other
Rate and apportionment changes
Change in valuation allowance
Effective income tax rate
Deferred tax assets consist of the following:
Deferred tax assets:
Net operating loss carryforwards
Research and development tax credits
Capitalized research and development costs
Stock-based compensation
Intangible assets
Lease liability
Total gross deferred tax assets
Deferred tax liabilities:
Property and equipment
Right of use asset
Deferred tax assets, net before allowance
Valuation allowance
Deferred tax assets, net
For The Years Ended
December 31,
2023
(21.0)%
0.0 %
1.2 %
0.0 %
1.3 %
1.9 %
16.6 %
0.0 %
2022
(21.0)%
(2.5)%
1.6 %
(1.0)%
1.3 %
1.3 %
20.3 %
0.0 %
For The Years Ended
December 31,
2023
2022
$ 23,804,461
528,894
3,581,962
2,080,864
688,746
376,883
31,061,809
$ 20,165,693
799,182
2,304,110
2,089,014
633,151
327,276
26,318,426
(348,323)
(350,160)
30,363,326
(30,363,326)
$
(184,138)
(303,554)
25,830,734
(25,830,734)
—
— $
Changes in valuation allowance
$ (4,532,592) $ (5,670,556)
F-21
Table of Contents
EYENOVIA, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
As of December 31, 2023, the Company had approximately $104,300,000 of domestic federal net operating loss carryforwards, or NOLs,
that may be available to offset future federal taxable income. Approximately $10,800,000 of those NOLs will expire during the years
ranging from 2034 to 2037. The remaining NOLs of approximately $93,500,000 have no expiration dates. Internal Revenue Code
Section 382 limits the utilization of approximately $35,000,000 of those NOLs to approximately $918,000 on an annual basis as a result
of ownership changes that occurred through July 15, 2019. As of December 31, 2023, the Company had approximately $20,600,000 of
state NOLs, of which approximately $20,400,000 will expire during the years ranging from 2040 to 2041, and approximately $200,000
will not expire, and had approximately $6,400,000 of local NOLs which do not expire.
The Company has assessed the likelihood that deferred tax assets will be realized in accordance with the provisions of ASC 740 “Income
Taxes Accounting”, or ASC 740. ASC 740 requires that a valuation allowance be established when it is “more likely than not” that all, or
a portion of, deferred tax assets will not be realized. The assessment considers all available positive or negative evidence, including the
scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. After the performance of such
reviews as of December 31, 2023 and 2022, management believes that uncertainty exists with respect to future realization of its deferred
tax assets and has, therefore, established a full valuation allowance as of those dates.
Management has evaluated and concluded that there were no material uncertain tax positions requiring recognition in the Company’s
financial statements as of December 31, 2023 and 2022. The Company does not expect any significant changes in its unrecognized tax
benefits within twelve months of the reporting date.
No tax audits were commenced or were in process during the years ended December 31, 2023 and 2022. No tax related interest or
penalties were incurred during the years ended December 31, 2023 and 2022. The Company’s federal, state and local income tax returns
beginning with the year ended December 31, 2020 remain subject to examination.
Note 9 – Commitments and Contingencies
Employment Agreements
On February 14, 2022, the Compensation Committee of the Board approved amendments to the Executive Employment Agreements,
(the “Employment Agreement Addendums”), for three executive officers. Each of the Employment Agreement Addendums provides that
if the executive’s employment is terminated by the Company without “Cause” or the executive suffers an “Involuntarily Termination”
(each as defined in the employment agreements), provided that the executive has signed a full release of all claims, the executive will be
entitled to receive: (i) severance pay equal to twelve months of his or her then-current base salary, and (ii) a reimbursement for health
insurance benefits under COBRA for the executive and his or her spouse and dependents for a period of twelve months or until the
executive becomes eligible for comparable insurance benefits from another employer, whichever is earlier.
Transition of Chief Executive Officer
On July 27, 2022, the Company announced the appointment of Michael Rowe as its new Chief Executive Officer, or CEO, effective
August 1, 2022, with Dr. Tsontcho Ianchulev (the former CEO) becoming Executive Chairman of the Board. Mr. Rowe is also serving as
a member of the Board.
On July 26, 2022, the Company entered into an Employment Agreement, (the “Employment Agreement”), with Mr. Rowe under which
he will serve as Chief Executive Officer of the Company. Under the terms of the Employment Agreement, Mr. Rowe will receive an
annual salary of $575,000. He is eligible to receive a cash bonus of up to 60% of his base salary. Additionally, Mr. Rowe received an
option to purchase 440,000 shares of the Company’s common stock, exercisable at $1.66 per share, pursuant to the Company’s Amended
and Restated 2018 Omnibus Stock Incentive Plan, as amended. Mr. Rowe will also continue to participate in any and all benefit plans,
from time to time, in effect for senior management, along with vacation, sick and holiday pay in accordance with the Company’s policies
established and in effect from time to time. As a result of the change of salary, the aggregate potential severance pay for the executive
officers of the Company is approximately $1,004,000.
F-22
Table of Contents
EYENOVIA, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
The Company also entered into an agreement with Dr. Ianchulev, or the Executive Chairman Agreement, pursuant to which Dr.
Ianchulev will provide medical expertise and consultation related to the Company’s research and development programs, and such other
matters as reasonably requested by the Company for an initial period of one year. In consideration for Dr. Ianchulev’s services, the
Company has agreed to provide Dr. Ianchulev with a $5,000 monthly retainer throughout the term of the agreement, in addition to the
compensation payable to all non-employee members of the Board.
Clinical Supply Returns
A certain portion of clinical supply product sold to a licensee has been determined to be defective and will be returned to the Company to
be replaced or reworked. The Company is still working to determine the exact quantity of the defective clinical supply and the cost to
replace or rework the product. As of December 31, 2023, the estimate of the range of the loss is between $400,000 and $600,000, with no
amount within that range being a more accurate estimate than the others at this time. Accordingly, as of December 31, 2023, the
Company has recorded a charge equal to the low end of the range or $400,000, which is included within other income (expense), because
the original sales to the licensee were recorded on that line item. See Note 13 – Subsequent Events.
Operating Leases
In April 2022, the Company entered into a new lease agreement for 3,916 square feet in Laguna Hills, California. The new lease term is
five years and two months, commencing on June 1, 2022 and expiring on July 31, 2027. The monthly base rent ranges from $9,203 to
$10,358 per month over the term of the lease. The security deposit is $11,400. The Company’s rent expense for all Laguna Hills space is
recorded in general and administrative expense and amounted to $118,746 and $66,196 for the years ended December 31, 2023 and
2022, respectively.
In May 2022, the Company entered into a lease agreement to lease 10,880 square feet of office space in Reno, Nevada. The lease term is
five years and four months, commencing on May 23, 2022 and expiring on September 23, 2027. The monthly base rent ranges from
$13,056 to $16,663 per month over the term of the lease. The security deposit is $53,000. The Company’s rent expense for this space is
recorded in research and development expense and amounted to $164,950 and $169,521 for the years ended December 31, 2023 and
2022, respectively.
In February 2023, the Company exercised its options to renew its three leases in Redwood City, California, for a total of approximately
6,700 square feet. The leases were due to expire on August 31, 2023. The leases were extended from September 1, 2023 to August 31,
2025. The aggregate monthly base rent ranges from $15,742 to $16,700 per month over the term of the lease. The security deposit is
$15,000. The Company’s rent expense for this space is recorded in research and development expense and amounted to $192,710 and
$180,240 for the years ended December 31, 2023 and 2022, respectively.
In June 2023, the Company entered into an extension agreement to renew its lease for approximately 3,800 square feet of office space in
New York, NY. The lease was due to expire on September 30, 2023. The lease was extended from November 1, 2023 to December 31,
2026. The monthly base rent ranges from $19,633 to $21,298 per month over the term of the lease. The security deposit is $118,000. The
Company’s rent expense for this space is recorded in general and administrative expense and amounted to $233,534 and $242,067 for the
years ended December 31, 2023 and 2022, respectively.
F-23
Table of Contents
EYENOVIA, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
A summary of the Company’s right-of-use assets and liabilities is as follows:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used in operating activities
Right-of-use assets obtained in exchange for lease obligations
Operating leases
Weighted Average Remaining Lease Term (Years)
Operating leases
Weighted Average Discount Rate
Operating leases
Future minimum payments under the Company’s operating lease agreements are as follows:
For the Years Ending
December 31,
2024
2025
2026
2027
Total future minimum lease payments
Less: Imputed interest
Present value of lease liabilities
Less: current portion
Lease liabilities, non-current portion
Litigations, Claims and Assessments
For the Years Ended
December 31,
2023
2022
$
$
503,046
904,437
$
$
412,478
1,186,098
3.04 years
3.71 years
10.0 %
10.0 %
$
Minimum Lease Payments
660,923
675,400
560,996
214,619
2,111,938
(318,021)
1,793,917
(501,250)
1,292,667
$
In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary
course of business. The Company records legal costs associated with loss contingencies as incurred and accrues for all probable and
estimable settlements.
Note 10 – Related Party Transactions
See Note 9 - Commitments and Contingencies for certain commitments and contingencies entered into with certain related parties.
Senju License Agreement
During 2015, the Company entered into an exclusive license agreement with Senju, or the Senju License Agreement, whereby the
Company agreed to grant to Senju an exclusive, royalty-bearing license for its microdose product candidates for Asia to sublicense,
develop, make, have made, manufacture, use, import, market, sell, and otherwise distribute the microdose product candidates. In
consideration for the license, Senju agreed to pay to Eyenovia five percent (5%) royalties on sales (net of certain manufacturing costs)
for the term of the Senju License Agreement, subject to certain adjustments upon the loss of patent coverage for the term of the license
agreement. The agreement will continue in full force and effect, on a country-by-country basis, until the latest to occur of: (i) the tenth
(10th) anniversary of the first commercial sale of such a product candidate in a country; or (ii) the expiration of the licensed patents in a
country. As of the date of this filing, there have been no commercial sales of such a product in Asia; therefore, no royalties have been
earned. Senju is owned by the family of a former member of the Company’s Board of Directors.
F-24
Table of Contents
EYENOVIA, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
On April 8, 2020, Eyenovia entered into an amendment, (the “Senju License Amendment”), to the Senju License Agreement. Pursuant to
the Senju License Amendment, the Company can license to any third party the right to research, develop, commercialize, manufacture or
use certain products, or the Senju Licensed Products previously licensed to Senju in China (including the People’s Republic of China,
Hong Kong, Macao, and Taiwan) and South Korea, or the Territory.
Pursuant to the Senju License Amendment, the Company must pay Senju (a) a percentage in the range of 30% to 40% of revenue on (i)
any lump-sum payments the Company receives from the third party, (ii) revenue (net of costs) obtained by the Company from contract
research and/or development of the Senju Licensed Product in the Territory, and (iii) revenue (net of costs) obtained by the Company
from contract manufacture for the device of the Senju Licensed Product in the Territory, the aggregate of which must be at least a $9
million minimum payment to Senju; and (b) a percentage in the range of 30% to 40% of any sales royalty revenue the Company receives
from the third party. Since the Company executed a third-party license prior to the April 8, 2021 expiration of the Senju License, the
Senju License Amendment will remain in effect for the duration of the license, subject to early termination.
The Senju License Agreement was further amended in a Letter Agreement by and between the Company and Senju on August 10, 2020,
or the Letter Agreement. Pursuant to the Letter Agreement, the Company will pay to Senju a percentage in the range of 30% to 40% of
certain payments, royalties, or net proceeds received from Arctic Vision in connection with the Arctic Vision License Agreement. The
Senju License Agreement was amended further by the License Amendment 2, effective September 14, 2021, (“Amendment 2”). The
Amendment 2 excludes Greater China and South Korea from the territory in which Senju was granted an exclusive royalty-bearing
license from the Company. In consideration for this exclusion, and upon and after the execution of Amendment 1 with Arctic Vision, the
Company must make payments to Senju based on non-royalty license revenue and sales revenue, including the following:
1.
2.
3.
a one-time upfront payment of $250,000, paid on September 17, 2021, which represented an inducement to Senju to approve
Amendment 1 of the Arctic Vision License Agreement related to the MicroStat product.
a percentage in the range from 30% to 40% of any upfront or milestone lump sum payments, or net revenues received by the
Company in connection with any licensed product using piezo-print technology in a microdose dispenser containing: (a) the
chemical substance atropine sulfate as its sole active ingredient and that is used for the treatment of myopia in humans; (b) the
chemical substance pilocarpine as its sole active ingredient and that is used for the treatment of presbyopia in humans; or (c) the
chemical substances phenylephrine and tropicamide in combination as active ingredients that are used for pharmaceutical
mydriasis in humans (the “LA2 Licensed Product”) from certain third parties, and
a percentage in the range from thirty to forty percent of the amounts received by the Company in connection with sales of the
LA2 Licensed Product in China and South Korea by certain third parties.
See Note 2 – Summary of Significant Accounting Policies – Revenue Recognition - Arctic Vision License Agreement for additional
details regarding the Arctic Vision License Agreement.
Note 11 – Stockholders’ Equity
Authorized Capital
The Company is authorized to issue 90,000,000 shares of common stock, par value of $0.0001 per share, and 6,000,000 shares of
preferred stock, par value of $0.0001 per share. The holders of the Company’s common stock are entitled to one vote per share. The
Board of Directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, redemption, voting
or other rights.
Equity Incentive Plans
On April 7, 2020, the Company’s Board of Directors approved the Company’s Amended and Restated 2018 Omnibus Stock Incentive
Plan (the “Restated Plan”), which stockholders approved on June 30, 2020. Under the Restated Plan, as amended on June 16, 2022 and
June 27, 2023, 6,700,000 shares of the Company’s common stock are reserved for issuance. The Restated Plan requires that all equity
awards issued under the Restated Plan vest at least twelve months from the applicable grant date, subject to accelerated vesting, and
provides that no dividend or dividend equivalent will be paid on any unvested equity award, although dividends with respect to unvested
portions of equity may accrue and be paid when, and if, the awards later vest and the shares are actually issued to the grantee. In addition,
the Restated Plan sets an annual limit on the grant date fair value of awards to any non-employee director, together with any cash fees
F-25
Table of Contents
EYENOVIA, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
paid during the year, of $150,000, subject to certain exceptions for a non-executive chair of the Board. As of December 31, 2023, the
number of securities remaining available for future issuance under equity compensation plans was 2,054,409.
At-The-Market Offering
December 2021 Sales Agreement
On December 14, 2021, the Company entered into a Sales Agreement, (the “December 2021 Sales Agreement”), with SVB Securities
under which the Company may offer and sell, from time to time at its sole discretion, shares of common stock for gross proceeds of up to
$50.0 million through SVB Securities as its sales agent, or the Offering. The issuance and sale of shares, if any, of common stock by the
Company under the December 2021 Sales Agreement will be pursuant to the Company’s Registration Statement on Form S-3 (File No.
333-261638) filed with the SEC on December 14, 2021, or the Registration Statement, and the prospectus relating to the Offering filed
therewith that forms a part of the Registration Statement.
Subject to the terms and conditions of the December 2021 Sales Agreement, SVB Securities may sell the common stock by any method
permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) of the Securities Act of 1933, as amended. SVB
Securities will use commercially reasonable efforts to sell the common stock from time to time, based upon instructions from the
Company (including any price, time or size limits or other customary parameters or conditions the Company may impose). The Company
will pay SVB Securities a commission equal to three percent (3.0)% of the gross sales proceeds of any common stock sold through SVB
Securities under the December 2021 Sales Agreement, and also has provided SVB Securities with certain indemnification rights.
During the year ended December 31, 2022, the Company received approximately $5.4 million in gross proceeds and $5.3 million in net
proceeds from the sale of 2,716,061 shares of its common stock under the December 2021 Sales Agreement. During the year ended
December 31, 2023, the Company received approximately $4.7 million in gross proceeds and $4.6 million in net proceeds from the sale
of 1,866,147 shares of its common stock.
Securities Purchase Agreement
On March 3, 2022, the Company entered into a securities purchase agreement, (the “Purchase Agreement”) with a certain institutional
and accredited investor, or the Purchaser, pursuant to which the Company issued (i) 3,000,000 shares of common stock, (ii) pre-funded
warrants, (the “Pre-Funded Warrants”), to purchase an aggregate of 1,870,130 shares of common stock and (iii) warrants to purchase an
aggregate of 4,870,130 shares of common stock, (the “Investor Warrants”), (together, the “the March 2022 Offering”). The Company
determined that the warrants qualified for equity classification.
The offering price for the shares was $3.08 per share and the offering price for the Pre-Funded Warrants was $3.07 per Pre-Funded
Warrant, which represents the per share public offering price less $0.01 per share exercise price for each Pre-Funded Warrant. The
Investor Warrants will have an exercise price of $3.54 per share and each Investor Warrant became exercisable for one share of Common
Stock. The Investor Warrants became exercisable six months from the date of issuance and the Pre-Funded Warrants were exercisable
immediately upon issuance. The Pre-Funded Warrants shall terminate when fully exercised and the Investor Warrants will terminate five
years from the initial exercisability date. The aggregate gross proceeds to the Company from the March 2022 Offering were
approximately $15 million, excluding the proceeds, if any, from the exercise of the Pre-Funded Warrants and the Investor Warrants. No
underwriter or placement agent participated in the March 2022 Offering. The Company incurred issuance costs in the amount of $83,391
in connection with the March 2022 offering.
The March 2022 Offering was made pursuant to an effective registration statement on Form S-3 (Registration Statement No. 333-
261638), as previously filed with and declared effective by the Securities and Exchange Commission and a related prospectus.
Registered Direct Offering
On August 24, 2023, the Company entered into a securities purchase agreement with a certain institutional and accredited investor (the
“Purchaser”), pursuant to which the Company agreed to sell, in a registered direct offering by the Company directly to the Purchaser (the
“August 2023 Offering”), 4,198,633 shares of common stock, pre-funded warrants to purchase up to 2,252,979 shares of common stock
and warrants to purchase up to 4,838,709 shares of common stock (the “Common Warrants” and, together with the Pre-Funded
F-26
Table of Contents
EYENOVIA, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Warrants, the “Warrants”). The combined offering price for each share of common stock and accompanying Common Warrant was
$1.86, and the combined offering price for each Pre-Funded Warrant and accompanying Common Warrant was $1.85.
The Common Warrants will be exercisable beginning six months following the date of issuance and may be exercised for a period of five
years from the initial exercisability date at an exercise price of $2.23 per share. The Pre-Funded Warrants were immediately exercisable
and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full at an exercise price of $0.01 per share. The
exercise prices and numbers of shares of common stock issuable upon exercise of the Common Warrants and the Pre-Funded Warrants
are subject to typical anti-dilution provisions. A holder may not exercise any portion of such holder’s Common Warrants or Pre-Funded
Warrants to the extent that the holder would own more than 4.99% of the Company’s outstanding common stock immediately after
exercise (unless the holder otherwise elects a limitation of 9.99%). The Company determined that the Warrants met the criteria to be
classified as equity.
The net cash proceeds of the August 2023 Offering were approximately $10.9 million after deducting cash issuance costs in the
aggregate amount of approximately $1.1 million. See Warrant Modification below for details about an additional $1.7 million of non-
cash issuance costs. The August 2023 Offering closed on August 29, 2023.
Warrant Modification
In connection with the August 2023 Offering (see “Registered Direct Offering” below), the Company entered into a warrant amendment
agreement (the “Amendment”) with the Purchaser, whereby the Company agreed to amend the March 2022 Investor Warrants to (i)
reduce the exercise price from $3.54 per share of common stock to $2.23 per share of common stock, (ii) extend the term of the March
2022 Investor Warrants until March 1, 2029, (iii) include a stockholder approval requirement in connection with a modification of the
beneficial ownership limitation and (iv) prohibit exercise of the March 2022 Investor Warrants for the six-month period following the
effective date of the Amendment.
The Company accounted for the modification of the March 2022 Investor Warrants as an exchange of the old warrants for new warrants.
The incremental value of the new warrant (resulting from the decrease in exercise price from $3.54 to $2.23 per share and the extension
of the warrant expiration date to March 1, 2029) was measured as the excess of the fair value of the modified warrants over the fair value
of the original warrants immediately before modification. The increase in the incremental value of $1,738,700 was credited to additional
paid-in-capital (“APIC”) and debited to APIC as an issuance cost of the August 2023 Offering.
Warrants
A summary of the warrant activity during the year ended December 31, 2023 is presented below:
Outstanding January 1, 2023
Granted
Repriced - (Old)
Repriced - (New)
Exercised
Outstanding December 31, 2023
Exercisable December 31, 2023
F-27
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Life
In Years
3.37
1.52
3.54
2.23
0.01
2.28
2.69
4.8
1.7
Number of
Warrants
6,087,845
7,091,688
(4,870,130)
4,870,130
(2,252,979)
10,926,554
1,217,715
$
$
$
Table of Contents
EYENOVIA, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
The following table presents information related to warrants as of December 31, 2023:
Warrants Outstanding
Warants Exercisable
Exercise
Price
$2.2300 (1)
$2.4696
$2.7240
$4.7600
Outstanding
Number of
Warrants
9,708,839
909,451
216,380
91,884
10,926,554
Weighted
Average
Remaining Life
In Years
—
1.2
1.2
7.3
1.7
Exercisable
Number of
Warrants
—
909,451
216,380
91,884
1,217,715
Shares x
Remaining
Years
—
1,093,209
260,100
670,376
2,023,685
Warrants x
Exercise
Price
—
2,245,980
589,419
437,368
3,272,767
(1) - These warrants become exercisable on or about February 24, 2024.
During the year ended December 31, 2023, warrants for the purchase of 2,252,979 shares of the Company’s common stock with an
exercise price of $0.01 per share were exercised for aggregate proceeds of $22,529.
During the year ended December 31, 2022, warrants for the purchase of 1,870,130 shares of the Company’s common stock with an
exercise price $0.01 per share were exercised for aggregate proceeds of $18,701.
Stock-Based Compensation Expense
The Company records stock-based compensation expense related to stock options and restricted stock units, or RSUs. For the years
ended December 31, 2023 and 2022, the Company recorded stock-based compensation expense of $2,497,890 ($839,038 of which was
included within research and development expenses and $1,658,852 was included within general and administrative expenses on the
statements of operations) and $3,765,364 ($1,809,305 of which was included within research and development expenses and $1,956,062
was included within general and administrative expenses on the statements of operations), respectively.
Restricted Stock Units
A summary of the restricted stock units activity during the year ended December 31, 2023 is presented below:
RSUs non-vested January 1, 2023
Granted
Vested
Forfeited
RSUs non-vested December 31, 2023
Vested RSUs undelivered December 31, 2023
Weighted
Average
Exercise
Price
1.80
2.12
1.80
1.80
2.12
2.22
Number of
RSUs
172,800
106,019
(150,578)
(22,222)
106,019
135,745
$
$
$
To date, the RSUs have only been granted to directors in accordance with the Company’s Amended and Restated 2018 Omnibus Stock
Incentive Plan. The Company’s policy is not to deliver shares underlying the RSUs until the termination of service.
Between February 14, 2022 and August 18, 2022, the Company granted members of its Board of Directors an aggregate of 193,304
RSUs under the Restated Plan. Each RSU is subject to settlement into one share of the Company’s common stock. The RSUs vest on the
earlier of (i) the one-year anniversary of the date of grant and (ii) the date of the 2023 annual stockholders meeting, subject to the grantee
remaining on the Board until then. The RSUs had a grant date fair value of $373,000, which will be recognized over the vesting period.
In 2022, there was 108,366 of common shares issued related to vested RSUs.
F-28
Table of Contents
EYENOVIA, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Between June 27, 2023 and November 14, 2023, the Company granted members of its Board of Directors an aggregate of 106,019 RSUs
under the Restated Plan. Each RSU is subject to settlement into one share of the Company’s common stock. The RSUs vest on the earlier
of (i) the one-year anniversary of the date of grant and (ii) the date of the 2024 annual stockholders meeting, subject to the grantee
remaining on the Board until then. The RSUs had a grant date fair value of $224,800, which will be recognized over the vesting period.
In 2023, there was 47,733 of common shares issued related to vested RSUs.
As of December 31, 2023, there was $119,141 of unrecognized stock-based compensation expense related to RSUs which will be
recognized over a weighted average period of 0.6 years.
Stock Options
A summary of the option activity during the year ended December 31, 2023 is presented below:
Outstanding, January 1, 2023
Granted
Exercised
Forfeited
Outstanding, December 31, 2023
Exercisable, December 31, 2023
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Life
In Years
Aggregate
Intrinsic
Value
3.55
2.24
1.83
3.92
3.31
3.63
6.7
$ 541,252
6.0
$ 341,137
Number of
Options
5,380,553
848,989
(88,999)
(834,166)
5,306,377
3,980,102
$
$
$
The 2023 option exercises resulted in common stock issuances of (a) 10,000 shares; and (b) 20,749 shares after withholding 58,250
shares pursuant to a cashless exercise.
The following table presents information related to stock options as of December 31, 2023:
Exercise
Price
$1.00 - $1.99
$2.00 - $2.99
$3.00 - $3.99
$4.00 - $4.99
$5.00 - $5.99
$6.00 - $6.99
$7.00+
Outstanding
Number of
Options
Average
Remaining Life
In Years
Exercisable
Number of
Options
5.2
6.4
6.5
7.6
3.8
6.1
4.3
6.0
1,115,074
831,695
750,743
252,123
50,638
829,189
150,640
3,980,102
1,578,982
1,450,663
898,528
333,000
50,805
843,759
150,640
5,306,377
F-29
Table of Contents
EYENOVIA, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
In applying the Black-Scholes option pricing model to stock options granted, the Company used the following approximate assumptions:
Expected term (years)
Risk free interest rate
Expected volatility
Expected dividends
For the Year Ended
December 31,
2023
5.50 - 10.00
2022
0.58 - 10.00
3.44% - 4.72% 0.76% - 3.80%
80% - 95%
0.00%
82% - 90%
0.00%
The Company has computed the fair value of stock options granted using the Black-Scholes option pricing model. Option forfeitures are
accounted for at the time of occurrence. The expected term used for options issued is the estimated period of time that options granted
are expected to be outstanding. The Company utilizes the “simplified” method to develop an estimate of the expected term of “plain
vanilla” option grants. The Company uses its historical volatility for the period from its initial public offering through the valuation date
in computing the expected volatility. Accordingly, the Company is utilizing an expected volatility figure based on a review of its
historical volatility over a period of time equivalent to the expected life of the instrument being valued. The risk-free interest rate was
determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of
the instrument being valued. The Company has not declared dividends, is currently in the development stage and has no plan to declare
future dividends at this time.
The weighted average estimated grant date fair value of the stock options granted for the years ended December 31, 2023 and 2022 was
approximately $1.65 and $1.60 per share, respectively.
As of December 31, 2023, there was $1,812,323 of unrecognized stock-based compensation expense related to stock options which will
be recognized over a weighted average period of 1.5 years.
Note 12 – Employee Benefit Plans
401(k) Plan
In April 2019, the Company adopted the Eyenovia 401(k) Plan, or the Plan, which went into effect in May 2019. All Company
employees are able to participate in the Plan, subject to eligibility requirements as outlined in the Plan documents. Under the terms of the
Plan, eligible employees are able to defer a percentage of their pay every pay period up to annual limitations set by Congress and the
Internal Revenue Service under Section 401(k) of the Internal Revenue Code. The Company’s Board of Directors approved a matching
contribution equal to 100% of elective deferrals up to 4% of eligible earnings with the matching contribution subject to certain vesting
requirements as outlined in the Plan documents. For the years ended December 31, 2023 and 2022, the Company recorded expense of
$218,170 and $208,006 associated with its matching contributions, respectively.
Note 13 – Subsequent Events
Bausch + Lomb/ Eyenovia Reversion of Licensed Rights Under Mutual Termination Agreement
On January 12, 2024, the Company and Bausch + Lomb entered into a Letter Agreement (the “Letter Agreement”), pursuant to which
Eyenovia will reacquire the rights to the Bausch Licensed Product. See Note 2 – Summary of Significant Accounting Policies – Revenue
Recognition – Bausch + Lomb License Agreement for details of the Letter Agreement.
As presented in Note 9 – Commitments and Contingencies – Clinical Supply Returns, the Company had recorded a charge equal to
$400,000 for the cost to replace or to rework the clinical supply product. The Letter Agreement will result in a reversal of the clinical
supply return reserve, because Bausch + Lomb will no longer be returning the defective product.
F-30
[Pursuant to Item 601(b)(10)(iv) of Regulation S-K, certain identified portions of this exhibit have been omitted by means of
marking such portions with asterisks as the identified portions are both not material and the type that the registrant treats as
private or confidential.]
January 12, 2024
Exhibit 10.38
CONFIDENTIAL
VIA EMAIL AND COURIER
[***]
Bausch and Lomb
3013 Lake Drive
Citywest Business Campus
Dublin 24
D24 PPT3
Ireland
Re:
Reversion of Licensed Rights Under Mutual Termination Agreement
Dear [***],
Reference is hereby made to the License Agreement entered into between Eyenovia, Inc., a Delaware corporation having an
office at 295 Madison Ave., Suite 2400, New York, NY 10017 (“Eyenovia”) and Bausch + Lomb Ireland Limited (as assignee of Bausch
Health Ireland Limited), an Ireland corporation having an office at 3013 Citywest Business Campus, Dublin 34, Ireland (“Bausch”),
dated October 9, 2020 (the “License Agreement”). All capitalized terms used but not defined herein will have the meaning set forth in
the License Agreement.
This Reversion of Licensed Rights (the “Letter Agreement”) is intended to confirm recent discussions between Eyenovia and
Bausch regarding the terms by which the License Agreement will be terminated by mutual agreement and all rights and licenses reverted
to Eyenovia. Each of the parties acknowledges agreement with the following terms and conditions and agrees that upon acceptance and
execution, the terms recited herein shall be legally binding.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties hereby agree as follows:
Termination and Reversion of Rights. Eyenovia and Bausch hereby agree that this Letter Agreement shall be on the terms and
1.
subject to the conditions set forth on Exhibit A.
2.
Confidentiality. The existence and the terms of this Letter Agreement and the proposed transactions contemplated herein, and
any information exchanged shall be maintained in confidence by the parties and their respective officers, directors and employees. All
public announcements, notices or other communications regarding such matters to third parties shall require the prior written approval of
Eyenovia and Bausch. In addition, each party will not (and will cause its Affiliates to not) use the name of the other party or any of the
other party’s Affiliates in any manner, context or format (including reference on or links to websites, press releases, etc.) without
obtaining in each instance the prior written consent of the other Party. Except as provided in this Section 2, the Parties agree to hold in
confidence and not use, disclose or reveal to any other person any confidential or proprietary information disclosed to the other in
connection with the transactions proposed in this Letter Agreement or the negotiations between such Parties until such information has
become generally available to the public through no fault or omission on the part of the receiving party. Notwithstanding the foregoing,
each Party shall be permitted, upon prior written notice to the other Party, to make such disclosures to the public or to governmental
agencies as its counsel shall deem necessary to maintain compliance with, and to prevent violation of, applicable Laws (including federal
or state securities Laws) or judicial order; provided, however, that before disclosing this Agreement or any of the terms hereof pursuant
to this Section 2, the Parties will coordinate in advance with each other and in a reasonable manner in order to allow the Party seeking
disclosure to make such disclosure within the timelines required by applicable Laws (including the rules and regulations promulgated by
the SEC or any other Governmental Authority or securities exchange) or as reasonably requested by the Party seeking disclosure,
including in connection with the redaction of certain provisions of this Letter Agreement with respect to any filings with the SEC,
Nasdaq, or any other stock exchange on which securities issued by a Party or a Party’s Affiliate are traded, and each Party will use
commercially reasonable efforts to seek confidential treatment for such terms as may be reasonably requested by the other Party. In
addition, either Party may disclose the existence and terms of this Letter Agreement in confidence to: its attorneys and advisors, and to
potential acquirers (and their respective professional attorneys and advisors), in connection with a potential bona fide merger, acquisition,
or reorganization and to existing and potential investors or lenders of such Party, or to existing and potential licensees or sublicensees or
to permitted assignees, in each case under an agreement to keep the terms of confidentiality and non-use substantially no less rigorous
than the terms contained in this Letter Agreement.
Term. The provisions of this Letter Agreement will be effective from the date of this Letter Agreement written above
3.
(“Effective Date”) and shall remain in full force for an unlimited period of time.
4.
Miscellaneous.
(a)
Governing Law. This Letter Agreement (and any claims or disputes arising out of or related thereto or to the
transactions contemplated thereby or to the inducement
2
of any party to enter therein, whether for breach of contract, tortious conduct, or otherwise and whether predicated on common law,
statute, or otherwise) shall in all respects be governed by and construed in accordance with the laws of the State of New York, including
all matters of construction, validity, and performance, in each case without reference to any conflict of law rules that might lead to the
application of the laws of any other jurisdiction.
(b)
Consent to Jurisdiction. Each Party irrevocably submits to the exclusive jurisdiction of the United States District Court
for the Southern District of New York for the purposes of any suit, action, or other proceeding arising out of this Letter Agreement or the
transactions contemplated thereby. Each Party agrees to commence any such action, suit, or proceeding in the United States District
Court for the Southern District of New York or if such suit, action, or other proceeding may not be brought in such court for
jurisdictional reasons, in the Supreme Court of the State of New York, New York County. Each Party further agrees that service of any
process, summons, notice, or document by U.S. registered mail or internationally recognized overnight courier service to such Party’s
respective address set forth above shall be effective service of process for any action, suit, or proceeding in New York with respect to any
matters to which it has submitted to jurisdiction. Each Party irrevocably and unconditionally waives any objection to the laying of venue
of any action, suit, or proceeding arising out of this Letter Agreement in the United States District Court for the Southern District of New
York (or, if applicable, the Supreme Court of the State of New York), and hereby and thereby further irrevocably and unconditionally
waives and agrees not to plead or claim in any such court that any such action, suit, or proceeding brought in any such court has been
brought in an inconvenient forum.
(c)
Successors and Assigns. This Letter Agreement will inure to the benefit of, and is binding upon, the parties hereto and
their respective successors and assigns.
(d)
Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE
WAIVED, THE PARTIES HEREBY WAIVE, AND COVENANT THAT THEY WILL NOT ASSERT (WHETHER AS PLAINTIFF,
DEFENDANT, OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY ACTION ARISING IN WHOLE OR IN PART
UNDER OR IN CONNECTION WITH THIS LETTER AGREEMENT, WHETHER NOW EXISTING OR HEREAFTER ARISING,
AND WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE. THE PARTIES AGREE THAT ANY OF THEM MAY
FILE A COPY OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY, AND
BARGAINED-FOR AGREEMENT AMONG THE PARTIES IRREVOCABLY TO WAIVE ITS RIGHT TO TRIAL BY JURY IN
ANY PROCEEDING WHATSOEVER BETWEEN THEM RELATING TO THIS LETTER AGREEMENT WILL INSTEAD BE
TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
(e)
Entire Agreement. This Letter Agreement shall constitute the entire agreement between the Parties with respect to the
subject matter hereof, and supersedes the License Agreement and all previous arrangements with respect to the subject matter hereof,
3
whether written or oral. Any amendment or modification to this Letter Agreement shall be made in writing signed by both Parties.
(f)
Notices. Unless otherwise specified herein, all notices required or permitted to be given under this Letter Agreement
shall be in writing and shall be delivered (a) by hand, (b) by internationally recognized overnight delivery service that maintains records
of delivery, or (c) by electronic mail (including “.pdf”) with transmission confirmed, in each case, addressed to the Parties at their
respective addresses specified above or to such other address as the Party to whom notice is to be given may have provided to the other
Party in accordance with this Section. Such notice shall be deemed to have been given under subsection (a) above as of the date delivered
by hand, under subsection (b) above on the second (2nd) Business Day (at the place of delivery) after deposit with an internationally
recognized overnight delivery service, and under subsection (c) above at the time the recipient confirms to the sender the transmission of
such electronic mail:
If to Eyenovia:
Eyenovia, Inc.
295 Madison Ave., Suite 2400
New York, NY 10017
Attention: John Gandolfo
[***]
with a copy to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Attention: Fred Hernandez, Member
[***]
If to Bausch:
Bausch + Lomb Ireland Limited
3013 Citywest Business Campus
Dublin 34, Ireland
Attention: Director
[***]
with a copy to:
Bausch & Lomb Americas Inc.
400 Somerset Corporate Boulevard
Bridgewater, NJ 08807
Attention: General Counsel
[***]
4
(g)
Compliance with Laws. Each Party shall perform its obligations under this Letter Agreement in compliance with all
applicable Laws.
(h)
Headings. The captions or headings of the Sections or other subdivisions hereof are inserted only as a matter of
convenience or for reference and shall have no effect on the meaning of the provisions hereof.
(i)
No Implied Waivers; Rights Cumulative. No failure on the part of Eyenovia or Bausch to exercise, and no delay by
either Party in exercising, any right, power, remedy, or privilege under this Letter Agreement, or provided by statute or at law or in equity
or otherwise, shall impair, prejudice, or constitute a waiver of any such right, power, remedy, or privilege by such Party or be construed
as a waiver of any breach of this Letter Agreement or as an acquiescence therein by such Party, nor shall any single or partial exercise of
any such right, power, remedy, or privilege by a Party preclude any other or further exercise thereof or the exercise of any other right,
power, remedy, or privilege.
(j)
Interpretation. Unless a context otherwise requires, wherever used, (i) the singular will include the plural, the plural the
singular; (ii) the use of any gender will be applicable to all genders; (iii) the word “or” is used in the inclusive sense (and/or); and (iv) the
word “including” is used without limitation and will mean “including without limitation.”
(k)
Severability. If, under applicable Laws, any provision of this Letter Agreement is invalid or unenforceable, or
otherwise directly or indirectly affects the validity of any other material provision(s) of this Letter Agreement (such invalid or
unenforceable provision, a “Severed Clause”), this Letter Agreement shall endure except for the Severed Clause. The Parties shall
consult one another and use good faith efforts to agree upon a valid and enforceable provision that is a reasonable substitute for the
Severed Clause in view of the intent of this Letter Agreement.
(l)
No Third Party Beneficiaries. No Person other than Bausch and Eyenovia (and their respective assignees) shall be
deemed an intended beneficiary hereunder or have any right to enforce any obligation of this Letter Agreement.
(m)
Further Assurances. Each Party shall take any other reasonable actions requested by the other Party to effectuate the
purposes of this Letter Agreement, including but not limited to the prompt execution and delivery of any further documents to effect,
record and evidence the termination of the rights and obligations as contemplated hereby.
[Remainder of this page intentionally left blank / Signature pages follow
5
The foregoing is agreed to and accepted as of the date set forth below.
Very truly yours,
EYENOVIA, INC.
By: /s/ Michael Rowe
Name: Michael Rowe
Title: Chief Executive Officer
Date: January 12, 2024
The foregoing is agreed to and accepted as of the date set forth below.
BAUSCH + LOMB IRELAND LIMITED
By: /s/ Olive McDaid
Name: Olive McDaid
Title: Director
Date: January 12, 2024
Signature page to Letter Agreement
EXHIBIT A
MUTUAL TERMINATION
1. Termination. As of the Effective Date, the License Agreement shall terminate in its entirety and cease to have any further force
and effect (subject and without prejudice to Section 8.3(d) of the License Agreement and all other provisions therein that expressly
survive termination (and for the avoidance of doubt, Sections 8.3(a), (b) and (c) are inapplicable to such termination and shall not
survive)). In particular, as of the Effective Date, (i) any and all licenses and other rights granted by Eyenovia to Bausch under the License
Agreement shall terminate and revert to Eyenovia, (ii) any and all licenses and other rights granted by Bausch to Eyenovia under the
License Agreement shall terminate, other than as set forth herein, and (iii) other than as set forth herein, Bausch shall be released from all
of its ongoing obligations under the License Agreement, including its Development and Commercialization obligations thereunder.
2. Up-Front Payment. Eyenovia will pay Bausch a one-time, non-creditable, non-refundable fee of Two Million Dollars (USD
$2,000,000) within [***] of the Effective Date.
3. Bausch Obligations.
a. Bausch shall transfer and assign to Eyenovia all Regulatory Documentation and other documented technical and other
information or materials Controlled by Bausch or its Affiliates, in each case, to the extent solely related to the Licensed
Product or otherwise generated in connection with its activities under the License Agreement, including investigational
new drug applications (“IND”) and clinical data (including all study data), to Eyenovia as quickly as possible
following the Effective Date, but not later than end of the Transition Period (subject to the timely receipt by Bausch
from Eyenovia of the requisite information required to so transfer the IND); provided, however, that Bausch may retain
a confidential copy of such items for its records. [***]
b.
[***]
c. Within [***] from the Effective Date (“Transition Period”), Bausch shall assign to Eyenovia (or its designated
Affiliate), and Eyenovia (or its designated Affiliate) shall assume, each of the agreements, statements of work, work
orders and change orders set out on Schedule 1 hereto (the “Study Contracts”) and the rights and obligations
thereunder arising after the Effective Date; provided however that Eyenovia shall not assume or agree to pay,
discharge, or perform any liabilities or obligations under the Study Contracts relating to the period prior to the actual
date of assignment and assumption of such Study Contract, including any such liabilities arising out of any breach by
Bausch or its Affiliates of any provision of any Study Contract. Bausch shall immediately make available to Eyenovia
all
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Study Contracts. In connection herewith, the Parties (or their respective Affiliates) shall execute an assignment and
assumption agreement with respect to such Study Contracts, in a form to be agreed upon by the Parties, acting
reasonably and good faith. [***]
d.
Inventory. [***]
e. Study Transition.
i.
In addition to the items described above, during the Transition Period, Bausch shall, and shall cause its
Affiliates to, reasonably cooperate with Eyenovia to facilitate the orderly transition of the CHAPERONE
study (the “Study”).
ii. During the Transition Period, Bausch, at Bausch’s cost, shall conduct (or caused to be conducted) the Study in
the ordinary course, materially consistent with past practice, in compliance with applicable Laws.
iii. Bausch hereby transfers title and ownership of the equipment described on Schedule 2 hereto , [***] and on
an “as is, where is” basis. Bausch will make such equipment available to Eyenovia for inspection or collection
at Eyenovia’s cost, EXW origin, during the Transition Period. For the sake of clarity, Eyenovia, at its sole
election, may request equipment remains at the Study sites to ensure continuity in study activities after the
Transition Period.
iv. During the Transition Period, with regard to the Study, Bausch shall facilitate introductions between Eyenovia
and the contract research organization conducting the Study and shall use commercially reasonable efforts to
assist Eyenovia and such contract research organization in transitioning the Study from Bausch to Eyenovia.
The date on which Eyenovia has received all of the following items shall be the “Regulatory Transfer Completion Date”: (i) delivery of
the Regulatory Documentation described in subsection 3(a) above, (ii) the assignment of the Study Contracts (other than those for which
consent has not been obtained within the Transition Period) pursuant to subsection 3(c) above; and (iii) delivery of the inventory of
Licensed Product pursuant to subsection 3(d) above.
Eyenovia hereby grants to Bausch a non-exclusive, non-transferable, non-sublicensable, royalty-free license to the License IP, solely to
the extent necessary for Bausch to conduct and satisfy its obligations under this Section 3. Such license shall automatically terminate
upon the Regulatory Transfer Completion Date.
4. Regulatory Transfer Payment. Eyenovia will pay Bausch Three Million Dollars (USD $3,000,000) of EYEN common stock
within ten (10) Business Days of the Regulatory Transfer Completion Date, on the terms described below.
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5.
Issuance of Restricted Shares. The number of shares of Eyenovia common stock, $0.0001 par value per share (the “Common
Stock”), to be issued hereunder shall be calculated using the volume-weighted average price (VWAP) for [***]. Such shares of Common
Stock shall be offered in a transaction not involving any public offering within the meaning of the Securities Act of 1933, as amended.
As a condition to the issuance of the Common Stock, Eyenovia and Bausch shall enter into the subscription agreement attached hereto as
Schedule 4 (the “Subscription Agreement”).
6. Royalty Payment. Eyenovia will pay Bausch a royalty of [***] percent ([***]%) of Eyenovia Net Sales in the Licensed
Territory for a period of ten years from the date of the first commercial sale by Eyenovia or its Affiliates or licensees of the Licensed
Product in the United States, as further described on Schedule 3.
7. Termination. Upon the Regulatory Transfer Completion Date, the following agreements shall be automatically terminated: (i)
the Clinical Supply Agreement dated September 30, 2021 between Eyenovia and Bausch and the Quality Agreement entered into by the
parties thereunder, and (ii) the Safety Data Exchange Agreement dated as of June 15, 2021 between Eyenovia and Bausch; provided,
however, that, to the extent required by Applicable Law, the Parties will continue to exchange information, to follow procedures, and to
file single case reports, related to adverse events associated with the Licensed Product that occurred prior to the Effective Date.
8. Sublicenses. Any and all sublicense agreements entered into by Bausch or any of its Affiliates with a sublicensee pursuant to the
License Agreement shall terminate upon the Effective Date. Bausch hereby confirms that there are no such sublicense agreements as of
the Effective Date.
9. Mutual Release. Each Party, on behalf of itself and its present and former parents, subsidiaries, affiliates, officers, directors,
shareholders, members, successors and assigns (the “Releasors”) hereby releases, waives and forever discharges the other Party and its
present and former, direct and indirect, parents, subsidiaries, affiliates and its and their respective employees, officers, directors,
shareholders, members, agents, representatives, successors and assigns (the “Releasees”) of and from any and all actions, causes of
action, suits, losses, liabilities, rights, debts, dues, sums of money, accounts, reckonings, obligations, costs, expenses, liens, bonds, bills,
specialties, covenants, contracts, controversies, agreements (whether oral, written or otherwise), promises, variances, trespasses,
damages, judgments, extents, executions, claims, and demands, of every kind and nature whatsoever, whether now known or unknown,
foreseen or unforeseen, matured or unmatured, suspected or unsuspected, in law, admiralty or equity (collectively, “Claims”), which any
of such Party’s Releasors ever had, now has, or hereafter can, shall, or may have against any of such other Party’s Releasees arising out
of the License Agreement from the beginning of time through the Effective Date of this Letter Agreement, except for any claims relating
to rights and obligations under this Letter Agreement. Each Party, on behalf of itself and each of its respective Releasors, understands
that it may later discover Claims or facts that may be different than, or in addition to, those that it or any other Releasor now knows or
believes to exist regarding the subject matter of the release
A-3
contained in this Section 9, and which, if known at the time of signing this Letter Agreement, may have materially affected this Letter
Agreement and such Party’s decision to enter into it and grant the release contained in this Section 9. Nevertheless, the Parties and their
respective Releasors intend to fully, finally and forever settle and release all Claims that now exist, may exist or previously existed, as set
forth in the release contained in this Section 9, whether known or unknown, foreseen or unforeseen, or suspected or unsuspected, and the
release given herein is and will remain in effect as a complete release, notwithstanding the discovery or existence of such additional or
different facts. The Parties and their respective Releasors hereby waive any right or Claim that might arise as a result of such different or
additional Claims or facts. The Parties have each been made aware of, and understand, the provisions of California Civil Code Section
1542 (“Section 1542”), which provides: “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR
RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE
RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT
WITH THE DEBTOR OR RELEASED PARTY.” The Parties expressly, knowingly and intentionally waive any and all rights, benefits,
and protections of Section 1542 and of any other state or federal statute or common law principle limiting the scope of a general release.
[***]
Schedule 1
A-4
[***]
Schedule 2
A-5
1.
[***]
Schedule 3
A-6
Schedule 4
[***]
A-7
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENT
We consent to the incorporation by reference in the Registration Statements of Eyenovia, Inc. on Form S-3 (File No. 333-229365, File
No. 333-237790, File No. 333-261638 and File No. 333-268832) and Form S-8 (File No. 333-227049, File No. 333-233278, File No.
333-233280, File No. 333-246288, File No. 333-261035, File No. 333-266823 and File No. 333-272962) of our report dated March 18,
2024, which includes an explanatory paragraph as to the Company’s ability to continue as a going concern, with respect to our audits of
the financial statements of Eyenovia, Inc. as of December 31, 2023 and 2022 and for the two years ended December 31, 2023, which
report is included in this Annual Report on Form 10-K of Eyenovia, Inc. for the year ended December 31, 2023.
Exhibit 23.1
/s/ Marcum LLP
Marcum LLP
New York, NY
March 18, 2024
Exhibit 31.1
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael Rowe, certify that:
1.
I have reviewed this annual report on Form 10-K of Eyenovia, Inc. for the year ended December 31, 2023;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: March 18, 2024
/s/ Michael Rowe
Name: Michael Rowe
Title Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
CERTIFICATION OF THE PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, John Gandolfo, certify that:
1.
I have reviewed this annual report on Form 10-K of Eyenovia, Inc. for the year ended December 31, 2023;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: March 18, 2024
/s/ John Gandolfo
Name: John Gandolfo
Title Chief Financial Officer
(Principal Financial and Accounting Officer)
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the annual report of Eyenovia, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2023,
as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael Rowe, Chief Executive Officer of the
Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my
knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.
Date: March 18, 2024
/s/ Michael Rowe
Name: Michael Rowe
Title Chief Executive Officer
(Principal Executive Officer)
Exhibit 32.2
CERTIFICATION OF THE PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report of Eyenovia, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2023,
as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John Gandolfo, Chief Financial Officer of the
Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my
knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.
Date: March 18, 2024
/s/ John Gandolfo
Name: John Gandolfo
Title Chief Financial Officer
(Principal Financial and Accounting Officer)
Eyenovia, Inc.
Compensation Clawback Policy
Adopted October 4, 2023
Exhibit 97.1
Purpose
The Board of Directors (the “Board”) of Eyenovia, Inc. (the “Corporation”) has adopted this compensation clawback policy (the
“Policy”) which provides for the recoupment of incentive-based compensation in the event of an accounting restatement. This Policy is
intended to comply with Section 10D of the Securities Exchange Act of 1934 (the “Act”), the rules promulgated thereunder by the
Securities and Exchange Commission (“SEC”), and the listing standards of Nasdaq (collectively, the “Applicable Rules”), and will be
interpreted consistent therewith.
Applicability and Effective Date
This Policy is effective October 2, 2023 (the “Effective Date”) and is applicable to all Incentive-Based Compensation (as defined below)
received by Executive Officers (as defined below) after the Effective Date. The Policy will be administered by the Board or, if so
designated by the Board, the Compensation Committee of the Board (the “Committee”), in which case references to the Board will be
deemed to be references to the Committee. Any determination made by the Board under this Policy will be final and binding on all
affected individuals. Each Executive Officer shall be required to execute the acknowledgement in Appendix A of this Policy as soon as
practicable after the later of (i) the Effective Date and (ii) the date on which the employee is designated as an Executive Officer;
provided, however, that failure to execute such acknowledgement shall have no impact on the enforceability of this Policy.
Restatement Clawback
In the event the Corporation is required to prepare an Accounting Restatement (as defined below), any Executive Officer who received
Excess Compensation (as defined below) during the three (3) completed fiscal years preceding the date the Corporation is required to
prepare an Accounting Restatement (the “Look-Back Period”) shall be required to repay or forfeit such Excess Compensation reasonably
promptly. For purposes of this Policy, the date the Corporation is required to prepare an Accounting Restatement is deemed to be the
earlier of the date (i) the Board concludes, or reasonably should have concluded, that the Corporation is required to prepare an
Accounting Restatement, or (ii) a court, regulator, or other legally authorized body directs the Corporation to prepare an Accounting
Restatement.
Method of Repayment, Conditions for Non-Recovery
The Board shall have discretion to determine the appropriate means of recovery of Excess Compensation, which may include, without
limitation, direct payment in a lump sum from the Executive Officer, recovery over time, cancellation of outstanding awards, the
reduction of future pay and/or awards, and/or any other method which the Board determines is advisable to achieve reasonably prompt
recovery of Excess Compensation. At the direction of the Board, the Corporation shall take all actions reasonable and appropriate to
recover Excess Compensation from any applicable Executive Officer, and such Executive Officer shall be required to reimburse the
Corporation for any and all expenses reasonably incurred (including legal fees) by the Corporation in recovering such Excess
Compensation in accordance with this Policy.
The Committee, or in the absence of the Committee, a majority of the independent directors on the Board, may determine that repayment
of Excess Compensation (or a portion thereof) is not required only where it determines that recovery would be impracticable and one of
the following circumstances exists: (i) the direct expense paid to a third party to assist in enforcing this Policy would exceed the amount
to be recovered, provided the Corporation
has (A) made a reasonable attempt to recover such Excess Compensation, (B) documented such reasonable attempt, and (C) provided
such documentation to Nasdaq; or (ii) recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are
broadly available to employees of the Corporation, to fail to meet the requirements of 26 U.S.C. 401(a)(13) or 26 U.S.C. 411(a) and the
regulations thereunder.
No Fault Application, No Indemnification
Recovery of Excess Compensation under this Policy is on a “no fault” basis, meaning that it will occur regardless of whether the
Executive Officer engaged in misconduct or was otherwise directly or indirectly responsible, in whole or in part, for the Accounting
Restatement. No Executive Officer may be indemnified by the Corporation, or any of its affiliates, from losses arising from the
application of this Policy.
Definitions
For purposes of this Policy, the following definitions will apply:
“Accounting Restatement” means an accounting restatement due to the material noncompliance of the Corporation with any
financial reporting requirement under securities laws, including any required accounting restatement to correct an error in
previously issued financial statements that is material to the previously issued financial statements, or that corrects an error that
is not material to previously issued financial statements but would result in a material misstatement if the error were corrected in
the current period or left uncorrected in the current period.
Changes to financial statements that do not constitute an Accounting Restatement include retroactive: (i) application of a change
from one generally accepted accounting principle to another generally accepted accounting principle; (ii) revisions to reportable
segment information due to a change in internal organization; (iii) reclassification due to a discontinued operation; (iv)
application of a change in reporting entity, such as from a reorganization of entities under common control; and (v) revisions for
stock splits, reverse stock splits, stock dividends, or other changes in capital structure.
“Excess Compensation” means any amount of Incentive-Based Compensation received by an Executive Officer after
commencement of service as an Executive Officer that exceeds the amount of Incentive-Based Compensation that otherwise
would have been received had it been determined based on the Accounting Restatement, computed without regard to any taxes
paid. For Incentive Compensation based on stock price or total shareholder return, where the amount to be recovered is not
subject to mathematical recalculation directly from information in the Accounting Restatement, the amount to be recovered
shall be based on a reasonable estimate of the effect of the Accounting Restatement on the stock price or total shareholder
return, as applicable, and the Corporation shall retain documentation of the determination of such estimate and provide such
documentation to Nasdaq if so required by the Applicable Rules. Incentive-Based Compensation is deemed received during the
fiscal year during which the applicable financial reporting measure, stock price and/or total shareholder return measure, upon
which the payment is based, is achieved, even if the grant or payment occurs after the end of such period.
“Executive Officer” means an individual who is, or was during the Look-Back Period, an executive officer of the Corporation
within the meaning of Rule 10D-1(d) under the Act.
“Incentive-Based Compensation” means any compensation that is granted, earned or vested based wholly or in part on stock
price, total shareholder return, and/or the attainment of (i) any financial reporting measure(s) that are determined and presented
in accordance with the accounting principles used in preparing the Corporation’s financial statements and/or (ii) any other
measures that are derived in whole or in part from such measures.
Compensation that does not constitute “Incentive-Based Compensation” includes equity incentive awards for which the grant is
not contingent upon achieving any financial reporting measure performance goal for an individual to receive such award and
that vest exclusively upon completion of a specified employment period, without any performance condition, and bonus awards
that are discretionary or based on subjective goals or goals unrelated to financial reporting measures.
Administration, Amendment, and Termination
This Policy will be enforced and, if applicable, appropriate proxy disclosures and exhibit filings will be made in accordance with the
Applicable Rules and any other applicable rules and regulations of the Securities and Exchange Commission and applicable Nasdaq
listing standards.
The Board shall have authority to (i) exercise all of the powers granted to it under the policy, (ii) construe, interpret, and implement this
policy, and (iii) make all determinations necessary or advisable in administering this policy.
In addition, the Board may amend this policy, from time to time in its discretion, and shall amend this Policy, as it deems necessary,
including to reflect changes in applicable law. The Board may terminate this Policy at any time. Any such amendment (or provision
thereof) or termination shall not be effective if such amendment or termination would (after taking into account any actions taken by the
Corporation contemporaneously with such amendment or termination) cause the Corporation to violate the Applicable Rules.
In the event of any conflict or inconsistency between this Policy and any other policies, plans, or other materials of the Corporation
(including any agreement between the Corporation and any Executive Officer subject to this Policy), this Policy will govern.
This Policy will be deemed to be automatically updated to incorporate any requirement of law, the SEC, exchange listing standard, rule
or regulation applicable to the Corporation.
Appendix A:
Eyenovia, Inc.
Compensation Clawback Policy
ACKNOWLEDGMENT
The undersigned acknowledges and agrees that the undersigned (i) is, and will be, subject to the Compensation Clawback Policy (the
“Policy”) to which this acknowledgement is appended, and (ii) will abide by the terms of the Policy, including by returning Excess
Compensation (as defined in the Compensation Clawback Policy) pursuant to whatever method the Board determines is advisable to
achieve reasonably prompt recovery of such Excess Compensation, as prescribed under the Policy.
Capitalized terms used but not defined have the meanings set forth in the Policy.
Print Name
Signature
Dated: